As filed with the Securities and Exchange Commission on January 23, 1997
1940 Act File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-2
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
BULL & BEAR GLOBAL INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
11 Hanover Square
New York, New York 10005
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 1-212-785-0900
Thomas B. Winmill
Bull & Bear Advisers, Inc
11 Hanover Square
New York, New York 10005
(Name and Address of Agent for Service)
Copy to:
Richard T. Prins
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
(212) 735-3000
CROSS REFERENCE SHEET
BULL & BEAR GLOBAL INCOME FUND, INC.
N-2 Item Number Prospectus (Caption)
Part A
Item 1 Outside Front Cover . . . . . . . . Cover Page
Item 2 Inside Front and Outside Back
Cover Page . . . . . . . . . . . Not Applicable
Item 3 Fee Table and Synopsis. . . . . . . Expense Table
Item 4 Financial Highlights. . . . . . . . Not Applicable
Item 5 Plan of Distribution. . . . . . . . Not Applicable
Item 6 Selling Shareholders. . . . . . . . Not Applicable
Item 7 Use of Proceeds. . . . . . . . . . Not Applicable
Item 8 General Description of the
Registrant . . . . . . . . . . . The Fund's Investment
Program; Capital Stock
Item 9 Management. . . . . . . . . . . . . The Fund's Investment
Program; Investment
Manager; Repurchase of
Shares; Capital Stock;
Custodian, Transfer
Agent and Dividend
Disbursing Agent
Item 10 Capital Stock, Long-Term Debt, and
Other Securities . . . . . . . . Dividend Reinvestment Plan;
Repurchase of Shares;
Dividends, Distributions
and Taxes; Capital Stock
Item 11 Defaults and Arrears on Senior
Securities . . . . . . . . . . Not Applicable
Item 12 Legal Proceedings. . . . . . . . . Not Applicable
Item 13 Table of Contents of the Statement
of Additional Information . . . Table of Contents of the
Statement of Additional
Information
Part B
Location in Statement of
Additional Information
(Caption)
Item 14 Cover Page . . . . . . . . . . . . Outside Front Cover Page
Item 15 Table of Contents. . . . . . . . . Outside Front Cover Page
Item 16 General Information and History. . Not Applicable
Item 17 Investment Objective and Policies. The Fund's Investment
Program; Investment
Restrictions
Item 18 Management. . . . . . . . . . . . Officers and Directors;
The Investment Manager;
Investment Management
Agreement
Item 19 Control Persons and Principal
Holder of Securities . . . . . Officers and Directors; The
Investment Manager;
Custodian, Transfer and
Dividend Disbursing Agent;
Auditors
Item 20 Investment Advisory and Other
Services. . . . . . . . . . . . Officers and Directors; The
Investment Manager; Custodian,
Transfer and Dividend
Disbursing Agent; Auditors
Item 21 Brokerage Allocation and Other
Practices. . . . . . . . . . . . Allocation of Brokerage
Item 22 Tax Status . . . . . . . . . . . Distributions and Taxes
Item 23 Financial Statements . . . . . . . Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration
Statement.
The primary investment objective of Bull & Bear Global Income
Fund, Inc. (the "Fund"), a diversified, closed-end management
investment company, is to provide for its shareholders a high level of
income. This primary investment objective is fundamental and may not be
changed without shareholder approval.The Fund's secondary investment
objective, which may be changed by the Board of Directors of the Fund
(the "Directors") without shareholders approval, is capital
appreciation.
The Fund will commence operations as a diversified, closed-end
management investment company on the date hereof. Prior to the date
hereof, since September 1, 1983, the Fund was a diversified series of
shares designated Bull & Bear Global Income Fund (and prior to October
29, 1992, Bull & Bear High Yield Fund), an open- end management
investment company organized in 1974 and operating under the name Bull
& Bear Incorporated until October 29, 1993.
The Fund pursues its investment objectives by investing primarily
in a global portfolio of investment grade fixed income securities.
There can be no assurance that the Fund will achieve its investment
objectives.
The Fund may also borrow money from banks from time to time to
purchase or carry securities. Such borrowing is speculative and
increases both investment opportunity and investment risk.
Listings and Symbol. The Fund's shares are listed on the American
Stock Exchange under the symbol "BBZ".
This prospectus contains information you should know about the
Fund before you invest. Please keep it for future reference. The Fund's
Statement of Additional Information, dated February 7, 1997, has been
filed with the Securities and Exchange Commission and is incorporated
by reference in this prospectus. It is available at no charge by
calling toll-free 1-888-847-4200.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Tables . . . . . . 3 Dividends, Distributions and
Prospectus Summary . . . . 4 Taxes . . . . . . . . . . . . 13
The Fund's Investment Repurchase of Shares . . . . . 14
Program . . . . . . . . . 5 Capital Stock . . . . . . . . . 14
Investment Manager . . . . 12 Custodian, Transfer Agent and
Dividend Reinvestment Plan. 12 Dividend Disbursing Agent . . 15
EXPENSE TABLES
The table below is designed to help you understand the costs and
expenses that you will bear directly or indirectly as an investor in
the Fund. The amounts are based on estimates. These expenses should not
be considered a representation of actual future expenses as such
expenses may be greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)... None
Dividend Reinvestment Plan Fees.................. None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets
attributable to common shares)
Management Fees . . . . . . . . . . . 0.70%
Interest Payments on Borrowed Funds . . 0.00%
Other Expenses . . . . . . . . . . . . 0.68%
Total Fund Operating Expenses . . . . . 1.38%
Example
1 year 3 years 5 years 10 years
You would pay the following
expenses on a $1,000 investment,
assuming a 5% annual return . . . $14 $44 $76 $166
The example set forth above assumes a 5% annual rate of return as
required by the Securities and Exchange Commission (the "SEC").
THE EXAMPLE IS AN ILLUSTRATION ONLY AND SHOULD NOT BE CONSIDERED AN
INDICATION OF PAST OR FUTURE RETURNS AND EXPENSES. Actual returns and
expenses may be greater or less than those shown. "Other Expenses"
includes amounts paid to the Fund's custodian and transfer agent and
reimbursed to Bull & Bear Advisers, Inc., the Fund's Investment
Manager.
The percentages given for annual Fund expenses are based on the Fund's
operating expenses restated using the current fees that would have been
applicable had they been in effect during the fiscal year ended June
30, 1996 and net assets of approximately $31 million as of October 29,
1996. Based on the same restated expenses and average daily net assets
of the Fund during its fiscal year ended June 30, 1996, "Other
Expenses" and "Total Fund Operating Expenses" would have been 59% and
129%, respectively. "Other Expenses" includes amounts paid to the
Fund's Custodian and Transfer Agent and reimbursable to the Investment
Manager for certain administrative services. Until February 7, 1997,
the Fund was a diversified series of shares issued by Bull & Bear Funds
II, Inc., an open-end management investment company.
PROSPECTUS SUMMARY
PURPOSES OF THE FUND. The Fund is for long term investors seeking the
yields offered worldwide by a portfolio consisting primarily of
investment grade fixed income securities, together with the advantages
of professional management, diversification and liquidity. The net
asset value of the Fund will change as interest rates and currency
prices fluctuate. The Fund is subject to risks unique to global
investing. The Fund should not be considered a complete investment
program, and there is no assurance it will achieve its objectives.
PORTFOLIO MANAGEMENT. The investment manager of the Fund is Bull & Bear
Advisers, Inc. (the "Investment Manager"). The Fund's Portfolio Manager
is Steven A. Landis. Mr. Landis is also Senior Vice President and a
member of the Investment Policy Committee of the Investment Manager
with overall responsibility for the Bull & Bear fixed income funds. Mr.
Landis was formerly Associate Director -- Proprietary Trading at
Barclays De Zoete Wedd Securities Inc. and Director, Bond Arbitrage at
WG Trading Company. Mr. Landis received his MBA in Finance from
Columbia University. LISTING AND SYMBOL. The Fund's shares are listed
on the American Stock Exchange under the symbol "BBZ".
REPURCHASE OF SHARES. Although the Fund does not currently intend to
repurchase shares, no assurance can be given that the Fund will decide
to repurchase shares in the future, or, if undertaken, that such
repurchases will reduce any market discount that may develop. While the
Fund does not currently intend to repurchase its shares, its officers
and directors and the Investment Manager and its affiliates may do so
from time to time. See "Repurchase of Shares."
ANTI-TAKEOVER PROVISIONS. Certain provisions of the Fund's Articles of
Incorporation and By-Laws may be regarded as "anti- takeover"
provisions. Pursuant to these provisions, only one of five classes of
directors is elected each year, the affirmative vote of the holders of
80% of the outstanding shares of the Fund is necessary to amend the
Articles of Incorporation, to authorize the conversion of the Fund from
a closed-end to an open-end investment company and to authorize certain
business combinations (including any merger, consolidation, or share
exchange with any interested shareholder or any affiliate thereof),
unless approved by the vote of at least a majority of the Continuing
Directors (defined as (1) the persons acting as directors until the
first annual meeting of the Board of Directors after effectiveness of
the Articles of Incorporation and until their successors are duly
elected and qualifying and (2) directors whose election is approved by
a majority of the Continuing Directors then on the Board), in which
case such amendment, conversion or business combination requires the
affirmative vote of the holders of at least a majority of the votes
entitled to be cast by holders of voting stock. The overall effect of
these provisions may be to render more difficult the accomplishment of
a merger with, or the assumption of control by, a principal
shareholder. These provisions may have the effect of depriving Fund
shareholders of an opportunity to sell their shares at a premium to the
prevailing market price. See "Capital Stock - Certain Provisions of the
Articles of Incorporation and By-Laws of the Fund."
MARKET PRICE OF SHARES. Shares of closed-end investment companies
frequently trade at a discount from net asset value. This
characteristic of shares of a closed-end investment company is a risk
separate and distinct from the risk that the value of the Fund's
portfolio securities and the Fund's Net Asset Value may decrease. The
Fund cannot predict whether its shares will trade at, below or above
net asset value. See "The Fund's Investment Program - Market and Net
Asset Value."
DIVIDEND REINVESTMENT PLAN. Under the Fund's Dividend Reinvestment Plan
(the "Plan"), all dividends and capital gain distributions will be
automatically reinvested in additional Fund shares instead of being
paid in cash, unless at any time prior to the record date for a
particular dividend or distribution a shareholder elects otherwise by
notifying the Fund in writing. There are no sales or other charges in
connection with the reinvestment of dividends or capital gain
distributions. Shareholders who intend to hold their Fund shares
through a broker or nominee should contact such broker or nominee to
confirm that they may participate in the Plan. The Fund has no fixed
dividend rate, and there can be no assurance that the Fund will pay any
dividends or realize any capital gain. See "Dividend Reinvestment Plan"
and "Dividends, Distributions and Taxes."
THE FUND'S INVESTMENT PROGRAM
Prior to February 7, 1997, the Fund was a diversified series of
shares issued by Bull & Bear Funds II, Inc., an open-end management
investment company organized under Maryland law in 1974. On February 7,
1997, upon shareholder approval, the Fund converted from open-end to
closed-end status. The Fund's primary, fundamental, investment
objective is to provide a high level of income. The Fund's secondary,
non-fundamental, investment objective is capital appreciation. The Fund
pursues its investment objectives by investing primarily in a global
portfolio of investment grade fixed income securities. There can be no
assurance that the Fund will achieve its investment objectives.
The Fund will normally invest at least 65% of its net assets in
investment grade fixed income securities which are rated, at the time
of purchase, BBB or better by Standard & Poor's Ratings Group ("S&P"),
Baa or better by Moody's Investors Service, Inc. ("Moody's") or, if
unrated, are determined by the Investment Manager to be of comparable
quality. The Fund may also invest up to 35% of its assets in fixed
income securities rated BB, B, or CCC by S&P or Ba, B, or Caa by
Moody's and in other securities (including common stocks, warrants,
options and securities convertible into common stock), when such
investments are consistent with its investment objectives or are
acquired as part of a unit consisting of a combination of fixed income
securities and other securities. The Fund currently expects to invest
predominately in the United States, Western Europe, Latin America, the
Pacific Rim, South Africa, and Canada. The Fund will normally invest in
at least three different countries, but may invest in fixed income
securities of only one country for temporary defensive purposes.
Pending investment or for temporary defensive purposes, the Fund may
commit all or any portion of its assets to cash (U.S. dollars and/or
foreign currencies) or invest in money market instruments of U.S. and
foreign issuers, including repurchase agreements. In seeking to
identify the world's best performing bonds and other fixed income
securities, the Investment Manager bases its investment decisions on
fundamental market attractiveness, interest rates and trends, currency
trends, and credit quality.
The Investment Manager undertakes several measures in seeking to
achieve the Fund's objectives:
(X) First, the fixed income securities purchased by the Fund will be
primarily rated at the time of purchase in the top four categories
by S&P or Moody's or, if unrated, are determined by the Investment
Manager to be of comparable quality. Ratings are not a guarantee
of quality and ratings can change after a security is purchased by
the Fund. Moreover, securities rated Baa by Moody's are deemed by
that rating agency to have speculative characteristics.
(X) Second, the Investment Manager actively manages the average
maturity of the Fund's portfolio in response to expected interest
rate movements in pursuit of capital appreciation or to protect
against depreciation. Debt securities generally change in value
inversely to changes in interest rates. Increases in interest
rates generally cause the market values of debt securities to
decrease, and vice versa. Movements in interest rates typically
have a greater effect on the prices of longer term bonds than on
those with shorter maturities. When anticipating a decline in
interest rates, the Investment Manager will attempt to lengthen
the portfolio's maturity to capitalize on the appreciation
potential of such securities. Conversely, when anticipating rising
rates, the Investment Manager will seek to shorten the Fund's
maturity to protect against capital depreciation. The Fund's
portfolio may consist of securities with long, intermediate, and
short maturities. Consistent with seeking to maximize current
income, the proportion invested in each category can be expected
to vary depending upon the Investment Manager's evaluation of the
market outlook.
(X) Third, the Investment Manager may employ certain investment
techniques to seek to reduce the Fund's exposure to risks
involving foreign currency exchange rates. An increase in the
value of a foreign currency relative to the U.S. dollar (the
dollar weakens) will increase the U.S. dollar value of securities
denominated in that foreign currency. Conversely, a decline in the
value of a foreign currency relative to the U.S. dollar (the
dollar strengthens) causes a decline in the U.S. dollar value of
these securities. The percentage of the Fund's investments in
foreign securities that will be hedged back to the U.S. dollar
will vary depending on anticipated trends in currency prices and
the relative attractiveness of such techniques and other
strategies.
There is, of course, no guarantee that these investment strategies will
accomplish their objectives.
FOREIGN INVESTMENTS. Investors should understand and consider carefully
the substantial risks involved in foreign investing. Foreign
securities, which are generally denominated in foreign currencies, and
utilization of forward contracts on foreign currencies involve certain
considerations comprising both risk and opportunity not typically
associated with investing in U.S. securities. These considerations
include: fluctuations in currency exchange rates; restrictions on
foreign investment and repatriation of capital; costs of converting
foreign currencies into U.S. dollars; greater price volatility and
trading illiquidity; less public information on issuers of securities;
difficulty in enforcing legal rights outside of the United States; lack
of uniform accounting, auditing, and financial reporting standards; the
possible imposition of foreign taxes, exchange controls, and currency
restrictions; and possible political, economic, and social instability
of developing as well as developed countries including without
limitation nationalization, expropriation of assets, and war.
Furthermore, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency, and balance of payments position. Securities of many
foreign companies may be less liquid and their prices more volatile
than securities issued by comparable U.S. issuers. Transactions in
foreign securities may be subject to less efficient settlement
practices. These risks are often heightened when the Fund's investments
are concentrated in a small number of countries. In addition, because
transactional and custodial expenses for foreign securities are
generally higher than for domestic securities, the expense ratio of the
Fund can be expected to be higher than investment companies investing
exclusively in domestic securities. Foreign securities trading
practices, including those involving securities settlement where Fund
assets may be released prior to receipt of payment, may expose the Fund
to increased risk in the event of a failed trade or insolvency of a
foreign broker/dealer. Legal remedies for defaults and disputes may
have to be pursued in foreign courts, whose procedures differ
substantially from those of U.S. courts.
Since investments in foreign securities usually involve foreign
currencies and since the Fund may temporarily hold funds in bank
deposits in foreign currencies in order to facilitate portfolio
transactions, the value of the assets of the Fund as measured in U.S.
dollars may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations. For example,
if the value of the U.S. dollar decreases relative to a foreign
currency in which a Fund investment is denominated or which is
temporarily held by the Fund to facilitate portfolio transactions, the
value of such Fund assets and the Fund's net asset value per share will
increase, all else being equal. Conversely, an increase in the value of
the U.S. dollar relative to such a foreign currency will result in a
decline in the value of such Fund assets and its net asset value per
share. The Fund may incur additional costs in connection with
conversions of currencies and securities into U.S. dollars. The Fund
will conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis, or by entering into forward contracts. The
Fund generally will not enter into a forward contract with a term of
greater than one year.
The Fund may invest in securities of issuers located in emerging
market countries. The risks of investing in foreign securities may be
greater with respect to securities of issuers in, or denominated in the
currencies of, emerging market countries. The economies of emerging
market countries generally are heavily dependent upon international
trade and accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. These economies also
have been and may continue to be adversely affected by economic
conditions in the countries with which they trade. The securities
markets of emerging market countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of
the U.S. and other developed countries. Disclosure and regulatory
standards in many respects are less stringent in emerging market
countries than in the U.S. and other developed countries. There also
may be a lower level of monitoring and regulation of emerging markets
and the activities of investors in such markets, and enforcement of
existing regulations may be extremely limited. Investing in local
markets, particularly in emerging market countries, may require the
Fund to adopt special procedures, seek local government approvals or
take other actions, each of which may involve additional costs to the
Fund. Emerging market countries may also restrict investment
opportunities in issuers in industries deemed important to national
interests.
U.S. AND FOREIGN GOVERNMENT SECURITIES. The U.S. Government securities
in which the Fund may invest include direct obligations of the U.S.
Government (such as U.S. Treasury bills, notes and bonds) and
obligations issued by U.S. Government agencies and instrumentalities.
Agencies and instrumentalities include executive departments of the
U.S. Government and independent Federal organizations supervised by
Congress. The types of support for these obligations can range from the
full faith and credit of the United States (for example, U.S. Treasury
securities), to the creditworthiness of the issuer (for example,
securities of the Federal National Mortgage Association, Federal Home
Loan Mortgage Corporation and the Tennessee Valley Authority). In the
case of obligations not backed by the full faith and credit of the
United States, the Fund must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet
its commitments. Accordingly, these securities may involve more risk
than securities backed by the U.S. Government's full faith and credit.
The foreign government securities in which the Fund invests
include obligations issued or supported by national, state or
provincial governments or similar political subdivisions or obligations
of supranational agencies, such as the International Bank for
Reconstruction and Development (the World Bank). Supranational agencies
rely on funds from participating countries, often including the United
States, from which they must request funds. Such requests may not
always be honored.
Foreign government securities, depending on where and how they are
issued, may be subject to some of the risks discussed above with
respect to foreign securities. In addition, investments in foreign
government debt securities involve special risks. The issuer of the
debt or the governmental authorities that control the repayment of the
debt may be unable or unwilling to pay interest or repay interest or
repay principal when due in accordance with the terms of such debt, and
the Fund may have limited legal recourse in the event of default.
Political conditions, especially a sovereign entity's willingness to
meet the terms of its debt obligations, are of considerable
significance.
SECURITIES OF PRIVATE ISSUERS. The securities of U.S. and foreign
private issuers in which the Fund invests may be denominated in U.S.
dollars or other currencies, including obligations of U.S. and foreign
issuers payable in U.S. dollars outside the United States ("Euros") and
obligations of foreign issuers payable in U.S. dollars and issued in
the United States ("Yankees"). The securities of private issuers may
include corporate bonds, notes and commercial paper, as well as
certificates of deposit, time deposits, bankers' acceptances and other
obligations of U.S. banks and their branches located outside the United
States, U.S. branches of foreign banks, foreign branches of foreign
banks and U.S. agencies of foreign banks and wholly owned banking
subsidiaries of foreign banks located in the United States. The
securities of private issuers also may include common stocks and other
equity securities such as warrants, options and securities convertible
into common stock, when such investments are consistent with the Fund's
investment objectives or are acquired as part of a unit consisting of
fixed income and equity securities.
FIXED INCOME SECURITIES. The Fund will normally invest at least 65% of
its net assets in investment grade fixed income securities. Securities
rated BBB or better by S&P or Baa or better by Moody's are investment
grade but Moody's considers securities rated Baa to have speculative
characteristics. Changes in economic conditions or other circumstances
are more likely to lead to a weakened capacity for issuers of such
securities to make principal and income payments than is the case for
higher-rated securities. The Fund also may invest up to 35% of its
assets in fixed income securities rated below investment grade but not
lower than CCC by S&P or Caa by Moody's. These securities are deemed by
those agencies to be in poor standing and predominantly speculative;
the issuers may be in default on such securities or deemed without
capacity to make scheduled payments of income or repay principal,
involving major risk exposure to adverse conditions. The Fund is also
permitted to purchase fixed income securities that are not rated by S&P
or Moody's but that the Investment Manager determines to be of
comparable quality to that of rated securities in which the Fund may
invest. Such securities are included in percentage limitations
applicable to the comparable rated securities.
Ratings of fixed income securities represent the rating agencies'
opinions regarding their quality, are not a guarantee of quality, and
may be lowered after the Fund acquires the security. The Investment
Manager will consider such an event in determining whether the Fund
should continue to hold the security but is not required to dispose of
it. Credit ratings attempt to evaluate the safety of principal and
income payments and do not evaluate the risk of fluctuations in market
value. Also, rating agencies may fail to make timely changes in credit
ratings in response to subsequent events, so that an issuer's financial
condition may be better or worse than the rating indicates. See the
Appendix to the Statement of Additional Information for a further
description of S&P and Moody's ratings.
Lower rated fixed income securities generally offer a higher
current yield than that available on higher grade issues. However,
lower rated securities involve higher risks, in that they are
especially subject to adverse changes in general economic conditions
and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers, and to price fluctuations in
response to changes in interest rates. During periods of economic
downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability
to make payments of principal and income and increase the possibility
of default. In addition, such issuers may not have more traditional
methods of financing available to them, and may be unable to repay debt
at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.
The market for lower rated securities has expanded rapidly in
recent years, and its growth paralleled a long economic expansion. In
the past, the prices of many lower rated securities declined
substantially, reflecting an expectation that many issuers of such
securities might experience financial difficulties. As a result, the
yields on lower rated securities rose dramatically, but such higher
yields did not reflect the value of the income stream that holders of
such securities expected, but rather the risk that holders of such
securities could lose a substantial portion of their value as a result
of the issuers' financial restructuring or default. There can be no
assurance that such price declines will not recur. The market for lower
rated securities generally is thinner and less active than that for
higher quality securities, which may limit the Fund's ability to sell
such securities at fair value in response to changes in the economy or
financial markets. Adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may also decrease the value and
liquidity of lower rated securities, especially in a thinly traded
market.
During its fiscal year ended June 30, 1996, the Fund invested 92%
of its average annual net assets in debt securities that had received a
rating from S&P. The remaining 8% can be classified as non-rated debt
securities, other fixed income securities, equities and other net
assets. The Fund had the following percentages of its average net
assets invested in rated securities: AAA -- 14%, AA -- 5%, A -- 17%,
BBB -- 26%, BB -- 9%, B -- 14%; CCC -- 2%. It should be noted that this
information reflects the average composition of the Fund's assets
during the fiscal year ended June 30, 1996 and is not necessarily
representative of the Fund's assets as of the end of that fiscal year,
the current year or at any time in the future.
PREFERRED SECURITIES. The fixed income securities in which the Fund may
invest includes preferred share issues of U.S. and foreign companies.
