BARTLIT BECK HERMAN PALENCHAR & SCOTT
The Kittredge Building
511 Sixteenth Street
Denver, CO 80202
(303)592-3100
February 13, 1998
(303)592-3175
polly.swartzfager@
bartlit-beck.com
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Preferred Income Management Fund Incorporated
Dear Sir or Madam:
On behalf of Horejsi, Inc., the Lola Brown Trust No. 1B, Badlands Trust Company,
the Stewart R. Horejsi Trust No. 2 and Stewart R. Horejsi, we hereby
electronically transmit, pursuant to Regulation S-T promulgated by the
Securities and Exchange Commission, the preliminary Proxy Statement in
opposition to the solicitation by the Board of Directors of Preferred Income
Management Fund Incorporated in connection with the election of directors.
Please contact the undersigned at (303) 592-3175 or Thomas R. Stephens
of this firm at (303) 592-3144 should you require further information or have
any questions.
Very truly yours,
/s/ Polly S. Swartzfager
Polly S. Swartzfager
(Admitted in New York;
application pending in Colorado)
PSS/kmv
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. _ )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Preferred Income Management Fund Incorporation
(Name of Registrant as Specified In Its Charter)
Horejsi, Inc.
Lola Brown Trust No. 1B
Badlands Trust Company
Stewart R. Horejsi Trust No. 2
Stewart R. Horejsi
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per-unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
STEWART R. HOREJSI.
253 NORTH SANTA FE
SALINA, KANSAS 67401
Dear Fellow Shareholder:
We represent the largest shareholder of the Preferred Income Management
Fund Incorporated (the "Fund"). Horejsi, Inc., together with Stewart R.
Horejsi, the Lola Brown Trust No. 1B, Badlands Trust Company, and the Stewart R.
Horejsi Trust No. 2, are concerned that the Fund's present investment focus does
not take advantage of the recent changes in the federal income tax laws and is
not positioned to maximize value to shareholders.
We believe the Fund's Board of Directors should change the Fund's
investment focus. Toward this end, we are seeking your support in electing our
three nominees, Stewart R. Horejsi, Richard I. Barr and James G. Duff, to the
Board of Directors of the Fund at the April 17, 1998 Annual Meeting of
Shareholders.
I became a member of the Board of Directors of the Fund in July 1997. I
have become convinced that the Fund's investment objective should be one of
maximizing the after tax return received by its shareholders, particularly in
view of the recent changes in the Federal income tax code which have lowered
taxes on long term capital gains. More specifically, I believe, and have
proposed to management of the Fund and the Board, that the Fund should:
change the Fund's investment focus to emphasize capital gains rather
than current income, thereby reducing taxes paid by the Fund's
shareholders,
sell a significant portion of the Fund's preferred stock portfolio
and reinvest the proceeds in common stocks of companies that offer
the potential for growth. Ideally, the Fund's managers should
identify a small number of common stocks that offer good long term
investment prospects, including common stocks of troubled
companies, and consider investing in other investment companies,
and
retain and reinvest the maximum amounts of income and gains that
can be retained, consistent with federal income tax requirements.
In addition, I believe the Fund should consider changing from a
"diversified" to a "nondiversified" investment company to enable the Fund, when
the opportunity arises, to take a larger position in the securities of a
particular company or group of companies than is permitted for diversified
funds.
I have also proposed appointing a chief executive officer of the Fund
who is unaffiliated with the Fund's investment advisor and renaming the Fund to
reflect its new investment focus.
In addition, I believe the Fund should adopt a policy to prohibit its
directors from receiving fees from the Funds' investment advisor or any
companies controlled or advised by the Fund's investment advisor. Currently, all
directors other than me receive compensation either from Flaherty & Crumrine
Incorporated, the Fund's current investment advisor ("Flaherty & Crumrine"), or
from Preferred Income Fund Incorporated and Preferred Income Opportunity Fund
Incorporated, both of which are also advised by Flaherty & Crumrine.
Although I believe that Flaherty & Crumrine should continue to advise
the Fund with respect to the preferred stock and fixed income portion of its
portfolio, I have proposed to the Board that a company which I control would be
better suited to implement a new investment focus for the Fund than Flaherty &
Crumrine.
On February 10, 1998, the Board established a special committee of
four directors to consider my proposals, but has not taken any action on them.
While the S&P 500 Total Returns increased at a compound annual rate of
approximately 30.4% over the three year period ended November 30, 1997 and at a
rate of approximately 28.5% for the year ended November 30, 1997, according to
management's Annual Report, the total returns on net asset value of the Fund's
shares during the same periods under management's direction was only 19.4% and
14.7% , respectively. Although I cannot assure you that the Fund's future
performance will equal or exceed the growth rate of the S&P 500 Total Returns or
the Fund's historical total returns, I strongly believe that the Fund's results
will be better if my investment policies are followed, rather than those of
current management.
Messrs. Barr and Duff have indicated to me that, if elected to the
Board of Directors of the Fund, they will support my efforts to cause the full
Board of Directors of the Fund to implement a new investment focus.
Shareholders should be aware, however, that, even if our nominees are
elected to the Board of Directors of the Fund, they will constitute only three
of the seven members of the Board and they may not be able to persuade other
Board members to take any actions that they propose. In addition, several of our
proposals will require shareholder approval, which we are not seeking at this
time. Consequently, even if the Board adopts our proposals, the Fund may not be
able to implement the proposals unless and until they are approved by
shareholders.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD IN THE
POSTAGE-PREPAID ENVELOPE THAT HAS BEEN PROVIDED.
It is important that you not return any proxy card sent to you by the
Fund if you wish to support our nominees. If you have returned a proxy card sent
to you by the Fund, you have the right to revoke that proxy and vote for our
nominees by signing, dating and mailing a later dated BLUE proxy card in the
envelope provided. You may vote for all proposals contained in management's
proxy card by using our BLUE proxy card, as explained below. If you have any
questions, please contact Georgeson & Company Inc., who is assisting us in the
solicitation, toll-free at 1-800-223-2064.
