<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for
use of the Commission
Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE RUSHMORE FUND, INC.
(Name of Registrant as Specified in Its Charter)
(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:
- -------------------------------------------------------------------------------
<PAGE>
THE RUSHMORE FUND, INC.
4922 FAIRMONT AVENUE
BETHESDA, MARYLAND 20814
(800) 622-1386
------------------------
U.S. GOVERNMENT BOND PORTFOLIO
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2000
------------------------
To the Shareholders of
THE RUSHMORE FUND, INC.:
Notice is hereby given that an annual meeting of shareholders of the U.S.
Government Bond Portfolio of The Rushmore Fund, Inc. (the "Fund") will be held
at 9:30 a.m. Eastern Time on June 1, 2000 at the offices of the Fund, 4922
Fairmont Avenue, Bethesda, Maryland 20814, or as adjourned from time to time
(the "Meeting"), for the purposes listed below. The Meeting will be held:
I. To elect the Board of Directors of the Fund;
II. To approve a new investment advisory contract;
III. To ratify the selection of independent auditors; and
IV. To transact such other business as may properly come before the Meeting.
After careful consideration, the Directors of the Fund unanimously approved
each of the nominees to the Board of Directors and unanimously approved each of
the other proposals and recommend that shareholders vote "FOR" each of the
nominees and "FOR" each other proposal.
The matters referred to above are discussed in detail in the proxy statement
attached to this notice. The Board of Directors has fixed the close of business
on March 17, 2000 as the record date for determining shareholders entitled to
notice of and to vote at the Meeting. Each share of the Fund is entitled to one
vote with respect to proposals, with fractional votes for fractional shares.
Regardless of whether you plan to attend the Meeting, PLEASE COMPLETE, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, SO
THAT YOU WILL BE REPRESENTED AT THE MEETING.
If you have returned a proxy card and are present at the Meeting, you may
change the vote specified in the proxy at that time. However, attendance in
person at the Meeting, by itself, will not revoke a previously tendered proxy.
By Order of the Board of Directors,
Stephenie E. Adams,
SECRETARY
Bethesda, Maryland
April 11, 2000
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. IN
ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
<PAGE>
THE RUSHMORE FUND, INC.
4922 FAIRMONT AVENUE
BETHESDA, MARYLAND 20814
(800) 622-1386
------------------------
U.S. GOVERNMENT BOND PORTFOLIO
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2000
---------------------
This proxy statement and enclosed proxy are being furnished in connection
with the solicitation of proxies by the Board of Directors (the "Board" or
"Directors") of The Rushmore Fund, Inc. (the "Fund") for use at an annual
meeting of shareholders of the U.S. Government Bond Portfolio, the only series
of the Fund's shares, to be held at 9:30 a.m. Eastern Time on June 1, 2000 at
the offices of the Fund, 4922 Fairmont Avenue, Bethesda, Maryland 20814, or as
adjourned from time to time (the "Meeting"). The Board is soliciting proxies
from shareholders of the Fund with respect to the proposals set forth in the
accompanying notice.
It is anticipated that the first mailing of proxies and proxy statements to
shareholders will be on or about April 11, 2000.
SHAREHOLDER REPORTS. Shareholders can find important information about the
Fund in the Fund's annual report dated August 31, 1999, which previously has
been furnished to shareholders. Shareholders may request another copy of this
report by writing to the Fund at the above address, or by calling the telephone
number above. A copy of such report will be provided free of charge.
INTRODUCTION. On October 20, 1999, Money Management Associates, L.P.
("MMA"), the Fund's investment adviser, entered into a definitive agreement
pursuant to which Friedman, Billings, Ramsey Group, Inc. ("FBR"), and two of its
affiliates, will acquire all of the outstanding ownership interests in MMA.
Under the Investment Company Act of 1940, as amended (the "1940 Act"),
consummation of the transaction will result in the assignment and automatic
termination of the Fund's current investment advisory contract with MMA. The
Board of the Fund has met and considered the proposed transaction and its
consequences for the Fund and has determined to (1) approve a new investment
advisory contract with MMA which would take effect upon consummation of the
transaction, (2) recommend that shareholders approve such contract, and
(3) take certain other actions necessitated by the transaction, including
reconstitution of the Fund's Board. For more information concerning the
transaction, see "Proposal II. Approval of New Investment Advisory
Contract--Description of the Transaction."
1
<PAGE>
PROPOSAL I.
ELECTION OF DIRECTORS
In light of the proposed transaction, the Board has determined to
reconstitute the Board so that at least 75% of the Directors are not "interested
persons," as defined in the 1940 Act, of the Fund, MMA or FBR. These persons are
commonly referred to as "independent Directors."
At its meeting held on January 27, 2000, the Board appointed a Nominating
Committee consisting of Patrick F. Noonan and Bruce C. Ellis, each of whom is an
independent Director, to consider and recommend to the Board nominees for
service on the Board. The Nominating Committee consulted with counsel and other
independent Directors, as well as representatives of MMA and FBR, and
recommended to the Board that the size of the Board be fixed at eight members
and that the following persons be nominated for election to the Board
("Nominees"):
<TABLE>
<S> <C>
Daniel L. O'Connor Jeffrey R. Ellis
Richard J. Garvey F. David Fowler
Louis T. Donatelli Patrick F. Noonan
Bruce C. Ellis Michael A. Willner
</TABLE>
Messrs. Daniel L. O'Connor, Richard J. Garvey, Bruce C. Ellis, Jeffrey R. Ellis,
and Patrick F. Noonan, currently serve as Directors of the Fund and are proposed
for re-election to the Board.
On March 17, 2000, the Board met to consider the Nominating Committee's
recommendations and the background, experience and credentials of each Nominee,
as well as any relationships such Nominee has or has had with the Fund, MMA and
FBR. Based upon such consideration, the Board unanimously agreed to nominate
each such person and recommended that the nominations be submitted to
shareholders for approval.
