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
Bull & Bear Municipal Income Fund, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0- 11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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PRELIMINARY COPY
BULL & BEAR MUNICIPAL INCOME FUND, INC.
BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC.
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NOTICE OF ANNUAL MEETINGS OF STOCKHOLDERS
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To the Stockholders:
The Annual Meeting of Stockholders of each of Bull & Bear Municipal
Income Fund, Inc. and Bull & Bear U.S. Government Securities Fund, Inc. (each, a
"Fund" and, collectively, the "Funds") will be held at the offices of Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, 34th Floor, New York, New York, on
Thursday, November 20, 1997 at 10:00 a.m., for the following purposes:
1. To elect Directors to serve for a specified term and until their
successors are duly elected and qualified.
2. To change the investment objective and approve certain changes to
the fundamental investment policies of each Fund.
3. To amend each Fund's Articles of Incorporation to change the
Fund's name.
4. To change the classification of each Fund from a diversified
investment company to a non-diversified investment company.
5. To ratify the selection of Tait, Weller & Baker as independent
auditors of each Fund.
6. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on October __, 1997
will be entitled to receive notice of and to vote at the meeting.
By Order of the Boards
Thomas B. Winmill
Co-President
New York, New York
October, 1997
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WE NEED YOUR PROXY VOTE IMMEDIATELY
A STOCKHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY
LAW, THE ANNUAL MEETING OF STOCKHOLDERS OF EACH FUND WILL HAVE TO BE ADJOURNED
WITHOUT CONDUCTING ANY BUSINESS IF LESS THAN A QUORUM IS REPRESENTED. IN THAT
EVENT, THE AFFECTED FUND WOULD CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO
ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE CRITICAL TO ENABLE THE FUND(S) TO
HOLD THE MEETING(S) AS SCHEDULED, SO PLEASE RETURN YOUR PROXY CARD(S)
IMMEDIATELY. YOU AND ALL OTHER STOCKHOLDERS WILL BENEFIT FROM YOUR COOPERATION.
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<PAGE>
PRELIMINARY COPY
BULL & BEAR MUNICIPAL INCOME FUND, INC.
BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC.
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COMBINED PROXY STATEMENT
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ANNUAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON THURSDAY, NOVEMBER 20, 1997
This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of each of Bull & Bear Municipal Income Fund,
Inc. ("BBM") and Bull & Bear U.S. Government Securities Fund, Inc. ("BBG")
(each, a "Fund" and, collectively, the "Funds") to be used at the Annual Meeting
of Stockholders (the "Meeting") of each Fund to be held on Thursday, November
20, 1997 at 10:00 a.m., at the offices of Stroock & Stroock & Lavan LLP, 180
Maiden Lane, 34th Floor, New York, New York, for the purposes set forth in the
accompanying Notice of Annual Meetings of Stockholders. Stockholders of record
at the close of business on October __, 1997 are entitled to be present and to
vote on matters at the Meeting. Stockholders are entitled to one vote for each
Fund share held and fractional votes for each fractional Fund share held.
Stockholders can vote only on matters affecting the Fund(s) of which they are
stockholders. Shares represented by executed and unrevoked proxies will be voted
in accordance with the specifications made thereon. If any enclosed form of
proxy is executed and returned, it nevertheless may be revoked by another proxy
or by letter or telegram directed to the relevant Fund, which must indicate the
stockholder's name. To be effective, such revocation must be received prior to
the Meeting. In addition, any stockholder who attends the Meeting in person may
vote by ballot at the Meeting, thereby canceling any proxy previously given.
As of __________, 1997, the Funds had issued and outstanding the
following number of shares:
NUMBER OF
SHARES
FUND OUTSTANDING
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Bull & Bear Municipal Income Fund, Inc. ------
Bull & Bear U.S. Government Securities Fund, Inc. ------
It is estimated that proxy materials will be mailed to stockholders of
record on or about October 20, 1997. Each Fund's principal executive offices are
located at 11 Hanover Square, New York, New York 10005. COPIES OF EACH FUND'S
MOST RECENT ANNUAL AND SEMI- ANNUAL REPORTS ARE AVAILABLE UPON REQUEST, WITHOUT
CHARGE, BY WRITING TO THE FUND AT 11 HANOVER SQUARE, NEW YORK, NEW YORK 10005,
OR BY CALLING TOLL FREE 1-888-847-4200.
Stockholders of each Fund will vote as a single class and will vote
separately on each proposal on which stockholders of that Fund are entitled to
vote. If a proposal is approved by stockholders of one Fund and disapproved by
stockholders of the other Fund, the proposal will be implemented only for the
Fund that approved the proposal. Therefore, it is essential that stockholders
who own shares in both Funds complete, date, sign, and return EACH proxy card
they receive.
PROPOSAL 1. ELECTION OF DIRECTORS
Each Fund's Board of Directors is divided into five classes with the
terms of office of one class expiring each year.
It is proposed that stockholders of each Fund elect one Class I
Director to serve for a one year term, one Class II Director to serve for a two
year term, one Class III Director to serve for a three year term, one Class IV
Director to serve for a four year term, and one Class V Director to serve for a
five year term, and, in each case, until their respective successors are duly
elected and qualified.
The following table sets forth certain information concerning each of
the Directors of the Funds. Each of Frederick A. Parker, Jr., Bassett S.
Winmill, Mark C. Winmill and Thomas B. Winmill with respect to BBG, and Bassett
S. Winmill with respect to BBM, is currently a Director of such Fund. Each
Director who is deemed to be an "interested person" of a Fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), is indicated by an
asterisk. Unless otherwise indicated, information set forth herein applies to
both Funds.
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<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND DIRECTOR YEAR TERM
BUSINESS EXPERIENCE FOR PAST FIVE YEARS SINCE EXPIRES
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<S> <C> <C>
CLASS I:
RUSSELL E. BURKE III
BBM N/A 1998
He is President of Russell E. Burke III, Inc. Fine
Art, New York, New York. His address is 900 Park
Avenue, New York, New York 10021. He is 51 years
old.
FREDERICK A. PARKER, JR.
BBG 1996 1998
He is President and Chief Executive Officer of
American Pure Water Corporation, a manufacturer of
water purifying equipment. His address is 219 East
69th Street, New York, New York 10021. He is 70
years old.
CLASS II:
DAVID R. STACK
BBM N/A 1999
He is a partner with the law firm of McLaughlin &
Stern, LLP. His address is Franklin Avenue,
Millbrook, New York 12545. He is 40 years old.
DOUGLAS WU
BBG N/A 1999
He is Managing Director, Private Equity
Investments, of Croesus Capital Management
Corporation, since September 1996. From 1992 to
September 1996, he was a partner with Medali
Partners, a merchant banking firm. His address is
1251 Avenue of the Americas, New York, New York
10020. He is __ years old.
CLASS III:
MARK C. WINMILL*
BBM N/A 2000
BBG 1996 2000
He is Co-President, Co-Chief Executive Officer,
and Chief Financial Officer of the Funds, as well
as the other investment companies (the "Investment
Company Complex") advised by affiliates of Bull &
Bear Group, Inc. ("Group"), the parent company of
Bull & Bear Advisers, Inc. (the "Investment
Manager"), and Group and certain of its
affiliates. He also is Chairman of the Investment
Manager and Investor Service Center, Inc.
("Investor Service"), a registered broker/dealer
and a subsidiary of Group, and President of Bull &
Bear Securities, Inc. ("BBSI"), a registered
broker/dealer and a subsidiary of Group. He is a
son of Bassett S. Winmill and brother of Thomas B.
Winmill. His address is 11 Hanover Square, New
York, New York 10005. He is 39 years old.
CLASS IV:
THOMAS B. WINMILL*
BBM N/A 2001
BBG 1996 2001
He is Co-President, Co-Chief Executive Officer,
and General Counsel of the Funds, as well as the
other investment companies in the Investment
Company Complex, and Group and certain of its
affiliates. He also is President of the Investment
Manager and Investor Service and Chairman of BBSI.
He is a member of the New York State Bar
Association and the SEC Rules Committee of the
Investment Company Institute. He is a son of
Bassett S. Winmill and brother of Mark C. Winmill.
His address is 11 Hanover Square, New York, New
York 10005. He is 38 years old.
CLASS V:
BASSETT S. WINMILL*
BBM 1996 2002
BBG 1996 2002
He is Chairman of the Board of the Funds, as well
as one of the other investment companies in the
Investment Company Complex and Group. He is a
member of the New York Society of Security
Analysts, the Association for Investment
Management and Research, and the International
Society of Financial Analysts. He is the father of
Mark C. Winmill and Thomas B. Winmill. His address
is 11 Hanover Square, New York, New York 10005. He
is 67 years old.
</TABLE>
The persons named in the accompanying form of proxy intend to vote
each such proxy for the election of the nominees listed above, unless
stockholders specifically indicate on their proxies the desire to withhold
authority to vote for any one or more of the nominees. It is not contemplated
that any nominee will be unable to serve as a Director for any reason, but if
that should occur prior to the Meeting, the proxyholders reserve the right to
substitute another person or persons of their choice as nominee or nominees.
Each nominee listed above has consented to being named in this Proxy Statement
and has agreed to serve as a Director if elected. Robert D. Anderson, Bruce B.
Huber, James E. Hunt and John B. Russell are currently Directors of each Fund
and Russell E. Burke III is currently a Director of BBG; each such Director
intends to resign from such Fund's Board upon the election and qualification of
the nominees.
Each Fund has an audit committee comprised of all of its Directors,
the function of which is routinely to review financial statements and other
audit-related matters as they arise throughout the year. Neither of the Funds
has a standing nominating or compensation committee or any committee performing
similar functions. Certain information concerning each Fund's Directors and
executive officers and other relevant information is set forth on Exhibit A
hereto.
The Investment Manager is a wholly-owned subsidiary of Group, a
publicly- owned company whose securities are listed on The Nasdaq Stock Market.
Bassett S. Winmill may be deemed a controlling person of Group on the basis of
his ownership of 100% of Group's voting stock and, therefore, of the Investment
Manager.
