SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (ss.) 240.14a-11(c)
or (ss.) 240.14a-12
Bexil Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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Please Vote Immediately by Signing and Returning the Enclosed Proxy
Card. Delay may cause the Fund to incur additional expenses to solicit
sufficient votes for the meeting.
BEXIL CORPORATION
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Notice of Annual Meeting of Stockholders
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To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
Bexil Corporation (the "Fund") will be held at the offices of the Fund at 11
Hanover Square, New York, New York on Tuesday, December 21, 1999 at 8:30 a.m.
for the following purposes:
1. To elect to the Board of Directors the Nominees, Douglas Wu and Robert D.
Anderson, as respectively, Class II Director and Class III Director, each
to serve for a five year term and until his successor is duly elected and
qualified.
2. To ratify the selection of Tait, Weller & Baker as the Fund's independent
auditors.
3. To change the Fund's investment objective and certain investment policies.
4. To change the classification of the Fund from a diversified investment
company to a non-diversified investment company.
Stockholders of record at the close of business on November 11, 1999 are
entitled to receive notice of and to vote at the meeting.
By Order of the Board of Directors
Deborah Ann Sullivan
Secretary
New York, New York
November 8, 1999
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BEXIL CORPORATION
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PROXY STATEMENT
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Annual Meeting of Stockholders
To Be Held December 21, 1999
This Proxy Statement, dated November 8, 1999, is furnished in
connection with a solicitation of proxies by the Board of Directors of Bexil
Corporation (the "Fund") to be voted at the Annual Meeting of Stockholders of
the Fund to be held at the offices of the Fund at 11 Hanover Square, New York,
New York on Tuesday, December 21, 1999 at 8:30 a.m. and at any postponement or
adjournment thereof ("Meeting") for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. Stockholders of record at the close of
business on November 11, 1999 ("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. Shares
represented by executed and unrevoked proxies will be voted in accordance with
the specifications made thereon. If the enclosed form of proxy is executed and
returned, it nevertheless may be revoked by another proxy or by letter or
telegram directed to the Fund, 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 date hereof,
the Fund had 766,175.870 shares of common stock issued and outstanding entitled
to be voted at the Meeting. Stockholders of the Fund will vote as a single
class. It is estimated that proxy materials will be mailed to stockholders of
record on or about November 17, 1999. 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.
PROPOSAL 1: ELECTION OF DIRECTORS
The Fund's Board of Directors is divided into five classes with the
term of office of one class expiring each year. It is proposed that stockholders
of the Fund elect one Class II Director and one Class III Director to serve for
a five year term, and until his successor is duly elected and qualified. Each
nominee currently serves as a Director of the Fund. The following table sets
forth certain information concerning the nominees for Class II Director and
Class III Director of the Fund.
<TABLE>
<CAPTION>
Name, Principal Occupation, Business Experience for Past Five Years, Director Year Term
Address, and Age Since Expires
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<S> <C> <C>
CLASS II:
DOUGLAS WU -- He is Principal of Maxwell Partners. From July 1998 to December 1997 2004
1998 he was a Principal of Libra Advisors LLC. From 1996 to June 1998, he was
Managing Director - Private Equity Investments, of Croesus Capital Management
Corporation. From 1992 to 1996, he was a partner of Medall Partners, a merchant
banking firm. His address is 114 East 90th Street, New York, New York 10128. He
was born on July 31, 1960.
CLASS III:
ROBERT D. ANDERSON* - He is Vice Chairman of the Fund, as well as the other 1999 2000
investment companies in the Investment Company Complex, and of Winmill & Co.
Incorporated ("WCI") and certain of its affiliates. He also is Vice Chairman of
the Investment Manager. He was a member of the Board of Governors of the Mutual
Fund Education Alliance, and of its predecessor, the No-Load Mutual Fund
Association. He has also been a member of the District #12, District Business
Conduct and Investment Companies Committees of the NASD. He was born on December
7, 1929.
</TABLE>
* Mr. Anderson is an "interested person" because he is an "affiliated person" as
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
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The persons named in the accompanying form of proxy intend to vote
each such proxy for the election of the nominees listed above, unless
stockholders specifically indicate on their proxies the desire to withhold
authority to vote for the nominee. It is not contemplated that either nominee
will be unable to serve as a Director for any reason, but if that should occur
prior to the Meeting, the proxyholders reserve the right to substitute another
person of their choice as nominee. Each nominee listed above has consented to
being named in this Proxy Statement and has agreed to serve as a Director if
elected.
The Fund has an audit committee comprised of Douglas Wu, Frederick
A. Parker, Jr., and Thomas B. Winmill, the function of which is routinely to
review financial statements and other audit-related matters as they arise
throughout the year. The Fund has an executive committee comprised of Thomas B.
Winmill, the function of which is to exercise the powers of the Board of
Directors between meetings of the Board to the extent permitted by law to be
delegated and not delegated by the Board to any other committee. Mr. Winmill is
an "interested person" because he is an "affiliated person" as defined in the
1940 Act. The Fund has no standing nominating or compensation committee or any
committee performing similar functions.
Information relevant to the Continuing Directors is set forth below.
Each Director who is deemed to be an "interested person" because he is an
"affiliated person" as defined in the 1940 Act is indicated by an asterisk.
<TABLE>
<CAPTION>
Name, Principal Occupation, Business Experience for Past Five Years, Director Year Term
Address, and Age Since Expires
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<S> <C> <C>
CLASS I:
FREDERICK A. PARKER, JR. -- He is retired President and Chief Executive Officer 1996 2003
of American Pure Water Corporation, a manufacturer of water purifying equipment.
His address is 219 East 69th Street, New York, New York 10021. He was born on
November 14, 1926.
CLASS IV:
THOMAS B. WINMILL* -- He is President, Chief Executive Officer, and General 1996 2001
Counsel of the Fund, as well as the other investment companies in the Investment
Company Complex, and of WCI and certain of its affiliates. He also is President
of the Investment Manager. He is a member of the New York State Bar and the SEC
Rules Committee of the Investment Company Institute. He is a son of Bassett S.
Winmill, the Chairman of the Board of the Fund. His address is 11 Hanover
Square, New York, New York 10005. He was born on June 25, 1959.
CLASS V:
BASSETT S. WINMILL* -- He is Chairman of the Board of the Fund, as well as 1996 2002
other investment companies in the Investment Company Complex, and of WCI. He
is a member of the New York Society of Security Analysts, the Association for
Investment Management and Research, and the International Society of Financial
Analysts. He is the father of Thomas B. Winmill, the President, Chief Executive
Officer, and General Counsel of the Fund. His address is 11 Hanover Square, New
York, New York 10005. He was born on February 10, 1930.
</TABLE>
The executive officers, other than those who serve as Directors, and
their relevant biographical information are set forth below:
STEVEN A. LANDIS - Senior Vice President. He also is Senior Vice President of
the other investment companies in the Investment Company Complex, and the
Investment Manager and certain of its affiliates. From 1993 to 1995, he was
Associate Director - Proprietary Trading at Barclays de Zoete Wedd Securities
Inc. and, from 1992 to 1993, he was Director, Bond Arbitrage at WG Trading
Company. He was born on March 1, 1955.
JOSEPH LEUNG, CPA - Treasurer and Chief Accounting Officer. He also
is Treasurer and Chief Accounting Officer of the other investment companies in
the Investment Company Complex, and the Investment Manager and its
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affiliates. From 1992 to 1995, he held various positions with Coopers & Lybrand
LLP, a public accounting firm. He is a member of the American Institute of
Certified Public Accountants. He was born on September 15, 1965.
DEBORAH ANN SULLIVAN - Vice President, Secretary and Chief
Compliance Officer. She also is Vice President, Secretary and Chief Compliance
Officer of the other investment companies in the Investment Company Complex, and
the Investment Manager and certain of its affiliates. From 1993 to 1994, she was
the Blue Sky Paralegal for SunAmerica Asset Management Corporation and, from
1992 to 1993, she was Compliance Administrator and Blue Sky Administrator with
Prudential Securities, Inc. and Prudential Mutual Fund Management, Inc. She is a
member of the New York State Bar. She was born on June 13, 1969.
The address of each executive officer of the Fund is 11 Hanover
Square, New York, New York 10005.
The following table presents certain information regarding the
beneficial ownership of the Fund's shares as of the Record Date by each officer
and Director of the Fund owning shares on such date. In each case, such amount
constitutes less than 1% of the Fund's outstanding shares.