_______________________________________________________________________________
It is important that you not return any proxy card sent to you by the
Fund if you wish to support our nominees. If you have returned a proxy card sent
to you by the Fund, you have the right to revoke that proxy and vote for our
nominees by signing, dating and mailing a later dated BLUE proxy card in the
envelope provided. You may vote for all proposals contained in management's
proxy card by using our BLUE proxy card, as explained below. If you have any
questions, please contact Georgeson & Company Inc., who is assisting us in the
solicitation, toll-free at 1-800-223-2064.
_______________________________________________________________________________
There are two proposals scheduled to be voted upon at the Annual
Meeting (the election of three directors of the Fund and the ratification of
independent accountants of the Fund for the current fiscal year).
We recommend that you vote FOR each of these proposals.
All of the proposals scheduled to be voted upon at the Annual Meeting
are included in our BLUE proxy card. If you wish to vote for our nominees, you
may do so by completing and returning a BLUE proxy card.
A Blue proxy card that is returned to us or our agent will be voted as
the shareholder indicates thereon. If a BLUE proxy card is returned without a
vote indicated thereon, the shares represented thereby will be voted FOR the
election of our nominees and FOR the ratification of the independent
accountants.
Sincerely yours
Stewart R. Horejsi
<PAGE>
21
PRELIMINARY COPY
PROXY STATEMENT IN OPPOSITION TO
THE SOLICITATION BY THE BOARD OF DIRECTORS OF
PREFERRED INCOME MANAGEMENT FUND INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS
To be held on April 17, 1998
To Our Fellow Shareholders:
This Proxy Statement and the enclosed BLUE proxy card are being
furnished to holders of record on January 20, 1998 (the "Record Date") of shares
of common stock, par value $0.0l per share (the "Common Stock"), of Preferred
Income Management Fund Incorporated, a Maryland corporation (the "Fund"), by
Horejsi, Inc., together with Stewart R. Horejsi, the Lola Brown Trust No. 1B,
Badlands Trust Company, and the Stewart R. Horejsi Trust No. 2 (collectively,
the "Soliciting Shareholders"), in connection with the solicitation of proxies
by the Soliciting Shareholders for use at the Annual Meeting of shareholders of
the Fund (the "Annual Meeting") scheduled to be held on Friday, April 17, 1998
at 9:00 a.m., Eastern Daylight time, and any and all adjournments or
postponements thereof. The Annual Meeting will be held at the offices of Willkie
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, 47th Floor, New
York, New York 10022. It is estimated that this Proxy Statement and the
accompanying BLUE proxy card will first be sent to shareholders of the Fund on
or about February 25, 1998.
There are two matters scheduled to be voted upon at the Annual Meeting:
(i) the election of three directors of the Fund and (ii) the ratification of the
independent accountants of the Fund.
The Soliciting Shareholders are soliciting your proxy in support of the
election of its three nominees to the Board of Directors of the Fund (the
"Board") so that the Board will take action to change the Fund's investment
focus to, among other things, take advantage of recent changes in the federal
income tax laws and attempt to maximize value to shareholders.
All of the proposals scheduled to be voted upon at the Annual Meeting
are included in the Soliciting Shareholders' BLUE proxy card. If you wish to
vote for the Soliciting Shareholders' nominees, you may do so by completing and
returning a BLUE proxy card. A BLUE proxy card that is returned to the
Soliciting Shareholders or their agent will be voted as the shareholder
indicates thereon. If a BLUE proxy card is returned without a vote indicated
thereon, the shares represented thereby will be voted FOR the election of the
Soliciting Shareholders' nominees and FOR the ratification of the independent
accountants.
Discretionary authority is provided in the proxy sought hereby as to
other business as may properly come before the meeting of which the Soliciting
Shareholders are not aware as of the date of this Proxy Statement and matters
incident to the conduct of the Annual Meeting, which discretionary authority
will be exercised in accordance with Rule 14a-4 promulgated by the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended.
The Fund currently has a total of seven directors, divided into three
classes. (There are three Class I directors, whose terms expire in 1998, two
Class II directors, whose terms expire in 1999, and two Class III directors,
whose terms expire in 2000). All of the directors to be elected at the Annual
Meeting will be Class I directors. The Soliciting Shareholders propose Stewart
R. Horejsi, Richard I. Barr and James G. Duff as the Class I directors (terms
expiring in 2001) to be elected at the Annual Meeting. BLUE proxy cards that are
properly signed, dated and returned will be voted in a manner consistent with
this proposal.
The Fund's Articles of Incorporation and Articles Supplementary
(collectively, the "Articles") provide that holders of shares of the Fund's
Money Market Cumulative Preferred (TM) Stock, par value $0.01 per share (the
"Preferred Stock"), voting as a single class, will be entitled to elect two
directors of the Fund and that holders of Common Stock will be entitled to elect
the remaining directors, subject to certain provisions under the Articles and
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
that permit the Preferred Stockholders to elect additional directors in certain
circumstances. The Preferred Stockholders are currently represented by Donald F.
Crumrine, a Class II director, and Morgan Gust, a Class III director, neither of
whose term expires in 1998. Accordingly, only holders of Common Stock will be
entitled to vote for the election of directors at the upcoming Annual Meeting.
Holders of Preferred Stock will, however, be entitled to vote, together with
holders of Common Stock, for the ratification of independent auditors of the
Fund. This Proxy Statement and the accompanying Blue proxy card are being sent
to Preferred Stockholders for informational purposes only and not as part of the
proxy solicitation of the Soliciting Shareholders.
Voting, Quorum
Only shareholders of record on the Record Date will be entitled to vote
at the Annual Meeting. According to information contained in the Fund's 1998
Proxy Statement, there were 9,416,743 shares of Common Stock issued and
outstanding as of the Record Date, January 20, 1998. Holders of record on the
Record Date will be entitled to cast one vote on each matter for each share of
Common Stock held by them. Shares of Common Stock do not have cumulative voting
rights. Directors of the Fund are elected by a plurality of the votes cast. The
vote on the ratification of the independent accountant requires the affirmative
vote of a majority of the shares of Common Stock and Preferred Stock
represented, voting together as a single class on the matter. The Soliciting
Shareholders recommend that shareholders vote FOR the election of their
nominees, Messrs. Horejsi, Barr and Duff, and FOR the ratification of Coopers &
Lybrand L.L.P., as independent accountants for the Fund.
