BULL & BEAR QUALITY GROWTH FUND
March 25, 1996
Dear Shareholders:
Enclosed is the proxy statement and proxy card for a Special Meeting of
Shareholders of Bull & Bear Quality Growth Fund ("Growth Fund"). Please take
this opportunity to review the proxy statement and sign and return the enclosed
proxy card. Your vote is important and must be counted, no matter how many or
how few shares you own. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE PROPOSAL.
About the Proposal
The Board of Directors is asking shareholders to approve a proposal
that Growth Fund merge into and become part of Bull & Bear U.S. and Overseas
Fund ("Acquiring Fund"). If the proposal is approved and implemented, each
shareholder of Growth Fund automatically would become a shareholder of Acquiring
Fund. The Board concluded that it is in the best interests of Growth Fund to
combine with Acquiring Fund. The Board believes that combining the Funds will
benefit Growth Fund's shareholders by providing them with a portfolio that has
an investment objective similar to the investment objective of Growth Fund, but
with greater flexibility to achieve that objective.
Your Vote is Important - Please Return the Proxy Card Promptly
Your vote is extremely important and I urge you to complete and return
promptly the proxy card using the enclosed postage paid envelope. If you have
any questions, please call our Investor Service Representatives at
1-800-847-4200, who will be happy to assist you.
Sincerely,
Thomas B. Winmill
Co-President
PLEASE VOTE IMMEDIATELY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD.
Otherwise, your Fund may incur needless expense to solicit
sufficient votes for the meeting.
BULL & BEAR QUALITY GROWTH FUND
11 HANOVER SQUARE
NEW YORK, NEW YORK 10005
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NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
to be held on April 25, 1996
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TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Bull &
Bear Quality Growth Fund (the "Fund") will be held at the offices of the Fund at
11 Hanover Square, New York, New York 10005, on April 25, 1996, at 11:00 a.m.
Eastern time, for the following purposes:
1. Approval of an Agreement and Plan of Reorganization and Termination; and
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
You are entitled to vote at the meeting and any adjournment thereof if
you owned Fund shares at the close of business on February 15, 1996. If you do
not expect to attend the meeting, please complete, date, sign and return the
enclosed proxy card in the enclosed postage paid envelope.
By order of the Board of Directors,
William J. Maynard
Secretary
March 25, 1996
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATIONS, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY CARD PROMPTLY IF YOU DO NOT EXPECT TO
ATTEND THE MEETING. NO POSTAGE IS NECESSARY.
BULL & BEAR U.S. AND OVERSEAS FUND
BULL & BEAR QUALITY GROWTH FUND
(EACH A SERIES OF BULL & BEAR FUNDS I, INC.)
11 HANOVER SQUARE
NEW YORK, NEW YORK 10005
1-800-847-4200
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PROSPECTUS/PROXY STATEMENT
March 25, 1996
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished
to shareholders of Bull & Bear Quality Growth Fund ("Growth Fund") in connection
with the solicitation of proxies by the board of directors of Bull & Bear Funds
I, Inc. (the "Corporation"), on behalf of Growth Fund, for use at a special
meeting of shareholders to be held at the offices of the Corporation at 11
Hanover Square, New York, New York 10005, on April 25, 1996, at 11:00 a.m.
Eastern time, and at any adjournment thereof ("Meeting").
As more fully described in this Proxy Statement, the purpose of the
Meeting is to vote on a proposed reorganization ("Reorganization"). Under the
Reorganization, Bull & Bear U.S. and Overseas Fund ("Acquiring Fund"), a series
of the Corporation, would acquire the assets of Growth Fund in exchange solely
for shares of common stock of Acquiring Fund and the assumption by Acquiring
Fund of Growth Fund's liabilities. Those Acquiring Fund shares then would be
distributed to Growth Fund's shareholders so that each such shareholder would
receive a number of full and fractional shares of Acquiring Fund having an
aggregate net asset value that, on the effective date of the Reorganization, is
equal to the aggregate net asset value of the shareholder's shares in Growth
Fund. As soon as practicable following these distributions, Growth Fund will be
terminated.
Acquiring Fund is a non-diversified series of the Corporation, an
open-end management investment company. Acquiring Fund's investment objective is
to seek to obtain the highest possible total return on its assets from long term
growth of capital and from income principally through a portfolio of securities
of U.S. and foreign issuers.
This Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the Reorganization and Acquiring Fund
that a shareholder should know before voting. This Proxy Statement is
accompanied by the Prospectus of Acquiring Fund dated May 1, 1995, and Acquiring
Fund's Annual Report to Shareholders for the fiscal year ended December 31,
1995, which are incorporated by reference into this Proxy Statement. A Statement
of Additional Information dated March 25, 1996 relating to the Reorganization
and including Acquiring Fund's and Growth Fund's Annual Reports to Shareholders
for the fiscal year ended December 31, 1995 and pro forma financial statements,
and a Statement of Additional Information with respect to Acquiring Fund, dated
May 1, 1995 have been filed with the Securities and Exchange Commission ("SEC")
and are incorporated herein by this reference. The Prospectus of Growth Fund,
dated May 1, 1995, and Statement of Additional Information also dated May 1,
1995, have been filed with the SEC and are incorporated herein by this
reference. Copies of these documents may be obtained free of charge by
contacting your Investor Service Representative toll-free at 1-800-847-4200.
Voting Information.................................................2
Synopsis...........................................................3
Comparison of Principal Risk Factors...............................7
The Proposed Transaction...........................................9
Additional Information About Acquiring Fund.......................12
Miscellaneous.....................................................13
Appendix A - Agreement And Plan of Reorganization And Termination.A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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BULL & BEAR QUALITY GROWTH FUND
11 HANOVER SQUARE
NEW YORK, NEW YORK 10005
PROSPECTUS/PROXY STATEMENT
Special Meeting of Shareholders
to be Held on April 25, 1996
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VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished
to shareholders of Bull & Bear Quality Growth Fund ("Growth Fund") in connection
with the solicitation of proxies by the board of directors of Bull & Bear Funds
I, Inc. (the "Corporation"), on behalf of Growth Fund, for use at a special
meeting of shareholders of Growth Fund to be held at the offices of Growth Fund
at 11 Hanover Square, New York, New York 10005, on April 25, 1996, at 11:00 a.m.
Eastern time, and at any adjournment thereof ("Meeting"). This Proxy Statement
will first be mailed to shareholders on or about March 25, 1996.
At least one-third of the shares of Growth Fund outstanding on February
15, 1996, represented in person or by proxy, must be present for the transaction
of business by Growth Fund at the Meeting. If a quorum is not present at the
Meeting or a quorum is present but sufficient votes to approve the proposal are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares represented at
the Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR any such proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST any such
proposal against such adjournment.
Abstentions and broker non-votes will be counted as shares present for
purposes of determining whether a quorum is present but will not be voted for or
against any adjournment or proposal. Accordingly, abstentions and broker
non-votes effectively will be a vote against adjournment or against any proposal
where the required vote is a percentage of the shares present or outstanding.
Abstentions and broker non-votes will not be counted, however, as votes cast for
purposes of determining whether sufficient votes have been received to approve a
proposal. Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority.
The individuals named as proxies on the enclosed proxy card will vote
in accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of the
Agreement and Plan of Reorganization and Termination dated as of February 20,
1996 (the "Reorganization Plan") which is attached to this Proxy Statement as
Appendix A. Under the Reorganization Plan, Bull & Bear U.S. and Overseas Fund
("Acquiring Fund"), a series of the Corporation, would acquire the assets of
Growth Fund in exchange solely for shares of common stock of Acquiring Fund and
the assumption by Acquiring Fund of Growth Fund's liabilities; those shares then
would be distributed to Growth Fund's shareholders. ("Acquiring Fund" and
"Growth Fund" may be referred to herein individually as a "Fund" or,
collectively, as "Funds.") After completion of the Reorganization, Growth Fund
would be terminated.
In addition, if you sign, date and return the enclosed proxy card, but
give no voting instructions, the duly appointed proxies may, in their
discretion, vote upon such other matters as may come before the Meeting. The
proxy card may be revoked by giving another proxy or by letter or telegram
revoking such proxy. To be effective, such revocation must be received by the
Corporation prior to the Meeting and must indicate your name and account number.
In addition, if you attend the Meeting in person you may, if you wish, vote by
ballot at the Meeting, thereby canceling any proxy previously given.
