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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under (Rule 13d-101) of the Securities Exchange Act of 1934
(Amendment No. 11)
BULL & BEAR U. S. GOVERNMENT SECURITIES FUND, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
12017N105
(CUSIP Number)
George W. Karpus, President
Karpus Management, Inc. d/b/a
Karpus Investment Management
14 Tobey Village Office Park
Pittsford, New York 14534
(716) 586-4680
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
October 12, 1998
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of the Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box. [ ]
(page 1 of 15 Pages)
(continued on following pages)
(1 Exhibits Attached)
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SCHEDULE 13D
CUSIP No. 12017N105 Page 2 of 15 Pages
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Karpus Management, Inc. d/b/a Karpus Investment Management
I.D.# 16-1290558
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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7. SOLE VOTING POWER
119,250 shares
NUMBER OF -----------------------------------------------------------
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
OWNED BY
EACH -----------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON
WITH 119,250 shares
-----------------------------------------------------------
10. SHARED DISPOSITIVE POWER
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
119,250 shares
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.28%
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14. TYPE OF REPORTING PERSON*
I.A.
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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ITEM 1 Security and Issuer
Common Stock
Bull & Bear U.S. Government Securities Fund, Inc. ("BBG")
11 Hanover Square
New York, New York 10005
ITEM 2 Identity and Background
a) Karpus Management, Inc. d/b/a Karpus Investment Management
("KIM")
George W. Karpus, President, Director, & controlling stockholder
JoAnn VanDegriff, Vice President and Director
Sophie Karpus, Director
b) 14 Tobey Village Office Park
Pittsford, New York 14534
c) Principal business and occupation - Investment Management for
individuals, pension and profit sharing plans, corporations,
endowments, trusts and others, specializing in conservative
asset management (i.e., fixed income investments).
d) None of George W. Karpus, JoAnn VanDegriff or Sophie Karpus
(the "Principals") or KIM has been convicted in the past 5 years
of any criminal proceeding (excluding traffic violations).
e) During the last five years none of the principals or KIM has
been a party to a civil proceeding as a result of which any of
them is subject to a judgment, decree or final order enjoining
future violations of or prohibiting or mandating activities
subject to, federal or state securities laws or finding any
violation with respect to such laws.
f) Each of the Principals is a United States citizen.
KIM is a New York State corporation.
ITEM 3 Source and Amount of Funds or Other Considerations.
KIM, an independent investment advisor, has accumulated shares of BBG
on behalf of accounts that are managed by KIM (the "Accounts") under limited
powers of attorney. All funds that have been utilized in making such purchases
are from such Accounts.
ITEM 4 Purpose of Transaction
KIM purchased shares of the Fund for investment purposes only. The
profile of the Fund, being a conservative, high credit quality fixed income
fund, met the investment criteria necessary for the Accounts to become
shareholders.
On July 2, 1998 the Fund filed with the SEC a preliminary prospectus
which was essentially the same change in investment composition that was
proposed in September of 1997. The Fund is fully aware that the Accounts
managed by KIM are not permitted by their investment guidelines to invest in a
"balanced type fund," nor may own securities of companies which are currently
in bankruptcy. The Management of the Fund has been duly apprised and was in
complete knowledge that this radical change in investment philosophy within
the Fund would force "the Accounts" managed by KIM's to sell shares in the
open market, since they would become non-permissible investment
(page 3 of 15 Pages)
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vehicles. The proposed changes by management have been abandoned once again.
It is the opinion of KIM that management has spent the shareholders money
frivolously by filing preliminary prospectus's with the Security and Exchange
proposing changes that its largest shareholder violently objects to. However,
on August 17, 1998 the Fund announced that commencing on October 19, 1998 the
Fund intends to invest up to 35% of its total assets in equity and other
securities. It is KIM's opinion that a change of this magnitude should be
voted upon by the shareholders before being enacted.