Name of Officer or Director Number of Shares
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Robert D. Anderson 200
Steven A. Landis 50
Joseph Leung 0
Frederick A. Parker, Jr. 326
Deborah Ann Sullivan 0
Bassett S. Winmill 5000
Thomas B. Winmill 22.927
Douglas Wu 0
WCI and its subsidiaries, of which Bassett S. Winmill may be deemed a
controlling person, also own in the aggregate 121,476.210 Fund shares, or 16.00%
of all outstanding on the Record Date. Mr. Winmill disclaims beneficial
ownership of such shares.
The Fund pays its Directors who are not "interested persons" of the
Fund an annual retainer of $2,500, and a per meeting fee of $2,750, and
reimburses them for their meeting expenses. The Fund also pays such Directors
$250 per special telephonic meeting attended and per committee meeting attended.
The Fund does not pay any other remuneration to its executive officers and
Directors, and the Fund has no bonus, pension, profit-sharing, or retirement
plan. The Fund had 9 Board meetings, 1 audit committee meeting, and no executive
committee meetings during the Fund's most recently completed fiscal year. No
Director attended less than 75% of all Board and all committee meetings held
during such year during the period such Director was in office or on such
committee. For the fiscal year ended June 30, 1999, the aggregate amount of
compensation paid to the nominee by the Fund and by all other investment
companies advised by CEF Advisers, Inc. (the "Investment Manager"), the Fund's
investment adviser, and its affiliates (collectively, the "Investment Company
Complex") for which such nominee is a Board member (the current number of which
is set forth in parenthesis next to the nominee's total compensation) was as
follows:
<TABLE>
<CAPTION>
Total Compensation from Fund and
Aggregate Compensation Investment Company Complex (the
Name of Nominee from the Fund number of other funds) Paid to Nominee
- ----------------------------------------------------------- -----------------------------------------------
<S> <C> <C>
Robert D. Anderson $0 $0 (4)
Douglas Wu $15,000 $15,000 (0)
The aggregate amount of compensation
paid to each continuing Director by the
Fund and by all other funds in the
Investment Company Complex for which
such continuing Director is a Board
Member (the number of which is set forth
in parenthesis next to the continuing
Director's total compensation) for the
fiscal year ended June 30, 1999, was as
follows:
</TABLE>
<TABLE>
<CAPTION>
Aggregate Total Compensation from Fund and
Compensation from the Investment Company Complex (number of
Name of Continuing Director Fund other funds) Paid to Continuing Director
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frederick A. Parker, Jr. $15,000 $15,000 (0)
Bassett S. Winmill $0 $0 (5)
Thomas B. Winmill $0 $0 (8)
The Investment Manager, located at 11
Hanover Square, New York, New York
10005, is a wholly-owned subsidiary of
WCI, a publicly-owned company whose
securities are listed on The Nasdaq
Stock Market. During the fiscal year
ended June 30, 1999, the Fund paid the
Investment Manager no investment
management fees. Bassett S. Winmill, a
Director of the Fund, may be deemed a
controlling person of WCI on the basis
of his ownership of 100% of WCI's voting
stock and, therefore, of the Investment
Manager. In February and March 1999,
Robert D. Anderson, Bassett S. Winmill
and Thomas B. Winmill sold 29,000,
36,500, and 52,250 shares respectively
of WCI's Class A common stock on the
open market at prices varying between
$3.69 and $9.25 per share. In September
1999, Robert D. Anderson, Bassett S.
Winmill, and Thomas B. Winmill received
from WCI, respectively, 10,000, 40,000,
and 40,000 incentive stock options to
purchase shares of WCI's Class A common
stock at, respectively, $2.375, $2.6125,
and $2.6125 per share. These options
expire after five years.
</TABLE>
Vote Required
Inasmuch as the election of the nominees was approved by the vote of
a majority of the Board of Directors, the election of the nominees requires the
affirmative vote of a plurality of the votes cast at the Meeting.
THE FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEES.
PROPOSAL 2: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Investment Company Act of 1940, as amended (the "1940 Act"),
requires that the Fund's independent auditors be selected by a majority of those
Directors who are not "interested persons" (as defined in the 1940 Act) of the
Fund; that such selection be submitted for ratification or rejection at the
Meeting; and that the employment of such independent auditors be conditioned
upon the right of the Fund, by vote of a majority of its outstanding securities
at any meeting called for that purpose, to terminate such employment forthwith
without penalty. The Fund's Board of Directors, including a majority of those
Directors who are not "interested persons," approved the selection of Tait,
Weller & Baker for the fiscal period commencing July 1, 1999 at a Board meeting
held on September 8, 1999. Accordingly, the selection by the Fund's Board of
Tait, Weller & Baker as independent auditors for the fiscal period commencing
July 1, 1999 is submitted to stockholders for ratification or rejection. Apart
from its fees received as independent auditors, neither Tait, Weller & Baker nor
any of its partners has a direct, or material indirect, financial interest in
the Fund or the Investment Manager.
Tait, Weller & Baker acted as independent auditors of the Fund since
its organization through the fiscal year ended June 30, 1998, and acts as
independent auditors of WCI. Sanville & Company ("Sanville") served as the
independent auditors for the Fund for the fiscal year ended June 30, 1999. At
the Fund's Board of Directors meeting held on September 8, 1999, with the
approval of the Board's audit committee the Board of Directors dismissed
Sanville as the independent auditors of the Fund and approved the selection of
Tait, Weller & Baker as the independent auditors of the Fund for the fiscal
period beginning July 1, 1999. In connection with the audit of the fiscal year
ended June 30, 1999 and subsequent interim period through September 8, 1999,
there were no disagreements with Sanville on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused them
to make reference in connection with their opinion to the subject matter of the
disagreement. The audit report of Sanville on the financial statements of the
Fund as of and for the year ended June 30, 1999, did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles.
The Fund's Board believes that the employment of the services of
Tait, Weller & Baker, as described herein, is in the best interests of the Fund.
A representative of Sanville is not expected to be present at the Meeting, have
the opportunity to make a statement, nor be available to respond to questions. A
representative of Tait, Weller & Baker is expected to be present at the Meeting,
will have the opportunity to make a statement, and will be available to respond
to appropriate questions.
THE FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE SELECTION OF TAIT,
WELLER & BAKER AS INDEPENDENT AUDITORS OF THE FUND.
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PROPOSAL 3: TO CHANGE THE FUND'S INVESTMENT OBJECTIVE AND CERTAIN
INVESTMENT POLICIES.
Introduction
The Fund currently seeks to achieve its investment objective of
providing a high level of current income, liquidity, and safety of principal by
investing primarily in securities backed by the full faith and credit of the
United States ("U.S. Government Securities"). It currently is a fundamental
policy of the Fund to invest at least 65% of the value of its total assets in
U.S. Government Securities, including direct obligations of the United States
(such as U.S. Treasury bills, notes, and bonds) and certain agency securities,
such as those issued by the Government National Mortgage Association ("GNMA").
The Fund may invest up to 35% of the value of its total assets in other
securities, including common stocks and other equity securities and securities
issued by agencies and instrumentalities of the U.S. Government that may have
different levels of government backing but which are not backed by the full
faith and credit of the U.S. Government. In addition, the Fund may engage in
various investment techniques, such as leveraging, lending portfolio securities,
writing covered call options, and purchasing securities on a when-issued basis
as described in its Prospectus and Statement of Additional Information. 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 on October 19, 1998.
Management believes that a portion of the Fund's assets may be
invested more effectively if the permissible investments are broadened to
include equity securities, convertible securities, and fixed income securities,
particularly those issued by companies involved in natural resources and
commodities. Issuers of these securities may include U.S. and foreign entities,
including small capitalization companies and private companies, and such
securities may be denominated in U.S. dollars or foreign currencies.
In a rapidly changing market, it is important for the Fund to have
the flexibility to purchase a variety of instruments because while under certain
market conditions certain types of securities may be deemed most appropriate for
purchase by the Fund, under other market conditions other types of securities
may be deemed preferable. By expanding the universe of securities the Fund may
purchase, the Fund's management will be given the opportunity to adjust the
Fund's portfolio from time to time in such manner as it then deems appropriate.
The proposed securities in which the Fund would be permitted to invest are
described in further detail below.
The proposed changes to the Fund's policies are designed to combine
the growth potential of equities and other securities with the more regular
income that investing in U.S. Government Securities can provide. The approach
proposed by management will attempt to balance the potential for growth and
greater volatility of equity and other securities with the generally more stable
income and the relatively more moderate price fluctuations of U.S. Government
Securities. There can be no assurance, however, that this attempt will be
successful. Increasing the range of investments the Fund may make will increase
the risks to which the Fund's portfolio will be exposed and will increase the
volatility of the overall portfolio. Further, these changes will cause the net
asset value of the Fund's shares to fall at a faster rate, under certain
conditions, and will increase the overall risk to the Fund's portfolio.