Such securities involve greater risk of loss of income than debt
securities because issuers are not obligated to pay dividends. In
addition, preferred securities are subordinate to debt securities, and
are more subject to changes in economic and industry conditions and in
the financial conditions of the issuers of such securities.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities
which are bonds, debentures, notes, preferred stocks or other fixed
income securities that may be converted into or exchanged for a
specified amount of common stock of the same or a different issuer
within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest generally
paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or
exchanged. Convertible securities have unique investment
characteristics in that they generally (i) have higher yields than
common stocks, but lower yields than comparable non-convertible
securities, (ii) are less subject to fluctuation in value than the
underlying stock since they have fixed income characteristics and (iii)
provide the potential for capital appreciation if the market price of
the underlying common stock increases.
The value of a convertible security is a function of its
"investment value" (determined by its yield in comparison with the
yields of other securities of comparable maturity and quality that do
not have a conversion privilege) and its "conversion value" (the
security's worth, at market value, if converted into the underlying
common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value
declining as interest rates increase and increasing as interest rates
decline. The credit standing of the issuer and other factors also may
have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market
price of the underlying common stock. If the conversion value is low
relative to the investment value, the price of the convertible security
is governed principally by its investment value and generally the
conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the
convertible security will be increasingly influenced by its conversion
value. In addition, a convertible security will sell at a premium over
its conversion value determined by the extent to which investors place
value on the right to acquire the underlying common stock while holding
a fixed income security. The Fund will exchange or convert the
convertible securities held in its portfolio into shares of the
underlying common stock when, in the Investment Manager's opinion, the
investment characteristics of the underlying common shares will assist
the Fund in achieving its investment objectives. Otherwise, the Fund
may hold or trade convertible securities. In selecting convertible
securities for the Fund, the Investment Manager evaluates the
investment characteristics of the convertible security as a fixed
income instrument and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the Investment Manager
considers numerous factors, including the economic and political
outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and
the issuer's management capability and practices.
HEDGING AND INCOME STRATEGIES. The Fund may purchase call options on
securities that the Investment Manager intends to include in the Fund's
portfolio in order to fix the cost of a future purchase or to attempt
to enhance return by, for example, participating in an anticipated
price increase of a security. The Fund may purchase put options to
hedge against a decline in the market value of securities held in the
Fund's portfolio or to attempt to enhance return. The Fund may write
(sell) covered put and call options on securities in which it is
authorized to invest. The Fund may purchase and write straddles,
purchase and write put and call options on bond indexes, and take
positions in options on foreign currencies to hedge against the risk of
foreign exchange rate fluctuations on foreign securities the Fund holds
in its portfolio or that it intends to purchase. The Fund may purchase
and sell interest rate futures contracts, bond index futures contracts
and foreign currency futures contracts, and may purchase put and call
options and write covered put and call options on such contracts.
The Fund may enter into forward currency contracts to set the rate
at which currency exchanges will be made for contemplated or completed
transactions. The Fund may also enter into forward currency contracts
in amounts approximating the value of one or more portfolio positions
to fix the U.S. dollar value of those positions. For example, when the
Investment Manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, the
Fund may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such foreign
currency. The Fund has no specific limitation on the percentage of
assets it may commit to foreign currency exchange contracts, except
that it will not enter into a forward contract if the amount of assets
set aside to cover the contract would impede portfolio management or
the Fund's ability to meet redemption requests.
Strategies with options, financial futures, and forward currency
contracts may be limited by market conditions, regulatory limits and
tax considerations, and the Fund might not employ any of the strategies
described above. There can be no assurance that any strategy used will
be successful. The loss from investing in futures transactions is
potentially unlimited. Options and futures may fail as hedging
techniques in cases where price movements of the securities underlying
the options and futures do not follow the price movements of the
portfolio securities subject to the hedge. Gains and losses on
investments in options and futures depend on the Investment Manager's
ability to predict correctly the direction of stock prices, interest
rates, and other economic factors. In addition, the Fund will likely be
unable to control losses by closing its position where a liquid
secondary market does not exist and there is no assurance that a liquid
secondary market for hedging instruments will always exist. It also may
be necessary to defer closing out hedged positions to avoid adverse tax
consequences. The percentage of the Fund's assets segregated to cover
its obligations under options, futures, or forward currency contracts
could impede effective portfolio management or meeting redemptions or
other current obligations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
with U.S. banks or dealers involving securities in which the Fund is
authorized to invest. A repurchase agreement is an instrument under
which the Fund purchases securities from a bank or dealer and
simultaneously commits to resell the securities to the bank or dealer
at an agreed upon date and price. The Fund's custodian maintains
custody of the underlying securities until their repurchase; thus the
obligation of the bank or dealer to pay the repurchase price is, in
effect, secured by such securities. The Fund's risk is limited to the
ability of the seller to pay the agreed upon amount on the repurchase
date; if the seller defaults, the security constitutes collateral for
the seller's obligation to pay. If, however, the seller defaults and
the value of the collateral declines, the Fund may incur loss and
expenses in selling the collateral. To attempt to limit the risk in
engaging in repurchase agreements, the Fund enters into repurchase
agreements only with banks and dealers believed by the Investment
Manager to present minimum credit risks in accordance with guidelines
established by the Board.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse
repurchase agreements. In such agreements, the Fund sells the
underlying security to a creditworthy securities dealer or bank and the
Fund agrees to repurchase it at an agreed-upon date and price
reflecting a market rate of interest. Such agreements are considered to
be borrowings and involve leveraging which is speculative and increases
both investment opportunity and investment risk. When the Fund enters
into reverse repurchase agreements, its custodian will set aside in a
segregated account cash or liquid securities whose value is marked to
the market daily with a market value at least equal to the repurchase
price. If necessary, assets will be added to the account daily so that
the value of the account will not be less than the amount of the Fund's
purchase commitment. Such agreements are subject to the risk that the
benefit of purchasing a security with the proceeds of the sale by the
Fund will be less than the cost to the Fund of transacting the reverse
repurchase agreement. Such agreements will be entered into when, in the
judgment of the Investment Manager, the risk is justified by the
potential advantage of total return.
PRIVATE PLACEMENTS AND RULE 144A SECURITIES. The Fund may purchase
securities in private placements or pursuant to the Rule 144A exemption
from Federal registration requirements. Because an active trading
market may not exist for such securities, the sale of such securities
may be subject to delay and greater discounts than the sale of
registered securities. Investing in such securities could have the
effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become less interested in buying these
securities.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a
"when-issued" basis. In such transactions delivery and payment occur at
a date subsequent to the date of the commitment to make the purchase.
Although the Fund will enter into when-issued transactions with the
intention of acquiring the securities, the Fund may sell the securities
prior thereto for investment reasons, which may result in a gain or
loss. Acquiring securities in this manner involves a risk that yields
available on the delivery date may be higher than those received in
such transactions, as well as the risk of price fluctuation. When the
Fund purchases securities on a when-issued basis, its custodian will
set aside in a segregated account cash or liquid securities whose value
is marked to the market daily with a market value at least equal to the
amount of the commitment. If necessary, assets will be added to the
account daily so that the value of the account will not be less than
the amount of the Fund's purchase commitment. Failure of the issuer to
deliver the security may result in the Fund incurring a loss or missing
an opportunity to make an alternative investment.
LENDING. Pursuant to an arrangement with its custodian, the Fund may
lend portfolio securities or other assets of the Fund. If the Fund
engages in lending transactions, it will enter into agreements that
require that the loans be continuously secured by cash, securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, or any combination of cash and such securities, as
collateral equal at all times to at least the market value of the
assets lent. To the extent of such activities, the custodian will apply
credits against its custodial charges. There are risks to the Fund of
delay in receiving additional collateral and risks of delay in recovery
of, and failure to recover, the assets lent should the borrower fail
financially or otherwise violate the terms of the lending agreement.
Loans will be made only to borrowers deemed to be of good standing. Any
loan made by the Fund will provide that it may be terminated by either
party upon reasonable notice to the other party.
PORTFOLIO TURNOVER. Given the investment objectives of the Fund, the
rate of portfolio turnover will not be a limiting factor when the
Investment Manager deems changes in the composition of the portfolio
appropriate, and the investment strategy pursued by the Fund therefore
includes the possibility of short term transactions. The Fund's
portfolio turnover rate will vary from year to year depending on world
market conditions. For the fiscal years ended June 30, 1996 and 1995,
the portfolio's turnover rate was 585% and 385%, respectively. Higher
portfolio turnover involves correspondingly greater transaction costs
and increases the potential for short term capital gains and taxes (see
"Dividends, Distributions and Taxes" below).
LEVERAGE. The Fund may borrow money from banks (including its custodian
bank) and may issue senior securities, including debt and preferred
stock, to purchase and carry securities and will pay interest thereon.
These practices are referred to as leverage, are speculative, and
increase both investment opportunity and investment risk. If the
investment income on securities purchased with leverage exceeds the
interest paid on the leverage, the Fund's income will be
correspondingly higher. If the investment income fails to cover the
Fund's costs, including interest on leverage, or if there are losses,
the net asset value of the Fund's shares will decrease faster than
would otherwise be the case. The 1940 Act requires the Fund to have
asset coverage of at least 200% for preferred securities and 300% for
debt. Interest on money borrowed is an expense the Fund would not
otherwise incur, and it may therefore have little or no investment
income during periods of substantial borrowings.
Use of leverage by the Fund would increase the Fund's total return
to shareholders if the Fund's returns on its investments out of the
proceeds of such leverage exceed the cost of such leverage. Although in
the past the Fund has not used leverage and there can be no assurance
that if employed, it will be successful, the Directors and Investment
Manager believe that increased capacity to employ leverage may
potentially increase yields and total returns.
Leverage is a speculative investment technique and, as such,
entails two primary risks. The first risk is that the use of leverage
magnifies the impact on the common shareholders of changes in net asset
value. For example, a fund that uses leverage of one third of its total
assets will show a 1.5% increase or decline in net asset value for each
1% increase or decline in the value of its total assets. The second
risk is that if the cost of leverage exceeds the return on the
securities acquired with the proceeds of that leverage, it will
diminish rather than enhance the return to common shareholders. These
two risks would generally make the Fund's total return to common
shareholders more volatile. However, if the Fund is able to provide
total returns on its assets exceeding the costs of leverage, the use of
leverage would over the longer term enhance the Fund's yields and total
returns, although there can be no assurance that this can be achieved.
The Fund may invest without limit in illiquid securities,
including securities with legal or contractual conditions on resale.
Investing in such securities entails certain risks. The primary risk is
that the Fund may not be able to dispose of a security at the desired
price at the time it wishes to make such disposition. In addition, such
securities often sell at a discount from liquid and freely tradable
securities of the same class or type, although they are also usually
purchased at an equivalent discount which enhances yield while the
securities are held by the Fund. Such securities may also be more
difficult to price accurately although this is less significant in a
closed-end fund where shares are not purchased or sold solely on the
basis of net asset value.
MARKET VALUE AND NET ASSET VALUE. The Fund was recently converted from
a diversified series of shares of an open-end management investment
company to a diversified, closed-end management investment company.
Shares of closed-end investment companies are bought and sold in the
open market and may trade at either a premium to or discount from net
asset value, although they frequently trade at a discount. This is a
risk separate and distinct from the risk that the value of the Fund's
portfolio securities, and as a result its net asset value, may
decrease. The Fund cannot predict whether its shares will trade at,
above or below net asset value. Shareholders will incur brokerage and
possibly other transaction costs to buy and sell shares in the open
market, provided, however, that the Investment Manager has arranged
with its affiliate, Bull & Bear Securities, Inc., that for two years
after February 7, 1997, any Fund shares may be bought or sold at the
market price without commission through Bull & Bear Securities, Inc.
A decline in net asset value could affect the Fund's ability to
pay dividends, make capital gain distributions or effect any share
repurchases with respect to its common stock if the Fund has
outstanding any preferred stock or debt securities, because the Fund
would be required by the 1940 Act to have asset coverage immediately
after such dividend, distribution or repurchase of two hundred percent
for any preferred stock and three hundred percent for any debt
securities, in each case after giving effect to such dividend,
distribution or repurchase. In addition, if the Fund's current
investment income were not sufficient to meet dividend requirements on
any outstanding preferred stock, the Fund may be required to sell a
portion of its portfolio securities when it might be disadvantageous to
do so, which would reduce the net asset value attributable to the
Fund's common stock.
OTHER INFORMATION. The Fund is not obligated to deal with any
particular broker, dealer or group thereof. Certain broker/dealers that
the Investment Manager and its affiliates do business with may, from
time to time, own more than 5% of the publicly traded Class A
non-voting Common Stock of Bull & Bear Group, Inc., the parent of the
Investment Manager, and may provide clearing services to Bull & Bear
Securities, Inc. ("BBSI").
The Fund's primary investment objective of providing a high level
of income is fundamental and may not be changed without shareholder
approval. The Fund is also subject to certain investment restrictions,
set forth in the Statement of Additional Information, that are
fundamental and cannot be changed without shareholder approval. The
Fund's secondary investment objective of capital appreciation and the
other investment policies described herein, unless otherwise stated,
are not fundamental and may be changed by the Directors without
shareholder approval.
INVESTMENT MANAGER
Bull & Bear Advisers, Inc. acts as general manager of the Fund,
being responsible for the various functions assumed by it, including
the regular furnishing of advice with respect to portfolio
transactions. The Investment Manager manages the investment and
reinvestment of the assets of the Fund, subject to the control and
oversight of the Directors. The Investment Manager may also allocate
portfolio transactions to broker/dealers that remit a portion of their
commissions as a credit against the Fund's expenses. For its services,
the Investment Manager receives an investment management fee, payable
monthly, based on the average weekly net assets of the Fund, at the
annual rate of 7/10 of 1% of the first $250 million, 5/8 of 1% from
$250 million to $500 million, and 1/2 of 1% over $500 million. From
time to time, the Investment Manager may reimburse all or part of this
fee to improve the Fund's yield and total return. The Investment
Manager provides certain administrative services to the Fund at cost.
During the fiscal year ended June 30, 1996, the investment management
fees paid by the Fund represented 0.70% of its average daily net
assets. The Investment Manager is a wholly owned subsidiary of Bull &
Bear Group, Inc. ("Group"). Group, a publicly owned company whose
securities are listed on Nasdaq and traded in the over-the-counter
market, is a New York based manager of mutual funds and discount
brokerage services. Bassett S. Winmill may be deemed a controlling
person of Group and, therefore, may be deemed a controlling person of
the Investment Manager.
DIVIDEND REINVESTMENT PLAN
The Directors have adopted a Dividend Reinvestment Plan (the
"Plan"). Under the Plan, shareholders have the option of reinvesting
distributions automatically, unless such shareholders elect to receive
cash. Each dividend and capital gain distribution, if any, declared by
the Fund on outstanding shares will, unless elected otherwise by each
shareholder by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution, be paid on the
payment date fixed by the Directors in that number of additional shares
equal to (a) the amount of such dividend divided by the Fund's net
asset value per share if the average closing market prices on the five
trading days prior to the valuation date (the "Market Price") is at or
above such net asset value per share on the record date for such
distribution and (b) the amount of such dividend divided by the Market
Price if the Market Price is less than such net asset value per share
on the record date for such distribution. Upon a shareholder's request
to receive a certificate for shares, a certificate will be issued for
such shares in whole share amounts and fractional share amounts will be
paid in cash. There are no sales or other charges in connection with
the reinvestment of dividends and capital gain distributions. There is
no fixed dividend rate and there can be no assurance that the Fund will
pay any dividends or realize any capital gain.
DST Systems, Inc. (the "Transfer Agent") maintains all shareholder
accounts in the Plan and furnishes written confirmations of all
transactions in the account, including information needed by
shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Transfer Agent in
non-certificated form in the name of the participant, and each
shareholder's proxy will include those shares purchased pursuant to the
Plan, unless otherwise requested by a shareholder.
In the case of shareholders such as banks, brokers or nominees,
which hold shares for others who are the beneficial owners, the
Transfer Agent will administer the Plan on the basis of the number of
shares certified from time to time by the shareholder as representing
the total amount registered in the shareholder's name and held for the
account of beneficial owners who participate in the Plan.
There is no charge to participants for reinvesting dividends or
capital gain distributions payable in either stock or cash. The
Transfer Agent's fees for handing the reinvestment of such dividends
and capital gain distributions are paid by the Fund. There are no
brokerage charges with respect to shares issued directly by the Fund as
a result of dividends or capital gain distributions payable in stock or
in cash. However, each participant bears a pro rata share of brokerage
commissions incurred with respect to open market purchases in
connection with the reinvestment of dividends or capital gain
distributions. The automatic reinvestment of dividends and
distributions will not relieve participants of any income tax which may
be payable on such dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan
and any dividend or distribution paid subsequent to written notice of
the change sent to the members of the Plan at least 30 days before the
record date for such dividend or distribution. The Plan also may be
amended or terminated by the Transfer Agent on at least 30 days'
written notice to participants in the Plan. All correspondence
concerning the Plan should be directed to the Transfer Agent at P.O.
Box 419789, Kansas City, MO 64141-6789.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Fund's Dividend Reinvestment Plan, all dividends and
capital gain distributions will be automatically reinvested in
additional Fund shares instead of being paid in cash, unless at any
time prior to the record date for a particular dividend or distribution
a shareholder elects otherwise by notifying the Fund in writing. There
are no sales or other charges in connection with the reinvestment of
dividends or capital gain distributions. Shareholders who intend to
hold their Fund shares through a broker or nominee should contact such
broker or nominee to confirm that they may participate in the Plan. The
Fund has no fixed dividend rate, and there can be no assurance that the
Fund will pay any dividends or realize any capital gain.
The Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Code. If the Fund qualifies as a regulated
investment company and complies with certain distribution requirements,
the Fund will be relieved of Federal income tax on that part of its net
investment income and realized capital gain which it distributes to its
shareholders.
To qualify as a regulated investment company, the Fund must meet
certain relatively complex tests. The loss of such status would result
in the Fund being subject to Federal income tax on its taxable income
and gain without regard to dividends and distributions paid to
shareholders.
Dividends out of net investment income and distributions of net
realized short-term capital gain are taxable to the recipient
shareholders as ordinary income whether paid in cash or shares. In the
case of corporate shareholders, such distributions are unlikely to be
eligible for the 70% dividends received deduction, since the Fund does
not anticipate investing in stocks of domestic corporations.
Distributions out of net capital gain of which shareholders will be
notified are taxable to the recipient as long term capital gain,
whether paid in cash or shares.
In any year, if the Fund has excess net realized long-term capital
gain over its net realized short-term capital losses, the Fund reserves
the authority not to distribute such excess in any year. If such excess
is not distributed, a shareholder must include in taxable income as
long-term capital gain his share of the excess. However, the Fund will
pay the taxes imposed on any such undistributed gain and such
shareholder will receive a credit or refund for taxes on his share of
the excess. If, for any year, the total distributions exceed
accumulated undistributed net investment income and net realized
capital gain, the excess will generally be treated as a tax-free return
of capital (up to the amount of such shareholder's tax basis in his
shares). The amount treated as a tax-free return of capital will reduce
the shareholder's adjusted basis in his shares, thereby increasing his
potential gain (or decreasing his potential loss) on the sale of his
shares. In the event the Fund distributes amounts in excess of its net
investment income and net realized capital gain, such distributions
will decrease the Fund's total assets and, therefore, have the likely
effect of increasing the Fund's expense ratios.
The Fund will be required to back-up withhold an amount equal to
31% of a shareholder's dividend or capital gain distribution or the
proceeds of a redemption unless such shareholder furnishes the Fund
with his taxpayer identification number (a social security number in
the case of an individual) and certifies that the number is correct and
that he has not been notified by the Internal Revenue Service that he
is subject to back-up withholding.
In order to make distributions, the Fund may have to sell a
portion of its investment portfolio at a time when independent
investment judgment might not dictate such action. Such sales, if they
involve assets held for less than three months, could also adversely
affect the Fund's status as a regulated investment company since, in
order for the Fund to qualify as a regulated investment company, for
each taxable year, less than 30% of the Fund's gross income must be
derived from gain realized on the sale or other disposition of stocks
or securities held for less than three months.
The foregoing is a general and abbreviated summary of the
provisions of the Code applicable to a shareholder's investment in the
Fund. Dividends and distributions declared by the Fund may also be
subject to state and local taxes. Prior to investing in shares of the
Fund, prospective shareholders are urged to consult their tax advisors
concerning the Federal, state and local tax consequences of such
investment.
REPURCHASE OF SHARES
The Fund is a closed-end, management investment company and as
such its shareholders do not have the right to redeem their shares. The
Fund, however, may repurchase its shares from time to time as and when
it deems such a repurchase advisable. The Fund may repurchase its
shares on a securities exchange, provided that the Fund has informed
its shareholders within the preceding six months of its intention to
repurchase such shares.
The Fund may also repurchase its shares other than in the open
market if certain conditions are met regarding, among other things,
distribution of net income for the preceding fiscal year, identity of
the seller, price paid, brokerage commissions, prior notice to
shareholders of the Fund's intention to effect such a repurchase, and
the manner in which such a repurchase is effected so as not to
discriminate unfairly against other Fund shareholders. Shares
repurchased by the Fund will constitute authorized and unissued shares
available for reissuance. No assurances can be given that the Directors
will decide to undertake any repurchases, or if undertaken, that
repurchases would have the desired effect on market price.
If the Fund repurchases its shares at a price representing a
discount to net asset value, the net asset value of the remaining
outstanding shares will be enhanced but the market price of the
remaining outstanding shares will not necessarily be affected.
Furthermore, the Fund may incur debt to finance share repurchases, and
the interest on such borrowings would increase the Fund's expenses and
reduce its net income. See "The Fund's Investment Program."
The Fund does not currently have an established tender offer
program or an established schedule for considering tender offers. No
assurance can be given that the Directors will decide to undertake any
tender offers in the future, or if undertaken, that a tender offer
would affect the market price of the Fund's shares.
CAPITAL STOCK
On January 22, 1997, shareholders approved a proposal to change
the status of the Fund to a closed-end fund. The Fund's Articles of
Incorporation (the "Charter") were filed on December 12, 1996. The
Fund's stock is fully paid and non-assessable and is freely assignable
by way of pledge (as, for example, for collateral purposes), gift,
settlement of an estate, and also by an investor to another investor.
In case of dissolution or other liquidation of the Fund, shareholders
will be entitled to receive ratably per share the net assets of the
Fund. Shareholders vote for Directors with each share entitled to one
vote. Each share entitles the holder to one vote for all purposes.
Shares have no preemptive or conversion rights. The Fund is authorized
to issue up to twenty million (20,000,000) shares ($.01 par value).
The Directors can reclassify unissued shares as preferred stock
with such terms and conditions as determined by the Directors.
Anti-Takeover Provisions. The Fund presently has provisions in its
Charter and By-Laws (collectively, the "Governing Documents") which
could have the effect of limiting (i) the ability of other entities or
persons to acquire control of the Fund, (ii) the Fund's freedom to
engage in certain transactions, or (iii) the ability of the Fund's
directors or shareholders to amend the Governing Documents or
effectuate changes in the Fund's management. These provisions of the
Governing Documents of the Fund may be regarded as "anti- takeover"
provisions. The Directors are divided into five classes, each having a
term of five years (except, to ensure that the term of a class of the
Fund's directors expires each year, the first class of the Fund's
directors will serve an initial one-year term and five-year terms
thereafter, the second class of its directors will serve an initial
two-year term and five-year terms thereafter, the third class will
serve an initial three-year term and five-year terms thereafter, and
the fourth class will serve an initial four-year term and five-year
terms thereafter). Each year the term of one class of directors will
expire. Accordingly, only those directors in one class may be changed
in any one year, and it would require three years to change a majority
of the Directors. Such system of electing directors may have the effect
of maintaining the continuity of management and, thus, make it more
difficult for the shareholders of the Fund to change the majority of
directors. A director of the Fund may be removed only with cause by a
vote of eighty percent (80%) of the shares then entitled to be cast for
the election of directors. In addition, the affirmative vote of the
holders of 80% of the outstanding shares of the Fund is required to
authorize its conversion from a closed-end to an open-end investment
company, to amend certain provisions of the Charter involving
conversion to an open-end fund, or to authorize any business
combination (including any merger, consolidation, or share exchange
with any interested shareholder or any affiliate thereof), unless
approved by the vote of at least a majority of the Continuing
Directors, in which case the affirmative vote of the holders of at
least a majority of the votes entitled to be cast by holders of voting
stock is required. Reference is made to the Governing Documents, on
file with the SEC, for the full text of these provisions.