The poor performance of the Fund, coupled with uncontrolled expenses,
and the apparent desire of the Fund to achieve its own agenda has forced KIM
to take steps which may possibly lead to the termination of the Manager of the
Fund. On September 30, 1998 KIM filed with the SEC a Preliminary Proxy
Statement that it intends to seek the termination of the Investment Management
Agreement dated September 12, 1996, as the same may have been amended,
extended or restated, between Bull & Bear Advisers, Inc. and Bull & Bear U.S.
Government Securities Fund, Inc. at the annual meeting of shareholders. KIM
also nominated Donald R. Chambers, Ph.D. in Finance, as its candidate elect to
the Board of Directors. KIM will continue to seek changes by the Fund that it
believes is in the best interest of the shareholders.
ITEM 5 Interest in Securities of the Issuer
a) As of the date of this Report, KIM owns 119,250 Shares which
represents 16.28% of the outstanding Shares. None of the
Principals owns any other Shares.
b) KIM has the sole power to dispose of and to vote all of such
Shares under limited powers of attorney.
c) Open market purchases and sales for the Accounts.
Price Per
Date Shares Share
4/1/98 1,300 13.3125
5/13/98 700 12.75
5/14/98 1,100 12.75
5/14/98 1,000 12.6875
5/18/98 400 12.6875
5/26/98 200 12.6875
The open market purchase of 4/1/98 was entered on December 16, 1997
and executed at a price of $13.3125.
1.) There have been no dispositions and no acquisitions, other than
by such open market purchases, during such period.
2.) The Accounts have the right to receive all dividends from, and
any proceeds from the sale of the Shares. None of the Accounts
has an interest in Shares constituting more than 5% of the
Shares outstanding.
(page 4 of 15 Pages)
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ITEM 6 Contracts, Arrangements, Understandings, or Relationships with
Respect to Securities of the Issuer.
Except as described above, there are no contracts, arrangements
understandings or relationships of any kind among the Principals and KIM and
between any of them and any other person with respect to any of BBG
securities.
ITEM 7 Materials to be Filed as Exhibits
Yes, 1 exhibit attached
Signature
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
October 12, 1998 Karpus Management, Inc. By:
- ----------------
Date /s/ George W. Karpus
-------------------------
George W. Karpus
President
(page 5 of 15 Pages)
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BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC.
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PROXY STATEMENT FOR MEETING
OF KARPUS MANAGEMENT, INC. d/b/a
KARPUS INVESTMENT MANAGEMENT
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This Proxy Statement is furnished in connection with a solicitation
of proxies by Karpus Management, Inc. doing business as Karpus Investment
Management ("KIM"), to be used at a Meeting of Shareholders of Bull & Bear
U.S. Government Securities Fund, Inc. After reviewing the proxy statement,
PLEASE TAKE THIS OPPORTUNITY TO SIGN AND RETURN THE BLUE PROXY CARD TO
GEORGESON & COMPANY, WALL STREET PLAZA, NEW YORK, NEW YORK 10005. YOUR VOTE IS
CRITICAL. KIM RECOMMENDS THAT YOU VOTE FOR KIM'S PROPOSALS A & B.
A annual Meeting of Stockholders of Bull & Bear U.S. Government
Securities Fund, Inc. (the "Fund") will be held at the offices
_______________________________, on __________ at ___ a.m. (the "Meeting").
KIM is soliciting proxies for the following purposes:
The Fund's Current Management has announced on August 17, 1998 that the Fund
intends to invest up to 35% of its total assets in equity and other
securities, commencing on October 19, 1998.
Karpus Management Inc., d/b/a Karpus Investment Management ("KIM"), the
largest shareholder of the Fund opposes the addition of other security types
in the Fund. Because of this opposition KIM is presenting the following
proposals to the shareholders of the Fund.
KARPUS MANAGEMENT, INC. PROPOSES:
A. The Investment Management Agreement dated September 12, 1996, as the same
may have been amended, extended or restated, between Bull & Bear Advisers,
Inc. and Bull & Bear U. S. Government Securities Fund, Inc., shall be
terminated promptly following the annual meeting of shareholders of the Fund
at which this proposal is approved.