- 2 -
As of February 15, 1996 (the "Record Date"), Growth Fund had 174,587.11
shares of common stock outstanding. The solicitation of proxies, the cost of
which will be borne by Bull & Bear Advisers, Inc. (the "Investment Manager"),
will be made primarily by mail but also may include telephone or oral
communications by representatives of the Investment Manager, who will not
receive any compensation therefor from the Funds, or by Shareholder
Communications Corporation, professional proxy solicitors retained by the
Corporation, for a fee of $2,500 for soliciting services. As of the record date,
PaineWebber Inc., 1000 Harbor Blvd., Weehawken, NJ 07087, beneficially owned
17,640.64 shares, representing approximately 10.10% of Growth Fund's outstanding
shares, and Prudential Securities Inc., One New York Plaza, New York, NY 10292,
beneficially owned 9,160.83 shares, representing approximately 5.25% of Growth
Fund's outstanding shares. Management does not know of any other single
shareholder or "group" (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934) who beneficially owns 5% or more of the shares. Directors
and officers of the Corporation own in the aggregate less than 1% of the shares
of Acquiring Fund.
Under Maryland law, the affirmative vote of a majority of the
outstanding shares of Growth Fund entitled to vote at the Meeting is required to
approve the Reorganization. Each outstanding full share of Growth Fund is
entitled to one vote, and each outstanding fractional share of Growth Fund is
entitled to a proportionate share of one vote. Although the shareholders of
Growth Fund may exchange or redeem out of the Fund, they do not have appraisal
rights.
PROPOSAL 1: APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION AND
TERMINATION.
SYNOPSIS
The following is a summary of certain information contained elsewhere
in this Proxy Statement, the Prospectuses of the Funds (which are incorporated
herein by reference), and the Reorganization Plan. Shareholders should read this
Prospectus/Proxy Statement and the Prospectus of Acquiring Fund carefully. As
discussed more fully below, the board of directors of the Corporation believes
that the Reorganization will benefit Growth Fund's shareholders. Acquiring Fund
has an investment objective similar to the investment objective of Growth Fund,
although its investment policies and strategies differ from those of Growth Fund
in some respects. It is anticipated that, following the Reorganization, Growth
Fund's shareholders will, as shareholders of Acquiring Fund, be subject to
comparable total operating expenses as a percentage of net assets as those
experienced by Growth Fund during its fiscal year ended December 31, 1995.
THE REORGANIZATION
The board of directors of the Corporation voted to approve the
Reorganization Plan at a meeting held on February 15, 1996. The Reorganization
Plan provides for the acquisition by Acquiring Fund of the assets of Growth Fund
in exchange solely for shares of Acquiring Fund and the assumption by Acquiring
Fund of the liabilities of Growth Fund. Growth Fund then will distribute the
Acquiring Fund shares to its shareholders, so that each shareholder will receive
the number of full and fractional shares of Acquiring Fund that is equal in
value to such shareholder's holdings in Growth Fund as of the Closing Date
(defined below). Growth Fund then will be terminated as soon as practicable
thereafter.
The exchange of Growth Fund's assets for Acquiring Fund shares and
Acquiring Fund's assumption of Growth Fund's liabilities will occur at or as of
4:00 p.m., Eastern time, on April 26, 1996, or such later date as the conditions
to the closing are satisfied ("Closing Date").
For the reasons set forth below under "The Proposed Transaction --
Reasons for the Reorganization," the board of directors of the Corporation, on
behalf of Growth Fund, including the directors who are not "interested persons,"
as that term is defined in the Investment Company Act of 1940 ("1940 Act") (the
"Independent Directors"), has determined that the Reorganization is in the best
interests of Growth Fund, that the terms of the Reorganization are fair and
reasonable and that the interests of Growth Fund's shareholders will not be
diluted as a result of the Reorganization. Accordingly, the board of directors
of the Corporation, on behalf of Growth Fund, recommends approval of the
Reorganization. In addition, the board of directors of the Corporation, on
behalf of Acquiring Fund, including its Independent Directors, has determined
that the Reorganization is in the best interests of Acquiring Fund, that the
terms of the Reorganization are fair and reasonable and that the interests of
Acquiring Fund's shareholders will not be diluted as a result of the
Reorganization.
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COMPARATIVE FEE TABLE
Certain fees and expenses that Growth Fund's shareholders pay, directly
or indirectly, are different from those incurred by Acquiring Fund shareholders.
Until Growth Fund's net assets reach $5 million, the Investment Manager receives
no fee for its services as Growth Fund's investment manager. Thereafter, the
Investment Manager is paid a fee for its investment management services at the
annual rate of 1.00% of Growth Fund's average daily net assets up to $10
million, 7/8th of 1% over $10 million up to $30 million, 3/4th of 1% over $30
million up to $150 million, 5/8th of 1% over $150 million up to $500 million,
and 1/2 of 1% over $500 million. With respect to Acquiring Fund, the Investment
Manager is paid a fee for its investment management services at the annual rate
of 1.00% of Acquiring Fund's average daily net assets up to $10 million, 7/8th
of 1% over $10 million up to $30 million, 3/4th of 1% over $30 million up to
$150 million, 5/8th of 1% over $150 million up to $500 million, and 1/2 of 1%
over $500 million. These fees are higher than those paid by most investment
companies.
The following tables show (1) transaction expenses currently incurred
by shareholders of Acquiring Fund and Growth Fund and transaction expenses that
each shareholder will incur after giving effect to the Reorganization and (2)
the annual Fund operating expenses incurred by Growth Fund and Acquiring Fund
for the fiscal year ended December 31, 1995 and pro forma fees for Acquiring
Fund shares after giving effect to the Reorganization.
SHAREHOLDER TRANSACTION EXPENSES
Growth Acquiring Combined
Fund Fund Fund
Sales load imposed on purchases NONE NONE NONE
Sales load imposed on reinvested dividends NONE NONE NONE
Deferred sales load NONE NONE NONE
Redemption fee within 30 days of purchase 1.00% 1.00% 1.00%
Redemption fee after 30 days of purchase NONE NONE NONE
Exchange fee NONE NONE NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Acquiring Combined Fund
Growth Fund(1)(2) Fund(2) (Pro Forma)
Investment Management Fees(2) 0.00% 0.99% 0.97%
(after reimbursement)
12b-1 Fees(3) 1.00% 1.00% 1.00%
Other Expenses(4) 2.71% 1.56% 1.56%
Total Fund Operating Expenses 3.71% 3.55% 3.53%
(after reimbursement)
(1) The percentages given for Growth Fund's annual fund operating expenses are
based on an assumed level of average net assets of $2.2 million.
(2) Without the Investment Manager's expense guarantee, investment management
fees and certain operating expenses for Acquiring Fund and Growth Fund would
have been higher. For Acquiring Fund, investment management fees would have been
1.00%, other expenses would have been 1.84%, and total Fund operating expenses
would have been 3.84% of average net assets, respectively. For Growth Fund,
other expenses would have been 3.30% and total Fund operating expenses would
have been 4.30% of average net assets, respectively.
- 4 -
(3) Long term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc.'s ("NASD") rules regarding investment companies.
(4) "Other Expenses" include amounts (a) paid to each Fund's custodian and to
each Fund's transfer agent and (b) reimbursable to the Investment Manager and
each Fund's distributor for certain administrative and shareholder services, and
does not include interest expense from each Fund's bank borrowings.
EXAMPLE OF EFFECT OF FUND EXPENSES
The following illustrates the expenses on a $1,000 investment under the
fees and expenses stated above, assuming a 5% annual return and a redemption at
the end of each time period.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Growth Fund $37 $113 $192 $396
Acquiring Fund $36 $109 $184 $382
Combined Fund $36 $108 $183 $380
This Example assumes the reinvestment of all dividends and other
distributions and uses an assumed 5% annual rate of return as required by the
Securities and Exchange Commission ("SEC"). THE EXAMPLE IS AN ILLUSTRATION ONLY
AND SHOULD NOT BE CONSIDERED AN INDICATION OF PAST OR FUTURE RETURNS OR
EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FORM OF ORGANIZATION
Acquiring Fund and Growth Fund are each series of the Corporation, an
open-end management investment company organized as a Maryland corporation. The
Corporation was organized under the laws of Maryland in 1986. Prior to September
23, 1993, the Corporation operated under the name Bull & Bear U.S. and Overseas
Fund Ltd. The Corporation is authorized to issue up to 1 billion shares ($.01
par value) of common stock, 250 million shares of which have been designated to
Acquiring Fund and 250 million shares of which have been designated to Growth
Fund. The Corporation's board of directors may establish one or more other
series, although it has no current intention of doing so.
