SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
The Guardian Stock Fund, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Board of Directors of The Guardian Stock Fund, Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined.)
-----------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------
5) Total fee paid:
--------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check |_| if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------
<PAGE>
Preliminary Copy
THE GUARDIAN STOCK FUND, INC.
201 Park Avenue South, New York, New York 10003
Telephone (800) 221-3253
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
April 21, 1998
A special meeting of shareholders of The Guardian Stock Fund, Inc., a
Maryland corporation (the "Fund") will be held on Tuesday, April 21, 1998, at
9:30 a.m. for the following purposes:
1. To consider the amendment and restatement of the Fund's Articles of
Incorporation;
2. To consider the amendment and restatement of the Fund's investment
restrictions;
3. To consider the ratification of the selection of the Fund's independent
public accountants; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The special meeting will be held at the offices of The Guardian Insurance
& Annuity Company, Inc. ("GIAC"), 201 Park Avenue South, Mezzanine Floor, New
York, New York 10003.
You are entitled to provide notice of and to provide voting instructions
for use at the Meeting if, at the close of business on February 23, 1998, you
owned a variable annuity or variable life insurance policy issued by GIAC and
some or all of your contract value was allocated for investment in the Fund.
By order of the Board of Directors,
Joseph A. Caruso, Secretary
February __, 1998
-1-
<PAGE>
YOUR VOTE IS IMPORTANT
Please provide your voting instructions on the enclosed preference
statement(s). Then date and sign the preference statement(s) and return the
statement(s) in the accompanying postage-paid envelope. If you sign and date
your preference statement(s), but do not provide voting instructions, the shares
in which you have an interest will be voted FOR the proposals. Preference
statements submitted by corporations, trusts, partnerships or other entities
must be signed by the appropriate person(s). If you are eligible to vote in more
than one account, you must provide a separate preference statement for each
account to provide voting instructions for all of the shares of the Fund in
which you have an interest.
Please complete and mail your preference statement promptly. Your prompt
response will help us to minimize the costs to the Fund of additional proxy
mailings.
-2-
<PAGE>
Preliminary Copy
THE GUARDIAN STOCK FUND, INC.
201 Park Avenue South, New York, New York 10003
Telephone (800) 221-3253
--------------------------
PROXY STATEMENT
Special Meeting of Shareholders - April 21, 1998
--------------------------
The Board of Directors of THE GUARDIAN STOCK FUND, INC. (the "Fund"), is
soliciting preference statements to be used at a special meeting of shareholders
of the Fund to be held on Tuesday, April 21, 1998, or any adjournment thereof.
This Proxy Statement describes the proposals to be acted upon at the special
meeting and will be mailed to eligible voters on or about February 27, 1998.
You are being asked to give your voting instructions on each proposal discussed
in this proxy statement. You are eligible to provide voting instructions for use
at the meeting if, at the close of business on February 23, 1998, you owned a
variable annuity or variable life insurance policy (either, a "Variable
Contract") issued by The Guardian Insurance & Annuity Company, Inc. ("GIAC") and
some or all of your Variable Contract value was allocated for investment in the
Fund. GIAC, which is the sole record shareholder of the Fund, will vote the Fund
shares attributable to your GIAC Variable Contract in accordance with the voting
instructions you provide on each enclosed preference statement if it is properly
executed and returned in a timely manner.
If your returned preference statement is signed and dated, but gives no voting
instructions, GIAC will vote the Fund shares attributable to your Variable
Contract FOR each of the proposals described in this Proxy Statement. If you are
eligible to give voting instructions for the Fund in more than one GIAC Variable
Contract, you must submit a separate preference statement for each Variable
Contract to provide instructions for all of the shares in which you have an
interest. For purposes of determining the approval of the matters submitted for
a vote of shareholders of the Fund, abstentions will be treated as shares voted
against the proposal. Votes will be tabulated by the inspector of election
appointed for the special meeting. You may revoke your voting instructions by
submitting a subsequent preference statement before the meeting, by timely
written notice, or by attending and providing voting instructions at the
meeting.
GIAC will vote the Fund shares attributable to Variable Contracts for which it
does not receive timely voting instructions in the same proportion as the shares
for which it does receive timely voting instructions. GIAC will also vote the
Fund shares that it owns directly due to its contributions or accumulations in
the separate accounts through which it offers variable annuities
-3-
<PAGE>
in proportion to the shares for which it receives timely voting instructions.
With regard to separate accounts through which it offers variable life insurance
policies, GIAC does not own any Fund shares directly. The presence in person or
by proxy of the holders of a majority of the shares of the Fund entitled to be
voted at the meeting is required to establish a quorum at the meeting.
Set forth below is a chart which lists the following information for the Fund,
all as of the close of business on February 23, 1998: the number of shares
outstanding, the number of such shares attributable to GIAC's Variable
Contracts, and the number of such shares directly owned by GIAC in the separate
accounts through which it offers variable annuities. Each full share is entitled
to one vote, and fractional shares are entitled to proportionate fractional
votes. As of February 23, 1998, the Directors and officers of the Fund
beneficially owned less than 1% of the shares of the Fund. Management does not
know of any person who was eligible to submit voting instructions relating to 5%
or more of the Fund's outstanding shares as of February 23, 1998.
---------------------------------------------------------
OUTSTANDING GIAC VARIABLE SHARES DIRECTLY
SHARES CONTRACT SHARES OWNED BY GIAC
---------------------------------------------------------
( %) ( %)
---------------------------------------------------------
The cost of preparing, printing and mailing the enclosed preference statement,
accompanying notice and proxy statement and all other costs in connection with
the solicitation of preference statements will be paid by the Fund. The Fund has
engaged Management Information Systems Corporation ("MIS") to assist in the
solicitation of preference statements at an estimated cost of $150,000. Although
MIS will conduct the solicitation of preference statements primarily by mail,
its representatives and selected officers and directors of the Fund or Guardian
Investor Services Corporation may also solicit preference statements in person
or by telephone. The Fund will furnish, without charge, a copy of its latest
annual report upon request. Such written or oral requests should be directed to
the Fund at 201 Park Avenue South, New York, New York 10003 or by calling
1-800-221-3253.
PROPOSAL NO. 1
AMENDMENT AND RESTATEMENT
OF THE FUND'S ARTICLES OF INCORPORATION
The Board of Directors has considered and approved, subject to shareholder
approval, the adoption of a comprehensive amendment and restatement of the
Fund's current Articles of Incorporation (the current Articles of Incorporation
will be referred to as the "Current Charter"). A copy of the proposed Articles
of Amendment and Restatement of the Articles of Incorporation of the Fund (the
"Proposed Charter") is included in this proxy statement as Exhibit A. The Board
believes that approval of the Proposed Charter is in the best interests of the
Fund and its shareholders, and recommends that shareholders approve the Proposed
Charter. There are certain material differences between the Proposed Charter and
the Current Charter. In summary, if the Proposed Charter is approved, the Fund
will:
-4-
<PAGE>
-- authorize the issuance of shares in two classes, and provide the Board
of Directors with authority to issue its shares of stock in additional
classes and series in the future;
-- authorize the issuance of 200,000,000 additional shares of the existing
class of shares of the Fund and 100,000,000 shares of a new class;
-- reduce the par value of its shares from $0.10 to $0.001 per share, with
a commensurate reduction in the Fund's stated capital and increase in its
capital surplus;
-- remove or update certain provisions contained in the Current Charter
that no longer reflect the current requirements of Maryland corporate law;
-- change the provisions regarding the indemnification and exculpation
from liability of the Directors and officers of the Fund to reflect the
broadest indemnification permitted by current Maryland law;
-- expand the Fund's ability under law to close small shareholder
accounts;
-- establish that one-third of the Fund's outstanding shares (or of a
particular class for matters affecting that class) will constitute a
quorum for future shareholder meetings; and
-- include certain other non-material changes, as described in this Proxy
Statement.
Set forth below is a detailed analysis of the changes that would result
from the adoption of the Proposed Charter. Please refer to Exhibit A to review
the specific text of the sections of the Proposed Charter described below.
Authority to Issue Multiple Classes and Series of Shares
The Fund's Current Charter provides that the Fund may offer a single class
of shares and may not authorize additional classes or series of shares. If the
Proposed Charter is approved, one or more additional classes and series of
shares could be authorized by the Board without obtaining a vote of
shareholders. Any new classes or series would have the preferences or special or
relative rights or privileges as the Board may determine, to the extent
permitted by the Investment Company Act of 1940 (the "1940 Act"), the principal
federal law regulating mutual funds, and by applicable Maryland law.
Many mutual funds offer their shares in multiple classes. Each class of
shares represents an identical interest in the investment portfolio of the
mutual fund (if, like the Fund, it operates as a single series) or in an
identified series of a fund. Typically, each class bears all expenses relating
to the distribution and sale of that class and is allocated a pro rata portion
of the fund's ongoing expenses. All shares of multiple class funds generally
have identical redemption, voting, dividend and liquidation rights, although
each class may bear expenses specific to that class and experience variations in
share price and dividends as a result of class-specific expenses.
-5-
<PAGE>
A mutual fund may also offer shares in multiple series. Each series within
a mutual fund represents a separate portfolio of investments, with its own
investment objective, investment policies and expenses. Each series is also
treated as a separate entity for tax purposes. Multiple mutual funds offered by
a fund family are often organized as separate series within one corporate mutual
fund entity in order to reduce expenses and duplicative corporate documentation.
If the Fund is permitted to be offered in multiple classes of shares, it
is anticipated that, in addition to the existing class of shares of the Fund
that is offered through GIAC Variable Contracts, the Fund may create another
class of the Fund to be offered as an investment option underlying variable
annuities or variable life insurance policies offered by insurance companies
other than GIAC. If shareholders approve the Proposed Charter, the existing
class of shares will be designated Class I shares, and the additional class will
be designated Class II shares. Management believes that the Fund and its
shareholders would benefit from being offered as an investment vehicle through
other variable products in the marketplace. The addition of a multiple class
structure would allow the Fund to be distributed through channels that are not
currently available, which management believes would result in the addition of
assets to the Fund over time. The Board of Directors have approved the creation
of one additional class of shares of the Fund for introduction during 1998,
subject to shareholder approval of the Proposed Charter. The creation of a new
class of shares within the Fund will not change the current expense structure of
the existing class of Fund shares.
The Fund currently has no plans to add any other series. However, the
Board of Directors believes that the Fund would benefit from having the ability
to add series in the future, because the Fund would not be subject to the time
and costs of a shareholder meeting called specifically to consider the addition
of any future series. The addition of new series of shares would not affect the
structure or operations of the Fund or have any other material effect on current
shareholders.
Article V(5) of the Proposed Charter describes the voting requirements
applicable to multiple classes and series of the Fund. In general, if the Fund
offers more than one class or series of shares, all shares will vote as a single
group. However, a particular class or series may be required by law or by the
terms of exemptive relief granted by the SEC to vote separately. In addition,
where a matter does not affect the interests of a particular class or series,
that class or series will not be entitled to vote on that matter. Under the 1940
Act, the Fund is required to adopt a plan that delineates the differences among
the various share classes.
-6-
<PAGE>
Corporate Purposes and Powers
The purposes for which the Fund was formed are described in the Fund's
Current Charter. The Proposed Charter would generally update and simplify the
description of the Fund's business purpose with respect to the issuance of the
Fund's shares and the portfolio instruments which are available for investment
by the Fund. The amendment would not affect the Fund's investment objective or
management policies. The amendment would, however, clarify the Fund's ability to
operate with the maximum flexibility provided to Maryland corporations under
Maryland law, consistent with its investment objective and policies, and to
issue its shares in any manner permitted by law, such as the multiple classes
and series described above.