Each Fund proposes to pay its Directors who are not "interested
persons" of the Fund an annual retainer of $2,500, and a per meeting fee of
$2,500, and to reimburse them for their expenses. Each Fund also proposes to pay
such Directors $250 per special telephonic meeting attended and per committee
meeting attended. The Funds do not pay any other remuneration to their executive
officers and Directors, and neither of the Funds has a bonus, pension,
profit-sharing, or retirement plan. There were three Board and three committee
meetings held during the most recently completed fiscal year of each Fund. All
of the Directors attended all Board and committee meetings held during such year
during the period the Director was in office.
The aggregate amount of compensation estimated to be paid to each
Director or nominee by each Fund, and by all other funds in the Investment
Company Complex for which such person is a Board member (the number of which is
set forth in parenthesis next to each person's total compensation) for the year
ending June 30, 1998, is as follows:
TOTAL COMPENSATION FROM
NAME OF AGGREGATE FUND(S) AND INVESTMENT
DIRECTOR/NOMINEE COMPENSATION COMPANY COMPLEX PAID TO
AND FUND(S) FROM THE FUND(S) DIRECTOR/NOMINEE
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Russell E. Burke III
BBM $12,500 $12,500 (0)
Frederick A. Parker, Jr.
BBG $12,500 $12,500 (0)
David R. Stack
BBM $12,500 $12,500 (0)
Mark C. Winmill
BBM $0 $0 (4)
BBG $0
Thomas B. Winmill
BBM $0 $0 (7)
BBG $0
Bassett S. Winmill
BBM $0 $0 (1)
BBG $0
Douglas Wu
BBG $12,500 $12,500 (0)
VOTE REQUIRED
For each Fund, the election of each of the nominees requires the
affirmative vote of a plurality of the votes cast at the Fund's Meeting.
PROPOSAL 2. TO APPROVE CERTAIN CHANGES TO THE FUNDAMENTAL INVESTMENT
POLICIES OF EACH FUND
THIS PROPOSAL IS SUBJECT TO THE APPROVAL BY THE RELEVANT FUND'S
STOCKHOLDERS TO CHANGE THE NAME OF THE FUND AS DESCRIBED IN PROPOSAL 3. IF
PROPOSAL 3 IS NOT APPROVED BY A FUND, THIS PROPOSAL WILL NOT BE PRESENTED AT
THAT FUND'S MEETING.
INTRODUCTION
BBM currently seeks to achieve its investment objective of providing
the highest possible income exempt from Federal income tax that is consistent
with the preservation of principal by investing primarily in a diversified
portfolio of municipal securities ("Municipal Securities"). Municipal Securities
are debt obligations issued by states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities, or multistate agencies or authorities, the interest from
which is exempt from Federal income tax. Such securities include municipal
bonds, municipal notes, and tax-free commercial paper. BBM invests in municipal
bonds rated investment grade or, if unrated, determined by the Investment
Manager to be of comparable quality. BBM currently may not invest more than 20%
of its total assets in unrated securities unless such securities are secured by
the full faith and credit of the U.S. Government. It currently is a fundamental
policy of BBM that at least 80% of the Fund's income during any fiscal year be
exempt from Federal income tax. It is also a fundamental policy of BBM that it
will not purchase any security if, as a result, less than 80% of the Fund's
total assets (exclusive of cash) would be invested in securities the income from
which is exempt from Federal income tax, except that the Fund may invest
temporarily more than 20% of its total assets in taxable obligations during
periods of abnormal market conditions. BBM may invest up to 20% of the value of
its total assets in taxable debt obligations only when the Investment Manager
believes it would be in the best interests of stockholders. In addition, BBM may
engage in various investment techniques, such as leveraging and purchasing
securities on a when-issued basis as described in its Prospectus and Statement
of Additional Information.
BBG currently seeks to achieve its investment objective of providing a
high level of current income, liquidity, and safety of principal by investing
primarily in securities backed by the full faith and credit of the United States
("U.S. Government Securities"). It currently is a fundamental policy of BBG to
invest at least 65% of the value of its total assets in U.S. Government
Securities, including direct obligations of the United States (such as U.S.
Treasury bills, notes, and bonds) and certain agency securities, such as those
issued by the Government National Mortgage Association ("GNMA"). BBG may invest
up to 35% of the value of its total assets in securities issued by agencies and
instrumentalities of the U.S. Government that may have different levels of
government backing but which are not backed by the full faith and credit of the
U.S. Government. In addition, BBG may engage in various investment techniques,
such as leveraging, lending portfolio securities, writing covered call options,
and purchasing securities on a when-issued basis as described in its Prospectus
and Statement of Additional Information.
Management believes that a portion of each Fund's assets may be
invested more effectively if the permissible investments and investment
techniques are broadened to include those described below. In a rapidly changing
market, it is important for each Fund to have the flexibility to purchase a
variety of instruments because while under certain market conditions certain
types of securities may be deemed most appropriate for purchase by the Fund,
under other market conditions other types of securities may be deemed
preferable. By expanding the universe of securities each Fund may purchase, the
Fund's management will be given the opportunity to adjust the Fund's portfolio
from time to time in such manner as it then deems appropriate. The proposed
securities in which each Fund would become entitled to invest and the investment
techniques in which each Fund would be entitled to engage are described below
and in Exhibit B to this Proxy Statement.
With respect to BBM, the Fund's management believes that the Fund will
be able to increase its after-tax returns by combining the Fund's portfolio of
Municipal Securities with equity securities and tax-advantaged investments, such
as securities issued by real estate companies and real estate investment trusts
("REITs"). The proposed changes to BBM's policies are designed to combine the
growth potential of equities with the more regular tax-free income that
investing in Municipal obligations can provide. The approach proposed by
management will attempt to balance the potential for growth and greater
volatility of equity securities with the generally more stable income and the
relatively more moderate price fluctuations of Municipal Securities.
With respect to BBG, the Fund's management believes that the Fund will
be able to preserve and increase the "purchasing power" value of its shares
(i.e., real total return) over the long-term by combining the Fund's portfolio
of U.S. Government Securities with equity securities, particularly those issued
by companies involved in natural resources and commodities. The Fund would
invest in U.S. dollar-denominated securities, as well as those denominated in
foreign currencies, such as the Swiss franc. Real total return is a measure of
the change in purchasing power of money invested in a particular instrument
after adjusting for inflation. The proposed changes to BBG's policies are
designed to cause the net asset value of the Fund's shares to rise at a rate
equal to or greater than the rate of general price inflation, thereby preserving
the "purchasing power" value of the Fund's shares.
This Proposal involves changing each Fund's investment objective,
fundamental policies and investment restrictions. Pursuant to the requirements
of the 1940 Act, these changes also necessitate changing each Fund's name as
described under Proposal 3. Management also believes it appropriate to change
each Fund's investment objective (which currently is a fundamental policy) and,
with respect to BBM only, change certain other fundamental policies, which
cannot be changed without approval by the holders of a majority (as defined in
the 1940 Act) of the Fund's outstanding shares, to non-fundamental policies,
which may be changed by vote of the Fund's Directors at any time.
The 1940 Act requires that a relatively limited number of investment
policies and restrictions be designated as fundamental policies which may not be
changed without stockholder approval. These policies relate to (a) the
classification and subclassification under the 1940 Act within which the Fund
may operate, (b) borrowing money, (c) issuing senior securities, (d) engaging in
the business of underwriting securities issued by other persons, (e)
concentrating investments in a particular industry or group of industries, (f)
purchasing and selling real estate or commodities, (g) making loans to others
persons, and (h) changing the nature of the business so as to cease to be an
investment company. When each Fund was formed, its Board designated a number of
other policies as fundamental, in large part in response to certain regulatory
requirements or business or industry conditions that no longer exist, and
adopted certain restrictions which now are believed to be unduly restrictive. In
addition, stockholders of each Fund are being asked in Proposal 4 to change the
Fund's classification from a diversified to a non-diversified investment
company, which would call for the deletion of the Fund's investment restriction
pertaining to diversification. If Proposal 4 is not approved, BBM's Board
recommends revising the Fund's diversification investment restrictions to
conform to the 1940 Act's definition of diversification; BBG's diversification
investment restriction currently conforms to said definition.
To enable each Fund to broaden its permissible investments as
described below, the Fund's Board, at a meeting held on September 9, 1997,
unanimously approved changes in the Fund's investment objective, fundamental
policies and investment restrictions, and directed that this Proposal be
submitted to stockholders for their approval.
CHANGES TO INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
BULL & BEAR MUNICIPAL INCOME FUND, INC.--If the Proposal is approved, BBM would
change its investment objective to providing an attractive level of long-term
total return on an after-tax basis, consisting of tax-exempt current income and
capital appreciation. To achieve this new objective, BBM would invest at least
50% of the value of its total assets (except when maintaining a temporary
defensive position) in Municipal Securities. BBM would invest the remainder of
its total assets primarily in securities of selected growth companies that, in
the Investment Manager's opinion, will grow faster than the economy as a whole
and tax-advantaged investments, such as securities issued by real estate
companies and REITs. The Municipal Securities in which the Fund would invest
primarily would be rated investment grade by a nationally recognized statistical
rating organization and of varying maturities, depending on the Investment
Manager's evaluation of current and anticipated market conditions. The Fund
would continue to maintain the tax-advantaged status of the income generated
from the portion of its portfolio invested in Municipal Securities. The
securities in which the Fund would be permitted to invest also would include
equity securities, such as common stocks and preferred stocks, convertible
securities, non-municipal debt securities, mortgage-related securities,
asset-backed securities, warrants, loan participation interests, and securities
of other investment companies ("Additional Portfolio Securities"). In addition,
BBM would be permitted to engage in various additional investment techniques
such as futures and options transactions, lending portfolio securities, and
foreign currency transactions.
BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC.-- If the Proposal is approved,
BBG would change its investment objective to preserving and increasing the
purchasing power value of its shares over the long-term. To achieve this new
investment objective, BBG would invest at least 50% of the value of its total
assets in U.S. Government Securities, obligations of other U.S. Government
agencies or instrumentalities, including inflation-indexed instruments, and
money market instruments described below. BBG would invest the remainder of its
total assets primarily in securities of selected growth companies that, in the
Investment Manager's opinion, will grow faster than the economy as a whole,
securities issued by companies that invest or deal in natural resources or
commodities. The Fund would invest in U.S. dollar-denominated securities, as
well as those denominated in foreign currencies, such as the Swiss franc. The
securities in which the Fund would be permitted to invest also would include
Additional Portfolio Securities to the extent it cannot do so already. In
addition, BBG would be permitted to engage in various additional investment
techniques, such as futures and options transactions, and foreign currency
transactions.
ADDITIONAL PORTFOLIO SECURITIES AND INVESTMENT TECHNIQUES
If this Proposal is approved, each Fund would be permitted to invest,
except where noted, up to 50% of the value of its total assets in the following
portfolio securities and engage in the following additional investment
techniques. FOR A MORE DETAILED DISCUSSION OF THE ADDITIONAL PORTFOLIO
SECURITIES AND INVESTMENT TECHNIQUES AND THEIR RELATED RISKS, SEE EXHIBIT B TO
THIS PROXY STATEMENT.
* EQUITY SECURITIES. The Funds would be permitted to invest in
equity securities, including common stocks, preferred stocks and
securities that are convertible into common stocks of domestic
and foreign issuers. The Funds also would be permitted to invest
in equity securities in the form of Depositary Receipts, and in
warrants to purchase equity securities.
* FIXED-INCOME SECURITIES. The Funds would be permitted to invest
in fixed-income securities, such as bonds, debentures, notes,
mortgage-related securities, and asset- backed securities of
domestic and foreign issuers (collectively, "Fixed-Income
Securities"). The issuers of these obligations may include
domestic and foreign corporations, partnerships or trusts, and
governments or their political subdivisions, agencies or
instrumentalities. Each Fund would be permitted to invest in
convertible securities rated below investment grade. These
instruments may be subject to certain risks with respect to the
issuing entity and to greater market fluctuations than certain
lower yielding, higher rated Fixed-Income Securities.
* MONEY MARKET INSTRUMENTS. The Funds would be permitted to invest
in money market instruments which include U.S. Government
securities, certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and
other short-term debt instruments, and repurchase agreements. BBM
currently may invest in money market instruments under certain
conditions as described above.
* INVESTMENT COMPANY SECURITIES. BBM also would be permitted to
invest, to the extent permitted under the 1940 Act, in securities
of other investment companies which principally invest in
securities of the type in which the Fund invests. BBG currently
is permitted to invest in such securities. Under the 1940 Act,
purchasers of the securities of other investment companies,
subject to certain exceptions, are limited to a maximum of (i) 3%
of the total voting stock of any one investment company, (ii) 5%
of the Fund's total assets with respect to any one investment
company and (ii) 10% of the Fund's total assets in the aggregate.
Investments in the securities of investment companies may involve
duplication of advisory fees and certain other expenses.
Nonetheless, the Board of BBM believes that these changes will
provide the Fund greater flexibility to achieve its investment
objective.
* OPTIONS AND FUTURES TRANSACTIONS. Each Fund would be permitted to
purchase and write (i.e., sell) call or put options with respect
to specific securities and purchase cash-settled options on
swaps. Each Fund also would be permitted to enter into futures
contracts and options on futures contracts. The Fund would
purchase options and enter into futures transactions as a
substitute for a comparable market position in the underlying
securities or for hedging purposes. The principal reason for
writing options is to realize income in the form of premiums. BBG
currently is permitted to write covered call options.
* LENDING PORTFOLIO SECURITIES. To increase its income, BBM would
be permitted to lend securities from its portfolio to brokers,
dealers and other financial institutions needing to borrow
securities to complete certain transactions. BBG currently is
permitted to lend portfolio securities.
* FOREIGN CURRENCY TRANSACTIONS. Each Fund would be permitted to
engage in foreign currency transactions which involve, for
example, the Fund's purchase of foreign currencies for U.S.
dollars or the maintenance of short positions in foreign
currencies, which would involve the Fund agreeing to exchange an
amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the
value of the currency sold relative to the currency the Fund
contracted to receive in the exchange. Foreign currency
transactions would be entered into to fix in U.S. dollars,
between trade and settlement date, the value of a security the
Fund has agreed to buy or sell; to hedge the U.S. dollar value of
securities the Fund already owns, particularly if it expects a
decrease in the value of the currency in which the foreign
security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
CORRESPONDING CHANGES IN INVESTMENT RESTRICTIONS
BULL & BEAR MUNICIPAL INCOME FUND, INC.--If this Proposal is approved by BBM's
stockholders, BBM's current Investment Restrictions numbered 4, 5, 9, 13, 14 and
15 will be deleted and Investment Restrictions numbered 6, 7, 8, 10 and 11
(proposed to be renumbered as Investment Restrictions 2, 3, 4, 5 and 6) will be
revised to reflect BBM's proposed investment objective and management policies
described in this Proxy Statement, and generally to clarify the extent to which
BBM may invest in certain types of securities or engage in various investment
techniques. In addition, current Investment Restrictions numbered 1 and 2, which
pertain to the Fund's classification as a "diversified" investment company, will
be deleted if Proposal 4 is approved by BBM's stockholders. If Proposal 4 is not
so approved, Investment Restrictions numbered 1 and 2 will remain in effect, but
will be revised as described below, and the remaining Investment Restrictions
will be renumbered.
Investment Restriction Nos. 1 and 2, which pertain to BBM's current
classification as a diversified investment company, will be revised if they are
not deleted pursuant to Proposal 4. Under the 1940 Act, a diversified fund is
permitted to invest with respect to 75% of its total assets, not more than 5% of
such assets in the securities of a single issuer (the "5% requirement"),
provided the investment represents less than 10% of the outstanding voting
securities of such issuer (the "10% requirement"). Investment Restriction Nos. 1
and 2 contain an unnecessarily restrictive version of the 5% requirement and the
10% requirement, respectively, which, in each case, has the restriction applying
to 100% instead of 75% of the Fund's total assets. The Board of Directors
recommends revising these Investment Restrictions to conform to the 1940 Act's
definition of diversification, thus permitting the Fund additional investment
flexibility in pursuing its investment objective.
Investment Restriction No. 4, which prohibits BBM from investing more
than 5% of its assets in unseasoned issuers, will be deleted. This Investment
Restriction was adopted to comply with certain state securities law requirements
which are no longer in effect.
Investment Restriction No. 5, which prohibits BBM from investing in
equity securities, or securities convertible into equity securities, will be
deleted.
Investment Restriction No. 6, proposed to be renumbered as Investment
Restriction No. 2, which prohibits BBM from purchasing or selling real estate,
except for municipal and other debt securities secured by real estate or
interests therein, will be revised to clarify that BBM is permitted to invest in
any security secured by real estate or issued by companies that invest in real
estate or REITs and to reserve for the Fund the freedom of action to hold and
sell real estate acquired as a result of the Fund's ownership of securities.
Investment Restriction No. 7, proposed to be renumbered as Investment
Restriction No. 3, which prohibits BBM from investing in securities of other
investment companies, except as they may be acquired as part of a merger,
consolidation, acquisition or reorganization of assets, will be amended to
permit the acquisition of securities of other investment companies to the extent
permitted under the 1940 Act and will be designated as a non-fundamental policy.
Investment Restriction No. 8, proposed to be renumbered as Investment
Restriction No. 4, which prohibits BBM from purchasing or selling commodities or
commodity contracts, will be amended to permit the Fund to purchase and sell
options, futures contracts, including those relating to indices, and options on
futures contracts or indices.
Investment Restriction No. 9, which prohibits BBM from purchasing
participations or other direct interests in oil, gas, or other mineral
exploration or development programs, will be deleted. This Investment
Restriction was adopted to comply with certain state securities law requirements
which are no longer in effect. Deleting the restriction will involve no change
in the manner in which the Fund's assets are invested.
Investment Restriction No. 10, proposed to be renumbered as Investment
Restriction No. 5, which prohibits BBM from making short sales or purchasing
securities on margin, except for such short term credit necessary for the
clearance of purchases of portfolio securities, will be amended to permit the
Fund to make margin deposits in connection with transactions in options, futures
contracts, including those relating to indices, and options on futures contracts
or indices and to designate the prohibition on short sales as a non-fundamental
policy.
Investment Restriction No. 11, proposed to be renumbered as Investment
Restriction No. 6, which prohibits BBM from making loans, except through the
purchase of debt securities, will be amended to permit the Fund to enter into
repurchase agreements and to lend its portfolio securities in an amount not to
exceed 33-1/3% of the value of its total assets.
Investment Restriction No. 13, which prohibits BBM from investing in
companies for the purposes of exercising control, will be deleted. This
Investment Restriction was adopted to comply with certain state securities law
requirements which are no longer in effect. Deleting the restriction will
involve no change in the manner in which the Fund's assets are invested.
Investment Restriction No. 14, which prohibits BBM from purchasing or
retaining securities of any issuer if more than a certain percentage of such
issuer's securities are owned by officers or Directors of the Fund or the
Investment Manager, will be deleted. This Investment Restriction was adopted to
comply with certain state securities law requirements which are no longer in
effect. Deleting the restriction will involve no change in the manner in which
the Fund's assets are invested.
Investment Restriction No. 15, which prohibits BBM from investing in
puts, calls, straddles, spreads, or any combination thereof, will be deleted.
If approved by BBM's stockholders, BBM's Investment Restrictions would
read as follows (new language is underscored and language to be deleted is in
brackets):
The Fund may not:
[1. Purchase any security if, as a result, more than 5% of the value
of the Fund's total assets would be invested in the securities of
a single issuer, except THAT UP TO 25% OF THE VALUE OF THE FUND'S
TOTAL ASSETS MAY BE INVESTED, AND securities issued or guaranteed
by the U.S. Government or any of its agencies or
instrumentalities, MAY BE PURCHASED WITHOUT REGARD TO ANY SUCH
limitation. For purposes of this limitation and that set forth in
(2) below, the Fund will regard the entity which has the ultimate
responsibility for the payment of interest and principal as the
issuer.] THIS INVESTMENT RESTRICTION WILL BE DELETED ONLY IF
BBM'S STOCKHOLDERS APPROVE PROPOSAL 4; OTHERWISE, IT WILL BE
REVISED AS INDICATED.