Each Fund's shares are freely assignable by way of pledge (as, for
example, for collateral purposes), gift, settlement of an estate and also by an
investor to another investor. Each share has equal dividend, voting, liquidation
and redemption rights with every other share. The shares have no preemptive,
conversion or cumulative voting rights and they are not subject to further call
or assessment.
Neither Fund holds shareholder meetings annually except as required by
law. Stock certificates for either Fund will be issued only for full shares when
requested in writing.
INVESTMENT OBJECTIVES AND POLICIES
The Funds have similar investment objectives, although their investment
policies differ in some respects. The investment objective and certain
investment policies of each Fund are set forth below. There can be no assurance
that either Fund will achieve its investment objective, and each Fund's net
asset value fluctuates based upon changes in the value of its portfolio
securities.
ACQUIRING FUND. The investment objective of Acquiring Fund is to seek
to obtain the highest possible total return on its assets from long term growth
of capital and from income principally through a portfolio of securities of U.S.
and overseas issuers. There is no limitation on the percent or amount of the
Fund's assets which may be invested for growth of capital or income, and at any
time the investment emphasis may be placed solely or primarily on growth of
capital or solely or primarily on income.
Acquiring Fund may invest in any type of security including common
stocks, convertible securities, preferred stocks, bonds, notes, and other debt
securities (including Eurodollar securities), warrants, obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, or by
foreign governments and their political subdivisions,
- 5 -
money market instruments such as bankers' acceptances, commercial paper, short
term corporate debt securities, and repurchase agreements. The Fund may also
engage in options, futures, and forward currency transactions.
Acquiring Fund may invest in companies based in (or governments of or
within) Europe, the Far East, Australia, the United States, Canada, South and
Central America, and such other areas and countries as the Investment Manager
may determine. Under normal market conditions, the Fund's assets will be
invested in at least three different countries, including the United States.
There are no limitations on the relative amounts of the Fund's assets that may
be invested in any one country.
When seeking income, Acquiring Fund will normally invest in investment
grade fixed income securities of varying maturities, depending upon the
Investment Manager's evaluation of market patterns and trends. The Fund may
invest up to 35% of its assets in fixed income securities rated below investment
grade, although it has no current intention of investing more than 5% of its
assets in such securities during the coming year. The Fund may invest without
limit in unrated securities. For temporary defensive purposes, the Fund may
invest all or a portion of its assets in high grade fixed income securities.
GROWTH FUND. Growth Fund seeks growth of capital as its principal
investment objective and, secondarily, income. The Fund invests primarily in
common stocks of large, quality companies considered to have the potential for
significant growth of earnings and dividends. Under normal conditions, the Fund
will invest at least 65%, and may invest up to 100%, of its total assets in the
common stocks of such companies.
In addition to the type of common stocks described above, Growth Fund
may invest up to 35% of its total assets in other investments, including
preferred stocks, debt and other fixed income securities, securities convertible
into or exchangeable for common or preferred stocks, warrants and rights of
foreign or domestic issuers, and common stocks of domestic or foreign issuers
that do not have the characteristics set forth in the Fund's principal
investment policy. The Fund may invest without limit in high grade debt
securities, securities of the U.S. Government, its agencies or
instrumentalities, and money market instruments, including repurchase
agreements, or retain cash when as a result of market conditions, a defensive
position is deemed advisable to help preserve capital or for other temporary
purposes.
Growth Fund may employ the following other investment strategies in
seeking to achieve its investment objectives, although it has no intention of
doing so in such a manner that any one strategy would involve more than 5% of
the Fund's total assets: lending its portfolio securities; transactions in put
and call options on securities, indexes, and foreign currencies, and futures
contracts on interest rates, stock and bond indexes, and foreign currencies and
options thereon; and, forward foreign currency contracts. The Fund also has no
current intention of investing more than 5% of its total assets in convertible
securities, foreign securities or fixed income securities rated below investment
grade.
OTHER POLICIES. Each Fund may borrow money from banks for temporary or
emergency purposes and engage in reverse repurchase agreements, but not in
excess of an amount equal to one-third of the Fund's total assets. Acquiring
Fund has no current intention of engaging in reverse repurchase agreements.
Acquiring Fund may engage in short sales "against the box."
OPERATIONS OF ACQUIRING FUND FOLLOWING THE REORGANIZATION
While there are differences in the Funds' investment policies, it is
not expected that Acquiring Fund will revise its investment policies following
the Reorganization to reflect those of Growth Fund. Because Growth Fund is
permitted to invest in securities having characteristics different from those
permitted for Acquiring Fund, certain of the securities currently held in Growth
Fund's portfolio may need to be sold, rather than transferred to Acquiring Fund.
If the Reorganization is approved, Growth Fund will sell, prior to the effective
date of the Reorganization, any assets if necessary that are inconsistent with
the investment policies of Acquiring Fund, and the proceeds thereof will be held
in temporary investments or reinvested in assets that qualify to be held by
Acquiring Fund. The necessity for Growth Fund to dispose of assets prior to the
effective date of the Reorganization may result in selling securities at a
disadvantageous time and could result in Growth Fund's realizing losses that
would not otherwise have been realized.
Following the Reorganization, the directors and officers of the
Corporation, the Investment Manager and Acquiring Fund's distributor and other
outside agents will continue to serve Acquiring Fund in their current
capacities. Acquiring Fund's Portfolio Manager since 1994 has been Brett B.
Sneed. Mr. Sneed is Senior Vice President and a member of the Investment Policy
Committee of the Investment Manager. Mr. Sneed was formerly Vice President of
Morgan Stanley Asset
- 6 -
Management, Inc., a security analyst with Argus Research and a portfolio manager
and member of the finance and investment committees of American International
Group, Inc., a major insurance company. He is a Chartered Financial Analyst, a
member of the Association for Investment Management and Research, and a member
of the New York Society of Security Analysts.
PURCHASES, REDEMPTIONS AND EXCHANGES
Shares of each Fund are available through Investor Service Center,
Inc., each Fund's distributor (the "Distributor"). The minimum initial
investment in either Fund is $1,000 for regular and gifts/transfers to minors
custody accounts, and $500 for Bull & Bear retirement plans. The minimum
subsequent investment is $100. The initial investment minimums may be waived
under some circumstances.
Shares of each Fund may be redeemed at their particular net asset value
per share next determined after receipt of the redemption request in proper
form. Payment for shares redeemed will be made as soon as possible, ordinarily
within seven days after receipt of the redemption request in proper form.
Shares of either Fund with a value of at least $500 may be exchanged
for shares of any other Bull & Bear Fund (provided the registration is exactly
the same, the shares may be sold in your state of residence, and the exchange
may otherwise legally be made).
If the Reorganization is approved, Growth Fund shares will cease to be
offered on April 26, 1996, so that shares of Growth Fund will no longer be
available for purchase or exchange thereafter. If the Meeting is adjourned and
the Reorganization is approved on a later date, Growth Fund shares will no
longer be available for purchase or exchange on the next business day following
the date on which the Reorganization is approved and all contingencies have been
met. Redemptions of Growth Fund's shares and exchanges of such shares for shares
of other Bull & Bear Funds may be effected through the Closing Date.
DISTRIBUTIONS
Each Fund pays dividends annually to its shareholders from its net
investment income, if any. Each Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared, and payable to
shareholders of record, on a date in December of each year. Such distributions
may be paid in January of the following year, in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. Each
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains.
On or before the Closing Date, Growth Fund will declare a dividend of
substantially all of its net investment income and a distribution of
substantially all of its net capital gain (the excess of net long term capital
gain over net short term capital loss), net short term capital gain and net
foreign currency gains, if any, and distribute those amounts plus any previously
declared but unpaid dividends, in order to continue to maintain its tax status
as a regulated investment company. Such distributions are expected to be fully
taxable to Growth Fund shareholders, with the portion thereof attributable to
net capital gain being treated as long term capital gains by shareholders who
hold their Growth Fund shares as capital assets.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Corporation, on behalf of each Fund, has received an opinion of
Kirkpatrick & Lockhart LLP, its counsel, to the effect that the Reorganization
will constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, no gain or loss will be recognized to either Fund or its
shareholders as a result of the Reorganization. See "The Proposed
Transaction--Federal Income Tax Considerations."
COMPARISON OF PRINCIPAL RISK FACTORS
Because the Funds' investment policies and strategies differ, the
Funds' investment risks also differ. Certain differences between the two Funds
are identified below. See the Acquiring Fund Prospectus for a more detailed
discussion
- 7 -
of the investment risks of Acquiring Fund, and see the Growth Fund Prospectus
for a more detailed discussion of the risks of Growth Fund.