Reduction in Par Value of Shares of Common Stock
Currently, the par value of all of the authorized shares of stock of the
Fund is $0.10 per share. It is proposed that the par value for any shares that
are currently authorized, or that are authorized in the future, be reduced to
$0.001 per share. The reduction is sought in order to reduce the costs to the
Fund of authorizing additional shares of stock from time to time. When
additional shares are authorized, the Fund must pay to Maryland regulatory
authorities a fee, which is based on the aggregate par value of the shares. The
reduction in par value would have the effect of reducing the Fund's stated
capital with a commensurate increase in its capital surplus.
Quorum
The Proposed Charter contains a provision that, subject to any voting
requirements under the 1940 Act, the presence in person or by proxy of the
holders of one-third of the shares of stock of the Fund entitled to vote would
constitute a quorum at any future meetings of stockholders. The Fund's Current
Charter provides that a majority of shares is required to constitute a quorum.
Under Maryland law, unless the charter of a corporation provides otherwise, a
majority of all votes entitled to be cast at a shareholders' meeting constitutes
a quorum. Establishing that one-third of outstanding shares constitutes a quorum
should enable the Fund to conduct future stockholders' meetings without
incurring the increased burden and expense of soliciting votes from at least a
majority of the Fund's shares in order to achieve a quorum. If shareholders of a
particular class or series are asked to vote on a matter affecting only that
class or series, the Proposed Charter provides that one-third of the outstanding
shares of that class or series will constitute a quorum for purposes of that
matter.
Liability and Indemnification of Directors and Officers
After the Fund was organized in 1981, the Maryland General Corporation Law
was revised to permit a Maryland corporation to limit the liability of its
directors and officers in certain circumstances and to broaden the
indemnification that a Maryland corporation may make available to its directors
and officers. The Proposed Charter contains a provision that
-7-
<PAGE>
incorporates the Maryland law amendments and reflects the broadest
indemnification and limitation on liability permitted by current Maryland law.
Maryland law is similar to the laws of most other states, which permit
limitation of the risk of personal liability of corporate directors and, in many
cases, officers. These laws respond to concerns about increased litigation
against corporate directors and officers, and the resulting increases in costs
and limited availability of liability insurance for directors and officers.
Concerns also have been raised about the willingness of qualified persons to
serve as directors and officers and the possibility that personal liability
concerns will have an effect on decision-making by persons who serve as
directors and officers in ways that may adversely affect the corporation.
The Proposed Charter would provide that to the full extent permitted by
Maryland law, but subject to the 1940 Act and related limitations described
below, no Director or officer of the Fund shall have any liability to the Fund
or its shareholders for money damages. The Proposed Charter would provide,
however, that it would not protect or purport to protect any Director or officer
of the Fund (i) against any liability for noncompliance with any provision of
the Securities Act of 1933, as amended (the "Securities Act") or the 1940 Act,
or of any valid rule, regulation or order of the Securities and Exchange
Commission (the "SEC") under those Acts, or (ii) against any liability to the
Fund or its shareholders to which such Director or officer 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
("disabling conduct"). The 1940 Act provides that the articles of incorporation
of any investment company may not contain any provision which so protects or
purports to protect any director or officer of the investment company with
respect to this disabling conduct. This provision is set forth in Article VIII
of the Proposed Charter, and would amend the Fund's Current Charter with respect
to indemnification and advances.
If the Proposed Charter is approved by shareholders, the Fund's Directors
and officers would continue to have personal liability for damages in suits
brought by or on behalf of the Fund in circumstances in which the Maryland
General Corporation Law, the 1940 Act or the Securities Act does not permit
their personal liability to be limited. Under the Maryland General Corporation
Law, personal liability would continue to the extent that (i) it is proved that
a Director or officer received an improper benefit or profit in money, property
or services, for the amount of such improper benefit or profit, or (ii) a
judgment or other final adjudication adverse to a Director or officer is entered
in a proceeding based on a finding that his or her action or failure to act was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. Under the 1940 Act or the Securities Act,
personal liability would continue to the extent that the Proposed Charter would
(i) require any person to fail to comply with any provision of the 1940 Act or
the Securities Act or of any valid rule, regulation or order of the SEC under
those Acts, or (ii) protect or purport to protect any Director or officer of the
Fund against any liability to the Fund or its shareholders 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. In circumstances where the
-8-
<PAGE>
personal liability of Directors and officers is limited, claims made by or on
behalf of the Fund against them would be limited to equitable remedies, such as
injunction.
The proposed amendment would apply only to claims against a Director or
officer arising out of his or her role as a Director or officer, not to his or
her responsibilities under other laws. It will not limit possible liability to
third parties (other than shareholders) under tort or contract law, and will not
apply with respect to events or omissions occurring prior to the effective date
of the Proposed Charter.
Under Maryland law, indemnification against judgments, penalties, fines,
settlements and reasonable expenses may be available to a Fund Director unless
the act or omission was material to the cause of action, and was committed in
bad faith or was the result of active and deliberate dishonesty, or the
individual received an improper personal benefit (or, in a criminal case, had
reasonable cause to believe that his or her act or omission was unlawful).
Indemnification may be made against amounts recoverable by settlement of suits
brought by or in the right of a corporation, except where the individual is
adjudged liable to the corporation. The termination of a civil proceeding by
judgment, order or settlement does not create a presumption that the requisite
standard of conduct was not met. The law also provides that a corporation, in
addition to providing insurance, may fund its indemnification obligations with
trust funds, letters of credit or surety bonds. Advances of reasonable expenses
by a corporation in the course of litigation will be required (upon the
undertaking of the director to repay such sums if indemnification is ultimately
denied) without a preliminary determination as to the ultimate entitlement of
the person to be indemnified. Under Maryland law, a director must provide a
written affirmation of his or her good faith belief that the standard of conduct
necessary for indemnification by the corporation has been met. Officers will be
indemnified to the same extent as Directors and may be indemnified to such
further extent as is consistent with law. Other employees and agents may be
indemnified to the same extent as Directors and to such further extent as is
consistent with law.
As discussed above, the SEC is of the view that an indemnification
provision in an investment company's articles of incorporation or by-laws would
not violate the relevant provisions of the 1940 Act if (a) it precludes
indemnification for any liability, whether or not there is an there is an
adjudication of liability, arising by reason of disabling conduct, and (b) it
sets forth "reasonable and fair means" for determining whether indemnification
shall be made. The SEC is also of the view that the Fund may advance funds to a
current or former Director or officer claiming indemnification for payment of
the reasonable expenses incurred by him or her in conjunction with proceedings
to which he or she is a party, provided that, among other things, the person
seeking indemnification shall provide to the Fund a written undertaking to repay
any such advance if it should ultimately be determined that the standard of
conduct necessary for indemnification has not been met, and provided further
that at least one of the following additional conditions is met: (a) the person
seeking indemnification shall provide security in form and amount acceptable to
the Fund for his or her undertaking; (b) the Fund is insured against losses
arising by reason of any lawful advance; or (c) a majority of the Directors of
the Fund who are neither "interested persons" of the Fund, as defined in the
1940 Act, nor parties to the proceeding, or independent legal counsel in a
written opinion, shall determine that, based on a
-9-
<PAGE>
review of facts readily available to the Fund at the time the advance is
proposed to be made, there is reason to believe that the person seeking
indemnification ultimately will be found to be entitled to indemnification. As
to the indemnification provisions described above, it is the opinion of the SEC
staff that, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and certain others, such
indemnification is against public policy and is unenforceable.
If Maryland law is subsequently amended so as to permit further limitation
of the monetary liability of Directors and officers, then under the Proposed
Charter such liability will be limited to the greatest extent permitted without
further action by the Fund's shareholders, but subject to the limitations
described above with respect to the Securities Act, the 1940 Act and disabling
conduct by a Director or officer. The Proposed Charter would assure the Fund's
Directors and officers that the Charter's protections could not subsequently be
withdrawn with respect to actions arising from events or omissions occurring
prior to withdrawal.
Under the provisions of the Proposed Charter, in certain circumstances,
the Fund and its shareholders will lose the right to recover monetary damages
from Directors and officers who might otherwise have been found liable under the
provisions of the Current Charter. In addition, in contrast to the Current
Charter, the Proposed Charter provides that Directors and officers may be
entitled to more liberal indemnification from the Fund in suits brought by or on
behalf of the Fund. To the extent that certain claims against Directors and
officers involving a breach of duty are limited to equitable remedies, adoption
of the Proposed Charter may also result in a reduced likelihood of derivative
litigation and may discourage the initiation of suits against Directors and
officers for breach of their duty of care.
No litigation of the type covered by the Proposed Charter is currently
pending or threatened against any Director or officer of the Fund. During the
Fund's existence, no occasion has arisen in which the Fund has been required to
pay any amount in indemnification of any Director or officer of the Fund. In
addition, the Fund has not experienced difficulty in attracting and retaining
highly qualified Directors and officers, although the Board believes that the
changes regarding indemnification in the Proposed Charter will enhance its
ability to attract and retain such Directors and officers in the future.
After consideration, the Board has approved the indemnification and
liability provisions included in the Proposed Charter and recommends that
shareholders approve the Proposed Charter including such provisions at the
meeting. The Board has concluded that, in view of the proliferation of
litigation against corporate directors and officers in which difficult business
judgments are tested with the benefit of hindsight, and considering the Fund's
need to attract and retain corporate directors and officers who can make
significant corporate decisions in the best interests of the Fund with the
reduced threat of personal liability, approval of the Proposed Charter would
place the Fund in the best possible position in the current environment. It
should be noted that the current Directors and officers of the Fund may
personally benefit from the adoption of the Proposed Charter and are thus
subject to a conflict of interest in proposing its approval. Nevertheless, the
Board believes, for the reasons stated above, that approval of the
-10-
<PAGE>
Proposed Charter, with the inclusion of the revised provisions concerning
liability and indemnification, is in the best interests of the Fund and its
shareholders.
Valuation of Fund Shares
The Fund's Current Charter provides that the price of the Fund's shares
upon issue or redemption be at least the net asset value of such shares. The
Current Charter contains related provisions regarding the method of
determination of the Fund's net asset value, the effect of a suspension of
determination of net asset value and the payment of proceeds by the Fund to
redeeming shareholders. The Board of Directors believes that all of these
provisions are unnecessary as charter provisions in light of similar
requirements under the 1940 Act and recommends that each of them be omitted from
the Proposed Charter. The omission of those provisions will have no effect on
the Fund's operations. In addition, in the event that applicable law is changed
in the future relating to these matters, the Fund would be better able to comply
with the law as amended if these provisions were removed from the charter,
rather than being bound by obsolete requirements.
Minimum Account Balance
Under the Proposed Charter, the Fund's Board would have explicit authority
to establish minimum account balances. As stated in Article VI of the Proposed
Charter, the Board could establish a minimum amount below which the Fund could
redeem a shareholder's shares at their then-current net asset value, provided
that the Fund has previously notified the shareholder in writing of the pending
redemption, and the shareholder has failed to purchase additional shares to
bring the account value above the required minimum. While the Fund does not
intend to require minimum account balances, it is possible that the Board may
deem it expedient to do so in the future.