B. Karpus Investment Management (KIM) nominates Donald R. Chambers, Ph.D. in
Finance, as its candidate elect to the Board of Directors.
This Proxy Statement is furnished in connection with a solicitation
of proxies by KIM to be used at the Meeting. Stockholders of record at the
close of business on ____________, 1998 ("Record Date") are entitled to be
present and to vote on matters at the Meeting. Stockholders are entitled to
one vote for each Fund share held and fractional votes for each fractional
Fund share held. Stockholders of the Fund will vote as a single class and will
vote separately on each proposal. Shares represented by executed and unrevoked
proxies will be voted in accordance with the specifications made thereon. If
no instructions are given, such shares will be voted FOR Proposals A and B and
on any other matter that may properly come before the Meeting. If the enclosed
form or proxy is executed and returned, it nevertheless may be revoked by
another proxy, or by letter, or telegram directed to the Fund, or to KIM c/o
Georgeson & Company Inc., Wall Street Plaza, New York NY 10005 (fax no.
212-440-9955) which must indicate the stockholder's name. To be effective,
such revocation must be received prior to the Meeting. In addition, any
stockholder who attends the Meeting in person may vote by ballot at the
Meeting, thereby canceling any proxy previously given. As of the Record Date,
the Fund had _____________ shares of common stock issued and outstanding.
(page 6 of 15 Pages)
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It is estimated that this proxy statement and proxy voting card will
be mailed to stockholders of record on or about____________________, 1998. The
Fund's principal executive offices are located at 11 Hanover Square, New York,
New York 10005. Copies of the Fund's most recent Annual and Semi-Annual
Reports are available without charge upon written request to the Fund at 11
Hanover Square, New York, New York 10005 or by calling toll-free
1-888-847-4200. Bull & Bear Advisers, Inc. (the "Investment Manger"), located
at 11 Hanover Square, New York, New York 10005 is the Fund's investment
manager.
A. The Investment Management Agreement dated September 12, 1996, as the same
may have been amended, extended or restated, between Bull & Bear Advisers,
Inc. and Bull & Bear U. S. Government Securities Fund, Inc., shall be
terminated promptly following the annual meeting of shareholders of the Fund
at which this proposal is approved.
KIM is proposing the termination of the management contract and the
advisory contract of Bull & Bear Advisers, Inc. with the Fund due to inferior
investment performance and uncontrolled expenses. KIM believes that the Fund
has generated inadequate investment returns for shareholders. At a Special
Meeting of the Shareholders of the Fund held on September 19, 1996, Fund
management recommended the conversion of the Fund from an open-end format to
closed-end format. This was subsequently approved by the shareholders and the
Fund began trading in closed-end format on the American Stock Exchange on
October 4, 1996. From October 4, 1996 through and including September 30, 1998
shares of the Fund have experienced a 8.47% price decline. The market price on
October 4, 1996 was $14.75 per share, whereas the September 30, 1998 market
price was $13.50 per share. (Based on closing prices.) The total return of the
Fund including dividends being reinvested in shares equaled an annual
equivalent of 1.6932% (10/4/96 through 9/30/98). During this same time period
the Merrill Lynch 1-10 Year U.S. Government Index generated an annualized
return of 8.919%.
The net asset value of the Fund has also seriously underperformed
appropriate market indices. As computed on Bloomberg Analytics, the simple
price appreciation or depreciation (net change in price) of the NAV of the
Fund, which does not include dividends being reinvested, from February 7, 1997
(this is the first reported NAV to Bloomberg) to October 2, 1998 equaled
1.0565% annual equivalent. ( Annual equivalent is the annual representation of
a securities yield which pays interest more than once a year.)
As reported in The Wall Street Journal on June 30, 1998 according to
Lipper Analytical Services, Inc., Bull & Bear U.S. Government Securities Fund.