A proxy which is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter). Proxies that reflect abstentions or broker non-votes (collectively,
"abstentions") will be counted as shares that are present and entitled to vote
on the matter for purposes of determining the presence of a quorum. Under
Maryland law, abstentions do not constitute a vote "for" or "against" a matter
and will be disregarded in determining "votes cast" on an issue.
Under the By-Laws of the Fund, a quorum for the transaction of business
is constituted by the presence in person or by proxy of a majority of the
outstanding shares of the Fund entitled to vote at the meeting. If a proposal is
to be voted upon by only one class of the Fund's shares, a quorum of that class
of shares must be present at the meeting in order for the proposal to be
considered.
Revocation of Proxies
Any proxy given in connection with the Annual Meeting (whether given to
the Fund or to the Soliciting Shareholders) may be revoked by a shareholder at
any time prior to the voting thereof at the Annual Meeting by delivering a
written revocation of his or her proxy to the Secretary of the Fund or with the
presiding officer at the Annual Meeting, by executing and delivering a later
dated proxy to the Soliciting Shareholders or the Fund or their solicitation
agents, or by voting in person at the Annual Meeting. Attendance at the Annual
Meeting will not in and of itself revoke a proxy.
There is no limit on the number of times that a shareholder may revoke
his or her proxy prior to the Annual Meeting. Only the latest dated, properly
signed proxy card will be counted.
IF YOU HAVE ALREADY SENT A PROXY CARD TO THE BOARD OF DIRECTORS OF THE
FUND, YOU MAY REVOKE THAT PROXY AND VOTE FOR THE NOMINEES OF THE SOLICITING
SHAREHOLDERS BY SIGNING, DATING AND MAILING THE ENCLOSED BLUE PROXY CARD IN THE
ENVELOPE PROVIDED.
THE BLUE PROXY CARD CONTAINS ALL OF THE PROPOSALS SCHEDULED TO BE VOTED
UPON AT THE ANNUAL MEETING. IF YOU WISH TO VOTE FOR THE SOLICITING SHAREHOLDERS'
NOMINEES, YOU MAY DO SO BY COMPLETING AND RETURNING A BLUE PROXY CARD. A BLUE
PROXY CARD THAT IS RETURNED TO THE SOLICITING SHAREHOLDES OR THEIR AGENT WILL BE
VOTED AS THE SHAREHOLDER INDICATES THEREON. IF A BLUE PROXY CARD IS RETURNED
WITHOUT A VOTE INDICATED THEREON, IT WILL BE VOTED IN FAVOR OF THE SOLICITING
SHAREHOLDERS' NOMINEES AND IN FAVOR OF THE RATIFICATION OF INDEPENDENT AUDITORS.
INFORMATION CONCERNING THE SOLICITING SHAREHOLDERS
Horejsi, Inc., a South Dakota corporation ("HI") and the successor by
merger to Horejsi Enterprises, Inc., is a holding company engaged through its
affiliates in the retail sale of welding consumables, equipment and gases, the
wholesale sale of bulk gases, leasing of cylinders to various wholesale and
retail customers, and the financing of such activities. The business address of
HI is 122 South Phillips Avenue, Suite 220, Sioux Falls, South Dakota 57104. HI
is the largest shareholder of the Fund (based on public filings with the
Commission). As of the Record Date, HI owned 2,073,430 shares of Common Stock,
representing approximately 22.0% of the issued and outstanding shares of Common
Stock. Information concerning purchases of shares of Common Stock of the Fund by
HI during the last two years is set forth in Exhibit 1 attached hereto. During
such period, HI has not sold any shares of the Fund.
The Lola Brown Trust No. 1B (the "Brown Trust"), the Ernest Horejsi
Trust No. 1B (the "Ernest Horejsi Trust"), Evergreen Atlantic LLC ("Evergreen")
and the Stewart Horejsi Trust No. 2 (the "Stewart Horejsi Trust") are the
holders of approximately 40%, 24% 18% and 16%, respectively, of the outstanding
shares of HI. Mr.Horejsi is an agent of HI and the Manager of Evergreen. By
virtue of the relationships described above and his
roles with HI and the primary stockholders of HI, Mr. Horejsi may be deemed to
control HI and may be deemed to possess indirect beneficial ownership of the
shares of Common Stock held by HI. However, Mr. Horejsi disclaims such
beneficial ownership of the shares of Common Stock beneficially owned, directly
or indirectly, by HI. The business address of Mr. Horejsi is located at 253 N.
Santa Fe, P.O. Box 45, Salina, Kansas 67401. Susan Ciciora, Mr. Horejsi's
daughter, owns approximately 1% of the outstanding shares of HI, is a director
of HI and one of the three trustees of each of the Brown Trust, the Ernest
Horejsi Trust and the Stewart Horejsi Trust. The business address of Ms. Ciciora
is 1428 Coventry Court, Darien, Illinois 60561.
The Brown Trust is a trust organized by Lola Brown for the benefit of
her children and grandchildren. The business address of the Brown Trust is 122
South Phillips Avenue, Suite 220, Sioux Falls, South Dakota 57104. As of the
Record Date, the Brown Trust owned 1,581,665 shares of Common Stock,
representing approximately 16.8% of the issued and outstanding shares of Common
Stock. Information regarding purchases of shares of Common Stock by the Brown
Trust during the last two years is set forth on Exhibit 1 attached hereto.
During such period, the Brown Trust has not sold any shares of the Fund. The
trustees of the Brown Trust, Badlands Trust Company ("Badlands"), Larry Dunlap
and Ms. Ciciora, may be deemed to control the Brown Trust and may be deemed to
possess indirect beneficial ownership of the shares held by the Brown Trust.
However, none of the trustees, acting alone, can vote or exercise dispositive
authority over Shares held by the Brown Trust. Accordingly, Badlands, Mr. Dunlap
and Ms. Ciciora disclaim beneficial ownership of the shares of Common Stock
beneficially owned, directly or indirectly, by the Brown Trust.
Badlands is a South Dakota corporation organized to act as a private
trust company to administer the Brown Trust as well as other affiliated trusts.