Required Vote
Approval of this proposal requires the affirmative vote of the holders of
a majority of the Fund's outstanding shares entitled to vote at the meeting. If
shareholders do not approve the Proposed Charter, then the Fund's Current
Charter will remain in effect and unchanged.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE
FUND'S ARTICLES OF INCORPORATION
* * * * *
-11-
<PAGE>
PROPOSAL NO. 2
AMENDMENT AND RESTATEMENT
OF THE FUND'S INVESTMENT RESTRICTIONS
The Fund has several investment restrictions that govern its general
investment operations. All of the Fund's current restrictions are "fundamental",
meaning that they may not be changed without shareholder approval.
"Non-fundamental" investment restrictions, on the other hand, may be changed by
vote of the Board of Directors without obtaining a shareholder vote, if the
Board believes it is advisable to do so.
The Fund's Board of Directors has approved, and recommends that
shareholders approve, comprehensive revisions to its investment restrictions for
the reasons described in each Proposal. The following Proposals request that
shareholders approve amending or deleting certain fundamental restrictions and
making others non-fundamental. The Fund's investment operations will be largely
unaffected by the proposed changes, except where noted in the discussion of the
particular restrictions. A table of the current and proposed investment
restrictions appears as Exhibit B to this Proxy Statement.
Certain of the Fund's current investment restrictions are now more
limiting than those of comparable mutual funds, with the result that the Fund is
more constrained in its ability to respond to changes in the marketplace than
many of its competitors. In addition, since the Fund's current investment
restrictions were initially adopted, the SEC has taken more flexible positions
with respect to some of these restrictions. The Fund, however, remains subject
to the more stringent limitations contained in the investment restrictions.
Finally, in 1996 Congress enacted securities legislation that reduces the extent
to which states may regulate the operations of entities such as the Fund. Prior
to such legislation, a number of states required investment companies to adopt
limitations in their investment restrictions which were not otherwise required
by the 1940 Act or other law. Because some of the Fund's current fundamental
investment restrictions reflect these now obsolete state limitations, the Fund's
management and the Board of Directors believe that the Fund and its shareholders
would benefit from changing or deleting these restrictions as described below.
In several instances, the proposed investment restrictions are stated in
terms of the extent to which applicable law currently permits the investment
activity covered by the restriction. Applicable law can change over time, and
certain of these proposed restrictions are written so that a change in
applicable law would not require the Fund to propose further amendments to
conform any restrictions to changes in the law at a future date, which in the
case of fundamental restrictions would require a shareholder vote. To the extent
that shareholders approve these Proposals at the upcoming meeting, the Fund is
more likely to gain maximum flexibility.
Shareholders may vote for or against all of the proposed restrictions, or
may vote for particular restrictions and against others. If some, but not all,
of the proposals are approved, the Fund will only make the changes that receive
a favorable shareholder vote. However, some of the current and proposed
restrictions are interdependent, and failure to approve all of the
-12-
<PAGE>
Proposals may limit the Fund's ability to implement changes that have received
shareholder approval. For this reason, as well as the reasons provided in each
of the following Proposals, the Board of Directors recommends that shareholders
approve all of the Proposals below.
Proposal 2(a) -- Deletion of Restriction Regarding General Prospectus Disclosure
Under this proposal, shareholders are being asked to delete the Fund's
current fundamental investment restriction requiring that the Fund's Prospectus
must describe every type of security that the Fund may purchase. The current
investment restriction provides that the Fund may not:
"Purchase any security other than those discussed under "Investment
Objective and Policies," as set forth in the Prospectus."
Mutual funds are not required to adopt this restriction; in fact, recent
guidance from the SEC has suggested that too much information in the prospectus
contravenes the goal of readability. Under the 1940 Act and the Securities Act,
all mutual funds are required to disclose to investors the investment techniques
that the investment adviser may use in managing the fund's portfolio of
investments, including the types of securities that a fund may purchase. The
amount of prospectus disclosure required by the 1940 Act depends on the amount
of the fund's assets that may be committed to the various securities and
investment techniques and the extent to which the fund intends to employ them.
Some of the disclosure, particularly information about securities that will be
acquired by the fund only occasionally and/or in small percentage amounts, is
not required to be described at length in the prospectus, but may instead be
contained in the fund's statement of additional information, which investors can
receive from the mutual fund upon request.
The Fund believes that the current restriction is burdensome and not
necessary to ensure that shareholders have adequate information about the
investment strategies and securities types that the Fund may pursue. In effect,
although the language is ambiguous, the current restriction could be construed
to impose a burden on the Fund that is greater than the burden imposed by the
1940 Act, with the result that the Fund's Prospectus is required to include more
comprehensive disclosure than is required by law. In addition, the SEC is
generally moving toward more concise prospectus disclosure requirements, with
the possible result that some of the most complex disclosure may be moved from
the Prospectus to the Statement of Additional Information. For these reasons,
the Board of Directors recommends that this restriction be deleted.
Proposal 2(b) -- Deletion of Restriction Regarding "Unseasoned" Issuers
To comply with former state securities laws that are no longer applicable,
the Fund currently has a fundamental investment restriction that provides that
the Fund may not:
-13-
<PAGE>
"Invest more than 5% of its total assets in securities of issuers having a
record, together with predecessors, of less than three years of continuous
operation. This restriction does not apply to any obligation issued or
guaranteed by the United States Government, its agencies or
instrumentalities."
The Board of Directors recommends deleting this restriction because state laws
no longer require that mutual funds adhere to this policy.
The current restriction limits the Fund's ability to invest in unseasoned
issuers. An "unseasoned issuer" is a small company that has been in business for
less than three years. Such companies typically offer greater prospects for
capital appreciation than larger, more established companies. Because they have
had shorter track records, however, these companies may be unsuccessful in
managing the transition to a more established business and may have a higher
risk of failure than older companies.
If shareholders approve the deletion of this restriction, the Fund will be
able to invest in these types of companies to the extent it may do so as a
"diversified" mutual fund. If shareholders approve this proposal, and also
approve Proposal 2(g) below, the Fund would be permitted to invest a maximum of
25% of its assets in a single unseasoned issuer. However, the Fund does not plan
to invest a significant portion of its assets in unseasoned issuers generally or
in specific unseasoned issuers, and does not intend to invest more than 5% of
its assets in any single issuer, seasoned or unseasoned. The Board of Directors
recommends that shareholders approve the deletion of this restriction. If the
Fund wishes to invest more than 5% of its assets in unseasoned issuers in the
future, the Fund would include relevant disclosure in its Prospectus.
Proposal 2(c) -- Amendment of Restriction on Borrowing
The 1940 Act requires that mutual funds have a fundamental policy, which
cannot be changed without shareholder approval, as to any borrowing the Fund may
undertake as permitted by law. The Fund's current investment restriction on
borrowing provides that the Fund may not:
"Borrow money, except that the Fund may borrow from banks up to 5% of the
value of its total assets as a temporary measure for extraordinary or
emergency needs and not for investment purposes, such as enabling the Fund
to meet redemption requests which might otherwise require the sale of
portfolio securities at a time when it is not in the Fund's best
interests."
The current limitation is more restrictive than 1940 Act requires, and the Board
recommends that shareholders approve a revised restriction that provides the
maximum flexibility permitted by law. In addition, the revised restriction would
incorporate the Fund's other current restrictions related to borrowing, as
discussed in Proposals 2(d) and 2(k) below. Shareholders are being asked to
approve the following fundamental investment restriction, which would provide
that the Fund may not:
-14-
<PAGE>
"Borrow money or pledge its assets, except that the Fund may (i) borrow
for temporary or emergency needs, and engage in reverse repurchase
agreements, mortgage dollar rolls or other transactions which may involve
a borrowing from banks or other persons, provided that the aggregate
amount involved in all such transactions shall not exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage permitted by
law; (ii) obtain such short-term credit as may be necessary for the
clearance of transactions in portfolio securities; and (iii) purchase
securities on margin to the extent permitted by applicable law."
As described in the Prospectus, the Fund does not currently have authority
to borrow money, except that it may borrow up to 5% of the value of its total
assets in limited temporary or emergency circumstances. The amended restriction
is intended to provide a general statement of the Fund's borrowing policies, and
will consolidate in one restriction the Fund's policies on related techniques.
The amended restriction would enable the Fund to borrow to the extent permitted
by law. Currently, under the 1940 Act, the Fund could increase to 33 1/3% of
total assets the maximum amount that the Fund could borrow for temporary or
emergency purposes or for investment.
The amended restriction would also enable the Fund to use additional
investment techniques in managing its portfolio. The Fund does not currently
intend to employ any of these additional techniques as part of its normal
investment policies and will not employ them without prior Board approval.
However, if the Board determines at a future date that the use of these
techniques would be likely to benefit the Fund, it would be able to authorize
the Fund to implement them after the disclosure is appropriately supplemented in
the Fund's Prospectus and Statement of Additional Information. At any time that
the Fund borrows money, the 1940 Act requires that the Fund set aside in a
segregated account cash or liquid securities in its portfolio to cover its
obligation to repay the borrowed amount, in compliance with guidelines
established by the SEC.
Borrowing money may involve the use of leverage of the Fund's assets.
Leverage may exaggerate the effect on the Fund's net asset value of any increase
or decrease in the market value of the Fund's portfolio. Money borrowed for
leverage will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. It is possible that interest costs
could exceed the return on the securities purchased with the borrowed money. In
addition, changes in interest rates may reduce or eliminate the benefits of
leverage and could have a negative impact on the Fund's net asset value. The SEC
is of the view that purchasing securities while borrowings exceed 5% of a fund's
total assets creates leverage. The Fund does not intend to engage in leveraging
transactions, and could only do so upon approval of the Board and the addition
of appropriate disclosure in the Prospectus or Statement of Additional
Information.
-15-
<PAGE>
Proposal 2(d) -- Deletion of Policy on the Pledge of Assets
The Fund currently has a fundamental investment policy that provides that
the Fund may not:
"Mortgage, pledge or hypothecate more than 5% of the value of its total
assets and then only to secure borrowings effected within the above
restriction."
Shareholders are being asked to delete this policy, which was adopted to
conform with former state securities laws. Since those laws have been abolished,
this restriction is no longer required. If this Proposal and Proposal 2(c) above
are approved, the Fund will be subject to a single fundamental restriction on
its ability to borrow money or pledge its assets, as described in Proposal 2(c).
Proposal 2(e) -- Amendment of Restriction on Lending
Shareholders are being asked to amend the Fund's fundamental investment
restriction on securities lending. Under its current restriction, the Fund may
not:
"Make loans of money, except through the purchase of debt obligations and
repurchase agreements in which the Fund may invest, consistent with its
investment objectives and policies, provided that repurchase agreements
maturing in more than seven days, when taken together and at current
value, may not exceed 10% of the Fund's net assets."
If approved, the existing restriction would be deleted and replaced with
the following, which would provide that the Fund may not:
"Make loans to other persons except (i) loans of portfolio securities and
entry into repurchase agreements to the extent permitted under applicable
law, and (ii) to the extent that the purchase of debt obligations in which
the Fund may invest, consistent with its investment objectives and
policies, may be deemed to be loans."
The proposed amendment would permit the Fund to engage in securities
lending to the extent allowed by law. Currently, applicable law generally would
permit the Fund to lend its portfolio securities up to 33 1/3% of its total
assets (including the amount of collateral received for the loan), in
accordance with guidelines approved by the Board. The proposed investment
restriction also provides that debt securities and repurchase agreements will
not be subject to the lending restriction, to eliminate any confusion as to
whether these investments are permitted. The limitation in the current
restriction on repurchase agreements maturing in more than seven days would be
covered under Proposal 2(i) below.