If the Nominees are elected at the Meeting, there will be a total of eight
Directors on the Board, six of whom will be independent Directors.
The Nominees have indicated their willingness to serve as Directors. The
Board knows of no reason why the Nominees would be unable to serve, but in the
event of any such unavailability, the proxies received will be voted for such
substituted nominee as the Board may recommend.
The persons named as proxies on the enclosed proxy card will vote your
shares for the election of the Nominees unless you withhold authority to vote
for the Nominees in your proxy. If elected by shareholders, the Nominees will
continue to serve as Directors of the Fund until the next meeting of
shareholders, if any, called for the purpose of electing Directors, unless
sooner succeeded as provided in the Fund's Articles of Incorporation and Bylaws.
It is proposed, and the Board recommends, that shareholders elect the Nominees.
The following table sets forth certain information concerning each of the
Nominees.
<TABLE>
<CAPTION>
SHARES OWNED
POSITION PRINCIPAL OCCUPATIONS BENEFICIALLY ON
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS MARCH 17, 2000
- --------------------- ------------- ------------------------------- ---------------
<S> <C> <C> <C>
Daniel L. O'Connor,* 58 ....... Chairman, General Partner of MMA, N/A
100 Lakeshore Drive Treasurer, registered investment adviser
Suite 1555 and Director of four registered investment
North Palm Beach, FL 33408 companies (the "Rushmore
Funds"), since 1975. Director,
Rushmore Trust and Savings,
FSB, the Fund's transfer agent
and custodian. Director or
Trustee of four Rushmore Funds.
Trustee of the
Cappiello-Rushmore Trust.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
POSITION PRINCIPAL OCCUPATIONS BENEFICIALLY ON
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS MARCH 17, 2000
- --------------------- ------------- ------------------------------- ---------------
<S> <C> <C> <C>
Richard J. Garvey,* 67 ........ President and Limited Partner of MMA and Vice N/A
730 Southwest 67th Place Director President of Rushmore
Portland, OR 97225 Services, Inc. until 1998.
Director or Trustee of four
Rushmore Funds.
Louis T. Donatelli, 63 ........ President of Donatelli and N/A
7200 Wisconsin Avenue Klein, Inc., engaged in the
Bethesda, MD 20814 acquisition of real estate,
primarily office buildings and
multi-family housing projects,
since 1973. Director, American
Gas Index Fund, Inc.
Bruce C. Ellis,** 55 .......... Director A private investor in start-up N/A
7108 Heathwood Court companies. Vice President,
Bethesda, MD 20817 LottoPhone, Inc., a telephone
state lottery service,
September 1991-1995. Director,
The Torray Fund, since 1994;
Director, the Sheppard Fund,
since 1994. Director or Trustee
of three Rushmore Funds, and
Trustee of the Cappiello-
Rushmore Trust.
Jeffrey R. Ellis,** 55 ........ Director President, Innovative LLC, a N/A
513 Kerry Lane manufacturing-marketing company
Virginia Beach, VA 23451 in Virginia Beach, Virginia
since January 1999. Private
investor prior thereto.
Director or Trustee of three
Rushmore Funds, and Trustee of
the Cappiello-Rushmore Trust.
F. David Fowler, 66 ........... Private investor. Dean, The N/A
9450 Newbridge Drive George Washington University
Potomac, MD 20854 School of Business and Public
Management, 1992-1997; Partner,
KPMG Peat Marwick from
October 1969 to June 1992.
Trustee, The FBR Family of
Funds.
Patrick F. Noonan, 57 ......... Director Chairman and Chief Executive N/A
11901 Glen Mill Drive Officer of the Conservation
Potomac, MD 20854 Fund, a national non-profit
environmental organization,
since 1985. Director or Trustee
of four Rushmore Funds.
Director, International Paper
Co., Ashland Inc. and Saul
Centers.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
POSITION PRINCIPAL OCCUPATIONS BENEFICIALLY ON
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS MARCH 17, 2000
- --------------------- ------------- ------------------------------- ---------------
<S> <C> <C> <C>
Michael A. Willner, 43 ........ President, Catalyst N/A
11521 Potomac Road Advisers, Inc., a news
Lorton, VA 22079 organization, from
September 1996 to Present;
President, Federal
Filings, Inc., a news
organization, from July 1994
to July 1995. Trustee, The FBR
Family of Funds.
</TABLE>
- ------------------------
* Messrs. O'Connor and Garvey are "interested persons" of the Fund (as that
term is defined in the 1940 Act) because of their current or former
affiliations with MMA and the Fund.
** Bruce C. Ellis and Jeffrey R. Ellis are brothers.
The following table sets forth certain information concerning the current
Directors who are not standing for re-election.
<TABLE>
<CAPTION>
SHARES OWNED
POSITION PRINCIPAL OCCUPATIONS BENEFICIALLY ON
NAME, ADDRESS AND AGE WITH FUND DURING LAST FIVE YEARS MARCH 17, 2000
- --------------------- ------------- ------------------------------- ---------------
<S> <C> <C> <C>
Michael D. Lange,* 58 ......... Director Vice President, Capital Hill N/A
P.O. Box 1348 Management Corporation since
Great Falls, VA 22066 1967. Owner of Michael D.
Lange, Ltd., a builder and
developer, since 1980. Partner
of Greatful Falls, a building
developer, since 1994.
Director, Rushmore Trust and
Savings, FSB, the Fund's
transfer agent and custodian.
Director or Trustee of three
Rushmore Funds.
Leo Seybold, 86 ............... Director Retired 1988. Director or 9,117.53
5804 Rockmere Drive Trustee of three Rushmore
Bethesda, MD 20816 Funds.
</TABLE>
- ------------------------
* Mr. Lange is an "interested person" of the Fund (as that term is defined in
the 1940 Act) because of his affiliation with Rushmore Trust and Savings,
FSB.