This Proposal involves changing the Fund's investment objective,
fundamental policies and investment restrictions. The 1940 Act requires that a
relatively limited number of investment policies and restrictions be designated
as fundamental policies which may not be changed without stockholder approval.
These policies relate to (a) the classification and subclassification under the
1940 Act within which the Fund may operate, (b) borrowing money, (c) issuing
senior securities, (d) engaging in the business of underwriting securities
issued by other persons, (e) concentrating investments in a particular industry
or group of industries, (f) purchasing and selling real estate or commodities,
(g) making loans to others persons, and (h) changing the nature of the business
so as to cease to be an investment company. When the Fund was formed, its Board
designated a number of other policies as fundamental, in large part in response
to certain regulatory requirements or business or industry conditions that no
longer exist, and adopted certain restrictions which now are believed to be
unduly restrictive. In addition, stockholders of the Fund are being asked in
Proposal 4 to change the Fund's classification from a diversified to a
non-diversified investment company, which would call for the deletion of the
Fund's investment restriction pertaining to diversification.
This Proposal involves changing the Fund's investment objective,
which currently is fundamental and therefore cannot be changed without approval
by the holders of a majority (as defined in the 1940 Act) of the Fund's
outstanding shares, to non-fundamental. As a non-fundamental policy, the
proposed investment objective may be changed by vote of the Fund's Directors at
any time without stockholder approval, subject to compliance with applicable
Securities and Exchange Commission ("SEC") requirements.
To enable the Fund to broaden its permissible investments as
described below, the Fund's Board, at a meeting held on September 8, 1999
unanimously approved changes in the Fund's investment objective, fundamental
policies and
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<PAGE>
investment restrictions, and directed that this Proposal be submitted to
stockholders for their approval. If this Proposal is approved, it will increase
the Fund's ability to invest in equity securities and other types of non-fixed
income investments. Inasmuch as these types of investment often tend to be more
volatile than U.S. Government Securities and earn less income, stockholders
should consider that this could have the effect of increasing the volatility of
the net asset value and market price of the Fund's shares and result in the
Fund's shares trading at a greater discount to net asset value, with less
liquidity, and/or greater spreads and earn a lower yield than other closed-end
fund shares that invest primarily in U.S. Government Securities.
Changes to Investment Objective and Management Policies
If the Proposal is approved, the Fund would change its investment
objective from the current fundamental one of providing a high level of current
income, liquidity, and safety of principal by investing primarily in securities
backed by the full faith and credit of U.S. Government Securities to the
proposed non-fundamental one of providing shareholders with an attractive rate
of total return from capital appreciation and income. To achieve this new
investment objective, as a non-fundamental policy, the Fund would invest at
least 50% of the value of its total assets in U.S. Government Securities,
obligations of other U.S. Government agencies or instrumentalities, including
inflation-indexed instruments, and money market instruments described below. As
a non-fundamental policy, the Fund would invest the remainder of its total
assets primarily in equity and other securities of selected growth companies
that, in the Investment Manager's opinion, will grow faster than the economy as
a whole, and companies that invest or deal in natural resources or commodities,
based on its analysis of issuer fundamentals, technical and economic trends, and
other factors. As a non-fundamental policy, the securities in which the Fund
would be permitted to invest would include equity securities, such as common
stocks and preferred stocks, convertible securities, non-municipal debt
securities, mortgage-related securities (including inverse floaters),
asset-backed securities, warrants, loan participation interests, securities of
other investment companies, and securities issued by companies that invest or
deal in natural resources or commodities ("Additional Portfolio Securities").
Issuers of these securities may include U.S. and foreign entities, including
small capitalization companies and private companies, and such securities may be
denominated in U.S. dollars or foreign currencies. Except as described below,
the new investment objective and management policies would be non- fundamental.
Additional Portfolio Securities
If this Proposal is approved, the Fund would be permitted to invest,
except where noted, up to 50% of the value of its total assets in the following
Additional Portfolio Securities. For a more detailed discussion of the
Additional Portfolio Securities and their related risks, see "Certain Additional
Portfolio Securities" below.
Equity Securities. The Fund would be permitted to invest in equity securities,
including common stocks, preferred stocks and securities that are convertible
into common stocks of domestic and foreign issuers ("convertible securities").
The Fund also would be permitted to invest in equity securities in the form of
depositary receipts, and in warrants to purchase equity securities.
Fixed-Income Securities. The Fund would be permitted to invest in fixed-income
securities, such as bonds, debentures, notes, mortgage-related securities, and
asset-backed securities of domestic and foreign issuers (collectively, "Fixed
Income Securities"). The issuers of these obligations may include domestic and
foreign corporations, partnerships or trusts, and governments or their political
subdivisions, agencies or instrumentalities. The Fund will invest less than 50%
of its total assets in convertible securities rated below investment grade.
These instruments may be subject to certain risks with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated Fixed Income Securities. For a discussion of the risks related to
investing in convertible securities rated below investment grade, see "Certain
Additional Portfolio Securities" below.
Money Market Instruments. The Fund would be permitted to invest in money market
instruments, which include U.S. Government securities, certificates of deposit,
time deposits, bankers' acceptances, short-term investment grade corporate bonds
and other short-term debt instruments, and repurchase agreements. The Fund
currently may invest in money market instruments under certain conditions as
described above.
Investment Company Securities. The Fund also would be permitted to invest in
securities of other open-end and closed end investment companies which
principally invest in securities of the type in which the Fund invests and other
securities. Under the 1940 Act, purchasers of the securities of other investment
companies, subject to certain exceptions, are limited to a maximum of (i) 3% of
the total voting stock of any one investment company, (ii) 5% of the Fund's
total assets with respect to any one investment company and (ii) 10% of the
Fund's total assets in the aggregate. Investments in the securities of
investment companies may involve duplication of advisory fees and certain other
expenses.
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Nonetheless, the Fund's Board believes that these changes will provide the Fund
greater flexibility to achieve its proposed investment objective.
If Proposal 3 is approved, the Fund, except as noted, would be
permitted to invest up to 50% of its total assets in the portfolio securities
described below.
Certain Additional Portfolio Securities
Equity Securities
Common and Preferred Stocks -- Stocks represent shares of ownership
in a company. Generally, preferred stock has a specified dividend and ranks
after bonds and before common stocks in its claim on income for dividend
payments and on assets should the company be liquidated. After other claims are
satisfied, common stockholders participate in company profits on a pro-rata
basis; profits may be paid out in dividends or reinvested in the company to help
it grow. Increases and decreases in earnings are usually reflected in a
company's stock price, so common stocks generally have the greatest appreciation
and depreciation potential of all corporate securities. While most preferred
stocks pay a dividend, the Fund may purchase preferred stock where the issuer
has omitted, or is likely to omit, payment of its dividend. Such investments
would be made primarily for their capital appreciation potential.
Warrants -- A warrant is an instrument issued by a corporation which
gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time.
Convertible Securities -- Convertible securities may be converted at
either a stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities are investments that provide for a stable
stream of income with generally higher yields than common stocks. There can be
no assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
Convertible securities generally are not investment grade, that is,
not rated within the four highest categories by a credit rating agency, such as
Standard & Poor's Ratings Group ("S&P") or Moody's Investor Services, Inc.
("Moody's"). To the extent that such convertible securities and other
non-convertible debt securities, which are acquired by the Fund, are rated lower
than investment grade or are not rated, there would be a greater risk as to the
timely repayment of the principal of, and timely payment of interest or
dividends on, those securities. Securities rated BB or lower by S&P or Ba or
lower by Moody's are often referred to as "junk bonds" and may include
securities of issuers in default. "Junk bonds" are considered by the rating
agencies to be predominantly speculative and may involve major risk exposures
such as: (i) vulnerability to economic downturns and changes in interest rates;
(ii) sensitivity to adverse economic changes and corporate developments; (iii)
redemption or call provisions which may be exercised at inopportune times; (iv)
difficulty in accurately valuing or disposing of such securities; (v)
subordination to other debt of the issuer; and (vi) junk bonds are generally
unsecured.
As a non-fundamental policy, the Fund's investments in securities of
issuers in default will be limited to not more than 5% of the total assets of
the Fund. Further, the Fund will invest in securities of issuers in default only
when the Investment Manager believes that such issuers will emerge from
bankruptcy and the value of such securities will
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appreciate. By investing in securities of issuers in default the Fund bears the
risk that such issuers will not emerge from bankruptcy or that the value of such
securities will not appreciate. Securities rated BBB by S&P or Baa by Moody's,
in the opinion of the rating agencies, also have speculative characteristics.