-16-
<PAGE>
Proposal 2(f) -- Amendment of Restriction on Industry Concentration
It is proposed that the fundamental restriction on industry concentration
be amended to clarify that the Fund will not concentrate its portfolio
investments in any particular industry. The Fund's current investment
restriction provides that the Fund may not:
"Purchase any securities other than the obligations of U.S. branches of
domestic banks or of the U.S. Government, or its agencies or
instrumentalities, if, immediately after such purchase, more than 25% of
the value of the Fund's total assets would be invested in the securities
of issuers in the same industry (there is no limitation as to investments
in obligations issued by U.S. branches of domestic banks or in obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities)."
Although the Fund does not currently concentrate its investments in any
industry, the current restriction permits the Fund to exceed this limitation in
certain bank obligations. As amended, this exception would be eliminated. In
addition, the proposed restriction states clearly that the limitation applies if
at least 25% of assets is concentrated in an industry, as required under the
1940 Act. The amended restriction would provide that the Fund may not:
"Purchase any securities other than the obligations of the U.S.
Government, or its agencies or instrumentalities, if, immediately after
such purchase, 25% or more of the value of the Fund's total assets would
be invested in the securities of issuers conducting their principal
business activities in the same industry or group of industries."
Proposal 2(g) -- Amendment of Restriction on Issuer Diversification
The Fund is a "diversified" mutual fund as defined in the 1940 Act. This
means that the Fund is restricted as to the percentage of its assets that can be
invested in a single issuer. However, as explained below, the Fund's current
restriction is more limiting than the 1940 Act requires for diversified mutual
funds. The current restriction provides that the Fund may not:
"Invest more than 5% of the value of its total assets in the securities of
any one issuer or purchase more than 10% of the outstanding voting
securities, or any other class of securities, of any one issuer. For
purposes of this restriction, all outstanding debt securities of an issuer
are considered as one class, and all preferred stock of an issuer is
considered as one class. (This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.)"
It is proposed that shareholders approve a more general fundamental investment
restriction to replace the current restriction. The proposed restriction would
provide the Fund with the full flexibility permitted by the 1940 Act, and would
also allow the Fund to incorporate any future flexibility in the event that the
1940 Act is amended in the future. As proposed, the amended restriction would
provide that the Fund may not:
-17-
<PAGE>
"Make any investment inconsistent with the Fund's classification as a
diversified company under the Investment Company Act of 1940."
There is one substantive difference between the current and the proposed
restriction. The 1940 Act permits diversified mutual funds to invest up to 25%
of total assets without regard to the percentage limitations set forth in the
Fund's current restriction. Currently, the Fund does not have the full
flexibility for this portion of its assets afforded by the 1940 Act. Although
the Fund does not intend to change its current operating policy (5% limit) on
investment in specific issuers if the amended restriction is approved, the Board
of Directors believes that the additional flexibility provided by the 1940 Act,
combined with the flexibility the amended restriction would allow in the event
that applicable law is amended in the future, would benefit the Fund and its
shareholders.
Proposal 2(h) -- Deletion of Restriction on Warrants
Shareholders are being asked to delete the Fund's investment restriction
relating to warrants. Currently, as a fundamental policy, the Fund may not:
"Invest more than 5% of the value of its total assets in warrants or more
than 2% of such value in warrants which are not listed on the New York or
American Stock Exchanges, except that warrants attached to other
securities are not subject to these limitations."
This investment restriction was imposed under a former state securities
law. This state law has since been abolished and the restriction on warrants is
no longer required. The Board recommends that this restriction be deleted.
Proposal 2(i) -- Amendment of Restriction on Illiquid and Restricted Securities
Shareholders are being asked to amend the Fund's fundamental investment
policy relating to illiquid securities and securities restricted as to
disposition, in order to make the policy non-fundamental and to increase the
Fund's flexibility. Under current law, an "illiquid" security is a security that
cannot be sold or disposed of in the ordinary course of business within seven
days at approximately the value at which the owner has valued the security.
"Restricted" securities are securities that cannot be readily resold because of
legal or contractual restrictions relating to disposition of the securities. The
current restriction provides that the Fund may not:
"Invest more than 10% of the value of its total assets in securities that
are not readily marketable or which are restricted as to disposition under
the federal securities laws or otherwise. This restriction will apply to
repurchase agreements maturing in more than seven days. This restriction
will also apply to securities received as a result of a corporate
reorganization or similar transaction affecting readily-marketable
securities already held in the Fund's portfolio. To the extent that
securities received under these circumstances, together with other
unmarketable securities, exceed 10% of the value of
-18-
<PAGE>
the Fund's total assets, the Fund will attempt to dispose of them in an
orderly fashion in order to reduce its holdings in such securities to less
than 10%."
As proposed, the Fund would replace the current fundamental policy with a
non-fundamental investment restriction which would provide that the Fund may
not:
"Invest in (i) securities which at the time of such investment are not
readily marketable, (ii) securities restricted as to resale or other
disposition, or (iii) repurchase agreements maturing in more than seven
days, if, as a result, more than 15% of the Fund's net assets (taken at
current value), or such other percentage provided by applicable law, would
then be invested in the aggregate in securities described in (i), (ii),
and (iii) above. This restriction shall not apply to securities which the
Board of Directors of the Fund has determined to be liquid pursuant to
applicable law."
The amended restriction would differ from the current restriction in three
principal respects. First, current law does not require that the restriction
relating to illiquid securities be fundamental, and the proposed restriction
would be made non-fundamental, so that future amendments to the restriction
could be effective upon a favorable vote of the Board, without shareholder
approval. Second, the maximum amount that could be invested in illiquid or
restricted securities would be increased to 15% of the Fund's net assets from
10% of total assets. This increase is proposed because, since the adoption of
the current restriction, the SEC has increased the maximum amount that mutual
funds (other than money market funds) may invest in these types of securities
from 10% to 15%. The proposed restriction would also provide that the maximum
percentage of assets invested in these securities may be adjusted if there are
future changes in applicable law. Finally, the proposed restriction explicitly
excludes securities which the Board of Directors has determined to be liquid as
permitted under applicable law. The Board has adopted guidelines for use in
making liquidity determinations. Such securities include so-called Rule 144A
securities, which are securities that are not registered under federal
securities laws but may be sold to institutional investors such as mutual funds.
Proposal 2(j) -- Deletion of Restriction on Investment in Other Mutual Funds
Currently, the Fund may not invest in other mutual funds. Because mutual
funds are not required to state their investment policy with respect to
investment in other mutual funds, shareholders of the Fund are being asked to
delete this restriction. The current fundamental investment restriction provides
that the Fund may not "purchase securities issued by any other investment
company."
The Fund does not normally intend to invest in other investment companies.
If the current restriction is deleted, the Fund's investments in other mutual
funds would be limited by the provisions of the 1940 Act. Under the 1940 Act in
its current form, the Fund would be able to invest in other mutual funds,
provided that as a result of the investment (a) the Fund owns no more than 3% of
the acquired fund's outstanding shares, (b) no more than 5% of the value of the
Fund's total assets are invested in a single fund, and (c) no more than 10% of
the Fund's total
-19-
<PAGE>
assets are invested in the aggregate in other mutual funds. If the Fund
determines that it would be advisable to invest in other mutual funds in the
future, the Fund will do so only after a favorable vote of the Board and the
addition of disclosure to the Fund's Prospectus and Statement of Additional
Information.
Proposal 2(k) -- Amendment of Restriction on Margin and Short Sales
The Fund has a fundamental investment restriction prohibiting the purchase
of securities on margin and short sales of securities. In effect, the current
restriction deals with two different investment techniques in a single
restriction. Shareholders are being asked to delete the current restriction and
to separate the policy on margin purchases from the policy on short sales in the
separate restrictions proposed for approval. Information about these techniques
is set forth below. The Fund's current restriction provides that the Fund may
not:
"Purchase securities on margin or sell securities short, or participate on
a joint or a joint and several basis in any trading account in
securities."
It is proposed that the policy on margin purchases be included within the
proposed fundamental investment restriction relating to borrowing, described
above in Proposal 2(c). It is also proposed that shareholders adopt a
non-fundamental investment restriction relating to short sales, which would
provide that the Fund may not:
"Make short sales of securities or maintain a short position except to the
extent permitted by applicable law."
Purchases on Margin
The Fund generally does not intend to engage in transactions that involve
purchases on margin. Under the 1940 Act, purchases on margin are permitted only
to obtain short-term credit for the clearance of transactions. In addition, in
order to engage in futures transactions as described in Proposal 2(n) below, the
Fund may post initial and variation margin with a dealer in futures. The Board
of Directors has approved a proposal to include the permission to engage in
margin transactions to the extent permitted by applicable law as one of the
exceptions to the proposed fundamental investment restriction on borrowing, as
described in Proposal 2(c) above. The Fund would then be able to engage in
margin transactions only in accordance with that restriction upon Board approval
and the addition of appropriate disclosure.
Short Sales
The Fund does not intend to engage in short sales. In a short sale, an
investor borrows a security and sells that security, believing that the market
price of the security sold short will decline. The investor has an obligation to
purchase the same security at a later date for delivery
-20-
<PAGE>
to the broker from whom it was originally borrowed. In a short sale "against the
box" the investor takes the same steps, but in an "against the box" transaction
the investor also owns an equal amount of the security being sold short, with
the result that the investor has less risk if the security's price increases.
Under the 1940 Act, short sales (other than those "against the box") involve the
creation of a "senior security" and mutual funds that engage in short sales must
maintain a segregated account in compliance with SEC guidelines in order to
secure its repayment obligation on the borrowed security. If the Fund determines
in the future that short sales and/or short sales "against the box" would be an
appropriate investment technique and the Board approves the use of these
transactions, they could be used by the Fund following the addition of
appropriate disclosure in the Prospectus or Statement of Additional Information.
Proposal 2(l) -- Deletion of Investment Restriction Relating to Options
The Fund has a fundamental investment restriction which provides that the
Fund may not "write, purchase or sell puts, calls, or combinations thereof."
This restriction prohibits the Fund from entering into any options transactions.
Because this restriction is no longer required by law, it is proposed that this
restriction be deleted.
Subject to the SEC's disclosure requirements, there is no legal
requirement for mutual funds to state any investment policy or restriction on
the use of options. If the current restriction is deleted, the use of options
would be permitted for the Fund in limited instances where GISC believes the use
of options would be appropriate, and following the addition of appropriate
disclosure to the Fund's Prospectus or Statement of Additional Information.
Information about options appears below. If shareholders approve this Proposal,
GISC may on occasion write (sell) covered call options on securities in its
portfolio that are the subject of merger negotiations or other corporate
transactions to attempt to hedge the value of securities in the Fund's
portfolio.
Information About Options
Basically, there are two types of options: call options and put options.
The purchaser of a call option acquires the right to buy a security at a fixed
price during a specified period. The writer (seller) of such an option is then
obligated to sell the security if the option is exercised, and bears the risk
that the security's market price will increase over the purchase price set by
the option. The purchaser of a put option acquires the right to sell a security
at a fixed price during a specified period. The writer of such an option is then
obligated to buy the security if the option is exercised, and bears the risk
that the security's market price will decline from the purchase price set by the
option. Options are typically purchased subject to a premium which can reduce
the risks retained by the option writer.