Inc. ranked in the BOTTOM 10 PERFORMERS IN THE CLOSED-END BOND CATEGORY.
(page 7 of 15 Pages)
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Bull & Bear U.S. Government Securities Fund, Inc.'s net asset value
return (with dividends being re-invested in the security) from June 30, 1997
to June 30, 1998 was reported to be 5.40% which was the last place performance
out of 118 closed-end bond funds in the Wall Street Journal Quarterly
Closed-End Funds Review, published on July 6, 1998. (This included categories
of U.S. Gov't Bond Funds, U.S. Mortgage Bond Funds, Investment Grade Bond
Funds, Loan Participation Funds, High Yield Bond Funds, and Other Domestic
Taxable Bond Funds.)
Management of the Fund, in the opinion of KIM, should not invest up
to 35% of the assets of the Fund in equity and other securities. It is the
opinion of KIM that Management has consistently recommended changes to the
Fund that have been to the detriment of the Shareholders. This is the same
Management that recommended converting the Fund to closed-end format which
resulted in the shares selling at a discount to the net asset value. Without
changing the Fund's fundamental policy of investing in securities backed by
full faith credit of the United States, direct obligations of the United
States, Treasury Bills, Notes, Bonds, and certain agencies such as the
Government National Mortgage Association, the Fund believes they can invest up
to 35% of the assets of the Fund in a equity securities without approval of
the shareholders. KIM BELIEVES THE ADDITION OF EQUITIES AND OTHER SECURITIES
TO THE FUND IS A POLICY THAT WILL NOT BENEFIT THE SHAREHOLDERS.
The 8% distribution policy adopted by the Fund is eroding the net
asset value of the Fund. The 8% distribution policy pays dividends to the
shareholders equaling 2% of the net asset value of the fund on a quarterly
basis. This dividend is to be comprised of any interest earned, dividends
received, and if this is not sufficient to equal 2%, then the balance is to be
return of principal. The Fund is giving shareholders their own money back,
giving the illusion of profitable operations. As of June 30, 1998 the Fund had
returned to holders $0.42 per share in distributions from paid in capital.
This means that the shareholders are getting their own money back.
Shareholders should not entrust management of the Fund to implement
the addition of equity and other securities to the Fund, as the Fund's advisor
has achieved dismal investment results in other areas also. Every fund that
owns stocks and other investments listed in the Wall Street Journal (Monday,
October 5, 1998) under Bull & Bear Group, the Adviser, has generated negative
returns year-to-date, for the latest four weeks and latest twelve months.
According to the Lipper Analytical Services, Inc. published in the Wall Street
Journal of August 28, 1998 all three of the open-end mutual funds managed by
Bull & Bear Group that contain stocks and other investments performed in the
bottom 20% for 1 year, 3 years, and 5 year periods of time.
KIM opposes the addition of equity and other securities.
KIM believes that it is the best interest of the Fund to seek another
manager and adviser that rank amongst the top quartile of fixed income
managers by a nationally recognized services. The manager should be open to
recommending the open-ending the Fund, may consider merging the Fund with
another fund of similar characteristics, will consider share repurchase
programs and initiate tender offers.
(page 8 of 15 Pages)
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KIM RECOMMENDS THAT SHAREHOLDERS TERMINATE THE INVESTMENT MANAGEMENT
AGREEMENT OF THE INVESTMENT MANAGER OF THE FUND.
VOTE FOR PROPOSAL B
KIM'S PROPOSAL B.
B. Karpus Investment Management (KIM) nominates Donald R. Chambers,
Ph.D. in Finance, as its candidate-elect to the Board of Directors.
KIM is proposing the election of Donald R. Chambers, Ph.D. because
shareholders of Fund are entitled to an independent Director who will be
dedicated to increasing shareholder value.
Poor performance and outrageous expenses can no longer be tolerated.