Except as otherwise provided in the Charter and notwithstanding
any other provision of the Maryland General Corporation Law to the
contrary, any action submitted to a vote by stockholders requires the
affirmative vote of at least 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 Continuing 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 cast
at a meeting at which a quorum is present in person or by proxy 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. In the absence of action
by the Directors to remove the foregoing 80% requirement, such
requirement would have the effect of making it very difficult for
stockholders to elect Directors or modify the composition of the Board.
The Fund has asked not to be governed by any provision of Section
3-602 of Subtitle 6 of the Maryland General Corporation Law.
The provisions of the Governing Documents described above could
have the effect of depriving owners of shares in the Fund of
opportunities to sell their shares at a premium over prevailing market
prices, by discouraging a third party from seeking to obtain control of
the Fund in a tender offer or similar transaction. The overall effect
of these provisions is to render more difficult the accomplishment of a
merger or the assumption of control by a third party, unless approved
by the Directors.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111,
acts as custodian of the Fund's assets. The custodian also performs
certain accounting services for the Fund. The Fund's transfer and
dividend disbursing agent is DST Systems, Inc., P.O. Box 419789, Kansas
City, MO 64141-6789. DST also provides shareholder services to the Fund
and is reimbursed its cost by the Fund.
[Left Side of Back Cover Page] [Right Side of Back Cover Page]
BULL & BEAR BULL & BEAR
GLOBAL INCOME GLOBAL INCOME
FUND, INC. FUND, INC.
11 HANOVER SQUARE
NEW YORK, NY 10005
TOLL-FREE 1-888-847-4200
E-MAIL: [email protected]
Prospectus
February 7, 1997
BULL
& BEAR
PERFORMANCE DRIVEN
Statement of Additional Information February 7, 1997
BULL & BEAR GLOBAL INCOME FUND, INC.
11 Hanover Square
New York, NY 10005
Toll-free 1-888-847-4200
Bull & Bear Global Income Fund, Inc. (the "Fund") is a
diversified, closed-end management investment company organized as a
Maryland corporation. Until February 7, 1997, the Fund was a
diversified series of shares of Bull & Bear Funds II, Inc. (the
"Corporation"), an open-end management investment company organized in
1974 as a Maryland corporation. Prior to October 29, 1993, the
Corporation operated under the name Bull & Bear Incorporated. This
Statement of Additional Information regarding the Fund is not a
prospectus and should be read in conjunction with the Fund's prospectus
dated February 7 , 1997. The prospectus is available without charge
upon written request to the Fund at 11 Hanover Square, New York, NY
10005,or by calling toll-free telephone 1-888- 847-4200.
TABLE OF CONTENTS
THE FUND'S INVESTMENT PROGRAM . . . . . . . . . . . . . . 18
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . 18
OFFICERS AND DIRECTORS . . . . . . . . . . . . . . . . . 26
THE INVESTMENT MANAGER . . . . . . . . . . . . . . . . . 27
INVESTMENT MANAGEMENT AGREEMENT . . . . . . . . . . . . . 28
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . 28
ALLOCATION OF BROKERAGE . . . . . . . . . . . . . . . . . 29
DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . 30
REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . 31
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT . . . . 32
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . 32
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 32
THE FUND'S INVESTMENT PROGRAM
The following information supplements the information concerning
the investment objectives, policies and limitations of the Fund found
in the prospectus.
LOAN PARTICIPATIONS. The Fund may invest in loan participations in
which the Fund purchases from a lender a portion of a larger loan to a
U.S. or foreign private or governmental entity. The Fund receives a
portion of the amount due the lender, except for any servicing fees
received by the lender. Investing in loan participations may enable the
Fund to obtain undivided interests in loans that Bull & Bear Advisers,
Inc. (the "Investment Manager") considers attractive, but which would
not be available to the Fund otherwise. Although normally available
without recourse to the lender, such loans may be backed by a letter of
credit and may include the right to demand accelerated payment of
principal and interest. Loan participations may be subject to credit
risks of the borrower, the lender or both. Loans to foreign borrowers
may involve risks not typically associated with domestic investments.
The Fund has no current intention to engage in loan participations in
excess of 5% of total net assets of the Fund.
COLLATERALIZED MORTGAGE OBLIGATIONS. CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
The CMOs in which the Fund invests are collateralized by GNMA
certificates or other government mortgage-backed securities (such
collateral are called mortgage assets). Multi-class pass-through
securities are interests in trusts that are comprised of mortgage
assets and that have multiple classes similar to those in CMOs. Unless
the context indicates otherwise, references herein to CMOs include
multi-class pass-through securities. Payments of principal and interest
on the mortgage assets, and any reinvestment income thereon, provide
the means to pay debt service on the CMOs or to make scheduled
distributions on the multi-class pass-through securities. Principal
prepayments on the mortgage assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final
distribution dates. Rising interest rates may cause prepayments to
occur at a slower than expected rate, which is known as "extension
risk". Extension risk may effectively change a security which was
considered short or intermediate term at the time of purchase into a
long term security. Long term securities generally fluctuate more
widely in response to changes in interest rates than short or
intermediate term securities.
SHORT SALES. The Fund may engage in short sales if it owns or, by
virtue of its ownership of other securities, has the right to obtain
securities equivalent in kind or amount. This investment technique is
known as a short sale "against the box." In a short sale, the Fund
sells a borrowed security and has a corresponding obligation to the
lender to return the identical security. The Fund will not dispose of
the securities underlying a short sale while a short sale is
outstanding. The Fund intends to engage in short sales against the box
for hedging purposes. The Investment Manager expects that the Fund will
engage in short sales against the box as a hedge when the Investment
Manager believes that the price of a security may decline, or when the
Fund wants to sell the security it owns at the current price, but wants
to defer recognition of gain or loss for tax purposes. The Investment
Manager currently anticipates that no more than 5% of the Fund's total
assets would be involved in short sales against the box.
INVESTMENT RESTRICTIONS
The following fundamental investment restrictions may not be
changed without the approval of the lesser of (a) 67% or more of the
voting securities of the Fund present at a meeting if the holders of
more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy or (b) more than 50% of the outstanding
voting securities of the Fund. Any investment restriction which
involves a maximum percentage of securities or assets shall not be
considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition of securities or
assets of, or borrowing by, the Fund. The Fund may not:
(1) Purchase a security if, as a result, more than 5% of the Fund's
total assets would be invested in the securities of any one issuer
or the Fund would own or hold 10% of the outstanding securities of
that issuer, except that up to 25% of the Fund's total assets may
be invested without regard to this limitation and provided that
this limitation does not apply to securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities or
securities of other investment companies;
(2) 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;
(3) Purchase or sell real estate (although it may purchase securities
of companies whose business involves the purchase or sale of real
estate);
(4) Invest in commodities or commodities futures contracts, although
it may enter into financial and foreign currency futures contracts
and options thereon, options on foreign currencies, and forward
contracts on foreign currencies;
(5) Lend its assets, except as permitted by applicable law;
(6) Underwrite the securities of other issuers except to the extent
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; or
(7) Issue senior securities as defined in the Investment Company Act
of 1940, as amended (the "1940 Act") (including borrowing money),
except as permitted by applicable law.
The Fund, notwithstanding any other investment policy or
restriction (whether or not fundamental), may invest all of its assets
in the securities or beneficial interests of a single pooled investment
fund having substantially the same investment objectives, policies and
restrictions as the Fund.
The Directors have established the following non-fundamental
investment restrictions that may be changed by the Board without
shareholder approval:
(i) The Fund may not make short sales of securities or purchase
securities on margin, except (a) the Fund may buy and sell
options, futures contracts, options on futures contracts, and
forward currency contracts, (b) the Fund may obtain such short
term credits as may be necessary for the clearance of
transactions, (c) the Fund may make initial margin deposits and
variation margin payments in connection with transactions in
futures contracts and options thereon, and forward currency
contracts, and (d) the Fund may sell "short against the box"
where, by virtue of its ownership of the other securities, the
Fund owns or has the right to obtain securities equivalent in kind
and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions;
(ii) The Fund may not purchase the securities of any investment company
except (a) by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase, provided
that immediately after such purchase no more than: 10% of the
Fund's total assets are invested in securities issued by
investment companies, 5% of the Fund's total assets are invested
in securities issued by any one investment company, or 3% of the
voting securities of any one such investment company are owned by
the Fund, and (b) when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition of assets; and
(iii) With respect to financial and foreign currency futures and related
options (including options traded on a commodities exchange), the
Fund will not purchase or sell futures contracts or related
options other than for bona fide hedging purposes if, immediately
thereafter, the sum of the amount of initial margin deposits on
the Fund's existing futures positions and related options and
premiums paid for related options would exceed 5% of the Fund's
total assets.
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES
REGULATION OF THE USE OF OPTIONS, FUTURES AND FORWARD CURRENCY
CONTRACT STRATEGIES. As discussed in the prospectus, the Investment
Manager may engage in certain options strategies to attempt to enhance
return or for hedging purposes. The Investment Manager also may use
securities index futures contracts, interest rate futures contracts,
foreign currency futures contracts (collectively, "futures contracts"
or "futures"), options on futures contracts and forward currency
contracts for hedging purposes or in other circumstances permitted by
the Commodity Futures Trading Commissions ("CFTC"). Certain special
characteristics of and risks associated with using these instruments
are discussed below. In addition to the investment guidelines
(described below) adopted by the Fund to govern investment in these
instruments, use of options, forward currency contracts and futures by
the Fund is subject to the applicable regulations of the SEC, the
several options and futures exchanges upon which such instruments may
be traded, the CFTC and the various state regulatory authorities.
In addition to the products, strategies and risks described below
and in the prospectus, the Investment Manager expects to discover
additional opportunities in connection with options, futures and
forward currency contracts. These new opportunities may become
available as the Investment Manager develops new techniques, as
regulatory authorities broaden the range of permitted transactions and
as new options, futures and forward currency contracts are developed.
The Investment Manager may utilize these opportunities to the extent
they are consistent with the Fund's investment objective, permitted by
the Fund's investment limitations and permitted by the applicable
regulatory authorities. The Fund's registration statement will be
supplemented to the extent that new products and strategies involve
materially different risks than those described below and in the
prospectus.
COVER FOR OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT
STRATEGIES. The Fund will not use leverage in its options, futures and
forward currency contract strategies. Accordingly, the Fund will comply
with guidelines established by the SEC with respect to these strategies
and will, when required, either (1) set aside cash or liquid assets in
a segregated account with its custodian in the prescribed amount, or
(2) hold securities, currencies or other options or futures contracts
whose values are expected to offset ("cover") its obligations
thereunder. Securities, currencies or other options or futures
contracts used for cover and securities held in a segregated account
cannot be sold or closed out while the strategy is outstanding, unless
they are replaced with similar assets. As a result, there is a
possibility that the use of cover or segregation involving a large
percentage of the Fund's assets could impede portfolio management or
the Fund's ability to meet redemption requests or other current
obligations.
OPTION INCOME AND HEDGING STRATEGIES. The Fund may purchase and
write (sell) both exchange-traded options and options traded on the
over-the-counter ("OTC") market. Currently, options on debt securities
are primarily traded on the OTC market. Although many options on
currencies are exchange-traded, the majority of such options currently
are traded on the OTC market. Exchange-traded options in the United
States are issued by a clearing organization affiliated with the
exchange on which the option is listed, which, in effect, guarantees
completion of every exchange-traded option transaction. In contrast,
OTC options are contracts between the Fund and its contra-party with no
clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the dealer from which it has purchased the OTC
option to make or take delivery of the securities or currencies
underlying the option. Failure by the dealer to do so would result in
the loss of any premium paid by the Fund as well as the loss of the
expected benefit of the transaction.
The Fund may purchase call options on securities (both equity and
debt) that the Investment Manager intends to include in the Fund's
portfolio in order to fix the cost of a future purchase. Call options
also may be used as a means of enhancing returns by, for example,
participating in an anticipated price increase of a security. In the
event of a decline in the price of the underlying security, use of this
strategy would serve to limit the potential loss to the Fund to the
option premium paid; conversely, if the market price of the underlying
security increases above the exercise price and the Fund either sells
or exercises the option, any profit eventually realized would be
reduced by the premium paid.
The Fund may purchase put options on securities in order to hedge
against a decline in the market value of securities held in its
portfolio or to attempt to enhance return. The put option enables the
Fund to sell the underlying security at the predetermined exercise
price; thus, the potential for loss to the Fund below the exercise
price is limited to the option premium paid. If the market price of the
underlying security is higher than the exercise price of the put
option, any profit the Fund realizes on the sale of the security would
be reduced by the premium paid for the put option less any amount for
which the put option may be sold.
The Fund may on certain occasions wish to hedge against a decline
in the market value of securities held in its portfolio at a time when
put options on those particular securities are not available for
purchase. The Fund may therefore purchase a put option on other
carefully selected securities, the values of which historically have a
high degree of positive correlation to the value of such portfolio
securities. If the Investment Manager's judgment is correct, changes in
the value of the put options should generally offset changes in the
value of the portfolio securities being hedged. However, the
correlation between the two values may not be as close in these
transactions as in transactions in which the Fund purchases a put
option on a security held in its portfolio. If the Investment Manager's
judgment is not correct, the value of the securities underlying the put
option may decrease less than the value of the Fund's portfolio
securities and therefore the put option may not provide complete
protection against a decline in the value of the Fund's portfolio
securities below the level sought to be protected by the put option.
The Fund may write covered call options on securities in which it
is authorized to invest for hedging or to increase return in the form
of premiums received from the purchasers of the options. A call option
gives the purchaser of the option the right to buy, and the writer
(seller) the obligation to sell, the underlying security at the
exercise price during or at the end of the option period. The strategy
may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium
received for writing the call option less any transaction costs. Thus,
if the market price of the underlying security held by the Fund
declines, the amount of such decline will be offset wholly or in part
by the amount of the premium received by the Fund. If, however, there
is an increase in the market price of the underlying security to a
level in excess of the option's exercise price, and the option is
exercised, the Fund would be obligated to sell the security at less
than its market value. In addition, the Fund could lose the ability to
participate in an increase in the value of such securities above the
exercise price of the call option because such an increase would likely
be offset by an increase in the cost of closing out the call option (or
could be negated if the buyer chose to exercise the call option at an
exercise price below the current market value).
The Fund generally would give up the ability to sell any portfolio
securities used to cover the call option while the call option was
outstanding.
The Fund also may write covered put options on securities in which
it is authorized to invest. A put option gives the purchaser of the
option the right to sell, and the writer (seller) the obligation to
buy, the underlying security at the exercise price during the option
period. So long as the obligation of the writer continues, the writer
may be assigned an exercise notice by the broker/dealer through whom
such option was sold, requiring it to make payment of the exercise
price against delivery of the underlying security. The operation of put
options in other respects, including their related risks and rewards,
is substantially identical to that of call options. If the put option
is not exercised, the Fund will realize income in the amount of the
premium received. This technique could be used to enhance current
return during periods of market uncertainty. The risk in such a
transaction would be that the market price of the underlying security
would decline below the exercise price less the premiums received, in
which case the Fund would expect to suffer a loss.
The Fund may purchase put and call options and write covered put
and call options on securities indexes in much the same manner as the
more traditional securities options discussed above, except that index
options may serve as a hedge against overall fluctuations in the
securities markets (or a market sector) rather than anticipated
increases or decreases in the value of a particular security. A
securities index assigns values to the securities included in the index
and fluctuates with changes in such values. Settlements of securities
index options are effected with cash payments and do not involve
delivery of securities. Thus, upon settlement of a securities index
option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing
price of the index. The effectiveness of hedging techniques using
securities index options will depend on the extent to which price
movements in the securities index selected correlate with price
movements of the securities in which the Fund invests.
The Fund may purchase and write covered straddles on securities
indexes. A long straddle is a combination of a call and a put purchased
on the same security where the exercise price of the put is less than
or equal to the exercise price on the call. The Fund would enter into a
long straddle when the Investment Manager believes that it is likely
that securities prices will be more volatile during the term of the
options than is implied by the option pricing. A short straddle is a
combination of a call and a put written on the same security where the
exercise price on the put is less than or equal to the exercise price
of the call where the same issue of the security is considered "cover"
for both the put and the call. The Fund would enter into a short
straddle when the Investment Manager believes that it is unlikely that
securities prices will be as volatile during the term of the options as
is implied by the option pricing. In such case, the Fund will set aside
cash or liquid assets in a segregated account with its custodian
equivalent in value to the amount, if any, by which the put is
"in-the-money," that is, that amount by which the exercise price of the
put exceeds the current market value of the underlying security.
FOREIGN CURRENCY OPTIONS AND RELATED RISKS. The Fund may take
positions in options on foreign currencies to hedge against the risk of
foreign exchange rate fluctuations on foreign securities that the Fund
holds in its portfolio or that it intends to purchase. For example, if
the Fund enters into a contract to purchase securities denominated in a
foreign currency, it could effectively fix the maximum U.S. dollar cost
of the securities by purchasing call options on that foreign currency.
Similarly, if the Fund held securities denominated in a foreign
currency and anticipated a decline in the value of that currency
against the U.S. dollar, the Fund could hedge against such a decline by
purchasing a put option on the currency involved. The Fund's ability to
establish and close out positions in such options is subject to the
maintenance of a liquid secondary market. Although many options on
foreign currencies are exchange-traded, the majority are traded on the
OTC market. The Fund will not purchase or write such options unless, in
the Investment Manager's opinion, the market for them is sufficiently
liquid to ensure that the risks in connection with such options are not
greater than the risks in connection with the underlying currency. In
addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments
generally.
The value of a foreign currency option depends upon the value of
the underlying currency relative to the U.S. dollar. As a result, the
price of the option position may vary with changes in the value of
either or both currencies and may have no relationship to the
investment merits of a foreign security. Because foreign currency
transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign
currency options, investors may be disadvantaged by having to deal in
an odd lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for
foreign currencies or any regulatory requirement that quotations
available through dealers and other market resources be firm or revised
on a timely basis. Available quotation information is generally
representative of very large transactions in the interbank market and
thus may not reflect relatively smaller transactions (that is, less
than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets
for the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets until they reopen.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. The Fund may
effectively terminate its right or obligation under an option by
entering into a closing transaction. If the Fund wishes to terminate
its obligation to purchase or sell securities or currencies under a put
or a call option it has written, the Fund may purchase a put or a call
option of the same series (that is, an option identical in its terms to
the option previously written); this is known as a closing purchase
transaction. Conversely, in order to terminate its right to purchase or
sell specified securities or currencies under a call or put option it
has purchased, the Fund may sell an option of the same series as the
option held; this is known as a closing sale transaction. Closing
transactions essentially permit the Fund to realize profits or limit
losses on its options positions prior to the exercise or expiration of
the option.
In considering the use of options to enhance returns or to hedge
the Fund's portfolio, particular note should be taken of the following:
(1) The value of an option position will reflect, among other
things, the current market price of the underlying security, securities
index or currency, the time remaining until expiration, the
relationship of the exercise price to the market price, the historical
price volatility of the underlying security, securities index or
currency and general market conditions. For this reason, the successful
use of options depends upon the Investment Manager's ability to
forecast the direction of price fluctuations in the underlying
securities or currency markets or, in the case of securities index
options, fluctuations in the market sector represented by the selected
index.
(2) Options normally have expiration dates of up to three years.
The exercise price of the options may be below, equal to or above the
current market value of the underlying security, securities index or
currency. Purchased options that expire unexercised have no value.
Unless an option purchased by the Fund is exercised or unless a closing
transaction is effected with respect to that position, the Fund will
realize a loss in the amount of the premium paid and any transaction
costs.
(3) A position in an exchange-listed option may be closed out only
on an exchange that provides a secondary market for identical options.
Most exchange-listed options relate to stocks. Although the Fund
intends to purchase or write only those exchange-traded options for
which there appears to be a liquid secondary market, there is no
assurance that a liquid secondary market will exist for any particular
option at any particular time. Closing transactions may be effected
with respect to options traded in the OTC markets (currently the
primary markets for options on debt securities and a significant market
for foreign currencies) only by negotiating directly with the other
party to the option contract or in a secondary market for the option if
such market exists. Although the Fund will enter into OTC options with
dealers that agree to enter into, and that are expected to be capable
of entering into, closing transactions with the Fund, there can be no
assurance that the Fund would be able to liquidate an OTC option at a
favorable price at any time prior to expiration. In the event of
insolvency of the contra-party, the Fund may be unable to liquidate an
OTC option. Accordingly, it may not be possible to effect closing
transactions with respect to certain options, which would result in the
Fund having to exercise those options that it has purchased in order to
realize any profit. With respect to options written by the Fund, the
inability to enter into a closing transaction may result in material
losses to the Fund. For example, because the Fund must maintain a
covered position with respect to any call option it writes on a
security, currency or securities index, the Fund may not sell the
underlying securities or currency (or invest any cash or securities
used to cover the option) during the period it is obligated under such
option. This requirement may impair the Fund's ability to sell a
portfolio security or make an investment at a time when such a sale or
investment might be advantageous.
(4) Securities index options are settled exclusively in cash. If
the Fund writes a call option on an index, the Fund will not know in
advance the difference, if any, between the closing value of the index
on the exercise date and the exercise price of the call option itself
and thus will not know the amount of cash payable upon settlement. In
addition, a holder of a securities index option who exercises it before
the closing index value for that day is available, runs the risk that
the level of the underlying index may subsequently change.
(5) The Fund's activities in the options markets may result in a
higher portfolio turnover rate and additional brokerage costs and
taxes; however, the Fund also may save on commissions by using options
as a hedge rather than buying or selling individual securities in
anticipation or as a result of market movements.
FUTURES AND RELATED OPTIONS STRATEGIES. The Fund may engage in
futures strategies for hedging purposes to attempt to reduce the
overall investment risk that would normally be expected to be
associated with ownership of the securities in which it invests. This
may involve, among other things, using futures strategies to manage the
effective duration of the Fund. If the Investment Manager wishes to
shorten the effective duration of the Fund, the Fund may sell a futures
contract or a call option thereon, or purchase a put option on that
futures contract. If the Investment Manager wishes to lengthen the
effective duration of the Fund, the Fund may buy a futures contract or
a call option thereon, or sell a put option.
The Fund may use interest rate futures contracts and options
thereon to hedge its portfolio against changes in the general level of
interest rates and in other circumstances permitted by the CFTC. The
Fund may purchase an interest rate futures contract when it intends to
purchase debt securities but has not yet done so. This strategy may
minimize the effect of all or part of an increase in the market price
of the debt security that the Fund intends to purchase in the future. A
rise in the price of the debt security prior to its purchase may either
be offset by an increase in the value of the futures contract purchased
by the Fund or avoided by taking delivery of the debt securities under
the futures contract. Conversely, a fall in the market price of the
underlying debt security may result in a corresponding decrease in the
value of the futures position. The Fund may sell an interest rate
futures contract in order to continue to receive the income from a debt
security, while endeavoring to avoid part or all of the decline in
market value of that security that would accompany an increase in
interest rates.
