BOULDER TOTAL RETURN FUND INC, N-2/A, 2000-07-03

BOULDER TOTAL RETURN FUND INC
N-2/A, 2000-07-03

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As filed with the Securities and Exchange Commission on July 3, 2000

Securities Act Registration No. 333-
Investment Company Registration No. 811-7390

--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

------------------

FORM N-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933|X| [X]
Pre-Effective Amendment No. 1 [X]

Post-Effective Amendment No. [_]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 7 [X]

------------------

Boulder Total Return Fund, Inc.
(Exact Name of Registrant as Specified In Charter)

1680 38th Street, Suite 800
Boulder, Colorado 80301
(Address of Principal Executive Offices)

(303) 444-5483
(Registrant's Telephone Number, including Area Code)

Stephen C. Miller
1680 38th Street, Suite 800
Boulder, Colorado 80301
(Name and Address of Agent for Service)

Copies to:

Rose F. DiMartino, Esq. Richard T. Prins, Esq.
Willkie Farr and Gallagher Skadden, Arps, Slate, Meagher & Flom LLP
787 7th Avenue Four Times Square
New York, NY 100019-6099 New York, NY 10036

Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of thisRegistration Statement.

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
====================================================================================================================================
Proposed Proposed

Title of Securities Amount Being Maximum Offering Maximum Aggregate Amount of
Being Registered Registered Price per Unit Offering Price Registration Fee
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Auction Market Preferred Stock ......... 775 shares $100,000 $77,500,000 $20,460.00
previously paid
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BOULDER TOTAL RETURN FUND, INC.
CROSS REFERENCE SHEET

Part ABProspectus

Items in Part A of Form N-2
Specified in Prospectus Location in Prospectus
----------------------- ----------------------
<S> <C> <C>
Item 1. Outside Front Cover............................................... Cover page

Item 2. Inside Front and Outside Back Cover Page.......................... Inapplicable

Item 3. Fee Table and Synopsis............................................ Inapplicable

Item 4. Financial Highlights.............................................. Financial Highlights

Item 5. Plan of Distribution.............................................. Cover Page; Prospectus Summary; Underwriting

Item 6. Selling Shareholders.............................................. Inapplicable

Item 7. Use of Proceeds................................................... Use of Proceeds; Investment Objective and Policies

Item 8. General Description of the Registrant............................. Cover Page; Prospectus Summary The Company;
Investment Objective and Policies

Item 9. Management........................................................ Prospectus Summary; Management of the Company

Item 10. Capital Stock, Long-Term Debt, and Other Securities............... Capitalization; Investment Objective and Policies;
Description of AMPS; the Auction

Item 11. Defaults and Arrears on Senior Securities......................... Inapplicable

Item 12. Legal Proceedings................................................. Inapplicable

Item 13. Table of Contents of the Statement of Additional Information...... Table of Contents of the Statement of Additional
Information

Part BBStatement of Additional Information

Items In Part B of Form N-2 Location in Statement of
Additional Information
----------------------

Item 14. Cover Page........................................................ Cover Page

Item 15. Table of Contents................................................. Back Cover Page

Item 16. General Information and History................................... Inapplicable

Item 17. Investment Objective and Policies................................. Investment Objective and Policies;
Investment Policies and Techniques

Item 18. Management........................................................ Management of the Company

Item 19. Control Persons and Principal Holders of Securities............... Management of the Company

Item 20. Investment Advisory and Other Services............................ Management of the Company

Item 21. Brokerage Allocation and Other Practices.......................... Portfolio Transactions

Item 22. Tax Status........................................................ Tax Matters

Item 23. Financial Statements.............................................. Financial Statements (incorporated by reference)
</TABLE>

Part CBOther Information

Items 24-33 have been answered in Part C of this Registration Statement

<PAGE>

The information in this Prospectus is not complete and may be changed. We
may not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 3, 2000

PROSPECTUS

$77,500,000
BOULDER TOTAL RETURN FUND INC.
Taxable Auction Market Preferred Stock (the "AMPS")
775 Shares
Liquidation Preference $100,000 Per Share

Boulder Total Return Fund, Inc. is a closed-end, diversified management
investment company. The Company's investment objective is total return. The
Company seeks to produce both long-term capital appreciation through investment
in common stocks and current income consistent with preservation of capital
through investments in income producing securities. The Company typically
invests in securities of U.S.-based companies, though it is not limited to
investing in the U.S. stock market. The Company anticipates a low turnover rate
in its portfolio of common stocks and, with respect to common stocks held for
capital appreciation rather than income, seeks to invest in stocks that have a
proven track record of earnings, and the prospect of increased future value
through growth in revenues and profits. The Company has the flexibility to
invest in companies of any size; however, it is expected that it will not make
significant investments in start-up companies, initial public offerings,
non-public companies, or companies with little or no operating history.

Boulder Investment Advisers, LLC (the "Adviser") acts as the investment
adviser to the Company. The address of the Company and the Adviser is 1680 38th
Street, Suite 800, Boulder, Colorado 80301 and their common telephone number is
(303) 444-5483. Stewart West Indies Trading Company, Ltd. doing its investment
advisory business under the name Stewart Investment Advisers ("SIA") acts as a
sub-adviser to the Company and its address is Bellerive, Queen Street, St.
Peter, Barbados.

The AMPS will not be listed on an exchange. You may only buy or sell AMPS
through an order placed at an auction with or through a broker-dealer that has
entered into an agreement with the auction agent and the Company, or in a
secondary market maintained by certain broker-dealers. These broker-dealers are
not required to maintain this market, and it may not provide you with liquidity.

This prospectus contains important information about the Company. You
should read the prospectus before deciding whether to invest and retain it for
future reference. A statement of additional information, dated , 2000,
containing additional information about the Company, has been filed with the
Securities and Exchange Commission and is incorporated by reference in its
entirety into this prospectus. You can review the table of contents of the
statement of additional information on page of this prospectus. You may request
a free copy of the statement of additional information by calling (____)
___________. You may also obtain the statement of additional information and
other information regarding the Company on the Securities Exchange Commission's
("SEC") web site (http://www.sec.gov).

Investing in the AMPS involves certain risks. See "Risks" beginning on page
___. The minimum purchase amount of the AMPS is $100,000.

Neither the SEC nor any state securities commission has approved or
disapproved these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.

Per Share Total
--------- -----
Public Offering Price $100,000 $77,500,000
Sales Load $ $
Proceeds to Company (before expenses)1 $ $

Offering expenses payable by the Company are estimated to be $_______________.

The underwriters are offering the AMPS subject to various conditions. The
underwriters expect to deliver the AMPS to purchasers, in book-entry form,
through the facilities of The Depository Company Trust on or about ___, 2000.

July __, 2000

<PAGE>

MERRILL LYNCH & CO.

The Company is offering 775 newly issued shares of Cumulative Auction
Market Preferred Stock (the "Offering"). We refer to these shares as the "AMPS"
throughout this prospectus and the related statement of additional information.
The dividend rate for the initial dividend period (the period from the date of
issue through ____, 2000) will be ___%, and will be paid on _________, 2000.
After the initial dividend period, the dividend rate on the AMPS for each
subsequent dividend period generally will be determined pursuant to auctions
held every 28 days. Prospective purchasers should carefully review the auction
procedures described in this prospectus, including the appendices, and should
note:

o a buy order or sell order is a commitment to buy or sell AMPS based on
the results of an auction;

o auctions will be conducted by telephone; and

o purchases and sales will be settled on the next business day after the
auction.

The Company is required to allocate net capital gains and other taxable
income, if any, proportionately between common shares and preferred shares,
including the AMPS, based on the percentage of total dividends distributed to
each class for that year.

Dividends on the AMPS are cumulative. The AMPS are redeemable, in whole or
in part, at the option of the Company on any date dividends are paid on the AMPS
(except during certain non-call periods), and will be subject to mandatory
redemption, in certain circumstances, at a redemption price of $100,000 per
share plus accumulated but unpaid dividends to the redemption date (whether or
not declared), plus a premium in certain circumstances.

You should rely only on the information contained in this prospectus. The
Company has not authorized anyone to provide you with different information. The
Company is not making an offer of these securities in any state where the offer
is not permitted. You should not assume that the information provided by this
prospectus is accurate as of any date other than the date on the front of this
prospectus.

<PAGE>

TABLE OF CONTENTS
Page
----

PROSPECTUS SUMMARY.............................................................6
FINANCIAL HIGHLIGHTS..........................................................10
THE COMPANY...................................................................10
USE OF PROCEEDS...............................................................11
CAPITALIZATION................................................................11
INVESTMENT OBJECTIVE AND POLICIES.............................................11
OTHER INVESTMENT PRACTICES....................................................12
Leverage...................................................................12
Hedging....................................................................12
Other Investment Techniques................................................12
RISKS.........................................................................12
Interest Rate and Hedging Risks............................................12
Investments In Common Stocks...............................................13
Investments in Real Estate Investment Trusts ("REITs").....................13
Investments in Other Registered Investment Companies ("RICs")..............13
Investments in Preferred Stocks and Bonds..................................14
Auction Risk...............................................................14
Secondary Market Risk......................................................14
Ratings and Asset Coverage Risk............................................14
MANAGEMENT OF THE COMPANY.....................................................15
Directors and Officers.....................................................15
Investment Advisers........................................................15
Beneficial Ownership and Control Persons...................................17
Investment Philosophy......................................................18
The Investment Advisory Agreements.........................................18
The Administration and Co-Administration Agreements........................19
Expenses of The Company....................................................20
DESCRIPTION OF AMPS...........................................................21
General....................................................................21
Dividends and Dividend Periods.............................................21
Redemption.................................................................24
Liquidation................................................................24
Rating Agency Guidelines and Asset Coverage................................24
Voting Rights..............................................................26
THE AUCTION...................................................................27
General....................................................................27
Auction Procedures.........................................................28
Secondary Market Trading and Transfer of AMPS..............................29
TAXES.........................................................................30
Federal Income Tax Matters.................................................30
State and Local Tax Matters................................................30
DETERMINATION OF NET ASSET VALUE..............................................30
REPURCHASE OF COMMON SHARES...................................................31
DESCRIPTION OF CAPITAL STOCK..................................................31
Common Shares..............................................................31
Preferred Stock............................................................32
Anti-takeover Provisions of the Charter and By-Laws........................32
OTHER SERVICE PROVIDERS.......................................................33
UNDERWRITING..................................................................34
LEGAL OPINIONS................................................................34
EXPERTS.......................................................................34
REPORTS TO STOCKHOLDERS.......................................................34
AVAILABLE INFORMATION.........................................................35
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION.................36

<PAGE>

PROSPECTUS SUMMARY

The following information is a summary of, and is qualified in its entirety
by reference to, more detailed information included in this prospectus and the
Company's statement of additional information.

The Company...................Boulder Total Return Fund, Inc. is a diversified,
closed-end management investment company. The
Company's investment objective is total return.
The Company seeks to produce both long-term
capital appreciation through investment in common
stocks and current income consistent with
preservation of capital through investments in
income producing securities. The Company typically
invests in securities of U.S.-based companies. See
"Investment Objective and Policies". As of March
31, 2000, the Company had 9,416,743 shares of
common stock outstanding and 775 preferred shares
outstanding. The 775 preferred shares are Money
Market Cumulative Preferred Stock (the "MMP
Shares") which will be redeemed in their entirety
in conjunction with the Offering out of the
proceeds of the Offering. The Company's common
shares are traded on the New York Stock Exchange
under the symbol "BTF."

The Offering..................The Company is offering 775 shares of AMPS (the
"Offering"). The purchase price for each AMPS
Share is $100,000 plus accumulated dividends, if
any, from the date the share is first issued. The
AMPS are being offered by Merrill Lynch & Co.
("Merrill Lynch").

Investment Objective
and Policies..................The Company's investment objective is total
return. The Company seeks to produce both
long-term capital appreciation through investment
in common stocks and current income consistent
with preservation of capital through investments
in income producing securities such as dividend
paying closed-end funds, real estate investment
trusts, U.S. Government securities, preferred
stocks and bonds. No assurance can be given that
the Company will achieve its investment objective.

The Company operates as a "diversified" investment
company, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). Under this
definition, the Company must limit to 5% the
portion of its assets invested in the securities
of a single issuer. This limit does not apply,
however, to 25% of the Company's assets, which may
be invested in a single issuer. The Company
intends to concentrate its common stock
investments in a few issuers and to take large
positions in those issuers, consistent with being
a "diversified" fund. As a result, the Company is
subject to a greater risk of loss than a fund that
diversified its investments more broadly. Taking
larger positions is also likely to increase the
volatility of the Company's net asset value
reflecting fluctuation in the value of its large
holdings.

Under normal market conditions, the Company
intends to invest at least 80% of its net assets
in common stocks and income securities. The term
"common stocks" include income-producing closed
end funds and real estate investment trusts
("REITs"). The term "income securities" includes
preferred stocks, bonds, notes, bills, debentures,
convertible securities, bank debt obligations,
repurchase agreements and short-term money market
obligations.

<PAGE>

Investment Advisers...........Boulder Investment Advisers, L.L.C. (the
"Adviser") acts as the investment adviser to the
Company and Stewart Investment Advisers
("Sub-Adviser" or "SIA") is the Company's
sub-investment adviser. The Adviser has delegated
to SIA full authority to make investment decisions
for the Company and to determine the Company's
asset allcoation. The address of the Company and
the Adviser is 1680 38th Street, Suite 800,
Boulder Colorado 80301 and their common telephone
number is (303) 444-5483. SIA's address is
Bellerive, Queen Street, St. Peter, Barbados.
Spectrum and SIA are referred to herein as the
"Sub-Advisers".

