<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
PREFERRED INCOME MANAGEMENT FUND INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check 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:
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<PAGE> 2
PREFERRED INCOME MANAGEMENT FUND INCORPORATED
301 E. COLORADO BOULEVARD, SUITE 720
PASADENA, CALIFORNIA 91101
REVISED NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 1998
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Preferred
Income Management Fund Incorporated, a Maryland corporation (the "Fund"), will
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, for the following purposes:
1. To elect TWO Directors of the Fund (PROPOSAL 1).
2. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants for the Fund for the fiscal year ending November 30,
1998 (PROPOSAL 2).
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
As stated in the previous Notice, the Board of Directors of the Fund has
fixed the close of business on January 20, 1998 as the record date for the
determination of shareholders of the Fund entitled to notice of and to vote at
the Annual Meeting.
By Order of the Board of
Directors,
DONALD F. CRUMRINE
Secretary
March 12, 1998
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IMPORTANT
HOLDERS OF THE FUND'S COMMON STOCK ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
GREEN PROXY CARD.
THE GREEN PROXY CARD SHOULD BE RETURNED IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO
POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE COVER.
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<PAGE> 3
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and may avoid the time and expense to the Fund involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
------------ ---------------
<S> <C>
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp., c/o John Doe Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee, u/t/d Jane B. Doe
12/28/78
CUSTODIAN OR ESTATE ACCOUNTS
(1) John B. Smith, Cust., John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr., Executor
</TABLE>
<PAGE> 4
MARCH 12, 1998
SUPPLEMENT TO PROXY STATEMENT DATED FEBRUARY 6, 1998
PREFERRED INCOME MANAGEMENT FUND INCORPORATED
301 E. COLORADO BOULEVARD, SUITE 720
PASADENA, CALIFORNIA 91101
This Supplement amends and supplements the Proxy Statement dated February
6, 1998 (the "Original Proxy Statement") of Preferred Income Management Fund
Incorporated (the "Fund") previously furnished in connection with the Fund's
1998 Annual Meeting of Shareholders and any adjournments thereof (the "Annual
Meeting"). The Annual Meeting will be held on April 17, 1998 at 9:00 a.m. at the
offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
47th Floor, New York, New York 10022.
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IMPORTANT
This Supplement is being provided because a group headed by Stewart R.
Horejsi is attempting a hostile takeover of the Fund. Mr. Horejsi is seeking to
radically change the nature of the Fund, including, among other things, reducing
the Fund's distributions of income and gains to shareholders to the minimum
amount required.
Before Mr. Horejsi began his hostile takeover attempt, the Fund had
included Mr. Horejsi on its slate of nominees for election at the Annual
Meeting. As a result of Mr. Horejsi's actions, the Fund's Nominating Committee
has removed Mr. Horejsi from the Fund's slate, and your Board of Directors has
eliminated the Board seat that was created last July specifically for Mr.
Horejsi.
YOUR BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND RETURN THE GREEN PROXY
CARD TODAY IN THE ENCLOSED, POSTAGE PRE-PAID ENVELOPE. The revised proxy card
reflects the changes your Board of Directors has made in reaction TO THIS
HOSTILE TAKEOVER ATTEMPT.
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<PAGE> 5
Except as modified herein, the information contained in the Original Proxy
Statement remains unchanged. You may obtain copies of the Original Proxy
Statement by writing First Data Investor Services Group, Inc., P.O. Box 1376,
Boston, Massachusetts 02104, or calling 1-800-331-1710.
If the enclosed GREEN proxy card is properly executed and returned in time
to be voted at the Annual Meeting, the shares represented thereby will be voted
in accordance with the instructions marked thereon. Unless instructions to the
contrary are marked thereon, a proxy will be voted FOR the election of the
nominees for Director and FOR the other matters listed in the accompanying
Notice of Annual Meeting of Shareholders. If you sent in the proxy card included
with the Original Proxy Statement but have not sent in a subsequent proxy, your
shares will be voted only for the nominees for Directors of the Fund set forth
in this Supplement, notwithstanding the fact that Mr. Horejsi was named on that
card.