Securities need not meet a minimum rating standard in order to be acceptable for
investment by the Fund.
In the absence of adequate anti-dilution provisions in a convertible
security, dilution in the value of the Fund's holding may occur in the event the
underlying stock is subdivided, additional securities are issued for below
market value, a stock dividend is declared, or the issuer enters into another
type of corporate transaction which has a similar effect. Every convertible
security may be valued, on a theoretical basis, as if it did not have a
conversion privilege. This theoretical value is determined by the yield it
provides in comparison with the yields of other securities of comparable
character and quality which do not have a conversion privilege. This theoretical
value, which may change with prevailing interest rates, the credit rating of the
issuer and other pertinent factors, often referred to as the "investment value,"
represents the security's theoretical price support level.
"Conversion value" is the amount a convertible security would be
worth in market value if it were to be exchanged for the underlying equity
security pursuant to its conversion privilege. Conversion value fluctuates
directly with the price of the underlying equity security, usually common stock.
If, because of low prices for the common stock, the conversion value is
substantially below the investment value, the price of the convertible security
is governed principally by the factors described in the preceding paragraph. If
the conversion value rises near or above its investment value, the price of the
convertible security generally will rise above its investment value and, in
addition, will sell at some premium over its conversion value. This premium
represents the price investors are willing to pay for the privilege of
purchasing a fixed-income security with a possibility of capital appreciation
due to the conversion privilege. If this appreciation potential is not realized,
this premium may not be recovered. In its selection of convertible securities
for the Fund, the Investment Manager will not emphasize either investment value
or conversion value, but will consider both in light of the Fund's overall
investment objective.
The Fund has no limit on the amount of its assets it may invest in
unregistered and otherwise illiquid convertible securities and other
investments. Unregistered securities are securities that cannot be sold publicly
in the United States without registration under the Securities Act of 1933, as
amended (the "1933 Act"). Unregistered securities generally can be resold only
in privately negotiated transactions with a limited number of purchasers, in a
public offering registered under the 1933 Act, or pursuant to an exemption
therefrom. Considerable delay could be encountered in either event and, unless
otherwise contractually provided for, the Fund's proceeds upon sale may be
reduced by the costs of registration or underwriting discounts. The difficulties
and delays associated with such transactions could result in the Fund's
inability to realize a favorable price upon disposition of unregistered
securities, and at times might make disposition of such securities impossible.
When unregistered convertible securities are converted into common stock and the
common stock is publicly traded (as is typically the case), the common stock
normally may be resold publicly under certain volume and other restrictions
beginning one year following the acquisition of the unregistered convertible
securities and without any restrictions beginning two years after the
acquisition of the unregistered convertible securities. Securities freely
salable among qualified institutional investors under special rules adopted by
the SEC may be treated as liquid if they satisfy institutional liquidity
standards established by the Board of Directors. The continued liquidity of such
securities is not as well assured as that of publicly traded securities.
Real Estate Investment Trusts -- A real estate investment trust
("REIT") is a corporation, or a business trust that would otherwise be taxed as
a corporation, which meets the definitional requirements of the Internal Revenue
Code of 1986, as amended ("Code"). The Code permits a qualifying REIT to deduct
dividends paid, thereby effectively eliminating corporate level Federal income
tax and making the REIT a pass-through vehicle for Federal income tax purposes.
To meet the definitional requirements of the Code, a REIT must, among other
things, invest substantially all of its assets in interests in real estate
(including mortgages and other REITs) or cash and government securities, derive
most of its income from rents from real property or interest on loans secured by
mortgages on real property, and distribute to stockholders annually a
substantial portion of its otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own real
estate directly and the value of, and income earned by, the REITs depends upon
the income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management
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skill. They also are subject to heavy cash flow dependency, defaults by
borrowers or tenants, self-liquidation and the possibility of failing to qualify
for tax-free status under the Code or to maintain exemption from the 1940 Act.
Risks -- Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's investments
will result in changes in the value of its shares and thus the Fund's total
return to investors. The value of a Fund's investments in certain equity
securities may be affected by changes in the price of precious metals, such as
gold, platinum and silver. Precious metals have been subject to substantial
price fluctuations over short periods of time. The prices have been influenced
by industrial and commercial demand, investment and speculation, and monetary
and fiscal policies of central banks and governmental and international
agencies. Changes in political, social and economic conditions affecting the
countries which are major producers of precious metals also pose certain risks
to a Fund's investments.
Fixed Income Securities
U.S. Treasury Securities -- U.S. Treasury securities include
Treasury Inflation-Protection Securities ("TIPS"), which are newly created
securities issued by the U.S. Treasury designed to provide investors a long term
investment vehicle that is not vulnerable to inflation. The interest rate paid
by TIPS is fixed, while the principal value rises or falls semi-annually based
on changes in a published Consumer Price Index. Thus, if inflation occurs, the
principal and interest payments on the TIPS are adjusted accordingly to protect
investors from inflationary loss. During a deflationary period, the principal
and interest payments decrease, although the TIPS' principal will not drop below
its face amount at maturity.
In exchange for the inflation protection, TIPS generally pay lower
interest rates than typical Treasury securities. Only if inflation occurs will
TIPS offer a higher real yield than a conventional Treasury bond of the same
maturity. In addition, it is not possible to predict with assurance how the
market for TIPS will develop; initially, the secondary market for these
securities may not be as active or liquid as the secondary market for
conventional Treasury securities. Principal appreciation and interest payments
on TIPS will be taxed annually as ordinary interest income for Federal income
tax calculations. As a result, any appreciation in principal must be counted as
interest income in the year the increase occurs, even though the investor will
not receive such amounts until the TIPS are sold or mature. Principal
appreciation and interest payments will be exempt from state and local income
taxes.
Money Market Instruments -- Money market instruments include the
following:
U.S. Government Securities. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury; others
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law.
Repurchase Agreements. In a repurchase agreement, a Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time and
price (usually within seven days). The repurchase agreement thereby determines
the yield during the purchaser's holding period, while the seller's obligation
to repurchase is secured by the value of the underlying security. Repurchase
agreements could involve risks in the event of a default or insolvency of the
other party to the agreement, including possible delays or restrictions upon the
Fund's ability to dispose of the underlying securities. The Fund may enter into
repurchase agreements with certain banks or non-bank dealers.
Bank Obligations. Bank obligations include certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the
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obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
Commercial Paper. Commercial paper consists of short-term,
unsecured promissory notes issued to finance short-term credit needs. These
instruments include variable amount master demand notes, which are obligations
that permit a Fund to invest fluctuating amounts at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the borrower.
These notes permit daily changes in the amounts borrowed. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value, plus accrued interest, at any time.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand.
Zero Coupon Securities -- Zero coupon U.S. Treasury securities are
Treasury Notes and Bonds that have been stripped of their unmatured interest
coupons, the coupons themselves and receipts or certificates representing
interests in such stripped debt obligations and coupons. Zero coupon securities
also are issued by corporations and financial institutions which may constitute
a proportionate ownership of the issuer's pool of underlying U.S. Treasury
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The market prices
of zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a greater
degree to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities.
Foreign Government Obligations; Securities of Supranational Entities
- -- These are obligations issued or guaranteed by one or more foreign governments
or any of their political subdivisions, agencies or instrumentalities and may
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
Corporate Debt Securities -- Corporate debt securities include
bonds, debentures, notes and other similar instruments, including convertible
securities issued by domestic and foreign entities. Debt securities may be
acquired with warrants attached. These securities also may include forms of
preferred or preference stock. The rate of interest on a corporate debt security
may be fixed, floating or variable, and may vary inversely with respect to a
reference rate. The rate of return or return of principal on some debt
obligations may be linked or indexed to the level of exchange rates between the
U.S. dollar and a foreign currency or currencies. Variable and floating rate
securities provide for a periodic adjustment in the interest rate paid on the
obligations. The terms of such obligations must provide that interest rates are
adjusted periodically based upon an interest rate adjustment index as provided
in the respective obligations. The adjustment intervals may be regular, and
range from daily up to annually, or may be event based, such as based on a
change in the prime rate. The interest rate on floating rate debt instruments
("floaters") is a variable rate which is tied to another interest rate, such as
a money-market index or Treasury bill rate. The interest rate on a floater
resets periodically. Because of the interest rate reset feature, floaters
provide the Fund with a certain degree of protection against rises in interest
rates, although the Fund will participate in any declines in interest rates as
well. The interest rate on inverse floating rate debt instruments ("inverse
floaters") resets in the opposite direction from the market rate of interest to
which the inverse floater is indexed. An inverse floating rate security may
exhibit greater price volatility than a fixed rate obligation of similar credit
quality. See "Mortgage-Related Securities" below.