Poor performance and high expenses raise certain issues of concern to the
shareholders.
a. Why are they receiving such sub-par investment results?
b. Why, for the year ending June 30, 1998, were the expenses $641,257
(net expenses of $634,993) as compared to $239,566 for the FULL fiscal year
ending June 30, 1997?
The expense ratio for the Fund for the year ended June 30,1998
equaled 5.77% according to the Fund's annual statement listed under "Financial
Highlights". According to the Wall Street Journal Mutual Fund Listing the Fund
ranks in the worst 1% of all open or closed end funds in its' expense ratio.
High expenses are depriving the shareholders of additional returns. Someone
must put a stop to "open-pocket" spending of the shareholder money.
Dr. Chambers, as a member of the Board, will effectively monitor the
expenses within the Fund and initiate the necessary steps to reduce operating
costs. Dr. Chambers, will provide another opinion to the Board and a new
prospective.
According to Lipper Analytic Services, Inc. BBG is identified as one
of the worst performing bond funds in its investment category in 1997. Since
BBG was converted to a closed end investment company effective October 4,
1996, its price has fallen from $14.75 to $13.50 on October 2, 1998. This
price decline of 8.47% during a strong bull market supports our belief that
converting BBG to a closed end investment company and poor management hurt the
stockholders of BBG. The annualized return for this time period was -4.1209%.
If a shareholder had reinvested dividends in the Fund they would have received
a annualized return of 3.2755% for the time period.
(page 9 of 15 Pages)
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In further analyzing the Fund, the net asset value has continued to
erode in the first nine months of 1998 (ended September 25, 1998) with a total
return of 5.89% during this time period. The Lehman Aggregate Index (an
appropriate benchmark to measure performance), had a total return of 8.32% for
the same time period. This comparison is a clear indication of the Fund's poor
performance. KIM believes that this inferior return should no longer be
acceptable to shareholders.
KIM BELIEVES THAT A CHANGE WITHIN THE BOARD IS NECESSARY TO SET THE
FUND BACK ON A PROFITABLE INVESTMENT COURSE.
KIM believes that Donald R. Chambers, Ph.D. will provide the insight
and unbiased professionalism that will benefit shareholders by taking viable
steps to manage the discount at which the Fund has historically traded. These
steps could include proposing open-ending the Fund and share "buy backs" or
tender offers.
Donald R. Chambers is a consulting strategist for Karpus Management,
Inc.
A vote for Donald R. Chambers, Ph.D., the KIM candidate, will be a vote for
representing shareholder interest.
Donald R. Chambers, Ph.D., Finance
DONALD R. CHAMBERS, Ph.D. in Finance, 42, has been the Walter E.
Hanson/KPMG Peat Marwick Professor of Finance, Department of Economics and
Business at Lafayette College, Easton, Pennsylvania, for the past five years.
His Ph.D. is from the University of North Carolina at Chapel Hill, North
Carolina.
A senior portfolio strategist and consultant, Dr. Chambers serves as
a consultant to the industry and government, having advised the Consumers
Advocate's Office of the Commonwealth of Pennsylvania, AT&T, Allstate, Bank of
New York, Chase Manhattan Bank and other major corporations.
Among his publishing credits are The Journal of Financial Economics,
The Journal of Cash Management, The Journal of Finance, The Journal of Futures
Markets, The Journal of Financial and Quantitative Analysis and Financial
Management. He is the author of the corporate finance textbook with Harper
Collins entitled Modern Corporate Finance, Theory and Practice.
Dr. Chambers' address is 3325 Abbey Court, Bethlehem,
Pennsylvania 18017
(page 10 of 15 Pages)
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ADDITIONAL PORTFOLIO SECURITIES
Currently the Fund's portfolio is invested in U.S. Treasury Notes and
Bonds, obligations of other U.S. Government agencies or instrumentalities,
including inflation-index instruments, and money market instruments. This
conservative portfolio maintains the highest possible credit quality. Pursuant
to the Fund's announcement on August 17, 1998 of changes anticipated to
commence on October 19, 1998, only 65% of the value of the total assets would
be invested in U.S. Government Securities, obligations of other U.S.