THE CHANGES IN THE ENCLOSED PROXY CARD RELATE SOLELY TO THE ELECTION OF
DIRECTORS BY THE HOLDERS OF THE FUND'S COMMON STOCK; ACCORDINGLY, THE PROXY CARD
INCLUDED WITH THE ORIGINAL PROXY STATEMENT FOR HOLDERS OF THE FUND'S PREFERRED
STOCK REMAINS VALID AND THERE IS NO NEED FOR SUCH PREFERRED SHAREHOLDERS TO
COMPLETE ANY NEW PROXY. If required, preferred shareholders may obtain another
copy of such original proxy card by contacting First Data Investor Services
Group, Inc., as described above.
HOSTILE ACTIONS TAKEN BY STEWART R. HOREJSI
On January 23, 1998, the Board of Directors of the Fund received an
informal proposal from Mr. Stewart R. Horejsi, a member of a group that holds
almost 39% of the Fund's common stock, to substantially change the Fund's
objective and policies. This informal proposal was presented to the Board
without prior notice -- in fact, Mr. Horejsi had been asked twice whether he had
any item he wished to add to the meeting's agenda -- and no written proposal or
other written material was provided to the Board.
The main points proposed by Mr. Horejsi at the meeting were:
- changing the Fund's objective from current income to capital
appreciation in recognition of the most recent reduction in federal
tax rates applicable to capital gains (capital gains being more
advantageous to the Horejsi group from a tax standpoint than ordinary
income or dividends qualifying for the dividends-received deduction);
- converting the Fund from diversified to non-diversified status and
gradually accumulating over time large holdings of a small number of
common stocks;
- eliminating, to the maximum extent possible, the investment
restrictions contained in the Fund's original prospectus, including
the restriction on investing for the purpose of gaining management
control of other companies;
- raising investment advisory fees only on common stocks to one percent
(1%) of market value and permitting the Fund's investment adviser,
Flaherty & Crumrine Incorporated, to retain sub-advisers in areas
outside its area of expertise in fixed income markets;
- prohibiting directors from receiving fees from other funds managed by
the adviser to the Fund; and
- changing the Fund's name to reflect its new investment focus.
2
<PAGE> 6
On January 26, 1998, the Fund received a copy of a Schedule 13D filed
by the group of which Mr. Horejsi is a member. The Schedule 13D also set
forth the following additions to the items raised by Mr. Horejsi at the
Board meeting:
- Mr. Horejsi's group would consider whether it should take a more
active role in the Fund's management and may consider soliciting
proxies in connection with the Fund's annual meeting of shareholders;
- Flaherty & Crumrine Incorporated should continue to manage the
preferred stock and fixed income portion of the Fund's portfolio, but
an unnamed company controlled by Mr. Horejsi would be better suited
to implement a new investment focus for the Fund than Flaherty &
Crumrine Incorporated;
- the Fund should appoint a chief executive officer who is not
affiliated with Flaherty & Crumrine Incorporated;
- the Fund should consider investing in other investment companies;
- the Fund should dispose of a portion of its preferred stock portfolio
in connection with the change in the Fund's investment focus; and
- the Fund should retain and reinvest the maximum amounts of income and
gains that can be retained consistent with tax requirements.
In response to Mr. Horejsi's proposals, on February 10, 1998, the Board
established a Special Committee comprised of four non-interested directors (the
"Special Committee"). The Special Committee concluded that it would require a
comprehensive description of Mr. Horejsi's proposals before it could properly
consider such fundamental changes in investment policy. With additional details
from Mr. Horejsi, the Board would consider the proposals in light of the Board's
responsibilities to all holders of the Fund's Common Stock and MMP(R) Preferred
Stock, including those not affiliated with Mr. Horejsi.
However, rather than providing the requested information and following the
procedures established by the Board, Mr. Horejsi commenced a proxy solicitation
seeking to elect his own candidates as directors of the Fund. In his filing on
February 13, 1998 of preliminary proxy material with the Securities and Exchange
Commission, Mr. Horejsi explained that he was seeking proxies in order to
implement the dramatic changes in investment focus of the Fund and the other
proposals described above.
BOARD REACTION TO HOSTILE ACTIONS
As a result of Mr. Horejsi's actions, on February 20, 1998, the Nominating
Committee of the Board determined that it could no longer recommend Mr. Horejsi
for inclusion on the Fund's Board of Directors; instead, it continued to
recommend the election of Martin Brody and David Gale, the two non-interested
directors for whom your proxy was sought in the Original Proxy Statement. The
Nominating Committee concluded that as a result of Mr. Horejsi's failure to
comply with the procedures established by the Board, as evidenced by his filing
opposing proxy materials within three days of the creation of the Special
Committee, the inclusion of himself on the opposing slate, which creates the
potential for confusion, and the significant expenses the Fund expected to incur
as a result of his proxy contest, Mr. Horejsi was no longer a suitable
candidate.