Badlands is wholly owned by the Stewart Horejsi Trust, an irrevocable trust
organized by Mr. Horejsi for the benefit of his issue. As of the Record Date,
Badlands directly owned 12,735 shares of Common Stock, representing
approximately 0.13% of the outstanding shares of Common Stock. Information
regarding purchases of shares of Common Stock by Badlands during the last two
years is set forth on Exhibit 1 attached hereto. During such period, Badlands
has not sold any shares of the Fund. In addition to being a trustee of the Brown
Trust, Badlands is also one of the three trustees of each of the Ernest Horejsi
Trust and the Stewart Horejsi Trust. The business address of Badlands and of the
Stewart Horejsi Trust is 122 South Phillips Avenue, Suite 220, Sioux Falls,
South Dakota 57104. By virtue of the relationships described above, Badlands,
Ms. Ciciora and Robert H. Kastner, as trustees of the Stewart Horejsi Trust, may
be deemed to share indirect beneficial ownership of the shares of Common Stock
directly beneficially owned by Badlands. The trustees of the Stewart Horejsi
Trust disclaim all such beneficial ownership. Ann M. Hartmann, Stephen C. Miller
and John Raforth are the President, Vice President and Secretary, respectively,
of Badlands and Messrs. Dunlap, Miller and Raforth, Ms. Hartmann and Ms. Ciciora
are directors of Badlands. By virtue of such relationships, Messrs. Dunlap,
Miller and Raforth and Ms. Hartman and Ms. Ciciora may be deemed to share the
indirect power to vote and direct the disposition of the shares of Common Stock
held by Badlands, but such persons disclaim beneficial ownership of such shares.
The business address of Mr. Miller is 1680 38th Street, Suite 800, Boulder,
Colorado 80301, of Mr. Dunlap is 223 N. Santa Fe, P.O. Box 121, Salina, Kansas
67401, of Mr. Raforth is 818 St. Joseph Street, P.O. Box 2670, Rapid City, South
Dakota 57709 and of Ms. Hartmann is 122 South Phillips Avenue, Suite 220, Sioux
Falls, South Dakota 57104.
By virtue of the relationships and transactions described above, HI,
the Brown Trust, Badlands, the Stewart Horejsi Trust and Mr. Horejsi may be
deemed to constitute a group. HI disclaims beneficial ownership of the shares of
Common Stock directly beneficially owned by the Brown Trust and Badlands, the
Brown Trust disclaims beneficial ownership of the shares of Common Stock
directly beneficially owned by HI and Badlands, and Badlands and the Stewart
Horejsi Trust both disclaim beneficial ownership the shares of Common Stock
directly owned by the Brown Trust and HI.
REASONS FOR THE SOLICITATION
The Soliciting Shareholders have owned the Fund's Common Stock since
July 22, 1996 and, through HI, the Lola Brown Trust and Badlands, have invested
more than $50 million in more than 3.6 million shares of the Fund. As a result,
the Soliciting Shareholders have a strong financial incentive to improve the
Fund's performance. By contrast, the remaining six directors of the Fund hold
fewer than 15,000 shares of the Fund.
Mr. Horejsi became a member of the Board of the Fund in July 1997.
Since that time, he concluded that the investment focus of the Fund should be
changed so that, among other things, its shareholders may take advantage of the
recent reduction in the federal income tax rate on capital gains.
As a result, on January 28, 1998, at a meeting of the Fund's Board of
Directors (the "January Board Meeting"), Mr. Horejsi advised the Board that he
believed that the Fund should take the following steps (the "Horejsi Proposal"):
o The Fund's objective should be to maximize after the tax
return received by the Fund's shareholders. In view of the
recent changes in the Federal income tax code which have
lowered taxes on long term capital gains, the Fund should
attempt to increase after tax returns to shareholders by
changing the Fund's investment focus to emphasize capital
gains rather than current income, thereby reducing taxes paid
by the Fund's shareholders. Specifically, Mr. Horejsi
suggested that the Fund invest a significant portion of its
portfolio in a small number of common stocks that offer good
long-term investment prospects, including common stocks of
troubled companies. In addition, the Fund should consider
investing in other investment companies. Finally, the Fund
should retain and reinvest the maximum amounts of income and
gains that can be retained, consistent with tax requirements.
o In connection with the change of the Fund's investment
focus, the Fund should dispose of a portion of its preferred
stock portfolio. Recent changes in the tax laws have permitted
corporations owned by trusts to elect Subchapter S status,
thereby eliminating the appeal of the deduction for preferred
stock dividends received for such corporations. It is also
possible that Congress will enact legislation to repeal or
limit the corporate dividends received deduction for preferred
stocks. If this occurs, the market value of the Fund's
preferred stock portfolio could be adversely affected. Sale of
a significant portion of the portfolio would reduce this risk
to the Fund and its shareholders. HI may elect to be taxed as
a Subchapter S corporation in the future, in which case HI
would not be able to use the dividends received deduction.
o The sale of a significant portion of the Fund's preferred
stock portfolio and reinvestment of the proceeds in common
stocks would be likely to reduce the dividend income received
by the Fund and consequently reduce the dividends paid by the
Fund to its shareholders, which may reduce current returns in
the near term. However, if the Fund is able to invest in
common stocks that increase in value, that increase in value
should be reflected in higher market prices for the Fund's
shares. Shareholders of the Fund who hold their shares for the
long term will be able to take advantage of lower federal
income taxes on long term capital gains as opposed to higher
taxes on dividend income. Mr. Horejsi noted that investing a
significant portion of the Fund's portfolio in a small number
of common stocks may significantly increase the volatility of
the price of the Fund's shares.
o The Fund should change from a diversified investment company
to a non-diversified investment company.
o The Fund should appoint a chief executive officer who is
unaffiliated with the Fund's investment advisor and change the
Fund's name to reflect its new investment focus.
o The Fund should adopt a policy to prohibit its directors
from receiving fees from the Fund's investment advisor or any
companies controlled or advised by the Fund's investment
advisor. Currently, all directors other than Mr. Horejsi
receive compensation either from Flaherty & Crumrine
Incorporated ("Flaherty & Crumrine"), the Fund's current
investment advisor, or from the Preferred Income Fund
Incorporated and the Preferred Income Opportunity Fund
Incorporated, both of which are also advised by Flaherty &
Crumrine.