Government agencies or instrumentalities, including inflation-indexed
instruments, and money market instruments. The Fund intends to invest up to
35% of the total assets of the Fund in equity and other securities. Previously
the Fund has only invested in securities that are U.S. Government Securities,
obligations of other U.S. Government agencies or instrumentalities, including
inflation-indexed instruments, and money market instruments.
KIM RECOMMENDS THAT SHAREHOLDERS TERMINATE THE ADVISORY AND
MANAGEMENT CONTRACT OF THE MANAGER AND ADVISOR WITH THE FUND.
ALL OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
KIM and the following advisory clients for whom it acts as investment
adviser will bear the cost of soliciting proxies: Acra-Local 725 Pension Trust
of Dade, Amalgamated Transit Union Local #1342, Cardinal American Corporation,
Jeffrey I Cooper, Elderwood Affiliates, Inc. Retirement Plan, Seymour Fisher
Marital Tr., Fish Furniture Profit Sharing Tr., The William and Estelle Golub
Foundation, Inc., Hammer Lithograph Corp. Deferred Profit Sharing, Peter
Russo, Trustee U/W William Henderson FBO F. Elizabeth, City of Hialeah Police
Pension Fd., InterMetro Ind. Corp. Salaried Employees Pension Trust, James E.
Morris IRA Rollover, Monro Muffler Brake, Inc. Retirement Plan, Painters Local
150 Annuity Fund, Plumbers & Pipefitters Local 138 Pension Fund, Roman
Catholic Diocese of Syracuse, Inc., Sheet Metal Workers Local 46 Annuity
Fund., Sheet Metal Workers Local 46 Pension Fund, YWCA of Rochester and Monroe
County - Board Designated Fd., YWCA of Rochester & Monroe County - Endowment
Fund, R. M. Blumenberg MD, M.L. Gelfand MD, P.A. Skudder MD Retirement Plan,
John W. Brown Jr. IRA Rollover, Gateway-Longview Inc. Asset Management, Golub
Corporation Employees Retirement Plan, Bull Bros. Inc. Employees Profit
Sharing Plan, James Vazzanna, Patircia Vazanna & Michael Ray as Trustees for
Andrew J. Kirch Charitable Remainder Trust U/Paragraph 7th of Will R. Edward
Lodico IRA Rollover, Ronald and Judith Newman, and Siewert Equipment Co. Inc.
Deferred Profit Sharing Plan. In addition to the use of the mails, proxies may
be solicited personally, by telephone or by other means and such clients may
pay persons holding Fund shares in their names or those of their nominees for
their expenses in sending soliciting materials to their principals.
Solicitations may be made by regular employees of KIM. In addition, KIM has
retained Georgeson & Company Inc., Wall Street Plaza, New York, New York 10005
to solicit proxies on behalf of KIM for a fee estimated at $20,000 plus
expenses. Additional costs and expenditures, including fees for attorneys,
printing, and mailing are anticipated to be approximately $50,000. KIM intends
to seek reimbursement from the Fund to itself and its advisory clients for
some or all of their costs of solicitation.
(page 11 of 15 Pages)
<PAGE>
KIM has been advised by the Fund, which advice is applicable to
proxies, as follows:
If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote, represents a broker "non-vote"
(that is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to
vote shares of the Fund on a particular matter with respect to which the
broker or nominee does not have discretionary power) or is marked with an
abstention (collectively "abstentions") the Fund's shares represented thereby
will be considered to be present at the Meeting for purposes of determining
the existence of a quorum for the transaction of business. Abstentions count
for a majority to constitute a quorum, but do not count for a yes vote and
broker "no" votes have the effect of a no vote.