3
<PAGE> 7
Over the period from February 24, 1998 through March 10, 1998, Robert T.
Flaherty, the Chairman of the Board, Chief Executive Officer and a director of
the Fund, explored with Mr. Horejsi various arrangements under which Mr. Horejsi
and his nominees might be added to the Board and his proposals could be
developed for presentation to the Fund's shareholders for their consideration.
Over this period, Messrs. Flaherty and Horejsi reached an oral understanding for
a cooperative resolution of Mr. Horejsi's proxy contest on terms Mr. Flaherty
believes to be substantially as follows:
- The Horejsi group would discontinue its proxy contest for the
election of directors at the Annual Meeting and withdraw its
proposals to appoint a chief executive officer who is unaffiliated
with the Fund or its investment adviser and to prohibit the Fund's
non-interested directors from receiving fees from other funds advised
by the Fund's investment adviser.
- The Fund would expand the size of the Board to nine directors and
would, subject to the procedures of the Board's Nominating Committee,
nominate and recommend for election at the Annual Meeting Mr.
Horejsi's three nominees for directors (including Mr. Horejsi
himself). One nominee would be recommended for election for each of
the Board's three classes of directors, with terms expiring on the
Annual Meeting of Shareholders in 2001, 2000 and 1999, respectively.
- In order to provide an opportunity for the Fund's shareholders to
consider Mr. Horejsi's proposals, the Fund and the Horejsi group
would cooperate in good faith to prepare a detailed description of
the proposals, which would then be communicated to the Fund's
shareholders.
- Once such proposals were communicated to the Fund's shareholders, the
Fund and the Horejsi group would take reasonable steps, including the
possibility of a cash tender offer or periodic share repurchases, to
afford the Fund's common shareholders the opportunity to terminate
their investment in the Fund in a manner designed to minimize, to the
extent practicable, any adverse impact on the price of the shares of
Common Stock reasonably related to the proposals.
However, on March 4, 1998, the Fund received Mr. Horejsi's counsel's
comments on a draft settlement agreement. Those comments significantly diverged
from the foregoing understanding. Among the differences were the following:
- The Horejsi group would not agree to include in the settlement
agreement a provision concerning the preparation of a detailed
description of its proposals for consideration by the Fund's
shareholders or the implementation of any value realization
mechanism.
- The Board, or any committee thereof, would not be permitted to take
any action without the approval of at least one of the Horejsi
nominees. Similarly, any action to be taken by the Fund's
non-interested directors would require the approval of at least one
of the Horejsi nominees.
- All of the Horejsi nominees would be added as Class I Directors, with
terms expiring at the Fund's 2001 Annual Meeting of Shareholders,
forcing the Fund's nominees to take shorter terms.
- The Horejsi group would not withdraw its proposals to replace the
Fund's chief executive officer and to prohibit the Fund's
non-interested directors from receiving fees from other funds advised
by the Fund's investment adviser.
The letter accompanying Mr. Horejsi's counsel's comments on the proposed
settlement agreement imposed a March 6, 1998 deadline for the conclusion of
negotiations, including any necessary board meetings. Over the period from March
4, 1998 through March 10, 1998, Messrs. Flaherty and Horejsi engaged in further
4
<PAGE> 8
discussions and corresponded in an effort to bridge the substantial differences
described above. These discussions failed to produce an acceptable agreement on
a means for providing shareholders who consider the proposed changes not to be
suitable to their needs with a reasonable opportunity to dispose of their shares
at fair value.
The Board met on March 11, 1998 and, in light of Mr. Horejsi's actions,
reaffirmed the Nominating Committee's previous decision to exclude him from its
proposed slate of nominees. The Board further decided to reduce the size of the
Board, effective immediately following the Annual Meeting, from seven to six
directors to eliminate the extra position that had been created specifically for
Mr. Horejsi in July 1997. In reaching such decision, the Board considered the
time required both to locate qualified persons willing to serve on the Board of
Directors in light of the special criteria applicable to directors of registered
investment companies and to conduct the responsible, deliberative process it has
undertaken when nominating candidates in the past. The Board concluded that,
especially in light of Mr. Horejsi's proposals and proxy solicitation, even an
expedited search would be unlikely to locate a qualified and willing replacement
in sufficient time before the Annual Meeting to enable the shareholders to
properly consider the candidate's qualifications and that it could adequately
carry out its functions without the additional director, as it did before its
expansion to include Mr. Horejsi.