During the fiscal year ended August 31, 1999, there were four meetings of
the Board. There was 100% attendance by Directors at the meetings of the Board
held throughout the period.
As of March 17, 2000, the Directors and officers of the Fund, as a group,
owned less than one percent of the outstanding shares of the Fund in the
aggregate.
BOARD OF DIRECTORS--COMMITTEES. In addition to the Nominating Committee,
the Fund has a standing Audit Committee that currently consists of
Messrs. Bruce C. Ellis, Jeffrey R. Ellis, Michael D. Lange, Patrick F. Noonan,
and Leo Seybold, each of whom, except Mr. Michael D. Lange, is an independent
Director. The Audit Committee reviews both the audit and non-audit work of the
Fund's independent public accountants, submits a recommendation to the Board as
to the selection of independent auditors, and reviews generally the maintenance
of the Fund's records and the safekeeping arrangements of the Fund's custodian.
During the fiscal year ended August 31, 1999, the Audit Committee met one time,
and each member of the Audit Committee attended the meeting. There were no
meetings of any other committee during such fiscal year.
4
<PAGE>
REMUNERATION OF DIRECTORS. The following table sets forth the compensation
received by the Directors for their services to the Fund during the fiscal year
ended August 31, 1999. In addition to the fees listed below, the Directors are
also reimbursed for all reasonable expenses incurred during the execution of
their duties.
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ESTIMATED FROM THE FUND
FROM THE AS PART OF THE ANNUAL BENEFITS COMPLEX* PAID TO
NAME OF DIRECTOR FUND FUND EXPENSES UPON RETIREMENT THE DIRECTOR
- ---------------- ------------ ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Bruce C. Ellis.................... $3,000 $0 $0 $9,000
Jeffrey R. Ellis.................. $3,000 $0 $0 $9,000
Richard J. Garvey................. $0 $0 $0 $0
Michael D. Lange.................. $3,000 $0 $0 $9,000
Patrick F. Noonan................. $3,000 $0 $0 $10,000
Daniel L. O'Connor................ $0 $0 $0 $0
Leo Seybold....................... $3,000 $0 $0 $9,000
</TABLE>
- ------------------------
* The "Fund Complex" includes the Fund, Fund for Government Investors, Fund
for Tax-Free Investors, Inc. and American Gas Index Fund, Inc.
MATERIAL INTEREST OF DIRECTOR. Daniel O'Connor has a direct material
interest in the transaction described below in Proposal II, pursuant to which
Mr. O'Connor, as the sole general partner of MMA, the investment adviser of the
Fund, and a shareholder of Rushmore Trust and Savings, FSB ("RTS"), will receive
compensation for consulting services and other benefits. For a complete
discussion of the transaction, see Proposal II.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NOMINEES UNDER PROPOSAL I. UNMARKED PROXIES WILL BE
SO VOTED.
PROPOSAL II.
APPROVAL OF A NEW INVESTMENT
ADVISORY CONTRACT
INTRODUCTION. MMA, a District of Columbia limited partnership located at
100 Lakeshore Drive, Suite 1555, North Palm Beach, Florida 33408, has served as
the Fund's investment adviser since the organization of the Fund in 1985. MMA
currently serves as investment adviser to the Fund pursuant to an investment
advisory contract dated October 10, 1985 (the "Current Advisory Contract"). RTS,
a federal savings bank, serves as the administrator, transfer agent, portfolio
accountant, and custodian to the Fund, and provides shareholder services to the
Fund. MMA is the majority shareholder of RTS, whose address is 4922 Fairmont
Avenue, Bethesda, Maryland 20814.
MMA will undergo a "change in control" as a result of the consummation of
the transaction described below, which, under applicable law, will terminate the
Current Advisory Contract. It is proposed that MMA continue to serve as
investment adviser to the Fund following completion of the transaction.
Therefore, in connection with the transaction and as required by the 1940 Act,
shareholders of the Fund are being asked in Proposal II to approve a new
investment advisory contract between the Fund and MMA which is substantially
comparable to the Current Advisory Contract (the "New Advisory Contract"). The
Board recommends that shareholders approve the New Advisory Contract, a form of
which is attached as Appendix A.
DESCRIPTION OF THE TRANSACTION. On October 20, 1999, MMA, RTS, Daniel
O'Connor, the limited partners of MMA, Money Management Associates, Inc. ("MMA
Buyer"), Money Management Associates
5
<PAGE>
(LP), Inc. ("LP Buyer" and, together with MMA Buyer, the "Buyers"), and FBR
entered into a Purchase and Sale Agreement (the "Agreement") pursuant to which
the Buyers will acquire ownership of MMA and RTS (the "Transaction").
The Agreement provides for the purchase by MMA Buyer of all of the
outstanding general partnership interests in MMA from Mr. O'Connor, the sole
general partner of MMA, and the purchase by LP Buyer of all of the outstanding
limited partnership interests in MMA from the current limited partners of MMA.
MMA currently owns 72.4% of the outstanding capital stock of RTS, and Daniel
O'Connor owns 27.6% of the outstanding capital stock of RTS. The Agreement
further provides that Mr. O'Connor will sell to MMA Buyer all of the RTS stock
owned by him. As a result of the Transaction, the Buyers will control MMA,
having acquired all of the outstanding general partnership and limited
partnership interests in MMA for a total consideration of $17.5 million, minus
the book value of the outstanding shares of RTS stock not owned by MMA, and an
installment note unconditionally guaranteed by FBR in the amount of $9.7
million. MMA Buyer also will purchase the shares of RTS stock owned by Daniel
O'Connor, and other shareholders, as part of the Transaction.
The purchase price of the RTS stock owned by Daniel O'Connor is expected to
be approximately $1,261,000, based on the October 20, 1999 book value of all
shares not owned by MMA, subject to adjustment to reflect any changes occurring
in the ordinary course of business prior to the closing of the Transaction.