Participation Interests -- Participation interests are corporate
obligations, denominated in U.S. dollars or foreign currencies, that are
originated, negotiated and structured by a syndicate of lenders ("Co-Lenders")
consisting of commercial banks, thrift institutions, insurance companies,
finance companies or other financial institutions, one or more of which
administers the security on behalf of the syndicate ("Agent Bank"). Co-Lenders
may sell such securities to third parties called "Participants." The Fund may
invest in such securities either by participating as a Co-Lender at origination
or by acquiring an interest in the security from a Co-Lender or a Participant
(collectively, "participation interests"). Co-Lenders and Participants
interposed between the Fund and the corporate borrower ("Borrower"), together
with Agent Banks, are referred to herein as "Intermediate Participants." The
Fund will not act as an Agent Bank, guarantor or sole negotiator with respect to
securities that are the subject of a participation interest. A participation
interest gives the Fund an undivided interest in the security in the proportion
that the Fund's participation interest bears to the total principal amount of
the security. These instruments may have fixed, floating or variable rates of
interest. The Fund also may purchase a participation interest in a portion of
the rights of an Intermediate Participant, which would not establish any direct
relationship between the Fund and the Borrower. In such cases, the Fund would be
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required to rely on the Intermediate Participant that sold the participation
interest not only for the enforcement of the Fund's rights against the Borrower,
but also for the receipt and processing of payments due to the Fund under the
security. Because it may be necessary to assert through an Intermediate
Participant such rights as may exist against the Borrower, if the Borrower fails
to pay principal and interest when due, the Fund may be subject to delays,
expenses and risks that are greater than those that would be involved if the
Fund were to enforce its rights directly against the Borrower. Moreover, under
the terms of a participation interest, the Fund may be regarded as a creditor of
the Intermediate Participant (rather than of the Borrower), so that the Fund
also may be subject to the risk that the Intermediate Participant may become
insolvent. Similar risks may arise with respect to the Agent Bank if, for
example, assets held by the Agent Bank for the benefit of the Fund were
determined by the appropriate regulatory authority or court to be subject to the
claims of the Agent Bank's creditors. In such case, the Fund might incur certain
costs and delays in realizing payment in connection with the participation
interest or suffer a loss of principal and/or interest. Further, in the event of
the bankruptcy or insolvency of the Borrower, the obligation of the Borrower to
repay the loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant. For certain participation interests, the Fund will have the right
to demand payment, on not more than seven days' notice, for all or any part of
the Fund's participation interest in the security, plus accrued interest. As to
these instruments, the Fund intends to exercise its right to demand payment only
upon a default under the terms of the security, as needed to provide liquidity
or to maintain or improve the quality of its investment portfolio.
Mortgage-Related Securities -- Mortgage-related securities are a
form of derivative collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations.
These securities may include complex instruments such as collateralized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs") or
other kinds of mortgage-backed securities, including those with fixed, floating
and variable interest rates, those with interest rates that change based on
multiples of changes in a specified index of interest rates and those with
interest rates that change inversely to changes in interest rates.
Government-Agency Securities -- Mortgage-related securities
issued by GNMA include GNMA Mortgage Pass-Through Certificates (also known as
"Ginnie Maes") which are guaranteed as to the timely payment of principal and
interest by GNMA and such guarantee is backed by the full faith and credit of
the United States. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee.
Government-Related Securities -- Mortgage-related securities issued
by the Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of FNMA and are not backed by or entitled to the full
faith and credit of the United States. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are guaranteed
as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the
United States created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or
by any Federal Home Loan Bank and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by FHLMC. FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Private Entity Securities -- These mortgage-related securities are
issued by commercial banks, savings and loan institutions, mortgage bankers,
private mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by pools
created by non-governmental issuers often is supported partially by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. There can be no assurance
that the private insurers or mortgage poolers can meet their obligations under
the policies, so that if the issuers default on their obligations the holders of
the security could sustain a loss. No insurance or guarantee covers the Fund or
the price of the Fund's shares. Mortgage-related securities issued by
non-governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.
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Commercial Mortgage-Related Securities -- Commercial
mortgage-related securities generally are multi- class debt or pass-through
certificates secured by mortgage loans on commercial properties. These
mortgage-related securities generally are structured to provide protection to
the senior classes investors against potential losses on the underlying mortgage
loans. This protection generally is provided by having the holders of
subordinated classes of securities ("Subordinated Securities") take the first
loss if there are defaults on the underlying commercial mortgage loans. Other
protection, which may benefit all of the classes or particular classes, may
include issuer guarantees, reserve funds, additional Subordinated Securities,
cross-collateralization and over-collateralization.
Subordinated Securities are issued or sponsored by commercial banks,
savings and loan institutions, mortgage bankers, private mortgage insurance
companies and other non-governmental issuers. Subordinated Securities have no
governmental guarantee, and are subordinated in some manner as to the payment of
principal and/or interest to the holders of more senior mortgage-related
securities arising out of the same pool of mortgages. The holders of
Subordinated Securities typically are compensated with a higher stated yield
than are the holders of more senior mortgage-related securities. On the other
hand, Subordinated Securities typically subject the holder to greater risk than
senior mortgage-related securities and tend to be rated in a lower rating
category, and frequently a substantially lower rating category, than the senior
mortgage-related securities issued in respect of the same pool of mortgage.
Subordinated Securities generally are likely to be more sensitive to changes in
prepayment and interest rates and the market for such securities may be less
liquid than is the case for traditional fixed-income securities and senior
mortgage-related securities.
The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is viewed
as exposing the lender to a greater risk of loss than one- to four-family
residential lending. Commercial lending, for example, typically involves larger
loans to single borrowers or groups of related borrowers than residential one-
to four-family mortgage loans. In addition, the repayment of loans secured by
income producing properties typically is dependent upon the successful operation
of the related real estate project and the cash flow generated therefrom.
Consequently, adverse changes in economic conditions and circumstances are more
likely to have an adverse impact on mortgage-related securities secured by loans
on commercial properties than on those secured by loans on residential
properties.
Collateralized Mortgage Obligations ("CMOs") -- A CMO is a
multi-class bond backed by a pool of mortgage pass-through certificates or
mortgage loans. CMOs may be collateralized by (a) Ginnie Mae, Fannie Mae, or
Freddie Mac pass-through certificates, (b) unsecuritized mortgage loans insured
by the Federal Housing Administration or guaranteed by the Department of
Veterans' Affairs, (c) unsecuritized conventional mortgages, (d) other
mortgage-related securities, or (e) any combination thereof. Each class of CMOs,
often referred to as a "tranche," is issued at a specific coupon rate and has a
stated maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than the
stated maturities or final distribution dates. The principal and interest on the
underlying mortgages may be allocated among the several classes of a series of a
CMO in many ways. One or more tranches of a CMO may have coupon rates which
reset periodically at a specified increment over an index, such as the London
Interbank Offered Rate ("LIBOR") (or sometimes more than one index). These
floating rate CMOs typically are issued with lifetime caps on the coupon rate
thereon. The Fund also may invest in inverse floating rate CMOs. Inverse
floating rate CMOs constitute a tranche of a CMO with a coupon rate that moves
in the reverse direction to an applicable index such a LIBOR. Accordingly, the
coupon rate thereon will increase as interest rates decrease. Inverse floating
rate CMOs are typically more volatile than fixed or floating rate tranches of
CMOs.
Many inverse floating rate CMOs have coupons that move inversely to
a multiple of the applicable indices. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse floaters
based on multiples of a stated index are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and loss of principal. The markets for inverse floating rate
CMOs with highly leveraged characteristics at times may be very thin. A Fund's
ability to dispose of its positions in such securities will depend on the degree
of liquidity in the markets for such securities. It is impossible to predict the
amount of trading interest that may exist in such securities, and therefore the
future degree of liquidity.
Stripped Mortgage-Backed Securities -- Stripped mortgage-backed
securities are created by segregating the cash flows from underlying mortgage
loans or mortgage securities to create two or more new securities, each with a
specified percentage of the underlying security's principal or interest
payments. Mortgage securities may be partially stripped so that each investor
class receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type of
security, known as an interest-only security, or IO, and all of the principal is
distributed to holders of another type of security known as a principal-only
security, or PO.
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Strips can be created in a pass-through structure or as tranches of
a CMO. The yields to maturity on IOs and POs are very sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may not fully recoup its initial investment
in IOs. Conversely, if the underlying mortgage assets experience less than
anticipated prepayments of principal, the yield on POs could be materially and
adversely affected.