The Board also considered, but did not base its action upon, how a
reduction in the size of the Board would affect Mr. Horejsi's ability to obtain
majority representation on the Board. The Board concluded that such reduction
would not affect Mr. Horejsi's ability to obtain majority representation through
two successful annual elections if he were able to obtain the support of the
holders of the Fund's MMP(R) Preferred Stock at the 1999 Annual Meeting.
ACCORDINGLY, IN ORDER TO DEFEAT THIS HOSTILE TAKEOVER ATTEMPT BY MR.
HOREJSI AND MAINTAIN THE FUND'S CURRENT INVESTMENT FOCUS, THE BOARD URGES YOU TO
SIGN, DATE AND RETURN THE GREEN PROXY CARD TODAY. In order that your shares may
be represented at the Annual Meeting, you are requested to vote for the election
of Directors (Proposal 1), as set forth below. Proposal 2 (Ratification of the
Selection of Independent Accountants) remains the same as set forth in the
Original Proxy Statement.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Fund is divided into three classes, each
class having a term of three years. Each year the term of office of one class
expires and the successor or successors elected to such class serve for a
three-year term. Currently, there are three Class I Directors of the Fund; from
and after the Annual Meeting, the Fund will have only two Class I Directors.
Mr. Martin Brody and Mr. David Gale, two of the current Class I Directors
of the Fund, each of whose term expires on the date of the Annual Meeting, have
been nominated for a three-year term to expire at the Fund's 2001 Annual Meeting
of Shareholders and until their successors are duly elected and qualified. Mr.
Brody has served as a Director since the Fund's commencement of operations; Mr.
Gale has served as a Director since January 24, 1997.
THE DIRECTORS, INCLUDING ALL NON-INTERESTED DIRECTORS, RECOMMEND THAT THE
SHAREHOLDERS VOTE FOR PROPOSAL NO. 1.
5
<PAGE> 9
BROKER NON-VOTES AND ABSTENTIONS
Proxies that reflect "broker non votes" or abstentions with respect to a
particular matter will be counted as shares that are not present and not
entitled to vote on such matter, even though such shares will be considered
present for purposes of determining a quorum and voting on other proposals. A
"broker non-vote" results when a broker or a nominee, who holds shares on behalf
of a beneficial owner, returns an executed proxy accompanied by instructions to
withhold authority to vote. This typically occurs when (i) instructions have not
been received from the beneficial owners or the persons entitled to vote or (ii)
the broker or nominee does not have the discretionary voting authority on a
particular matter. BECAUSE OF THE PROXY CONTEST, BROKERS OR NOMINEES WHO DO NOT
RECEIVE VOTING INSTRUCTIONS WILL NOT HAVE THE DISCRETIONARY AUTHORITY TO VOTE ON
PROPOSAL NO. 1. ACCORDINGLY, ANY BROKER NON-VOTES OR ABSTENTIONS ON SUCH
PROPOSAL WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" AND WILL AFFECT WHETHER
THE PROPOSAL WILL BE APPROVED.
QUESTIONS
Questions and requests for assistance in completing or delivering the GREEN
proxy card may be directed to MacKenzie Partners, Inc. at the following address
and telephone numbers:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free (800) 322-2885
6
<PAGE> 10
PREFERRED INCOME MANAGEMENT FUND INCORPORATED
301 E. COLORADO BOULEVARD, SUITE 720
PASADENA, CALIFORNIA 91101
PLEASE VOTE THE GREEN CARD TODAY
EVEN IF YOU HAVE PREVIOUSLY SENT IN A PROXY CARD
WARNING: YOU MAY RECEIVE PROXY MATERIALS FROM DIRECTOR STEWART
HOREJSI WHO IS ATTEMPTING A HOSTILE TAKEOVER OF YOUR FUND
March 12, 1998
TO OUR SHAREHOLDERS:
You should be aware that a dissident shareholder group led by current
director Stewart R. Horejsi -- who controls 39% of the Fund's outstanding
shares -- intends to solicit proxies to elect his own candidates to the Fund's
Board, in opposition to management's candidates, at the Fund's annual meeting
scheduled for April 17th.
You may receive proxy materials from the Horejsi group seeking your support
for its dissident slate of candidates. We ask that you ignore these materials
and vote FOR management's slate on our enclosed GREEN proxy card.