The Fund may purchase a call option on an interest rate futures
contract to hedge against a market advance in debt securities that the
Fund plans to acquire at a future date. The purchase of a call option
on an interest rate futures contract is analogous to the purchase of a
call option on an individual debt security, which can be used as a
temporary substitute for a position in the security itself. The Fund
also may write covered put options on interest rate futures contracts
as a partial anticipatory hedge and may write covered call options on
interest rate futures contracts as a partial hedge against a decline in
the price of debt securities held in the Fund's portfolio. The Fund may
also purchase put options on interest rate futures contracts in order
to hedge against a decline in the value of debt securities held in the
Fund's portfolio.
The Fund may sell securities index futures contracts in
anticipation of a general market or market sector decline that could
adversely affect the market value of the Fund's portfolio. To the
extent that a portion of the Fund's portfolio correlates with a given
index, the sale of futures contracts on that index could reduce the
risks associated with a market decline and thus provide an alternative
to the liquidation of securities positions. For example, if the Fund
correctly anticipates a general market decline and sells securities
index futures to hedge against this risk, the gain in the futures
position should offset some or all of the decline in the value of the
portfolio. The Fund may purchase securities index futures contracts if
a market or market sector advance is anticipated. Such a purchase of a
futures contract would serve as a temporary substitute for the purchase
of individual securities, which securities may then be purchased in an
orderly fashion. This strategy may minimize the effect of all or part
of an increase in the market price of securities that the Fund intends
to purchase. A rise in the price of the securities should be in part or
wholly offset by gains in the futures position.
As in the case of a purchase of a securities index futures
contract, the Fund may purchase a call option on a securities index
futures contract to hedge against a market advance in securities that
the Fund plans to acquire at a future date. The Fund may write covered
put options on securities index futures as a partial anticipatory hedge
and may write covered call options on securities index futures as a
partial hedge against a decline in the prices of securities held in the
Fund's portfolio. This is analogous to writing covered call options on
securities. The Fund also may purchase put options on securities index
futures contracts. The purchase of put options on securities index
futures contracts is analogous to the purchase of protective put
options on individual securities where a level of protection is sought
below which no additional economic loss would be incurred by the Fund.
The Fund may sell foreign currency futures contracts to hedge
against possible variations in the exchange rate of foreign currencies
in relation to the U.S. dollar. In addition, the Fund may sell foreign
currency futures contracts when the Investment Manager anticipates a
general weakening of the foreign currency exchange rate that could
adversely affect the market value of the Fund's foreign securities
holdings or interest payments to be received in that foreign currency.
In this case, the sale of futures contracts on the underlying currency
may reduce the risk to the Fund of a reduction in market value caused
by foreign currency exchange rate variations and, by so doing, provide
an alternative to the liquidation of securities positions and resulting
transaction costs. When the Investment Manager anticipates a
significant foreign exchange rate increase while intending to invest in
a security denominated in that currency, the Fund may purchase a
foreign currency futures contract to hedge against the increased rates
pending completion of the anticipated transaction. Such a purchase
would serve as a temporary measure to protect the Fund against any rise
in the foreign currency exchange rate that may add additional costs to
acquiring the foreign security position. The Fund may also purchase
call or put options on foreign currency futures contracts to obtain a
fixed foreign currency exchange rate at limited risk. The Fund may
purchase a call option on a foreign currency futures contract to hedge
against a rise in the foreign currency exchange rate while intending to
invest in a security denominated in that currency. The Fund may
purchase put options on foreign currency futures contracts as a hedge
against a decline in the foreign currency exchange rates or the value
of its foreign portfolio securities. The Fund may write a covered put
option on a foreign currency futures contract as a partial anticipatory
hedge and may write a covered call option on a foreign currency futures
contract as a partial hedge against the effects of declining foreign
currency exchange rates on the value of foreign securities.
The Fund may also write put options on interest rate, securities
index or foreign currency futures contracts while, at the same time,
purchasing call options on the same interest rate, securities index or
foreign currency futures contract in order to synthetically create an
interest rate, securities index or foreign currency futures contract.
The options will have the same strike prices and expiration dates. The
Fund will only engage in this strategy when it is more advantageous to
the Fund to do so as compared to purchasing the futures contract.
The Fund may also purchase and write covered straddles on interest
rate or securities index futures contracts. A long straddle is a
combination of a call and a put purchased on the same security at the
same exercise price. The Fund would enter into a long straddle when it
believes that it is likely that securities prices will be more volatile
during the term of the options than is implied by the option pricing. A
short straddle is a combination of a call and put written on the same
futures contract at the same exercise price where the same security or
futures contract is considered "cover" for both the put and the call.
The Fund would enter into a short straddle when it believes that it is
unlikely that securities prices will be as volatile during the term of
the options as is implied by the option pricing. In such case, the Fund
will set aside cash or liquid assets in a segregated account with its
custodian equal in value to the amount, if any, by which the put is
"in-the-money," that is the amount by which the exercise price of the
put exceeds the current market value of the underlying security.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS
TRADING. No price is paid upon entering into a futures contract.
Instead, upon entering into a futures contract, the Fund is required to
deposit with its custodian in a segregated account in the name of the
futures broker through whom the transaction is effected an amount of
cash or certain liquid securities whose value is marked to the market
daily generally equal to 10% or less of the contract value. This amount
is known as "initial margin." When writing a call or a put option on a
futures contract, margin also must be deposited in accordance with
applicable exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not involve borrowing to
finance the futures transactions. Rather, initial margin on futures
contracts is in the nature of a performance bond or good-faith deposit
on the contract that is returned to the Fund upon termination of the
transaction, assuming all obligations have been satisfied. Under
certain circumstances, such as periods of high volatility, the Fund may
be required by an exchange to increase the level of its initial margin
payment. Additionally, initial margin requirements may be increased
generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily
basis as the value of the futures or options position varies, a process
known as "marking to the market." For example, when the Fund purchases
a contract and the value of the contract rises, the Fund receives from
the broker a variation margin payment equal to that increase in value.
Conversely, if the value of the futures position declines, the Fund is
required to make a variation margin payment to the broker equal to the
decline in value. Variation margin does not involve borrowing to
finance the futures transaction but rather represents a daily
settlement of the Fund's obligations to or from a clearing
organization.
Buyers and sellers of futures positions and options thereon can
enter into offsetting closing transactions, similar to closing
transactions on options on securities, by selling or purchasing an
offsetting contract or option. Futures contracts or options thereon may
be closed only on an exchange or board of trade providing a secondary
market for such futures contracts or options.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures contract or related
option may vary either up or down from the previous day's settlement
price. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond that limit. The daily
limit governs only price movements during a particular trading day and
therefore does not limit potential losses, because prices could move to
the daily limit for several consecutive trading days with little or no
trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for the Fund to close
a position and, in the event of adverse price movements, the Fund would
have to make daily cash payments of variation margin (except in the
case of purchased options). However, if futures contracts have been
used to hedge portfolio securities, such securities will not be sold
until the contracts can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or
completely offset losses on the futures contract. However, there is no
guarantee that the price of the securities will, in fact, correlate
with the price movements in the contracts and thus provide an offset to
losses on the contracts.
In considering the Fund's use of futures contracts and related
options, particular note should be taken of the following:
(1) Successful use by the Fund of futures contracts and related
options will depend upon the Investment Manager's ability to predict
movements in the direction of the overall securities, currencies and
interest rate markets, which requires different skills and techniques
than predicting changes in the prices of individual securities.
Moreover, futures contracts relate not only to the current price level
of the underlying instrument or currency but also to the anticipated
price levels at some point in the future. There is, in addition, the
risk that the movements in the price of the futures contract will not
correlate with the movements in the prices of the securities or
currencies being hedged. For example, if the price of the securities
index futures contract moves less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective,
but if the price of the securities being hedged has moved in an
unfavorable direction, the Fund would be in a better position than if
it had not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, the advantage may be partially
offset by losses in the futures position. In addition, if the Fund has
insufficient cash, it may have to sell assets from its portfolio to
meet daily variation margin requirements. Any such sale of assets may
or may not be made at prices that reflect a rising market.
Consequently, the Fund may need to sell assets at a time when such
sales are disadvantageous to the Fund. If the price of the futures
contract moves more than the price of the underlying securities, the
Fund will experience either a loss or a gain on the futures contract
that may or may not be completely offset by movements in the price of
the securities that are the subject of the hedge.
(2) In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in the
futures position and the securities or currencies being hedged,
movements in the prices or futures contracts may not correlate
perfectly with movements in the prices of the hedged securities or
currencies due to price distortions in the futures market. There may be
several reasons unrelated to the value of the underlying securities or
currencies that cause this situation to occur. First, as noted above,
all participants in the futures market are subject to initial and
variation margin requirements. If, to avoid meeting additional margin
deposit requirements or for other reasons, investors choose to close a
significant number of futures contracts through offsetting
transactions, distortions in the normal price relationship between the
securities or currencies and the futures markets may occur. Second,
because the margin deposit requirements in the futures market are less
onerous than margin requirements in the securities market, there may be
increased participation by speculators in the futures market; such
speculative activity in the futures market also may cause temporary
price distortions. As a result, a correct forecast of general market
trends may not result in successful hedging through the use of futures
contracts over the short term. In addition, activities of large traders
in both the futures and securities markets involving arbitrage and
other investment strategies may result in temporary price distortions.
(3) Positions in futures contracts may be closed out only on an
exchange or board of trade that provides a secondary market for such
futures contracts. Although the Fund intends to purchase and sell
futures only on exchanges or boards of trade where there appears to be
an active secondary market, there is no assurance that a liquid
secondary market on an exchange or board of trade will exist for any
particular contract at any particular time. In such event, it may not
be possible to close a futures positions, and in the event of adverse
price movements, the Fund would continue to be required to make
variation margin payments.
(4) Like options on securities and currencies, options on futures
contracts have limited life. The ability to establish and close out
options on futures will be subject to the development and maintenance
of liquid secondary markets on the relevant exchanges or boards of
trade. There can be no certainty that such markets for all options on
futures contracts will develop.
(5) Purchasers of options on futures contracts pay a premium at
the time of purchase. This amount and the transaction costs are all
that is at risk. Sellers of options on futures contracts, however, must
post initial margin and are subject to additional margin calls that
could be substantial in the event of adverse price movements. In
addition, although the maximum amount at risk when the Fund purchases
an option is the premium paid for the option and the transaction costs,
there may be circumstances when the purchase of an option on a futures
contract would result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement in the level of
the underlying securities index value or the securities or currencies
being hedged.
(6) As is the case with options, the Fund's activities in the
futures markets may result in a higher portfolio turnover rate and
additional transaction costs in the form of added brokerage commissions
and taxes; however, the Fund also may save on commissions by using
futures contracts or options thereon as a hedge rather than buying or
selling individual securities or currencies in anticipation or as a
result of market movements.
SPECIAL RISKS RELATED TO FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS. Buyers and sellers of foreign currency futures
contracts are subject to the same risks that apply to the use of
futures generally. In addition, there are risks associated with foreign
currency futures contracts and their use as a hedging device similar to
those associated with options on foreign currencies described above.
Options on foreign currency futures contracts may involve certain
additional risks. The ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary
market. Compared to the purchase or sale of foreign currency futures
contracts, the purchase of call or put options thereon involves less
potential risk to the Fund because the maximum amount at risk is the
premium paid for the option (plus transaction costs). However, there
may be circumstances when the purchase of a call or put option on a
foreign currency futures contract would result in a loss, such as when
there is no movement in the price of the underlying currency or futures
contract, when the purchase of the underlying futures contract would
not.
FORWARD CURRENCY CONTRACTS. The Fund may use forward currency
contracts to protect against uncertainty in the level of future foreign
currency exchange rates.
The Fund may enter into forward currency contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or the Fund anticipates the receipt in a foreign
currency of dividend or interest payments on a security that it holds
or anticipates purchasing, the Fund may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such
payment, as the case may be, by entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars or foreign
currency, of the amount of foreign currency involved in the underlying
transaction. The Fund will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship
between the currency exchange rates during the period between the date
on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The Fund also may hedge by using forward currency contracts in
connection with portfolio positions to lock in the U.S. dollar value of
those positions, to increase the Fund's exposure to foreign currencies
that the Investment Manager believes may rise in value relative to the
U.S. dollar, or to shift the Fund's exposure to foreign currency
fluctuations from one country to another. For example, when the
Investment Manager believes that the currency of a particular foreign
country may suffer a substantial decline relative to the U.S. dollar or
another currency, it may enter into a forward contract to sell the
amount of the former foreign currency approximating the value of some
of all of the Fund's portfolio securities denominated in such foreign
currency. This investment practice generally is referred to as
"cross-hedging" when another foreign currency is used. Certain of these
strategies may result in income subject to the "Short-Short
Limitation". See "Distributions and Taxes" on page 30.
The precise matching of the forward contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it
matures. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot (that is, cash) market (and
bear the expense of such purchase) if the market value of the security
is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the
sale of the portfolio security if the market value of the security
exceeds the amount of foreign currency the Fund is obligated to
deliver. The projection of short term currency market movements is
extremely difficult and the successful execution of a short term
hedging strategy is highly uncertain. Forward contracts involve the
risk that anticipated currency movements will not be accurately
predicted, causing the Fund to sustain losses on these contracts and
transaction costs. Under normal circumstances, consideration of the
prospects for currency parities will be incorporated into the longer
term investment decisions made with regard to overall diversification
strategies. However, the Investment Manager believes that it is
important to have the flexibility to enter into such forward contracts
when it determines that the best interests of the Fund will be served.
At or before the maturity date of a forward contract requiring the
Fund to sell a currency, the Fund may either sell a portfolio security
and use the sale proceeds to make delivery of the currency or retain
the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund
will obtain, on the same maturity date, the same amount of the currency
that it is obligated to deliver. Similarly, the Fund may close out a
forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of
the same currency on the maturity date of the first contract. The Fund
would realize a gain or loss as a result of entering into such an
offsetting forward currency contract under either circumstance to the
extent the exchange rate or rates between the currencies involved moved
between the execution dates of the first contract and the offsetting
contract.
The cost to the Fund of engaging in forward currency contracts
varies with factors such as the currencies involved, the length of the
contract period, and the market conditions then prevailing. Because
forward currency contracts are usually entered into on a principal
basis, no fees or commissions are involved. The use of forward currency
contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund owns or intends to acquire, but it does
fix a rate of exchange in advance. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value
of the hedged currencies, at the same time they limit any potential
gain that might result should the value of the currencies increase.
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund may convert
foreign currency from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
OFFICERS AND DIRECTORS
The Directors and the officers, their respective offices, dates of
birth and principal occupations during the last five years are set
forth below. Unless otherwise noted, the address of each is 11 Hanover
Square, New York, NY 10005.
BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the
Board of six of the other investment companies advised by the
Investment Manager and its affiliates (the "Funds Complex") and of the
parent of the Investment Manager, Bull & Bear Group, Inc. ("Group"). He
was born February 10, 1930. 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 Mark C. Winmill and Thomas B. Winmill.
ROBERT D. ANDERSON* -- Vice Chairman and Director. He is Vice Chairman
of the other investment companies in the Investment Company Complex and
of the Investment Manager and its affiliates. He was born December 7,
1929. He is 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.
RUSSELL E. BURKE III -- Director. 900 Park Avenue, New York, NY 10021.
He was born August 23, 1946. He is President of Russell E. Burke III,
Inc. Fine Art, New York, New York. From 1988 to 1991, he was President
of Altman Burke Fine Arts, Inc. From 1983 to 1988, he was Senior Vice
President of Kennedy Galleries. He is also a Director of three of the
other investment companies in the Funds Complex.
BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune,
NJ 07753. He is Senior Consultant with The Berger Financial Group, LLC
specializing in financial, estate and insurance matters. From March
1995 to December 31, 1995 he was President of Huber Hogan Knotts
Consulting, Inc. From 1990 to March 1995 he was president of Huber-
Hogan Associates. He was born February 7, 1930. He is also a Director
of the other investment companies in the Funds Complex.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY
10017. He is a principal of Kenny, Kindler, Hunt & Howe, Inc.,
executive recruiting consultants. He was born December 14, 1930. From
1976 until 1983 he was Vice President of Russell Reynolds Associates,
Inc., also executive recruiting consultants. He is also a Director of
the other investment companies in the Funds Complex.
FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York,
NY 10021. He is President and Chief Executive Officer of American Pure
Water Corporation, a manufacturer of water purifying equipment. He was
born November 14, 1926. He is also a Director of the other investment
companies in the Funds Complex.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill,
NC 27514. He was Executive Vice President and a Director of Dan River,
Inc., a diversified textile company, from 1969 until he retired in
1981. He was born February 9, 1923. He is a Director of Wheelock, Inc.,
a manufacturer of signal products, and a consultant for the National
Executive Service Corps in the health care industry. He is also a
Director of the other investment companies in the Funds Complex.
MARK C. WINMILL* -- Director, Co-President, Co-Chief Executive Officer,
and Chief Financial Officer. He is Co-President, Co-Chief Executive
Officer, and Chief Financial Officer of the Investment Company Complex
and of Group and certain of its affiliates, Chairman of the Investment
Manager and Investor Service Center, Inc. (the "Distributor"), and
President of Bull & Bear Securities, Inc. ("BBSI"). He was born
November 26, 1957. He received his M.B.A. from the Fuqua School of
Business at Duke University in 1987. From 1983 to 1985 he was Assistant
Vice President and Director of Marketing of E.P. Wilbur & Co., Inc., a
real estate development and syndication firm and Vice President of
E.P.W. Securities, its broker/dealer subsidiary. He is a son of Bassett
S. Winmill and brother of Thomas B. Winmill. He is also a Director of
three of the other investment companies in the Funds Complex.
THOMAS B. WINMILL* -- Director, Co-President, Co-Chief Executive
Officer, and General Counsel. He is Co-President, Co-Chief Executive
Officer, and General Counsel of the Investment Company Complex and of
Group and certain of its affiliates, President of the Investment
Manager and the Distributor, and Chairman of BBSI. He was born June 25,
1959. He was associated with the law firm of Harris, Mericle & Orr from
1984 to 1987. 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 and brother of Mark C. Winmill. He is also a
Director of four of the other investment companies in the Funds
Complex.
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President
of the Funds Complex, the Investment Manager and certain of its
affiliates. He was born March 1, 1955. From 1993 to 1995, he was
Associate Director -- Proprietary Trading at Barclays De Zoete Wedd
Securities Inc., from 1992 to 1993 he was Director, Bond Arbitrage at
WG Trading Company, and from 1989 to 1992 he was Vice President of
Wilkinson Boyd Capital Markets.
BRETT B. SNEED, CFA -- Senior Vice President. He is Senior Vice
President of the Funds Complex, the Investment Manager and certain of
its affiliates. He was born June 11, 1941. He is a Chartered Financial
Analyst, a member of the Association for Investment Management and
Research, and a member of the New York Society of Security Analysts.
From 1986 to 1988, he managed private accounts, from 1981 to 1986, he
was Vice President of Morgan Stanley Asset Management, Inc. and prior
thereto was a portfolio manager and member of the Finance and
Investment Committees of American International Group, Inc., an
insurance holding company.
JOSEPH LEUNG, CPA -- Treasurer and Chief Accounting Officer (since
1995). He is Treasurer and Chief Accounting Officer of the Funds
Complex, the Investment Manager and its affiliates. From 1992 to 1995
he held various positions with Coopers & Lybrand L.L.P., a public
accounting firm. From 1991 to 1992, he was the accounting supervisor at
Retirement Systems Group, a mutual fund company. From 1987 to 1991, he
held various positions with Ernst & Young, a public accounting firm. He
is a member of the American Institute of Certified Public Accountants.
He was born September 15, 1965.
WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice
President and Secretary of the Funds Complex, the Investment Manager
and its affiliates. He was born September 13, 1964. From 1991 to 1994
he was associated with the law firm of Skadden, Arps, Slate, Meagher &
Flom. He is a member of the New York State Bar.
* Bassett S. Winmill, Robert D. Anderson, Mark C. Winmill and Thomas B.
Winmill are "interested persons" of the Fund as defined by the 1940
Act, because of their positions and other relationships with the
Investment Manager.
COMPENSATION TABLE
TOTAL
COMPENSATION
FROM
PENSION OR REGISTRANT
RETIREMENT ESTIMATED AND
AGGREGATE BENEFITS ANNUAL INVESTMENT
NAME OF COMPENSATION ACCRUED AS BENEFITS COMPANY
PERSON, FROM PART OF FUND UPON COMPLEX PAID
POSITION REGISTRANT EXPENSES RETIREMENT TO DIRECTORS
Russell E. Burke III $5,500 None None $9,000 from
Director 4 Investment
Companies
Bruce B. Huber $5,500 None None $12,500 from
Director 7 Investment
Companies
James E. Hunt $5,500 None None $12,500 from
Director 7 Investment
Companies
Frederick A. $5,500 None None $12,500 from
Parker 7 Investment
Director Companies
John B. Russell $5,500 None None $12,500 from
Director 7 Investment
Companies
Information in the above table is based on fees paid during the
year ended June 30, 1996.
No officer, Director or employee of the Investment Manager
receives any compensation from the Fund for acting as an officer,
Director or employee of the Fund. As of October 15, 1996, officers and
Directors of the Fund owned less than 1% of the outstanding shares of
the Fund. As of October 16, 1996, no shareholder of record owned more
than 5% of the outstanding shares of the Fund.
INVESTMENT MANAGER
The Investment Manager acts as general manager of the Fund, being
responsible for the various functions assumed by it, including the
regular furnishing of advice with respect to portfolio transactions.
The other principal subsidiaries of Group include the Distributor,
which is a registered broker/dealer, Midas Management Corporation and
Rockwood Advisers, Inc., registered investment advisers, and BBSI, a
registered broker/dealer providing discount brokerage services.
Group is a publicly owned company whose securities are listed on
the Nasdaq Stock Market ("Nasdaq") and traded in the OTC market.
Bassett S. Winmill may be deemed a controlling person of Group on the
basis of his ownership of 100% of Group's voting stock and, therefore,
of the Investment Manager. The Fund and its affiliated investment
companies had net assets in excess of $417,000,000 as of October 28,
1996.
INVESTMENT MANAGEMENT AGREEMENT
Under the Investment Management Agreement, the Fund assumes and
pays all expenses required for the conduct of its business including,
but not limited to, custodian and transfer agency fees, accounting and
legal fees, investment management fees, fees of disinterested
Directors, association fees, printing, salaries of certain
administrative and clerical personnel, necessary office space, all
expenses relating to the registration or qualification of the shares of
the Fund under Blue Sky laws and reasonable fees and expenses of
counsel in connection with such registration and qualification,
miscellaneous expenses and such non-recurring expenses as may arise,
including actions, suits or proceedings affecting the Fund and the
legal obligation which the Fund may have to indemnify its officers and
Directors with respect thereto.
The Investment Manager has agreed in the Investment Management
Agreement that it will waive all or part of its fee or reimburse the
Fund monthly if and to the extent that the Fund's aggregate operating
expenses exceed the most restrictive limit imposed by any state in
which shares of the Fund are qualified for sale. Currently, the most
restrictive such limit applicable to the Fund is 7/10 of 1% of the
first $250 million, 5/8 of 1% from $250 million to $500 million, and
1/2 of 1% over $500 million. Certain expenses, such as brokerage
commissions, taxes, interest, distribution fees, certain expenses
attributable to investing outside the United States and extraordinary
items, are excluded from this limitation. For the fiscal years ended
June 30, 1994, 1995 and 1996, the Fund paid to the Investment Manager
investment management fees of $378,598, $288,533 and $251,003,
respectively.