FOREIGN INVESTING. Acquiring Fund may invest without limit in foreign
securities. In contrast, Growth Fund has no current intention of investing more
than 5% of its total assets in such securities. Investing in foreign securities,
which are generally denominated in foreign currencies, and utilization of
forward contracts on foreign currencies involves certain considerations
comprising both risk and opportunity not typically associated with investing in
U.S. securities. These considerations include: fluctuations in currency exchange
rates; restrictions on foreign investment and repatriation of capital; costs of
converting foreign currency into U.S. dollars; greater price volatility and
trading illiquidity; less public information on issuers of securities;
difficulty in enforcing legal rights outside of the United States; lack of
uniform accounting, auditing and financial reporting standards; the possible
imposition of foreign taxes, exchange controls and currency restrictions; and
the possible greater political, economic and social instability of developing as
well as developed countries including without limitation, nationalization,
expropriation of assets, and war. These risks are often heightened for
investments in developing countries and emerging markets or when Acquiring
Fund's investments are concentrated in a small number of countries. In addition,
because transactional and custodial expenses for foreign securities are
generally higher than for domestic securities, the expense ratio of Acquiring
Fund can be expected to be higher than that of investment companies investing
exclusively in domestic securities.
FIXED INCOME INVESTING. Each Fund may invest up to 35% of its assets in
fixed income securities rated below investment grade, although neither Fund has
any current intention of investing more than 5% of its assets in such securities
during the coming year. Acquiring Fund may also invest without limits in unrated
securities. Investment grade securities are those rated in the top four
categories by a nationally recognized statistical rating organization such as
Standard & Poor's Ratings Services or Moody's Investors Service, Inc.,
("Moody's") or, if unrated, are determined by the Investment Manager to be of
comparable quality. Moody's considers securities in the fourth highest category
to have speculative characteristics. Securities rated below investment grade and
many unrated securities may be considered predominantly speculative and subject
to greater market fluctuations and risks of loss of income and principal than
higher rated fixed income securities.
The market value of fixed income securities usually is affected by
changes in the level of interest rates. An increase in interest rates tends to
reduce the market value of such investments, and a decline in interest rates
tends to increase their value. In addition, fixed income securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. Fluctuations in the market value of fixed income securities
subsequent to their acquisition do not affect cash income from such securities
but are reflected in the Fund's net asset value.
HEDGING AND INCOME STRATEGIES. Each Fund may engage in options, futures
and forward currency transactions to hedge or to enhance return, although Growth
Fund has no current intention of involving more than 5% of its total assets in
any one such strategy. There can be no assurance that any strategy employing
these instruments will be successful. The loss from investing in futures
transactions is potentially unlimited. Options and futures may fail as hedging
techniques in cases where price movements of the securities underlying the
options and futures do not follow the price movements of the portfolio
securities subject to the hedge. Gains and losses on investments in options and
futures depend on the ability of the Investment Manager to predict correctly the
direction of stock prices, interest rates, and other economic factors. In
addition, the Fund will likely be unable to control losses by closing its
position where a liquid secondary market does not exist and there is no
assurance that a liquid secondary market for hedging instruments will always
exist. It also may be necessary to defer closing out hedged positions to avoid
adverse tax consequences. The correlation between hedging instru ments and the
securities or sectors being hedged also may be imperfect. The percentage of the
Fund's assets segregated to cover its obligations under options, futures, or
forward contracts could impede effective portfolio management or the ability to
meet redemption or other current obligations.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements
with U.S. banks or dealers involving securities in which the Fund is authorized
to invest. To attempt to limit the risk of engaging in repurchase agreements,
each Fund enters into repurchase agreements only with banks and dealers believed
by the Investment Manager to present minimal credit risks in accordance with
guidelines established by its board of directors. Each Fund will not enter into
a repurchase agreement with a maturity of more than seven days, if, as a result,
more than 15% of its net assets would then be invested in such agreements and
other illiquid securities.
- 8 -
OTHER INFORMATION. Each Fund is "non-diversified," as defined in the
1940 Act, but intends to continue to qualify as a regulated investment company
for Federal income tax purposes. This means, in general, that more than 5% of
each Fund's total assets may be invested in the securities of one issuer
(including a foreign government), but only if at the close of each quarter of
each Fund's taxable year, the aggregate amount of such holdings does not exceed
50% of the value of its total assets and no more than 25% of the value of its
total assets is invested in the securities of a single issuer. To the extent
that each Fund's portfolio at times may include the securities of a smaller
number of issuers than if it were diversified (as defined in the 1940 Act), each
Fund will at such times be subject to greater risk with respect to its portfolio
securities than an investment company that invests in a broader range of
securities in that changes in the financial condition or market assessment of a
single issuer may cause greater fluctuation in the Fund's total return and the
price of Fund shares.
THE PROPOSED TRANSACTION
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, which is attached as
Appendix A to this Proxy Statement.
The Reorganization Plan contemplates (1) Acquiring Fund's acquiring on
the Closing Date the assets of Growth Fund in exchange solely for shares of
Acquiring Fund and the assumption by Acquiring Fund of Growth Fund's liabilities
and (2) the constructive distribution of such shares of Acquiring Fund to the
shareholders of Growth Fund.
The assets of Growth Fund to be acquired by Acquiring Fund include all
cash, cash equivalents, securities, receivables and other property owned by
Growth Fund. Acquiring Fund will assume from Growth Fund all debts, liabilities,
obligations and duties of Growth Fund of whatever kind or nature; provided,
however, that Growth Fund will use its best efforts, to the extent practicable,
to discharge all of its known debts, liabilities, obligations and duties prior
to the Closing Date. Acquiring Fund also will deliver to Growth Fund shares of
Acquiring Fund, which then will be constructively distributed to Growth Fund's
shareholders. Growth Fund will be terminated as soon as practicable thereafter.
The value of Growth Fund's assets to be acquired, and the amount of its
liabilities to be assumed, by Acquiring Fund and the net asset value of a share
of Acquiring Fund will be determined as of the close of regular trading on the
NYSE on the Closing Date. Portfolio securities and other assets of the Fund are
valued primarily on the basis of market quotations, if readily available.
Foreign securities, if any, are valued on the basis of quotations from a primary
market in which they are traded and are translated from the local currency into
U.S. dollars using current exchange rates. Securities, and other assets for
which quotations are not readily available will be valued at fair value as
determined in good faith by or under the direction of the Corporation's board of
directors.
On, or as soon as practicable after the Closing Date, Growth Fund will
distribute pro rata to its shareholders of record the shares of Acquiring Fund
it received so that each Growth Fund shareholder will receive a number of full
and fractional shares of Acquiring Fund equal in value to the shareholder's
holdings in Growth Fund. Such distribution will be accomplished by opening
accounts on the books of Acquiring Fund in the names of Growth Fund's
shareholders and by transferring thereto the shares of Acquiring Fund previously
credited to the account of Growth Fund on those books.
Fractional shares of Acquiring Fund will be rounded to the third decimal place.
Accordingly, immediately after the Reorganization, each former
shareholder of Growth Fund will own shares of Acquiring Fund that will be equal
in value to that shareholder's shares of Growth Fund immediately prior to the
Reorganization. Moreover, because shares of Acquiring Fund will be issued at net
asset value in exchange for the net assets of Growth Fund, the aggregate value
of Acquiring Fund shares so issued will equal the aggregate value of Growth Fund
shares. The net asset value per share of Acquiring Fund will be unchanged by the
transaction. Thus, the Reorganization will not result in a dilution of any
shareholder's interest.
Any transfer taxes payable upon issuance of shares of Acquiring Fund in
a name other than that of the registered holder of the shares on the books of
Growth Fund shall be paid by the person to whom such shares are to be issued as
a condition of such transfer. Any reporting responsibility of Growth Fund will
continue to be its responsibility up to and including the Closing Date and such
later date on which it is terminated.
- 9 -
The cost of the Reorganization, including professional fees and the
cost of soliciting proxies for the Meeting, consisting principally of printing
and mailing expenses, together with the cost of any supplementary solicitation,
will be borne by the Investment Manager.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Reorganization Plan, some of which may be waived by
Growth Fund or Acquiring Fund. In addition, the Reorganization Plan may be
amended in any mutually agreeable manner, except that no amendment may be made
subsequent to the Meeting that would have a material adverse effect on the
shareholders' interests.
