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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. 12)
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)
November 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 8 Pages)
(continued on following pages)
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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*
AF
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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)
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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 offence (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
The poor performance of the Fund (verified by Lipper Analytical
Services citing BBG to be in the bottom 10 performers in the Closed-End Bond
Category, Wall Street Journal June 30,1998 issue) coupled with uncontrolled
expenses, has forced KIM to take steps which may lead to the termination of
the Manager of the Fund. On September 30, 1998 KIM filed with the SEC a
Preliminary Proxy stating that it intends to seek the termination of the
Investment Management Agreement dated
3
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September 12, 1996, as the same may have been amended, extended or restated,
between Bull & Bear Advisers, Inc. at the annual meeting of shareholders. KIM
is not now proposing a substitute manager to the Fund. KIM is also asking
stockholders to vote against the Fund's nominee for Director, Frederick
Parker, to vote against ratification of the Fund's auditors and to vote
against a name change of the Fund to Bexil Corporation.
It is the belief of KIM the Board has approved actions, which are
not in the best interest of the stockholders. Fund's Management recommended
changing the Fund's format from open end to closed end in 1996. This has
resulted in the Fund trading at a substantial discount to net asset value.
(The average price discount to net asset value has been - 10.27% for the time
period of November 14, 1997 through November 6, 1998.) The Board has
recommended in September of 1997 and in July of 1998 in a preliminary proxy
filing to change the Fund to a 50/50 "balanced" approach. This change would
have required a vote of the stockholders since it would have changed the
fundamental investment policy of the Fund. These proposals appear to have been
abandoned by the Fund. Instead the Board has approved the intention to invest
up to 35% of the Funds' assets in equity and other securities. The Fund claims
that this change can be made without shareholder approval.
It is the opinion of KIM that Bull & Bear Advisers are poor equity
managers. Bull & Bear Adviser's three funds 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). All three funds captioned in the Bull &Bear Group
are ranked in the bottom quintile for 1,3, and 5 year periods according to the
most recent Wall Street Journals.
Poor performance coupled with uncontrolled expenses prompted KIM to
oppose Management's candidate for director. It is the belief of KIM that the
Board of Directors should work for the stockholders.
The Fund is also proposing to the stockholders to "Amend the Fund's
Articles of Incorporation to Change the Fund's Name". The Fund is proposing to
retain the fundamental policy of investing 65% of the Fund's assets in
securities backed by the full faith and credit of the United States such as
U.S. Government Securities, including direct obligations of the United States
Government (such as U.S. Treasury bills, notes, and bonds) and certain agency
securities, such as those issued by the Government National Mortgage
Association. However, on August 17, 1998, the Fund announced that it intended
to invest up to 35% of its total assets in equity and other securities,
commencing October 19,1998. Up to 35% of total assets may be invested in
equity securities, fixed-income securities, money market instruments, and
securities of other investment companies to the extent consistent with its
investment objective. Issuers of these securities may include U.S. and foreign
entities, including small capitalization companies, private companies and
companies that invest or deal in natural resources or commodities. Equity
securities will include common stocks, preferred stocks, securities that are
convertible into common stocks, depository receipts, and warrants. The value
of the Fund's investment in certain equity securities may be affected by
changes in the price of precious metals, such as gold, platinum and silver.
KIM believes that these securities would be far too volatile to be contained
in this Fund. KIM believes, that Bull & Bear
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4
Advisers' in light of their dismal record in managing equities and other
investment should not be entrusted to buy equities and feels that stockholders
should reject the name change and change in the Amendment in the By-Laws as
purposed by the Fund.
KIM has repeatedly voiced its opinion to Fund's Management that these
changes are not in the best interest of the stockholders of the Fund. It is
the opinion of KIM that this "balanced" approach could lead to further
widening of the discount to net asset value at which the Fund currently
trades.
The "Accounts" for which KIM is the Investment Manager are managed by
individual investment guidelines, which may restrict or prohibit the Account
from investing in equity and other types of securities. KIM believes that if
the Accounts were forced to sell a considerable amount of shares, this would
be devastating to the market price of BBG, and may create further losses for
stockholders. On October 21, 1998 KIM wrote to Steven Landis with various
questions regarding the portfolio (copy as exhibit 1). On November 9,1998, KIM
made a second request to Mr. Landis, as the first request had gone unanswered.
Once KIM receives a reply to the attached letter it will analyze the response
and take appropriate actions with respect to each of its clients that own BBG
shares.
In September of 1997 and again in July of 1998, BBG filed preliminary
prospectus with the SEC proposing radical Fundamental changes in the
investment objective of the Fund, changing the name of the Fund, and changing
the Fund from a Diversified Fund to a Non-Diversified Fund. KIM opposed these
changes and the Fund abandoned these filings.
The intentions announced on August 17, 1998 by the Fund are not as
radical. The Fundamental Objectives of the Fund would not change. Therefore,
KIM believes that it would not be compelled to sell as many shares, especially
if stockholders at the 1998 annual meeting do not approve the name change of
the Fund.