Risk Factors..................Before investing in AMPS, you should consider
carefully the following risks of such an
investment:

o If an auction fails you may not be able to sell
some or all of your shares;

o The Company holds a substantial position (e.g.,
more than 25% of its assets) in the common
stock of a single issuer, Berkshire Hathaway,
Inc. and thus, the volatility of the Company's
common stock, and the Company's net asset value
and its performance in general, depends
disproportionately more on the performance of
such single issuer than might a more
diversified fund;

o The Company has substantial investments in
non-income producing common stocks (e.g.,
Berkshire Hathaway as described above);

o Because of the nature of the market for AMPS,
you may receive less than the price you paid
for your shares if you sell them outside of the
auction, especially when market interest rates
are rising;

o A rating agency could downgrade the rating
assigned to the AMPS, which could affect
liquidity;

o The Company may be forced to redeem your shares
to meet regulatory or rating agency
requirements and may voluntarily redeem your
shares without your consent;

o In certain circumstances the Company may not
earn sufficient income from its investments to
pay dividends out of income;

o Market factors, such as declines in the value
of its stock holdings or increases in interest
rates, may result in a decline in the value of
the Company's investment portfolio thus
reducing the asset coverage for the AMPS; and

o Adverse developments in the business affairs of
issuers of securities in which the Company
invests may have a negative impact on the value
of the Company's portfolio and its income.

<PAGE>

Secondary Market Trading......The AMPS will not be listed on a stock exchange.
Instead, you may buy or sell AMPS at a periodic
auction by submitting orders to a broker-dealer (a
"Broker-Dealer") that has entered into a separate
agreement with the auction agent and the Company
or to a broker-dealer that has entered into an
agreement with a Broker-Dealer. In addition to the
auctions, Broker-Dealers and other broker-dealers
may maintain a separate secondary trading market
in AMPS, but may discontinue this activity at any
time. You may transfer shares outside of auctions
only to or through a Broker-Dealer, a
broker-dealer that has entered into a separate
agreement with a Broker-Dealer, or other persons
as the Company may agree. There can be no
assurance that a secondary trading market for the
AMPS will develop, or if it does develop, that it
will provide you with liquidity.

Dividends and Dividend
Periods.......................After the initial dividend period, the AMPS
normally will have a dividend period consisting of
twenty-eight (28) days. The Board may, from time
to time, declare a different dividend period upon
giving notice to the holders of the AMPS.
Dividends on the AMPS offered hereby are
cumulative from the date they are first issued and
are payable when, as and if declared by the Board,
out of funds legally available therefor. The
Company will pay the initial dividend for the AMPS
on [____________] and thereafter generally on the
business day following each auction, subject to
certain exceptions.

After the initial dividend period, the dividend
rate for the AMPS will be determined by auction.
The dividend rate for the initial dividend period
is ___% and the first auction will be held on ___.

Taxes.........................Because in normal circumstances the Company will
invest substantially all of its assets in common
and fixed-income securities that pay dividends and
interest that is not exempt from regular Federal
income tax, the income you receive will ordinarily
be subject to regular Federal income tax. In
addition, your income may be subject to state and
local taxes. Taxable income or net realized
capital gains earned by the Company will be
allocated proportionately to holders of the
Company's preferred shares and common shares,
based on the percentage of total dividends paid to
each class for that year. In addition, income
eligible for the "dividends received deduction"
will be allocated proportionally to holders of the
AMPS and the Company's common shares. Accordingly,
a portion of the dividends paid on the AMPS may be
taxable at long-term capital gains rates, which
are lower for individuals than rates on ordinary
income and short-term capital gain.

Liquidation Preference........The liquidation preference of each AMPS share will
be $100,000, plus an amount equal to accumulated
but unpaid dividends (whether or not earned or
declared) plus the premium, if any, resulting from
the designation of a premium call period.

<PAGE>

Ratings.......................It is a condition to their issuance that the AMPS
be issued with a rating of "aa1" from Moody's
Investor Services, Inc. ("Moody's") and "AA" from
Standard & Poor's Ratings Group ("S&P"). These
ratings are an assessment of the capacity and
willingness of an issuer to pay preferred stock
obligations. The ratings are not a recommendation
to purchase, hold or sell those shares, inasmuch
as the rating does not comment as to market price
or suitability for a particular investor. The
rating agency guidelines described above also do
not address the likelihood that an owner of AMPS
will be able to sell such shares in an auction or
otherwise. The ratings are based on current
information furnished to Moody's and S&P by the
Company and the Adviser and information obtained
from other sources. The ratings may be changed,
suspended or withdrawn, in the rating agencies'
discretion, as a result of changes in, or the
unavailability of, such information.

Redemption....................Holders of AMPS will not have the right to cause
the Company to redeem their shares. The Company
may, however, be required by applicable law or by
rating agency guidelines to redeem the AMPS if,
for example, the Company does not meet an asset
coverage ratio required by law or correct a
failure to meet a rating agency guideline in a
timely manner. The Company may also voluntarily
redeem the AMPS without your consent.

Voting Rights.................The 1940 Act requires that the holders of any
preferred shares, voting together as a single
class separate from the holders of common shares,
have the right to elect at least two directors of
the Company at all times and to elect a majority
of the directors at any time if two years'
dividends on the AMPS have not been paid and the
Company has not eliminated all dividend
arrearages. The holders of AMPS and any other
outstanding preferred shares will vote as a
separate class on certain other matters as
required under the Company's charter, the 1940 Act
and Maryland law.

<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain specified information for a share of
common stock of the Company outstanding throughout each period presented. The
financial highlights for each period presented have been audited by
PricewaterhouseCoopers LLP, the Company's independent auditors, whose report
covering each of the five years in the period ended November 30, 1999, is
included in the Company's most recent Annual Report and is incorporated by
reference in the statement of additional information. The financial highlights
should be read in conjunction with the financial statements and notes thereto
included in the Company's most recent Annual Report, which is available without
charge from the Company.

[INSERT FINANCIALS]

THE COMPANY

Boulder Total Return Fund, Inc. (the "Company") is a diversified,
closed-end management investment company. The Company was incorporated under the
laws of the State of Maryland on December 21, 1992, and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The address of the
Company is 1680 38th Street, Suite 800, Boulder Colorado 80301 and its telephone
number is (303) 444-5483.

The Company commenced investment operations on [ ], upon the closing of the
initial public offering of [ ] of its common shares. The net proceeds of such
offering were approximately $[ ] million.

Prior to August, 1999, the Company's investment objective was "high current
income consistent with preservation of capital". On August 27, 1999, a special
shareholders meeting was held at which the Company's shareholders approved,
among other things:

o A change in the Company's investment objective from "high current
income consistent with preservation of capital" to total return;

o Three new advisers for the Company (e.g., Boulder Investment Advisers,
LLC, Stewart Investment Advisers and Spectrum Asset Management, Inc.);

o A new name for the Company (e.g., from Preferred Income Management
Fund Incorporated to Boulder Total Return Fund, Inc.); and

o The amendment of certain investment restrictions consistent with the
Company's new investment objective.

The Company has outstanding 775 shares of Money Market Cumulative Preferred
Shares (the "MMP Shares"). The MMP Shares were issued with a liquidation
preference per share of $100,000, plus accumulated and unpaid dividends. The MMP
Shares will be redeemed in conjunction with the Offering out of the proceeds
from the Offering.

As of March 31, 2000, there were shares issued and outstanding as follows:

<TABLE>
<CAPTION>
Amount Held by Company
Title and Class Amount Authorized or for Its Account Amount Outstanding
<S> <C> <C> <C>
Common Stock 240,000,000 0 9,416,742
Preferred Stock 10,000,000 0 775

The Company's common shares are traded on the New York Stock Exchange under
the symbol "BTF."
</TABLE>

<PAGE>

USE OF PROCEEDS

The net proceeds of the Offering will be $[ ], after payment of offering
expenses (estimated to be [$300,000]) and the sales load.

The net proceeds of the Offering will be used to redeem the MMP Shares and
thus will be invested in accordance with the Company's investment objective and
policies as stated below. To the extent that all of the proceeds cannot be so
invested, pending such investment, they will be invested in short-term, high
quality securities.

CAPITALIZATION

The following table sets forth the unaudited capitalization of the Company
as of November 30, 1999, and as adjusted to give effect to the issuance of the
AMPS pursuant to the Offering.

[INSERT CAPITALIZATION TABLE]

INVESTMENT OBJECTIVE AND POLICIES

The Company's investment objective is total return. The Company seeks to
produce both long-term capital appreciation through investment in common stocks
and current income consistent with preservation of capital through investments
in income producing securities, such as dividend-paying closed-end funds
("RICs"), real estate investment trusts ("REITs"), U.S. Government securities,
preferred stocks and bonds. No assurance can be given that the Company will
achieve its investment objective.

The Company operates as a "diversified" investment company, as defined in
the 1940 Act. Under this definition, the Company must limit to 5% the portion of
its assets invested in the securities of a single issuer. This limit does not
apply, however, to 25% of the Company's assets, which may be invested in a
single issuer. The Company intends to concentrate its common stock investments
in a few issuers and to take large positions in those issuers, consistent with
being a "diversified" fund. As a result, the Company is subject to a greater
risk of loss than a fund that diversified its investments more broadly. Taking
larger positions is also likely to increase the volatility of the Company's net
asset value reflecting fluctuation in the value of its large holdings.

Under normal market conditions, the Company intends to invest in a
portfolio of common stocks and income securities. The portion of the Company's
assets invested in each can vary depending on market conditions. The term
"common stocks" includes both stocks acquired primarily for their appreciation
potential and stocks acquired for their income potential, such as
dividend-paying R/Cs and REITs. The term "income securities" includes bonds,
U.S. Government securities, notes, bills, debentures, preferred stocks,
convertible securities, bank debt obligations, repurchase agreements and
short-term money market obligations. The term "preferred stocks" or "preferreds"
includes traditional preferred stocks as well as so-called "hybrid," or taxable,
preferred securities and other similar or related investments. These hybrid
securities, which currently are marketed under such acronyms as TOPrS, TIPS,
QUIPS, MIPS, QUIDS, QUICS and Capital Securities, may be debt-like in key
characteristics.

As of June __, 2000 the Company's portfolio is invested primarily in common
stocks (__%), with __% invested in preferred stocks and __% in cash equivalents.
The Company currently intends to invest in RICs and REITs in order to generate
sufficient income to pay interest on the AMPS when due. Under the 1940 Act, the
Company must limit to 10% the portion of its assets invested in RICs and, absent
an amendment to the Company's industry concentration policy, must limit to 25%
the portion of its assets invested in REITs. Each of these percentage
limitations is calculated at the time of investment, and the Company will not be
required to dispose of assets if holdings increase above these levels due to
appreciation. Under current market conditions, it is expected that the Company
will have investments in RICs and REITs close to such 10% and 25% limitation as
long as the AMPS or other leverage is outstanding.

The volatility of common stock prices has historically been greater than
fixed-income securities, and as the Company continues to shift a greater portion
of its assets into common stocks, the volatility of the Company's net

<PAGE>

asset value may also increase. The time horizon for the Company to achieve its
objective of total return will likely be longer than for a fund that invests
solely for income.

The Company may, for temporary defensive purposes, allocate a higher
portion of its assets to cash and cash equivalents. For this purpose, cash
equivalents consist of short-term (less than twelve months to maturity) U.S.
Government securities, certificates of deposit and other bank obligations,
investment grade corporate bonds and other debt instruments, and repurchase
agreements. Under normal market circumstances, the Company will not have more
than 10% of its assets in cash and cash equivalents.

Except for the Company's investment objective and the Company's industry
concentration and issuer diversification policies described above, the
percentage limitations and investment policies set forth in this Prospectus can
be changed by the Board of Directors without shareholder approval.

OTHER INVESTMENT PRACTICES

Leverage

Since February 1993, the Company has been leveraged with $77.5 million of
the MMP Shares and, after redemption of the MMP Shares and issuance of the AMPS,
it is intended that the Company will remain leveraged to the same degree with
the AMPS (i.e., $77.5 million). It is expected that as long as the Company
utilizes the leverage, it will maintain an investment in income-producing
securities sufficient to pay the expenses of the Company and to service the
dividends payable on the AMPS.

Hedging

Historically the Company had entered into certain hedging transactions to
offset some of the interest rate risk associated with its preferred stock
portfolio when 100% of the Company's assets were in preferred stocks. However,
due to the cost of hedging, and the smaller percentage of the Company's assets
invested in fixed income securities, the Company has discontinued hedging its
portfolio.

Other Investment Techniques

The Company may engage in other types of transactions, including, but not
limited to, investment in restricted and illiquid securities, RICs or REITs,
repurchase and reverse repurchase agreements, when-issued and forward commitment
transactions, borrowing, securities lending and other transactions. For a
description of such types of transactions, see "Investment Policies and
Techniques B Other Investment Policies and Techniques" in the statement of
additional information.

RISKS

Risk is inherent in all investing. Investing in any investment company
security involves risk, including the risk that you may receive little or no
return on your investment or that you may lose part or all of your investment.
Therefore, before investing you should consider carefully the following risks
that you assume when you invest in AMPS.