[2. Purchase any security if, as a result, more than 10% of the
outstanding securities of any issuer would be held by the Fund,
except securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities. THIS INVESTMENT
RESTRICTION APPLIES ONLY WITH RESPECT TO 75% OF THE FUND'S TOTAL
ASSETS.] THIS INVESTMENT RESTRICTION WILL BE DELETED ONLY IF
BBM'S STOCKHOLDERS APPROVE PROPOSAL 4; OTHERWISE, IT WILL BE
REVISED AS INDICATED.
1[3]. Purchase any security if, as a result, 25% or more of the value
of the Fund's total assets would be invested in the securities of
issuers having their principal business activities in the same
industry, except that this limitation does not apply to
securities issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities, or to municipal securities,
certificates of deposit, or banker's acceptances.
[4. Purchase any security if, as a result, more than 5% or more of
the value of the Fund's total assets would be invested in the
securities of issuers which at the time of purchase had been in
operation for less than three years, except obligations issued or
guaranteed by the U.S. Government, or its agencies, and municipal
securities (for this purpose, the period of operation of any
issuer shall include the period of operation of any predecessor
or unconditional guarantor of such issuer).]
[5. Purchase equity securities, or securities convertible into equity
securities.]
2[6]. Purchase or sell real estate, [(although it may purchase
municipal and other debt securities secured by real estate or
interest therein)] BUT THE FUND MAY PURCHASE AND SELL SECURITIES
THAT ARE SECURED BY REAL ESTATE OR INTERESTS THEREIN OR ISSUED BY
COMPANIES WHICH INVEST OR DEAL IN REAL ESTATE OR INTERESTS
THEREIN OR REAL ESTATE INVESTMENT TRUSTS AND HOLD AND SELL REAL
ESTATE AS A RESULT OF OWNERSHIP OF SUCH SECURITIES OR
INSTRUMENTS.
3[7]. Purchase securities of other investment companies except [in
connection with a merger, consolidation, acquisition, or
reorganization] TO THE EXTENT PERMITTED UNDER THE 1940 ACT.
4[8]. Purchase or sell commodities [or commodity contracts], EXCEPT
THAT THE FUND MAY PURCHASE AND SELL OPTIONS, FUTURES CONTRACTS,
INCLUDING THOSE RELATING TO INDICES, AND OPTIONS ON FUTURES
CONTRACTS OR INDICES.
[9. Purchase participations or other direct interest in oil, gas, or
other mineral exploration or development programs.]
5[10]. Make short sales of securities or purchase securities on
margin, [except for such short term credit as may be necessary
for the clearance of purchases of portfolio securities] BUT THE
FUND MAY MAKE MARGIN DEPOSITS IN CONNECTION WITH TRANSACTIONS IN
OPTIONS, FUTURES CONTRACTS, INCLUDING THOSE RELATING TO INDICES,
AND OPTIONS ON FUTURES CONTRACTS OR INDICES. THE PROHIBITION ON
SHORT SALES OF SECURITIES CONTAINED IN THIS INVESTMENT
RESTRICTION IS NOT A FUNDAMENTAL POLICY.
6[11]. Make loans[, although it may purchase issues of debt
securities] TO OTHERS, EXCEPT THROUGH THE PURCHASE OF DEBT
OBLIGATIONS OR THE ENTRY INTO REPURCHASE AGREEMENTS. HOWEVER, THE
FUND MAY LEND ITS PORTFOLIO SECURITIES IN AN AMOUNT NOT TO EXCEED
33-1/3% OF THE VALUE OF ITS TOTAL ASSETS. ANY LOANS OF PORTFOLIO
SECURITIES WILL BE MADE ACCORDING TO GUIDELINES ESTABLISHED BY
THE SECURITIES AND EXCHANGE COMMISSION AND THE FUND'S BOARD.
7[12]. Underwrite any issue of securities, except to the extent that
the purchase of municipal securities, or other permitted
investments, directly from the issuer thereof and the later
disposition of such securities in accordance with the Fund's
investment program may be deemed to be an underwriting.
[13. Invest in the securities of any issuer for the purpose of
exercising management or control.]
[14. Purchase or retain the securities of any issuer if, to the
knowledge of the Fund's management, any of the officers or
directors of the Fund, or its Investment Manager, owns
beneficially more than 1/2 of 1% of such issuer's securities, or
together own beneficially more than 5% of such securities.]
[15. Invest in puts, calls, straddles, spreads, or any combination
thereof.]
8[16]. Issue senior securities (including borrowing money), except to
the extent permitted by applicable law.
BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC.--If this Proposal is approved
by BBG's stockholders, BBG's current Investment Restrictions numbered 5 and 6
(proposed to be renumbered as Investment Restrictions 4 and 5) will be revised
to reflect the Fund's proposed investment objective and management policies
described in this Proxy Statement, and generally to clarify the extent to which
BBG may invest in certain types of securities or engage in various investment
techniques. In addition, current Investment Restriction No. 1, which pertains to
the Fund's classification as a "diversified" investment company, will be deleted
if Proposal 4 is approved by BBG's stockholders. If Proposal 4 is not so
approved, Investment Restriction No. 1 will remain in effect and the remaining
Investment Restrictions will be renumbered.
Investment Restriction No. 5, proposed to be renumbered as Investment
Restriction No. 4, which prohibits BBG from purchasing or selling commodities or
commodity futures contracts, except for financial and foreign currency futures
contracts and options thereon, and options and futures contracts on foreign
currencies, will be amended to clarify that BBG may invest in options, forward
currency contracts and futures contracts, including those relating to indices,
and currencies.
Investment Restriction No. 6, proposed to be renumbered as Investment
Restriction No. 5, which prohibits BBG from purchasing or selling real estate,
but permits BBG to invest in securities (excluding limited partnership
interests) secured by real estate or issued by companies which invest in real
estate, will be revised to clarify that BBG may invest in companies that deal in
real estate and REITs and to reserve for the Fund the freedom of action to hold
and sell real estate acquired as a result of the Fund's ownership of securities.
If approved by BBG's stockholders, BBG's Investment Restrictions would
read as follows (new language is underscored and language to be deleted is in
brackets):
The Fund may not:
[1. Purchase the securities of any one issuer if, as a result, more
than 5% of the Fund's total assets would be invested in the
securities of such issuer, or the Fund would own or hold 10% or
more of the outstanding voting securities of that issuer, except
that up to 25% of the Fund's total assets may be invested without
regard to those limitations and provided that those limitations
do not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.]
1[2]. Issue senior securities as defined in the 1940 Act (including
borrowing money) except as permitted by applicable law.
2[3]. Lend its assets, except as permitted by applicable law.
3[4]. Underwrite the securities of other issuers, except to the extent
that the Fund may be deemed to be an underwriter under the
Federal securities laws in connection with the disposition of the
Fund's authorized investments.
4[5]. Purchase or sell commodities [or commodity futures contracts,
although it may enter into (i) financial and foreign currency
futures contracts and options thereon, (ii) options on foreign
currencies, and (iii) forward contracts on foreign currencies.],
EXCEPT THAT THE FUND MAY PURCHASE AND SELL OPTIONS, FUTURES
CONTRACTS, INCLUDING THOSE RELATING TO INDICES, AND OPTIONS ON
FUTURES CONTRACTS OR INDICES, AND CURRENCIES.
5[6]. Purchase or sell real estate, [provided that] but the Fund may
[invest in] PURCHASE AND SELL securities [(excluding limited
partnership interests)] THAT ARE secured by real estate or
interests therein or issued by companies which invest OR DEAL in
real estate or interests therein OR REAL ESTATE INVESTMENT TRUSTS
AND HOLD AND SELL REAL ESTATE AS A RESULT OF OWNERSHIP OF SUCH
SECURITIES OR INSTRUMENTS.
6[7]. Purchase a security if, as a result, 25% or more of the value of
the Fund's total assets would be invested in the securities of
issuers in a single industry, provided that this limitation does
not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
VOTE REQUIRED AND EACH BOARD'S RECOMMENDATION
For each Fund, approval of this Proposal requires the affirmative vote
of (a) 67% of the Fund's voting securities present at the Meeting, if the
holders of more than 50% of the Fund's outstanding voting securities are present
in person or represented by proxy or (b) more than 50% of the Fund's outstanding
voting securities, whichever is less.
EACH FUND'S BOARD OF DIRECTORS, INCLUDING THE
"NON-INTERESTED" DIRECTORS, RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" PROPOSAL 2 TO CHANGE THE FUND'S FUNDAMENTAL
INVESTMENT POLICIES AS DESCRIBED IN THE PROPOSAL.
PROPOSAL 3. TO AMEND EACH FUND'S ARTICLES OF INCORPORATION TO CHANGE
THE FUND'S NAME
As described above in Proposal 2, management of each Fund believes
that it is advisable for the Fund to change its investment objective and certain
management policies so as to have the flexibility to purchase a variety of
instruments under certain market conditions. To provide each Fund with such
investment flexibility, it is necessary under the 1940 Act to change, among
other things, the name of the Fund. That is because, under the 1940 Act, an
investment company with the words "municipal" or "government securities" in its
name would be required to invest at least 65% of its total assets in municipal
obligations or government securities, respectively. As described in Proposal 2,
management desires the flexibility to invest a smaller percentage of the
respective Fund's assets in those securities. Accordingly, each Fund's Board has
proposed an amendment to the Fund's Articles of Incorporation to change the
Fund's name. It is proposed that Bull & Bear Municipal Income Fund, Inc.'s name
be changed to "BBM Corporation," and Bull & Bear U.S. Government Securities
Fund, Inc.'s name be changed to "BBG Corporation." The text of each amendment is
set forth in Exhibit C hereto.