If requested by the Directors, the Investment Manager may provide
other services to the Fund such as, without limitation, the functions
of billing, accounting, certain shareholder communications and
services, administering state and Federal registrations, filings and
controls and other administrative services. Any services so requested
and performed will be for the account of the Fund and the costs of the
Investment Manager in rendering such services shall be reimbursed by
the Fund, subject to examination by those directors of the Fund who are
not interested persons of the Investment Manager or any affiliate
thereof. For the fiscal years ended June 30, 1994, 1995 and 1996 the
Fund reimbursed the Investment Manager $20,581, $16,064 and $16,889,
respectively, for such services.
The Investment Management Agreement provides that the Investment
Manager will not be liable to the Fund or any shareholder of the Fund
for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which the agreement relates.
Nothing contained in the Investment Management Agreement, however,
shall be construed to protect the Investment Manager against any
liability to the Fund by reason of willful misfeasance, bad faith, or
gross negligence in the performance of its duties or by reason of its
reckless disregard of obligations and duties under the Investment
Management Agreement.
The Investment Management Agreement will continue in effect,
unless sooner terminated as described below, for successive periods of
twelve months, provided such continuance is specifically approved at
least annually by (a) the Directors or by the holders of a majority of
the outstanding voting securities of the Fund as defined in the 1940
Act and (b) a vote of a majority of the Directors who are not parties
to the Investment Management Agreement, or interested persons of any
such party. The Investment Management Agreement may be terminated
without penalty at any time either by a vote of the Directors or the
holders of a majority of the outstanding voting securities of the Fund,
as defined in the 1940 Act, on 60 days' written notice to the
Investment Manager, or by the Investment Manager on 60 days' written
notice to the Fund, and shall immediately terminate in the event of its
assignment.
Group has granted the Fund a non-exclusive license to use the
service marks "Bull & Bear," "Bull & Bear Performance Driven," and
"Performance Driven" under certain terms and conditions on a royalty
free basis. Such license will be withdrawn in the event the investment
manager of the Fund shall not be the Investment Manager or another
subsidiary of Group. If the license is terminated, the Fund will
eliminate all reference to "Bull & Bear" in its corporate name and
cease to use any of such service marks or any similar service marks in
its business.
DETERMINATION OF NET ASSET VALUE
Net asset value will normally be calculated (a) no less frequently
than weekly, (b) on the last business day of each month and (c) at any
other time determined by the Directors. Net asset value is calculated
by dividing the value of the Fund's net assets (the value of its assets
less its liabilities) by the total number of shares of its common stock
outstanding. All securities for which market quotations are readily
available, which include the options and futures in which the Fund may
invest, are valued at the last sales price on the primary exchange on
which they are traded prior to the time of determination, or, if no
sales price is available at that time, at the closing price quoted for
the securities (but if bid and asked quotations are available, at the
mean between the last current bid and asked prices, rather than the
quoted closing price). Securities that are traded in the unregulated
market are valued, if bid and asked quotations are available, at the
mean between the current bid and asked prices. If bid and asked
quotations are not available, then such securities are valued as
determined pursuant to procedures established in good faith by the
Directors.
ALLOCATION OF BROKERAGE
The Fund seeks to obtain prompt execution of orders at the most
favorable net prices. The Fund is not currently obligated to deal with
any particular broker, dealer or group thereof. Fund transactions in
debt and OTC securities generally are with dealers acting as principals
at net prices with little or no brokerage costs. In certain
circumstances, however, the Fund may engage a broker as agent for a
commission to effect transactions for such securities. Purchases of
securities from underwriters include a commission or concession paid to
the underwriter, and purchases from dealers include a spread between
the bid and asked price. While the Investment Manager generally seeks
reasonably competitive spreads or commissions, payments of the lowest
spread or commission is not necessarily consistent with obtaining the
best net results. Accordingly, the Fund will not necessarily be paying
the lowest spread or commission available.
The Investment Manager directs portfolio transactions to
broker/dealers for execution on terms and at rates which it believes,
in good faith, to be reasonable in view of the overall nature and
quality of services provided by a particular broker/dealer, including
brokerage and research services, and allocation of commissions to the
Fund's Custodian. With respect to brokerage and research services,
consideration may be given in the selection of broker/dealers to
brokerage or research provided and payment may be made of a fee higher
than that charged by another broker/dealer which does not furnish
brokerage or research services or which furnishes brokerage or research
services deemed to be of lesser value, so long as the criteria of
Section 28(e) of the Securities Exchange Act of 1934, as amended, or
other applicable law are met. Section 28(e) was adopted in 1975 and
specifies that a person with investment discretion shall not be "deemed
to have acted unlawfully or to have breached a fiduciary duty" solely
because such person has caused the account to pay a higher commission
than the lowest available under certain circumstances. To obtain the
benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions
paid are "reasonable in relation to the value of the brokerage and
research services provided ... viewed in terms of either that
particular transaction or his overall responsibilities with respect to
the accounts as to which he exercises investment discretion." Thus,
although the Investment Manager may direct portfolio transactions
without necessarily obtaining the lowest price at which such
broker/dealer, or another, may be willing to do business, the
Investment Manager seeks the best value to the Fund on each trade that
circumstances in the market place permit, including the value inherent
in on-going relationships with quality brokers.
Currently, it is not possible to determine the extent to which
commissions that reflect an element of value for brokerage or research
services might exceed commissions that would be payable for execution
alone, nor generally can the value of such services to the Fund be
measured, except to the extent such services have a readily
ascertainable market value. There is no certainty that services so
purchased, if any, will be beneficial to the Fund, and it may be that
other affiliated investment companies will derive benefit therefrom.
Such services being largely intangible, no dollar amount can be
attributed to benefits realized by the Fund or to collateral benefits,
if any, conferred on affiliated entities. These services may include
(1) furnishing advice as to the value of securities, the advisability
of investing in, purchasing or selling securities and the availability
of securities or purchasers or sellers of securities, (2) furnishing
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts, and (3) effecting securities transactions and performing
functions incidental thereto (such as clearance, settlement, and
custody). Pursuant to arrangements with certain broker/dealers, such
broker/dealers provide and pay for various computer hardware, software
and services, market pricing information, investment subscriptions and
memberships, and other third party and internal research of assistance
to the Investment Manager in the performance of its investment
decision-making responsibilities for transactions effected by such
broker/dealers for the Fund. Commission "soft dollars" may be used only
for "brokerage and research services" provided directly or indirectly
by the broker/dealer and under no circumstances will cash payments be
made by such broker/dealers to the Investment Manager. To the extent
that commission "soft dollars" do not result in the provision of any
"brokerage and research services" by a broker/dealer to whom such
commissions are paid, the commissions, nevertheless, are the property
of such broker/dealer. To the extent any such services are utilized by
the Investment Manager for other than the performance of its investment
decision-making responsibilities, the Investment Manager makes an
appropriate allocation of the cost of such services according to their
use.
BBSI, a wholly owned subsidiary of Group and the Investment
Manager's affiliate, provides discount brokerage services to the public
as an introducing broker clearing through unaffiliated firms on a fully
disclosed basis. The Investment Manager is authorized to place Fund
brokerage through BBSI at its posted discount rates and indirectly
through a BBSI clearing firm. The Fund will not deal with BBSI in any
transaction in which BBSI acts as principal. The clearing firm will
execute trades in accordance with the fully disclosed clearing
agreement between BBSI and the clearing firm. BBSI will be financially
responsible to the clearing firm for all trades of the Fund until
complete payment has been received by the Fund or the clearing firm.
BBSI will provide order entry services or order entry facilities to the
Investment Manager, arrange for execution and clearing of portfolio
transactions through executing and clearing brokers, monitor trades and
settlements and perform limited back-office functions including the
maintenance of all records required of it by the NASD.
In order for BBSI to effect any portfolio transactions for the
Fund, the commissions, fees or other remuneration received by BBSI must
be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. The Directors
have adopted procedures in conformity with Rule 17e-1 under the 1940
Act to ensure that all brokerage commissions paid to BBSI are
reasonable and fair. Although BBSI's posted discount rates may be lower
than those charged by full cost brokers, such rates may be higher than
some other discount brokers and certain brokers may be willing to do
business at a lower commission rate on certain trades. The Directors
have determined that portfolio transactions may be executed through
BBSI if, in the judgment of the Investment Manager, the use of BBSI is
likely to result in price and execution at least as favorable as those
of other qualified broker/dealers and if, in particular transactions,
BBSI charges the Fund a rate consistent with that charged to comparable
unaffiliated customers in similar transactions. Brokerage transactions
with BBSI are also subject to such fiduciary standards as may be
imposed by applicable law. The Investment Manager's fees under its
agreement with the Fund are not reduced by reason of any brokerage
commissions paid to BBSI.
During the fiscal years ended June 30, 1994, 1995 and 1996 the
Fund paid total brokerage commissions of $8,653, $958 and $16,243,
respectively. Of such commissions $2,753, $0, and $10,756 were
allocated to broker/dealers that provided research in the years 1994,
1995 and 1996, respectively. No transactions were directed to
broker/dealers during such periods for selling shares of the Fund or
any other affiliated investment companies. During the Fund's fiscal
years ended June 30, 1994, 1995 and 1996 the Fund paid brokerage
commissions of $4,278, $958 and $5,487, respectively, to BBSI,
representing approximately 49.44%, 100% and 33.78%, respectively of the
total commissions paid by the Fund and involving approximately 76.36%,
100% and 3.02%, respectively, of the aggregate dollar amount of
transactions involving the payment of commissions.
Investment decisions for the Fund and for other affiliated
investment companies managed by the Investment Manager or its
affiliates are made independently based on each Fund's investment
objectives and policies. The same investment decision, however, may
occasionally be made for two or more Funds. In such a case, the
Investment Manager may combine orders for two or more Funds for a
particular security if it appears that a combined order would reduce
brokerage commissions and/or result in a more favorable transaction
price. Combined purchase or sale orders are then averaged as to price
and allocated as to amount according to a formula deemed equitable to
each Fund. While in some cases this practice could have a detrimental
effect upon the price or quantity available of the security with
respect to the Fund, the Investment Manager believes that the larger
volume of combined orders can generally result in better execution and
prices. The Fund is not obligated to deal with any particular broker,
dealer or group thereof. Certain broker/dealers that the Funds Complex
does business with may, from time to time, own more than 5% of the
publicly traded Class A non-voting Common Stock of Group, the parent of
the Investment Manager, and may provide clearing services to BBSI.
The Fund's portfolio turnover rate may vary from year to year and
will not be a limiting factor when the Investment Manager deems
portfolio changes appropriate. The portfolio turnover rate is
calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases or sales of
securities whose maturities at the time of acquisition were one year or
less) by the monthly average value of securities in the portfolio
during the year.
DISTRIBUTIONS AND TAXES
The Fund intends to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of
1986, as amended ("Code"). To qualify for that treatment, the Fund must
distribute to its shareholders for each taxable year at least 90% of
its investment company taxable income (consisting generally of net
investment income, net short term capital gain and net gains from
certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. Among these requirements are
the following: (1) at least 90% of the Fund's gross income each taxable
year must be derived from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from
options, futures, or forward contracts) derived with respect to its
business of investing in securities or those currencies ("Income
Requirement"); (2) the Fund must derive less than 30% of its gross
income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three
months - options, futures, or forward contracts (other than those on
foreign currencies), or foreign currencies (or options, futures, or
forward contracts thereon) that are not directly related to the Fund's
principal business of investing in securities (or options and futures
with respect thereto) ("Short-Short Limitation"); and (3) the Fund's
investments must satisfy certain diversification requirements. In any
year during which the applicable provisions of the Code are satisfied,
the Fund will not be liable for Federal income tax on net income and
gains that are distributed to its shareholders. If for any taxable year
the Fund does not qualify for treatment as a RIC, all of its taxable
income would be taxed at corporate rates.
A loss on the sale of Fund shares that were held for six months or
less will be treated as a long term (rather than a short term) capital
loss to the extent the seller received any capital gain distributions
attributable to those shares.
Any dividend or other distribution will have the effect of
reducing the net asset value of the Fund's shares on the payment date
by the amount thereof. Furthermore, any such dividend or other
distribution, although similar in effect to a return of capital, will
be subject to tax. Dividends and other distributions may also be
subject to state and local taxes.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar
year an amount equal to the sum of (1) 98% of its ordinary income, (2)
98% of its capital gain net income (determined on an October 31 fiscal
year basis), plus (3) generally, income and gain not distributed or
subject to corporate tax in the prior calendar year. The Fund intends
to avoid imposition of the Excise Tax by making adequate distributions.
Interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce
or eliminate these foreign taxes, however, and many foreign countries
do not impose taxes on capital gains in respect of investments by
foreign investors. If more than 50% of the value of the Fund's total
assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible to, and may, file an
election with the Internal Revenue Service that would enable its
shareholders, in effect, to receive the benefit of the foreign tax
credit with respect to any foreign and U.S. possessions' income taxes
paid by it. Pursuant to the election, the Fund would treat those taxes
as dividends paid to its shareholders and each shareholder would be
required to (1) include in gross income, and treat as paid by the
shareholder, the shareholder's proportionate share of those taxes, (2)
treat the shareholder's share of those taxes and of any dividend paid
by the Fund that represents income from foreign or U.S. possessions
sources as the shareholder's own income from those sources, and (3)
either deduct the taxes deemed paid by the shareholder in computing the
shareholder's taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against the
shareholder's Federal income tax. The Fund will report to its
shareholders shortly after each taxable year their respective shares of
the Fund's income from sources within, and taxes paid to, foreign
countries and U.S. possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general,
meets either of the following tests: (1) at least 75% of its gross
income is passive or (2) an average of at least 50% of its assets
produce, or are held for the production of, passive income. Under
certain circumstances, the Fund will be subject to Federal income tax
on a portion of any "excess distribution" received on the stock of a
PFIC or of any gain from disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the
PFIC income will be included in the Fund's taxable income and,
accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders. If the Fund invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu
of the foregoing tax and interest obligation, the Fund will be required
to include in income each year its pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain (the
excess of net long term capital gain over net short term capital loss),
even if they are not distributed to the Fund; those amounts likely
would have to be distributed to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax. In most instances it will be
very difficult, if not impossible, to make this election because of
certain requirements thereof.
Proposed regulations have been published pursuant to which open-
end RICs, such as the Fund, would be entitled to elect to "mark-to-
market" their stock in certain PFICs. "Marking-to-market," in this
context, means recognizing as gain for each taxable year the excess, as
of the end of that year, of the fair market value of each such PFIC's
stock over the adjusted basis in that stock (including mark-to-market
gain for each prior year for which an election was in effect).
OPTIONS, FUTURES, AND FORWARD CONTRACTS. The Fund's use of hedging
strategies, such as selling (writing) and purchasing options and
futures contracts and entering into forward contracts, involves complex
rules that will determine for income tax purposes the timing of
recognition and character of the gains and losses the Fund realizes in
connection therewith. Gains from the disposition of foreign currencies
(except certain gains that may be excluded by future regulations), and
gains from options, futures, and forward contracts derived by the Fund
with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income
Requirement. However, income from the disposition of options, futures,
and forward contracts (other than those on foreign currencies) will be
subject to the Short-Short Limitation if they are held for less than
three months. Income from the disposition of foreign currencies, and
options, futures, and forward contracts on foreign currencies, also
will be subject to the Short-Short Limitation if they are held for less
than three months and are not directly related to the Fund's principal
business of investing in securities (or options and futures with
respect thereto).
If the Fund satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by
any decrease in value (whether realized or not) of the offsetting
hedging position during the period of the hedge for purposes of
determining whether the Fund satisfies the Short-Short Limitation.
Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. The Fund will
consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it
may be forced to defer the closing out of certain options, futures,
forward contracts and foreign currency positions beyond the time when
it otherwise would be advantageous to do so, in order for the Fund to
continue to qualify as a RIC.
The foregoing discussion of Federal tax consequences is based on
the tax law in effect on the date of this Statement of Additional
Information, which is subject to change by legislative, judicial, or
administrative action. The Fund may be subject to state or local tax in
jurisdictions in which it may be deemed to be doing business.
REPORTS TO SHAREHOLDERS
The Fund issues, at least semi-annually, reports to its
shareholders including a list of investments held and statements of
assets and liabilities, income and expense, and changes in net assets
of the Fund. The Fund's fiscal year ends on June 30.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, P.O. Box 2197, Boston, MA 02111
has been retained by the Fund to act as Custodian of the Fund's
investments and may appoint one or more subcustodians. The Custodian
also performs certain accounting services for the Fund. As part of its
agreement with the Fund, the Custodian may apply credits or charges for
its services to the Fund for, respectively, positive or deficit cash
balances maintained by the Fund with the Custodian. DST Systems, Inc.,
P.O. Box 419789, Kansas City, Missouri 64141-6789, is the Fund's
Transfer and Dividend Disbursing Agent.
AUDITORS
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA
19102-1707, are the independent accountants for the Fund. Financial
statements of the Fund are audited annually.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended June 30,
1996 together with the Report of the Fund's independent accountants
thereon, appear in the Fund's Annual Report to Shareholders and are
incorporated herein by reference.
APPENDIX - DESCRIPTIONS OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS
AAA Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are
protected by a large or an exceptionally stable margin and principle is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds which are rate Aa are judged to be of high quality by all
standards and, together with the Aaa group, comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
of fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the longer term risks
appear somewhat larger in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments of maintenance
of other terms of the contract over any period of time may be small.
CAA Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
CA Bonds which are rated as Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest
and repay principal.
AA Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay interest and repay principal is very strong, and in the
majority of instances they differ from AAA issues only in small degree.
A Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB Bonds rated BBB are regarded as having adequate capacity to pay
interest and repay principal. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this capacity than for bonds in higher rated
categories.
BB, B, CCC, CC AND C Bonds rated BB, B, CCC, CC, and C are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposure to adverse conditions.
BULL & BEAR GLOBAL INCOME FUND, INC.
Part C. Other Information
Item 24. Financial Statements and Exhibits
i. Financial Statements.*
ii. (i) Articles of Incorporation**
(ii) By-Laws**
(iii) Not applicable
(iv) Specimen stock certificate**
(v) Automatic Dividend Reinvestment Plan**
(vi) Not applicable
(vii) Investment Management Agreement**
(viii) Not applicable
(ix) Not applicable
(x) Custodian Agreement***
(xi) Transfer Agent Agreement***
(xii) Not applicable
(xiii) Not applicable
(xiv) Not applicable
(xv) Not applicable
(xvi) Not applicable
(xvii) Not applicable
- ------------------------
* Incorporated by reference from Registrant's Annual Report for
the fiscal year ended June 30, 1996, accession number 00000
15260-96-000013.
** Filed herewith.
*** Incorporated by reference from Registrant's Statement on Form
N-1A, File Nos. 2-57953 and 811-2474, as filed with the
Securities and Exchange Commission on October 26, 1995.
Item 25. Marketing Arrangements
None
Item 26. Other Expenses of Issuance and Distribution
Not applicable.
Item 27. Persons Controlled by or under Common Control with
Registrant
Insofar as the following have substantially identical boards of
directors or trustees, they may be deemed with the Registrant to be
under common control: Bull & Bear Dollar Reserves, a series of shares
issued by Bull & Bear Funds II, Inc.; Bull & Bear Municipal Income
Fund, Inc.; Bull & Bear U.S. Government Securities Fund, Inc.; Bull &
Bear Gold Investors Ltd.; Bull & Bear U.S. and Overseas Fund, a series
of Bull & Bear Funds I, Inc.; Bull & Bear Special Equities Fund, Inc.;
The Rockwood Growth Fund, Inc.; and Midas Fund, Inc.
Item 28. Number of Holders of Securities
Number of Record Holders
Title of Class (as of January 22, 1997)
Shares of Common Stock 3,185
$0.01 par value
Item 29. Indemnification
The Registrant is incorporated under Maryland law. Section 2- 418
of the Maryland General Corporation Law requires the Registrant to
indemnify its directors, officers and employees against expenses,
including legal fees, in a successful defense of a civil or criminal
proceeding. The law also permits indemnification of directors,
officers, employees and agents unless it is proved that (a) the act or
omission of the person was material and was committed in bad faith or
was the result of active or deliberate dishonesty, (b) the person
received an improper personal benefit in money, property or services or
(c) in the case of a criminal action, the person had reasonable cause
to believe that the act or omission was unlawful.
The Registrant's Articles of Incorporation: (1) provide that, to
the maximum extent permitted by applicable law, a director or officer
will not be personally liable to the Registrant or its stockholders;
(2) require the Registrant to indemnify and advance expenses as
provided in the By-laws to its present and past directors, officers,
employees, agents, and persons who are serving or have served at the
request of the Registrant in similar capacities for other entities in
advance of final disposition of any action against that person to the
extent permitted by Maryland law and the 1940 Act; (3) allow the
corporation to purchase insurance for any present or past director,
officer, employee, or agent; and (4) require that any repeal or
modification of the Articles of Incorporation or By-laws or adoption or
modification of any provision of the Articles of Incorporation or
By-laws inconsistent with the indemnification provisions, be
prospective only to the extent such repeal or modification would, if
applied retrospectively, adversely affect any limitation on the
liability of or indemnification and advance of expenses available to
any person covered by the indemnification provisions of the Articles of
Incorporation and By-laws.
Section 1 of Article 10 of the By-Laws sets forth the procedures
by which the Registrant will indemnify its directors, officers,
employees and agents. Section 2 of Article 10 of the By- Laws further
provides that the Registrant may purchase and maintain insurance or
other sources of reimbursement to the extent permitted by law on behalf
of any person who is or was a director or officer of the Registrant, or
is or was serving at the request of the Registrant as a director or
officer of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and
incurred by him or her in or arising out of his or her position.
The Registrant's Investment Management Agreement between the
Registrant and Bull & Bear Advisers, Inc. (the "Investment Manager")
provides that the Investment Manager shall not be liable to the
Registrant or any shareholder of the Registrant for any error of
judgment or mistake of law or for any loss suffered by the Registrant
in connection with the matters to which the Investment Management
Agreement relates. However, the Investment Manager is not protected
against any liability to the Registrant by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under the Investment Management Agreement.
The Registrant undertakes to carry out all indemnification
provisions of its Articles of Incorporation and By-Laws and the
above-described Investment Management Agreement in accordance with
Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Item 30. Business and Other Connections of Investment Adviser
The directors and officers of Bull & Bear Advisers, Inc., the
Investment Manager, are also directors and officers of the other Funds
managed by the Investment Manager, a wholly-owned subsidiary of Bull &
Bear Group, Inc. (the "Bull & Bear Funds"). In addition, such officers
are officers and directors of Bull & Bear Group, Inc. and its other
subsidiaries: Investor Service Center, Inc., the distributor of the
Bull & Bear Funds and a registered broker/dealer; Midas Management
Corporation and Rockwood Advisers, Inc., registered investment
advisers; and Bull & Bear Securities, Inc., a discount brokerage firm.
Bull & Bear Group, Inc.'s predecessor was organized in 1976. In 1978,
it acquired control of and subsequently merged with Investors Counsel,
Inc., a registered investment adviser organized in 1959. The principal
business of both companies since their founding has been to serve as
investment manager to registered investment companies. The Investment
Manager serves as investment manager of Bull & Bear Dollar Reserves, a
series of shares issued by Bull & Bear Funds II, Inc.; Bull & Bear
Municipal Income Fund, Inc.; Bull & Bear Gold Investors Ltd.; Bull &
Bear U.S. and Overseas Fund, a series of Bull & Bear Funds I, Inc.;
Bull & Bear Special Equities Fund, Inc.; and Bull & Bear U.S.
Government Securities Fund, Inc.
Item 31. Location of Accounts and Records
The minute books of Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the
offices of the Registrant and its Investment Manager). All other
records required by Section 31(a) of the Investment Company Act of 1940
are located at Investors Bank & Trust Company, 89 South Street, Boston,
MA 02111 (the offices of Registrant's custodian) and DST Systems, Inc.,
1055 Broadway, Kansas City, MO 64105-1594 (the offices of the
Registrant's Transfer and Dividend Disbursing Agent). Copies of certain
of the records located at Investors Bank & Trust Company and DST
Systems, Inc. are kept at 11 Hanover Square, New York, NY 10005 (the
offices of Registrant and the Investment Manager).