Interest Rate and Hedging Risks

Since August 27, 1999, at which time the Company changed its investment
objective from "income" to "total return", the Company has steadily reduced its
holdings in preferred stocks in an effort to make cash available to purchase
common stocks. As a result of implementing the Company's change in investment
objective, the income available for servicing the dividends payable to holders
of the AMPS will decrease significantly from its historical levels, although it
is contemplated that such income will be more than adequate to pay the expenses
of the Company while at the same time servicing the dividend payable to holders
of the AMPS. Nonetheless, if short-term interest rates rise, the dividend rates
on the AMPS, which are expected to correlate with short-term interest rates, may
rise so that the amount of dividends paid to holders of the AMPS approaches or
exceeds the income from the

<PAGE>

entire portfolio. If that occurs, the Company may have to liquidate a portion of
its holdings in order to service dividends to holders of the AMPS, which may
have adverse tax consequences and generate transaction costs.

Dividend rates on fixed rate preferred stocks held by the Company, as their
name implies, would be fixed regardless of the direction of interest rates. In
addition, the market prices of such fixed rate preferred stocks would tend to
(1) decline as interest rates rose and (2) rise as interest rates fell. See
"Risk Factors."

Investments In Common Stocks

Common stocks generally have greater risk exposure and reward potential
over time than bonds. The volatility of common stock prices has historically
been greater than bonds, and as the Company shifts a greater portion of its
assets into common stocks, the volatility of the Company's net asset value may
also increase. Further, because the time horizon for the Company's investments
in common stock is longer, the time necessary for the Company to achieve its
objective of total return will likely be longer than for a fund that invests
solely for income.

The Company presently has invested a significant percentage (38% as of June
23, 2000) of its portfolio in low-dividend or non-dividend paying common stocks
such as Berkshire Hathaway, Inc. Accordingly, once the Company's recently
approved investment objective (i.e., total return) is fully implemented, the
Company will not generate income at its historic levels thus resulting in a
decreased distribution of investment income to the holders of the Company's
common stock. As of March 31, 2000, the Company held 750 Berkshire Hathaway,
Inc. "A" shares and 9010 "B" shares. At the time of investment, this represented
less than 25% of the Company's assets. However, because of appreciation, as of
________, 2000 these positions represented 29% of the Company's assets. The
Adviser does not intend to liquidate any portion of its position in Berkshire
Hathaway, Inc. Though not an insurance company itself, Berkshire Hathaway owns
Geico Insurance and General Re Insurance companies, and therefore derives a
significant portion of its income, and its value, from these two insurance
companies. The insurance company can be significantly affected by interest rates
as well as price competition within the industry. In addition, an insurance
company may experience significant changes in its year to year operating
performance based both on claims paid and on performance of invested assets.
Insurance companies can also be affected by government regulations and tax laws,
which may change from time to time. A significant decline in the market price of
Berkshire Hathaway, Inc. or other company in which the Company has made a
significant common stock investment (i) may result in the Company's failing the
coverage ratio thresholds imposed on the Company by the 1940 Act or by Moody's
and S&P, (ii) may result in a decline in the market price of the Company's
common shares and (iii) greater risk and market fluctuation than a fund that has
securities representing a broader range of investment alternatives.

Investments in Real Estate Investment Trusts ("REITs")

REITs, or Real Estate Investment Trusts, are securities of companies whose
primary objective is investment in real property or providing services to real
property interests. The Company may invest up to 25% of its assets in REIT
securities. The Company intends to invest in REIT securities primarily for
income. The Company intends to invest primarily in equity rather than mortgage
REITs, although the amount invested in each may vary based on market conditions.
As of June 23, 2000, the Company had 9.7% of its assets invested in REITs.

There are risks associated with investing in REITs, including the potential
for loss of value if the underlying properties in which the REIT invests decline
in value. Property valuations may rise and fall with either the local economy
conditions or with the national economy. Furthermore, the dividend income paid
out by the REIT may be reduced or eliminated. In addition, the Company bears its
ratable share of a REIT's expenses while still paying management fees on the
Company assets so invested.

Investments in Other Registered Investment Companies ("RICs")

The Company may invest up to 10% of its assets in other investment
companies registered under the 1940 Act. The Company intends to invest in other
closed-end RICs having an income objective when they are trading at a discount,
and when market conditions seem appropriate to the Adviser. As of April 28,
2000, the Company had 3.3% of its assets invested in RICs.

<PAGE>

The Company intends to normally invest in RICs that pay dividends. There
are risks associated with investments in RICs, including the risk that the
dividend paid by the RIC could be reduced or eliminated. As a shareholder in
another fund, the Company will pay double fees, by bearing its ratable share of
that fund's expenses, including management fees, and remaining subject to the
Company's advisory and administrative fees with respect to the assets so
invested.

Investments in Preferred Stocks and Bonds

Preferred stocks constituted approximately 19% of the Company's assets as
of June 23, 2000. This is down significantly from August 27, 1999 (the date
shareholders approved the change in objective from income to total return), when
the Company held almost 100% of its assets in preferred stocks. Preferred stock,
along with common stock, is one of the two ajor types of equity securities.
Generally, preferred stock receives dividends prior to distributions on common
stock and usually has a priority claim over common stockholders if the issuer of
the stock is liquidated. Since 1993, a hybrid preferred security was introduced
to the market which had both equity and debt characteristics. Such hybrid
preferred securities pay dividends that are not eligible for the corporate
Dividends Received Deduction ("DRD"). The Company had approximately 15% of its
assets invested in such hybrid preferred securities as of ________, 2000.
Preferred stocks and corporate bonds may be substantially less liquid than many
other securities such as common stocks or U.S. Government securities. In
addition, preferred stocks and bonds purchased by the Company may be subject to
risk with respect to the issuing entity and to market fluctuations. In
particular, such preferred stocks and bonds may be subject to "credit risk"
which refers to an issuer's ability to make timely payments of interest and
principal. The Company does not expect to make substantial investments in
securities rated less than investment grade. Lower-quality fixed-income
securities in the Company's portfolio may be subject to greater risk than higher
rated securities. The Company limits to 15% of its assets the portion of its
portfolio invested in preferred stocks and bonds rated below investment grade,
which securities will be rated at least either "ba" by Moody's or "BB" by S&P at
the time of purchase and will have been issued by an issuer having a class of
outstanding senior debt that is rated at least investment grade by Moody's or
S&P.

Auction Risk

The dividend rate for the AMPS normally is set through an auction process.
In the auction, holders of AMPS indicate the dividend rate at which they would
be willing to hold or sell their AMPS or purchase additional AMPS and potential
investors indicate the rate at which they would be willing to purchase AMPS. The
auction also provides liquidity for the sale of AMPS. An auction fails if there
are more AMPS offered for sale than there are buyers. You may not be able to
sell your AMPS at an auction if the auction fails. Also, if you place hold
orders (orders to retain AMPS) at an auction only at a specified dividend rate,
and that rate exceeds the rate set at the auction, you will be obligated to sell
your AMPS to investors who bid a lower rate. Finally, if you and enough other
investors place bid or hold orders without specifying a dividend rate below
which you and such other investors would not wish to buy or continue to hold
those AMPS, you would receive a lower dividend rate on your shares for the next
dividend period than the market rate. See "The Auction".

Secondary Market Risk

If you try to sell your AMPS between auctions, you may not be able to sell
any or all of your shares, or you may not be able to sell them for $100,000 per
share plus accumulated dividends. If the Company has designated a special
dividend period of more than 28 days, changes in interest rates could affect the
price you would receive if you sold your shares in the secondary market more
than if the Company were utilizing the normal dividend period. Broker-dealers
that maintain a secondary trading market for AMPS are not required to maintain
this market, and the Company is not required to redeem shares either if an
auction or an attempted secondary market sale fails because of a lack of buyers.
AMPS are not listed on a stock exchange or the NASDAQ stock market. If you sell
your AMPS to a broker-dealer between auctions, you may receive less than the
price you paid for them, especially if market interest rates have risen since
the last auction.

Ratings and Asset Coverage Risk

While it is a condition to the issuance of the AMPS that Moody's assign a
rating of "aa1" and S&P a rating of "AA" to the AMPS, such ratings do not
eliminate or necessarily mitigate the risks of investing in AMPS.

<PAGE>

Moody's or S&P could downgrade the AMPS, which may make your shares less liquid
at an auction or in the secondary market. If Moody's or S&P downgrades the AMPS,
the Company may alter its portfolio or redeem AMPS in an effort to improve the
rating, although there is no assurance that it will be able to do so to the
extent necessary to restore the prior rating. The Company may voluntarily redeem
the AMPS without your consent. See "Rating Agency Guidelines and Asset Coverage"
for a description of the asset maintenance tests the Company must meet.

MANAGEMENT OF THE COMPANY

Directors and Officers

The Company's board of directors (the "Board") is responsible for oversight
of the overall management of the Company, including supervision of the Adviser
and Sub-Adviser. There are five directors of the Company. Two of the directors
are "interested persons" (as defined in the 1940 Act). The names and business
addresses of the directors and officers of the Company and their principal
occupations and other affiliations during the past five years are set forth
under "Management of the Company" in the statement of additional information.

Investment Advisers

The Company engages the investment advisory services of the following
registered investment advisers:

o Boulder Investment Advisers, L.L.C. (referred to herein as the
"Adviser") is the investment adviser to the Company. The Adviser has
delegated to Stewart Investment Advisers ("SIA") full authority to
make investment decisions for the Company and to determine the
Company's asset allocation. The Adviser was formed on April 8, 1999 as
a Colorado limited liability company; its principal place of business
is 1680 38th Street, Boulder, Colorado 80301. The Adviser, which is
registered as an investment adviser under the Investment Advisers Act
of 1940, had not prior to August 1999 previously served as adviser to
a registered investment company or managed assets on a discretionary
or non-discretionary basis. The equity owners of the Adviser are
Evergreen Atlantic, L.L.C. ("EALLC"), and the Lola Brown Trust No.1B
(the "Lola Brown Trust"), each an "affiliated person" with respect to
the Company (as that term is defined in the 1940 Act). Carl D. Johns,
the Company's Vice President and Treasurer, is responsible for the
Adviser's day-to-day activities. Mr. Johns received a Bachelors degree
in Mechanical Engineering at the University of Colorado in 1985, and a
Masters degree in Finance from the University of Colorado in 1991. He
worked at Flaherty & Crumrine Incorporated, the former adviser for the
Company, from 1992 to 1998. During that period he was an Assistant
Treasurer for the Preferred Income Fund Incorporated, the Preferred
Income Opportunity Fund Incorporated, and the Company. The executive
officers of the Adviser and the principal occupation of each are set
forth below:

<TABLE>

<CAPTION>
----------------------------------------------------- ------------------------------------------------------
Name and Position with the Adviser Principal Occupation
----------------------------------------------------- ------------------------------------------------------
<S> <C>
Stephen C. Miller, President, General Counsel President, Chief Executive Officer and Chairman of
and Chief Executive Officer the Board of the Company; Vice President and
Secretary of SIA; Director, Vice President and
Assistant Secretary of Badlands Trust Company; of
Counsel Krassa, Madsen & Miller, LLC since 1991; and
Manager of Boulder Administrative Services, L.L.C.
("BAS")
----------------------------------------------------- ------------------------------------------------------
Carl D. Johns - Investment Manager, Vice President Chief Financial Officer, Chief Accounting Officer,
and Treasurer Vice President and Treasurer of the Company;
Assistant Manager of BAS
----------------------------------------------------- ------------------------------------------------------
Laura Rhodenbaugh - Secretary Secretary of BAS; Treasurer of SIA; Secretary and
Treasurer of various Horejsi family entities
----------------------------------------------------- ------------------------------------------------------
</TABLE>

<PAGE>

o Stewart West Indies Trading Company, Ltd., doing business as Stewart
Investment Advisers (referred to herein as "Sub-Adviser" or "SIA")
acts as the sub-adviser to the Company. SIA manages the Company's
portfolio and determines the Company's asset allocation. Stewart R.
Horejsi, an employee of SIA and its primary investment manager, is
responsible for the day-to-day strategic management of the Company's
assets. Mr. Horejsi has full discretion regarding specific investment
decisions and the Company's asset allocation among cash, common stocks
and fixed income investments. Mr. Horejsi has been a Director of the
Company since July 1997; General Manager, Brown Welding Supply, LLC,
since April 1994; and the President or Manager of various subsidiaries
associated with the Horejsi family since June, 1986. Mr. Horejsi has
been the investment adviser for the Horejsi family trusts (i.e., the
Lola Brown Trust, the Ernest Horejsi Trust No.1B, the Stewart R.
Horejsi Trust No. 2 and certain other related trusts) since 1982. As
of June 14, 1999, the size of these trusts' common stock portfolio was
approximately $______ million. Mr. Horejsi has been the Director and
President of the Horejsi Family Charitable Foundation, Inc. since
1997. Mr. Horejsi received a Masters Degree in Economics from Indiana
University in 1961 and a Bachelor of Science Degree in Industrial
Management from the University of Kansas in 1959. The principal place
of business for SIA is Bellerive House, Queen Street, St. Peter,
Barbados. SIA, a Barbados international business company incorporated
on November 12, 1996, is wholly owned by the Stewart West Indies
Trust, a South Dakota trust established by Stewart R. Horejsi in 1996
primarily to benefit his issue. SIA, which is registered as an
investment adviser under the Investment Advisers Act of 1940, prior to
August 1999, had not served as adviser to a registered investment
company or managed assets on a discretionary or non-discretionary
basis except for Horejsi family interests. However, as described
above, Stewart R. Horejsi, a principal of SIA, has extensive
experience managing common stocks for his family interests. SIA
currently has no investment advisory clients other than the Company.