Mr. Horejsi indicated that he believed Flaherty & Crumrine should
continue to advise the Fund with respect to the preferred stock and fixed
income portion of the Fund's portfolio, but that the Fund should retain other
advisors with respect to other portions of the Fund's portfolio that are
outside Flaherty & Crumrine's area of expertise. Mr. Horejsi suggested that a
company controlled by him would be better suited to implement a new investment
focus for the Fund than Flaherty & Crumrine. Mr. Horejsi also recommended that
the investment advisory fee received on common stocks be increased to 1.0% of
market value.
The Board of Directors indicated that they would review the Horejsi
Proposal but did not take action on any of Mr. Horejsi's suggestions at the
January Board Meeting.
In view of response of the Board of Directors, Mr. Horejsi advised the
Board that the Soliciting Shareholders would consider whether they should take
a more active role in the Fund's management to protect the value of their
investment. Mr. Horejsi also advised the Board that, while no decision had
been made, the Soliciting Shareholders may consider, among other things,
soliciting proxies in connection with the Fund's Annual Meeting of
Shareholders with respect to the election of directors or other matters.
On January 28, 1998, the Fund issued a press release describing the
proposals made by Mr. Horejsi at the January Board Meeting. The Fund stated
that, to consider the Horejsi Proposal properly, the Board of Directors would
require more comprehensive information regarding such proposals.
At a Special Meeting of the Fund's Board of Directors held on February
10, 1998, the Board established a Special Committee of four independent
directors, Martin Brody, David Gale, Morgan Gust and Robert F. Wulf, to consider
the Horejsi Proposal. Also at such meeting, Mr. Horejsi advised the Board that
he had decided to solicit proxies in connection with the Fund's Annual Meeting
of Shareholders with respect to the election of directors.
The Soliciting Shareholders have determined to undertake this proxy
solicitation because they believe that their nominees will be committed to
causing the full Board of the Fund to take action to change the Fund's
investment focus as outlined in the Horejsi Proposal.
CERTAIN CONSIDERATIONS
In considering whether to support the Soliciting Shareholders'
nominees, shareholders of the Fund should consider the following.
Even if the full Board of Directors of the Fund determines to implement
any of the proposals that the nominees of the Soliciting Shareholders may urge
the full Board to consider, there can be no assurance that any such proposals
will ultimately be implemented. In addition, certain of the proposals that the
nominees of the Soliciting Shareholders may urge the full Board to consider
entail costs and difficulties that may impede or delay their implementation. For
example, if the Board of Directors determined to propose that the Fund change
from a diversified investment company (which is required to hold at least 75% of
the value of its total assets in cash and cash items, Government securities,
securities of other investment companies, and other securities limited in
respect of any one issuer to an amount not greater than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer) to a non-diversified investment company, pursuant to the Investment
Company Act the proposal would have to be approved by shareholders of the Fund
holding at least a majority of the outstanding shares.
Moreover, the adoption of certain of Mr. Horejsi's proposals would
require the Fund to change its investment objective, its concentration policy
and one or more of its fundamental investment restrictions (which objective,
policy and restrictions are set forth on Exhibit 2 hereto), and, as a result,
would require the prior approval of the holders of a majority of the Fund's
outstanding voting securities, voting together as a single class, and the
approval of the holders of a majority of the Fund's outstanding Preferred Stock,
voting as a separate class, as more fully described under "Shareholder Approval"
in Exhibit 2 hereto. There can be no assurance that the requisite shareholder
vote could be obtained. Moreover, the Fund might incur significant costs in
preparing a proxy statement relating to such proposals and holding a
shareholders' meeting to vote on such proposals.
In addition, the Fund's shareholders may experience an increase in
investment risk due to a reduction in diversification of investments by the Fund
if the Fund's policies are changed. The Soliciting Shareholders note, however,
that as a non-diversified investment company the Fund would still be required,
pursuant to the Internal Revenue Code of 1986, to meet certain diversification
requirements in order to qualify as a regulated investment company for tax
purposes and believe that the benefits afforded by such proposals will outweigh
any such increase in risk..
Shareholders of the Fund should note that even if the Soliciting
Shareholders' nominees are elected to the Board of Directors of the Fund, they
will constitute only three of the seven members of the Board of Directors. For
these and other reasons, there can be no assurance that, even if the Soliciting
Shareholders' nominees are elected, that the Fund's investment focus will be
changed or that any of the steps outlined in the Horejsi Proposal will be taken.
The Soliciting Shareholders have not made any decision as to whether or not they
will solicit proxies in future election contests involving the Fund.
THE NOMINEES
BLUE proxy cards which are signed, dated and returned to the Soliciting
Shareholders or their agent, Georgeson & Company Inc. ("Georgeson"), will be
voted in favor of the election of Stewart R. Horejsi, Richard I. Barr and James
G. Duff. Messrs. Horejsi, Barr and Duff have furnished the Soliciting
Shareholders with the following information concerning their employment history
and certain other matters: Stewart R. Horejsi, age 60, has been principally
employed as Manager of Brown Welding Supply L.L.C.., a subsidiary of HI, since
April 1994. Mr. Horejsi has also served as President or Manager of various
subsidiaries of HI since January 1992. Mr. Horejsi has served as a Class I
Director of the Fund since July 1997. Richard I. Barr, age 60, has been
principally employed as Chief Executive Officer of CBS Marketing Incorporated, a
food brokerage company ("CBS Marketing"), since January 1976. Mr. Barr served as
President of CBS Marketing from January 1976 to July 1997. Mr. Barr is the
national Chairman of ASMC (the Association of Sales and Marketing Companies) and
has been a Director of ASMC since 1993. Mr. Barr has been Vice Chairman of AIMS
Corporation, a cooperative of food brokers, since 1990.
James G. Duff, age 60, has been retired since January 1997. Mr. Duff
acted as Chairman and Chief Executive Officer of USL Capital, a commercial
financing company ("USL Capital"), from April 1990 to December 1996, and as
President and Chief Operating Officer of USL Capital from January 1988 to April
1990. Mr. Duff was an Executive Vice President of Ford Motor Credit Company, an
automotive financing company, from May 1980 to January 1988 and prior to that
time held various positions at Ford Motor Company.