As the writer of a covered call option or the purchaser of a secured put
option, the investor must own securities that can be used to cover or secure any
such outstanding options. The cover for a call option that is related to a
foreign currency can be short-term debt securities having a value equal to the
option's face that are denominated in the same currency as the call.
-21-
<PAGE>
Also, when a mutual fund writes a put option, it must segregate assets whose
value is at least equal to the exercise price of the put option in accordance
with SEC guidelines. Segregating assets may limit a fund's ability to pursue
other investment opportunities while options are outstanding. Options
transactions can be voluntarily terminated before the exercise or expiration of
the options only by entering into closing transactions. The ability to close out
an option depends, in part, upon the liquidity of the option market. If an
option holder cannot close an option when it wants, it may miss alternative
investment opportunities.
Options trade on U.S. or foreign securities exchanges and in the
over-the-counter ("OTC") market. Exchange listed options are three-party
contracts issued by a clearing corporation. They generally have standardized
prices, expiration dates and performance mechanics. In contrast, all the terms
of an OTC option, including price and expiration date, are set by negotiation
between the buyer and seller. An investor could lose any premium paid for an OTC
option, as well as any anticipated benefits of the transaction, if its
counterparty fails to perform under the option's terms. Generally, the staff of
the SEC currently requires OTC options and any assets used to cover such options
to be treated as illiquid assets because OTC options may not be actively traded.
Until the SEC staff revises this position, any OTC option transactions engaged
in by the Fund would be subject to the investment restriction on illiquid
securities, described in Proposal 2(i) above.
Through the writing or purchase of securities index options, an investor
can achieve many of same objectives as through the use of options on individual
securities. An option on a securities index is similar to an option on a
particular security except that, rather than the right to take or make delivery
of a particular security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than (in the case of a call) or less than (in the case of a put) the
exercise price of the option. Price movements in securities which an option
holder owns or intends to purchase probably will not correlate perfectly with
movements in the level of a securities index and, therefore, the option holder
bears the risk of a loss on a securities index option which is not completely
offset by movements in the price of such securities. Because securities index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on a specific stock,
cannot provide in advance for, or cover, its potential settlement obligations by
acquiring and holding underlying securities. Call options written on a
securities index may be covered by holding a mix of stocks which substantially
replicates the movement of the index or by holding a call option on the
securities index with an exercise price no higher than the call option sold.
Proposal 2(m) -- Amendment of Restriction on Commodities
The Fund has a current fundamental investment restriction stating that the
Fund may not "purchase or sell commodities or commodity contracts." It is
proposed that this restriction be amended to permit the Fund to invest in
financial futures contracts and related options. If approved by shareholders,
the revised restriction would provide that the Fund may not:
-22-
<PAGE>
"Purchase or sell commodities or commodity contracts, except to the extent
permitted under applicable law without registration as a commodity pool
operator under the Commodity Exchange Act (or any comparable registration
under successor legislation)."
The Board of Directors has approved, subject to shareholder approval of
this Proposal, the Fund's use of futures contracts, such as stock index futures,
and options on futures, so that, among other things, the Fund may immediately
invest substantial cash inflows in the equity markets or adjust its cash
position on an ongoing basis. Futures contracts and related options are
considered to be commodities. Under the current restriction, GISC, the Fund's
investment adviser, cannot always gain immediate exposure to the equity markets
when large inflows are received. GISC and the Board believe that the ability to
use futures in these instances will facilitate the operations of the Fund, and
better enable it to be fully invested in equities at all times. If approved, it
is possible that the use of this strategy could have a negative impact on the
Fund if the market returns are less than the returns of the cash instruments
that the Fund otherwise would have held. If the amendment is approved, the Fund
will add appropriate disclosure to its Prospectus and Statement of Additional
Information.
Information About Futures
Regulations of the Commodity Futures Trading Commission limit the extent
to which mutual funds may engage in futures trading. Under these regulations,
the Fund could engage in futures transactions (i) for bona fide hedging purposes
and (ii) for non-hedging purposes, if the aggregate initial margin and premiums
paid to establish positions in futures contracts do not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account unrealized
profits and losses on the futures contracts and related options. As stated
above, the Fund intends to use futures contracts only for hedging purposes.
If shareholders approve this Proposal, the Fund would be likely to
purchase or sell interest rate futures contracts and securities index futures
contracts. Interest rate futures contracts obligate the long or short holder to
take or make delivery of a specified quantity of a financial instrument during a
specified future period at a specified price. Securities index futures contracts
are similar in economic effect, but they are based on a specific index of
securities (rather than on specified securities) and are settled in cash. The
Fund could also purchase and write put and call options on financial futures
contracts as an attempt to hedge against market risks.
There are special risks associated with entering into financial futures
contracts. There may be an imperfect correlation between the price movements of
financial futures contracts and the price movements of the securities in which
the Fund invests. There is also a risk that the Fund could be unable to close a
futures position when desired because there is no liquid secondary market for
it. The skills needed to use financial futures contracts effectively are
different from those needed to select the Fund's investments. If GISC misjudges
the general direction of interest rates or markets, the Fund's overall
performance may be poorer than if no financial futures contracts had been
entered into. It is possible that the Fund could lose money on a financial
futures contract and also on the price of related securities, adversely
affecting the Fund's performance. The risk of loss in trading financial futures
contracts can be substantial
-23-
<PAGE>
due to the low margin deposits required and the extremely high degree of
leverage involved in futures pricing. A relatively small price movement in a
financial futures contract could have an immediate and substantial impact, which
may be favorable or unfavorable to a contractholder. It is possible for a
price-related loss to exceed the amount of the Fund's margin deposit.
The risks associated with purchasing and writing put and call options on
financial futures contracts can be influenced by the market for financial
futures contracts. An increase in the market value of a financial futures
contract on which the Fund has written an option may cause the option to be
exercised. In this situation, the benefit to the Fund would be limited to the
value of the exercise price of the option and, if the Fund closes out the
option, the cost of entering into the offsetting transaction could exceed the
premium the Fund initially received for writing the option. In addition, the
Fund's ability to enter into an offsetting transaction depends upon the market's
demand for such financial futures contracts. If a purchased option expires
unexercised, the Fund would realize a loss in the amount of the premium paid for
the option.
Proposal 2(n) -- Amendment of Restriction Relating to Real Estate
The Fund currently has a fundamental investment restriction relating to
investment in real estate, which provides that the Fund may not:
"Purchase or sell real estate (although it may purchase securities of
issuers that engage in real estate operations), securities that are
secured by interests in real estate, or securities that represent
interests in real estate, including real estate investment trusts."
This policy, which is required to be fundamental, is proposed for
amendment to be more flexible as to real estate investing. As proposed, the
amended restriction would provide that the Fund may not:
"Purchase, hold, sell or deal in real estate, although the Fund may (i)
purchase and sell securities that are secured by real estate or interests
therein, (ii) purchase and sell securities of issuers that engage in real
estate operations, as well as real estate investment trusts and
mortgage-related securities, and (iii) hold or sell real estate acquired
by the Fund as a result of the ownership of securities."
The Fund currently does not intend to engage in real estate-related
investments on a regular basis. If shareholders approve this Proposal, however,
the Fund may from time to time acquire readily marketable interests such as real
estate investment trusts. The proposed restriction would expand and clarify the
types of permissible real-estate investments, and the Fund would be able to
invest in such instruments upon the addition of appropriate disclosure.
If this Proposal is approved by shareholders, the Fund may occasionally
commit a small percentage of its assets to real estate-related investments.
Nevertheless, to the extent that the Fund acquires securities issued by
companies engaged in the real estate business, the Fund could be affected by
fluctuations in the real estate market. Real estate markets are sensitive to
-24-
<PAGE>
variations in conditions such as overall property prices, property taxes, rental
income and interest rates. As with all portfolio investments, the Fund would be
affected by the operations of particular real estate-related companies selected
by GISC as a Fund investment.
Proposal 2(o) -- Deletion of Restriction on Investment in Oil & Gas
The Fund has a fundamental investment restriction stating that the Fund
may not:
"Purchase oil, gas or other mineral leases, rights or royalty contracts or
exploration or development programs, except that the Fund may invest in
the securities of companies which invest in or sponsor such programs."
Shareholders are being asked to delete this policy, which was adopted to
conform with former state securities laws. Since those laws are no longer
applicable to the Fund, this restriction is no longer required. Deletion of this
restriction will not affect the management of the Fund.
Proposal 2(p) -- Deletion of Restriction on Ownership by Management
The Fund has a fundamental investment restriction stating that the Fund
may not:
"Purchase or retain the securities of any issuer if, to the knowledge of
the Fund, the officers, directors and employees of the Fund or of the
Adviser who individually own more than 1/2 of 1% of the outstanding
securities of such issuer together own more than 5% of the securities of
such issuer."
Shareholders are being asked to delete this policy, which was adopted to
conform with former state securities laws. Since those laws are no longer
applicable to the Fund, this restriction is no longer required. Deletion of this
restriction will not affect the management of the Fund.
Proposal 2(q) -- Redesignation of Restriction on Acquisition of Control
The Fund has a fundamental investment restriction stating that the Fund
may not "purchase securities for the purpose of exercising control over another
company." No change is sought for this restriction, but it is not required to be
a fundamental restriction requiring the approval of shareholders for amendment.
It is proposed that this restriction be made non-fundamental, with no change to
its language.
Proposal 2(r) -- Amendment of Restriction on Senior Securities
The Fund, like other mutual funds, may only issue senior securities to the
extent permitted under the 1940 Act. The Fund's current fundamental restriction
provides that the
-25-
<PAGE>
Fund may not "issue any senior securities (except for borrowing subject to the
restrictions set forth under Investment Restriction 3, above)."
Shareholders are being asked to approve a replacement restriction which
would limit the issuance of senior securities based on applicable law, rather
than by reference to another investment restriction. In addition to clarifying
the scope of the restriction by reference to law, the proposed restriction would
be broad enough to encompass certain investment techniques that the SEC permits
to a limited extent, even though the techniques could be considered to be senior
securities. For example, futures contracts (described in Proposal 2(m) above)
are generally considered by the SEC to be senior securities. The proposed
restriction would provide that the Fund may not
"issue senior securities to the extent such issuance would violate
applicable law."
The legal definition of a "senior security" involves complex statutory and
regulatory concepts. In general, a senior security is considered to be an
obligation of a mutual fund that has a claim to the fund's assets or earnings
that takes precedence over the claims of the fund's shareholders. The 1940 Act
generally prohibits funds from issuing senior securities. Mutual funds may,
however, employ certain types of investments that could be considered senior
securities, subject to SEC guidelines under the 1940 Act. When a fund engages in
transactions that are considered senior securities, the fund must maintain a
segregated account which holds an amount equal to the fund's aggregate exposure
under senior securities. Where investment in senior securities is permitted by
the SEC, the 1940 Act limits the amount of a mutual fund's assets that may be
committed to such transactions. In general, mutual funds may not commit more
than 33 1/3% of assets to senior security transactions.
Required Vote
Each proposed amendment of the Fund's current investment restrictions must be
approved by the affirmative vote of a majority of the Fund's outstanding voting
securities entitled to vote at the meeting, within the meaning of the 1940 Act.