Subject to stockholder approval, each Fund's Board of Directors
approved this name change at a meeting held on September 9, 1997. The Directors
of each Fund believe that approval of the proposed amendment is in the best
interests of the Fund and its stockholders.
VOTE REQUIRED AND EACH BOARD'S RECOMMENDATION
For each Fund, approval of this Proposal requires the affirmative vote
of a majority of the Fund's outstanding voting securities.
EACH FUND'S BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED"
DIRECTORS, RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO
THE FUND'S ARTICLES OF INCORPORATION TO CHANGE THE FUND'S NAME.
PROPOSAL 4. TO CHANGE THE CLASSIFICATION OF EACH FUND FROM A
DIVERSIFIED TO A NON-DIVERSIFIED INVESTMENT COMPANY
Each Fund currently is classified as a "diversified" investment
company. A diversified investment company is required by the 1940 Act generally
to invest, with respect to 75% of its total assets, not more than 5% of such
assets in the securities of a single issuer.
By approving the Proposal, stockholders would authorize the
reclassification of each Fund as a "non-diversified" investment company, which
means that the portion of the Fund's assets that may be invested in the
securities of a single issuer would not be limited by the 1940 Act. Management
of each Fund believes that changing the classification of the Fund from a
diversified to a non-diversified investment company would give the Investment
Manager more flexibility to focus the Fund's investments in investments that it
views as offering the best opportunities to achieve the Fund's investment
objective. If the Proposal is approved, a relatively high percentage of the
Fund's assets then could be invested in the securities of a limited number of
issuers. Therefore, the Fund's portfolio would be more sensitive to changes in
the market value of a single issuer. Each Fund, however, intends to continue to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), which
requires that, at the end of each quarter of the taxable year, (i) at least 50%
of the market value of the Fund's total assets be invested in cash, U.S.
Government securities, the securities of other regulated investment companies,
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Fund's total assets, and (ii) not more than 25% of the value of its total
assets be invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies).
CORRESPONDING CHANGES IN INVESTMENT RESTRICTIONS
If this Proposal is approved by BBM's stockholders, BBM's current
Investment Restrictions numbered 1 and 2 will be deleted. These Investment
Restrictions are set forth under "Proposal 2 -- Corresponding Changes in
Investment Restrictions -- Bull & Bear Municipal Income Fund, Inc."
If this Proposal is approved by BBG's stockholders, BBG's current
Investment Restriction numbered 1 will be deleted. This Investment Restriction
is set forth under "Proposal 2 -- Corresponding Changes in Investment
Restrictions -- Bull & Bear U.S. Government Securities Fund, Inc."
VOTE REQUIRED AND EACH BOARD'S RECOMMENDATION
For each Fund, approval of this Proposal requires the affirmative vote
of (a) 67% of the Fund's voting securities present at the Meeting, if the
holders of more than 50% of the Fund's outstanding voting securities are present
in person or represented by proxy or (b) more than 50% of the Fund's outstanding
voting securities, whichever is less.
EACH FUND'S BOARD OF DIRECTORS, INCLUDING THE
"NON-INTERESTED" DIRECTORS, RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" PROPOSAL 4 TO CHANGE THE
CLASSIFICATION OF EACH FUND FROM A DIVERSIFIED INVESTMENT
COMPANY TO A NON-DIVERSIFIED INVESTMENT COMPANY.
PROPOSAL 5. RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The 1940 Act requires that each Fund's independent auditors be
selected by a majority of those Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund; that such selection be submitted for
ratification or rejection at the Meeting; and that the employment of such
independent auditors be conditioned upon the right of the Fund, by vote of a
majority of its outstanding securities at any meeting called for that purpose,
to terminate such employment forthwith without penalty. Each Fund's Board of
Directors, including a majority of those Directors who are not "interested
persons," approved the selection of Tait, Weller & Baker for the fiscal year
ending December 31, 1997 in the case of BBM, and June 30, 1998, in the case of
BBG, at Board meetings held on ______________, 1997.
Accordingly, the selection by each Fund's Board of Tait, Weller &
Baker as independent auditors of the Fund for the fiscal year ending December
31, 1997, in the case of BBM, and June 30, 1998, in the case of BBG, is
submitted to stockholders for ratification or rejection. Apart from its fees
received as independent auditors, neither Tait, Weller & Baker nor any of its
partners has a direct, or material indirect, financial interest in the Funds or
the Investment Manager.
Tait, Weller & Baker has acted as independent auditors of each Fund
since the Funds' organization, and acts as independent auditors of Group. Each
Fund's Board believes that the employment of the services of Tait, Weller &
Baker, as described herein, is in the best interests of the Fund.
A representative of Tait, Weller & Baker is expected to be present at
the Meeting, will have the opportunity to make a statement, and will be
available to respond to appropriate questions.
EACH FUND'S BOARD OF DIRECTORS, INCLUDING THE
"NON-INTERESTED" DIRECTORS, RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE
SELECTION OF TAIT, WELLER & BAKER AS
INDEPENDENT AUDITORS OF THE FUND.
OTHER MATTERS
Each Fund will bear the cost of soliciting proxies. In addition to the
use of the mails, proxies may be solicited personally, by telephone, or by
telegraph, and each Fund may pay persons holding shares of the Fund in their
names or those of their nominees for their expenses in sending soliciting
materials to their principals. In addition, the Fund will retain Shareholder
Communication Corporation to solicit proxies on behalf of the Board, which is
estimated to cost the Fund its pro rata share of approximately $____________.
If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote, represents a broker "non-vote" (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
shares of the Fund on a particular matter with respect to which the broker or
nominee does not have discretionary power) or marked with an abstention
(collectively, "abstentions"), the Fund's shares represented thereby will be
considered to be present at the Meeting for purposes of determining the
existence of a quorum for the transaction of business. Under Maryland law,
abstentions do not constitute a vote "for" or "against" a matter and will be
disregarded in determining "votes cast" on an issue. Abstentions, however, will
have the effect of a "no" vote for the purpose of obtaining requisite approval
for Proposals 2, 3 and 4.
In the event that a quorum is not present at the Meeting, or if a
quorum is present but sufficient votes to approve any of the proposals are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. In determining whether to
adjourn the meeting the following factors may be considered: the nature of the
proposals that are the subject of the Meeting, the percentage of votes actually
cast, the percentage of negative votes actually cast, the nature of any further
solicitation, and the information to be provided to stockholders with respect to
the reasons for the solicitation. Any adjournment will require the affirmative
vote of a majority of those shares affected by the adjournment that are
represented at the meeting in person or by proxy. A stockholder vote may be
taken for one or more of the proposals in this Proxy Statement prior to any
adjournment if sufficient votes have been received for approval. If a quorum is
present, the persons named as proxies will vote those proxies which they are
entitled to vote "FOR" a Proposal in favor of any adjournment, and will vote
those proxies required to be voted "AGAINST" a Proposal against any adjournment.
A quorum is constituted with respect to each Fund by the presence in person or
by proxy of the holders or more than one-third of the outstanding shares of the
Fund entitled to vote at the Meeting.
Each Fund's Board is not aware of any other matters which may come
before the Meeting. However, should any such matters with respect to one or more
Funds properly come before the Meeting, it is the intention of the persons named
in the accompanying form of proxy to vote the proxy in accordance with their
judgment on such matters.
Proposals that stockholders wish to include in a Fund's proxy
statement for the Fund's next Annual Meeting of Stockholders must be sent to and
received by the Fund no later than June 30, 1998 at the principal executive
offices of the Fund at 11 Hanover Square, New York, New York 10005, Attention:
William J. Maynard.
NOTICE TO BANKS, BROKER/DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the appropriate Fund, at its principal executive
offices, to the attention of William J. Maynard, whether other persons are the
beneficial owners of the shares for which proxies are being solicited and, if
so, the number of copies of this Proxy Statement and other soliciting material
you wish to receive in order to supply copies to the beneficial owners of
shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
WHO DO NOT EXPECT TO ATTEND THE MEETING(S) IN PERSON ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN EACH ENCLOSED PROXY CARD IN THE ENCLOSED STAMPED
ENVELOPE.
Dated: October __, 1997
<PAGE>
EXHIBIT A
The executive officers, other than those who serve as Directors, and
their relevant biographical information are set forth below:
STEVEN A. LANDIS - Senior Vice President of the Funds. He also is
Senior Vice President of the other investment companies in the
Investment Company Complex, and the Investment Manager and certain of
its affiliates. From 1993 to 1995, he was Associate Director -
Proprietary Trading at Barclays de Zoete Wedd Securities Inc. and,
from 1992 to 1993, he was Director, Bond Arbitrage at WG Trading
Company. He is 42 years old.
JOSEPH LEUNG, CPA - Treasurer and Chief Accounting Officer of the
Funds. He also is Treasurer and Chief Accounting Officer of the other
investment companies in the Investment Company Complex, and the
Investment Manager and its affiliates. From 1992 to 1995, he held
various positions with Coopers & Lybrand L.L.P., a public accounting
firm. He is a member of the American Institute of Certified Public
Accountants. He is 32 years old.
WILLIAM J. MAYNARD - Vice President and Secretary of the Funds. He
also is Vice President and Secretary of the other investment companies
in the Investment Company Complex, and the Investment Manager and its
affiliates. From 1991 to 1994, he was associated with the law firm of
Skadden, Arps, Slate, Meagher & Flom. He is a member of the New York
State Bar Association. He is 33 years old.
The address of each executive officer of the Funds is 11 Hanover
Square, New York, New York 10005.
The following table presents certain information regarding the
beneficial ownership of each Fund's shares as of September 11, 1997 by each
officer and Director or nominee of the Fund owning shares on such date. In each
case, such amount constitutes less than 1% of the Fund's outstanding shares.