In the event that a quorum is not present at the Meeting, or if a
quorum is present but sufficient votes to approve any of the proposals are not
received, the persons names as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. In determining whether
to adjourn the meeting the following factors may be considered: the nature of
the proposals that are the subject of the Meeting, the percentage of votes
actually cast, the percentage of negative votes cast, the nature of any
further solicitation, and the information to be provided to stockholders with
respect to the reasons for the solicitation. Any adjournment will require the
affirmative vote of a majority of those shares affected by the adjournment
that are represented at the meeting in person or by proxy. A stockholder vote
may be taken for one or more of the proposals in this Proxy Statement prior to
any adjournment if sufficient votes have been received for approval. If a
quorum is present, the persons named as management proxies will vote those
proxies which they are entitled to vote "for" a Proposal in favor of
adjournment, and will vote those proxies required to be voted "against" a
Proposal against any adjournment. A quorum is constituted with respect to the
Fund by the presence in person or by proxy of the holders of a majority of the
outstanding shares of the Fund entitled to vote at the Meeting.
The Fund's Management has alleged that KIM has damaged the Fund's
trading market and violated Section 16 (b) of the Securities Exchange Act of
1934 and Rule 10b-5 thereunder. It is the belief of KIM, that the shareholder
activities KIM has engaged in have helped support the market price of BBG and
have in no manner damaged the Fund's trading market. KIM has repeatedly and
vigorously denied these allegations, which are now pending before the United
States District Court, Southern District, New York. KIM believes that the
Fund's Management is using this action to deny KIM access to the shareholder
list and records of the Fund, to force KIM to incur additional expenses and to
discourage KIM from pursuing its rights as a stockholder on behalf of its
clients. The Board of Directors of the Fund has continuously approved the
Fund's outrageous legal expenses of $319,621 for the year ended June 30, 1998
in connection with these and related matters, according to the Fund's Annual
Report of June 30, 1998.
(page 12 of 15 Pages)
<PAGE>
Advance Notice Provision of the Fund
Pursuant to Section 2.11 of the Fund's By-Laws, as amended June 23,
1998 KIM has submitted Proposal A to the Fund. The Proposal is submitted for
action by the stockholders of the Fund at the Meeting in conformation to the
provisions of Section 10.C. of the Investment Management Agreement dated
September 12, 1996, between the Fund and Bull & Bear Advisers, Inc., as the
same may have been amended, extended or restates (the "Agreement") , pursuant
to Section 15 (a) (3) of the Investment Company Act of 1940, as amended.
Cede & Co., the nominee of Depository Trust Co. (DTC) has brought
this proposal on behalf of its principal. Citibank, N.A. and Chase Manhattan
Bank have represented to Cede and Co. the nominee of Depository Trust Company
that they intend, through their customer, KIM, to appear in person or by proxy
at the annual meeting of the Fund to bring the aforementioned Proposal to such
meeting.
The Fund is contesting the Proposal as being submitted as untimely,
and has petitioned the Securities and Exchange Commission to issue a "no
action" position, so as to allow the Fund to exclude the proposal and not to
mail KIM materials.
VOTE FOR BOTH OF KIM'S PROPOSALS
PLEASE VOTE THE BLUE PROXY CARD. IF YOU HAVE ANY QUESTIONS, WE URGE YOU TO
CONTACT KIM TO DISCUSS ANY ISSUES WHICH MAY BE OF CONCERN. PLEASE CALL
800-646-4005 ANYTIME BETWEEN 8:30 A.M. AND 5:00 P.M.
YOUR VOTE IS IMPORTANT, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE.
IF YOU NEED ASSISTANCE VOTING YOUR SHARES, PLEASE CONTACT OUR
PROXY SOLICITOR, GEORGESON & CO. AT 800-223-2064
(page 13 of 15 Pages)
<PAGE>
KARPUS INVESTMENT MANAGEMENT
14A Tobey Village Office Park
Pittsford, NY 14534
Dear Fellow Bull & Bear U.S. Government Securities Fund Shareholders:
As the largest shareholder of Bull & Bear U.S. Government Securities Fund,
Karpus Investment Management ("KIM") owner of approximately 16.1% of the
outstanding shares of the Fund, believes you should be fully informed of
recent changes to your Fund. Like KIM, many of you invested in the Fund for
the purpose of earning fixed income on high-quality U.S. government
securities. Now, without the approval of its shareholders, the Fund has
decided to invest up to 35% of its assets in riskier debt and equity
investments, such as common stock, ....., at a time when the stock market has
become a perilous place.