SIA is not a U.S. company and substantially all of its assets are
located outside the United States. As a result, it may be difficult
for investors to realize judgments of courts of the United States
predicated upon civil liabilities under federal securities laws of the
United States. The Company has been advised that there is substantial
doubt as to the enforceability in Barbados of such civil remedies and
criminal penalties as are afforded by the federal securities laws of
the United States. Nonetheless, pursuant to the sub-advisory agreement
between SIA, the Adviser and the Company, SIA has agreed to have an
agent for service of process in any legal action in the United States
and to be subject to the jurisdiction of the U. S. courts. The
executive officers and directors of SIA and the principal occupation
of each are set forth below:
<TABLE>
<CAPTION>

----------------------------------------------------- ------------------------------------------------------
Name and Position with SIA Principal Occupation
----------------------------------------------------- ------------------------------------------------------
<S> <C>

Glade Christensen - President and Resident General Sales Manager for SIA. Mr. Christensen does not
Sales Manager participate in the investment advisory business of
SIA.

----------------------------------------------------- ------------------------------------------------------
Stephen C. Miller, Vice President and Secretary President, Chief Executive
Officer and Chairman of the Board of the Company; vice
president and Secretary of SIA; Director, Vice
President and Assistant Secretary of Badlands Trust
Company; of Counsel Krassa, Madsen & Miller, LLC since
1991; and Manager of BAS
----------------------------------------------------- ------------------------------------------------------
Laura Rhodenbaugh - Treasurer Secretary of BAS; Treasurer of SIA; Secretary and
Treasurer of various Horejsi family entities
----------------------------------------------------- ------------------------------------------------------
Stewart R. Horejsi - Investment Manager Investment manager for SIA and investment and
business consultant for the Horejsi Affiliates
----------------------------------------------------- ------------------------------------------------------
</TABLE>

o Spectrum Asset Management, Inc. (referred to herein as "Spectrum"),
acted as a sub-adviser to the Company managing the Company's preferred
stock portfolio until August 16, 2000. Spectrum has its principal
offices at 4 High Ridge Park, Stamford, Connecticut 06905.

<PAGE>

On June 23, 2000, the Board of Directors of the Company approved a
management proposal to substantially curtail or eliminate entirely, in
SIA's discretion, the Company's holdings in preferred stocks. This
decision necessarily contemplated the eventual resignation of
Spectrum. On June 30, 2000, management held discussions with Spectrum
and the parties mutually agreed to terminate the sub-advisory
agreement effective as of August 16, 2000.

Beneficial Ownership and Control Persons

The following table sets forth certain information regarding the beneficial
ownership of the Company's shares as of May ___, 2000, by each person who is
known by the Company to beneficially own 5% or more of the Company's common
stock. To the Company's knowledge, there are no 5% or greater beneficial owners
of MMP Shares.

--------------------------------------- -------------------------
(a) Name of Owner Number of Shares
Beneficially Owned
--------------------------------------- -------------------------
EALLC 257,811
--------------------------------------- -------------------------
John S. Horejsi Trust 65,747
--------------------------------------- -------------------------
Susan L. Ciciora Trust 131,475
--------------------------------------- -------------------------
Stewart West Indies Trust 191,907
--------------------------------------- -------------------------
Lola Brown Trust 1,028,001
--------------------------------------- -------------------------

Ernest Horejsi Trust 2,498,053
--------------------------------------- -------------------------
Badlands Trust Company 3,975,550
--------------------------------------- -------------------------
Stewart R. Horejsi Trust No. 2 3,975,550
--------------------------------------- -------------------------
Aggregate Shares Owned 3,975,550
--------------------------------------- -------------------------

* The address of each listed owner is 122 South Phillips Avenue, Suite 220,
Sioux Falls, South Dakota 57104.

** Aggregate number and percentage are less than the sum total of amounts
shown for each owner because the same shares may be deemed beneficially
owned by more than one party (see Footnotes 1 through 4).

(1) DIRECT OWNERSHIP. Evergreen Atlantic, L.L.C. ("EALLC"), John S. Horejsi
Trust ("John Trust"), Susan L. Ciciora Trust ("Susan Trust"), Stewart West
Indies Trust ("SWIT"), Lola Brown Trust ("Lola Brown Trust"), the Ernest
Horejsi Trust No. 1B ("Ernest Trust") and Badlands Trust Company
("Badlands") directly own 257,811; 27,075; 54,132; 78,470; 1,028,001;
2,498,053; and 12,735, respectively, of the Company's common stock shares,
totaling 3,945,550 shares or 41.9% of the outstanding shares of the
Company.

(2) INDIRECT OWNERSHIP THROUGH EVERGREEN. Numbers shown in the table include
shares held directly (see Footnote No. 1) and shares that may be deemed to
be beneficially owned indirectly through ownership of EALLC. The
outstanding equity membership of EALLC is owned by SWIT, the John Trust,
the Susan Trust and the Evergreen Trust in the following percentages - 44%,
15%, 30% and 11%. The sole trustee of SWIT, the John Trust and the Susan
Trust is Badlands. Mr. Horejsi is not a beneficiary under any of these
trusts. The trustees of Evergreen Trust are Badlands, Stephen C. Miller and
Larry Dunlap. Any action by the Evergreen Trust requires a majority vote of
the trustees.

<PAGE>

laws of South Dakota, which is wholly owned by the SRH Trust, an
irrevocable trust organized by Mr. Stewart Horejsi for the benefit of his
children. The directors of Badlands are Larry Dunlap, Stephen C. Miller,
Robert Ciciora, who is the brother of Mr. Horejsi's son-in-law (John
Ciciora), Ann M. Hartmann and Carol Jorgensen.

(4) INDIRECT OWNERSHIP BY SRH TRUST. Numbers shown in the table reflects shares
that may be deemed to be beneficially owned indirectly through ownership of
Badlands. The trustees of the SRH Trust are Badlands, Robert Ciciora and
Robert Kastner.

EALLC, the John Trust, the Susan Trust, SWIT, the Lola Brown Trust, the
Ernest Trust, Badlands, the Stewart R. Horejsi Trust No. 2 ("SRH Trust") and
Stewart R. Horejsi are, as a group, considered to be a "control person" of the
Company (as that term is defined in Section 2(a)(9) of the Investment Company
Act of 1940, as amended (the "1940 Act")). These entities and other trusts or
companies with interlocking management and/or common ownership (collectively,
the "Horejsi Affiliates") may be deemed to indirectly own additional Company
shares, which are included in the table above. Further, Stewart R. Horejsi, the
investment manager for SIA, is also the primary investment consultant for the
Horejsi Affiliates and, on a discretionary basis, implements and directs their
investment objective and asset allocation.

Investment Philosophy

Common Stocks. With respect to the common stock portfolio (other than
common stocks purchased primarily for their income-producing potential), SIAs
use an "intrinsic value" approach to selecting and managing the Company's
assets. SIA defines intrinsic value as the discounted value of the cash that can
be taken out of a business during its remaining life. Accordingly, in its
securities selection process, SIA put primary emphasis on analysis of balance
sheets, cash flows, the quality of management and their ability to efficiently
and effectively allocate capital, various internal returns which indicate
profitability, and the relationships that these factors have to the price of a
given security. The intrinsic value approach is based on the belief that the
securities of certain companies may sell at a discount from SIA's estimate of
such companies' "intrinsic value". The Company will seek to invest at reasonable
prices in companies having a high return on assets where the companies use such
return to benefit their shareholders either by reinvesting in other high yield
assets or by distributing such returns to their owners.

Cash and Cash Equivalents. As of _______________, 2000, the Company had a
significant cash position (___% of assets), including investments in U.S.
Treasury securities. The cash position is higher than it would normally be due
to the transition from being an income fund to a total return fund. It is
expected that a significant portion of this cash will be used for common stock
investments. Once the Company has fully implemented its total return objective,
under normal market conditions, the Company's cash position is expected
typically to be less than 10% of the Company's total assets.

Preferred Stocks and Bonds. In seeking its total return objective, the
Company may invest a portion of its assets in preferred stocks and bonds. In
selecting individual investments, SIA will consider, among other things, current
yield, price variability and the underlying fundamental characteristics of the
issuer, with particular emphasis on debt and dividend coverage and the potential
for the timely payment of dividends. SIA expects that any investments in
preferred stocks and bonds will be primarily in fixed rate preferred stocks and
bonds. The Company may invest in other types of preferred stocks -- such as
auction rate preferred stocks and convertible bonds and preferred stocks -- in
appropriate circumstances. Although the Company currently has approximately 19%
of its assets invested in preferred stocks, the Company currently intends to
emphasize RICs and REITs as the Company's primary income source.

The Investment Advisory Agreements

The Adviser and the Company are parties to an investment advisory agreement
dated as of August 27, 1999 (the "Adviser Agreement"). The Sub-Adviser, the
Adviser and the Company are parties to a sub-advisory agreement dated August 27,
1999 (the "Sub-Adviser Agreement"). Under the terms of the Adviser Agreement,
the Adviser manages the investment of the Company's assets and provides such
investment research, advice and supervision, in conformity with the Company's
investment objective and policies, as necessary for the operations of the
Company. Under the terms of the Sub-Adviser Agreement, the Adviser has engaged,
on behalf of the Company, the investment

<PAGE>

sub-advisory services of SIA. Under the Sub-Adviser Agreement, under the general
direction of the Adviser, SIA manages the investments of the Company and
provides such investment research, advice and supervision, in conformity with
the Company's investment objective and policies, as necessary for the selection
and monitoring of the portfolio. SIA also determines the Company's asset
allocation. The Adviser Agreement and the Sub-Adviser Agreement are referred to
herein as the "Advisory Agreements".

The Advisory Agreements provide, among other things, that the Adviser and
Sub-Adviser will bear all expenses in connection with the performance of their
services under the Advisory Agreements, although the Company will bear certain
other expenses to be incurred in its operation, including organizational
expenses, taxes, interest, brokerage costs and commissions and stock exchange
fees; fees of Directors of the Company who are not also officers, directors or
employees of the Adviser or Sub-Adviser; Securities and Exchange Commission
fees; state Blue Sky qualification fees; charges of any custodian, any
sub-custodians and transfer and dividend-paying agents; insurance premiums;
outside auditing and legal expenses; costs of maintenance of the Company's
existence; membership fees in trade associations; stock exchange listing fees
and expenses; and litigation and other extraordinary or non-recurring expenses.

The Adviser Agreement provides that the Company shall pay to the Adviser
for its services a monthly fee at the annual rate of 1.00% of the Company's
average monthly net asset value (the "Adviser Fee"). Under the terms of the
Sub-Adviser Agreement, the Adviser is required to pay SIA 80% of all fees
received by the Adviser pursuant to the Adviser Agreement net of fees paid to
any other sub-adviser. The liquidation value of any outstanding preferred stock
is included in determining the Company's net asset value.

Although the Adviser and Sub-Adviser intend to devote such time and effort
to the business of the Company as is reasonably necessary to perform their
respective duties to the Company, the services of the Adviser and Sub-Adviser
are not exclusive and the Adviser and Sub-Adviser may provide similar services
to other investment companies and/or other clients and may engage in other
activities.

The Advisory Agreements provide that the Adviser and Sub-Adviser shall not
be liable for any error of judgment or mistake of law or omission or any loss
suffered by the Company in connection with the matters to which the agreements
relate, although the agreements do not protect or purport to protect the Adviser
or Sub-Adviser against any liability to the Company to which the Adviser or
Sub-Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on their part in the performance of their duties or
from reckless disregard by them of their obligations and duties under the
agreements. Each Advisory Agreement also provides for indemnification by the
Company of the Adviser or Sub-Adviser, as the case may be, and its partners,
members, officers, employees, agents and control persons for liabilities
incurred by them in connection with their services to the Company, subject to
certain limitations and conditions.

Each Advisory Agreement is in effect for an initial two-year term, and
thereafter will continue in effect without a term so long as its continuation is
specifically approved at least annually by both (i) the vote of a majority of
the Board or the vote of a majority of the outstanding voting securities of the
Company (as such term is defined in the 1940 Act) and (ii) by the vote of a
majority of the directors who are not parties to such Agreement or interested
persons (as such term is defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval. Any of
the Advisory Agreements may be terminated as a whole at any time by the Company,
without the payment of any penalty, upon the vote of a majority of the Board or
a majority of the outstanding voting securities of the Company or by the Adviser
or Sub-Adviser, on 60 days' written notice by either party to the other. Except
as otherwise provided by order of the SEC or any rule or provision of the 1940
Act, all of the Advisory Agreements will terminate automatically in the event of
their assignment (as such term is defined in the 1940 Act and the rules
thereunder).

The Administration and Co-Administration Agreements

The Administration Agreement. PFPC, Inc. (the "Administrator"), located at
________________, acts as administrator for the Company. Under the
Administration Agreement with the Company (the "Administration Agreement"), the
Administrator administers the Company's corporate affairs subject to the
supervision of the Board ________________________.

<PAGE>

In connection with its administration of the corporate affairs of the
Company, the Administrator bears the following expenses: (i) the salaries and
expenses of all personnel of the Administrator; and (ii) all expenses incurred
by the Administrator in connection with administering the ordinary course of the
Company's business, other than those assumed by the Company, as described below.