Further, Daniel O'Connor will receive approximately $11,038,000 for the sale of
his partnership interests in MMA. In addition, Martin M. O'Connor and John
Cralle, each of whom is a Vice President of the Fund, will receive compensation
for the sale of their limited partnership interests in MMA. By virtue of these
payments, each of Daniel O'Connor, Martin O'Connor, and John Cralle may be
considered to have a material interest in the approval of the New Advisory
Contract.
FBR and the Buyers are seeking federal approval to acquire Rushmore National
Bank, Bethesda, Maryland ("RNB"). RNB will be the successor institution to RTS,
which will convert from a federal savings bank to a national banking association
immediately prior to the proposed acquisition pursuant to a conversion
application filed with the Office of the Comptroller of the Currency. Upon
conversion, RNB will engage in the same activities as RTS, but will no longer be
subject to various legal restraints imposed upon federal savings banks, such as
holding at least 65% of the institution's assets in mortgage-related
investments. Moreover, FBR anticipates that RNB's activities will be augmented
by offering personal trust services.
The closing date for the Transaction has not yet been determined, and there
is no assurance that the Transaction will be completed. Completion of the
Transaction is subject to a number of conditions including, among others, (i)
the receipt of certain regulatory approvals, (ii) approval of the New Advisory
Contract by shareholders of the Fund, and (iii) assets under management and net
management fees (excluding market-based changes) for all accounts managed by MMA
as of two days prior to closing must be at least 80% of the corresponding
amounts during the second half of 1999. Accordingly, if the New Advisory
Contract is not approved by shareholders, the Transaction will not be
consummated unless this condition is waived. If the Transaction is not completed
for any reason, the Current Advisory Contract will remain in effect.
POST-TRANSACTION STRUCTURE AND OPERATIONS. Upon completion of the
Transaction, MMA will be controlled by the Buyers, each of which is a Delaware
corporation and a wholly owned subsidiary of FBR, a Virginia corporation. The
address of FBR and each Buyer is Potomac Tower, 1001 Nineteenth Street North,
Arlington, Virginia 22209. FBR is a public company that is a holding company for
a number of subsidiaries engaged in the business of investment banking and asset
management. Subsidiaries of FBR manage approximately $800 million for numerous
clients, including individuals, banks and thrift institutions, investment
companies, pension and profit sharing plans and trusts, estates and charitable
organizations.
6
<PAGE>
Subsidiaries of FBR include Friedman, Billings, Ramsey & Co., Inc. and FBR
Investment Services, Inc., separately registered broker-dealers (the "Affiliated
Brokers"). Once the Transaction is completed, absent an SEC exemption or other
relief, the Fund generally would be precluded from effecting principal
transactions with the Affiliated Brokers, and its ability to purchase securities
being underwritten by an Affiliated Broker or to utilize the Affiliated Brokers
for agency transactions would be subject to restrictions. FBR and MMA do not
believe that the restrictions on transactions with the Affiliated Brokers
described above will materially adversely affect MMA's ability, post-closing, to
provide services to the Fund, the Fund's ability to take advantage of market
opportunities, or the Fund's overall performance.
ANTICIPATED IMPACT OF THE TRANSACTION ON MANAGEMENT OF THE FUND. Except as
described below, the Transaction should have no immediate impact on the
management of the Fund or MMA's capacity to provide the type, quality, or
quantity of services that it currently provides, and the Fund should continue to
receive high quality services after the Transaction. Information about the
current management of the Fund is presented in Appendix B. To help ensure
continuity in the operations of MMA, Daniel O'Connor, Martin O'Connor, and John
Cralle have contractually agreed to provide consulting and other services to MMA
for significant periods following the Transaction.
Historically, the Fund has been managed by a portfolio management team under
which no individual is primarily responsible for making investment decisions on
behalf of the Fund. Following the Transaction, it is anticipated that David
Ellison will join such portfolio management team for a transition period and
eventually will have primary portfolio management responsibility for the Fund.
Mr. Ellison currently is a Director of FBR Fund Advisers, Inc., an asset
management subsidiary of FBR, and serves as the portfolio manager of the FBR
Financial Services Fund and FBR Small Cap Financial Fund, two series of The FBR
Family of Funds, a registered investment company. Prior to joining FBR Fund
Advisers, Inc. in 1997, Mr. Ellison was portfolio manager of the Fidelity Select
Home Finance Fund from December 1985 until January 1997.
SECTION 15(F) OF THE 1940 ACT. Section 15(f) provides that an investment
adviser to an investment company or any affiliated person thereof may receive
any amount or benefit in connection with a "change in control" of the investment
adviser as long as two conditions are satisfied. First, an "unfair burden" (as
defined in the 1940 Act) must not be imposed on investment company clients of
the adviser as a result of the transaction, or any express or implied terms,
conditions or understandings applicable to the transaction. The Board has been
advised by FBR and MMA that they are not aware of any circumstances arising from
the Transaction that might result in an unfair burden being imposed on the Fund.
The second condition of Section 15(f) is that during the three-year period after
the transaction, at least 75% of the investment company's board of directors
must not be "interested persons" (as defined in the 1940 Act) of the investment
adviser (or predecessor or successor adviser). The Board of the Fund has
determined to reconstitute the Board, subject to shareholder approval, to comply
with this requirement and MMA and MMA Buyer have agreed to use commercially
reasonable best efforts to ensure compliance with Section 15(f) for the
applicable periods following completion of the Transaction.
THE CONTRACTS. THE CURRENT ADVISORY CONTRACT. MMA has served as investment
adviser to the Fund since the Fund's commencement of investment operations. The
Current Advisory Contract was last submitted for approval by shareholders of the
Fund at a meeting held on December 8, 1986, for the purpose of implementing the
Fund's current investment advisory arrangements.
Under the terms of the Current Advisory Contract, MMA is responsible for
making investment decisions and placing orders for the purchase and sale of the
Fund's investments directly with the issuers or with brokers or dealers selected
by it in its discretion. MMA also furnishes to the Board, which has overall
responsibility for the business and affairs of the Fund, periodic reports on the
investment performance of the Fund.