This in not the first time management has proposed major changes in the Fund.
In October 1996, management recommended, and shareholders approved, the Fund's
conversion from an open-end to a closed-end mutual fund. The Fund's shares now
trade at about a 10% discount to its current net asset value. This means that
shares sold in the market today would be worth approximately 10% less than if
the Fund had remained an open-end fund.
Both in September 1997 and in July 1998, the Fund, at shareholder expense, had
preliminary proxy materials prepared and filed with the SEC to convert this
U.S. Government Securities Fund into what, in our opinion, would have been a
fairly risky balanced fund that may invest in corporate bonds, common stocks,
commodities, options, futures, limited partnerships, etc. The Fund, after
incurring these expenses, dropped these proposals that would have required our
votes on the Fund's investment objectives.
The Fund then announced that it did not need our consent to invest 35% of the
Fund's assets in the more volatile bond and stock markets beginning October
19, 1998.
Fellow shareholders, we need to protect ourselves and voice our opinion. We
need to "fire" Bull & Bear Advisors, Inc. as the investment manager of our
Fund.
Why?
The Fund has one of the worst performance records in its category, as well as
one of the highest expense ratios in the industry (5.77%). Average expense
ratios of bond funds range from .55% to 1.2%. From October 4, 1996 through
June 26, 1998 the annualized return of the Fund equaled 0.0462% (including
reinvested dividends). During the same period, the Merrill Lynch 1-10 year
U.S. Treasury Index generated a 7.33% annualized return. Based on the Fund's
failure as a fixed income fund in a rising bond market, how much confidence do
you have in the Fund manager's ability to invest your money in a jittery stock
market -- or in other more complex and riskier investments?
(page 14 of 15 Pages)
<PAGE>
Bull & Bear's three open-end mutual funds, that are listed in the Wall Street
Journal, that invest in stocks and other investments, are all losing between
15% and 24% year-to-date (9/30/98). I believe all three of these funds are
also very poor performers. How could the Board of Directors, without our
approval as shareholders, dictate to us they are going to invest our monies in
stocks and other investments? Why would the Directors of the Fund pick Bull &
Bear Advisors to manage equity and other investments in light of their poor
performance record?
The Fund last year held its annual meeting in November, and to the best of our
knowledge, the date of this year's annual meeting has not been scheduled.
This meeting may be the only chance to send the message and protect our
investment. The replacement manager should be able to demonstrate top quartile
investment performance, be dedicated to reducing fund expenses and be willing
to take actions where we may be able to sell our shares at a 10% greater
value.
To protect your investments, we urge you not to return any proxy card you may
receive from Bull & Bear U.S. Government Securities Fund, Inc. ("the Fund")
until you have received and reviewed proxy materials from Karpus Investment
Management ("KIM").
PROTECT YOUR INVESTMENT. DO NOT VOTE ANY PROXY CARD YOU MAY RECEIVE FROM THE
FUND UNTIL YOU HAVE HAD AN OPPORTUNITY TO CONSIDER KIM'S PROXY STATEMENT.
For further information, please contact George Karpus at 1-800-646-4005. Mr.
Karpus is a principal of Karpus Investment Management ("KIM"), which owns
119,250 shares of the Bull & Bear U.S. Government Securities Fund, Inc. KIM
has retained Georgeson & Company Inc. to solicit proxies in connection with
this matter and will pay Georgeson a fee not to exceed $20,000 plus reasonable
expenses.
- -----------------------------
George W. Karpus, President
(page 15 of 15 Pages)