NAME OF OFFICER OR DIRECTOR/NOMINEE NUMBER OF SHARES
- ----------------------------------- ----------------
Thomas B. Winmill - BBG 18.68
Thomas B. Winmill - BBM 16.73
Bassett S. Winmill - BBM 80.66
<PAGE>
EXHIBIT B
If Proposal 2 approved, each Fund, except as noted, would be permitted
to invest up to 50% of its net assets in the portfolio securities described
below. In addition, each Fund would be permitted to engage in the various
additional investment techniques described below.
CERTAIN ADDITIONAL PORTFOLIO SECURITIES
COMMON AND PREFERRED STOCKS--Stocks represent shares of ownership in a company.
Generally, preferred stock has a specified dividend and ranks after bonds and
before common stocks in its claim on income for dividend payments and on assets
should the company be liquidated. After other claims are satisfied, common
stockholders participate in company profits on a pro-rata basis; profits may be
paid out in dividends or reinvested in the company to help it grow. Increases
and decrease in earnings are usually reflected in a company's stock price, so
common stocks generally have the greatest appreciation and depreciation
potential of all corporate securities. While most preferred stocks pay a
dividend, the Fund may purchase preferred stock where the issuer has omitted, or
is in danger of omitting, payment of its dividend. Such investments would be
made primarily for their capital appreciation potential.
REAL ESTATE INVESTMENT TRUSTS--A real estate investment trust ("REIT") is a
corporation, or a business trust that would otherwise be taxed as a corporation,
which meets the definitional requirements of the Code. The Code permits a
qualifying REIT to deduct dividends paid, thereby effectively eliminating
corporate level Federal income tax and making the REIT a pass- through vehicle
for Federal income tax purposes. To meet the definitional requirements of the
Code, a REIT must, among other things, invest substantially all of its assets in
interests in real estate (including mortgages and other REITs) or cash and
government securities, derive most of its income from rents from real property
or interest on loans secured by mortgages on real property, and distribute to
shareholders annually a substantial portion of its otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own real
estate directly and the value of, and income earned by, the REITs depends upon
the income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also are
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the 1940 Act.
CORPORATE DEBT SECURITIES--Corporate debt securities include bonds, debentures,
notes and other similar instruments, including convertible securities issued by
domestic and foreign entities. Debt securities may be acquired with warrants
attached. These securities also may include forms of preferred or preference
stock. The rate of interest on a corporate debt security may be fixed, floating
or variable, and may vary inversely with respect to a reference rate. The rate
of return or return of principal on some debt obligations may be linked or
indexed to the level of exchange rates between the U.S. dollar and a foreign
currency or currencies.
Variable and floating rate securities provide for a periodic
adjustment in the interest rate paid on the obligations. The terms of such
obligations must provide that interest rates are adjusted periodically based
upon an interest rate adjustment index as provided in the respective
obligations. The adjustment intervals may be regular, and range from daily up to
annually, or may be event based, such as based on a change in the prime rate.
The interest rate on floating rate debt instruments ("floaters") is a
variable rate which is tied to another interest rate, such as a money-market
index or Treasury bill rate. The interest rate on a floater resets periodically.
Because of the interest rate reset feature, floaters provide the Fund with a
certain degree of protection against rises in interest rates, although the Fund
will participate in any declines in interest rates as well.
The interest rate on inverse floating rate debt instruments ("inverse
floaters") resets in the opposite direction from the market rate of interest to
which the inverse floater is indexed. An inverse floating rate security may
exhibit greater price volatility than a fixed rate obligation of similar credit
quality. See "Mortgage-Related Securities" below.
CONVERTIBLE SECURITIES--Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock. Convertible
securities have characteristics similar to both fixed-income and equity
securities. Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities are investments that provide for a stable
stream of income with generally higher yields than common stocks. There can be
no assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
PARTICIPATION INTERESTS--Participation interests are corporate obligations,
denominated in U.S. dollars or foreign currencies, that are originated,
negotiated and structured by a syndicate of lenders ("Co-Lenders") consisting of
commercial banks, thrift institutions, insurance companies, finance companies or
other financial institutions, one or more of which administers the security on
behalf of the syndicate (the "Agent Bank"). Co-Lenders may sell such securities
to third parties called "Participants." The Fund may invest in such securities
either by participating as a Co-Lender at origination or by acquiring an
interest in the security from a Co-Lender or a Participant (collectively,
"participation interests"). Co-Lenders and Participants interposed between the
Fund and the corporate borrower (the "Borrower"), together with Agent Banks, are
referred to herein as "Intermediate Participants." The Fund will not act as an
Agent Bank, guarantor or sole negotiator with respect to securities that are the
subject of a participation interest. A participation interest gives the Fund an
undivided interest in the security in the proportion that the Fund's
participation interest bears to the total principal amount of the security.
These instruments may have fixed, floating or variable rates of interest. The
Fund also may purchase a participation interest in a portion of the rights of an
Intermediate Participant, which would not establish any direct relationship
between the Fund and the Borrower. In such cases, the Fund would be required to
rely on the Intermediate Participant that sold the participation interest not
only for the enforcement of the Fund's rights against the Borrower, but also for
the receipt and processing of payments due to the Fund under the security.
Because it may be necessary to assert through an Intermediate Participant such
rights as may exist against the Borrower, if the Borrower fails to pay principal
and interest when due, the Fund may be subject to delays, expenses and risks
that are greater than those that would be involved if the Fund were to enforce
its rights directly against the Borrower. Moreover, under the terms of a
participation interest, the Fund may be regarded as a creditor of the
Intermediate Participant (rather than of the Borrower), so that the Fund also
may be subject to the risk that the Intermediate Participant may become
insolvent. Similar risks may arise with respect to the Agent Bank if, for
example, assets held by the Agent Bank for the benefit of the Fund were
determined by the appropriate regulatory authority or court to be subject to the
claims of the Agent Bank's creditors. In such case, the Fund might incur certain
costs and delays in realizing payment in connection with the participation
interest or suffer a loss of principal and/or interest. Further, in the event of
the bankruptcy or insolvency of the Borrower, the obligation of the Borrower to
repay the loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant. For certain participation interests, the Fund will have the right
to demand payment, on not more than seven days' notice, for all or any part of
the Fund's participation interest in the security, plus accrued interest. As to
these instruments, the Fund intends to exercise its right to demand payment only
upon a default under the terms of the security, as needed to provide liquidity
to meet redemptions, or to maintain or improve the quality of its investment
portfolio.
MORTGAGE-RELATED SECURITIES--Mortgage-related securities are a form of
derivative collateralized by pools of commercial or residential mortgages. Pools
of mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations. These securities may
include complex instruments such as collateralized mortgage obligations and
stripped mortgage-backed securities, mortgage pass-through securities, interests
in real estate mortgage investment conduits ("REMICs") or other kinds of
mortgage-backed securities, including those with fixed, floating and variable
interest rates, those with interest rates that change based on multiples of
changes in a specified index of interest rates and those with interest rates
that change inversely to changes in interest rates.
GOVERNMENT-AGENCY SECURITIES--Mortgage-related securities issued by
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments under
its guarantee.
GOVERNMENT-RELATED SECURITIES--Mortgage-related securities issued by
the Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of FNMA and are not backed by or entitled to the full
faith and credit of the United States. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are guaranteed
as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the
United States created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or
by any Federal Home Loan Bank and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by FHLMC. FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
PRIVATE ENTITY SECURITIES--These mortgage-related securities are
issued by commercial banks, savings and loan institutions, mortgage bankers,
private mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by pools
created by non-governmental issuers often is supported partially by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. There can be no assurance
that the private insurers or mortgage poolers can meet their obligations under
the policies, so that if the issuers default on their obligations the holders of
the security could sustain a loss. No insurance or guarantee covers the Fund or
the price of the Fund's shares. Mortgage-related securities issued by non-
governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.
COMMERCIAL MORTGAGE-RELATED SECURITIES--Commercial mortgage-related
securities generally are multi-class debt or pass-through certificates secured
by mortgage loans on commercial properties. These mortgage-related securities
generally are structured to provide protection to the senior classes investors
against potential losses on the underlying mortgage loans. This protection
generally is provided by having the holders of subordinated classes of
securities ("Subordinated Securities") take the first loss if there are defaults
on the underlying commercial mortgage loans. Other protection, which may benefit
all of the classes or particular classes, may include issuer guarantees, reserve
funds, additional Subordinated Securities, cross- collateralization and
over-collateralization.
Subordinated Securities are issued or sponsored by commercial banks,
savings and loan institutions, mortgage bankers, private mortgage insurance
companies and other non-governmental issuers. Subordinated Securities have no
governmental guarantee, and are subordinated in some manner as to the payment of
principal and/or interest to the holders of more senior mortgage-related
securities arising out of the same pool of mortgages. The holders of
Subordinated Securities typically are compensated with a higher stated yield
than are the holders of more senior mortgage-related securities. On the other
hand, Subordinated Securities typically subject the holder to greater risk than
senior mortgage-related securities and tend to be rated in a lower rating
category, and frequently a substantially lower rating category, than the senior
mortgage-related securities issued in respect of the same pool of mortgage.
Subordinated Securities generally are likely to be more sensitive to changes in
prepayment and interest rates and the market for such securities may be less
liquid than is the case for traditional fixed-income securities and senior
mortgage-related securities.
The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is viewed
as exposing the lender to a greater risk of loss than one- to four-family
residential lending. Commercial lending, for example, typically involves larger
loans to single borrowers or groups of related borrowers than residential one-
to four-family mortgage loans. In addition, the repayment of loans secured by
income producing properties typically is dependent upon the successful operation
of the related real estate project and the cash flow generated therefrom.
Consequently, adverse changes in economic conditions and circumstances are more
likely to have an adverse impact on mortgage-related securities secured by loans
on commercial properties than on those secured by loans on residential
properties.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")--A CMO is a multiclass
bond backed by a pool of mortgage pass-through certificates or mortgage loans.