MMA is obligated to manage the Fund in accordance with the applicable
policies of the Fund. The investment advisory services of MMA to the Fund are
not exclusive under the terms of the Current
7
<PAGE>
Advisory Contract. MMA is free to, and does, render investment advisory services
to others. Information about MMA's other investment company clients is presented
in Appendix C.
Consistent with the requirements of the 1940 Act, the Current Advisory
Contract provides that MMA generally is not liable to the Fund for any mistake
in judgment, or otherwise, except by reason of willful misfeasance, bad faith or
gross negligence in the performance of MMA's duties or by reason of its reckless
disregard of its obligations under the Current Advisory Contract.
The Current Advisory Contract may be terminated by the Fund without penalty
upon 60 days' notice by the Board or by a vote of the holders of a majority of
the Fund's outstanding voting securities, or upon 60 days' notice by MMA. As
noted above, the Current Advisory Contract terminates automatically in the event
of its "assignment" (as defined in the 1940 Act).
For its services, MMA receives an investment advisory fee at an annual rate
based on 0.50% of the net assets of the Fund. For the fiscal year ended August
31, 1999, the Fund paid $90,039 in investment advisory fees to MMA.
THE NEW ADVISORY CONTRACT. The New Advisory Contract is substantially
identical to the Current Advisory Contract, except for the absence of a
provision in the Current Advisory Contract whereby MMA undertakes to reimburse
expenses of the Fund, exclusive of taxes, brokerage, interest and extraordinary
legal expenses, if the Fund's aggregate expenses in any fiscal year exceed 1.25%
of the average market value of the Fund's net assets. However, this expense
reimbursement obligation will be set forth in a separate agreement between MMA
and the Fund, which shall continue until the first anniversary of the New
Advisory Contract, and shall thereafter automatically continue for one-year
periods unless terminated in accordance with its terms. During the fiscal year
ended August 31, 1999, as well as all prior fiscal years since the Fund's
inception, MMA did not reimburse the Fund's expenses in accordance with the
Current Advisory Contract.
As noted previously, MMA does not anticipate that the Transaction will cause
any reduction in the quality or types of services now provided to the Fund or
have any adverse effect on MMA's ability to fulfill its obligations to the Fund.
No change is anticipated in the investment philosophies and practices currently
followed by the Fund. There will be no change in advisory fees.
At the March 17, 2000 meeting of the Board, the New Advisory Contract was
approved unanimously by the Board, including all of the Directors who are not
parties to the New Advisory Contract or "interested persons" (as defined in the
1940 Act) of any such party (other than as Directors of the Fund). The New
Advisory Contract, as approved by the Board, is submitted for approval by the
shareholders of the Fund.
If the New Advisory Contract is approved by shareholders, it will take
effect immediately upon the closing of the Transaction. The New Advisory
Contract will remain in effect for two years from the date it takes effect, and,
unless earlier terminated, will continue from year-to-year thereafter, provided
that each such continuance is approved annually (i) by the Board or by the vote
of a majority of the outstanding voting securities of the Fund, and, in either
case, (ii) by a majority of the Directors who are not parties to the New
Advisory Contract or interested persons of any such party (other than as
Directors of the Fund).
PAYMENTS TO RTS/RNB. RTS provides administrative services to the Fund, as
well as transfer agency, shareholder servicing, custodial and fund accounting
services, for which it receives compensation from the Fund at an annual rate of
0.30% of the average daily net assets of the Fund. For the fiscal year ended
August 31, 1999, the Fund paid RTS $54,031 in fees for such services. RNB, the
successor to RTS, will continue to provide these services after the Transaction.
EVALUATION BY THE BOARD OF DIRECTORS. The Board, advised by counsel, has
determined that in approving the New Advisory Contract on behalf of the Fund,
the Fund can best assure itself that the services currently provided to the Fund
by MMA will continue without interruption after the Transaction. The Board
believes that, like the Current Advisory Contract, the New Advisory Contract
will enable the Fund
8
<PAGE>
to obtain high quality services at a cost that is appropriate, reasonable, and
in the best interests of the Fund and its shareholders.
In determining whether or not it was appropriate to approve the New Advisory
Contract and to recommend approval to shareholders, the Board, including the
Directors who are not parties to the New Advisory Contract or interested persons
of such parties, considered various materials and representations provided by
MMA and FBR (including information concerning compensation and consulting
arrangements to be implemented in connection with the Transaction), information
provided by representatives of the Buyers, and was advised by legal counsel with
respect to these matters.
The Directors also considered the following information, among other things:
(1) Daniel O'Connor and others have agreed to provide consulting and other
services to MMA for significant periods following the Transaction, thus helping
to ensure continuity of management; (2) the compensation to be received by MMA
under the New Advisory Contract is the same as the compensation paid under the
Current Advisory Contract; (3) the fairness of the compensation payable to MMA
under the Current Advisory Contract; (4) the commonality of the terms and
provisions of the New Advisory Contract with the terms of the Current Advisory
Contract; (5) representations made by FBR concerning the potential impact of
affiliated brokerage relationships on MMA's ability to provide services to the
Fund, and on the Fund's ability to engage in portfolio transactions; and
(6) the financial condition of FBR and the expertise of its personnel and the
personnel of its affiliates, particularly those who will be involved in the
management of the Fund.
Based upon its review, the Board determined that, by approving the New
Advisory Contract, the Fund can best be assured that services from MMA will be
provided without interruption. The Board also determined that the New Advisory
Contract is in the best interests of the Fund and its shareholders. Accordingly,
after consideration of the above factors, and such other factors and information
it considered relevant, the Board unanimously approved the New Advisory Contract
and voted to recommend its approval by the Fund's shareholders.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW INVESTMENT ADVISORY CONTRACT AS
PROVIDED UNDER PROPOSAL II. UNMARKED PROXIES WILL BE SO VOTED.