REASONS FOR THE REORGANIZATION
The board of directors of the Corporation, on behalf of Growth Fund,
including a majority of its Independent Directors, has determined that the
Reorganization is in the best interests of Growth Fund, that the terms of the
Reorganization are fair and reasonable and that the interests of Growth Fund's
shareholders will not be diluted as a result of the Reorganization. The board of
directors of the Corporation, on behalf of Acquiring Fund, including a majority
of its Independent Directors, has determined that the Reorganization is in the
best interests of Acquiring Fund, that the terms of the Reorganization are fair
and reasonable and that the interests of Acquiring Fund's shareholders will not
be diluted as a result of the Reorganization.
In considering the Reorganization, the Corporation's board of directors
made an extensive inquiry into a number of factors, including the following:
(1) the similarity of the investment objectives, policies and
restrictions of the Funds;
(2) the effect of the Reorganization on expected investment
performance;
(3) the effect of the Reorganization on the expense ratio of
Acquiring Fund (after the Reorganization) relativ to each
Fund's current expense ratio;
(4) the costs to be incurred by each Fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) possible alternatives to the Reorganization, including continuing to
operate on a stand-alone basis or liquidation; and
(7) the potential benefits of the Reorganization to other persons,
especially the Investment Manager and its affiliates.
The Reorganization was recommended to the board of directors of the
Corporation by the Investment Manager at a meeting of the board of directors
held on February 15, 1996. The board was advised by Investment Manager that the
Funds have similar investment objectives. The Investment Manager noted, however,
that the investment policies of Acquiring Fund differ from those of Growth Fund
in that, among other things, Acquiring Fund may invest without limit in foreign
securities. In approving the proposed transactions, the board of directors took
into account the Investment Manager's opinion that Acquiring Fund's objective of
seeking to obtain the highest possible total return on its assets from long term
growth of capital and from income principally through a portfolio of securities
of U.S. and overseas issuers remains an appropriate one to offer to investors as
part of an overall investment strategy. The Investment Manager further advised
the board that, while past performance is no guarantee of future results,
Acquiring Fund has experienced better investment performance on average than
Growth Fund during the recent time period. The Investment Manager also advised
the board that Growth Fund's net assets have not increased as projected,
contributing to that Fund's relatively high expense ratios and creating
difficulties with respect to portfolio management. The Investment Manager
further noted that Growth Fund's high expense ratio hindered its performance and
made it more difficult for Growth Fund to increase its assets. The board was
further advised that the amount of expenses reimbursed by the Investment Manager
following the reorganization would be less than the amount it currently
reimburses for each Fund on a combined basis, thus benefitting the Investment
Manager, and that the costs of the Reorganization would be borne by the
Investment Manager.
In recommending the Reorganization, the Investment Manager advised the
board that combining the Funds would result in a comparable expense ratio for
Acquiring Fund shareholders as a percentage of net assets. The board was further
advised that the reorganization would be tax free. The board discussed the fact
that unrealized appreciation in Acquiring Fund assets could result in Growth
Fund shareholders experiencing taxable capital gains that they would otherwise
not have experienced. The board recognized, however, that whether or not such
gains would be realized was speculative.
- 10 -
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
OF GROWTH FUND VOTE "FOR" THE PROPOSED REORGANIZATION.
DESCRIPTION OF SECURITIES TO BE ISSUED
The Corporation is registered with the SEC as an open-end management
investment company. Its directors are authorized to issue 1 billion shares of
common stock of separate series (par value $.01 per share). The directors have
established Acquiring Fund as one of the Corporation's series. Each share in
Acquiring Fund represents an equal proportionate interest in Acquiring Fund with
each other share in the Fund. Shares of Acquiring Fund entitle their holders to
one vote per full share and fractional votes for fractional shares held. On the
Closing Date, Acquiring Fund will have outstanding one class of shares. Each
share of Acquiring Fund will be entitled to participate equally in dividends and
the proceeds of any liquidation.
The Corporation does not hold meetings of shareholders annually. There
will normally be no meetings of shareholders for the purpose of electing
directors unless fewer than a majority of the directors holding office has been
elected by shareholders, at which time the directors then in office will call a
shareholders' meeting for the election of directors. Under the 1940 Act,
shareholders of record of at least two-thirds of the outstanding shares of an
investment company may remove a director by votes cast in person or by proxy at
a meeting called for that purpose. The directors are required to call a meeting
of shareholders for the purpose of voting upon the question of removal of any
director when requested in writing to do so by the shareholders of record
holding at least 10% of the Corporation's outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Growth Fund's assets for shares of Acquiring Fund and
Acquiring Fund's assumption of Growth Fund's liabilities is intended to qualify
for federal income tax purposes as a tax-free reorganization under section
368(a)(1)(C) of the Code. The Corporation, on behalf of each Fund, has received
an opinion of Kirkpatrick & Lockhart LLP, its counsel, substantially to the
effect that --
(1) Acquiring Fund's acquisition of Growth Fund's assets in exchange solely
for Acquiring Fund shares and Acquiring Fund's assumption of Growth
Fund's liabilities, followed by Growth Fund's distribution of those
shares pro rata to its shareholders constructively in exchange for
their Growth Fund shares, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of section 368(b) of the
Code;
(2) No gain or loss will be recognized to Growth Fund on the transfer to
Acquiring Fund of its assets in exchange solely for Acquiring Fund
shares and Acquiring Fund's assumption of Growth Fund's liabilities or
on the subsequent distribution of those shares to Growth Fund's
shareholders in constructive exchange for their Growth Fund shares;
(3) No gain or loss will be recognized to Acquiring Fund on its receipt of
the transferred assets in exchange solely for Acquiring Fund shares and
its assumption of Growth Fund's liabilities;
(4) Acquiring Fund's basis for the transferred assets will be the same as
the basis thereof in Growth Fund's hands immediately before the
Reorganization, and Acquiring Fund's holding period for those assets
will include Growth Fund's holding period therefor;
(5) A Growth Fund shareholder will recognize no gain or loss on the
constructive exchange of all its Growth Fund shares solely for
Acquiring Fund shares pursuant to the Reorganization; and
(6) A Growth Fund shareholder's basis for the Acquiring Fund shares to be
received by it in the Reorganization will be the same as the basis for
its Growth Fund shares to be constructively surrendered in exchange for
those Acquiring Fund shares, and its holding period for those Acquiring
Fund shares will include its holding period for those Growth Fund
shares, provided they are held as capital assets by the shareholder on
the Closing Date.
Such opinion states that no opinion is expressed as to the effect of the
Reorganization on the Funds or any shareholder with respect to any asset
(including certain options, futures, and forward contracts included in the
transferred assets) as to which
- 11 -
any unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
Utilization by Acquiring Fund after the Reorganization of
pre-Reorganization capital losses realized by Growth Fund could be subject to
limitation in future years under the Code.
Acquiring Fund has more unrealized appreciation of investments and
foreign currencies per share than Growth Fund which, if realized, may result in
more taxable distributions to Growth Fund shareholders than otherwise.
Shareholders of Growth Fund should consult their tax advisers regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
CAPITALIZATION
The following table shows the capitalization of each Fund as of
December 31, 1995 and on a pro forma combined basis (unaudited) as of that date,
giving effect to the Reorganization.
Growth Fund Acquiring Fund Combined
Net Assets $2,215,764 $9,807,779 $12,023,878
Net Asset Value Per Share $12.46 $8.36 $8.36
Shares Outstanding 177,817 1,173,429 1,438,473
ADDITIONAL INFORMATION ABOUT ACQUIRING FUND
FINANCIAL HIGHLIGHTS
Financial highlights are presented below for a share of capital stock
outstanding throughout each period for Acquiring Fund. The following information
is supplemental to the Fund's financial statements and report thereon of Tait,
Weller & Baker, independent accountants, appearing in the December 31, 1995
Annual Report to Shareholders and incorporated by reference in the Statement of
Additional Information. On February 26, 1992, the Fund adopted its present name
and investment objective. Prior thereto it was known as Bull & Bear Overseas
Fund Ltd. and sought to obtain the highest possible total return on its assets
from long term growth of capital and from income principally through a
diversified portfolio of marketable securities of non-U.S. companies.