Item 32. Management Services -- none
Item 33. Undertakings -- not applicable
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City, County and State of New York on this 23rd day of January,
1997.
BULL & BEAR GLOBAL INCOME FUND, INC.
By: /s/ Thomas B. Winmill
Thomas B. Winmill
Co-President
SCHEDULE OF EXHIBITS TO FORM N-2
Exhibit Page
Number Exhibit Number
Exhibit A Articles of Incorporation* . . . . . . . . . .
Exhibit B By-Laws* . . . . . . . . . . . . . . . . . . .
Exhibit C Not Applicable . . . . . . . . . . . . . . . .
Exhibit D Specimen Stock Certificate* . . . . . . . . . .
Exhibit E Automatic Dividend Reinvestment Plan* . . . . .
Exhibit F Not Applicable . . . . . . . . . . . . . . . .
Exhibit G Investment Management Agreement* . . . . . . .
Exhibit H Not Applicable . . . . . . . . . . . . . . . .
Exhibit I Not Applicable . . . . . . . . . . . . . . . .
Exhibit J Form of Custodian Agreement** . . . . . . . . .
Exhibit K Form of Transfer Agent Agreement** . . . . . .
Exhibit L Not Applicable . . . . . . . . . . . . . . . .
Exhibit M Not Applicable . . . . . . . . . . . . . . . .
Exhibit N Not Applicable . . . . . . . . . . . . . . . .
Exhibit O Not Applicable . . . . . . . . . . . . . . . .
Exhibit P Not Applicable . . . . . . . . . . . . . . . .
Exhibit Q Not Applicable . . . . . . . . . . . . . . . .
Exhibit R Not Applicable . . . . . . . . . . . . . . . .
- ---------------------------
* Filed herewith.
** Incorporated by reference from Registrant's Statement on Form N-
1A, File Nos. 2-57953 and 811-2474, as filed with the Securities
and Exchange Commission on October 26, 1995.
ARTICLES OF INCORPORATION OF
BULL & BEAR GLOBAL INCOME FUND, INC.
ARTICLE I
(1) The name and address of the incorporator of the Corporation is as
follows:
Thomas B. Winmill
11 Hanover Square
New York, NY 10005
(2) The incorporator is over eighteen years of age.
(3) Said incorporator is forming a corporation under the general laws
of the State of Maryland.
ARTICLE II NAME
The name of the corporation is Bull & Bear Global Income Fund,
Inc. (the "Corporation").
ARTICLE III PURPOSES AND POWERS
The purpose for which the Corporation is formed is to exercise
and enjoy all of the general powers, rights and privileges granted to, or
conferred upon, corporations by the Maryland General Corporation Law now or
hereafter in force.
ARTICLE IV PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the principal office of the Corporation in the
State of Maryland is 11 East Chase Street, Baltimore, Maryland 21202. The
name of the resident agent of the Corporation in the State of Maryland is
United States Corporation Company, a corporation of the State of Maryland,
and the address of the resident agent is 11 East Chase Street, Baltimore,
Maryland 21202.
ARTICLE V CAPITAL STOCK
(1) The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is twenty million
(20,000,000) shares, all of which shall have a par value of ($.01) per
share and an aggregate par value of two hundred thousand dollars
($200,000).
(2) (a) The Board of Directors of the Corporation is authorized
to classify or to reclassify, from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms
and conditions or rights to require redemption of the stock.
(b) Without limiting the generality of the foregoing, the
dividends and distributions or other payments with respect to the stock of
the Corporation, and with respect to each class that hereafter may be
created, shall be in such amount as may be declared from time to time by
the Board of Directors, and such dividends and distributions may vary from
class to class to such extent and for such purposes as the Board of
Directors may deem appropriate, including, but not limited to, the purpose
of complying with requirements of regulatory or legislative authorities.
(c) Until such time as the Board of Directors shall provide
otherwise pursuant to the authority granted in this Section (2), all the
authorized shares of the Corporation are designated as Common Stock. Shares
of the Common Stock and the holders thereof, and shares of any class and
the holders thereof, shall be subject to the following provisions,
provided, however, that if no shares of any class other than Common Stock
are outstanding, the shares of the Common Stock and the holders thereof
shall nevertheless be subject to the following provisions except to the
extent that such provisions are by their terms applicable only when shares
of two or more classes are outstanding.
(3) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or in cash or both, as may be declared
from time to time by the Board of Directors, acting in its sole discretion,
with respect to such class.
(4) In the event of the liquidation or dissolution of the
Corporation, the holders of the Common Stock shall be entitled to receive
all the assets of the Corporation not attributable to other classes of
stock through any preference. The assets so distributable to the
stockholders shall be distributed among such stockholders in proportion to
the number of shares of that class held by them and recorded on the books
of the Corporation.
(5) Unless otherwise expressly provided in these Articles of
Incorporation, including any Articles Supplementary creating any additional
class of capital stock, on each matter submitted to a vote of stockholders,
each holder of a share of capital stock of the Corporation entitled to vote
shall be entitled to one vote for each share outstanding in such holder's
name on the books of the Corporation, and all shares of all classes of
capital stock entitled to vote shall vote together as a single class;
provided, however, that as to any matter with respect to which a separate
vote of any class or series is required by applicable law, such requirement
as to a separate vote by that class or series shall apply in lieu of a vote
of all classes voting together as a single class as described above.
(6) All shares purchased by the Corporation shall constitute
authorized but unissued shares and the number of the authorized shares of
stock of the Corporation shall not be reduced by the number of any shares
purchased by it. Unless and until their classification is changed in
accordance with Section (2) of this Article V, all shares of capital stock
so purchased shall continue to belong to the same class to which they
belonged at the time of their purchase.
(7) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in
fractional denominations shall be shares of capital stock having
proportionately to the respective fractions represented thereby all the
rights of whole shares of the same class, including without limitation, the
right to vote, the right to receive dividends and distributions, and the
right to participate upon liquidation of the Corporation, but excluding the
right to receive a stock certificate representing fractional shares.
(8) All persons who shall acquire capital stock or other
securities of the Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation and the By-Laws of the
Corporation, as each may be amended from time to time.
ARTICLE VI DENIAL OF PREEMPTIVE RIGHTS
No stockholder of the Corporation shall by reason of holding
shares of capital stock have any preemptive or preferential right to
purchase or subscribe to any shares of capital stock of the Corporation,
now or hereafter authorized, or any notes, debentures, bonds or other
securities convertible into shares of capital stock, now or hereafter to be
authorized, whether or not the issuance of any such shares of capital
stock, or notes, debentures, bonds or other securities would adversely
affect the dividend or voting rights of such stockholder; and the Board of
Directors may issue shares of any class of capital stock of the
Corporation, or any notes, debentures, bonds, or other securities
convertible into shares of any class of capital stock of the Corporation,
either, whole or in part, to the existing stockholders.
ARTICLE VII DETERMINATION BINDING
Any determination made in good faith, so far as accounting
matters are involved, in accordance with accepted accounting practice by or
pursuant to the authority of the direction of the Board of Directors, as to
the amount of assets, obligations or liabilities of the Corporation, as to
the amount of net income of the Corporation from dividends and interest for
any period or amounts at any time legally available for the payment of
dividends, as to the amount of any reserves or charges set up and the
propriety thereof, as to the time of or purpose for creating reserves or as
to the use, alteration or cancellation of any reserves or charges (whether
or not any obligation or liability for which such reserves or charges shall
have been created, shall have been paid or discharged or shall be then or
thereafter required to be paid or discharged), as to the value of any
security or other instrument or asset owned by the Corporation or as to any
matters relating to the issuance, sale, redemption or other acquisition or
disposition of securities or shares of capital stock of the Corporation,
and any reasonable determination made in good faith by the Board of
Directors shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its capital stock, past, present and future,
and shares of capital stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of capital
stock or acceptance of share certificates or other evidence thereof, that
any and all such determinations shall be binding as aforesaid. No provision
of these Articles of Incorporation shall be effective to (a) require a
waiver of compliance with any provision of the Securities Act of 1933, as
amended, or the Investment Company Act of 1940, as amended (the "1940
Act"), or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (b) protect or purport to protect any
director or officer of the Corporation against any liability to the
Corporation or its security holders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her
office.
ARTICLE VIII
The name "Bull & Bear" included in the name of the Corporation
shall be used pursuant to a royalty-free nonexclusive license from Bull &
Bear Group, Inc. or a subsidiary of Bull & Bear Group, Inc. The license may
be withdrawn by Bull & Bear Group, Inc. or its subsidiary at any time in
their sole discretion, in which case the Corporation shall have no further
right to use the name "Bull & Bear" in its corporate name or otherwise and
the Corporation, the holders of its capital stock and its officers and
directors, shall promptly take whatever action may be necessary to change
its name accordingly.
ARTICLE IX PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE
CORPORATION AND OF THE DIRECTORS AND STOCKHOLDERS
(1) The number of directors of the Corporation shall initially
be nine (9), which number may be increased or decreased by or pursuant to
the By-Laws of the Corporation but shall never be less than three nor more
than fifteen. The names of the persons who shall act as directors until the
first annual meeting of the Board of Directors after effectiveness of these
Articles of Incorporation and until their successors are duly elected and
qualify are (the "Initial Directors"):
Bassett S. Winmill, Robert D. Anderson, Russell E. Burke, III,
Bruce B. Huber, James E. Hunt, Frederick A. Parker, John B.
Russell, Mark C. Winmill, Thomas B. Winmill
Beginning with the first annual meeting of the Board of
Directors after effectiveness of these Articles of Incorporation, the
directors shall be divided into five classes, designated Class I, Class II,
Class III, Class IV and Class V. Prior to any change in the number of
directors, Class I shall consist of one director and Classes II - V shall
consist of two directors each. At the first annual meeting of stockholders
after effectiveness of these Articles of Incorporation, the Class I
director shall be elected for an initial term of one year, each Class II
director for an initial term of two years, each Class III director for an
initial term of three years, each Class IV director for an initial term of
four years, and each Class V director for an initial term of five years.
Upon the expiration of the initial term of each class, such class of
directors shall be elected for successive five-year terms. A director
elected at an annual meeting shall hold office until the annual meeting for
the year in which his or her term expires and until his or her successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. If the
number of directors is changed, any increase or decrease shall be
apportioned among the classes, as of the annual meeting of stockholders
next succeeding any such change, so as to maintain a number of directors in
each class as nearly equal as possible. In no case shall a decrease in the
number of directors shorten the term of any incumbent director. Any vacancy
on the Board of Directors that results from an increase in the number of
directors may be filled by a majority of the Continuing Directors (defined
as the Initial Directors and directors whose election is approved by a
majority of the Continuing Directors then on the Board), provided that a
quorum is present, and any other vacancy occurring in the Board of
Directors may be filled by a majority of the Continuing Directors then in
office, whether or not sufficient to constitute a quorum, or by a sole
remaining Continuing Director; provided, however, that if the stockholders
of any class of the Corporation's capital stock are entitled separately to
elect one or more directors, a majority of the remaining Continuing
Directors elected by that class or the sole remaining Continuing Director
elected by that class may fill any vacancy among the number of directors
elected by that class. A director elected by the Continuing Directors to
fill any vacancy in the Board of Directors shall serve until the next
annual meeting of stockholders and until his or her successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. At any annual meeting
of stockholders, any director elected to fill any vacancy in the Board of
Directors that has arisen since the preceding annual meeting of
stockholders (whether or not any such vacancy has been filled by election
of a new director by the Continuing Directors) shall hold office for a term
which coincides with the remaining term of the class to which such
directorship was previously assigned, if such vacancy arose other than by
an increase in the number of directors, and until his or her successor
shall be elected and shall qualify. In the event such vacancy arose due to
an increase in the number of directors, any director so elected to fill
such vacancy at an annual meeting shall hold office for a term which
coincides with that of the class to which such directorship has been
apportioned as heretofore provided, and until his or her successor shall be
elected and shall qualify. A director may be removed for cause only, and
not without cause, and only by action taken by the holders of at least
eighty percent (80%) of the outstanding shares of all classes of voting
stock then entitled to vote in an election of such director.
(2) The Continuing Directors are hereby empowered to authorize
the issuance from time to time of shares of capital stock, whether now or
hereafter authorized, for such consideration as the Continuing Directors
may deem advisable, subject to such limitations as may be set forth in
these Articles of Incorporation or in the By-Laws of the Corporation or
applicable law.
(3) (a) To the maximum extent permitted by applicable law, as
currently in effect or as may hereafter be amended:
(i) no Continuing Director or officer of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages;
and
(ii) the Corporation shall indemnify and advance expenses to
its present and past Continuing Directors, officers, employees and agents,
and persons who are serving or have served at the request of the
Corporation as a director, officer, employee or agent in similar capacities
for other entities.
(b) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Continuing Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him or her and incurred by him or her in any
such capacity or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or her against such
liability.
(c) Any repeal or modification of this Section (3) of this
Article IX by the stockholders of the Corporation, or adoption or
modification of any other provision of the Articles of Incorporation or
By-Laws inconsistent with this Section, shall be prospective only, to the
extent that such repeal or modification would, if applied retrospectively,
adversely affect any limitation on the liability of any Continuing Director
or officer of the Corporation or indemnification and advance of expenses
available to any person covered by these provisions with respect to any act
or omission which occurred prior to such repeal, modification or adoption.
(4) The Continuing Directors of the Corporation shall have the
exclusive authority to make, alter or repeal from time to time any of the
By-Laws of the Corporation except any particular By-Law which is specified
as not subject to alteration or repeal by the Continuing Directors.
ARTICLE X CERTAIN VOTES OF STOCKHOLDERS
(1) (a) Except as otherwise provided in these Articles of
Incorporation and notwithstanding any other provision of the Maryland
General Corporation Law to the contrary, 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 previously approved by the vote of a majority of the
Continuing 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.
(b) The Corporation elects not to be governed by any
provision of Section 3-602 of Subtitle 6 of the Maryland General
Corporation Law.
(2) (a) Except as otherwise provided in paragraph (b) of this
Section (2) of this Article X, 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, other than voting stock held by any interested stockholder or any
affiliate thereof, shall be necessary to authorize any of the following
actions:
(i) the merger or consolidation or share exchange of the
Corporation with or into any other person or company (including, without
limitation, a partnership, corporation, joint venture, business trust,
common law trust or any other business organization);
(ii) the issuance or transfer by the Corporation (in one
or a series of transactions in any 12-month period) of any securities of the
Corporation to any other person or entity for cash, securities or other
property (or combination thereof) having an aggregate fair market value of
$1,000,000 or more, excluding (A) sales of any securities of the Corpora-
tion in connection with a public offering thereof, (B) the issuance or
transfer in 1997 of securities of the Corporation to the shareholders of
Bull & Bear Global Income Fund, a series of Bull & Bear Funds II, Inc., in
exchange for such shareholder's shares of Bull & Bear Global Income Fund, a
series of Bull & Bear Funds II, Inc., (C) issuances of securities of the
Corporation pursuant to a dividend reinvestment plan adopted by the
Corporation, and (D) issuances of securities of the Corporation upon the
exercise of any stock subscription rights distributed by the Corporation;
(iii) a sale, lease, exchange, mortgage, pledge, transfer or
other disposition by the Corporation (in one or a series of transactions in
any 12-month period) to or with any person of any assets of the Corporation
having an aggregate fair market value of $1,000,000 or more, except for
transactions in securities effected by the Corporation in the ordinary
course of its business; or
(iv) any proposal as to the voluntary liquidation or
dissolution of the Corporation or any amendment to the Corporation's
Articles of Incorporation to terminate its existence.
(b) Notwithstanding paragraph (a) of this Section (2), the
actions enumerated in such paragraph will be authorized if previously
approved by a vote of at least (i) a majority of the Continuing Directors
of the Corporation and (ii) a majority of the number of votes entitled to
be cast thereon, including votes of voting stock held by any interested
stockholder or any affiliate thereof.
(3) Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation, the approval, adoption or
authorization of any amendment to these Articles of Incorporation that
makes the Common Stock or any other class of capital stock a "redeemable
security" as that term is defined in the 1940 Act shall require the affirma-
tive vote of the holders 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
previously approved by at least a majority of the Continuing Directors, in
which case such amendment or repeal would require the affirmative vote of
the holders of a majority of the number of votes entitled to be cast
thereon.
The Corporation shall notify the holders of all capital stock
of the approval, in accordance with the preceding paragraph of this Article
X, of any amendment to these Articles of Incorporation that makes the
Common Stock or any other class of capital stock a "redeemable security"
(as that term is defined in the 1940 Act) no later than thirty (30) days
prior to the date of filing of such amendment with the Department of
Assessments and Taxation (or any successor agency) of the State of
Maryland; such amendment may not be so filed, however, until the later of
(a) ninety (90) days following the date of approval of such amendment by
the holders of capital stock in accordance with the preceding paragraph of
this Article X and (b) the next January 1 or July 1, whichever is sooner,
following the date of such approval by holders of capital stock.
ARTICLE XI PRIVATE PROPERTY OF STOCKHOLDERS
The private property of stockholders shall not be subject to
the payment of corporate debts to any extent whatsoever.
ARTICLE XII UNLIMITED TERM OF EXISTENCE
The Corporation shall have an unlimited period of existence.
ARTICLE XIII AMENDMENT
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter pre scribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
Notwithstanding any other provisions of these Articles of Incorporation or
the By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
By-Laws of the Corporation), the amendment or repeal of Section (8) of
Article V, Section (1), Section (2), Section (3) or Section (4) of Article
IX, Section (1), Section (2), and Section (3) of Article X, Article XI,
Article XII, or this Article XIII of these Articles of Incorporation shall
require the affirmative vote of the holders 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 previously approved by at least a majority of the Continuing
Directors, in which case such amendment or repeal would require the
affirmative vote of the holders of a majority of the number of votes
entitled to be cast thereon.
IN WITNESS WHEREOF, the undersigned hereby executes the
foregoing Articles of Incorporation and acknowledges the same to be his act
and further acknowledges that, to the best of his knowledge, the matters
and facts set forth herein are true in all material respects under the
penalties of perjury.
Dated the 11th day of December, 1996.
/s/ Thomas B. Winmill
Thomas B. Winmill
BY-LAWS
OF
BULL & BEAR GLOBAL INCOME FUND, INC.
A MARYLAND CORPORATION
BY-LAWS
OF
BULL & BEAR GLOBAL INCOME FUND, INC.
(A MARYLAND CORPORATION)
ARTICLE I
NAME OF CORPORATION, LOCATION OF
OFFICES AND SEAL
Section 1.1. Name. The name of the Corporation is Bull & Bear
Global Income Fund, Inc.
Section 1.2. Principal Offices. The principal office of the
Corporation in the State of Maryland shall be located in
Baltimore, Maryland. The Corporation may, in addition, establish
and maintain such other offices and places of business as the
board of directors may, from time to time, determine.
Section 1.3. Seal. The corporate seal of the Corporation shall
consist of two (2) concentric circles, between which shall be the
name of the Corporation, and in the center shall be inscribed the
year of its incorporation, and the words "Corporate Seal". The
form of the seal shall be subject to alteration by the board of
directors and the seal may be used by causing it or a facsimile
to be impressed or affixed or printed or otherwise reproduced.
Any officer or director of the Corporation shall have authority
to affix the corporate seal of the Corporation to any document
requiring the same.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meetings. There shall be no stockholders'
meetings for the election of directors and the transaction of
other proper business except as required by law, the listing
requirements of the stock exchange or market where the
Corporation's stock is listed, or as hereinafter provided, in
which case the annual meeting shall be held in September of each
year.
Section 2.2. Special Meetings. Special meetings of
stockholders may be called at any time by the chairman of the
board or the president or a co-president and shall be held at
such time and place as may be stated in the notice of the
meeting.
Section 2.3. Notice of Meetings. The secretary shall cause
notice of the place, date and hour and, in the case of a special
meeting or as otherwise required by law, the purpose or purposes
for which the meeting is called, to be served personally or to be
mailed, postage prepaid, not less than 10 nor more than 90 days
before the date of the meeting, to each stockholder entitled to
vote at such meeting at his address as it appears on the records
of the Corporation at the time of such mailing. Notice shall be
deemed to be given when deposited in the United States mail
addressed to the stockholders as aforesaid.
Notice of any stockholders meeting need not be given to any
stockholder who shall sign a written waiver of such notice
whether before or after the time of such meeting, which waiver
shall be filed with the records of such meeting, or to any
stockholder who is present at such meeting in person or by proxy.
Notice of adjournment of a stockholders meeting to another time
or place need not be given if such time and place are announced
at the meeting.
Irregularities in the notice of any meeting to, or the nonreceipt
of any such notice by, any of the stockholders shall not
invalidate any action otherwise properly taken by or at any such
meeting.
Section 2.4. Quorum and Adjournment of Meetings. The presence
at any stockholders meeting, in person or by proxy, of
stockholders entitled to cast one-third of all votes entitled to
be cast thereat shall be necessary and sufficient to constitute a
quorum for the transaction of business, provided that with
respect to any matter to be voted upon separately by any class of
shares, a quorum shall consist of the holders of one-third of the
shares of that class outstanding and entitled to vote on the
matter. In the absence of a quorum, the stockholders present in
person or by proxy or, if no stockholder entitled to vote is
present in person or by proxy, any officer present entitled to
preside or act as secretary of such meeting may adjourn the
meeting without determining the date of the new meeting or from
time to time without further notice to a date not more than 120
days after the original record date. Any business that might
have been transacted at the meeting originally called may be
transacted at any such adjourned meeting at which a quorum is
present.
Section 2.5. Voting and Inspectors. Unless statute or the
Articles of Incorporation (the "Charter") provide otherwise, at
every stockholders meeting, each stockholder shall be entitled to
one vote for each share and a fractional vote for each fraction
of a share of stock of the Corporation validly issued and
outstanding and standing in his name on the books of the
Corporation on the record date fixed in accordance with Section
7.4 hereof, either in person or by proxy appointed by instrument
in writing subscribed by such stockholder or his duly authorized
attorney, except that no shares held by the Corporation shall be
entitled to a vote.
If no record date has been fixed, the record date for the
determination of stockholders entitled to notice of or to vote at
a meeting of stockholders shall be the later of the close of
business on the day on which notice of the meeting is mailed or
the 30th day before the meeting, or, if notice is waived by all
stockholders, at the close of business on the 11th day preceding
the day on which the meeting is held.
Except as otherwise specifically provided in the Charter or these
By-laws or as required by applicable law, all matters shall be
decided by a vote of the majority of the votes validly cast at a
meeting at which a quorum is present. The vote upon any question
shall be by ballot whenever requested by any person entitled to
vote, but, unless such a request is made, voting may be conducted
in any way approved by the meeting.
At any meeting at which there is an election of directors, the
chairman of the meeting may appoint two inspectors of election
who shall first subscribe an oath or affirmation to execute
faithfully the duties of inspectors at such election with strict
impartiality and according to the best of their ability, and
shall, after the election, make a certificate of the result of
the vote taken. No candidate for the office of director shall be
appointed as an inspector.
Section 2.6. Validity of Proxies. The right to vote by proxy
shall exist only if the instrument authorizing such proxy to act
shall have been signed by the stockholder or by his duly
authorized attorney. Unless a proxy provides otherwise, it shall
not be valid more than 11 months after its date. All proxies
shall be delivered to the secretary of the Corporation or to the
person acting as secretary of the meeting before being voted, who
shall decide all questions concerning qualification of voters,
the validity of proxies, and the acceptance or rejection of
votes. If inspectors of election have been appointed by the
chairman of the meeting, such inspectors shall decide all such
questions. A proxy with respect to stock held in the name of two
or more persons shall be valid if executed by one of them unless
at or prior to exercise of such proxy the Corporation receives
from any one of them a specific written notice to the contrary
and a copy of the instrument or order which so provides. A proxy
purporting to be executed by or on behalf of a stockholder shall
be deemed valid unless challenged at or prior to its exercise.