The Administration Agreement provides that the Company shall pay to the
Administrator a monthly fee for its services furnished by the Administrator at
the annual rate of 0.12% of the Company's average monthly net asset value. The
liquidation value of any outstanding AMPS is included in determining the
Company's average weekly net asset value. The Administration Agreement is
terminable on 60 days' prior written notice by either party to the other.

The Co-Administration Agreement. Boulder Administrative Services, L.L.C.
(the "Co-Administrator"), located at 1680 38th Street, Suite 800, acts as
co-administrator for the Company. Under the Co-Administration Agreement with the
Company (the "Co-Administration Agreement"), the Co-Administrator provides
specific administration and executive management services to the Company
including, but not limited to: officers and staffing and general office services
and equipment (e.g., phones, copy machines, computers, fax, etc.) for the
Company; provides the Company's general offices and associated facilities;
negotiates and monitors all contracts with service providers; negotiates and
monitors all insurance policies of the Company as well as the rating agency
agreements with Moody's and S & P; provides shareholder relations and
shareholder support; conducts weekly backup calculation of the Company's net
asset value; prepares all shareholder communications and oversees the
preparation of the Company's periodic reports to the SEC; reviews and authorizes
all expenses of the Company; makes recommendations to the Board regarding
policies of the Company; and provides in house counsel and compliance personnel
to the Company.

In connection with its co-administration of the corporate affairs of the
Company, the Co-Administrator bears the following expenses: (i) the salaries and
expenses of all personnel of the Co-Administrator; and (ii) all expenses
incurred by the Co-Administrator in connection with administering the ordinary
course of the Company's business, other than those assumed by the Company, as
described below. However, the Company bears travel-related expenses (1) of
employees of BAS (including interested directors) engaged in rendering services
pursuant to their employment by BAS other than in connection with attendance at
Board of Directors' meetings and (2) of employees of BAS (other than Company
directors and/or representatives of the Adviser or BIA) primarily engaged in
rendering administrative services under the Co-Administration Agreement.

The Co-Administration Agreement provides that the Company shall pay to the
Co-Administrator a monthly fee for its services furnished by the
Co-Administrator at the annual rate of 0.10% of the Company's average monthly
net asset value. The liquidation value of any outstanding AMPS is included in
determining the Company's net asset value. The Co-Administration Agreement is
terminable on 60 days' prior written notice by either party to the other.

Expenses of The Company

Except as indicated above, the Company will pay all of its expenses,
including fees of the directors not affiliated with the Adviser or the
Sub-Adviser and board meeting expenses: fees of the Adviser, Sub-Adviser,
Administrator and Co-Administrator; interest charges; taxes; organization
expenses; charges and expenses of the Company's legal counsel and independent
accountants, and of the transfer agent, registrar and dividend disbursing agent
of the Company; expenses of repurchasing shares; expenses of issuing any
preferred shares (including the AMPS) or indebtedness; expenses of printing and
mailing share certificates, stockholder reports, notices, proxy statements and
reports to governmental offices; brokerage and other expenses connected with the
execution, recording and settlement of portfolio security transactions; expenses
connected with negotiating, effecting purchase or sale, or registering privately
issued portfolio securities; custodial fees and expenses for all services to the
Company, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating and publishing the net asset value
of the Company's shares; expenses of membership in investment company
associations; expenses of fidelity bonding and other insurance expenses
including insurance premiums; expenses of stockholders meetings; SEC and state
registration fees; New York Stock Exchange listing fees; and fees payable to the
National Association of Securities Dealers, Inc. in connection with this
Offering and fees of any rating agencies retained to rate any preferred shares
(including the AMPS) issued by the Company.

<PAGE>

DESCRIPTION OF AMPS

The following is a brief description of the terms of the AMPS. For the
complete terms of the AMPS, including definitions of terms used but not defined,
please refer to the detailed description of the AMPS in the Articles
Supplementary attached as Appendix A to the statement of additional information.
We refer to the Articles of Incorporation in this prospectus as the "Articles"
and the Articles Supplementary as the "Articles Supplementary."

General

The Articles currently authorize the issuance of 240 million shares of
common stock and 10 million shares of preferred stock, par value $.01 per share
(which may be issued from time to time in such series and with such
designations, preferences, and other rights, qualifications, limitations and
restrictions as are determined in a resolution of the Board). As of June ___,
2000, there were issued and outstanding [9,416,743] shares of common stock and
[775] MMP Shares. Under the Articles Supplementary, the Company will be
authorized to issue up to 1,000 of the AMPS with a liquidation preference of
$100,000 per share plus an amount equal to dividends on each share (whether or
not earned or declared) accumulated and unpaid thereon. Each AMP Share carries
one vote with respect to matters on which AMPS can be voted. AMPS, when issued
against payment therefor, will be fully paid and non-assessable and have no
preemptive, conversion or cumulative voting rights.

As of the date of this prospectus, there are [775] MMP Shares issued and
outstanding but there are no AMPS issued or outstanding. It is expected and is a
condition precedent to issuance of the AMPS that the MMP Shares will be redeemed
in conjunction with the issuance of the AMPS and that the entirety of the
proceeds from the sale of the AMPS will be used, together with other assets of
the Company, if necessary, to fund such redemption.

The AMPS are shares of preferred stock of the Company. AMPS entitle their
holders to receive dividends when, as and if declared by the Board, out of funds
legally available therefor. The rate per annum on which dividends are paid may
vary from dividend period to dividend period for the AMPS. In general, the
applicable rate for a particular dividend period for the AMPS will be determined
by an auction conducted on the day before the start of the dividend period.
Existing holders and potential holders of AMPS may participate in the auctions.
Existing holders desiring to continue to hold all of their AMPS regardless of
the applicable rate resulting from the auction need not participate. For an
explanation of auctions and the method of determining the applicable rate, see
"The Auction".

After the fixed initial dividend period, the AMPS will generally have a
dividend period of 28 days in length although the AMPS may have a different
dividend period if the Company declares a special dividend period and certain
conditions are satisfied.

The AMPS have a liquidation preference of $100,000 per share plus an amount
equal to accumulated but unpaid dividends. The AMPS are fully paid and
non-assessable. The AMPS are not convertible into common shares or other capital
stock of the Company. Holders of AMPS have no preemptive rights. The AMPS are
not subject to any sinking fund. The AMPS are generally subject to redemption at
the option of the Company on any dividend payment date for the respective series
[(provided that no AMPS shall be subject to optional redemption during a
Non-Call Period)] and, in certain circumstances, are subject to mandatory
redemption by the Company. In connection with the auction procedures described
below, Bankers Trust Company is the auction agent, the transfer agent,
registrar, dividend disbursing agent and redemption agent for the AMPS.

Dividends and Dividend Periods

General. The following is a general description of dividends and dividend
periods for the AMPS. The initial dividend period for the AMPS will be ___ days
and the dividend rate for this period will be __%. Subsequent dividend periods
generally will be twenty-eight days and the dividend rates for those periods
will be determined by auction. The Company, subject to certain conditions, may
change the length of subsequent dividend periods by designating them as special
dividend periods. See "Designation of Special Dividend Periods" below.

<PAGE>

Dividend Payment Dates. Dividends on AMPS will be payable, when, as and if
declared by the Board, out of legally available funds in accordance with the
Company's charter and applicable law. The initial dividend will be paid on
_____________, 2000 (the "Initial Dividend Payment Date"). Subsequent dividends
generally will be paid on each fourth [Wednesday] after the Initial Dividend
Payment Date. If dividends are payable on a [Wednesday] that is not a business
day, then dividends will generally be payable on the next day, if such day is a
business day, or as otherwise specified in the Articles Supplementary. In the
case of a special dividend period of 21 days or fewer, dividends are generally
payable on the day following the last day of such dividend period. In the case
of a special dividend period of more than 35 but less than 92 days, dividends
generally are payable on the day following the last day of each 30 day period to
occur during the dividend period and on the day following the last day of the
dividend period. In the case of a special dividend period of 92 days or more,
dividends will be payable as the Company may specify in the notice of special
dividend period issued for such special dividend period.

Dividends will be paid through The Depository Company Trust ("DTC") on each
dividend payment date. DTC, in accordance with its current procedures, is
expected to distribute dividends received from the auction agent in same-day
funds on each dividend payment date to Agent Members (members of DTC that will
act on behalf of existing or potential holders of AMPS). These Agent Members are
in turn expected to distribute such dividends to the persons for whom they are
acting as agents. However, each of the current Broker-Dealers has indicated to
the Company that dividend payments will be available in same-day funds on each
dividend payment date to customers that use a Broker-Dealer or a Broker-Dealer's
designee as Agent Member.

Calculation of Dividend Payment. The Company computes the dividend per AMP
Share by multiplying the applicable rate in effect by a fraction. The numerator
of this fraction will normally be twenty-eight (i.e., the number of days in the
dividend period) and the denominator will normally be 360. If the Company has
designated a special dividend period of 365 days or more, then the numerator
will be the number of days in the dividend period, and the denominator will be
360. In either case, this rate is then multiplied by $100,000 to arrive at the
dividends per share. In addition, if dividends are scheduled to be paid more
than once during a dividend period, the total dividend per share will be
allocated among such payments on a daily basis.

Dividends on AMPS will accumulate from the date of their original issue.
For each dividend payment period after the initial dividend period, the dividend
rate will be the dividend rate determined at auction, except as provided below.
The dividend rate that results from an auction will not be greater than the
maximum applicable rate described below. In the case of a special dividend
period for which bid requirements are specified, the dividend rate will not be
less than the minimum applicable rate specified in the notice declaring the
special dividend period. During dividend periods for which no bid requirements
are specified, there will be no minimum applicable rate. Bid requirements may
also include, with respect to any special dividend period of longer than 91
days, the requirement that bids be expressed as a spread over a specified
reference index or reference security and the frequency of dividend payments
during such special dividend period.

The maximum applicable rate for any regular dividend payment period will be
the applicable percentage (set forth in the table below) of the 30-day "AA"
Composite Commercial Paper Rate. In the case of a special dividend period, the
maximum applicable rate will be the applicable percentage of the Special
Dividend Period Reference Rate (which will ordinarily be specified by the
Company in the notice of the special dividend period) for such dividend payment
period. The applicable percentage is determined on the day that a notice of a
special dividend period is delivered if the notice specifies a maximum
applicable rate for a special dividend period. The applicable percentage will be
determined based on the lower of the credit rating or ratings assigned to the
AMPS by Moody's and S&P. If Moody's or S&P or both shall not make such rating
available, the rate shall be determined by reference to equivalent ratings
issued by a substitute rating agency.

<PAGE>

Credit Ratings Applicable
-------------- Percentage:
Moody's S&P No Notification
------- --- ---------------

"aa3" or higher AA- or higher 110%
"a3" to "al" A- to A+ 125%
"baa3" to "baal" BBB- to BBB+ 150%
"ba3" to "bal" BB- to BB+ 200%
Below "ba3" Below BB- 250%

Prior to each dividend payment date, the Company is required to deposit
with the auction agent sufficient funds for the payment of declared dividends.
The failure to make such deposit will not result in the cancellation of any
auction. The Company does not intend to establish any reserves for the payment
of dividends.

Restrictions on Dividends and Other Distributions. While the AMPS are
outstanding, the Company generally may not declare, pay or set apart for
payment, any dividend or other distribution in respect of its common shares
(other than in additional shares of common stock or rights to purchase common
stock) or repurchase any of its common shares unless each of the following
conditions have been satisfied:

o In the case of the Moody's coverage requirements, immediately after
such transaction, the aggregate Moody's Coverage Value (i.e., the
aggregate value of the Company's portfolio discounted according to
Moody's criteria) would be equal to or greater than the Eligible Asset
Coverage Amount (i.e., the amount necessary to pay all outstanding
obligations of the Company with respect to the AMPS, any other
preferred stock outstanding, expenses for the next 90 days and any
other liabilities of the Company) (see "Rating Agency Guidelines and
Asset Coverage" below);

o In the case of S&P's coverage requirements, immediately after such
transaction, the Aggregate S&P Value (i.e., the aggregate value of the
Company's portfolio discounted according to S&P criteria) would be
equal to or greater than the Eligible Asset Coverage Amount;

o Immediately after such transaction, the 1940 Act Asset Coverage is
met;

o Full cumulative dividends on the AMPS due on or prior to the date of
the transaction have been declared and paid or shall have been
declared and sufficient funds for the payment thereof deposited with
the auction agent; and

o The Company has redeemed the full number of AMPS required to be
redeemed by any provision for mandatory redemption contained in the
Articles Supplementary.

The Company generally will not declare, pay or set apart for payment any
dividend on any shares of the Company ranking, as to the payment of dividends,
on a parity with AMPS unless the Company has declared and paid or
contemporaneously declares and pays full cumulative dividends on the AMPS
through its most recent dividend payment date. However, when the Company has not
paid dividends in full on the AMPS through the most recent dividend payment date
or upon any shares of the Company ranking, as to the payment of dividends, on a
parity with AMPS through their most recent respective dividend payment dates,
the amount of dividends declared per share on AMPS and such other class or
series of shares will in all cases bear to each other the same ratio that
accumulated dividends per share on the AMPS and such other class or series of
shares bear to each other.