CMOs may be collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac
pass-through certificates, (b) unsecuritized mortgage loans insured by the
Federal Housing Administration or guaranteed by the Department of Veterans'
Affairs, (c) unsecuritized conventional mortgages, (d) other mortgage-related
securities, or (e) any combination thereof. Each class of CMOs, often referred
to as a "tranche," is issued at a specific coupon rate and has a stated maturity
or final distribution date. Principal prepayments on collateral underlying a CMO
may cause it to be retired substantially earlier than the stated maturities or
final distribution dates. The principal and interest on the underlying mortgages
may be allocated among the several classes of a series of a CMO in many ways.
One or more tranches of a CMO may have coupon rates which reset periodically at
a specified increment over an index, such as the London Interbank Offered Rate
("LIBOR") (or sometimes more than one index). These floating rate CMOs typically
are issued with lifetime caps on the coupon rate thereon. Each Fund also may
invest in inverse floating rate CMOs. Inverse floating rate CMOs constitute a
tranche of a CMO with a coupon rate that moves in the reverse direction to an
applicable index such a LIBOR. Accordingly, the coupon rate thereon will
increase as interest rates decrease. Inverse floating rate CMOs are typically
more volatile than fixed or floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse floaters
based on multiples of a stated index are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and loss of principal. The markets for inverse floating rate
CMOs with highly leveraged characteristics at times may be very thin. A Fund's
ability to dispose of its positions in such securities will depend on the degree
of liquidity in the markets for such securities. It is impossible to predict the
amount of trading interest that may exist in such securities, and therefore the
future degree of liquidity.
STRIPPED MORTGAGE-BACKED SECURITIES--Stripped mortgage-backed
securities are created by segregating the cash flows from underlying mortgage
loans or mortgage securities to create two or more new securities, each with a
specified percentage of the underlying security's principal or interest
payments. Mortgage securities may be partially stripped so that each investor
class receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type of
security, known as an interest-only security, or IO, and all of the principal is
distributed to holders of another type of security known as a principal-only
security, or PO. Strips can be created in a pass-through structure or as
tranches of a CMO. The yields to maturity on IOs and POs are very sensitive to
the rate of principal payments (including prepayments) on the related underlying
mortgage assets. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may not fully recoup its initial
investment in IOs. Conversely, if the underlying mortgage assets experience less
than anticipated prepayments of principal, the yield on POs could be materially
and adversely affected.
ADJUSTABLE-RATE MORTGAGE LOANS ("ARMS")--ARMs eligible for inclusion
in a mortgage pool generally will provide for a fixed initial mortgage interest
rate for a specified period of time, generally for either the first three, six,
twelve, thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes in an
index. ARMs typically have minimum and maximum rates beyond which the mortgage
interest rate may not vary over the lifetime of the loans. Certain ARMs provide
for additional limitations on the maximum amount by which the mortgage interest
rate may adjust for any single adjustment period. Negatively amortizing ARMs may
provide limitations on changes in the required monthly payment. Limitations on
monthly payments can result in monthly payments that are greater or less than
the amount necessary to amortize a negatively amortizing ARM by its maturity at
the interest rate in effect during any particular month.
OTHER MORTGAGE-RELATED SECURITIES--Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals. Other mortgage-related securities may
be equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.
ASSET-BACKED SECURITIES--Asset-backed securities are a form of derivative. The
securitization techniques used for asset-backed securities are similar to those
used for mortgage-related securities. These securities include debt securities
and securities with debt-like characteristics. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. Each Fund may
invest in these and other types of asset- backed securities that may be
developed in the future.
Asset-backed securities present certain risks that are not presented
by mortgage- backed securities. Primarily, these securities may provide the Fund
with a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that recoveries
on the underlying collateral may not, in some cases, be available to support
payments on these securities.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL
ENTITIES--Obligations issued or guaranteed by one or more foreign governments or
any of their political subdivisions, agencies or instrumentalities may be
purchased if they are determined by the Investment Manager to be of comparable
quality to the other obligations in which the Fund may invest. Such securities
also include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
U.S. TREASURY SECURITIES--U.S. Treasury securities include Treasury
Inflation-Protection Securities ("TIPS"), which are newly created securities
issued by the U.S. Treasury designed to provide investors a long term investment
vehicle that is not vulnerable to inflation. The interest rate paid by TIPS is
fixed, while the principal value rises or falls semi-annually based on changes
in a published Consumer Price Index. Thus, if inflation occurs, the principal
and interest payments on the TIPS are adjusted accordingly to protect investors
from inflationary loss. During a deflationary period, the principal and interest
payments decrease, although the TIPS' principal will not drop below its face
amount at maturity.
In exchange for the inflation protection, TIPS generally pay lower
interest rates than typical Treasury securities. Only if inflation occurs will
TIPS offer a higher real yield than a conventional Treasury bond of the same
maturity. In addition, it is not possible to predict with assurance how the
market for TIPS will develop; initially, the secondary market for these
securities may not be as active or liquid as the secondary market for
conventional Treasury securities. Principal appreciation and interest payments
on TIPS will be taxed annually as ordinary interest income for Federal income
tax calculations. As a result, any appreciation in principal must be counted as
interest income in the year the increase occurs, even though the investor will
not receive such amounts until the TIPS are sold or mature. Principal
appreciation and interest payments will be exempt from state and local income
taxes.
ZERO COUPON SECURITIES--Zero coupon U.S. Treasury securities are Treasury Notes
and Bonds that have been stripped of their unmatured interest coupons, the
coupons themselves and receipts or certificates representing interests in such
stripped debt obligations and coupons. Zero coupon securities also are issued by
corporations and financial institutions which constitute a proportionate
ownership of the issuer's pool of underlying U.S. Treasury securities. A zero
coupon security pays no interest to its holder during its life and is sold at a
discount to its face value at maturity. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities.
DEPOSITARY RECEIPTS--American Depositary Receipts ("ADRs") are receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. European
Depositary Receipts ("EDRs"), which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), are receipts issued in Europe typically by non-
United States banks and trust companies that evidence ownership of either
foreign or domestic securities. Generally, ADRs in registered form are designed
for use in the United States securities markets and EDRs and CDRs in bearer form
are designed for use in Europe. These securities may be purchased through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without participation by the
issuer of the deposited security. Holders of unsponsored depositary receipts
generally bear all the costs of such facilities and the depositary of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted.
WARRANTS--A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the corporation's capital
stock at a set price for a specified period of time.
MONEY MARKET INSTRUMENTS--Money market instruments include the following:
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury; others
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund buys, and the
seller agrees to repurchase, a security at a mutually agreed upon time and price
(usually within seven days). The repurchase agreement thereby determines the
yield during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. Repurchase
agreements could involve risks in the event of a default or insolvency of the
other party to the agreement, including possible delays or restrictions upon the
Fund's ability to dispose of the underlying securities. The Fund may enter into
repurchase agreements with certain banks or non-bank dealers.
BANK OBLIGATIONS. Bank obligations include certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. These instruments
include variable amount master demand notes, which are obligations that permit a
Fund to invest fluctuating amounts at varying rates of interest pursuant to
direct arrangements between the Fund, as lender, and the borrower. These notes
permit daily changes in the amounts borrowed. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value, plus accrued interest, at any time. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand.
INVESTMENT TECHNIQUES
USE OF DERIVATIVES--Derivatives ("Derivatives"), such as options and futures
transactions, are entered into for a variety of reasons, including to hedge
certain market risks, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain. Derivatives may
provide a cheaper, quicker or more specifically focused way for the Fund to
invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives could
have a large potential impact on the Fund's performance.
If a Fund invests in Derivatives at inopportune times or judges market
conditions incorrectly, such investments may lower the Fund's return or result
in a loss. The Fund also could experience losses if its Derivatives were poorly
correlated with its other investments, or if the Fund were unable to liquidate
its position because of an illiquid secondary market. The market for many
Derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission ("CFTC") which
limit the extent to which the Fund can invest in certain Derivatives. The Fund
may invest in futures contracts and currency futures contracts, and options with
respect thereto for hedging purposes without limit. However, the Fund may not
invest in such contracts and options for other purposes if the sum of the amount
of initial margin deposits and premiums paid for unexpired options with respect
to such contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.
Each Fund would be permitted to purchase call and put options and
write (i.e., sell) covered call and put option contracts. When required by the
Securities and Exchange Commission, the Fund will set aside permissible liquid
assets in a segregated account to cover its obligations relating to its
transactions in Derivatives. To maintain this required cover, the Fund may have
to sell portfolio securities at disadvantageous prices or times since it may not
be possible to liquidate a Derivative position at a reasonable price.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the- counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with Derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over- the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
FUTURES TRANSACTIONS--IN GENERAL. Futures contracts may be entered
into in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange. Engaging in
these transactions involves risk of loss to the Fund which could adversely
affect the value of the Fund's net assets. Although the Fund intends to purchase
or sell futures contracts only if there is an active market for such contracts,
no assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the
Investment Manager's ability to predict correctly movements in the direction of
the relevant market, and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract. For
example, if the Fund uses futures to hedge against the possibility of a decline
in the market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit of
the increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets in connection with its commodities transactions in an amount
generally equal to the value of the underlying commodity. The segregation of
such assets will have the effect of limiting the Fund's ability otherwise to
invest those assets.
SPECIFIC FUTURES TRANSACTIONS. A stock index future obligates the Fund
to pay or receive an amount of cash equal to a fixed dollar amount specified in
the futures contract multiplied by the difference between the settlement price
of the contract on the contract's last trading day and the value of the index
based on the stock prices of the securities that comprise it at the opening of
trading in such securities on the next business day.
Each Fund may purchase and sell interest rate futures contracts. An
interest rate future obligates the Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price.
OPTIONS--IN GENERAL. A call option gives the purchaser of the option
the right to buy, and obligates the writer to sell, the underlying security or
securities at the exercise price at any time during the option period, or at a
specific date. Conversely, a put option gives the purchaser of the option the
right to sell, and obligates the writer to buy, the underlying security or
securities at the exercise price at any time during the option period, or at a
specific date.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written by the
Fund is covered when, among other things, cash or liquid securities having a
value equal to or greater than the exercise price of the option are placed in a
segregated account with the Fund's custodian to fulfill the obligation
undertaken. The principal reason for writing covered call and put options is to
realize, through the receipt of premiums, a greater return than would be
realized on the underlying securities alone. The Fund receives a premium from
writing covered call or put options which it retains whether or not the option
is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times have rendered
certain of the clearing facilities inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. Call and put options may be purchased
and sold in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock 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. Thus, the effectiveness of
purchasing or writing stock index options will depend upon price movements in
the level of the index rather than the price of a particular stock.