PROPOSAL III.
RATIFICATION OF INDEPENDENT AUDITORS
The Board, including a majority of the independent Directors, has selected
the firm of Deloitte & Touche LLP, to serve as the Fund's independent auditors
and to examine the Fund's financial statements for the current fiscal year. The
Fund knows of no direct or indirect financial interest of such firm in the Fund.
Representatives of Deloitte & Touche LLP, if requested by any shareholder, will
be present at the Meeting, will be available to respond to appropriate questions
from shareholders, and will have the opportunity to make a statement if they so
desire.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE
LLP AS INDEPENDENT AUDITORS. UNMARKED PROXIES WILL BE SO VOTED.
OTHER BUSINESS
The Directors do not know of any matters to be presented at the Meeting
other than those set forth in this proxy statement. If other business should
properly come before the Meeting, proxies will be voted in accordance with the
judgment of the persons named in the accompanying proxy.
9
<PAGE>
VOTING INFORMATION
PROXY SOLICITATION. The costs of the Meeting, including the solicitation of
proxies, will be paid by FBR. The principal solicitation will be by mail, but
proxies also may be solicited by telephone, telegraph, the Internet or personal
interview by officers or agents of the Fund. The Fund will forward to record
owners proxy materials for any beneficial owners that such record owners may
represent.
SHAREHOLDER VOTING. Shareholders of record at the close of business on
March 17, 2000 (the "Record Date") are entitled to notice of, and to vote at,
the Meeting. Each shareholder is entitled to one vote for each full share and an
appropriate fraction of a vote for each fractional share held.
As of the Record Date, 1,123,842.246 shares of the Fund, representing the
corresponding number of votes, were outstanding. The persons owning of record or
beneficially 5% or more of the Fund as of the Record Date are set forth in
Appendix D.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Fund is required to constitute a quorum at the
Meeting. Shares held by shareholders present in person or represented by proxy
at the Meeting will be counted both for the purposes of determining the presence
of a quorum and for calculating the votes cast on the issues before the Meeting.
Proxies that reflect abstentions or broker "non-votes" (that is, shares held
by brokers or nominees as to which (a) such persons have not received
instructions from the beneficial owner or other persons entitled to vote and
(b) the brokers or nominees do not have discretionary voting power on a
particular matter) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Pursuant to the
rules and policies of the New York Stock Exchange (the "Exchange"), members of
the Exchange may vote on the proposals to be considered at the Meeting without
instructions from the beneficial owners of the Fund's shares.
In the event that a quorum is present at the Meeting but sufficient votes to
approve any proposal are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies or to obtain the vote required for approval of one or more proposals.
Any such adjournment will require the affirmative vote of a majority of those
shares represented at the Meeting in person or by proxy. If a quorum is present,
the persons named as proxies will vote those proxies which they are entitled to
vote FOR the proposal in favor of such an adjournment and will vote those
proxies required to be voted AGAINST the proposal against any such adjournment.
A shareholder vote may be taken prior to any adjournment of the Meeting on any
proposal for which there are sufficient votes for approval, even though the
Meeting is adjourned as to other proposals.
Timely, properly executed proxies will be voted as instructed by
shareholders. A shareholder may revoke his or her proxy at any time prior to its
exercise by written notice addressed to the Secretary of the Fund at 4922
Fairmont Avenue, Bethesda, Maryland 20814 or by voting in person at the Meeting.
However, attendance in person at the Meeting, by itself, will not revoke a
previously tendered proxy.
ELECTRONIC VOTING. Shareholders may give voting instructions via the
Internet (WWW.PROXYVOTE.COM) or by touchtone telephone (1-800-690-6903) by
following the instructions enclosed with the proxy card.
VOTING BY MAIL. In addition to voting in person at the Meeting, via the
Internet, or by touchtone telephone, shareholders also may sign and mail the
proxy card received with the proxy statement.
REQUIRED VOTE. Approval of Proposals I and III requires the vote of
shareholders owning of record a plurality of the shares of the Fund voting at
the Meeting, if a quorum is present. Approval of Proposal II requires the vote
of a "majority of the outstanding voting securities," as defined in the 1940
Act, which means the vote of 67% or more of the voting securities that are
present at the Meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or the vote of more than 50% of the
outstanding voting securities entitled to vote on the proposal, whichever is
less. Accordingly,
10
<PAGE>
assuming the presence of a quorum, abstentions and non-votes have the effect of
a negative vote on Proposal II, and will have no effect on Proposals I and III.
SHAREHOLDER PROPOSALS. The Fund does not hold regular shareholders'
meetings. Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholders' meeting should send their written
proposals to the Secretary of the Fund at the address set forth on the cover of
this proxy statement.
Proposals must be received a reasonable time prior to the date of a meeting
of shareholders to be considered for inclusion in the proxy materials for a
meeting. Timely submission of a proposal does not, however, necessarily mean
that the proposal will be included. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
submitted on an untimely basis.
TO ENSURE THE PRESENCE OF A QUORUM AT THE MEETING, PROMPT EXECUTION AND
RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
Stephenie E. Adams,
SECRETARY
Bethesda, Maryland
April 11, 2000
11
<PAGE>
APPENDIX A
INVESTMENT ADVISORY CONTRACT
BETWEEN
THE RUSHMORE FUND, INC.
AND
MONEY MANAGEMENT ASSOCIATES, L.P.
This Contract (the "Contract"), dated as of the day of , 2000 is
entered into by and between The Rushmore Fund, Inc. (hereinafter sometimes
referred to as the "Fund") and Money Management Associates, L.P. (hereinafter
sometimes referred to as the "Manager").
WITNESSETH:
THAT in consideration of the mutual covenants hereinafter contained, it is
agreed as follows:
1. THE FUND hereby employs the Manager to manage the investment and
reinvestment of the assets of the Fund and to administer the affairs of the
Fund, subject to the control of the officers and Board of Directors of the Fund,
for the period and on the terms set forth in this Agreement. The Manager hereby
accepts such employment and agrees during such period to render the services and
to assume the obligations herein set forth, for the compensation herein
provided.