Under the 1940 Act, the required majority is the lesser of (1) two-thirds (2/3)
or more of the shares present at the meeting, if at least 50% of the outstanding
shares entitled to vote are present or represented by proxy; or (2) more than
50% of the outstanding shares of the Fund entitled to vote at the meeting. If
any of the proposed amendments fails to attract the required vote for approval,
that particular current fundamental investment restriction will remain in effect
unchanged.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
FUND'S AMENDED AND RESTATED INVESTMENT RESTRICTIONS
* * * * *
-26-
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF
THE FUND'S INDEPENDENT ACCOUNTANTS
The Board of Directors of the Fund, including the Directors who are not
"interested persons," has unanimously selected the firm of Ernst & Young LLP, to
act as the Fund's independent auditors for the fiscal year ended December 31,
1998.
A representative of Ernst & Young LLP will not be at the meeting, but is
expected to be available by telephone should any matter arise requiring
consultation with the accountants during the meeting, and the accountants have
been give the opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF ERNST & YOUNG LLP
AS INDEPENDENT ACCOUNTANTS FOR THE FUND
Required Vote
Ratification of the selection of the Fund's independent accountants
requires the affirmative vote of the holders of a majority of the Fund's
outstanding voting securities present in person or by proxy and entitled to vote
at the meeting. If the selection of the Fund's independent accountants is not
ratified by the shareholders at the meeting, the Board will reconsider such
selection.
* * * * *
Investment Adviser and Distributor
Guardian Investor Services Corporation ("GISC"), 201 Park Avenue South,
New York, New York 10003, serves as investment adviser and distributor for the
Fund. GISC is a wholly-owned subsidiary of GIAC, which is a wholly-owned
subsidiary of Guardian Life.
Future Meetings of Shareholders
The Fund is not required to hold annual meetings of shareholders and does
not plan to do so. The Board of Directors may call meetings of shareholders from
time to time for action by shareholder vote as may be required by the 1940 Act
or Maryland law.
Other Matters
The Board of Directors knows of no other matters to be presented at the
meeting. However, if any other business should properly come before the meeting,
it is intended that GIAC will vote thereon in its discretion.
-27-
<PAGE>
By order of the Board of Directors,
Joseph A. Caruso
Secretary
Dated: [February __, 1998]
-28-
<PAGE>
Exhibit A
---------
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
THE GUARDIAN STOCK FUND, INC.
The Guardian Stock Fund, Inc., a Maryland corporation having its
principal office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessment and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is amended and as so amended
is restated in its entirety by striking out Articles First through Eighth and
inserting in lieu thereof the following:
ARTICLE I.
INCORPORATOR
The undersigned, Sandra Camillo, Joan Brunson and Ralph Greggs, each
of whose post office address is 1633 Broadway, New York, New York 10019, all
being of full legal age, do, under and by virtue of the General Laws of the
State of Maryland authorizing the formation of corporations, associate ourselves
with the intention of forming a corporation.
ARTICLE II.
NAME
The name of the corporation is The Guardian Stock Fund, Inc. (the
"Corporation").
ARTICLE III.
PURPOSES AND POWERS
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment company.
<PAGE>
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts,
on such terms and conditions, for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(4) To exchange, classify, reclassify, redesignate, convert, rename,
redeem, purchase or acquire in any other manner, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its capital stock, in any manner and to the extent
now or hereafter permitted by law and by this charter.
(5) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
Maryland General Corporation Law now or hereafter in force, and the enumeration
of the foregoing shall not be deemed to exclude any powers, rights or privileges
so granted or conferred.
ARTICLE IV.
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the corporation
in the State of Maryland is c/o The Corporation Trust Company Incorporated, 300
E. Lombard Street, Baltimore, Maryland 21202. The name and address of the
resident agent of the corporation in the State of Maryland is The Corporation
Trust Company Incorporated, a Maryland corporation, 300 E. Lombard Street,
Baltimore, Maryland 21202.
ARTICLE V.
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is four hundred million (400,000,000) shares
having a par value of one-tenth of one cent ($.001) per share and an aggregate
par value of four hundred thousand dollars ($400,000). Until such time as the
Board of Directors of the Corporation shall provide otherwise in accordance with
paragraph 2 of Article V hereof, three hundred million (300,000,000) shares of
the authorized shares of the Corporation are classified as Class I Common Stock
and one hundred million (100,000,000) shares of the authorized shares of the
Corporation are classified as Class II Common Stock. The Class I Common Stock
and the Class II Common Stock shall be invested in a common
-2-
<PAGE>
investment portfolio which shall constitute the initial series of the
Corporation. The said series shall consist initially of all the authorized
shares of common stock of the Corporation. The said shares shall have the terms
and provisions set forth in this Article V and elsewhere in this Charter with
respect to series and classes of shares of the Corporation.
(2) The Board of Directors of the Corporation is authorized, from
time to time, to classify or to reclassify, as the case may be, any unissued
shares of the Corporation, whether now or hereafter authorized, in separate
series and classes, or otherwise. The said shares of stock shall have such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as shall be fixed and determined from time to time by the Board of
Directors. The Board of Directors is authorized to increase or decrease the
number of shares of any series or class, but the number of shares of any series
or class shall not be decreased by the Board of Directors below the number of
shares thereof then outstanding.
(3) The Board of Directors, through such charter document filings or
other procedures as may be required by Maryland law, may redesignate a class or
series of shares of capital stock whether or not shares of such class or series
are issued and outstanding, subject to pertinent provisions of law.
(4) Without limiting the authority of the Board of Directors set
forth herein to establish, designate and redesignate any series or classes of
shares, and to classify and reclassify any unissued shares, and subject to such
authority, shares of each series, now authorized and hereafter authorized, shall
be subject to the following provisions:
(a) As more fully set forth hereafter, the assets and liabilities
and the income and expenses of each series shall be determined separately
and, accordingly, the net asset value, the dividends payable to holders,
and the amounts distributable in the event of liquidation or dissolution
of the Corporation to holders of shares of the Corporation's stock may
vary from series to series.
(b) All consideration received by the Corporation for the issue or
sale of shares of a particular series, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including all proceeds derived from the
sale, exchange or liquidation thereof, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that series for all purposes, subject only to
the rights of creditors and shall be referred to as "assets belonging to"
that series. The assets belonging to a particular series shall be so
recorded upon the books of the Corporation.
(c) The assets belonging to each particular series shall be charged
with the liabilities of the Corporation with respect to that series, all
expenses, costs,
-3-
<PAGE>
charges and reserves attributable to that series and that series' share of
the liabilities, expenses, costs, charges or reserves of the Corporation
not attributable to any particular series, in the latter case in the
proportion that the net asset value of that series (determined without
regard to such liabilities) bears to the net asset value of all series
(determined without regard to such liabilities), or in such other manner
as may be determined by the Board of Directors in accordance with law. The
determination of the Board of Directors shall be conclusive as to the
allocation of liabilities, including accrued expenses and reserves, and
assets to a particular series or series.
(d) Shares of each series shall be entitled to such dividends and
distributions, in shares 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 series, provided that dividends and distributions shall be
paid on shares of a series only out of lawfully available assets belonging
to that series. Dividends may be declared daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Board of Directors may determine.
(e) The Board of Directors shall have the power, in its sole
discretion, to distribute in any fiscal year as dividends (including
dividends designated in whole or in part as capital gain distributions) an
amount sufficient, in the opinion of the Board of Directors, to enable
each series of the Corporation to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as from time to time
amended, or any successor or comparable statute thereto, and regulations
promulgated thereunder, and to avoid liability of each series of the
Corporation for federal income and excise taxes in respect of that year.
However, nothing in the foregoing shall limit the authority of the Board
of Directors to make distributions greater than or less than the amount
necessary to qualify as a regulated investment company and to avoid
liability of any series of the Corporation for such taxes.
(f) In the event of the liquidation or dissolution of the
Corporation, the stockholders of a series shall be entitled to receive, as
a single class, out of the assets of the Corporation available for
distribution to stockholders, the assets belonging to that series. The
assets so distributable to the stockholders of a series shall be
distributed among such stockholders in proportion to the number of shares
of that series held by them and recorded on the books of the Corporation
or, in the event that the series is divided into classes, in the manner
determined by the Board of Directors in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"). In the event that there
are any assets available for distribution that are not attributable to any
particular series, such assets shall be allocated to all series in
proportion to the net assets of the respective series, or in such other
manner as may be determined by the Board of Directors in accordance with
law, and then distributed to the holders of stock of each series as
aforesaid.
-4-
<PAGE>
(g) If a series is divided into multiple classes, the classes may be
invested with one or more other classes in the common investment portfolio
comprising the series. Notwithstanding the foregoing provisions of this
Article V(4) of these Articles of Incorporation, if two or more classes
are invested in a common investment portfolio, the shares of each such
class of stock of the Corporation shall be subject to the following
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption, and, if there are other classes of stock invested in a
different investment portfolio comprising a different series, shall also
be subject to the provisions of Article V(4)(a) through (f) of these
Articles of Incorporation at the series level as if the classes invested
in the common investment portfolio were one class:
(i) The income and expenses of the series shall be allocated
among the classes comprising the series in such manner as may be
determined by the Board of Directors in accordance with law.
(ii) As more fully set forth in this Article V(4)(g) of these
Articles of Incorporation, the liabilities and expenses of the classes
comprising the series shall be determined separately from those of each
other and, accordingly, the net asset values, the dividends and
distributions payable to holders, and the amounts distributable in the
event of liquidation of the Corporation or termination of a series to
holders of shares of the Corporation's stock may vary within the classes
comprising the series.
(iii) The dividends and distributions of investment income and
capital gains with respect to the classes comprising a series shall be in
such amounts as may be declared from time to time by the Board of
Directors, and such dividends and distributions may vary among the classes
comprising the series to reflect differing allocations of the expenses and
liabilities of the Corporation among the classes and any resultant
differences between the net asset values per share of the classes, to such
extent and for such purposes as the Board of Directors may deem
appropriate. The allocation of investment income, realized and unrealized
capital gains and losses, expenses and liabilities of the Corporation
among the classes comprising a series shall be determined by the Board of
Directors in a manner that is consistent with applicable law.
(h) The proceeds of the redemption of the shares of any class of
stock of the Corporation may be reduced by the amount of any contingent
deferred sales charge, liquidation charge, or other charge (which charges
may vary within and among the classes) payable on such redemption pursuant
to the terms of issuance of such shares, all in accordance with the 1940
Act and applicable rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD").
-5-
<PAGE>
(i) At such times (which may vary between and among the holders of
particular classes) as may be determined by the Board of Directors (or
with the authorization of the Board of Directors, by the officers of the
Corporation) in accordance with the 1940 Act, applicable rules and
regulations thereunder and applicable rules and regulations of the NASD
and reflected in the pertinent registration statement of the Corporation,
shares of any particular class of stock of the Corporation may be
automatically converted into shares of another class of stock of the
Corporation based on the relative net asset values of such classes at the
time of conversion, subject, however, to any conditions of conversion that
may be imposed by the Board of Directors (or with the authorization of the
Board of Directors, by the officers of the Corporation) and reflected in
the pertinent registration statement of the Corporation as aforesaid.
Except as provided above, all provisions of the Articles of
Incorporation relating to stock of the Corporation shall apply to shares of, and
to the holders of, all series and classes of stock.
(5) On each matter submitted to a vote of stockholders, each holder
of a share shall be entitled to one vote for each share standing in his/her name
on the books of the Corporation, irrespective of the series or class thereof,
and all shares of all series and classes shall vote as a single class ("Single
Class Voting"); provided, however, that (i) as to any matter with respect to
which a separate vote of any series or class is required by the 1940 Act, or by
the Maryland General Corporation Law, such requirement as to a separate vote by
that series or class shall apply in lieu of Single Class Voting as described
above; (ii) in the event that the separate vote requirements referred to in (i)
above apply with respect to one or more series or classes, then subject to (iii)
below, the shares of all other series and classes shall vote as a single class;
and (iii) as to any matter which does not affect the interests of a particular
series or class, only the holders of shares of the one or more affected series
or classes shall be entitled to vote.