Adjustable-Rate Mortgage Loans ("ARMs") -- ARMs eligible for
inclusion in a mortgage pool generally will provide for a fixed initial mortgage
interest rate for a specified period of time, generally for either the first
three, six, twelve, thirteen, thirty-six, or sixty scheduled monthly payments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index. ARMs typically have minimum and maximum rates beyond which
the mortgage interest rate may not vary over the lifetime of the loans. Certain
ARMs provide for additional limitations on the maximum amount by which the
mortgage interest rate may adjust for any single adjustment period. Negatively
amortizing ARMs may provide limitations on changes in the required monthly
payment. Limitations on monthly payments can result in monthly payments that are
greater or less than the amount necessary to amortize a negatively amortizing
ARM by its maturity at the interest rate in effect during any particular month.
Other Mortgage-Related Securities -- Other mortgage-related
securities include securities other than those described above that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans on real property, including CMO residuals. Other mortgage-related
securities may be equity or debt securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks, partnerships,
trusts and special purpose entities of the foregoing.
Asset-Backed Securities -- Asset-backed securities are a form of
derivative. The securitization techniques used for asset-backed securities are
similar to those used for mortgage-related securities. These securities include
debt securities and securities with debt-like characteristics. The collateral
for these securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Fund may invest
in these and other types of asset-backed securities that may be developed in the
future.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide the Fund
with a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that recoveries
on the underlying collateral may not, in some cases, be available to support
payments on these securities.
Risks -- Even though interest bearing securities are investments
which promise a stable stream of income, the prices of such securities generally
are inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. The values of fixed-income securities
also may be affected by changes in the credit rating or financial condition of
the issuer. Certain securities purchased by a Fund, such as convertible
securities rated below investment grade by a nationally recognized statistical
rating organization, may be subject to such risk with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated fixed income securities. Once the rating of a portfolio security has been
changed, the Fund will consider all circumstances deemed relevant in determining
whether to continue to hold the security.
Foreign Markets, Securities, and Currencies
Depositary Receipts -- American Depositary Receipts ("ADRs") are
receipts typically issued by a United States bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
European Depositary Receipts ("EDRs"), which are sometimes referred to as
Continental Depositary Receipts ("CDRs"), are receipts issued in Europe
typically by non-United States banks and trust companies that evidence ownership
of either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in the United States securities markets and EDRs and CDRs in
bearer form are designed for use in Europe. These securities may be purchased
through "sponsored" or "unsponsored" facilities. A sponsored facility is
established jointly by the issuer of the underlying security and a depositary,
whereas a depositary may establish an unsponsored facility without participation
by the issuer of the deposited security. Holders of unsponsored depositary
receipts generally bear all the costs of such facilities and the depositary of
an unsponsored facility frequently is under no obligation to distribute
stockholder communications received from the issuer of the deposited security or
to pass through voting rights to the holders of such receipts in respect of the
deposited securities. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted.
-12-
<PAGE>
Risks -- Foreign securities markets generally are not as developed
or efficient as those in the United States. Securities of some foreign issuers
are less liquid and more volatile than securities of comparable U.S. issuers.
Similarly, volume and liquidity in most foreign securities markets are less than
in the United States and, at times, volatility of price can be greater than in
the United States. Because evidences of ownership of such securities usually are
held outside the United States, the Fund will be subject to additional risks
which include possible adverse political and economic developments, seizure or
nationalization of foreign deposits or adoption of governmental restrictions
which might adversely affect or restrict the payment of principal and interest
on the foreign securities to investors located outside the country of the
issuer, whether from currency blockage or otherwise. Since foreign securities
often are purchased with and payable in currencies of foreign countries, the
value of these assets as measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations.
Additional Investment Considerations and Risks
Private Placements, Private Companies -- The Fund may invest in
securities that are sold in private placement transactions between the issuers
and their purchasers and that are neither listed on an exchange nor traded in
the secondary market and private companies. In many cases, privately placed
securities will be subject to contractual or legal restrictions on transfer. As
a result of the absence of a public trading market, privately placed securities
may in turn be less liquid and more difficult to value than publicly traded
securities. Although privately placed securities may be resold in privately
negotiated transactions, the prices realized from the sales could, due to
illiquidity, be less than if such securities were more widely traded. In
addition, private companies (issuers whose securities are not publicly traded)
may not be subject to the disclosure and other investor protection requirements
that may be applicable if their securities were publicly traded. If any
privately placed securities held by the Fund are required to be registered under
the securities laws of one or more jurisdictions before being resold, the Fund
may be required to bear the expenses of registration and may be deemed to be an
underwriter.
Small Capitalization Companies -- The Fund may invest in companies
that are small or thinly capitalized, and may have a limited operating history.
As a result, investment in these securities involves greater risks and may be
considered speculative. For example, such companies may have more limited
product lines, markets or financial resources than companies with larger
capitalizations, and may be more dependent on a small management group. In
addition, the securities of such companies may trade less frequently and in
smaller volume, and may be subject to more abrupt or erratic price movements,
than securities of large companies. The Fund's positions in securities of such
companies may be substantial in relation to the market of such securities.
Accordingly, it may be difficult for the Fund to dispose of securities of these
companies at prevailing market prices. Full development of these companies takes
time, and for this reason the Fund should be considered a long term investment
and not a vehicle for seeking short term profit. The securities of small or
thinly capitalized companies may also be more sensitive to market changes than
the securities of large companies. Such companies may not be well known to the
investing public and may not have institutional ownership. Such companies may
also be more vulnerable than larger companies to adverse business or economic
developments.
Natural Resource Companies -- Resource mining by its nature
involves significant risks and hazards. Even when a resource mineralization is
discovered, there is no guarantee that the actual reserves of a mine will
increase. Exploratory mining can last over a number of years, incur substantial
costs, and not lead to any new commercial mining. Resource mining runs the risk
of increased environmental, labor or other costs in mining due to environmental
hazards, industrial accidents, labor disputes, discharge of toxic chemicals,
fire, drought, flooding and other natural acts. Changes in laws relating to
mining or resource production or sales could also substantially affect resource
values.
Commodities and Derivatives. Although upon approval of the Proposal
the Fund will adopt a non-fundamental restriction that it may not purchase or
sell options, futures contracts, including those related to indices, and options
on futures contracts or indices, as a non-fundamental policy, such restriction
may be changed by vote of the Fund's Directors at any time without stockholder
approval, subject to compliance with applicable SEC requirements. In such
circumstances, the Fund would engage in options and futures transactions to
increase returns. The Fund may engage in certain options strategies to attempt
to enhance return or for hedging purposes. The Fund also would use securities
index futures contracts, interest rate futures contracts, foreign currency
futures contracts, options on futures contracts and forward currency contracts
for hedging purposes or in other circumstances, including speculation, to the
extent permitted by the CFTC pursuant to the Fund's filing under Rule 4.5. There
is a risk that these transactions sometimes may reduce returns or increase
volatility. In addition, derivatives, such as options and futures, can be
illiquid and highly sensitive to changes in their underlying security, interest
rate or index, and as a result can be highly volatile. A small investment in
certain derivatives could have a potentially large impact on the Fund's
performance.
-13-
<PAGE>
Corresponding Changes in Investment Restrictions
If this Proposal is approved by stockholders, the Fund's current
Investment Restrictions numbered 5 and 6 (proposed to be renumbered as
Investment Restrictions 4 and 5) will be revised to reflect the Fund's proposed
investment objective and management policies described in this Proxy Statement,
and generally to clarify the extent to which the Fund may invest in certain
types of securities or engage in various investment techniques. In addition,
current Investment Restriction No. 1, which pertains to the Fund's
classification as a "diversified" investment company, will be deleted if
Proposal 4 is approved by the Fund's stockholders. If Proposal 4 is not so
approved, Investment Restriction No. 1 will remain in effect and the remaining
Investment Restrictions will be renumbered.
Investment Restriction No. 5, proposed to be renumbered as
Investment Restriction No. 4, which prohibits the Fund from purchasing or
selling commodities or commodity futures contracts, except for financial and
foreign currency futures contracts and options thereon, and options and forward
contracts on foreign currencies, will be amended to permit the Fund to purchase
and sell options, futures contracts, including those relating to indices, and
options on futures contracts or indices. The Fund currently has no intention of
engaging in futures and options transactions and, thus, a non-fundamental policy
will be adopted to prohibit the Fund from purchasing and selling options,
futures contracts, including those relating to indices, and options on futures
contracts or indices.