Years Ended December 31,
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA* 1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------------------- ------ ------ ------ -----
Net asset value at beginning of period.................... $ 7.08 $ 8.71 $ 7.59 $ 8.37 $ 7.62 $ 8.46 $ 8.03 $ 7.46 $ 7.50
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss)............................ (.23) (.13) (.20) .04 .07 (.01) (.10) .03 .01
Net realized and unrealized gain (loss) on investments.. 2.00 (1.01) 2.22 (.25) 1.64 (.72) .99 .56 (.05)
------- ------- ----------------- ----- -------- ------- ----- -----
Total from investment operations...................... 1.77 (1.14) 2.02 (.21) 1.71 (.73) .89 .59 (.04)
------- ------- ----------------- ----- --------------- ---- ------
Less distributions:
Distributions from net realized gains on investments.... (.49) (.49) (.90) (.57) (.96) (.11) (.44) --- ---
------- ------- ------- ------- ------ -----------------------------
Net asset value at end of period.......................... $ 8.36 $ 7.08 $ 8.71$ 7.59$ 8.37 $ 7.62 $ 8.46 $8.03 $7.46
====== ====== ====================== ======= ======= ======= ====
</TABLE>
- 12 -
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL RETURN......................................... 25.11% (13.12)% 26.71% (2.57)%22.55% (8.61)% 11.10% 8.00% 0.60%
===== ====== ====== ===== ===== ====== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted).......... $9,808 $8,454 $12,250 $9,229 $1,275 $1,158 $1,149 $1,250 $1,042
Ratio of expenses to average net assets (a) (b)...... 3.55% 3.53% 3.55% 3.56% 3.56% 3.50% 3.50% 3.02% 3.20%
Ratio of net investment income (loss) to average net (2.85)% (1.65)% (2.36)% 0.51% 0.90% (0.09)% (1.29)% 0.44% 0.58%
assets (c)...........................................
Portfolio turnover rate.............................. 214% 212% 182% 175% 208% 270% 178% 140% 18%
==== === === ==== ==== ==== ==== ====
</TABLE>
* Per share net investment income (loss) and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share. The
financial highlights for 1991 have been restated to reflect the 100% stock
dividend effective February 24, 1992.
(a)Ratio prior to reimbursement by the Investment Manager was 3.84%, 3.59%,
3.69%, 4.09% and 13.35% for the years ended December 31, 1995, 1994,
1993, 1992 and 1991, respectively.
(b)Ratio after the reduction of custodian fees under a custodian agreement
was 3.49%. Prior to 1995, such reductions were reflected in the expense
ratios.
(c)Ratio prior to reimbursement by the Investment Manager was (3.14)%,
(1.71)%, (2.50)%, (0.02)% and (8.89)% for the years ended December 31,
1995, 1994, 1993, 1992 and 1991, respectively.
MISCELLANEOUS
AVAILABLE INFORMATION
Growth Fund and Acquiring Fund are each subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith file reports, proxy material and other information with the
SEC. Such reports, proxy material and other information can be inspected and
copied at the Public Reference Room maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material can also be obtained from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549 at
prescribed rates.
LEGAL MATTERS
Certain legal matters in connection with the issuance of Acquiring Fund
shares will be passed upon by Kirkpatrick & Lockhart LLP, counsel to the
Corporation.
EXPERTS
The audited financial statements of Acquiring Fund and Growth Fund,
incorporated by reference herein and in each Fund's respective Statement of
Additional Information, have been audited by Tait, Weller & Baker, independent
accountants, whose reports thereon are included in the each Fund's Annual Report
to Shareholders for the fiscal year ended December 31, 1995. The financial
statements audited by Tait, Weller & Baker have been incorporated by reference
herein and in the Statement of Additional Information in reliance on their
reports given on their authority as experts in auditing and accounting.
- 13 -
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is made
of February 20, 1996, between Bull & Bear Funds I, Inc. ("Corporation"), on
behalf of Bull & Bear U.S. and Overseas Fund, a segregated portfolio of assets
("series") thereof ("Acquiring Fund"), and the Corporation, on behalf of Bull &
Bear Quality Growth Fund, another series thereof ("Target"). (Acquiring Fund and
Target are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds.")
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets in exchange solely for voting shares of common
stock in Acquiring Fund ("Acquiring Fund Shares") and the assumption by
Acquiring Fund of Target's liabilities, followed by the constructive
distribution of the Acquiring Fund Shares to the holders of shares of common
stock in Target ("Target Shares") in exchange therefor, all upon the terms and
conditions set forth herein. The foregoing transactions are referred to herein
as the "Reorganization." All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by the Corporation on its behalf.
In consideration of the mutual promises herein, the parties covenant
and agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all
of its assets described in paragraph 1.2 ("Assets") to Acquiring
Fund. Acquiring Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and
fractional Acquiring Fund Shares determined by dividing the net value
of Target (computed as set forth in paragraph 2.1) by the net asset
value (computed as set forth in paragraph 2.2) ("NAV") of an Acquiring
Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided
herein) all of Target's liabilities, debts, obligations, and duties of whatever
kind or nature, whether absolute, accrued, contingent, or otherwise, whether or
not arising in the ordinary course of business, whether or not determinable at
the Effective Time, and whether or not specifically referred to in this
Agreement, including without limitation Target's share of the expenses described
in paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. Before the Effective Time, Target shall declare and pay to its
shareholders a dividend and/or other distribution in an amount large enough so
that it will have distributed substantially all (and in any event not less than
90%) of its investment company taxable income (computed without regard to any
deduction for dividends paid) and realized net capital gain, if any, for the
current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring
A-1
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective pro rata number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder. All outstanding
Target Shares, including any represented by certificates, shall simultaneously
be canceled on Target's share transfer records. Acquiring Fund will issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization only for full Acquiring Fund Shares when requested in
writing.
1.6. As soon as reasonably practicable after distribution of the
Acquiring Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a
series of the Corporation and any further actions shall be taken in connection
therewith as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is
and shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares
in a name other than that of the registered holder on Target's books of the
Target Shares constructively exchanged therefor shall be paid by the person to
whom such Acquiring Fund Shares are to be issued, as a condition of such
transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a)
the value of the Assets computed as of 4:00 p.m. on the date of the Closing
("Valuation Time"), using the valuation procedures set forth in Target's
then-current prospectus and statement of additional information less (b) the
amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund
Share shall be computed as of the Valuation Time, using the valuation procedures
set forth in Acquiring Fund's then-current prospectus and statement of
additional information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made
by or under the direction of the Corporation's Board of Directors.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Funds' principal office on
April 26, 1996, or at such other place and/or on such other date as the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of 4:00 p.m. on the date thereof or at such other time as the
parties may agree ("Effective Time"). If, immediately before the Valuation Time,
(a) the New York Stock Exchange, Inc. ("NYSE") is closed to trading or trading
thereon is restricted or (b) trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of the net value of Target
and the NAV per Acquiring Fund Share is impracticable, the Effective Time shall
be postponed until the first business day after the day when such trading shall
have been fully resumed and such reporting shall have been restored.
3.2. The Corporation shall deliver at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Target's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. The Corporation shall deliver at the Closing a list of the names
and addresses of the Shareholders and the number of outstanding Target Shares
owned by each Shareholder, all as of the Effective Time, certified by the
Corporation's Secretary or Assistant Secretary. The Transfer Agent shall deliver
at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. The Corporation shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited to Target at the Effective Time or provide evidence that such Acquiring
Fund Shares have been credited to Target's account on Acquiring Fund's books.
The
A-2
Corporation shall deliver at the Closing such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as may reasonably
be required.