2. The Manager assumes and shall pay or reimburse the Fund for: (a) all
expenses in connection with the management of the investment and reinvestment of
the assets of the Fund, except that the Fund assumes and shall pay all broker's
commissions and issue and transfer taxes chargeable to the Fund in connection
with securities transactions to which the Fund is a party; (b) the compensation
(if any) of those directors and officers of the Fund who also serve as
directors, officers or employees of the Manager; and (c) all expenses not
hereinafter specifically assumed by the Fund where such expenses are incurred by
the Manager or by the Fund in connection with the administration of the affairs
of the Fund.
The Fund assumes and shall pay or reimburse the Manager for the Fund's
taxes, corporate fees, interest expenses (if any) and its allocable share of all
charges, costs and expenses incurred in connection with: (a) determining from
time to time the net assets of the Fund, maintaining its books and records, and
preparing, reproducing and filing its tax returns and reports to governmental
agencies; (b) auditing its financial statements; (c) providing stock
certificates representing shares of the Fund and the services rendered in the
registration or transfer of such shares, in the payment and disbursement of
dividends and distributions by the Fund, and in the custody of the cash,
securities and other assets of the Fund; (d) stockholders' and directors'
meetings, and preparation, printing and distribution of all reports and proxy
materials; (e) printing the Fund's prospectus on at least an annual basis, and
distributing it to its then-existing shareholders; (f) legal services rendered
to the Fund; (g) retaining and compensating those directors, officers and
employees of the Fund who do not also serve as directors, officers or employees
of the Manager; (h) maintaining appropriate insurance coverage for the Fund and
its directors and officers; (i) its membership in trade associations;
(j) federal and state filing and registration fees; and (k) distribution
expenses pursuant to a distribution plan approved by a majority of the
shareholders and non-interested directors.
3. In connection with the management of the investment and reinvestment of
the assets of the Fund, the Manager is authorized on behalf of the Fund, to
place orders for the execution of the Fund's portfolio transactions in
accordance with the applicable policies of the Fund as set forth in the Fund's
registration statements under the Securities Act of 1933 and the Investment
Company Act of 1940, as such registration statements may be amended from time to
time, and is directed to use its best efforts to obtain the best available price
and most favorable execution with respect to all such transactions for the Fund.
A-1
<PAGE>
4. As compensation for the services to be rendered and the charges and
expenses to be assumed and paid by the Manager as provided in Section 2, the
Funds shall pay the Manager an annual fee of five tenths (0.50%) of one percent
of the average daily net asset value of the Fund. The fee will be paid monthly.
In the event of termination of this contract, the fee shall be computed on
the basis of the period ending on the last business day on which this contract
is in effect subject to a pro rata adjustment based on the number of days
elapsed in the current month as a percentage of the total number of days in such
month.
5. The directors of the Fund acknowledge that, in further consideration of
the services of the Manager hereunder, the Manager has reserved for itself all
rights to, and interest in, the name "The Rushmore Fund, Inc.," or any similar
name, and that use of the name shall continue only with the continuing consent
of the Manager, which consent may be withdrawn at any time, effective
immediately upon written notice thereof to the Fund.
6. Subject to and in accordance with the governing instruments of the Fund
and of the Manager respectively, directors, officers, agents and stockholders of
the Fund are or may be interested in the Manager (or any successor thereof) as
partners or otherwise; partners and agents of the Manager are or may be
interested in the Fund as directors, officers, agents, stockholders or
otherwise; the Manager (or any successor) is or may be interested in the Fund as
stockholder or otherwise; and the effect of any such interrelationships shall be
governed by said governing instruments and the applicable provisions of the
Investment Company Act of 1940.
The manager shall notify the Fund of any change in partners of Money
Management Associates, L.P. within a reasonable time after such change.
7. This contract shall continue in effect until two years from the date
hereof, and thereafter only so long as such continuance is approved at least
annually by a vote of a majority of the Fund's Board of Directors, including the
votes of a majority of the directors who are not parties to such contract or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. Provided, however, that (a) this Contract
may at any time be terminated without payment of any penalty either by vote of
the Board of Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Fund, on sixty days prior written notice to the
Manager, (b) this Contract shall automatically terminate in the event of its
assignment (within the meaning of the Investment Company Act of 1940), and
(c) this Contract may be terminated by the Manager on sixty days prior written
notice to the Fund. Any notice under this contract shall be given in writing,
addressed and delivered, or mailed post paid, to the other party at any office
of such party.
As used in this Section 6, the terms "interested persons" and "vote of a
majority of the outstanding securities" shall have the respective meanings set
forth in Section 2(a)(19) and Section 2(a)(42) of the Investment Company Act of
1940.
8. The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby. The Manager shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
9. No provision of this contract shall be deemed to protect the Manager
against any liability to the Fund or its stockholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this contract. Nor shall any provision hereof be deemed to
protect any director or officer of the Fund against any such liability to which
he might otherwise be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of his duties or the reckless disregard of
his obligations. If any
A-2
<PAGE>
provision of this contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this contract shall not be affected
thereby.
IN WITNESS WHEREOF, the parties hereto have caused this contract to be
executed on the day and year first above written.
WITNESS: THE RUSHMORE FUND, INC.
By:
- ----------------------------------- -----------------------------------
WITNESS: MONEY MANAGEMENT ASSOCIATES, L.P.
By:
- ----------------------------------- -----------------------------------
A-3
<PAGE>
APPENDIX B
OFFICERS OF THE FUND
<TABLE>
<CAPTION>
NAME, ADDRESS, AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------- -------------------- --------------------------------------------
<S> <C> <C>
Daniel L. O'Connor, 58 ............ Chairman, Treasurer, General Partner of MMA, registered
100 Lakeshore Drive and Director investment adviser of the Rushmore Funds,
Suite 1555 since 1975. Director, RTS. Director or
North Palm Beach, FL 33408 Trustee of four Rushmore Funds. Trustee of
the Cappiello-Rushmore Trust.