Each of Messrs. Horejsi, Barr and Duff are United States citizens. By virtue of
the relationships discussed above under "Information Concerning the Soliciting
Shareholders," Mr. Horejsi may be deemed to indirectly beneficially own the
shares of Common Stock held by HI and to be an "interested director" within the
meaning of the Investment Company Act. Mr. Barr beneficially owns 500 shares of
Common Stock. Mr. Duff does not own, beneficially or of record, any shares of
Common Stock. The principal business address of Mr. Barr is 3419 East University
Drive, Phoenix, Arizona 85034 and the address of Mr. Duff is 7544 South Dunn's
Farm Road, Maple City, Michigan 49664.
Each of the nominees listed above has consented to being named in this
Proxy Statement and has agreed to serve as a director of the Fund if elected.
None of such nominees has ever been an officer, employee, director, general
partner or shareholder of Flaherty & Crumrine, the Fund's current investment
advisor, or an affiliate thereof, nor has any of such nominees had any other
material direct or indirect interest in such investment advisor or any of its
affiliates or the Fund's administrator, First Data Investor Services Group, Inc.
Other than fees payable by the Fund to its directors, none of the
Soliciting Shareholders' nominees has any arrangement or understanding with any
person with respect to any future employment by the Fund or its affiliates.
According to the Fund's 1998 Proxy Statement, each director of the Fund who is
not a director, officer or employee of Flaherty & Crumrine or any of their
affiliates receives a fee of $9,000 per annum plus $500 for each in-person
meeting and $100 for each telephone meeting, with all directors being reimbursed
for travel and out-of-pocket expenses associated with attending such meetings.
Mr. Horejsi received compensation totaling $5,500 for his service as a director
of the Fund during its 1997 fiscal year. HI has agreed to indemnify the nominees
for liabilities they may incur in connection with this proxy solicitation.
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of the Record Date, (January 20, 1998), HI, the Brown Trust and
Badlands directly beneficially owned 2,073,430 shares, 1,581,665 shares and
12,735 shares, respectively, of Common Stock of the Fund, representing 22.0%,
16.8% and 0.13%, respectively, of the issued and outstanding shares of Common
Stock. Such beneficial ownership, as well as the relationships of Mr. Horejsi,
the Stewart Horejsi Trust and the trustees of certain trusts affiliated with HI,
is more fully described above under "Information Concerning the Soliciting
Shareholders."
According to the 1998 Proxy Statement of the Fund, the current
executive officers and directors (other than Mr. Horejsi, whose information is
described above under "Information Concerning the Soliciting Shareholders) of
the Fund beneficially owned the following amounts of Common Stock (as of January
20, 1998):
Common Stock Beneficially
Name Position Owned
Robert T. Flaherty*t Director, Chairman of the Board, President 8,169 shares
and Chief Executive Officer
Donald F. Crumrine*t Director, Chief Financial Officer, Chief 8,169 shares
Accounting Officer, Vice President and
Secretary
Martin Brody Director 508 shares
David Gale Director 1,000 shares
Robert F. Wulf Director 1,006 shares
Morgan Gust Director 1,412 shares
______________
* An "interested person" of the Fund as defined under the Investment Company
Act.
t 7,169 shares of the Fund are held by Flaherty & Crumrine, of which the
reporting person is a shareholder and director and, therefore, such person is
deemed to have an indirect beneficial interest in the respective share amounts.
THE SOLICITATION
Proxies will be solicited by mail and, if necessary to obtain the
requisite shareholder representation, by telephone, personal interview or by
other means. In addition, HI has retained Georgeson to assist and to provide
advisory services in connection with this proxy solicitation for which it will
be paid a fee of $20,000 and will be reimbursed for reasonable out-of-pocket
expenses. HI will indemnify Georgeson against certain liabilities and expenses
in connection with this proxy solicitation, including liabilities under the
federal securities laws. Other than the nominees, no officers, directors or
employees of the Soliciting Shareholders will solicit proxies.
Banks, brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward this Proxy Statement and the accompanying BLUE
proxy card to the beneficial owner of shares of Common Stock for whom they hold
of record and HI will reimburse them for their reasonable out-of-pocket
expenses.
The expenses related to this proxy solicitation will be borne by HI. HI
estimates that the total amount of expenses to be incurred by it in this proxy
solicitation will be approximately $100,000. Expenses to date have been
approximately $25,000. HI intends to seek reimbursement from the Fund for
expenses incurred in connection with the solicitation of proxies for the
election of Messrs. Horejsi, Barr and Duff as directors.
If you have any questions concerning this Proxy Solicitation or the
procedures to be followed to execute and deliver a proxy, please contact
Georgeson at:
Georgeson & Company, Inc.
Wall Street Plaza, 30th Floor
New York, New York 10005
Call Toll-Free: 1-800-223-2064
Dated: February , 1998
<PAGE>
Exhibit 1
ALL SECURITIES OF THE FUND PURCHASED OR SOLD
WITHIN THE PAST TWO YEARS BY THE SOLICITING SHAREHOLDERS
Except as disclosed in this Proxy Statement, neither the Soliciting
Shareholders nor their nominees for election to the Board of Directors of the
Fund has, or had, any interest, direct or indirect, by security holdings or
otherwise, in the Fund. The following table sets forth certain information with
respect to direct purchases of shares of Common Stock by the Soliciting
Shareholders. Mr. Barr beneficially owns 500 shares of Common Stock, of which
100 shares were purchased on January 27, 1998 and 400 shares were purchased on
January 28, 1998. Mr. Duff does not own any shares of Common Stock. Neither the
Soliciting Shareholders nor any of their nominees for election to the Board of
Directors of the Fund has sold any shares of Common Stock in the last two years.
HOREJSI, INC.