3.4. The Corporation shall deliver at the Closing a certificate
executed in its name by a Co-President or a Vice President dated the Effective
Time, to the effect that the representations and warranties it made in this
Agreement are true and correct at the Effective Time except as they may be
affected by the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. The Corporation is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Maryland, and a copy of its Articles of Incorporation is on file with
the Department of Assessments and Taxation of Maryland ("Department");
4.1.2. The Corporation is duly registered as an open-end management
investment company under the Investment Company Act of 1940
("1940 Act"), and such registration will be in full force and
effect at the Effective Time;
4.1.3. Target is a duly established and designated series of the
Corporation;
4.1.4. At the Closing, Target will have good and marketable
title to the Assets and full right, power, and authority to sell,
assign, transfer, and deliver the Assets free of any liens or other
encumbrances; and upon delivery and payment for the Assets, Acquiring
Fund will acquire good and marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable
requirements of the Securities Act of 1933 ("1933 Act") and the 1940
Act and the rules and regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
4.1.6. Target is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby by Target will not conflict with or violate,
Maryland law or any provision of the Corporation's Articles of
Incorporation or By-Laws or of any agreement, instrument, lease, or
other undertaking to which Target is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a
party or by which it is bound, except as previously disclosed in
writing to and accepted by the Corporation on behalf of Acquiring Fund;
4.1.7. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, all material contracts and
other commitments of or applicable to Target (other than this Agreement
and investment contracts, including options, futures and forward
contracts) will be terminated, or provision for discharge of any
liabilities of Target thereunder will be made, at or prior to the
Effective Time, without either Fund's incurring any liability or
penalty with respect thereto and without diminishing or releasing any
rights Target may have had with respect to actions taken or omitted to
be taken by any other party thereto prior to the Closing;
4.1.8. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is presently pending or (to Target's knowledge) threatened against
the Corporation with respect to Target or any of its properties or
assets that, if adversely determined, would materially and adversely
affect Target's financial condition or the conduct of its business;
Target knows of no facts that might form the basis for the institution
of any such litigation, proceeding, or investigation and is not a party
to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated
hereby;
4.1.9. The execution, delivery, and performance of this
Agreement by Target have been duly authorized as of the date hereof by
all necessary action on the part of the Corporation's board of
directors, which has made
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the determinations required by Rule 17a-8(a) under the 1940 Act; and,
subject to approval by Target's shareholders and receipt of any
necessary exemptive relief or no-action assurances requested from the
Securities and Exchange Commission ("SEC") or its staff with respect to
sections 17(a) and 17(d) of the 1940 Act, this Agreement will
constitute a valid and legally binding obligation of Target,
enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's
shareholders;
4.1.11. No governmental consents, approvals, authorizations,
or filings are required under the 1933 Act, the Securities Exchange Act
of 1934 ("1934 Act"), or the 1940 Act for the execution or performance
of this Agreement by Target, except for (a) the filing with the SEC of
a registration statement by the Corporation on Form N-14 relating to
the Acquiring Fund Shares issuable hereunder, and any supplement or
amendment thereto ("Registration Statement"), including therein a
prospectus/proxy statement ("Proxy Statement"), (b) receipt of any
necessary exemptive relief referenced in subparagraph 4.1.9, and (c)
such consents, approvals, authorizations, and filings as have been made
or received or as may be required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement,
at the time of the shareholders' meeting referred to in paragraph 5.2,
and at the Effective Time, the Proxy Statement will (a) comply in all
material respects with the applicable provisions of the 1933 Act, the
1934 Act, and the 1940 Act and the regulations thereunder and (b) not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading; provided that the foregoing shall
not apply to statements in or omissions from the Proxy Statement made
in reliance on and in conformity with information furnished by the
Corporation with respect to Acquiring Fund for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a "fund" as defined in section 851(h)(2) of
the Code; it qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year since
it commenced operations and will continue to meet all the requirements
for such qualification for its current taxable year; and it has no
earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it. The Assets shall be
invested at all times through the Effective Time in a manner that
ensures compliance with the foregoing;
4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar
case within the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total
assets (excluding cash, cash items, and U.S. government securities) is
invested in the stock and securities of any one issuer, and not more
than 50% of the value of such assets is invested in the stock and
securities of five or fewer issuers; and
4.1.17. Target will be terminated as soon as reasonably
practicable after the Reorganization, but in all events within six
months after the Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. The Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Maryland, and a copy of its Articles of Incorporation is on file
with the Department;
4.2.2. The Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration will
be in full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
the Corporation;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in
exchange for the Assets in the Reorganization;
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4.2.5. The Acquiring Fund Shares to be issued and delivered to
Target hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly and
validly issued and outstanding shares of Acquiring Fund, fully paid and
non-assessable. Except as contemplated by this Agreement, Acquiring
Fund does not have outstanding any options, warrants, or other rights
to subscribe for or purchase any of its shares, nor is there
outstanding any security convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of
additional information conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby by Acquiring Fund will not conflict
with or violate, Maryland law or any provision of the Corporation's
Articles of Incorporation or By-Laws or of any provision of any
agreement, instrument, lease, or other undertaking to which Acquiring
Fund is a party or by which it is bound or result in the acceleration
of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Acquiring Fund is a party or by
which it is bound, except as previously disclosed in writing to and
accepted by the Corporation on behalf of Target;
4.2.8. Except as otherwise disclosed in writing to and
accepted by the Corporation on behalf of Target, no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is presently pending or (to Acquiring Fund's
knowledge) threatened against the Corporation with respect to Acquiring
Fund or any of its properties or assets that, if adversely determined,
would materially and adversely affect Acquiring Fund's financial
condition or the conduct of its business; Acquiring Fund knows of no
facts that might form the basis for the institution of any such
litigation, proceeding, or investigation and is not a party to or
subject to the provisions of any order, decree, or judgment of any
court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated
hereby;
4.2.9. The execution, delivery, and performance of this
Agreement by Acquiring Fund have been duly authorized as of the date
hereof by all necessary action on the part of the Corporation's board
of directors, which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and, subject to receipt of any necessary
exemptive relief or no-action assurances requested from the SEC or its
staff with respect to sections 17(a) and 17(d) of the 1940 Act, this
Agreement will constitute a valid and legally binding obligation of
Acquiring Fund, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations,
or filings are required under the 1933 Act, the 1934 Act, or the 1940
Act for the execution or performance of this Agreement by Target,
except for (a) the filing with the SEC of the Registration Statement,
(b) receipt of any necessary exemptive relief referenced in
subparagraph 4.2.9, and (c) such consents, approvals, authorizations,
and filings as have been made or received or as may be required
subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement,
at the time of the shareholders' meeting referred to in paragraph 5.2,
and at the Effective Time, the Proxy Statement will (a) comply in all
material respects with the applicable provisions of the 1933 Act, the
1934 Act, and the 1940 Act and the regulations thereunder and (b) not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading; provided that the foregoing shall
not apply to statements in or omissions from the Proxy Statement made
in reliance on and in conformity with information furnished by the
Corporation with respect to Target for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section
851(h)(2) of the Code; it qualified for treatment as a RIC for each
past taxable year since it commenced operations and will continue to
meet all the requirements for such qualification for its current
taxable year; Acquiring Fund intends to continue to meet all such
requirements
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for the next taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M
of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue
additional Acquiring Fund Shares following the Reorganization except
for shares issued in the ordinary course of its business as a series of
an open-end investment company; nor does Acquiring Fund have any plan
or intention to redeem or otherwise reacquire any Acquiring Fund Shares
issued to the Shareholders pursuant to the Reorganization, other than
through redemptions arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's
business in substantially the same manner that Target conducted that
business immediately before the Reorganization, (b) has no plan or
intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of that business and
dispositions necessary to maintain its status as a RIC, and (c) expects
to retain substantially all the Assets in the same form as it receives
them in the Reorganization, unless and until subsequent investment
circumstances suggest the desirability of change or it becomes
necessary to make dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
"fund" thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more
than 25% of the value of Acquiring Fund's total assets (excluding cash,
cash items, and U.S. government securities) will be invested in the
stock and securities of any one issuer and (b) not more than 50% of the
value of such assets will be invested in the stock and securities of
five or fewer issuers; and
4.2.17. Acquiring Fund does not own, directly or indirectly,
nor at the Effective Time will it own, directly or indirectly, nor has
it owned, directly or indirectly, at any time during the past five
years, any shares of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares,
when received by the Shareholders, will be approximately equal to the
fair market value of their Target Shares constructively surrendered in
exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention
of Shareholders to redeem or otherwise dispose of any portion of the
Acquiring Fund Shares to be received by them in the Reorganization and
(b) does not anticipate dispositions of those Acquiring Fund Shares at
the time of or soon after the Reorganization to exceed the usual rate
and frequency of dispositions of shares of Target as a series of an
open-end investment company. Consequently, its management expects that
the percentage of Shareholder interests, if any, that will be disposed
of as a result of or at the time of the Reorganization will be de
minimis. Nor does its management anticipate that there will be
extraordinary redemptions of Acquiring Fund Shares immediately
following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. Immediately following consummation of the
Reorganization, Acquiring Fund will hold substantially the same assets
and be subject to substantially the same liabilities that Target held
or was subject to immediately prior thereto, plus any liabilities and
expenses of the parties incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets
will equal or exceed the Liabilities to be assumed by Acquiring
Fund and those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the
fair market value of the net assets, and at least 70% of the fair
market value of the gross assets, held by Target immediately before the
Reorganization. For the purposes of this representation, any amounts
used by Target to pay its Reorganization expenses and redemptions and
distributions made by it
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immediately before the Reorganization (except for (a) distributions
made to conform to its policy of distributing all or substantially all
of its income and gains to avoid the obligation to pay federal income
tax and/or the excise tax under section 4982 of the Code and (b)
redemptions not made as part of the Reorganization) will be included as
assets thereof held immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder
who is an employee of Target will be separate consideration for, or
allocable to, any of the Target Shares held by such
Shareholder-employee; none of the Acquiring Fund Shares received by any
such Shareholder-employee will be separate consideration for, or
allocable to, any employment agreement; and the consideration paid to
any such Shareholder-employee will be for services actually rendered
and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders
will not own shares constituting "control" of Acquiring Fund within the
meaning of section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that (a) such ordinary course will include declaring and paying customary
dividends and other distributions and such changes in operations as are
contemplated by each Fund's normal business activities and (b) each Fund will
retain exclusive control of the composition of its portfolio until the Closing;
provided that Target shall not dispose of more than an insignificant portion of
its historic business assets during such period without Acquiring Fund's prior
consent.