Each Fund may purchase cash-settled options on interest rate swaps,
interest rate swaps denominated in foreign currency and equity index swaps in
pursuit of its investment objective. Interest rate swaps involve the exchange by
the Fund with another party of their respective commitments to pay or receive
interest (for example, an exchange of floating-rate payments for fixed-rate
payments) denominated in U.S. dollars or foreign currency. Equity index swaps
involve the exchange by the Fund with another party of cash flows based upon the
performance of an index or a portion of an index of securities which usually
includes dividends. A cash-settled option on a swap gives the purchaser the
right, but not the obligation, in return for the premium paid, to receive an
amount of cash equal to the value of the underlying swap as of the exercise
date. These options typically are purchased in privately negotiated transactions
from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the
Investment Manager's ability to predict correctly movements in the prices of
individual stocks, the stock market generally, foreign currencies or interest
rates. To the extent the Investment Manager's predictions are incorrect, the
Fund may incur losses.
LENDING PORTFOLIO SECURITIES--Portfolio securities may be loaned to brokers,
dealers and other financial institutions needing to borrow securities to
complete certain transactions. The Fund will continue to be entitled to payments
in amounts equal to the interest, or other distributions payable on the loaned
securities which affords the Fund an opportunity to earn interest on the amount
of the loan and on the loaned securities' collateral. Loans of portfolio
securities may not exceed 33-1/3% of the value of the Fund's total assets, and
the Fund will receive collateral consisting of cash, U.S. Government securities
or irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable by the Fund at any time upon specified
notice. The Fund might experience risk of loss if the institution with which it
has engaged in a portfolio loan transaction breaches its agreement with the
Fund. In connection with its securities lending transactions, the Fund may
return to the borrower or a third party which is unaffiliated with the Fund, and
which is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable interest
on the loan, as well as any dividends, interest or other distributions payable
on the loaned securities, and any increase in market value; and (5) the Fund may
pay only reasonable custodian fees in connection with the loan.
FOREIGN CURRENCY TRANSACTIONS--Foreign currency transactions may involve, for
example, the Fund's purchase of foreign currencies for U.S. dollars or the
maintenance of short positions in foreign currencies, which would involve the
Fund agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
the Investment Manager's ability to predict accurately the future exchange rates
between foreign currencies and the U.S. dollar. Currency exchange rates may
fluctuate significantly over short periods of time. They generally are
determined by the forces of supply and demand in the foreign exchange markets
and the relative merits of investments in different countries, actual or
perceived changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments
in the United States or abroad.
ADDITIONAL INVESTMENT CONSIDERATIONS AND RISKS
EQUITY SECURITIES--Equity securities fluctuate in value, often based on factors
unrelated to the value of the issuer of the securities, and such fluctuations
can be pronounced. Changes in the value of each Fund's investments will result
in changes in the value of its shares and thus the Fund's total return to
investors.
The value of BBG's investments in certain equity securities may be
affected by changes in the price of precious metals, such as gold, platinum and
silver. Precious metals have been subject to substantial price fluctuations over
short periods of time. The prices have been influenced by industrial and
commercial demand, investment and speculation, and monetary and fiscal policies
of central banks and governmental and international agencies. Price fluctuations
in bullion have also caused large price fluctuations in securities in which BBG
may invest. Currently, there are only six major producers of gold: the Republic
of South Africa ("South Africa"), the United States, Australia, the Commonwealth
of Independent States (the "CIS," formerly the Union of Soviet Socialist
Republics), Canada and China. As South Africa, the CIS and China are three major
producers of gold and platinum, changes in political, social and economic
conditions affecting these countries pose certain risks to BBG's investments.
The social upheaval and related economic difficulties in these countries from
time to time, may influence the price of gold and platinum and the share values
of mining companies involved in these countries and elsewhere. Accordingly,
investors should understand the special considerations and risks related to such
an investment emphasis, and its potential effect on BBG's per share value.
National economic and political developments could affect South Africa's policy
regarding gold sales and in turn the price of gold and the share values of
mining companies involved in South Africa.
FIXED-INCOME SECURITIES--Even though interest-bearing securities are investments
which promise a stable stream of income, the prices of such securities generally
are inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. The values of fixed-income securities
also may be affected by changes in the credit rating or financial condition of
the issuer. Certain securities purchased by a Fund, such as convertible
securities rated below investment grade by a nationally recognized statistical
rating organization, may be subject to such risk with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated fixed-income securities. Once the rating of a portfolio security has been
changed, the Fund will consider all circumstances deemed relevant in determining
whether to continue to hold the security.
FOREIGN SECURITIES--Foreign securities markets generally are not as developed or
efficient as those in the United States. Securities of some foreign issuers are
less liquid and more volatile than securities of comparable U.S. issuers.
Similarly, volume and liquidity in most foreign securities markets are less than
in the United States and, at times, volatility of price can be greater than in
the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, seizure or
nationalization of foreign deposits or adoption of governmental restrictions
which might adversely affect or restrict the payment of principal and interest
on the foreign securities to investors located outside the country of the
issuer, whether from currency blockage or otherwise.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.
<PAGE>
EXHIBIT C
The Articles of Incorporation of Bull & Bear Municipal Income Fund,
Inc. shall be amended by striking Article II and inserting in lieu thereof the
following:
ARTICLE II NAME
The name of the corporation (hereinafter called the
"Corporation") is BBM Corporation.
* * *
The Articles of Incorporation of Bull & Bear U.S. Government
Securities Fund, Inc. shall be amended by striking Article II and inserting in
lieu thereof the following:
ARTICLE II
NAME
The name of the corporation (hereinafter called the
"Corporation") is BBG Corporation.
<PAGE>
PRELIMINARY COPY
BULL & BEAR MUNICIPAL INCOME FUND, INC.
The undersigned stockholder of BULL & BEAR MUNICIPAL INCOME FUND, INC.
(the "Fund") hereby appoints Thomas B. Winmill and Robert D. Anderson and each
of them, the attorneys and proxies of the undersigned, with full power of
substitution, to vote, as indicated herein, all of the shares of the Fund
standing in the name of the undersigned at the close of business on October __,
1997 at the Annual Meeting of Stockholders to be held at the offices of Stroock
& Stroock & Lavan LLP, 180 Maiden Lane, 34th Floor, New York, New York, at 10:00
a.m. on Thursday, November 20, 1997, and at any and all adjournments thereof,
with all of the powers the undersigned possesses and especially (but without
limiting the general authorization and power hereby given) to vote as indicated
on the Proposals, as more fully described in the proxy statement for the
Meeting.
Please mark boxes in blue or black ink.
1. To elect Nominees to the Board of Directors:
[ ] FOR All [ ] WITHHOLD authority only [ ] WITHHOLD
Nominees for those Nominee(s) authority for
whose name(s) I have ALL Nominees
written below
Nominees are: Russell E. Burke III, David R. Stack, Mark C. Winmill,
Thomas B. Winmill, and Bassett S. Winmill.
--------------------------------------------------------------------
2. To approve certain changes to the investment objective, fundamental
policies and investment restrictions of the Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider an amendment to the Fund's Articles of Incorporation to
change the Fund's name.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To change the classification of the Fund from a diversified investment
company to a non-diversified investment company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To ratify the selection of Tait, Weller & Baker as the Fund's
independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting, or any
adjournment(s) thereof.
<PAGE>
THIS PROXY IS SOLICITED BY THE FUND'S BOARD AND WILL BE VOTED FOR THE ABOVE
PROPOSALS UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this form. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: _______________, 1997
-------------------------
Signature(s)
-------------------------
Signature(s)
Sign, Date and Return this Proxy Card
Promptly Using the Enclosed Envelope.
<PAGE>
PRELIMINARY COPY
BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC.
The undersigned stockholder of BULL & BEAR U.S. GOVERNMENT SECURITIES
FUND, INC. (the "Fund") hereby appoints Thomas B. Winmill and Robert D. Anderson
and each of them, the attorneys and proxies of the undersigned, with full power
of substitution, to vote, as indicated herein, all of the shares of the Fund
standing in the name of the undersigned at the close of business on October __,
1997 at the Annual Meeting of Stockholders to be held at the offices of Stroock
& Stroock & Lavan LLP, 180 Maiden Lane, 34th Floor, New York, New York, at 10:00
a.m. on Thursday, November 20, 1997, and at any and all adjournments thereof,
with all of the powers the undersigned possesses and especially (but without
limiting the general authorization and power hereby given) to vote as indicated
on the Proposals, as more fully described in the proxy statement for the
Meeting.
Please mark boxes in blue or black ink.
1. To elect nominees to the Board of Directors:
[ ] FOR All [ ] WITHHOLD authority only [ ] WITHHOLD
Nominees for those Nominee(s) authority for
whose name(s) I have ALL Nominees
written below
Nominees are: Frederick A. Parker, Jr., Mark C. Winmill, Thomas B.
Winmill, Bassett S. Winmill and Douglas Wu .
---------------------------------------------------------------------
2. To approve certain changes to the fundamental policies and investment
restrictions of the Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider an amendment to the Fund's Articles of Incorporation to
change the Fund's name.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To change the classification of the Fund from a diversified investment
company to a non-diversified investment company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To ratify the selection of Tait, Weller & Baker as the Fund's
independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting, or any
adjournment(s) thereof.
<PAGE>
THIS PROXY IS SOLICITED BY THE FUND'S BOARD AND WILL BE VOTED FOR THE ABOVE
PROPOSALS UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this form. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: ____________________, 1997
-------------------------
Signature(s)
-------------------------
Signature(s)
Sign, Date and Return this Proxy Card
Promptly Using the Enclosed Envelope.