Date Number of Shares Purchased
07/22/96......................... 20,000
07/23/96 ......................... 28,400
07/24/96 ......................... 24,800
07/25/96 ......................... 4,000
07/29/96 ......................... 80,400
07/31/96 ......................... 100,000
08/02/96 ......................... 50,000
08/05/96 ......................... 10,000
09/09/96 ......................... 199,300
09/10/96 ......................... 78,200
09/11/96 ......................... 55,000
09/12/96 ......................... 53,000
09/16/96 ......................... 87,800
09/17/96 ......................... 12,700
09/18/96 ......................... 28,000
09/19/96 ......................... 31,000
09/20/96 ......................... 15,000
09/23/96 ......................... 30,000
09/24/96 ......................... 100,000
09/25/96 ......................... 30,000
09/26/96 ......................... 10,000
09/30/96 ......................... 30,000
10/01/96 ......................... 32,500
10/02/96 ......................... 6,000
10/03/96 ......................... 10,000
10/04/96 ......................... 8,400
10/08/96 ......................... 18,100
10/16/96 ......................... 147,600
10/17/96 ......................... 12,700
10/18/96 ......................... 4,700
10/22/96 ......................... 34,000
10/23/96 ......................... 21,000
10/24/96 ......................... 20,000
10/25/96 ......................... 6,000
10/28/96 ......................... 53,900
11/04/96 ......................... 12,100
11/05/96 ......................... 5,000
1106/96 .......................... 9,500
11/08/96 ......................... 4,600
11/11/96 ......................... 46,900
11/12/96 ......................... 7,000
11/13/96 ......................... 9,000
11/15/96 ......................... 46,700
11/19/96 ......................... 4,300
11/20/96 ......................... 8,200
11/21/96 ......................... 2,800
11/22/96 ......................... 34,900
11/25/96 ......................... 21,100
11/26/96 ......................... 33,000
11/27/96 ......................... 4,000
12/02/96 ......................... 3,000
12/03/96 ......................... 7,000
12/04/96 ......................... 10,300
12/05/96 ......................... 17,500
12/06/96 ......................... 16,000
12/09/96 ......................... 16,600
12/11/96 ......................... 25,600
12/12/96 ......................... 30,000
12/16/96 ......................... 8,000
12/17/96 ......................... 27,000
12/18/96 ......................... 15,000
12/19/96 ......................... 21,500
12/20/96 ......................... 17,500
12/22/97 ......................... 1,000
12/23/97 ......................... 1,000
- ----------------------------------------------------------- -------
HI financed a portion of the above-described purchases of Common Stock with
funds borrowed pursuant to a margin account, $1,630,841 of which indebtedness
was outstanding as of January 31, 1998.
LOLA BROWN TRUST NO. 1B
Date Number of Shares Purchased
12/23/96 13,000
12/24/96 1,800
12/26/96 3,800
12/27/96 8,700
12/30/96 700
01/08/97 6,300
01/09/97 3,700
01/10/97 3,000
01/13/97 3,900
01/14/97 600
01/15/97 9,000
01/16/97 3,700
01/17/97 9,100
01/20/97 8,700
01/22/97 15,000
01/23/97 6,000
01/24/97 5,000
01/27/97 3,700
01/28/97 12,200
01/29/97 500
01/30/97 4,000
01/31/97 5,000
02/04/97 8,500
02/05/97 5,100
02/06/97 3,800
02/07/97 700
02/10/97 4,000
02/11/97 2,100
02/12/97 2,000
02/18/87 30,000
02/19/97 8,200
02/20/97 12,900
02/21/97 3,500
02/27/97 100
02/28/97 200
03/04/97 33,500
03/05/97 6,600
03/06/97 9,000
03/10/97 14,000
03/11/97 1,400
03/12/97 5,400
03/13/97 14,100
03/14/97 1,000
03/17/97 42,500
03/19/97 29,700
03/20/97 3,300
03/21/97 32,000
03/24/97 12,800
03/25/97 18,000
03/26/97 16,500
03/27/97 7,300
03/31/97 200
04/01/97 5,800
04/02/97 9,000
04/03/97 23,400
04/04/97 14,000
04/08/97 4,300
04/09/97 20,500
04/10/97 3,000
04/11/97 14,600
04/14/97 1,600
04/15/97 1,400
04/16/97 7,700
04/22/97 6,600
04/23/97 400
04/24/97 1,100
05/01/97 9,400
05/02/97 12,600
05/09/97 9,000
05/13/97 10,000
05/19/97 37,800
05/20/97 1,200
05/22/97 8,000
06/13/97 320,000
06/20/97 20,000
06/26/97 15,000
07/14/97 208,600
07/15/97 200
07/22/97 22,800
07/23/97 40,000
07/28/97 21,000
08/08/97 20,000
08/11/97 8,700
08/13/97 15,000
08/14/97 1,600
08/15/97 15,000
08/20/97 25,500
08/22/97 18,300
08/25/97 3,700
08/26/97 6,700
08/27/97 1,600
08/28/97 5,200
09/05/97 3,800
09/08/97 4,000
09/09/97 800
09/10/97 3,700
09/11/97 7,500
09/12/97 5,600
09/15/97 3,600
09/16/97 800
09/18/97 4,400
09/19/97 21,700
10/14/97 27,265
12/16/97 20,000
12/17/97 25,000
12/18/97 10,200
12/19/97 7,200
01/26/98 100
The Lola Brown Trust financed a portion of the above-described purchases of
Common Stock with funds borrowed pursuant to a margin account, $16,429,402 of
which indebtedness was outstanding as of January 31, 1998.
BADLANDS TRUST COMPANY
Date Number of Shares Purchased
10/14/97 12,735
<PAGE>
Exhibit 2
FUNDAMENTAL INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
According to the Prospectus, dated February 11, 1993 (the
"Prospectus"), relating to the Fund's Common Stock, the Fund's fundamental
investment objective, policies and restrictions are as follows:
Investment Objective
The Fund's investment objective is high current income for holders of
its Common Stock consistent with preservation of capital. The Fund's investment
objective may not be changed without Shareholder Approval (as defined below).
Concentration Policy
The Fund's policy is to concentrate its investments in utility
companies and companies in the banking industry so that, under normal market
conditions, at least 25% of the Fund's total assets will be invested in
securities issued by utilities and an additional 25% or more of its total assets
will be invested in securities issued by companies in the banking industry. If
adverse economic conditions prevail in either or both of these industries at
some future date, the Fund, for defensive purposes, temporarily may invest less
than 25% of its total assets in the affected industry or industries. This
concentration policy is a fundamental policy of the Fund and cannot be changed
without Shareholder Approval.