Section 2.7. Stock Ledger and List of Stockholders. It shall
be the duty of the secretary or assistant secretary of the
Corporation to cause an original or duplicate stock ledger
containing the names and addresses of all the stockholders and
the number of shares held by them, respectively, to be maintained
at the office of the Corporation's transfer agent. Such stock
ledger may be in written form or any other form capable of being
converted into written form within a reasonable time for visual
inspection.
Section 2.8. Action Without Meeting. Any action required or
permitted to be taken by stockholders at a meeting of
stockholders may be taken without a meeting if (a) all
stockholders entitled to vote on the matter consent to the action
in writing, (b) all stockholders entitled to notice of the
meeting but not entitled to vote at it sign a written waiver of
any right to dissent, and (c) the consents and waivers are filed
with the records of the meetings of stockholders. Such consent
shall be treated for all purposes as a vote at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. General Powers. Except as otherwise provided by
operation of law, by the Charter, or by these By-laws, the
property, business and affairs of the Corporation shall be
managed under the direction of and all the powers of the
Corporation shall be exercised by or under authority of its board
of directors.
Section 3.2. Power to Issue and Sell Stock. The board of
directors may from time to time issue and sell or cause to be
issued and sold any of the Corporation's authorized shares to
such persons and for such consideration as the board of directors
shall deem advisable, subject to the provisions of the Charter.
Section 3.3. Power to Declare Dividends. The board of
directors, from time to time as they may deem advisable, may
declare and pay dividends in stock, cash or other property of the
Corporation, out of any source available for dividends, to the
stockholders according to their respective rights and interests
in accordance with the provisions of the Charter. The board of
directors may prescribe from time to time that dividends declared
may be payable at the election of any of the stockholders
(exercisable before or after the declaration of the dividend),
either in cash or in shares of the Corporation, provided that the
sum of the cash dividend actually paid to any stockholder and the
asset value of the shares received (determined as of such time as
the board of directors shall have prescribed, pursuant to the
Charter, with respect to shares sold on the date of such
election) shall not exceed the full amount of cash to which the
stockholder would be entitled if he elected to receive only cash.
Section 3.4. Number and Term of Directors. Except for the
initial board of directors, the board of directors shall consist
of not fewer than three nor more than fifteen directors, as
specified by a resolution of a majority of the entire board of
directors. Each director shall hold office until his successor
is elected and qualified or until his earlier death, resignation
or removal. Any vacancy created by an increase in directors may
be filled in accordance with Section 3.6 of this Article III.
All acts done at any meeting of the directors or by any person
acting as a director, so long as his successor shall not have
been duly elected or appointed, shall, notwithstanding that it be
afterwards discovered that there was some defect in the election
of the directors or of such person acting as a director or that
they or any of them were disqualified, be as valid as if the
directors or such other person, as the case may be, had been duly
elected and were or was qualified to be directors or a director
of the Corporation.
Directors need not be stockholders of the Corporation.
Section 3.5. Election. The initial director or directors shall
be that person or persons named as such in the Charter. At each
annual meeting, the stockholders shall elect directors to hold
office until the expiration of the term of his class or until the
annual election of directors next succeeding his election and
until his death, or until he shall have resigned, have been
removed as hereinafter provided in these By-laws, or as otherwise
provided by statute or the Charter.
Section 3.6. Vacancies and Newly Created Directorships. Any
vacancies in the board of directors, whether arising from death,
resignation, removal, an increase in the number of directors or
otherwise, shall be filled by a vote of the board of directors in
accordance with the Charter.
Section 3.7. [Reserved.]
Section 3.8. Regular Meetings. The meeting of the board of
directors for choosing officers and transacting other proper
business, and all other meetings, shall be held at such time and
place, within or outside the state of Maryland, as the board may
determine and as provided by resolution. Notice of such meetings
need not be given, following the annual meeting of stockholders,
provided that notice of any change in the time or place of such
meetings shall be sent promptly to each director not present at
the meeting at which such change was made, in the manner provided
for notice of special meetings. Members of the board of
directors or any committee designated thereby may participate in
a meeting of such board or committee by means of a conference
telephone or similar communications equipment that allows all
persons participating in the meeting to hear each other at the
same time; and participation by such means shall constitute
presence in person at a meeting.
Section 3.9. Special Meetings. Special meetings of the board
of directors shall be held whenever called by the chairman of the
board or the president or a co-president (or, in the absence or
disability of the chairman of the board or the president or a co-
president, by any officer or director, as they so designate) at
the time and place (within or outside of the State of Maryland)
specified in the respective notice or waivers of notice of such
meetings. At least three days before the day on which a special
meeting is to be held, notice of special meetings, stating the
time and place, shall be (a) mailed to each director at his
residence or regular place of business or (b) delivered to him
personally or transmitted to him by telegraph, telefax, telex,
cable or wireless.
Section 3.10. Waiver of Notice. No notice of any meeting need
be given to any director who is present at the meeting or who
waives notice of such meeting in writing (which waiver shall be
filed with the records of such meeting), either before or after
the time of the meeting.
Section 3.11. Quorum and Voting. At all meetings of the board
of directors, the presence of onehalf of the number of directors
then in office shall constitute a quorum for the transaction of
business, provided that there shall be present at least two
directors. In the absence of a quorum, a majority of the
directors present may adjourn the meeting, from time to time,
until a quorum shall be present. The action of a majority of the
directors present at a meeting at which a quorum is present shall
be the action of the board of directors, unless concurrence of a
greater proportion is required for such action by law, by the
Charter or by these By-laws.
Section 3.12. Action Without a Meeting. As amended, any action
required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a
meeting if a written consent to such action is signed by all
members of the board or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings
of the board or committee.
Section 3.13. Compensation of Directors. Directors may receive
such compensation for their services as may from time to time be
determined by resolution of the board of directors.
ARTICLE IV
COMMITTEES
Section 4.1. Organization. By resolution adopted by the board
of directors, the board may designate one or more committees of
the board of directors, including an Executive Committee, each
consisting of at least two directors. Each member of a committee
shall be a director and shall hold committee membership at the
pleasure of the board. The chairman of the board, if any, shall
be a member of the Executive Committee. The board of directors
shall have the power at any time to change the members of such
committees and to fill vacancies in the committees.
Section 4.2. Powers of the Executive Committee. Unless
otherwise provided by resolution of the board of directors, when
the board of directors is not in session the Executive Committee
shall have and may exercise all powers of the board of directors
in the management of the business and affairs of the Corporation
that may lawfully be exercised by an Executive Committee except
the power to declare a dividend or distribution on stock,
authorize the issuance of stock, recommend to stockholders any
action requiring stockholders approval, amend these By-laws,
approve any merger or share exchange which does not require
stockholder approval or approve or terminate any contract with an
"investment adviser" or "principal underwriter," as those terms
are defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). Notwithstanding the above, such Executive
Committee may make such dividend calculations and payments as are
consistent with applicable law, including the Maryland General
Corporation Law.
Section 4.3. Powers of Other Committees of the Board of
Directors. To the extent provided by resolution of the board,
other committees of the board of directors shall have and may
exercise any of the powers that may lawfully be granted to the
Executive Committee.
Section 4.4. Proceedings and Quorum. In the absence of an
appropriate resolution of the board of directors, each committee
may adopt such rules and regulations governing its proceedings,
quorum and manner of acting as it shall deem proper and
desirable, provided that a quorum shall not be less than two
directors. In the event any member of any committee is absent
from any meeting, the members thereof present at the meeting,
whether or not they constitute a quorum, may appoint a member of
the board of directors to act in the place of such absent member.
Section 4.5. Other Committees. The board of directors may
appoint other committees, each consisting of one or more persons,
who need not be directors. Each such committee shall have such
powers and perform such duties as may be assigned to it from time
to time by the board of directors, but shall not exercise any
power which may lawfully be exercised only by the board of
directors or a committee thereof.
ARTICLE V
OFFICERS
Section 5.1. Officers. The officers of the Corporation shall
be a president or co-presidents, a secretary, and a treasurer,
and may include one or more vice presidents (including executive
and senior vice presidents), assistant secretaries or assistant
treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.11 hereof. The board
of directors may, but shall not be required to, elect a chairman
and vice chairman of the board.
Section 5.2. Election, Tenure and Qualifications. The officers
of the Corporation (except those appointed pursuant to Section
5.11 hereof) shall be elected by the board of directors at its
first meeting or such subsequent meetings as shall be held prior
to its first annual meeting, and thereafter at regular board
meetings, as required by applicable law. If any officers are not
elected at any annual meeting, such officers may be elected at
any subsequent meetings of the board. Except as otherwise
provided in this Article V, each officer elected by the board of
directors shall hold office until his or her successor shall have
been elected and qualified. Any person may hold one or more
offices of the Corporation except that no one person may serve
concurrently as both the president or a co-president and vice
president. A person who holds more than one office in the
Corporation may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be
executed, acknowledged, or verified by more than one officer.
The chairman of the board shall be chosen from among the
directors of the Corporation and may hold such office only so
long as he continues to be a director. No other officer need be
a director.
Section 5.3. Vacancies and Newly Created Offices. If any
vacancy shall occur in any office by reason of death,
resignation, removal, disqualification or other cause, or if any
new office shall be created, such vacancies or newly created
offices may be filled by the chairman of the board at any meeting
or, in the case of any office created pursuant to Section 5.11
hereof, by any officer upon whom such power shall have been
conferred by the board of directors.
Section 5.4. Removal and Resignation. At any meeting called
for such purpose, the Executive Committee may remove any officer
from office (either with or without cause) by the affirmative
vote, given at the meeting, of a majority of the members of the
Committee. Any officer may resign from office at any time by
delivering a written resignation to the board of directors, the
president or a co-president, the secretary, or any assistant
secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 5.5. Chairman of the Board. The chairman of the board,
if there be such an officer, shall be the senior officer of the
Corporation, shall preside at all stockholders meetings and at
all meetings of the board of directors and shall be ex officio a
member of all committees of the board of directors. He shall
have such other powers and perform such other duties as may be
assigned to him from time to time by the board of directors.
Section 5.6. Vice Chairman of the Board. The board of
directors may from time to time elect a vice chairman who shall
have such powers and perform such duties as from time to time may
be assigned to him by the board of directors, chairman of the
board or the president or a co-president. At the request of, or
in the absence or in the event of the disability of the chairman
of the board, the vice chairman may perform all the duties of the
chairman of the board or the president or a copresident and, when
so acting, shall have all the powers of and be subject to all the
restrictions upon such respective officers.
Section 5.7. President, Co-President. The president or co-
presidents shall be the chief executive officer or co-chief
executive officers, as the case may be, of the Corporation and,
in the absence of the chairman of the board or vice chairman or
if no chairman of the board or vice chairman has been chosen,
shall preside at all stockholders meetings and at all meetings of
the board of directors and shall in general exercise the powers
and perform the duties of the chairman of the board. Subject to
the supervision of the board of directors, the president or the
co-presidents shall have general charge of the business, affairs
and property of the Corporation and general supervision over its
officers, employees and agents. Except as the board of directors
may otherwise order, the president or a co-president may sign in
the name and on behalf of the Corporation all deeds, bonds,
contracts, or agreements. The president or a co-president shall
exercise such other powers and perform such other duties as from
time to time may be assigned by the board of directors.
Section 5.8. Vice President. The board of directors may from
time to time elect one or more vice presidents (including
executive and senior vice presidents) who shall have such powers
and perform such duties as from time to time may be assigned to
them by the board of directors or the president or co-presidents.
At the request of, or in the absence or in the event of the
disability of, the president or both co-presidents, the vice
president (or, if there are two or more vice presidents, then the
senior of the vice presidents present and able to act) may
perform all the duties of the president or co-presidents and,
when so acting, shall have all the powers of and be subject to
all the restrictions upon the president or co-presidents.
Section 5.9. Treasurer and Assistant Treasurers. The treasurer
shall be the chief accounting officer of the Corporation and
shall have general charge of the finances and books of account of
the Corporation. The treasurer shall render to the board of
directors, whenever directed by the board, an account of the
financial condition of the Corporation and of all transactions as
treasurer; and as soon as possible after the close of each
financial year he shall make and submit to the board of directors
a like report for such financial year. The treasurer shall cause
to be prepared annually a full and complete statement of the
affairs of the Corporation, including a balance sheet and a
financial statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting of stockholders
and filed within 20 days thereafter at the principal office of
the Corporation in the state of Maryland. The treasurer shall
perform all acts incidental to the office of treasurer, subject
to the control of the board of directors.
Any assistant treasurer may perform such duties of the treasurer
as the treasurer or the board of directors may assign, and, in
the absence of the treasurer, may perform all the duties of the
treasurer.
Section 5.10. Secretary and Assistant Secretaries. The
secretary shall attend to the giving and serving of all notices
of the Corporation and shall record all proceedings of the
meetings of the stockholders and directors in books to be kept
for that purpose. The secretary shall keep in safe custody the
seal of the Corporation, and shall have responsibility for the
records of the Corporation, including the stock books and such
other books and papers as the board of directors may direct and
such books, reports, certificates and other documents required by
law to be kept, all of which shall at all reasonable times be
open to inspection by any director. The secretary shall perform
such other duties which appertain to this office or as may be
required by the board of directors.
Any assistant secretary may perform such duties of the secretary
as the secretary or the board of directors may assign, and, in
the absence of the secretary, may perform all the duties of the
secretary.
Section 5.11. Subordinate Officers. The chairman of the board
from time to time may appoint such other officers or agents as he
may deem advisable, each of whom shall have such title, hold
office for such period, have such authority and perform such
duties as the board of directors may determine. The chairman of
the board from time to time may delegate to one or more officers
or agents the power to appoint any such subordinate officers or
agents and to prescribe their respective rights, terms of office,
authorities and duties. Any officer or agent appointed in
accordance with the provisions of this Section 5.11 may be
removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the board of
directors.
Section 5.12. Remuneration. The salaries or other compensation
of the officers of the Corporation shall be fixed from time to
time by resolution of the board of directors, except that the
board of directors may by resolution delegate to any person or
group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in
accordance with the provisions of Section 5.11 hereof.
Section 5.13. Surety Bonds. The board of directors may require
any officer or agent of the Corporation to execute a bond
(including, without limitation, any bond required by applicable
law, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder) to the Corporation in such sum
and with such surety or sureties as the board of directors may
determine, conditioned upon the faithful performance of his or
her duties to the Corporation, including responsibility for
negligence and for the accounting of any of the Corporation's
property, funds or securities that may come into his hands.
ARTICLE VI
EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 6.1. Checks, Notes, Drafts, Etc. So long as the
Corporation shall employ a custodian to keep custody of the cash
and securities of the Corporation, all checks and drafts for the
payment of money by the Corporation may be signed in the name of
the Corporation by the custodian. Promissory notes, checks or
drafts payable to the Corporation may be endorsed only to the
order of the custodian or its nominee and only by any two of the
following: the treasurer, the president or a co-president, a
vice president (including executive and senior vice presidents)
or by such other person or persons as shall be authorized by the
board of directors, provided that no one person may sign in the
capacity of two such officers. Except as otherwise authorized by
the board of directors, all requisitions or orders for the
assignment of securities standing in the name of the custodian or
its nominee, or for the execution of powers to transfer the same,
shall be signed in the name of the Corporation by any two of the
following: the president or a co-president, vice president
(including executive and senior vice presidents), treasurer or an
assistant treasurer, provided that no one person may sign in the
capacity of two such officers.
Section 6.2. Voting of Securities. Unless otherwise ordered by
the board of directors, the president or a co-president, or any
vice president (including executive and senior vice presidents)
shall have full power and authority on behalf of the Corporation
to attend and to act and to vote, or in the name of the
Corporation to execute proxies to vote, at any meeting of
stockholders of any company in which the Corporation may hold
stock. At any such meeting such officer shall possess and may
exercise (in person or by proxy) any and all rights, powers and
privileges incident to the ownership of such stock. The board of
directors may by resolution from time to time confer like powers
upon any other person or persons in accordance with the laws of
the State of Maryland.
ARTICLE VII
CAPITAL STOCK
Section 7.1. Certificates of Stock. The interest of each
stockholder of the Corporation may be, but shall not be required
to be, evidenced by certificates for shares of stock in such form
not inconsistent with the Charter as the board of directors may
from time to time authorize. No certificate shall be valid
unless it is signed in the name of the Corporation by a president
or a co-president or a vice president and countersigned by the
secretary or an assistant secretary or the treasurer or an
assistant treasurer of the Corporation and sealed with the seal
of the Corporation, or bears the facsimile signatures of such
officers and a facsimile of such seal. In case any officer who
shall have signed any such certificate, or whose facsimile
signature has been placed thereon, shall cease to be such an
officer (because of death, resignation or otherwise) before such
certificate is issued, such certificate may be issued and
delivered by the Corporation with the same effect as if he were
such officer at the date of issue.
The number of each certificate issued, the name and address of
the person owning the shares represented thereby, the number of
such shares and the date of issuance shall be entered upon the
stock ledger of the Corporation at the time of issuance.
Every certificate exchanged, surrendered for redemption or
otherwise returned to the Corporation shall be marked "canceled"
with the date of cancellation.
Section 7.2. Transfer of Shares. Shares of the Corporation
shall be transferable on the books of the Corporation by the
holder of record thereof (in person or by his duly authorized
attorney or legal representative) (a) if a certificate or
certificates have been issued, upon surrender duly endorsed or
accompanied by proper instruments of assignment and transfer,
with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require, or (b) as
otherwise prescribed by the board of directors. Except as
otherwise provided in the Charter, the shares of stock of the
Corporation may be freely transferred, subject to the charging of
customary transfer fees, and the board of directors may, from
time to time, adopt rules and regulations with reference to the
method of transfer of the shares of stock of the Corporation.
The Corporation shall be entitled to treat the holder of record
of any share of stock as the absolute owner thereof for all
purposes, and accordingly shall not be bound to recognize any
legal, equitable or other claim or interest in such share on the
part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by
law or the statutes of the State of Maryland.
Section 7.3. Transfer Agents and Registrars. The board of
directors may from time to time appoint or remove transfer agents
or registrars of transfers for shares of stock of the
Corporation, and it may appoint the same person as both transfer
agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter
issued shall be countersigned by one of such transfer agents or
by one of such registrars of transfers or by both and shall not
be valid unless so countersigned. If the same person shall be
both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 7.4. Fixing of Record Date. The board of directors may
fix in advance a date as a record date for the determination of
the stockholders entitled to notice of or to vote at any
stockholders meeting or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose
of any other lawful action, provided that (a) such record date
shall be within 90 days prior to the date on which the particular
action requiring such determination will be taken, except that a
meeting of stockholders convened on the date for which it was
called may be adjourned from time to time without further notice
to a date not more than 120 days after the original record date;
(b) the transfer books shall not be closed for a period longer
than 20 days; and (c) in the case of a meeting of stockholders,
the record date shall be at least 10 days before the date of the
meeting.
Section 7.5. Lost, Stolen or Destroyed Certificates. Before
issuing a new certificate for stock of the Corporation alleged to
have been lost, stolen or destroyed, the board of directors or
any officer authorized by the board may, in its discretion,
require the owner of the lost, stolen or destroyed certificate
(or his legal representative) to give the Corporation a bond or
other indemnity, in such form and in such amount as the board or
any such officer may direct and with such surety or sureties as
may be satisfactory to the board or any such officer, sufficient
to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of such new certificate.
ARTICLE VIII
CONFLICT OF INTEREST TRANSACTIONS
Section 8.1. Validity of Contract or Transactions. In the
event that any officer or director of the Corporation shall have
any interest, direct or indirect, in any other firm, association
or corporation as officer, employee, director or stockholder, no
transaction or contract made by the Corporation with any such
other firm, association or corporation shall be valid unless such
interest shall have been disclosed or made known to all of the
directors or to a majority of the directors and such transaction
or contract shall have been approved by a majority of a quorum of
directors, which majority shall consist of directors not having
any such interest or a majority of the directors in office,
including directors having such an interest.
ARTICLE IX
FISCAL YEAR AND ACCOUNTANT
Section 9.1. Fiscal Year. The fiscal year of the Corporation
shall, unless otherwise ordered by the board of directors, be
twelve calendar months ending on the 30th day of June.
ARTICLE X
INDEMNIFICATION AND INSURANCE
Section 10.1. Indemnification of Officers, Directors, Employees
and Agents. In accordance with applicable law, including the
Maryland General Corporation Law, the Corporation shall indemnify
each person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative ("Proceeding"), by reason of the fact that he or
she is or was a director, officer, employee, or agent of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, partner, trustee or
agent of another corporation, partnership, joint venture, trust,
or other enterprise, against all reasonable expenses (including
attorneys' fees) actually incurred, and judgments, fines,
penalties and amounts paid in settlement in connection with such
Proceeding to the maximum extent permitted by law, now existing
or hereafter adopted. Notwithstanding the foregoing, the
following provisions shall apply with respect to indemnification
of the Corporation's directors, officers, and investment manager
(as defined in the 1940 Act):
(a) Whether or not there is an adjudication of
liability in such Proceeding, the Corporation
shall not indemnify any such person for any
liability arising by reason of such person's
willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in
the conduct of his or her office or under any
contract or agreement with the Corporation
("disabling conduct").
(b) The Corporation shall not indemnify any such
person unless:
(1) the court or other body before which the
Proceeding was brought (a) dismisses the
Proceeding for insufficiency of evidence of any
disabling conduct, or (b) reaches a final decision
on the merits that such person was not liable by
reason of disabling conduct; or
(2) absent such a decision, a reasonable
determination is made, based upon a review of the
facts, by (a) the vote of a majority of a quorum
of the directors of the Corporation who are
neither interested persons of the Corporation as
defined in the 1940 Act, nor parties to the
Proceeding, or (b) if such quorum is not
obtainable, or even if obtainable, if a majority
of a quorum of directors described above so
directs, based upon a written opinion by
independent legal counsel, that such person was
not liable by reason of disabling conduct.
(c) Reasonable expenses (including attorneys' fees)
incurred in defending a Proceeding involving any
such person will be paid by the Corporation in
advance of the final disposition thereof upon an
undertaking by such person to repay such expenses
unless it is ultimately determined that he or she
is entitled to indemnification, if:
(1) such person shall provide adequate security
for his or her undertaking;
(2) the Corporation shall be insured against
losses arising by reason of such advance; or
(3) a majority of a quorum of the directors of
the Corporation who are neither interested
persons of the Corporation as defined in the
1940 Act, nor parties to the Proceeding, or
independent legal counsel in a written
opinion, shall determine, based on a review
of readily available facts, that there is
reason to believe that such person will be
found to be entitled to indemnification.
Section 10.2. Insurance of Officers, Directors, Employees and
Agents. The Corporation may purchase and maintain insurance or
other sources of reimbursement to the extent permitted by law on
behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee, partner,
trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against him or her and incurred by him or her in or arising out
of his position.
Section 10.3. Non-exclusivity. The indemnification and
advancement of expenses provided by, or granted pursuant to, this
Article X shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under the Charter, these By-laws, agreement, vote
of stockholders or directors, or otherwise, both as to action in
his or her official capacity and as to action in another capacity
while holding such office.
Section 10.4. Amendment. Notwithstanding anything to the
contrary herein, no amendment, alteration or repeal of this
Article or the adoption, alteration or amendment of any other
provisions to the Charter or these By-laws inconsistent with this
Article shall adversely affect any right or protection of any
person under this Article with respect to any act or failure to
act which occurred prior to such amendment, alteration, repeal or
adoption.