Designation of Special Dividend Periods. The Company may, at its sole
option, declare a special dividend period. To declare a special dividend period,
the Company will give notice (a "request for special dividend period") to the
auction agent and to each Broker-Dealer. The notice will request that the next
succeeding dividend period for the AMPS be a number of days (other than
twenty-eight) evenly divisible by seven as specified in such notice. The Company
may not request a special dividend period unless sufficient clearing bids were
made in the most recent auction. In addition, full cumulative dividends, any
amounts due with respect to mandatory redemptions and any additional dividends
payable prior to such date must be paid in full. The Company also must have
received

<PAGE>

confirmation from Moody's and S&P or any substitute rating agency that the
proposed special dividend period will not adversely affect such agency's
then-current rating on the AMPS. A request for special dividend period also will
specify any proposed bid requirements. Upon receiving a request for a special
dividend period, the Broker-Dealer(s) will jointly determine whether, given the
factors set forth in the Articles Supplementary, it is advisable that the
Company issue a notice of special dividend period for the AMPS as contemplated
by the request. If no Broker-Dealer objects to the notice of special dividend
period, the Company may issue such notice specifying the duration of the special
dividend period, the bid requirements, if any, and the specific redemption
provisions, if any.

Redemption

Mandatory Redemption. The Company is required to maintain

(a) An aggregate Coverage Value (i.e., the Moody's coverage value) of its
portfolio equal to the Eligible Asset Coverage Amount;

(b) An Aggregate S&P Value of its portfolio equal to the Eligible Asset
Coverage Amount; and

If the Company fails to maintain such asset coverage amounts and does not
timely cure such failure in accordance with the requirements of the rating
agencies that rate the AMPS, the Company must redeem all or a portion of the
AMPS. This mandatory redemption will take place on a date that the Board
specifies out of legally available funds in accordance with the Company's
charter and applicable law, at the redemption price of $100,000 per share plus
accumulated but unpaid dividends (whether or not earned or declared) to the date
fixed for redemption. The mandatory redemption will be limited to the number of
AMPS necessary to restore the required Coverage Value (i.e., the Moody's
coverage value), Aggregate S&P Value and 1940 Act Asset Coverage, as the case
may be.

Optional Redemption. The Company, at its option, may redeem the AMPS, in
whole or in part, out of funds legally available therefor. Any optional
redemption will occur on a dividend payment date at the optional redemption
price per share of $100,000 per share plus an amount equal to accumulated but
unpaid dividends to the date fixed for redemption. No AMPS may be redeemed if
the redemption would cause the Company to violate the 1940 Act or Maryland law.

Liquidation

If the Company is liquidated, the holders of outstanding AMPS will receive
$100,000 per share, plus all accumulated but unpaid dividends (whether or not
earned or declared), plus the premium, if any, resulting from the designation of
a premium call period. The holders of AMPS will be entitled to receive these
amounts from the assets of the Company available for distribution to its
shareholders in preference to the holders of the Company's common shares. After
the payment to the holders of AMPS of the full preferential amounts as
described, the holders of AMPS will have no right or claim to any of the
remaining assets of the Company.

For purposes of the foregoing paragraph, a voluntary or involuntary
liquidation of the Company does not include:

o The sale of all or substantially all the property or business of the
Company;

o The merger or consolidation of the Company into or with any other
corporation; or

o The merger or consolidation of any other corporation into or with the
Company.

Rating Agency Guidelines and Asset Coverage

The Company is required under guidelines of Moody's and S&P to maintain
assets having in the aggregate a Coverage Value (i.e., the Moody's coverage
value) and Aggregate S&P Value at least equal to the Eligible Asset

<PAGE>

Coverage Amount. The aggregate Coverage Value and the Aggregate S&P Value are
collectively referred to herein as the "Aggregate Coverage Values". Moody's and
S&P have each established separate guidelines for calculating their respective
Aggregate Coverage Values. To the extent any particular portfolio holding does
not satisfy a rating agency's guidelines, all or a portion of the holding's
value will not be included in the rating agency's calculation of its respective
Aggregate Coverage Value. The Moody's and S&P guidelines do not impose any
limitations on the percentage of the Company's assets that may be invested in
holdings not eligible for inclusion in the calculation of the Aggregate Coverage
Value. The amount of ineligible assets included in the Company's portfolio at
any time may vary depending upon the rating, diversification and other
characteristics of the eligible assets included in the portfolio. The Eligible
Asset Coverage Amount includes the sum of (a) the aggregate liquidation
preference of the AMPS then outstanding and (b) certain accrued and projected
payment obligations of the Company.

The Company is also required under the Articles Supplementary to maintain
asset coverage (as defined in the 1940 Act) of at least 200% with respect to
senior securities which are equity shares, including the AMPS (referred to
herein as the "1940 Act Asset Coverage"). The 1940 Act Asset Coverage is tested
as of the last business day of each month in which any senior equity securities
are outstanding. The minimum required 1940 Act Asset Coverage amount of 200% may
be increased or decreased if the 1940 Act is amended. Based on the composition
of the portfolio of the Company and market conditions as of [May ___, 2000], the
1940 Act Asset Coverage with respect to all of the AMPS, assuming the issuance
on that date of all AMPS offered hereby and giving effect to the deduction of
related sales load and related offering costs estimated at $[ ], would have been
computed as follows:

Value of Company assets less liabilities
not constituting senior securities = $ [000000000] = [00000] %
---------------------------------- -----------------
Senior securities representing indebtedness $ [000000000]
plus
liquidation value of the preferred shares

The Company will be required to redeem AMPS as described under
"--Redemption--Mandatory Redemption" if the Company does not timely cure a
failure to maintain:

(a) An aggregate Coverage Value equal to or greater than the Eligible
Asset Coverage Amount (e.g., in the case of the Moody's coverage
requirements);

(b) An Aggregate S&P Value equal to or greater than the Eligible Asset
Coverage Amount (e.g., in the case of S&P's coverage requirements);
and

Pursuant to S&P guidelines, the Company is required under the Articles
Supplementary to have Deposit Securities with maturity or tender payment dates
not later than the next dividend payment date for the AMPS (collectively,
"Dividend Coverage Assets") and having in the aggregate a value not less than
the Projected Dividend Amount (the "Minimum Liquidity Level"). The "Projected
Dividend Amount," as of any Eligible Asset Evaluation Date, means the amount of
cash dividends, based on the number of AMPS outstanding on such Eligible Asset
Evaluation Date, which (whether or not earned or declared) are accumulated on
such shares up to but not including such Eligible Asset Evaluation Date and
unpaid and which are projected to accumulate on such shares from such Eligible
Asset Evaluation Date until the [35th] day after such Eligible Asset Evaluation
Date, at the rates set forth in the Articles Supplementary. The term "Deposit
Securities" means cash, short-term money market instruments that mature within
360 days, and U.S. Government Obligations. The definitions of "Deposit
Securities," "Dividend Coverage Assets" and "Dividend Coverage Amount" may be
changed from time to time by the Company without shareholder approval, but only
in the event the Company receives confirmation from S&P and Moody's, as the case
may be, that any such change would not impair the ratings then assigned by S&P
to AMPS. The Company needs to comply with the S&P Minimum Liquidity Level only
for so long as S&P rates the AMPS. The Minimum Liquidity Level is tested as of
each Eligible Asset Evaluation Date (ordinarily every Friday).

<PAGE>

The Company may, but is not required to, adopt any modifications to the
guidelines that may be established by Moody's or S&P. Failure to adopt any such
modifications, however, may result in a change in the ratings described above or
a withdrawal of ratings altogether. In addition, any rating agency providing a
rating for the AMPS may, at any time, change or withdraw any such rating. The
Board may, without shareholder approval, amend, alter or repeal any or all of
the definitions and related provisions which have been adopted by the Company
pursuant to the rating agency guidelines in the event the Company receives
written confirmation from Moody's or S&P, as the case may be, that any such
amendment, alteration or repeal would not impair the rating then assigned to the
AMPS.

A rating agency's guidelines will apply to AMPS only so long as the rating
agency is rating the shares. The Company will pay certain fees to Moody's and
S&P for rating the AMPS.

Voting Rights

Except as otherwise provided in this prospectus and in the statement of
additional information or as otherwise required by law, holders of AMPS will
have equal voting rights with holders of common shares and any other preferred
shares of the Company (one vote per share) and will vote together with holders
of common shares and any other preferred shares as a single class.

Holders of outstanding preferred shares of the Company, including AMPS,
voting as a separate class, are entitled to elect two of the Company's
directors. The remaining directors are elected by holders of common shares and
preferred shares, including AMPS, voting together as a single class. In
addition, if at any time dividends (whether or not earned or declared) on
outstanding preferred shares of the Company, including AMPS, are due and unpaid
in an amount equal to two full years of dividends, and sufficient cash or
specified securities have not been deposited with the auction agent for the
payment of such dividends, the sole remedy of holders of outstanding preferred
shares of the Company is that the number of directors constituting the Board
will be automatically increased by the smallest number that, when added to the
two directors elected exclusively by the holders of preferred shares as
described above, would constitute a majority of the Board. The holders of
preferred shares of the Company will be entitled to elect that smallest number
of additional directors at a special meeting of shareholders held as soon as
possible and at all subsequent meetings at which directors are to be elected.
The terms of office of the persons who are directors at the time of that
election will continue unless the election of additional directors by holders of
preferred stock would cause the number of directors to exceed 12. If the Company
thereafter pays in full all accumulated and unpaid dividends on all outstanding
preferred shares of the Company, the special voting rights stated above will
cease and the terms of office of the additional directors elected by the holders
of the preferred shares will automatically terminate.

As long as any preferred shares of the Company are outstanding, the Company
will not, without the affirmative vote or consent of the holders of the AMPS
outstanding at the time (voting as a separate class) as follows:

(a) Without the affirmative vote of at least a majority of the votes
entitled to be cast by holders of the AMPS, authorize, create or issue
any class or series of stock ranking prior to or on a parity with the
AMPS with respect to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up of the affairs of
the Company (other than previously authorized and un-issued AMPS,
including any AMPS purchased or redeemed by the Company), or increase
the authorized amount of AMPS or any other preferred stock; or unless,
in the case of shares of preferred stock on parity with the AMPS, the
Company obtains written confirmation from Moody's (if Moody's is then
rating preferred shares), S&P (if S&P is then rating preferred shares)
or any substitute rating agency (if any such substitute rating agency
is then rating preferred shares) that the issuance of a class or
series would not impair the rating then assigned by such rating agency
to the AMPS) and the Company continues to comply with Section 13(a) of
the 1940 Act, the 1940 Act Asset Coverage requirements and the
Eligible Asset Coverage Amount requirements, in which case the vote or
consent of the holders of the AMPS is not required;

(b) Without the affirmative vote of at least a majority of the votes
entitled to be cast by holders of the AMPS, amend, alter or repeal the
provisions of the Articles, including the Articles Supplementary,
whether by merger, consolidation or otherwise, so as to adversely
affect in any material respect

<PAGE>

any of the contract rights expressly set forth in the Articles,
including the Articles Supplementary, of such AMPS or the holders
thereof;

(c) Without the affirmative vote of at least a majority of the votes
entitled to be cast by holders of the AMPS, authorize any plan of
reorganization (as such term is used in the 1940 Act) adversely
affecting the Preferred Share or any action requiring a vote of
security holders of the Company under Section 13(a) of the 1940 Act.
With respect to the Company, Section 13(a) of the 1940 Act primarily
refers to a change in the Company's subclassification from that of a
closed-end investment company to that of an open-end investment
company or from a diversified to a non-diversified investment company;
or

(d) Without the affirmative vote of at least 2/3rds of the votes entitled
to be cast by holders of the AMPS, file a voluntary application for
relief under Federal bankruptcy law or any similar application under
state law.

To the extent permitted under the 1940 Act, the Company will not approve
any of the actions set forth above which adversely affect the rights expressly
set forth in the Company's charter of a holder of shares of a series of
preferred shares differently than those of a holder of shares of any other
series of preferred shares without the affirmative vote or consent of the
holders of at least a majority of the shares of each series whose rights are
adversely affected. To the extent permitted by the Maryland General Corporation
Law, no vote of holders of common stock, either separately or together with
holders of preferred shares as a single class, is necessary to take the actions
contemplated by (a) and (b) above. The holders of common shares will not be
entitled to vote in respect of such matters, unless, in the case of the actions
contemplated by (b) above, the action would adversely affect the contract rights
of the holders of common shares expressly set forth in the Company's charter.

The foregoing voting provisions will not apply with respect to AMPS if, at
or prior to the time when a vote is required, such shares have been (i) redeemed
or (ii) called for redemption and sufficient funds have been deposited in trust
to effect such redemption.

THE AUCTION

General

The Articles Supplementary provide that, except as otherwise described in
this prospectus, the applicable rate for the AMPS for each dividend period after
the initial dividend period will be the rate that results from an auction
conducted as set forth in Articles Supplementary and summarized below. In such
an auction, persons determine to hold or offer to sell or, based on dividend
rates bid by them, offer to purchase or sell AMPS. See the Articles
Supplementary included in the statement of additional information for a more
complete description of the auction process.

Auction Agency Agreement. The Company will enter into an auction agency
agreement with the auction agent (currently, [Deutsche Bank Group]) which
provides, among other things, that the auction agent will follow the auction
procedures to determine the applicable rate for AMPS so long as the applicable
rate for AMPS is to be based on the results of an auction.

The auction agent may terminate the auction agency agreement upon notice to
the Company no earlier than 60 days after such notice. If the auction agent
should resign, the Company will use its best efforts to enter into an agreement
with a successor auction agent containing substantially the same terms and
conditions as the auction agency agreement. The Company may remove the auction
agent provided that prior to such removal the Company has entered into such an
agreement with a successor auction agent.