(6) The presence in person or by proxy of the holders of one-third
(1/3) of the shares of capital stock of the corporation outstanding and entitled
to vote thereat shall constitute a quorum for the transaction of business at a
stockholders' meeting, except that where any provision of law or of the Charter
of the Corporation permit or require that holders of any series or class shall
vote as a separate series or class, then one-third (1/3) of the aggregate number
of shares of capital stock of that series or class, as applicable, outstanding
and entitled to vote shall constitute a quorum for the transaction of that
business by that series or class, as applicable.
(7) The Corporation may issue shares in fractional denominations to
the same extent as its whole shares, and any fractional share shall carry
proportionately the rights of a whole share including, without limitation, the
right to vote, the right to receive dividends and distributions and the right to
participate upon liquidation of the Corporation. Regardless of whether a full
share has such a right, a fractional share shall not have any right to receive a
certificate evidencing it.
-6-
<PAGE>
(8) No holder of stock of the Corporation by virtue of being such a
holder shall have any right to purchase, subscribe for, or otherwise acquire any
shares of the Corporation or any other security that the Corporation may issue
or sell (whether out of the number of shares authorized by the Charter of the
Corporation or out of any shares of the Corporation's capital stock that the
Corporation may acquire) other than a right that the Board of Directors in its
discretion may determine to grant.
(9) Notwithstanding any provision of the Maryland General
Corporation Law requiring any action to be taken or authorized by the
affirmative vote of a greater proportion than a majority of the votes of all
classes or of any class of stock of the Corporation, such action shall be
effective and valid if taken or authorized by the affirmative vote of a majority
of the total number of votes entitled to be cast thereon, except as otherwise
provided in the Charter of the Corporation or by law.
(10) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of the Charter of the Corporation and
the By-Laws of the Corporation, as from time to time amended or supplemented.
ARTICLE VI.
REDEMPTION
Each holder of shares of the Corporation's capital stock shall be
entitled to require the Corporation to redeem all or any part of the shares of
capital stock of the Corporation standing in the name of the holder on the books
of the Corporation, and all shares of capital stock issued by the Corporation
shall be subject to redemption by the Corporation, at the redemption price of
the shares as in effect from time to time as may be determined by or pursuant to
the direction of the Board of Directors of the Corporation in accordance with
the provisions of Article VII, subject to the right of the Board of Directors of
the Corporation to suspend the right of redemption or postpone the date of
payment of the redemption price in accordance with provisions of applicable law.
Without limiting the generality of the foregoing, the Corporation shall, to the
extent permitted by applicable law, have the right at any time, at its option,
to redeem in whole or in part the shares owned by any holder of capital stock of
the Corporation (i) if the redemption is, in the opinion of the Board of
Directors of the Corporation, desirable in order to prevent the Corporation from
being deemed a "personal holding company" within the meaning of the Internal
Revenue Code of 1986; (ii) if the redemption is, in the opinion of the Board of
Directors of the Corporation, necessary to reimburse the Corporation for any
loss sustained by the Corporation by reason of the failure of the stockholder in
whose name such account is registered to make full payment for shares of the
Corporation purchased by such stockholder; or (iii) if the value of the shares
in the account maintained by the Corporation or its transfer agent for any class
of stock for the stockholder is below an amount determined from time to time by
the Board of Directors of the Corporation (the "Minimum Account Balance") and
the stockholder has been given written notice of the
-7-
<PAGE>
redemption and has failed to make additional purchases of shares in an amount
sufficient to bring the value in his account to at least the Minimum Account
Balance before the redemption is effected by the Corporation. With respect to
any redemption effected to collect fees to be paid to the Corporation by any
stockholder whose account has fallen below such Minimum Account Balance, the
entire redemption value of the shares so redeemed may be retained by the
Corporation to the extent of such fees. The Corporation, at its option, also may
cause the redemption of outstanding shares of capital stock of any series or
class if the Board of Directors has determined that it is in the best interests
of the corporation and its stockholders to discontinue issuance of shares of
stock of such series or class. Payment of the redemption price shall be made by
the Corporation at the time and in the manner as may be determined from time to
time by the Board of Directors of the Corporation or under direction of the
Board of Directors, in accordance with the provisions of applicable law.
Purchase and redemption of shares of stock of the corporation is conditioned
upon the Corporation having funds or property legally available therefor. The
Board of Directors may establish procedures for redemption of shares.
ARTICLE VII.
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors is
currently nine (9). The number of Directors may be changed pursuant to the
By-Laws of the Corporation but shall at no time be less than the minimum number
required under the Maryland General Corporation Law.
(2) In furtherance, and not in limitation, of the powers conferred
by the Maryland General Corporation Law, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By- Laws of the Corporation,
except as otherwise required by the 1940 Act.
(ii) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations the
books and accounts of the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the stockholders. No
stockholder shall have any right to inspect any account or book or
document of the Corporation, except as conferred by law or authorized by
resolution of the Board of Directors.
(iii) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of the stock of any
series or class of the Corporation, whether now or hereafter authorized,
and securities convertible into shares of stock of the Corporation of any
series, class or classes whether now or hereafter authorized, for such
consideration as the Board of Directors may deem advisable.
-8-
<PAGE>
(iv) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured and unsecured,
as the Board of Directors may determine, and to authorize and cause to be
executed mortgages and liens upon the real or personal property of the
Corporation.
(v) Notwithstanding anything in this Charter to the contrary,
to establish in its absolute discretion the basis or method for
determining the value of the assets belonging to or attributable to any
series or class, the value of the liabilities belonging to or attributable
to any series or class and the net asset value of each share of any class
of the Corporation's stock.
(vi) To determine in accordance with accepted accounting
practices what constitutes net profits, earnings, surplus or net assets in
excess of capital, and to determine what accounting periods shall be used
by the Corporation for any purpose; to set apart out of any funds of the
Corporation reserves for such purposes as it shall determine and to
abolish the same; to declare and pay any dividends and distributions in
cash, securities or other property from surplus or any other funds legally
available therefor, at such intervals as it shall determine; to declare
dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; and to establish payment dates for
dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations thereof.
(vii) In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all powers and do all acts that may be exercised or
done by the Corporation pursuant to the provisions of the laws of the
State of Maryland, this Charter and the By-Laws of the corporation.
(3) Any determination made in good faith, and in accordance with
applicable law and accepted accounting practices, if applicable, by or pursuant
to the direction of the Board of Directors, with respect 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
the reserves or charges have been created has been paid or discharged or is then
or thereafter required to be paid or discharged), as to the value of any
security owned by the Corporation, the determination of the net asset value of
shares of any series or class of the Corporation's capital stock, or as to any
other matters relating to the issuance, sale or other acquisition or disposition
of securities or shares of capital stock of the Corporation 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 the capital stock of the
-9-
<PAGE>
Corporation are issued and sold on the condition and understanding, evidenced by
the purchase of shares of capital stock or acceptance of share certificates,
that any and all such determinations shall be binding as aforesaid. No provision
of this Charter shall be effective to (i) require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940 Act, or of
any valid rule, regulation or order of the Securities and Exchange Commission
under those Acts or (ii) 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.
INDEMNIFICATION AND LIMITATION OF LIABILITY
(1) Subject to any limitations imposed by the 1940 Act and to the
fullest extent that limitations on the liability of directors and officers are
permitted by the Maryland General Corporation Law, no director or officer of the
Corporation shall have any liability to the Corporation or its stockholders for
money damages. This limitation on liability applies to events occurring at the
time a person serves as a director or officer of the Corporation whether or not
such person is a director or officer at the time of any proceeding in which
liability is asserted.
(2) No provision of this Article VIII shall protect any director or
officer of the Corporation (i) against any liability for noncompliance with any
provision of the Securities Act of 1933, as amended, or the 1940 Act, or of any
valid rule, regulation or order of the Securities and Exchange Commission under
those Acts, or (ii) against any liability to the Corporation or its security
holders to which such director or officer 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.
(3) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors and advancement of expenses to directors is
permitted by the Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with such law. The Board
of Directors may, through a By-Law, resolution or agreement, make further
provisions for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation Law.
(4) References to the Maryland General Corporation Law in this
Article VIII are to the law as from time to time amended. No amendment to this
Charter shall affect any right of any person under this Article VIII based on
any event, omission or proceeding prior to such amendment. The term "Charter" as
used herein shall have the
-10-
<PAGE>
meaning set forth in the Maryland General Corporation Law and includes these
Articles of Incorporation and all amendments and supplements thereto.
ARTICLE IX.
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to its Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in this
Charter, of any outstanding stock, and all rights at any time conferred upon the
stockholders of the Corporation by its Charter are granted subject to the
provisions of this Article and the reservation of the right to amend the Charter
herein contained.
SECOND: The current name and address of the Corporation's resident
agent and address of the principal office of the Corporation in Maryland are as
set forth herein. The number of directors is currently set at nine (9) and their
names are: John C. Angle, Frank H. Fabozzi, Arthur V. Ferrara, Leo R. Futia,
William W. Hewitt, Jr., Sidney I. Lirtzman, Joseph D. Sargent, Carl W. Schafer
and Robert G. Smith.
THIRD: The Corporation desires to amend and restate its Charter as
currently in effect. The provisions set forth in these Articles of Amendment and
Restatement are all the provisions of the Charter currently in effect as herein
amended. The amendment and restatement of the Charter of the Corporation as
hereinabove set forth has been duly advised by the Board of Directors of the
Corporation and approved by its stockholders.
FOURTH: Each share (including for this purpose a fraction of a
share) of stock issued and outstanding immediately prior to these Articles of
Amendment and Restatement becoming effective, shall, at such effective time, be
reclassified automatically, and without any action or choice on the part of the
holder, into a share (or the same fraction of share) of Class I Common Stock.
Shares of Class I Common Stock resulting from the aforesaid reclassification
shall be subject, without limitation, to such rights and restrictions of such
class as set forth in these Articles of Amendment and Restatement. Outstanding
certificates representing issued and outstanding shares of stock of the
Corporation immediately prior to these Articles of Amendment and Restatement
becoming effective, shall upon these Articles of Amendment and Restatement
becoming effective be deemed to represent the same number of shares of the Class
I Common Stock. Certificates representing shares of the Class I Common Stock
resulting from the aforesaid reclassification need not be issued until
certificates representing the shares of stock so reclassified, if issued, have
been received by the Corporation or its agent duly endorsed for transfer with
the request that a new certificate be provided. The Class I Common Stock and the
Class II Common Stock shall have the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and
-11-
<PAGE>
conditions of redemption as set forth in the Charter of the Corporation as
herein amended and restated.
FIFTH: The total number of shares of capital stock that the
Corporation had authority to issue immediately prior to these Articles of
Amendment and Restatement becoming effective was one hundred million
(100,000,000) shares having a par value of ten cents ($.10) per share and an
aggregate par value of ten million dollars ($10,000,000), all of which shares
were of one class. The total number of shares of capital stock that the
Corporation has authority to issue upon these Articles of Amendment and
Restatement becoming effective is four hundred million (400,000,000) shares
having a par value of one-tenth of one cent ($.001) per share and an aggregate
par value of four hundred thousand dollars ($400,000), of which three hundred
million (300,000,000) shares of the authorized shares of the Corporation are
classified as Class I Common Stock and one hundred million (100,000,000) shares
of the authorized shares of the Corporation are classified as Class II Common
Stock.