IMPORTANT: HOREJSI'S INTERESTS MAY NOT BE THE SAME AS YOURS.
LET'S BE FRANK. MR. HOREJSI IS ATTEMPTING TO ELECT HIS OWN HANDPICKED
CANDIDATES TO THE BOARD SO THAT HE CAN RADICALLY CHANGE THE FUND'S OBJECTIVE TO
SUIT HIS OWN NEEDS -- WHICH MAY NOT MATCH YOURS. BECAUSE HE NO LONGER WANTS
INCOME, HE WANTS TO REDUCE THE FUND'S DISTRIBUTIONS TO SHAREHOLDERS TO THE
MINIMUM REQUIRED.
Mr. Horejsi has made it clear that his plans are designed to serve his
personal tax objectives. We firmly believe these proposed changes may not be in
the best interests of the Fund or its shareholders as a whole. Apparently, Mr.
Horejsi has simply decided that changing the objective of the Fund would be the
best course for him personally.
But you don't have to take our word for it. The March 6, 1998 Morningstar
Mutual Fund report says, "Horejsi's proposal is obviously more than the standard
effort to reduce a fund's discount. Indeed, it suggests that his group is more
interested in shaping the fund to meet its own investment goals. THAT WOULD
LEAVE THE FUND'S OTHER SHAREHOLDERS IN THE LURCH . . . It's also questionable
whether shareholders would be better served by putting some of the fund's assets
under the control of another manager. Flaherty & Crumrine, the fund's current
advisor, has produced an excellent record, which includes an 18.9% three-year
return. [Emphasis added.]"
WHY THE HOREJSI PROPOSALS MAY NOT BE IN YOUR BEST INTERESTS.
No matter how it affects you -- the owners of more than 60% of the
Fund -- Horejsi wants to change the Fund's primary objective from seeking
current income to seeking capital appreciation. He plans to pursue what even he
concedes is a far more volatile course of seeking capital gains from investments
in just a small group of common stocks -- including those of troubled, high-risk
companies.
Horejsi also wants to:
- - eliminate many current investment restrictions that embody important
shareholder protections, including diversification requirements and
restrictions against taking control of other companies.
- - become the Fund's adviser on common stocks and, to make it more worth his
while, to hike investment advisory fees on common stocks to 1%.
- - change the Fund's name to reflect its new direction.
<PAGE> 11
WHY WON'T HOREJSI GIVE YOU A CHOICE?
We believe most shareholders choose to invest in the Fund because it fills
a specialized need for an alternative to traditional bond funds in their overall
investment plans.
IF MR. HOREJSI WANTS TO CHANGE THE FUND'S OBJECTIVE, WE BELIEVE YOU AND ALL
THE OTHER SHAREHOLDERS SHOULD BE GIVEN A CHOICE ABOUT PARTICIPATING IN A FUND
WITH DRAMATICALLY DIFFERENT INVESTMENT POLICIES FROM WHAT SHAREHOLDERS EXPECT.
MR. HOREJSI IS APPARENTLY UNWILLING TO PROVIDE YOU WITH THAT CHOICE, PREFERRING
TO FORCE HIS WAY TO ACHIEVING HIS GOALS BECAUSE HE CONTROLS 39% OF THE FUND.
If Mr. Horejsi wants to make equity investments and -- even worse -- use
hostile tactics to achieve changes in control of those investments, we suggest
he take his money elsewhere, rather than try to cram these changes down the
throats of the Fund's shareholders.
DON'T ACCEPT HOREJSI'S HIGH-PRICED "PIG IN A POKE"
In our view, Mr. Horejsi wants to use your Fund simply to serve his
personal interests. That should be of grave concern to you because:
- - MR. HOREJSI CLAIMS AN UNNAMED COMPANY CONTROLLED BY HIM WOULD BE BETTER
SUITED TO IMPLEMENT THIS NEW INVESTMENT FOCUS FOR THE FUND. HE ADMITS THAT NO
SUCH COMPANY CURRENTLY EXISTS.
- - MR. HOREJSI AND HIS GROUP HAVE ABSOLUTELY NO EXPERIENCE OR TRACK RECORD
MANAGING OTHER PEOPLE'S MONEY. WHY ALLOW HIM TO LEARN WITH YOUR MONEY?
We see no reason to turn the Fund into a common stock fund since there are
already scores of well managed equity funds in which anyone is free to invest.
OUR TRACK RECORD IS OUTSTANDING. LET'S STICK TO OUR KNITTING.