Broker-Dealer Agreements. Each auction requires the participation of one or
more Broker-Dealers. The auction agent will enter into agreements with several
Broker-Dealers selected by the Company, which provide for the participation of
those Broker-Dealers in auctions for AMPS.

<PAGE>

The auction agent will pay to each Broker-Dealer after each auction, from
funds provided by the Company, a service charge at the annual rate of [1/4 of
1%] of the stated value ($100,000 per share) of the AMPS held by a
Broker-Dealer's customer upon settlement in an auction.

The Company may request the auction agent to terminate one or more
Broker-Dealer Agreements at any time upon five days' notice, provided that at
least one Broker-Dealer Agreement is in effect after such termination.

Auction Procedures

Prior to the submission deadline on each auction date for the AMPS, each
customer of a Broker-Dealer who is listed on the records of that Broker-Dealer
(or, if applicable, the auction agent) as a beneficial owner of AMPS may submit
the following types of orders with respect to AMPS to that Broker-Dealer:

1. Hold Order--indicating its desire to hold AMPS without regard to the
applicable rate for the next dividend period.

2. Bid--indicating its desire to purchase or hold the indicated number of
AMPS at $100,000 per share if the applicable rate for shares of such
series for the next dividend period is not less than the rate or
spread specified in the bid and which shall be deemed an irrevocable
offer to sell AMPS at $100,000 per share if the applicable rate for
shares of such series for the next dividend period is less than the
rate or spread specified in the bid.

3. Sell Order--indicating its desire to sell AMPS at $100,000 per share
without regard to the applicable rate for shares of such series for
the next dividend period.

A beneficial owner of AMPS may submit different types of orders to its
Broker-Dealer with respect to AMPS then held by the beneficial owner. A
beneficial owner that submits a bid to its Broker-Dealer having a rate higher
than the maximum applicable rate on the auction date will be treated as having
submitted a sell order to its Broker-Dealer. A beneficial owner that fails to
submit an order to its Broker-Dealer will ordinarily be deemed to have submitted
a hold order to its Broker-Dealer. However, if a beneficial owner fails to
submit an order for some or all of its shares to its Broker-Dealer for an
auction relating to a dividend period of more than 91 days, such beneficial
owner will be deemed to have submitted a sell order for such shares to its
Broker-Dealer. A sell order constitutes an irrevocable offer to sell the AMPS
subject to the sell order. A beneficial owner that offers to become the
beneficial owner of additional AMPS is, for purposes of such offer, a potential
holder as discussed below.

A potential holder is either a customer of a Broker-Dealer that is not a
beneficial owner of AMPS but that wishes to purchase AMPS or a beneficial owner
that wishes to purchase additional AMPS. A potential holder may submit bids to
its Broker-Dealer in which it offers to purchase AMPS at $100,000 per share if
the applicable rate for the next dividend period is not less than the rate
specified in such bid. A bid placed by a potential holder specifying a rate
higher than the maximum applicable rate on the auction date will not be
accepted.

Any bid by an existing holder that specifies a spread with respect to an
auction in which a spread is not included in any bid requirements or in which
there are no bid requirements and an order that does not specify a spread with
respect to an auction in which a spread is included in any bid requirements will
be treated as a sell order.

The Broker-Dealers in turn will submit the orders of their respective
customers who are beneficial owners and potential holders to the auction agent.
However, neither the Company nor the auction agent will be responsible for a
Broker-Dealer's failure to comply with these procedures. Any order placed with
the auction agent by a Broker-Dealer as or on behalf of an existing holder or a
potential holder will be treated the same way as an order placed with a
Broker-Dealer by a beneficial owner or potential holder. Similarly, any failure
by a Broker-Dealer to submit to the auction agent an order for any AMPS held by
it or customers who are beneficial owners will be treated as a beneficial
owner's failure to submit to its Broker-Dealer an order in respect of AMPS held
by it. A Broker-Dealer may also submit orders to the auction agent for its own
account as an existing holder or potential holder, provided it is not an
affiliate of the Company.

<PAGE>

There are sufficient clearing bids in an auction if the number of shares
subject to bids submitted or deemed submitted to the auction agent by
Broker-Dealers for potential holders with rates or spreads equal to or lower
than the maximum applicable rate is at least equal to the number of AMPS subject
to sell orders submitted or deemed submitted to the auction agent by
Broker-Dealers for existing holders. If there are sufficient clearing bids, the
applicable rate for AMPS for the next succeeding dividend period thereof will be
the lowest rate specified in the submitted bids which, taking into account such
rate and all lower rates bid by Broker-Dealers as or on behalf of existing
holders and potential holders, would result in existing holders and potential
holders owning the AMPS available for purchase in the auction.

If there are not sufficient clearing bids, the applicable rate for the next
dividend period will be the maximum applicable rate on the auction date.
However, if the Company has declared a special dividend period and there are not
sufficient clearing bids, the applicable rate for the next dividend period will
be the same as during the current dividend period. If there are not sufficient
clearing bids, beneficial owners of AMPS that have submitted or are deemed to
have submitted sell orders may not be able to sell in the auction all shares
subject to such sell orders. If all of the outstanding AMPS are the subject of
submitted hold orders, then the dividend period following the auction will
automatically be the same length as the preceding dividend period and the
applicable rate for the next dividend period will be the 30-day "AA" Composite
Commercial Paper Rate. The A30-day 'AA' Composite Commercial Paper Rate@ is the
30-day rate on commercial paper issued by corporations whose bonds are rated AA
by S&P as made available by the Federal Reserve Bank of New York or, if such
rate is not made available by the Federal Reserve Bank of New York, the
arithmetical average of such rates as quoted to the auction agent by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or such other commercial paper dealer
as may be appointed by the Company.

The auction procedures include a pro rata allocation of shares for purchase
and sale, which may result in an existing holder continuing to hold or selling,
or a potential holder purchasing, a number of AMPS that is different than the
number of shares specified in its order. To the extent the allocation procedures
have that result, Broker-Dealers that have designated themselves as existing
holders or potential holders in respect of customer orders will be required to
make appropriate pro rata allocations among their respective customers.

Settlement of purchases and sales will be made on the next business day
(which is also a dividend payment date) after the auction date through DTC.
Purchasers will make payment through their Agent Members in same-day funds to
DTC against delivery to their respective Agent Members. DTC will make payment to
the sellers' Agent Members in accordance with DTC's normal procedures, which now
provide for payment against delivery by their Agent Members in same-day funds.

The auctions for AMPS will normally be held every fourth [Tuesday], and
each subsequent dividend period will normally begin on the following
[Wednesday].

Secondary Market Trading and Transfer of AMPS

The Broker-Dealers are expected to maintain a secondary trading market in
AMPS outside of auctions, but are not obligated to do so, and may discontinue
such activity at any time. There can be no assurance that any secondary trading
market in AMPS will provide owners with liquidity of investment. The AMPS are
not registered on any stock exchange or on the NASDAQ system. Investors who
purchase shares in an auction for a special dividend period in which the Bid
Requirements, if any, do not require a bid to specify a spread, should note that
because the dividend rate on such shares will be fixed for the length of such
dividend period, the value of the shares may fluctuate in response to changes in
interest rates and may be more or less than their original cost if sold on the
open market in advance of the next auction. Investors who purchase shares in an
auction for a special dividend period in which the Bid Requirements require a
bid to specify a spread should be aware that the value of their shares may also
fluctuate and may be more or less than their original cost if sold on the open
market in advance of the next auction, particularly if market spreads narrow or
widen in a manner unfavorable to such purchaser's position.

A beneficial owner or an existing holder may sell, transfer or otherwise
dispose of AMPS only in whole shares and only (a) pursuant to a bid or sell
order placed with the auction agent in accordance with the auction procedures;
(b) to a Broker-Dealer; or (c) to such other persons as may be permitted by the
Company; provided, however, that (1) a sale, transfer or other disposition of
AMPS from a customer of a Broker-Dealer who is listed on

<PAGE>

the records of that Broker-Dealer as the holder of such shares to that
Broker-Dealer or another customer of that Broker-Dealer shall not be deemed to
be a sale, transfer or other disposition if such Broker-Dealer remains the
existing holder of the shares; and (2) in the case of all transfers other than
pursuant to auctions, the Broker-Dealer (or other person, if permitted by the
Company) to whom such transfer is made will advise the auction agent of such
transfer.

TAXES

Federal Income Tax Matters

The Company has qualified and elected, and intends to continue to qualify,
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended, and intends to distribute at least 90% of its net
investment income (including taxable income and net short-term capital gain, but
not net capital gain, which is the excess of net long-term capital gain over net
short-term capital loss) and substantially all of its net capital gain to its
shareholders. The Company will not be subject to Federal income tax on any net
investment income and net capital gain that it distributes to its shareholders,
but will be subject to Federal income tax at the regular corporate income tax
rate on any net investment income and net capital gains that it retains.

The Company expects that a substantial portion of the Company's dividends
to the common shareholders and the holders of the AMPS will be fully taxable as
ordinary income. In addition, the Company also intends to distribute to its
shareholders amounts that are treated as long-term capital gain. The Company
will allocate distributions to shareholders that are treated as long-term
capital gain and ordinary income, if any, proportionately among the common
shares and AMPS.

The sale or other disposition of common shares or AMPS of the Company will
normally result in capital gain or loss to shareholders. Present law taxes both
long-term and short-term capital gains of corporations at the rates applicable
to ordinary income. For non-corporate taxpayers, under current law short-term
capital gains and ordinary income will be taxed at a maximum rate of 39.6%,
while long-term capital gains will generally be taxed at a maximum rate of 20%.
Because of certain limitations on itemized deductions and the deduction for
personal exemptions applicable to higher income taxpayers, the effective rate of
tax may be higher in certain circumstances. Losses realized by a shareholder on
the sale or exchange of shares of the Company held for six months or less are
disallowed to the extent of any exempt-interest dividends received with respect
to such shares, and, if not disallowed, such losses are treated as long-term
capital losses to the extent of any distribution of net capital gain received
with respect to such shares. A shareholder's holding period is suspended for any
periods during which the shareholder's risk of loss is diminished as a result of
holding one or more other positions in substantially similar or related
property, or through certain options or short sales. Any loss realized on a sale
or exchange of shares of the Company will be disallowed to the extent those
shares of the Company are replaced by other shares within a period of 61 days
beginning 30 days before and ending 30 days after the date of disposition of the
original shares. In that event, the basis of the replacement shares of the
Company will be adjusted to reflect the disallowed loss.

The statement of additional information contains a more detailed summary of
the Federal income tax rules that apply to the Company and its shareholders.
Legislative, judicial or administrative action may change the tax rules that
apply to the Company or its shareholders, and any such change may be
retroactive. You should consult with your tax advisor about Federal income tax
matters.

State and Local Tax Matters

You should consult with your tax advisor about state and local tax matters.

DETERMINATION OF NET ASSET VALUE

The net asset value of common shares of the Company will be computed based
upon the value of the Company's portfolio securities and other assets. Net asset
value per common share of the Company will be determined as of the close of the
regular trading session on the New York Stock Exchange no less frequently than
Friday of each week and the last business day of each month, provided, however,
that if any such day is a holiday or

<PAGE>

determination of net asset value on such day is impracticable, the net asset
value shall be calculated on such earlier or later day as determined by the
Adviser. The Company calculates net asset value per common share of the Company
by subtracting the Company's liabilities (including accrued expenses, dividends
payable and any borrowings of the Company) and the liquidation value of any
outstanding preferred shares (including AMPS) of the Company from the Company's
total assets (the value of the securities the Company holds plus cash or other
assets, including interest accrued but not yet received) and dividing the result
by the total number of common shares of the Company outstanding.

The Company values its common and preferred securities by using market
quotations provided by pricing services, prices provided by market makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established by the Board. Short-term securities having a maturity of 60 days or
less are valued at amortized cost, which approximates market value. Any
securities or other assets for which current market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established by and under the general supervision and responsibility
of the Board.

REPURCHASE OF COMMON SHARES

Shares of closed-end investment companies often trade at a discount to
their net asset values, and the Company's common shares may also trade at a
discount to their net asset value. The market price of the Company's common
shares will be determined by such factors as relative demand for and supply of
such common shares in the market, the Company's net asset value, general market
and economic conditions and other factors beyond the control of the Company.
Although the Company's common shareholders will not have the right to have the
Company redeem their common shares, the Company may, subject to the restrictions
described above under "Description of AMPS", take action to repurchase common
shares in the open market or make tender offers for its common shares at their
net asset value. Nonetheless, the Company's largest shareholders have expressed
their opposition to attempts to manage the Company's discount through share
repurchases, tender offers or open-ending. In view of this and certain other
factors (such as the adverse impact of certain of these strategies on the
Company's asset coverage ratios and their failure to have a long-term impact on
the discount), the Board does not currently intend to pursue strategies to
narrow the discount at which the Company's shares trade. This may, but will not
necessarily, have the effect of reducing any market discount from net asset
value. See "Repurchase of Common Shares" in the statement of additional
information.

DESCRIPTION OF CAPITAL STOCK

Common Shares

The Company has no present intention of offering any additional shares of
capital stock other than AMPS as described herein. Any additional offerings of
shares of capital stock, if made, will require approval by the Board. Any
additional offering of common shares will be subject to the requirements of the
1940 Act that common shares may not be issued at a price below the then current
net asset value (exclusive of underwriting discounts and commissions) except in
connection with an offering to existing stockholders or with the consent of a
majority of the Company's common shareholders.