SIXTH: These Articles of Amendment and Restatement shall become
effective on May 1, 1998 at 8:00 a.m. Eastern Time.
IN WITNESS WHEREOF, The Guardian Stock Fund, Inc. has caused these
Articles of Amendment and Restatement to be signed in its name and on its behalf
by its President and witnessed by its Secretary, as of this ____ day of
_________, 1998.
The undersigned President acknowledges these Articles of Amendment
and Restatement to be the corporate act of the Corporation and states that to
the best of his knowledge, information and belief, the matters and facts set
forth in these Articles with respect to the authorization and approval of the
amendment and restatement of the Corporation's Charter are true in all material
respects and that this statement is made under penalties of perjury.
THE GUARDIAN STOCK FUND, INC.
By:
----------------------------------
Name: Charles E. Albers
Title: President
Witness:
- ----------------------------------
Name: Joseph A. Caruso
Title: Secretary
-12-
<PAGE>
Exhibit B
Current Restrictions Proposed Changes
The Fund may not: The Fund may not:
1. Purchase any security other than Delete
those discussed under "Investment
Objective and Policies," as set forth
in the Prospectus;
2. Invest more than 5% of its total Delete
assets in securities of issuers
having a record, together with
predecessors, of less than three
years of continuous operation. This
restriction does not apply to any
obligation issued or guaranteed by
the United States Government, its
agencies or instrumentalities;
3. Borrow money, except that the Fund Borrow money or pledge its assets,
may borrow from banks up to 5% of the except that the Fund may (i) borrow
value of its total assets as a for temporary or emergency needs, and
temporary measure for extraordinary engage in reverse repurchase
or emergency needs and not for agreements, mortgage dollar rolls or
investment purposes, such as enabling other transactions which may involve
the Fund to meet redemption requests a borrowing from banks or other
which might otherwise require the persons, provided that the aggregate
sale of portfolio securities at a amount involved in all such
time when it is not in the Fund's transactions shall not exceed 33 1/3%
best interests; of the value of the Fund's total
assets (including the amount
borrowed) less liabilities (other
than borrowings) or such other
percentage permitted by law; (ii)
obtain such short-term credit as may
be necessary for the clearance of
transactions in portfolio securities;
and (iii) purchase securities on
margin to the extent permitted by
applicable law.
4. Mortgage, pledge or hypothecate Delete
more than 5% of the value of its
total assets and then only to secure
borrowings effected within the above
restriction;
5. Make loans of money, except Make loans to other persons except
through the purchase of debt (i) loans of portfolio securities and
obligations and repurchase agreements entry into repurchase agreements to
in which the Fund may invest, the extent permitted under applicable
consistent with its investment law, and (ii) to the extent that the
objectives and policies, provided purchase of debt obligations in which
that repurchase agreements maturing the Fund may invest, consistent with
in more than seven days, when taken its investment objectives and
together and at current value, may policies, may be deemed to be loans.
not exceed 10% of the Fund's net
assets;
<PAGE>
Current Restrictions Proposed Changes
The Fund may not: The Fund may not:
6. Purchase any securities other than Purchase any securities other than
the obligations of U.S. branches of the obligations of the U.S.
domestic banks or of the U.S. Government, or its agencies or
Government, or its agencies or instrumentalities, if, immediately
instrumentalities, if, immediately after such purchase, 25% or more of
after such purchase, more than 25% of the value of the Fund's total assets
the value of the Fund's total assets would be invested in the securities
would be invested in the securities of issuers conducting their principal
of issuers in the same industry business activities in the same
(there is no limitation as to industry or group of industries.
investments in obligations issued by
U.S. branches of domestic banks or in
obligations issued or guaranteed by
the United States Government or its
agencies or instrumentalities);
7. Invest more than 5% of the value Make any investment consistent with
of its total assets in the securities the Fund's classification as a
of any one issuer or purchase more diversified company under the
than 10% of the outstanding voting Investment Company Act of 1940.
securities, or any other class of
securities, of any one issuer. For
purposes of this restriction, all
outstanding debt securities of an
issuer are considered as one class,
and all preferred stock of an issuer
is considered as one class. (This
restriction does not apply to
obligations issued or guaranteed by
the United States Government, its
agencies or instrumentalities.);
8. Invest more than 5% of the value Delete
of its total assets in warrants or
more than 2% of such value in
warrants which are not listed on the
New York or American Stock Exchanges,
except that warrants attached to
other securities are not subject to
these limitations;
9. Invest more than 10% of the value (As a non-fundamental investment
of its total assets in securities restriction) Invest in (i) securities
that are not readily marketable or which at the time of such investment
which are restricted as to are not readily marketable, (ii)
disposition under the federal securities restricted as to resale or
securities laws or otherwise. This other disposition, or (iii)
restriction will apply to repurchase repurchase agreements maturing in
agreements maturing in more than more than seven days, if, as a
seven days. This restriction will result, more than 15% of the Fund's
also apply to securities received as net assets (taken at current value),
a result of a corporate or such other percentage provided by
reorganization or similar transaction applicable law, would then be
affecting readily-marketable invested in the aggregate in
securities already held in the Fund's securities described in (i), (ii),
portfolio. To the extent that and (iii) above. This restriction
securities received under these shall not apply to securities which
circumstances, together with other the Board of Directors of the Fund
unmarketable securities, exceed 10% has determined to be liquid pursuant
of the value of the Fund's total to applicable law.
assets, the Fund will attempt to
dispose of them in an orderly fashion
in order to reduce its holdings in
such securities to less than 10%;
<PAGE>
Current Restrictions Proposed Changes
The Fund may not: The Fund may not:
10. Engage in the underwriting of the No change is proposed for this
securities of other issuers, except restriction.
to the extent that the Fund may be
deemed to be an underwriter under the
Securities Act of 1933 in selling
portfolio securities;
11. Purchase securities issued by any Delete
other investment company;
12. Purchase securities on margin or (As a non-fundamental investment
sell securities short, or participate restriction) Make short sales of
on a joint or a joint and several securities or maintain a short
basis in any trading account in position except to the extent
securities; permitted by applicable law.
13. Write, purchase or sell puts, Delete
calls, or combinations thereof;
14. Purchase or sell commodities or Purchase or sell commodities or
commodity contracts; commodity contracts, except to the
extent permitted under applicable law
without registration as a commodity
pool operator under the Commodity
Exchange Act (or any comparable
registration under successor
legislation).
15. Purchase or sell real estate Purchase, hold, sell or deal in real
(although it may purchase securities estate, although the Fund may (i)
of issuers that engage in real estate purchase and sell securities that are
operations), securities that are secured by real estate or interests
secured by interests in real estate, therein, (ii) purchase and sell
or securities that represent securities of issuers that engage in
interests in real estate, including real estate operations, as well as
real estate investment trusts; real estate investment trusts and
mortgage-related securities, and
(iii) hold or sell real estate
acquired by the Fund as a result of
the ownership of securities.
16. Purchase oil, gas or other Delete
mineral leases, rights or royalty
contracts or exploration or
development programs, except that the
Fund may invest in the securities of
companies which invest in or sponsor
such programs;
17. Purchase or retain the securities Delete
of any issuer if, to the knowledge of
the Fund, the officers, directors and
employees of the Fund or of the
Adviser who individually own more
than 1/2 of 1% of the outstanding
securities of such issuer together
own more than 5% of the securities of
such issuer;
18. Purchase securities for the Redesignate as non-fundamental, but
purpose of exercising con trol over language would not change.
another company; and
19. Issue any senior securities Issue senior securities to the extent
(except for borrowing subject to the such issuance would violate
restrictions set forth under applicable law.
Investment Restriction 3, above).
<PAGE>
Preliminary Copy
PLEASE COMPLETE THIS PREFERENCE STATEMENT TODAY.
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS.
The Guardian Stock Fund, Inc.
THIS PREFERENCE STATEMENT IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking any previously executed preference statements, hereby
directs The Guardian Insurance & Annuity Company, Inc. ("GIAC") to vote all
shares of The Guardian Stock Fund, Inc. in which the undersigned has a
beneficial interest on each of the Proposals specified on the reverse side, and
upon any other business that may properly come before the Special Meeting of
Shareholders to be held at 201 Park Avenue South, Mezzanine Floor, New York, NY
10003 on April 21, 1998 at 9:30 a.m. New York time and at any adjournments
thereof.
Receipt of the Notice of Special Meeting and the accompanying Proxy Statement
which describes the matters to be considered and voted on is hereby
acknowledged.
Date________________________________________, 1998
PLEASE sign exactly as your name(s) appear(s) on
your GIAC contract and this preference statement.
When signing as attorney, executor, trustee,
administrator, guardian, etc., please give full
title. Corporate, partnership and trust owners
should have this preference statement signed by an
authorized person, and that person's title should
be given.
--------------------------------------------------
--------------------------------------------------
Signature(s) and, if applicable, Title(s)
PLEASE SIGN, DATE, AND RETURN PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
THIS PREFERENCE STATEMENT, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE CONTRACTOWNER. IF YOU SIGN AND DATE THIS PREFERENCE STATEMENT,
BUT DO NOT SPECIFY YOUR VOTE BELOW, THE GUARDIAN INSURANCE & ANNUITY COMPANY,
INC. ("GIAC") WILL VOTE THE SHARES IN WHICH YOU HAVE A BENEFICIAL INTEREST FOR
THE PROPOSALS. A SEPARATE PREFERENCE STATEMENT IS PROVIDED FOR EACH ACCOUNT
THROUGH WHICH YOU HAVE INVESTED YOUR CONTRACT VALUES IN THE FUND AS OF FEBRUARY
23, 1998. PLEASE SIGN, DATE AND RETURN ALL PREFERENCE STATEMENTS RECEIVED IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. PLEASE REFER TO THE PROXY STATEMENT FOR A
DISCUSSION OF EACH PROPOSAL.
GIAC will vote the shares in which you have a beneficial interest as directed by
you in accordance with the voting procedures described in the prospectus for
your GIAC variable annuity contract or variable life policy.
Please indicate your vote by filling in the appropriate boxes below, as shown,
using blue or black ink or dark pencil. Do not use red ink. |_|
1. To approve or disapprove the amendment and restatement
of the Fund's Articles of Incorporation:
|_| FOR |_| AGAINST |_| ABSTAIN
2. To approve or disapprove the amendment and restatement
of the Fund's investment restrictions:
|_| FOR ALL, |_| AGAINST |_| ABSTAIN
Except As
Marked
Below
2(a) General Prospectus Disclosure 2(h) Warrants
2(b) "Unseasoned" Issuers 2(i) Illiquid/Restricted Securities
2(c) Borrowing 2(j) Other Investment Companies
2(d) Pledge of Assets 2(k) Margin and Short Sales
2(e) Lending 2(l) Options
2(f) Industry Concentration 2(m) Commodities
2(g) Issuer Diversification
2(n) Real Estate
2(o) Oil & Gas
2(p) Ownership by Management
2(q) Acquisition of Control
2(r) Senior Securities
To vote against one or more specific changes, write the
sub-proposal number on the line below.
- --------------------------------------------------------------------------
3. To ratify the selection of the Fund's independent public accountants:
|_| FOR |_| AGAINST |_| ABSTAIN