5.2. Target covenants to call a shareholders' meeting to consider and
act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. The Corporation covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act, and
such state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.5. Subject to this Agreement, each Fund covenants to take or cause to
be taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance
by the other Fund of all the obligations to be performed hereunder at or before
the Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Corporation's board of directors and shall
have been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
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necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall
be pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. The Corporation (on behalf of Target) shall have received an
opinion of Kirkpatrick & Lockhart LLP, its counsel, substantially to the effect
that:
6.4.1. Acquiring Fund is a duly established series of the
Corporation, a corporation duly organized and validly existing under
the laws of the State of Maryland with power under its Articles of
Incorporation to own all of its properties and assets and, to the
knowledge of such counsel, to carry on its business as presently
conducted;
6.4.2. This Agreement (a) has been duly authorized, executed,
and delivered by the Corporation on behalf of Acquiring Fund and (b)
assuming due authorization, execution, and delivery of this Agreement
by the Corporation on behalf of Target, is a valid and legally binding
obligation of the Corporation with respect to Acquiring Fund,
enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed
to the Shareholders under this Agreement, assuming their due delivery
as contemplated by this Agreement, will be duly authorized and validly
issued and outstanding and fully paid and non-assessable, and no
shareholder of Acquiring Fund has any preemptive right to subscribe for
or purchase such shares;
6.4.4. Acquiring Fund's execution and delivery of this
Agreement did not, and the consummation of the transactions
contemplated hereby will not, materially violate the Corporation's
Articles of Incorporation or ByLaws or any provision of any agreement
(known to such counsel, without any independent inquiry or
investigation) to which the Corporation (with respect to Acquiring
Fund) is a party or by which it is bound or (to the knowledge of such
counsel, without any independent inquiry or investigation) result in
the acceleration of any obligation, or the imposition of any penalty,
under any agreement, judgment, or decree to which the Corporation (with
respect to Acquiring Fund) is a party or by which it is bound, except
as set forth in such opinion or as previously disclosed in writing to
and accepted by the Corporation on behalf of Target;
6.4.5. To the knowledge of such counsel (without any
independent inquiry or investigation), no consent, approval,
authorization, or order of any court or governmental authority is
required for the consummation by the Corporation on behalf of Acquiring
Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act, and the 1940 Act and such as
may be required under state securities laws;
6.4.6. The Corporation is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been
issued or proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any
independent inquiry or investigation), (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to the Corporation (with
respect to Acquiring Fund) or any of its properties or assets
attributable or allocable to Acquiring Fund and (b) the Corporation
(with respect to Acquiring Fund) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects Acquiring
Fund's business, except as set forth in such opinion or as otherwise
disclosed in writing to and accepted by the Corporation on behalf of
Target.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and
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state law, and (iv) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.5. The Corporation (on behalf of Acquiring Fund) shall have received
an opinion of Kirkpatrick & Lockhart LLP, its counsel, substantially to the
effect that:
6.5.1. Target is a duly established series of the Corporation,
a corporation duly organized and validly existing under the laws of the
State of Maryland with power under its Articles of Incorporation to own
all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed,
and delivered by the Corporation on behalf of Target and (b) assuming
due authorization, execution, and delivery of this Agreement by the
Corporation on behalf of Acquiring Fund, is a valid and legally binding
obligation of the Corporation with respect to Target, enforceable in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity;
6.5.3. Target's execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby will
not, materially violate the Corporation's Articles of Incorporation or
By-Laws or any provision of any agreement (known to such counsel,
without any independent inquiry or investigation) to which the
Corporation (with respect to Target) is a party or by which it is bound
or (to the knowledge of such counsel, without any independent inquiry
or investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which the Corporation (with respect to Target) is a party or by which
it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by the Corporation on behalf of
Acquiring Fund;
6.5.4. To the knowledge of such counsel (without any
independent inquiry or investigation), no consent, approval,
authorization, or order of any court or governmental authority is
required for the consummation by the Corporation on behalf of Target of
the transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be
required under state securities laws;
6.5.5. The Corporation is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been
issued or proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any
independent inquiry or investigation), (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to the Corporation (with
respect to Target) or any of its properties or assets attributable or
allocable to Target and (b) the Corporation (with respect to Target) is
not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and
adversely affects its business, except as set forth in such opinion or
as otherwise disclosed in writing to and accepted by the Corporation on
behalf of Acquiring Fund.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, and (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. The Corporation shall have received an opinion of Kirkpatrick &
Lockhart LLP, its counsel, as to the federal income tax consequences mentioned
below ("Tax Opinion"). In rendering the Tax Opinion, such counsel may rely as to
factual matters, exclusively and without independent verification, on the
representations made in this Agreement (or in a separate letter or certificate
addressed to such counsel) and the certificates delivered pursuant to paragraph
3.4. The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares to
the Shareholders
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constructively in exchange for the Shareholders' Target Shares, will
constitute a reorganization within the meaning of section 368(a)(1)(C)
of the Code, and each Fund will be "a party to a reorganization" within
the meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the
transfer to Acquiring Fund of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities or on the subsequent distribution of those shares to the
Shareholders in constructive exchange for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund
Shares and its assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same
as the basis thereof in Target's hands immediately before the
Reorganization, and Acquiring Fund's holding period for the Assets will
include Target's holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for
Acquiring Fund Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to
be received by it in the Reorganization will be the same as the basis
for its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares, and its holding period for those Acquiring
Fund Shares will include its holding period for those Target Shares,
provided they are held as capital assets by the Shareholder at the
Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset (including certain options, futures, and
forward contracts included in the Assets) as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
At any time before the Closing, either Fund may waive any of the
foregoing conditions if, in the judgment of the Corporation's board of
directors, such waiver will not have a material adverse effect on its
shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Fund represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by Bull & Bear Advisers, Inc. Such expenses
include: (a) expenses incurred in connection with entering into and carrying out
the provisions of this Agreement; (b) expenses associated with the preparation
and filing of the Registration Statement; (c) registration or qualification fees
and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which Target's shareholders are
resident as of the date of the mailing of the Proxy Statement to such
shareholders; (d) printing and postage expenses; (e) legal and accounting fees;
and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not
set forth herein, and this Agreement constitutes the entire agreement between
the parties. The representations, warranties, and covenants contained herein or
in any document delivered pursuant hereto or in connection herewith shall
survive the Closing.
A-10
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material
breach of any representation, warranty, or covenant contained herein to be
performed at or prior to the Effective Time, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met, or (c) if the Closing has not occurred on or before August
20, 1996; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the directors or officers
of the Corporation, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Maryland; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
[Signatures Omitted]
A-11
PROXY
BULL & BEAR QUALITY GROWTH FUND
SERIES OF BULL & BEAR FUNDS I, INC.
The undersigned hereby appoints Robert D. Anderson and Thomas B.
Winmill, and each of them, with full power of substitution, to vote as
designated below all shares of common stock of Bull & Bear Quality Growth Fund
series of Bull & Bear Funds I, Inc. (the "Fund") which the undersigned is
entitled to vote at the Special Meeting of Shareholders to be held on April 25,
1996 and any adjournment thereof, revoking all proxies heretofore given, upon
the proposals described in the proxy statement.
1. Approval of an Agreement and Plan of Reorganization and Termination (Proposal
1).
|-| |-| |-|
FOR ABSTAIN AGAINST
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THIS PROXY, IF PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR PROPOSAL 1. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
__________________________(L.S.)
Signature
__________________________(L.S.)
Signature
Dated _________________, 1996
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF
SHARES ARE REGISTERED IN MORE THAN ONE NAME, ALL
SHOULD SIGN BUT IF ONE SIGNS, IT BINDS THE OTHERS.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
AGENT, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE
NAME BY AN AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AN AUTHORIZED
PERSON.
TO AVOID EXPENSES OF ADJOURNING THE
MEETING, PLEASE RETURN THIS
PROXY PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