Litigation
----------
On February 19, 1998, KIM filed a suit against the Fund in the
Circuit Court for Baltimore City, Maryland (Case No. 9805505) for the purpose
of inspecting the books and obtaining a listing of stockholders of the Fund.
The Fund had denied KIM. access to such records, alleging improper purposes,
which consequently forced litigation to secure the stockholder rights KIM was
entitled to under the State Law of Maryland. The estimated cost of litigation
was $5,000-$10,000. When legal fees exceeded $45,000, because of various
discovery efforts and motions by the Fund to prevent access to records KIM
made the conscious decision that the costs associated with asserting its
rights, as representing ownership of over 5% of the outstanding shares, became
not economically prudent to pursue. KIM presented to the Fund a Stipulation of
Voluntary Dismissal in September of 1998, pursuant to Maryland Rule
2-506(a)(2), for the voluntary dismissal of this action with prejudice with
each party bearing its own costs and legal fees. Both parties agreed upon this
Voluntary Dismissal with prejudice.
On February 19, 1998, about two hours after KIM filed its' Maryland
suit, the Fund filed suit against KIM, Inc. in the United States District
Court, Southern District of New York (Civil Action No 98 Civ. 1190) alleging
that KIM had violated Section 16(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 under such Act.
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5
KIM has repeatedly and vigorously denied these allegations, which it believes
to be lacking merit. The Fund has filed a First Amended Complaint on October
28,1998. In this proposed amended complaint BBG demands that "KIM will
immediately divest its client's holdings in BBG, in excess of 3%, on a
schedule to be determined by the Court, not to exceed six months, to protect
BBG and its investors from any negative financial impact on BBG caused by
KIM's breaches of the anti-pyramiding rule:" (Anti-pyramiding rule refers to
the Investment Company Act Section 12 (d) (1) (A), 15 U.S. C. 80a-12(d)
(1)(A), which provides in relevant part: "It shall be unlawful for any ....
investment company .... to purchase or otherwise acquire any security issued
by any registered investment company ("the acquired company"), if the
acquiring company and any company or companies controlled by it immediately
after such purchase or acquisition own in the aggregate: (i) More than three
per centum of the total outstanding voting stock of the acquired company...).
KIM believes that this claim is completely without merit, as KIM is a
Registered Investment Adviser, not an Investment Company. KIM believes this
divestiture could cause more harm to stockholders than any claim that is
alleged in the original complaint. The outcome of this matter can not be
predicted with certainty.
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 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
KIM Accounts have neither bought nor sold shares
since May 1998. KIM intends to hold all shares
through the annual meeting. However, if an
unforeseen liquidity need shall arise in an Account
(Accounts) KIM reserves the right to dispose of
shares according to the Account's requirements.
Should KIM receive a response answering the
questions in its October 21, 1998 letter to the
Fund's portfolio manager and having an opportunity
to evaluate the response in light of each client's
investment guidelines, KIM may sell shares of the
Fund prior to the 1998 annual meeting.
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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.
ITEM 6 Contracts, Arrangements, Understandings, or
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Relationships with Respect to Securities of the Issuer.
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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
---------------------------------
1 Exhibit
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.
November 12, 1998 Karpus Management, Inc.
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Date
By: /s/ George W. Karpus
-------------------------------
George W. Karpus
President
7
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EXHIBIT 1
October 21, 1998
Mr. Steven Landis, Portfolio Manager
Bull & Bear U.S. Government Securities Fund, Inc.
11 Hanover Square
New York, NY 10005
Dear Mr. Landis:
As I am sure you are aware, Karpus Investment Management (KIM)
represents the ownership of 119,250 shares of Bull & Bear U.S. Securities Fund
in our capacity as investment managers.
The Fund announced a radical departure from its original investment
objective on August 17, 1998 when it stated its intentions to invest up to 35%
of the Fund's assets in equities and other investments beginning October 19,
1998.
The Securities Exchange Acts of 1933 and 1934 as well as the Investment
Co Act of 1940 require disclosure. I have not found any disclosures in any of
your previous filings with respect to equity and other investments.
1. What type of equity and other investments are being made?
2. What are the criteria for choosing investments?
3. Are any of the investments foreign entities?
4. What percentage of the account is presently in equities and other
investments? What may that percentage be at year-end?
5. Do you have any policies or criteria with respect to socially responsible
investing? If so, what?
6. What are the credit quality parameters (nationally recognized rating
services of the securities)?
7. What are the industry classifications?
8. What do you mean by "other investments"?
9. What are your diversification guidelines with respect to this 35% of the
portfolio other than what is required by continuing to be a "diversified
investment company"?
The lack of disclosure has caused me to write this letter to you and
the Fund. In consideration of the fact that the Fund has twice, within the
last 13 months, already abandoned its intention to purchase equities and other
investments, I find it necessary to request and confirm that its August 17,
1998 intentions are being carried out. (Two abandoned preliminary proxy
filings Sept 1997 and July 1998).
Your response to the above questions is necessary for me to be in
compliance with guidelines established between KIM and its clients.
I would appreciate your prompt reply.
Sincerely,
George W. Karpus
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