Richard J. Garvey, 67 ............. President and Limited Partner of MMA and Vice President of
730 Southwest 67th Place Director Rushmore Services, Inc. until 1998.
Portland, OR 97225 Director or Trustee of four Rushmore Funds.
John R. Cralle, 59 ................ Vice President A limited partner of MMA since 1979.
4922 Fairmont Avenue Employee of Rushmore Services, Inc. until
Bethesda, MD 20814 1999. Vice President of three Rushmore
Funds.
Martin M. O'Connor, 55 ............ Vice President A limited partner of MMA since 1979.
4922 Fairmont Avenue Employee of Rushmore Services, Inc. until
Bethesda, MD 20814 1999. Vice President of three Rushmore
Funds.
Edward J. Karpowicz, CPA, 37 ...... Controller Vice President of RTS since 1997. Controller
4922 Fairmont Avenue of the Rushmore Funds and the
Bethesda, MD 20814 Cappiello-Rushmore Trust. Treasurer, Bankers
Finance Investment Management Corp.,
August 1993 to June 1997.
Stephenie E. Adams, 30 ............ Secretary Secretary of three Rushmore Funds and the
4922 Fairmont Avenue Cappiello-Rushmore Trust. Assistant
Bethesda, MD 20814 Secretary of one Rushmore Fund. Manager,
Fund Administration and Compliance, RTS,
from October 1999 to Present. Manager, Fund
Administration and Marketing, Rushmore
Services, Inc., from July 1994 to
October 1999.
</TABLE>
B-1
<PAGE>
APPENDIX C
OTHER INVESTMENT COMPANY CLIENTS
MMA also serves as investment adviser to the following investment companies,
at the fee rates set forth below, which had the indicated net assets as of
December 31, 1999.
<TABLE>
<CAPTION>
NAME OF FUND ADVISORY FEE RATE APPROXIMATE ASSETS
- ------------ ---------------------------------------- ------------------
<S> <C> <C>
American Gas Index Fund, Inc............ .40% of the average daily net assets $183,943,443
Fund for Government Investors........... .50% of the first $500 million of net $492,627,189
assets, .45% of the next $250 million of
net assets, .40% of the next $250
million of net assets, and .35% of the
net assets over $1 billion
Fund for Tax-Free Investors, Inc........ .50% of the net assets of the Rushmore $17,474,551
Tax-Free Money Market Portfolio
.625% of the net assets of the Rushmore $42,132,485
Maryland Tax-Free Portfolio
.625% of the net assets of the Rushmore $28,925,654
Virginia Tax-Free Portfolio
</TABLE>
C-1
<PAGE>
APPENDIX D
As of the Record Date, the following persons owned of record 5% or more of
the shares of the Fund.
<TABLE>
<CAPTION>
CONTROLLING PARTY OR PRINCIPAL HOLDER OF SECURITIES AND ADDRESS SHARES OWNED % OWNED
- --------------------------------------------------------------- ------------ --------
<S> <C> <C>
Charles Schwab & Co, Inc. 254,714.11 22.7%
101 California Street
San Francisco, CA 94101
National Financial Services Corp. 80,765.48 7.2%
82 Devonshire Street
Boston, MA 02109
</TABLE>
D-1
<PAGE>
To vote by telephone:
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903.
3) Enter the 12-digit control number set forth on the proxy card and
follow the simple instructions.
To vote by Internet:
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com.
3) Enter the 12-digit control number set forth on the proxy card and
follow the simple instructions.
- --------------------------------------------------------------------------------
PROXY
THE RUSHMORE FUND, INC.
U.S. GOVERNMENT BOND PORTFOLIO
ANNUAL MEETING OF SHAREHOLDERS
JUNE 1, 2000
The undersigned hereby appoints Stephenie E. Adams and Edward J.
Karpowicz, and each of them, as his/her attorneys and proxies with full power
of substitution to vote and act with respect to all shares of the Fund held by
the undersigned at the annual meeting of shareholders of the Fund to be held
at 9:30 a.m. Eastern Time on June 1, 2000 at 4922 Fairmont Avenue, Bethesda,
Maryland 20814, or as adjourned from time to time (the "Meeting"), and
instructs them to vote as indicated on the matters referred to in the Proxy
Statement for the Meeting, receipt of which is hereby acknowledged, with
discretionary power to vote upon such other business as may properly come
before the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE FUND. THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES AND FOR EACH OF
THE FOLLOWING PROPOSALS:
I. To elect the Board of Directors of the Fund.
Daniel L. O'Connor Jeffrey R. Ellis
Richard J. Garvey F. David Fowler
Louis T. Donatelli Patrick F. Noonan
Bruce C. Ellis Michael A. Willner
<PAGE>
/ / FOR ALL / / WITHHOLD ALL
/ / FOR ALL EXCEPT_______________________________________
(To withhold authority to vote, mark "For All Except" and write the
Nominee's number on the line below)
II. To approve a new investment advisory contract.
/ / FOR / / AGAINST / / ABSTAIN
III. To ratify the selection of independent auditors.
/ / FOR / / AGAINST / / ABSTAIN
IV. To transact such other business as may properly come before the
Meeting.
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND FOR ALL OF THE PROPOSALS.
<PAGE>
Receipt of the Notice of Meeting and Proxy Statement is hereby
acknowledged.
Dated __________________, 2000.
______________________________________________
Name of Shareholder(s) -- Please print or type
______________________________________________
Signature(s) of Shareholder(s)
______________________________________________
Signature(s) of Shareholder(s)
This proxy must be signed by the beneficial owner of Portfolio shares. If
signing as attorney, executor, guardian or in some representative capacity or as
an officer of a corporation, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