Investment Restriction No. 6, proposed to be renumbered as
Investment Restriction No. 5, which prohibits the Fund from purchasing or
selling real estate, but permits the Fund to invest in securities (excluding
limited partnership interests) secured by real estate or issued by companies
which invest in real estate, will be revised to clarify that the Fund may invest
in companies, limited partnerships, or other entities that deal in real estate
and REITs and to reserve for the Fund the freedom of action to hold and sell
real estate acquired as a result of the Fund's ownership of securities. Risks of
owning real estate versus publicly traded securities include its greater
illiquidity and greater difficulty of valuation. Also, the real estate industry
is cyclical and sensitive to interest rates, economic conditions (both
nationally and locally), property tax rates, and other factors.
If approved by Fund stockholders, the Fund's Investment Restrictions
would read as follows (new language is underscored and language to be deleted is
in brackets):
The Fund may not:
[1. Purchase the securities of any one issuer if, as a
result, more than 5% of the Fund's total assets would be
invested in the securities of such issuer, or the Fund
would own or hold 10% or more of the outstanding voting
securities of that issuer, except that up to 25% of the
Fund's total assets may be invested without regard to
those limitations and provided that those limitations do
not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.]
1[2]. Issue senior securities as defined in the 1940 Act
(including borrowing money) except as permitted by
applicable law.
2[3]. Lend its assets, except as permitted by applicable law.
3[4]. Underwrite the securities of other issuers, except to
the extent that the Fund may be deemed to be an
underwriter under the Federal securities laws in
connection with the disposition of the Fund's authorized
investments.
4[5]. Purchase or sell commodities [or commodity futures
contracts, although it may enter into (i) financial and
foreign currency futures contracts and options thereon,
(ii) options on foreign currencies, and (iii) forward
contracts on foreign currencies], except that the Fund
may purchase and sell options, futures contracts,
including those relating to indices, and options on
futures contracts or indices, and currencies.
5[6]. Purchase or sell real estate, [provided that] but the
Fund may [invest in] purchase and sell securities
[(excluding limited partnership interests)] that are
secured by real estate or interests therein or issued by
companies, limited partnerships, or other entities which
invest or deal in real estate or interests therein or
real estate investment trusts and hold and sell real
estate as a result of ownership of such securities or
instruments.
6[7]. Purchase a security if, as a result, 25% or more of the
value of the Fund's total assets would be invested in
the securities of issuers in a single industry, provided
that this limitation does not apply to securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities.
7. Purchase or sell options, futures contracts, including
those related to indices, and options on futures
contracts or indices. This Investment Restriction will
be designated as a non-fundamental policy. As a
-14-
<PAGE>
non-fundamental policy, such restriction may be changed
by vote of the Fund's Directors at any time without
stockholder approval, subject to compliance with
applicable SEC requirements.
Vote Required and the Board's Recommendation
Approval of this Proposal will be sought by four separate votes.
Approval of this Proposal, with respect to each separate vote, requires the
affirmative vote of (a) 67% of the Fund's voting securities present at the
Meeting, if the holders of more than 50% of the Fund's outstanding voting
securities are present in person or represented by proxy, or (b) more than 50%
of the Fund's outstanding voting securities, whichever is less.
THE FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL 3 TO CHANGE THE FUND'S
INVESTMENT OBJECTIVE AND CERTAIN INVESTMENT POLICIES, AS DESCRIBED IN THE
PROPOSAL.
PROPOSAL 4: TO CHANGE THE CLASSIFICATION OF THE FUND FROM A DIVERSIFIED TO A
NON-DIVERSIFIED INVESTMENT COMPANY
The Fund currently is classified as a "diversified" investment
company. A diversified investment company is required by the 1940 Act generally
to limit its investment, with respect to 75% of its total assets, to not more
than 5% of such assets in the securities of a single issuer and to not more than
10% of the outstanding voting securities of such issuer.
By approving the Proposal, stockholders would authorize the
reclassification of the Fund as a "non-diversified" investment company, which
means that the portion of the Fund's assets that may be invested in the
securities of a single issuer would not be limited by the 1940 Act. Management
of the Fund believes that changing the classification of the Fund from a
diversified to a non-diversified investment company would give the Investment
Manager more flexibility to focus the Fund's investments in investments that it
views as offering the best opportunities to achieve the Fund's investment
objective. If the Proposal is approved, a relatively high percentage of the
Fund's assets then could be invested in the securities of a limited number of
issuers and in more than 10% of the outstanding voting securities of issuers,
including small capitalization companies and private companies. Therefore, the
Fund's portfolio would be more sensitive to changes in the market value of a
single issuer and less liquid.
The Fund, however, currently intends to continue to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Code, which currently requires that, at the end of each quarter of the
taxable year, (i) at least 50% of the market value of the Fund's total assets be
invested in cash, U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of any one
issuer limited for the purposes of this calculation to an amount not greater
than 5% of the value of the Fund's total assets, and (ii) not more than 25% of
the value of its total assets be invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies). Compliance with the Code's requirements to qualify as a
"regulated investment company" for purposes of the Code is not necessary except
at the end of each quarter of the taxable year and, in any event, there can be
no assurance that the Fund will so qualify as a "regulated investment company"
for purposes of the Code.
The change in the Fund's status from diversified to non-diversified
is being proposed to allow the Fund more flexibility in determining the size of
its investments. Subject to the foregoing discussion, if the Fund becomes
non-diversified, the Fund, with respect to 50% of its assets, will be able to
invest over 5% of its assets in each of those issuers. Currently, as a
diversified investment company, the Fund may invest over 5% of its assets in any
one issuer, but only with respect to 25% of its assets. Thus, a change in status
from diversified to non-diversified would enable the Fund generally to commit
larger portions of its assets to the limited number of investments deemed
attractive by the Investment Manager. The change from diversified to
non-diversified would add an element of risk to an investment in the Fund. To
the extent that a non-diversified company invests in fewer issuers than a
diversified company, the performance of any one portfolio security is likely to
have a greater impact on the performance of a non-diversified company than would
be the case for a diversified company.
Corresponding Changes in Investment Restrictions
If this Proposal is approved by stockholders, the Fund's current
Investment Restriction numbered 1 will be deleted. This Investment Restriction
is set forth under "Proposal 3 -- Corresponding Changes in Investment
Restrictions."
-15-
<PAGE>
Vote Required and the Board's Recommendation
Approval of this Proposal requires the affirmative vote of (a) 67%
of the Fund's voting securities present at the Meeting, if the holders of more
than 50% of the Fund's outstanding voting securities are present in person or
represented by proxy or (b) more than 50% of the Fund's outstanding voting
securities, whichever is less.
THE FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS,
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL 4 TO CHANGE THE CLASSIFICATION
OF THE FUND FROM A DIVERSIFIED INVESTMENT COMPANY TO A NON-DIVERSIFIED
INVESTMENT COMPANY.
ADDITIONAL INFORMATION
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. 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 named 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 actually
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 proxies will vote
those proxies which they are entitled to vote "for" a Proposal in favor of any
adjournment, and will vote those proxies required to be voted "against" a
Proposal against any adjournment. 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 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. Under Maryland law,
abstentions do not constitute a vote "for" or "against" a matter and will be
disregarded in determining "votes cast" on an issue. Abstentions, however, will
have the effect of a "no" vote for the purpose of obtaining requisite approval
for Proposals 2, 3, and 4.
In addition to the use of the mails, proxies may be solicited
personally, by telephone, or by other means, and the Fund may pay persons
holding its shares in their names or those of their nominees for their expenses
in sending soliciting materials to their principals. The Fund will bear the cost
of soliciting proxies. In addition, the Fund will retain D.F. King & Co., Inc.
("D.F. King"), 77 Water Street, 20th Floor, New York, NY 10005, to solicit
proxies on behalf of its Board for a fee estimated at $7,500 plus expenses,
primarily by contacting stockholders by telephone and telegram. Authorizations
to execute proxies may be obtained by telephonic instructions in accordance with
procedures designed to authenticate the stockholder's identity. In all cases
where a telephonic proxy is solicited, the stockholder will be asked to provide
his or her address, social security number (in the case of an individual) or
taxpayer identification number (in the case of an entity) or other identifying
information and the number of shares owned and to confirm that the stockholder
has received the Fund's Proxy Statement and proxy card in the mail. Within 48
hours of receiving a stockholder's telephonic voting instructions and prior to
the Meeting, a confirmation will be sent to the stockholder to ensure that the
vote has been taken in accordance with the stockholder's instructions and to
provide a telephone number to call immediately if the stockholder's instruction
are not correctly reflected in the confirmation. Stockholders requiring further
information with respect to telephonic voting instructions or the proxy
generally should contact D.F. King toll-free at 1-800-431-9646. Any stockholder
giving a proxy may revoke it at any time before it is exercised by submitting to
the Fund a written notice of revocation or a subsequently executed proxy or by
attending the meeting and voting in person.