ARTICLE XI
AMENDMENTS
Section 11.1. General. Except as provided in Section 11.2 of
this Article XI, all By-laws of the Corporation, whether adopted
by the board of directors or the stockholders, shall be subject
to amendment, alteration or repeal, and new By-laws may be made
only by the affirmative vote of a majority of directors, at any
meeting the notice or waiver of notice of which shall have
specified or summarized the proposed amendment, alteration,
repeal or new By-law. No amendment of any Section of these By-
laws shall be made by the stockholders of the Corporation except
as set forth in Section 11.2 of this Article XI.
Section 11.2. By Stockholders Only. No amendment of any section
of these By-laws shall be made except by the stockholders of the
Corporation if the By-laws provide that such section may not be
amended, altered or repealed except by the stockholders. From
and after the issuance of any shares of the capital stock of the
Corporation no amendment, alteration or repeal of this Article XI
shall be made except by the stockholders of the Corporation.
BY-LAWS
TABLE OF CONTENTS
PAGE
ARTICLE I NAME OF CORPORATION, LOCATION OF OFFICES AND
SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Name . . . . . . . . . . . . . . . . . . 1
Section 1.2. Principal Offices . . . . . . . . . . . . 1
Section 1.3. Seal . . . . . . . . . . . . . . . . . . 1
ARTICLE II STOCKHOLDERS . . . . . . . . . . . . . . . . . . 1
Section 2.1. Annual Meetings . . . . . . . . . . . . . 1
Section 2.2. Special Meetings. . . . . . . . . . . . . 1
Section 2.3. Notice of Meetings . . . . . . . . . . . 1
Section 2.4. Quorum and Adjournment of Meetings . . . 2
Section 2.5. Voting and Inspectors. . . . . . . . . . 2
Section 2.6. Validity of Proxies . . . . . . . . . . . 3
Section 2.7. Stock Ledger and List of Stockholders . . 3
Section 2.8. Action Without Meeting . . . . . . . . . 3
ARTICLE III BOARD OF DIRECTORS . . . . . . . . . . . . . . 3
Section 3.1. General Powers . . . . . . . . . . . . . 3
Section 3.2. Power to Issue and Sell Stock . . . . . . 3
Section 3.3. Power to Declare Dividends. . . . . . . . 3
Section 3.4. Number and Term of Directors . . . . . . 4
Section 3.5. Election . . . . . . . . . . . . . . . . 4
Section 3.6. Vacancies and Newly Created
Directorships . . . . . . . . . . . . . 4
Section 3.7. Removal . . . . . . . . . . . . . . . . . 4
Section 3.8. Regular Meetings . . . . . . . . . . . . 5
Section 3.9. Special Meetings . . . . . . . . . . . . 5
Section 3.10. Waiver of Notice . . . . . . . . . . . . 5
Section 3.11. Quorum and Voting . . . . . . . . . . . . 5
Section 3.12. Action Without a Meeting . . . . . . . . 5
Section 3.13. Compensation of Directors . . . . . . . . 5
ARTICLE IV COMMITTEES . . . . . . . . . . . . . . . . . . . 6
Section 4.1. Organization . . . . . . . . . . . . . . 6
Section 4.2. Powers of the Executive Committee . . . . 6
Section 4.3. Powers of Other Committees of the Board
of Directors . . . . . . . . . . . . . 6
Section 4.4. Proceedings and Quorum . . . . . . . . . 6
Section 4.5. Other Committees . . . . . . . . . . . . 6
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . 6
Section 5.1. Officers . . . . . . . . . . . . . . . . 6
Section 5.2. Election, Tenure and Qualifications . . . 7
Section 5.3. Vacancies and Newly Created Offices . . . 7
Section 5.4. Removal and Resignation. . . . . . . . . 7
Section 5.5. Chairman of the Board. . . . . . . . . . 7
Section 5.6. Vice Chairman of the Board . . . . . . . 7
Section 5.7. President, Co-President . . . . . . . . . 7
Section 5.8. Vice President . . . . . . . . . . . . . 8
Section 5.9. Treasurer and Assistant Treasurers . . . 8
Section 5.10. Secretary and Assistant Secretaries . . . 8
Section 5.11. Subordinate Officers . . . . . . . . . . 8
Section 5.12. Remuneration . . . . . . . . . . . . . . 9
Section 5.13. Surety Bonds . . . . . . . . . . . . . . 9
ARTICLE VI EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES . 9
Section 6.1. Checks, Notes, Drafts, Etc. . . . . . . . 9
Section 6.2. Voting of Securities. . . . . . . . . . . 9
ARTICLE VII CAPITAL STOCK . . . . . . . . . . . . . . . . 10
Section 7.1. Certificates of Stock. . . . . . . . . . 10
Section 7.2. Transfer of Shares . . . . . . . . . . . 10
Section 7.3. Transfer Agents and Registrars . . . . . 10
Section 7.4. Fixing of Record Date . . . . . . . . . . 10
Section 7.5. Lost, Stolen or Destroyed Certificates . 11
ARTICLE VIII CONFLICT OF INTEREST TRANSACTIONS . . . . . . 11
Section 8.1. Validity of Contract or Transactions . . 11
ARTICLE IX FISCAL YEAR AND ACCOUNTANT . . . . . . . . . . . 11
Section 9.1. Fiscal Year . . . . . . . . . . . . . . . 11
ARTICLE X INDEMNIFICATION AND INSURANCE . . . . . . . . . . 11
Section 10.1 Indemnification of Officers, Directors,
Employees and Agents . . . . . . . . . 11
Section 10.2. Insurance of Officers, Directors,
Employees and Agents . . . . . . . . . 12
Section 10.3. Non-exclusivity . . . . . . . . . . . . . 13
Section 10.4. Amendment . . . . . . . . . . . . . . . . 13
ARTICLE XI AMENDMENTS . . . . . . . . . . . . . . . . . . . 13
Section 11.1. General . . . . . . . . . . . . . . . . . 13
Section 11.2. By Stockholders Only. . . . . . . . . . . 13
BULL & BEAR GLOBAL INCOME FUND, INC.
The Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of
each class of stock or series thereof of the Corporation, and the
qualifications, limitations, or restrictions of such preferences
and/or rights. The Corporation will also furnish without charge
to each stockholder who so requests a description of the
authority of the Corporation's board of directors to set the
relative rights and preferences of unissued series of the
Corporation's capital stock. Such requests may be made to the
Corporation or the transfer agent.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT -Custodian
TEN ENT -as tenants by the entire- (Cust) (Minor)
ties
JT TEN -as joint tenants with
right of under Uniform
Gifts to Minors Act
survivorship and not
as tenants in common
___________________________
(State)
Additional abbreviations may also be used though
not in the above list.
For value received, ________________________________________
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING
POSTAL ZIP CODE OF ASSIGNEE
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________ Shares of
the Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
__________________________________________________________________________
Attorney to transfer the said Stock on the books of the within-
named Corporation with full power of substitution in the premises.
Dated: ________________________
___________________________________________
Signature
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
COMMON STOCK
PAR VALUE $.01 Shares
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
THIS CERTIFICATE
IS TRANSFERABLE IN
KANSAS CITY, MO OR
IN NEW YORK, NY
CUSIP 119924 10 8
SEE REVERSE FOR
CERTAIN DEFINITIONS
BULL & BEAR GLOBAL INCOME FUND, INC.
THIS CERTIFIES THAT
IS THE OWNER OF
FULL PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
Bull & Bear Global Income Fund, Inc., transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney
upon surrender of this Certificate properly endorsed. This Certificate and
the shares represented hereby are issued and shall be subject to all of the
provisions of the Articles of Incorporation and By-Laws of the Corporation,
such as from time to time amended, to all of which the holder by acceptance
hereof assents. This Certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signa-
tures of its duly authorized officers.
DATED
SECRETARY CO-PRESIDENT
COUNTERSIGNED AND REGISTERED
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
FORM OF TERMS AND CONDITIONS OF
THE DIVIDEND REINVESTMENT PLAN
OF
1. Each shareholder (the "Shareholder")
holding shares of common stock (the "Shares") of
(the "Fund") will
automatically be a participant in the Dividend
Reinvestment Plan (the "Plan"), unless the Shareholder
specifically elects to receive all dividends and capital
gains in cash paid by check mailed directly to the
Shareholder by as agent under
the Plan (the "Agent"). The Agent will open an account
for each Shareholder under the Plan in the same name in
which such Shareholder's shares of Common Stock are
registered.
2. Whenever the Fund declares a capital gain
distribution or an income dividend payable in Shares or
cash, participating Shareholders will take the
distribution or dividend entirely in Shares and the Agent
will automatically receive the Shares, including
fractions, for the Shareholder's account in accordance
with the following:
Whenever the Market Price (as defined in
Section 3 below) per Share is equal to or exceeds
the net asset value per Share at the time Shares are
valued for the purpose of determining the number of
Shares equivalent to the cash dividend or capital
gain distribution (the "Valuation Date"),
participants will be issued additional Shares equal
to the amount of such dividend divided by the Fund's
net asset value per Share. Whenever the Market
Price per Share is less than such net asset value on
the Valuation Date, participants will be issued
additional Shares equal to the amount of such
dividend divided by the Market Price. The Valuation
Date is the dividend or distribution payment date
or, if that date is not an American Stock Exchange
trading day, the next trading day. If the Fund
should declare a dividend or capital gain
distribution payable only in cash, the Agent will,
as purchasing agent for the participating
Shareholders, buy Shares in the open market, on the
American Stock Exchange (the "Exchange") or
elsewhere, for such Shareholders' accounts after the
payment date, except that the Agent will endeavor to
terminate purchases in the open market and cause the
Fund to issue the remaining Shares if, following the
commencement of the purchases, the market value of
the Shares exceeds the net asset value. These
remaining Shares will be issued by the Fund at a
price equal to the Market Price.
In a case where the Agent has terminated open
market purchases and caused the issuance of
remaining Shares by the Fund, the number of shares
received by the participant in respect of the cash
dividend or distribution will be based on the
weighted average of prices paid for Shares purchased
in the open market and the price at which the Fund
issues remaining Shares. To the extent that the
Agent is unable to terminate purchases in the open
market before the Agent has completed its purchases,
or remaining Shares cannot be issued by the Fund
because the Fund declared a dividend or distribution
payable only in cash, and the market price exceeds
the net asset value of the Shares, the average Share
purchase price paid by the Agent may exceed the net
asset value of the Shares, resulting in the
acquisition of fewer Shares than if the dividend or
capital gain distribution had been paid in Shares
issued by the Fund.
The Agent will apply all cash received as a
dividend or capital gain distribution to purchase
shares of common stock on the open market as soon as
practicable after the payment date of the dividend
or capital gain distribution, but in no event later
than 45 days after that date, except when necessary
to comply with applicable provisions of the federal
securities laws.
3. For all purposes of the Plan: (a) the
Market Price of the Shares on a particular date shall be
the average closing market price on the five trading days
the Shares traded ex-dividend on the Exchange prior to
such date or, if no sale occurred on the Exchange prior
to such date, then the mean between the closing bid and
asked quotations for the Shares on the Exchange on such
date, and (b) net asset value per share on a particular
date shall be as determined by or on behalf of the Fund.
4. The open-market purchases provided for
herein may be made on any securities exchange on which
the Shares are traded, in the over-the-counter market or
in negotiated transactions, and may be on such terms as
to price, delivery and otherwise as the Agent shall
determine. Funds held by the Agent uninvested will not
bear interest, and it is understood that, in any event,
the Agent shall have no liability in connection with any
inability to purchase Shares within 45 days after the
initial date of such purchase as herein provided, or with
the timing of any purchases effected. The Agent shall
have no responsibility as to the value of the Shares
acquired for the Shareholder's account.
5. The Agent will hold Shares acquired
pursuant to the Plan in noncertificated form in the
Agent's name or that of its nominee. At no additional
cost, a Shareholder participating in the Plan may send to
the Agent for deposit into its Plan account those
certificate shares of the Fund in its possession. These
shares will be combined with those unissued full and
fractional shares acquired under the Plan and held by the
Agent. Shortly thereafter, such Shareholder will receive
a statement showing its combined holdings. The Agent
will forward to the Shareholder any proxy solicitation
material and will vote any Shares so held for the
Shareholder only in accordance with the proxy returned by
him or her to the Fund. Upon the Shareholder's written
request, the Agent will deliver to him or her, without
charge, a certificate or certificates for the full
Shares.
6. The Agent will confirm to the Shareholder
each acquisition for his or her account as soon as
practicable but not later than 60 days after the date
thereof. Although the Shareholder may from time to time
have an individual fractional interest (computed to three
decimal places) in a Share, no certificates for
fractional Shares will be issued. However, dividends and
distributions on fractional Shares will be credited to
Shareholders' accounts. In the event of a termination of
a Shareholder's account under the Plan, the Agent will
adjust for any such undivided fractional interest in cash
at the opening market value of the Shares at the time of
termination.
7. Any stock dividends or split Shares
distributed by the Fund on Shares held by the Agent for
the Shareholder will be credited to the Shareholder's
account. In the event that the Fund makes available to
the Shareholder the right to purchase additional Shares
or other securities, the Shares held for a Shareholder
under the Plan will be added to other shares held by the
Shareholder in calculating the number of rights to be
issued by such Shareholder.
8. The Agent's service fee for handling
capital gain distributions or income dividends will be
paid by the Fund. The Shareholder will be charged a pro
rata share of brokerage commissions on all open market
purchases.
9. The Shareholder may terminate his or her
account under the Plan by notifying the Agent in writing.
A termination will be effective immediately if notice is
received by the Agent at any time prior to any dividend
or distribution record date; otherwise such termination
will be effective, with respect to any subsequent
dividend or distribution, on the first trading day after
a dividend paid for the record date has been credited to
the Shareholder's account. Upon any termination the
Agent will cause a certificate or certificates for the
full Shares held for the Shareholder under the Plan and
cash adjustment for any fraction to be delivered to him
or her.
10. These terms and conditions may be amended
or supplemented by the Agent or the Fund at any time or
times but, except when necessary or appropriate to comply
with applicable law or the rules or policies of the
Securities and Exchange Commission or any other
regulatory authority, only by mailing to the Shareholder
appropriate written notice at least 30 days prior to the
effective date thereof. The amendment or supplement
shall be deemed to be accepted by the Shareholder unless,
prior to the effective date thereof, the Agent receives
written notice of the termination of such Shareholder's
account under the Plan. Any such amendment may include
an appointment by the Fund of a successor agent in its
place and stead under these terms and conditions, with
full power and authority to perform all or any of the
acts to be performed by the Agent. Upon any such
appointment of an Agent for the purpose of receiving
dividends and distributions, the Fund will be authorized
to pay to such successor Agent all dividends and
distributions payable on Shares held in the Shareholder's
name or under the Plan for retention or application by
such successor Agent as provided in these terms and
conditions.
11. In the case of Shareholders, such as
banks, brokers or nominees, which hold Shares for others
who are the beneficial owners, the Agent will administer
the Plan on the basis of the number of Shares certified
from time to time by the Shareholders as representing the
total amount registered in the Shareholder's name and
held for the account of beneficial owners who are to
participate in the Plan.
12. The Agent shall at all times act in good
faith and agree to use its best efforts within reasonable
limits to insure the accuracy of all services performed
under this agreement and to comply with applicable law,
but assumes no responsibility and shall not be liable for
loss or damage due to errors unless the errors are caused
by its negligence, bad faith or willful misconduct or
that of its employees.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made on ________ __, 1996, by and
between BULL & BEAR GLOBAL INCOME FUND, INC., a Maryland
corporation (the "Fund") and BULL & BEAR ADVISERS, INC., a
Delaware corporation (the "Investment Manager").
WHEREAS the Fund intends to register under the
Investment Company Act of 1940, as amended (the "1940 Act"),
as a closed-end management investment company; and
WHEREAS, the Fund desires to retain the Investment
Manager to furnish certain investment advisory and portfolio
management services to the Fund, and the Investment Manager
desires to furnish such services;
NOW THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good and
valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed between the parties hereto
as follows:
1. The Fund hereby employs the Investment Manager
to manage the investment and reinvestment of its assets,
including the regular furnishing of advice with respect to
the Fund's portfolio transactions subject at all times to the
control and oversight of the Fund's Board of Directors, for
the period and on the terms set forth in this Agreement. The
Investment Manager hereby accepts such employment and agrees
during such period to render the services and to assume the
obligations herein set forth, for the compensation herein
provided. The Investment Manager shall for all purposes
herein be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way, or
otherwise be deemed an agent of the Fund.
2. The Fund assumes and shall pay all the expenses
required for the conduct of its business including, but not
limited to, salaries of administrative and clerical
personnel, brokerage commissions, taxes, insurance, fees of
the transfer agent, custodian, legal counsel and auditors,
association fees, costs of filing, printing and mailing
proxies, reports and notices to shareholders, preparing,
filing and printing the prospectus and statement of
additional information, payment of dividends, costs of stock
certificates, costs of shareholders meetings, fees of the
independent directors, necessary office space rental, all
expenses relating to the registration or qualification of
shares of the Fund under applicable Blue Sky laws and
reasonable fees and expenses of counsel in connection with
such registration and qualification and such non-recurring
expenses as may arise, including, without limitation,
actions, suits or proceedings affecting the Fund and the
legal obligation which the Fund may have to indemnify its
officers and directors with respect thereto.
3. If requested by the Fund's Board of Directors,
the Investment Manager may provide other services to the Fund
such as, without limitation, the functions of billing,
accounting, certain shareholder communications and services,
administering state and Federal registrations, filings and
controls and other administrative services. Any services so
requested and performed will be for the account of the Fund
and the costs of the Investment Manager in rendering such
services shall be reimbursed by the Fund, subject to
examination by those directors of the Fund who are not
interested persons of the Investment Manager or any affiliate
thereof.
4. The services of the Investment Manager are not
to be deemed exclusive, and the Investment Manager shall be
free to render similar services to others in addition to the
Fund so long as its services hereunder are not impaired
thereby.
5. The Investment Manager shall create and
maintain all necessary books and records in accordance with
all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act
and the rules thereunder, as the same may be amended from
time to time, pertaining to the investment management
services performed by it hereunder and not otherwise created
and maintained by another party pursuant to a written
contract with the Fund. Where applicable, such records shall
be maintained by the Investment Manager for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Fund which are in the
possession of the Investment Manager shall be the property of
the Fund. The Fund, or the Fund's authorized
representatives, shall have access to such books and records
at all times during the Investment Manager's normal business
hours. Upon the reasonable request of the Fund, copies of
any such books and records shall be provided by the
Investment Manager to the Fund or the Fund's authorized
representatives.
6. As compensation for its services provided
pursuant to this Agreement, the Fund will pay to the
Investment Manager a fee from its assets, such fee to be
computed weekly and paid monthly in arrears at the annual
rate of 7/10 of 1% of the first $250 million, 5/8 of 1% from
$250 million to $500 million, and 1/2 of 1% over $500
million. If this Agreement becomes effective or terminates
before the end of any month, the fee for the period from the
effective date to the end of the month or from the beginning
of such month to the date of termination, as the case may be,
shall be protected according to the proportion which such
period bears to the full month in which such effectiveness or
termination occurs.
7. The Investment Manager shall direct portfolio
transactions to broker/dealers for execution on terms and at
rates which it believes, in good faith, to be reasonable in
view of the overall nature and quality of services provided
by a particular broker/dealer, including brokerage and
research services and sales of shares of the Fund and shares
of other investment companies or series thereof for which the
Investment Manager or an affiliate thereof serves as
Investment Adviser. The Investment Manager may also allocate
portfolio transactions to broker/dealers that remit a portion
of their commissions as a credit against Fund expenses. With
respect to brokerage and research services, the Investment
Manager may consider in the selection of broker/dealers
brokerage or research provided and payment may be made of a
fee higher than that charged by another broker/dealer which
does not furnish brokerage or research services or which
furnishes brokerage or research services deemed to be of
lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934, as amended, or other
applicable laws are met. Although the Investment Manager may
direct portfolio transactions without necessarily obtaining
the lowest price at which such broker/dealer, or another, may
be willing to do business, the Investment Manager shall seek
the best value for the Fund on each trade that circumstances
in the market place permit, including the value inherent in
on-going relationships with quality brokers. To the extent
any such brokerage or research services may be deemed to be
additional compensation to the Investment Manager from the
Fund, it is authorized by this Agreement. The Investment
Manager may place brokerage for the Fund through an affiliate
of the Investment Manager, provided that: the Fund not deal
with such affiliate in any transaction in which such
affiliate acts as principal; the commissions, fees or other
remuneration received by such affiliate be reasonable and
fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable
transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of
time; and such brokerage be undertaken in compliance with
applicable law. The Investment Manager's fees under this
Agreement shall not be reduced by reason of any commissions,
fees or other remuneration received by such affiliate from
the Fund.
8. The Investment Manager shall waive all or part
of its fee or reimburse the Fund monthly if and to the extent
the aggregate operating expenses of the Fund exceed the most
restrictive limit imposed by any state in which shares of the
Fund are qualified for sale. In calculating the limit of
operating expenses, all expenses excludable under state
regulation or otherwise shall be excluded. If this Agreement
is in effect for less than all of a fiscal year, any such
limit will be applied proportionately.
9. Subject to and in accordance with the Articles
of Incorporation and By-laws of the Fund and of the
Investment Manager, it is understood that directors,
officers, agents and shareholders of the Fund are or may be
interested in the Fund as directors, officers, shareholders
and otherwise, that the Investment Manager is or may be
interested in the Fund as a shareholder or otherwise and that
the effect and nature of any such interests shall be governed
by law and by the provisions, if any, of said Articles of
Incorporation or By-laws.
10. A. This Agreement shall become effective upon
the date hereinabove written provided that this Agreement
shall not take effect unless it has first been approved (i)
by a vote of a majority of the Directors of the Fund who are
not parties to this Agreement, or interested persons of any
such party and (ii) by vote of the holders of a majority of
the Fund's outstanding voting securities.
B. Unless sooner terminated as provided herein,
this Agreement shall continue in effect for two years from
the above written date. Thereafter, if not terminated, this
Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a
majority of the Directors of the Fund who are not parties to
this Agreement, or interested persons of any such party and
(ii) by the Board of Directors of the Fund by the vote of the
holders of a majority of the outstanding voting securities of
the Fund.
C. This Agreement may be terminated without
penalty at any time either by vote of the Board of Directors
of the Fund or by vote of the holders of a majority of the
Fund's outstanding voting securities on 60 days' written
notice to the Investment Manager, or by the Investment
Manager on 60 days' written notice to the Fund. This
Agreement shall immediately terminate in the event of its
assignment.
11. The Investment Manager shall not be liable to
the Fund or any shareholder of the Fund for any error of
judgment or mistake of law or for any loss suffered by the
Fund or the Fund's shareholders in connection with the
matters to which this Agreement relates, but nothing herein
contained shall be construed to protect the Investment
Manager against any liability to the Fund or the Fund's
shareholders by reason of willful misfeasance, bad faith, or
gross negligence in the performance of its duties or by
reason of its reckless disregard of obligations and duties
under this Agreement.
12. As used in this Agreement, the terms
"interested person," "assignment," and "majority of the
outstanding voting securities" shall have the meanings
provided therefor in the 1940 Act, and the rules and
regulations thereunder.
13. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior
agreement, with respect to the subject hereof whether oral or
written. If any provision of this Agreement shall be held or
made invalid by a court or regulatory agency, decision,
statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
14. This Agreement shall be construed in
accordance with and governed by the laws of the State of New
York, provided, however, that nothing herein shall be
construed in a manner inconsistent with the 1940 Act or any
rule or regulation promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first above
written.
ATTEST: BULL & BEAR GLOBAL INCOME FUND, INC.
________________________
By:_________________________
ATTEST: BULL & BEAR ADVISERS, INC.
_________________________
By:_________________________