We have an outstanding record as a fixed income fund specializing in
preferred stocks as an alternative to traditional bond funds. In the February
16, 1998 issue of BusinessWeek magazine, the Fund was one of only 26 bond funds
selected as "The Best of the Bunch" for giving shareholders superior risk
adjusted performance.
The article notes that of those 26 top bond funds (selected from a total of
180 closed-end bond funds), your Fund ranked third, with pre-tax returns of
19.7% for the three year period from 1995 through 1997.
WE WERE REASONABLE WITH MR. HOREJSI, BUT HE FORCED OUR HAND.
It is unfortunate that Mr. Horejsi's hostile actions will be a major
distraction for your Fund's management. Last summer, your Fund's Board attempted
to establish a working relationship with him and appointed him to a Board seat
specifically created for him alone. However, his proposed proxy fight and other
activities are completely counter to the many representations he made to us
concerning his intentions about the Fund's future. As a result, we have dropped
Mr. Horejsi from management's slate of director nominees and his seat has been
eliminated.
THIS IS NOT THE TIME FOR THE MAJORITY TO BE SILENT!
SUPPORT YOUR CURRENT BOARD. VOTE YOUR GREEN PROXY CARD TODAY!
<PAGE> 12
We urge you to continue to support the Board which has presided over this
period of superior investment performance. Please take a moment to mark, sign
and date the enclosed GREEN proxy card and mail it in the postage-paid envelope
provided. Remember -- please disregard any card or proxy materials sent by Mr.
Horejsi.
YOUR VOTE IS IMPORTANT. MR. HOREJSI AND HIS FAMILY INTERESTS OWN
APPROXIMATELY 39% OF THE FUND'S SHARES. HE HAS STATED IN HIS LEGAL FILINGS THAT
HE BELIEVES HE CAN EXERCISE CONTROL OF THE FUND WITH LESS THAN A MAJORITY OF THE
OUTSTANDING SHARES. WHAT THIS MEANS IS THAT HE IS COUNTING ON MANY OF YOU NOT
VOTING BECAUSE YOU MAY NOT COMPLETELY UNDERSTAND OR ARE PUT OFF BY THE COMMOTION
HE IS CAUSING -- OR BECAUSE YOU THINK YOU OWN TOO FEW SHARES TO MAKE A
DIFFERENCE AGAINST A 39% HOLDER. BUT IF WE ACT TOGETHER, WE CAN MAKE SURE YOU
HAVE A CHOICE ABOUT GOING ALONG WITH HIS PROPOSALS.
If you have any questions about the Fund or about voting your shares, we
invite you to call Carl Johns, Manager of Investor Relations for the Fund, at
(626) 795-7300 or MacKenzie Partners, Inc., which is assisting us with this
election contest, toll-free at (800) 322-2885. We appreciate your continued
support of the Fund and its investment objective. On behalf of your Board of
Directors,
Sincerely,
flaherty sig
ROBERT T. FLAHERTY
Chairman of the Board and Chief
Executive Officer
<PAGE> 13
GREEN CARD
PROXY
PREFERRED INCOME MANAGEMENT FUND INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock of Preferred Income
Management Fund Incorporated, a Maryland corporation (the "Fund"), hereby
appoints Robert T. Flaherty, Donald F. Crumrine, Teresa M.R. Hamlin and
Christine P. Ritch, 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, which 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 thereof. The undersigned hereby acknowledges receipt of
the Notice of Annual Meeting and Proxy Statement as supplemented 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 Annual Meeting. A majority of the
proxies present and acting at the Annual Meeting in person or by substitute
(or, if only one shall be so present, then 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.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[SEE REVERSE SIDE]
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
ELECTION OF NOMINEES AS DIRECTORS AND FOR PROPOSAL 2.
PLEASE REFER TO THE PROXY STATEMENT, AS SUPPLEMENTED, FOR A DISCUSSION OF THE
PROPOSAL.
1. Election of Directors.
Nominees: Martin Brody and David Gale
FOR WITHHELD
[ ] [ ]
[ ]
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For all nominees except as noted above
2. To ratify the selection of Coopers & Lybrand L.L.P. as
independent accountants for the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF ALL NOMINEES AND "FOR" RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND
L.L.P. AS INDEPENDENT ACCOUNTANTS FOR THE FUND.
NOTE: Please sign exactly as your name appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give your full title.
Date:
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Signature
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Signature
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Title
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