Investment Restrictions
The Fund has adopted certain fundamental investment restrictions that
may not be changed without prior Shareholder Approval. Under its fundamental
restrictions, the Fund may not:
1. Purchase securities (other than Governmental Securities) of any
issuer if as a result of the purchase more than 5% of the value of the Fund's
total assets would be invested in the securities of the issuer, except that up
to 25% of the value of the Fund's total assets may be invested without regard to
this 5% limitation.
2. Purchase more than 10% of the voting securities of any one issuer,
or more than 10% of the securities of any class of any one issuer, except that
(i) this limitation is not applicable to the Fund's investments in Government
Securities and (ii) up to 25% of the value of the Fund's total assets may be
invested without regard to this 10% limitation.
3. Borrow money, except for temporary or emergency purposes, or in
connection with repurchases of its shares or for clearance of transactions, and
then only in amounts not exceeding 10% of its total assets (not including the
amount borrowed) and as otherwise described in the Prospectus. When the Fund's
borrowings exceed 5% of the value of its total assets, the fund will not make
any additional investments.
4. Sell securities short or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of transactions, but
the Fund may make margin deposits in connection with transactions in futures
contracts, options on futures contracts and options on securities and securities
indices, and may make short sales of securities "against the box."
5. Underwrite any issue of securities, except to the extent that the
sale of portfolio securities may be deemed to be an underwriting.
6. Purchase, hold or deal in real estate or oil and gas interest,
except that the Fund may invest in securities secured by real estate or
interests in real estate.
7. Invest in commodities, except that the Fund may enter into futures
contracts, including interest rate and stock index futures contracts, and may
purchase options and write covered options on futures contracts, securities and
stock indices, as described in the Prospectus.
8. Lend any funds or other assets, except through purchasing debt
securities, lending portfolio securities and entering into repurchase agreements
consistent with the Fund's investment objective.
9. Issue senior securities other than preferred stock.
10. Invest more than 25% of its total assets in the securities of
issuers in any single industry other than each of the utilities industry and the
banking industry, except that this limitation will not be applicable to the
purchase of Government Securities.
11. Make any investments for the purpose of exercising control or
management of any company.
Shareholder Approval
The Fund's investment objective, policy of concentrating in the
utilities and banking industries and investment restrictions set forth above
cannot be changed without the prior approval of the holders of a majority of the
Fund's outstanding voting securities, voting as a single class, and approval of
the holders of a majority of the Fund's outstanding Preferred Stock, voting as a
separate class. A "majority of the Fund's outstanding voting securities" for
this purpose means the lesser of (i) 67% or more of the shares of Common Stock
and Preferred Stock present at a meeting of shareholders, voting as a single
class, if the holders of more than 50% of such shares are present or represented
by proxy at the meeting, or (ii) more than 50% of the outstanding shares of
Common Stock and Preferred Stock, voting as a single class. A majority of the
Fund's outstanding Preferred Stock for this purpose is determined in a similar
manner, by applying the percentages in the previous sentence to shares of
Preferred Stock.
<PAGE>
PROXY CARD
THIS PROXY IS SOLICITED IN OPPOSITION TO THE BOARD OF DIRECTORS OF PREFERRED
INCOME MANAGEMENT FUND BY HOREJSI, INC. AND THE OTHER SOLICITING SHAREHOLDERS
NAMED IN THE ACCOMPANYING PROXY STATEMENT IN OPPOSITION
Proxy for the April 17, 1998 Annual Meeting of Shareholders
of
Preferred Income Management Fund Incorporated
The undersigned holder of shares of Common Stock of Preferred Income
Management Fund Incorporated, a Maryland corporation (the "Fund"), hereby
appoints Stewart R. Horejsi and Stephen C. Miller, and each of them, as
attorneys and proxies for the undersigned, with full powers of substitution and
revocation, to represent the undersigned and to vote on behalf of the
undersigned all shares of Common Stock that the undersigned is entitled to vote
at the Annual Meeting of Shareholders of the Fund to be held at the offices of
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, 47th Floor,
New York, New York 10022 at 9:00 a.m., on April 17, 1998, and any adjournments
or postponements thereof. The undersigned hereby acknowledges receipt of the
Proxy Statement in Opposition of the Soliciting Shareholders and hereby
instructs said attorneys and proxies to vote said shares as indicated hereon. In
their discretion, the proxies are authorized to vote upon such other business as
may properly come before the Meeting. A majority of the proxies present and
acting at the Meeting in person or by substitute (or, if only one shall be so
present, than that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.
IMPORTANT:
Please indicate your vote by an "X" in the appropriate box below. This proxy, if
properly executed, will be voted in the manner directed by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF ALL NOMINEES NAMED IN PROPOSAL 1 BELOW AND FOR THE RATIFICATION OF THE FUND'S
INDEPENDENT ACCOUNTANTS NAMED IN PROPOSAL 2 BELOW.
Please refer to the Proxy Statement in Opposition for a discussion of the
Proposal.
1. ELECTION OF DIRECTORS
FOR all nominees listed below ___________
(except as marked to the contrary below)
WITHHOLD AUTHORITY
to vote for all nominees listed below __________
Stewart R. Horejsi (Class I Director)
Richard I. Barr (Class I Director)
James G. Duff (Class I Director)
(Instruction: To withhold authority for any individual, write his or her name
on the line below):
- ----------------------------------------------------------------------
2. TO RATIFY THE SELECTION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
ACCOUNTANTS FOR THE FUND.
FOR __________
AGAINST __________
ABSTAIN __________
The Soliciting Shareholders recommend that the shareholders vote FOR the
election of all nominees named in Proposal 1 and FOR the ratification of the
independent accountants for the Fund.
IMPORTANT:
Please sign exactly as name appears hereon or on the proxy card previously sent
to you. When shares are held by joint tenants, both should sign. When signing as
an attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by the
President or other duly authorized officer. If a partnership, please sign in
partnership name by authorized person.
DATE: _____________________ ________________________________
SIGNATURE(S)
-------------------------------
TITLE (IF APPLICABLE)
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
32185