To the knowledge of the management of the Fund, as of the Record
Date, the following purported to beneficially own 5% or more of the outstanding
shares of the Fund according to its Schedule 13D filed on August 3, 1999:
<TABLE>
<CAPTION>
Approximate Percentage of the
Name Common Stock Fund's Total Outstanding Shares
<S> <C> <C>
Investor Service Center, Inc. 121,476.21 shares 16.00%
11 Hanover Square
New York, New York 10005
</TABLE>
-16-
<PAGE>
Discretionary Authority; Submission Deadlines for Stockholder Proposals
Although no business may come before the Meeting other than that
specified in the Notice of Annual Meeting of Stockholders, shares represented by
executed and unrevoked proxies will confer discretionary authority to vote on
matters which the Fund did not have notice of by October 5, 1999 pursuant to
Rule 14a-4(c)(1) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). The deadline for submitting shareholder proposals for inclusion in the
Fund's proxy statement and form of proxy for the Fund's next annual meeting is
July 12, 2000 pursuant to Rule 14a-8(e)2 of the 1934 Act. The date after which
notice of a shareholder proposal submitted outside the processes of Rule 14a-8
under the 1934 Act is considered untimely is September 24, 2000. In addition,
for a nomination to be made by a stockholder or for any other business to be
properly brought before the annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Fund in the manner set forth in the Fund's By-laws. As of the date hereof,
the Fund's By-laws provide that to be timely, a stockholder's notice to the
Secretary must be delivered to or mailed and received at the principal executive
offices of the Fund (a) in the case of an annual meeting, not less than sixty
(60) calendar days nor more than ninety (90) calendar days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) calendar days before or sixty (60) calendar
days after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the later of
the sixtieth (60th) calendar day prior to such annual meeting or the tenth
(10th) calendar day following the day on which notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever first occurs; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) calendar day following the day on which
notice of the date of the special meeting was mailed or public disclosure of the
date of the special meeting was made, whichever first occurs. For the foregoing
purposes, the date of a public disclosure shall include, but not be limited to,
the date on which such disclosure is made in a press release reported by the Dow
Jones News Services, the Associated Press or any comparable national news
service or in a document publicly filed by the Fund with the Securities and
Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and
regulations thereunder) of the 1934 Act or pursuant to Section 30 (or the rules
and regulations thereunder) of the 1940 Act.
As set forth in the Fund's Articles of Incorporation, any action
submitted to a vote by stockholders requires the affirmative vote of at least
eighty percent (80%) of the outstanding shares of all classes of voting stock,
voting together, in person or by proxy at a meeting at which a quorum is
present, unless such action is approved by the vote of a majority of the Board
of Directors, in which case such action requires (A) if applicable, the
proportion of votes required by the 1940 Act, or (B) the lesser of (1) a
majority of all the votes entitled to be cast on the matter with the shares of
all classes of voting stock voting together, or (2) if such action may be taken
or authorized by a lesser proportion of votes under applicable law, such lesser
proportion.
Notice to Banks, Broker/dealers and Voting Trustees and Their Nominees
Please advise the Fund, at its principal executive offices, to the
attention of Deborah Ann Sullivan, Secretary, whether other persons are the
beneficial owners of the shares for which proxies are being solicited and, if
so, the number of copies of this Proxy Statement and other soliciting material
you wish to receive in order to supply copies to the beneficial owners of
shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
-17-
<PAGE>
Your vote is important!
Please sign and date the proxy/voting instructions card above and return it
promptly in the enclosed postage-paid envelope or otherwise to Bexil Corporation
c/o Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230, so that
your shares can be represented at the Meeting.
Please fold and detach card at perforation before mailing.
Bexil Corporation Proxy/Voting Instruction Card
- --------------------------------------------------------------------------------
This proxy is solicited by and on behalf of the Fund's Board of Directors for
the Annual Meeting of Stockholders on December 21, 1999, and at any postponement
or adjournment thereof.
The undersigned stockholder of Bexil Corporation (the "Fund") hereby appoints
Thomas B. Winmill and Deborah Ann Sullivan and each of them, the attorneys and
proxies of the undersigned, with full power of substitution in each of them, to
attend the Annual Meeting of Stockholders to be held at the offices of the Fund
at 11 Hanover Square, New York, New York on Tuesday, December 21, 1999 at 8:30
a.m., and at any postponement or adjournment thereof ("Meeting") to cast on
behalf of the undersigned all votes that the undersigned is entitled to cast at
the Meeting and otherwise to represent the undersigned at the Meeting with all
of the powers the undersigned possesses and especially (but without limiting the
general authorization and power hereby given) to vote as indicated on the
proposals, as more fully described in the proxy statement for the Meeting. The
undersigned hereby acknowledges receipt of the Notice of the Annual Meeting and
the accompanying Proxy Statement and revokes any proxy heretofore given for the
Meeting. If no directions are given, the proxies will vote FOR all proposals and
in their discretion on any other matter that may properly come before the
Meeting.
Sign here as name(s) appear to the left.
-------------------------
-------------------------
Signature(s) should be exactly as name or
names appearing on this form. Please sign
this proxy and return it promptly whether
or not you plan to attend the Meeting. If
signing for a corporation or partnership
or as agent, attorney or fiduciary,
indicate the capacity in which you are
signing. If you do attend the Meeting and
decide tovote by ballot, such vote will
supersede this proxy.
Dated: , 1999
<PAGE>
Proxy to be signed and dated on the
reverse side. Please fold and detach card
at perforation before mailing.
Bexil Corporation Please mark your votes as in this example: (record)
- --------------------------------------------------------------------------------
Please sign, date and return this proxy/voting instructions card promptly in the
enclosed postage-paid envelope. If no direction is given on a proposal, the
proxies will vote FOR the proposal, in accordance with the Fund Board's
recommendations.
1. To elect to the Board of Directors the Nominees, Douglas Wu and
Robert D. Anderson, as respectively, Class II Director and Class III
Director, each to serve for a five year term and until his successor
is duly elected and qualified.
|_|FOR All Nominees |_|WITHHOLD authority only
for those Nominee(s) whose
name(s) I have written
below
|_| WITHHOLD authority for
ALL Nominees
2. To ratify the selection of Tait, Weller & Baker as the Fund's independent
auditors.
|_|FOR |_|AGAINST |_|ABSTAIN
3. To change the Fund's investment objective and certain investment policies.
A. To change the Fund's investment objective from the current
fundamental one of providing a high level of current income,
liquidity, and safety of principal by investing primarily in
securities backed by the full faith and credit of U.S. Government
Securities to the proposed non-fundamental one of providing
shareholders with an attractive rate of total return from capital
appreciation and income.
|_|FOR |_|AGAINST |_|ABSTAIN
B. To change the current fundamental policy of the Fund to invest at
least 65% of the value of its total assets in U.S. Government
Securities, including direct obligations of the United States (such
as U.S. Treasury bills, notes, and bonds) and certain agency
securities, such as those issued by the Government National
Mortgage Association, to a non-fundamental policy of investing at
least 50% of the value of its total assets in U.S. Government
Securities, obligations of other U.S. Government agencies or
instrumentalities, including inflation- indexed instruments, and
money market instruments, and the remainder of its total assets
primarily in equity and other securities of selected growth
companies that, in the Investment Manager's opinion, will grow
faster than the economy as a whole, and companies that invest or
deal in natural resources or commodities, based on its analysis of
issuer fundamentals, technical and economic trends, and other
factors.
|_|FOR |_|AGAINST |_|ABSTAIN
C. To amend the investment restriction which currently prohibits the
Fund from purchasing or selling commodities or commodity futures
contracts, except for financial and foreign currency futures
contracts and options thereon, and options and forward contracts on
foreign currencies, to permit the Fund to purchase and sell options,
futures contracts, including those relating to indices, and options
on futures contracts or indices.
|_|FOR |_|AGAINST |_|ABSTAIN
D. To amend the investment restriction which prohibits the Fund from
purchasing or selling real estate, but permits the Fund to invest in
securities (excluding limited partnership interests) secured by real
estate or issued by companies which invest in real estate, to
clarify that the Fund may invest in companies, limited partnerships,
or other entities that deal in real estate and REITs and to reserve
for the Fund the freedom of action to hold and sell real estate
acquired as a result of the Fund's ownership of securities.
<PAGE>
|_|FOR |_|AGAINST |_|ABSTAIN
4. To change the classification of the Fund from a diversified investment
company to a non-diversified investment company.
|_|FOR |_|AGAINST |_|ABSTAIN
<PAGE>