So long as any AMPS or any other preferred shares of the Company are
outstanding, holders of common shares of the Company will not be entitled to
receive any net income of or other distributions from the Company unless all
accumulated dividends on outstanding preferred shares (including the AMPS) have
been paid, and unless asset coverage (as defined in the 1940 Act) with respect
to such preferred shares would be at least 200% after giving effect to such
distributions. See "Description of AMPS-Dividends and Dividend Periods" for
other restrictions on

<PAGE>

dividends to holders of common shares which will be applicable for so long as
any preferred shares of the Company are outstanding.

The common shares have traded on the New York Stock Exchange (the
"Exchange") from between February 19, 1993 to August 27, 1999, under the symbol
"PFM". From August 28, 1999 to the present, the common shares have traded on the
Exchange under the symbol "BTF". On May ____, 2000, there were 9,416,743 common
shares of the Company issued and outstanding and the net asset value per common
share was $[ ] and the closing price per common share on the NYSE was $[ ].

Preferred Stock

Under the Company's charter, the Company is authorized to issue 10 million
shares of preferred stock, $.01 par value. The Board is authorized to classify
and reclassify any unissued shares of capital stock from time to time by setting
or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of stock. Under the 1940 Act, the Company is
permitted to have outstanding more than one series of preferred shares so long
as no single series has a priority over another series as to the distribution of
assets of the Company or the payment of dividends. Holders of common shares and
outstanding preferred shares (i.e., the MMP Shares) of the Company have no
preemptive right to purchase any preferred shares (including the AMPS) that
might be issued. It is anticipated that the net asset value per share of the
AMPS will equal its original purchase price per share plus accrued dividends per
share. See "Description of AMPS" for a description of the rights, preferences,
privileges and other terms of the AMPS.

Anti-takeover Provisions of the Charter and By-Laws

The Company presently has provisions in its charter and By-Laws (commonly
referred to as "antitakeover" provisions) which may have the effect of limiting
the ability of other entities or persons to acquire control of the Company, to
cause it to engage in certain transactions or to modify its structure:

o A director elected by the holders of capital stock (i.e., the common
shares, the AMPS and any other preferred shares) or by the holders of
AMPS and any other preferred shares may be removed from office with or
without cause only by vote of the holders of at least 80% of the
shares of capital stock or preferred shares, as the case may be, of
the Company entitled to be voted in an election to fill that
directorship.

o The affirmative vote of at least 80% of the directors and of the
holders of at least 80% of the Company's outstanding shares of common
stock and preferred shares (including the AMPS) entitled to be voted
on the matter, voting as a single class, and the affirmative vote of
80% of outstanding preferred shares (including the AMPS) voting as a
separate class, will be required to authorize the Company's conversion
from a closed-end to an open-end investment company, which conversion
would result in delisting of the common shares from the NYSE.
Conversion to an open-end investment company would require redemption
of all outstanding preferred shares of the Company.

o The Board is classified into three classes, each with a term of three
years, with only one class of directors standing for election in any
year. Such classification may prevent replacement of a majority of the
directors for up to a two year period. The affirmative vote of at
least 80% of the Company's outstanding shares of capital stock
entitled to be voted on the matter, voting as a single class, and the
affirmative vote of at least 80% of outstanding AMPS, voting as a
separate class, will be required to amend the Charter to change any of
the provisions in this subparagraph. If, however, any such action is
authorized by at least 80% of the Continuing Directors (as defined
below), the vote required to approve such action is a majority of the
votes entitled to be cast by the holders of the Company's common stock
and preferred stock to be voted on the matter, voting as a single
class, unless otherwise provided in the Charter or applicable law.

o Subject to certain limited exceptions provided in the Articles, the
Articles also require the favorable vote of at least 80% of the
directors and at least 80% of the votes entitled to be cast by holders
of

<PAGE>

common stock and any outstanding preferred stock voting as a single
class, and at least 80% of the votes entitled to be cast by holders of
any outstanding preferred stock (including the AMPS), voting as a
separate class, to approve, adopt or authorize the following:

1. merger, consolidation or share exchange of the Company with or into
any other person;

2. issuance or transfer by the Company (in one or a series of
transactions in any 12 month period) of any securities of the Company
to any other person or entity for cash, securities or other property
(or combination thereof) having an aggregate fair market value of
$1,000,000 or more excluding sales of securities of the Company in
connection with a public offering or private placement, issuances of
securities of the Company pursuant to a dividend reinvestment and cash
purchase plan adopted by the Company and issuances of securities of
the Company upon the exercise of any stock subscription rights
distributed by the Company;

3. sale, lease, exchange, mortgage, pledge, transfer or other disposition
by the Company (in one or a series of transactions in any 12 month
period) to or with any person of any assets of the Company having an
aggregate fair market value of $1,000,000 or more except for portfolio
transactions effected by the Company in the ordinary course of its
business ((1), (2) and (3) each being a "Business Combination");

4. any proposal as to the voluntary liquidation or dissolution of the
Company or any amendment to the Articles to terminate its existence;
and

5. any shareholder proposal as to specific investment decisions made or
to be made with respect to the Company's assets.

However, separate 80% votes of the holders of shares of Common Stock and
any outstanding Preferred Stock (including shares of AMPS), voting as a single
class, and of the holders of any Preferred Stock (including shares of AMPS)
outstanding, voting as a separate class, will not be required with respect to
the transactions described in (1) through (4) above (A) if they are approved by
a vote of at least 80% of the Continuing Directors or (B) if certain conditions
regarding the consideration paid by the person entering into, or proposing to
enter into, a Business Combination with the Company and various other
requirements are satisfied, in which case (x) the affirmative vote of a majority
of the votes entitled to be cast by shareholders shall be required to approve a
transaction within (1), (3) (if the transfer or other disposition constitutes a
transfer of all or substantially all of the assets of the Company with respect
to which a shareholder vote is required under applicable state law) or (4) above
unless otherwise required by the charter or otherwise required by law and (y) no
shareholder vote is required to approve a transaction within (2) above or any
other transaction within (3) above unless otherwise provided in the Articles or
required by law. The Company's Bylaws contain provisions the effect of which is
to prevent matters, including nominations of Directors, from being considered at
shareholders' meetings where the Company has not received sufficient prior
notice of the matters.

The percentage of votes required under these provisions, which are greater
than the minimum requirements under Maryland law or in the 1940 Act, will make
more difficult a change in the Company's business or management and may have the
effect of depriving holders of common shares of an opportunity to sell shares at
a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Company in a tender offer or similar
transaction. The Board, however, has considered these antitakeover provisions
and believes they are in the best interests of shareholders.

OTHER SERVICE PROVIDERS

Custodian. The Company's securities and cash are held under a Custodial
Agreement with [ ] (the "Custodian"), located at ______________________________.

Transfer Agent, Dividend Disbursing Agent and Registrar. The transfer
agent, dividend disbursing agent and registrar for the AMPS will be [Deutsche
Bank Group], __________________________________________.

<PAGE>

The transfer agent, dividend disbursing agent and registrar for the common
shares of the Company is [____________________].

UNDERWRITING

Subject to the terms and conditions of the purchase agreement dated the
date hereof, Merrill Lynch, Pierce, Fenner and Smith Incorporated has agreed to
purchase, and the Company has agreed to sell all of the AMPS offered hereby.

The purchase agreement provides that the obligations of the underwriter to
purchase the shares included in this Offering are subject to the approval of
certain legal matters by counsel and to certain other conditions. The
underwriter is obligated to purchase all the AMPS if it purchases any of the
shares. In the purchase agreement, the Company and the Adviser have agreed to
indemnify the underwriters against certain liabilities, including liabilities
arising under the Securities Act of 1933, or to contribute payments the
underwriters may be required to make for any of those liabilities.

The underwriter proposes to initially offer some of the AMPS directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the AMPS to certain dealers at the public offering price
less a concession not in excess of $ per share. The sales load the Company will
pay of per share is equal to % of the initial offering price. The underwriter
may allow, and such dealers may reallow, a concession not in excess of $ per
share on sales to certain other dealers. After the initial public offering, the
underwriter may change the public offering price and the concession. Investors
must pay for any AMPS purchased in the initial public offering on or before ,
2000.

The Company anticipates that the underwriter may from time to time act as
broker or dealer in executing the Company's portfolio transactions after it has
ceased to be an underwriter. The underwriter is an active underwriter of, and
dealer in, securities and acts as a market maker in a number of such securities,
and therefore can be expected to engage in portfolio transactions with the
Company.

The Company anticipates that the underwriter or its affiliates may, from
time to time, act in auctions as Broker-Dealers and receive fees as set forth
under "The Auction." The underwriter engages in transactions with, and performs
services for, the Company in the ordinary course of business.

LEGAL OPINIONS

Certain legal matters in connection with the AMPS offered hereby will be
passed upon for the Company by Willkie Farr & Gallagher, New York, New York; for
the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York. Such counsel will rely, as to matters of Maryland law, on the opinion of
Venable, Baetjer & Howard, LLP, Baltimore, Maryland.

EXPERTS

The data in the "Financial Highlights" section of this prospectus are based
upon financial statements that have been audited by PricewaterhouseCoopers, LLP,
located at___________________________, independent auditors, as indicated in
their reports with respect thereto, and are incorporated by reference herein in
reliance on their reports given on their authority as experts in auditing and
accounting.

REPORTS TO STOCKHOLDERS

The Company sends unaudited semiannual reports and audited annual reports,
including a list of investments held, to stockholders.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act and in accordance therewith is required to
file reports, proxy statements and other information with the SEC. Any such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the SEC, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the SEC's New York Regional Office, Seven
World Trade Center, New York, New York 10048 and its Chicago Regional Office,
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Reports, proxy statements and other information concerning the
Company can also be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.

Additional information regarding the Company and the AMPS is contained in
the Registration Statement on Form N-2, including amendments, exhibits and
schedules thereto, relating to such shares filed by the Company with the SEC.
This prospectus does not contain all of the information set forth in the
Registration Statement, including any amendments, exhibits and schedules
thereto. For further information with respect to the Company and the shares
offered hereby, reference is made to the Registration Statement. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.

A copy of the Registration Statement may be inspected without charge at the
SEC's principal office in Washington, D.C., and copies of all or any part
thereof may be obtained from the SEC upon the payment of certain fees prescribed
by the SEC. The SEC maintains a web site (http://www.sec.gov) that contains the
Registration Statement, other documents incorporated by reference, and other
information the Company has filed electronically with the SEC, including proxy
statements and reports filed under the Securities Exchange Act of 1934.

<PAGE>

TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION
Page

INVESTMENT OBJECTIVE AND POLICIES............................................S-2
INVESTMENT POLICIES AND TECHNIQUES...........................................S-3
MANAGEMENT OF THE COMPANY....................................................S-6
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................S-9
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR AMPS.....................S-10
REPURCHASE OF COMMON SHARES.................................................S-11
TAX MATTERS.................................................................S-13
FINANCIAL STATEMENTS........................................................S-14
ADDITIONAL INFORMATION......................................................S-15

<PAGE>

Subject to completion, dated July 3, 2000

BOULDER TOTAL RETURN FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

Boulder Total Return Fund, Inc. (the "Company") is a closed-end, diversified
management investment company. This statement of additional information does not
constitute a prospectus, but should be read in conjunction with the prospectus
relating hereto dated ________ __, 2000 (the "Prospectus"). This statement of
additional information does not include all information that a prospective
investor should consider before purchasing the Company's Cumulative Auction
Market Preferred Stock ("AMPS"), and investors should obtain and read the
Prospectus prior to purchasing such shares. A copy of the Prospectus may be
obtained without charge by calling (____) ____________. You may also obtain a
copy of the Prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this statement
of additional information have the meanings given to them in the Prospectus.

THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.

This statement of additional information is dated _______ __ , 2000.

<PAGE>

TABLE OF CONTENTS
Page
----

INVESTMENT OBJECTIVE AND POLICIES..............................................2

Investment Objective......................................................2
Investment Restrictions...................................................2

INVESTMENT POLICIES AND TECHNIQUES.............................................3

Portfolio Investments.....................................................3
Borrowings................................................................6
Lending of Securities.....................................................6
Short Sales Against the Box...............................................6

MANAGEMENT OF THE COMPANY......................................................6

Officers and Directors....................................................6
Audit Committee...........................................................8
Nominating Committee......................................................8
Compensation to Directors.................................................8
Code of Ethics............................................................9
Compensation to Advisers and Co-Administrators............................9

PORTFOLIO TRANSACTIONS AND BROKERAGE...........................................9

ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR AMPS.......................10

General..................................................................10
Concerning the Auction Agent.............................................11
Broker-Dealers...........................................................11

REPURCHASE OF COMMON SHARES...................................................11

TAX MATTERS...................................................................13

FINANCIAL STATEMENTS..........................................................14

Independent Auditors.....................................................14
Incorporation by Reference...............................................15

ADDITIONAL INFORMATION........................................................15

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES.

The Company was organized in 1992 under the name "Preferred Income Management
Fund Incorporated", which was changed to the current name on August 27, 1999.

Investment Objective

The Company's investment objective is total return. The Company seeks to produce
both long-term capital appreciation through investment in common stocks and
current income consistent with preservation of capital through investments in
income producing securities, such as real estate investment trusts ("REITs"),
registered closed end investment companies ("RICs"), preferred stocks, bonds and
other income-producing securities. No assurance can be given that the Company
will achieve its investment objective.

The Company operates as a "diversified" investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). Under this
definition, the Company must limit to 5% the portion of its assets invested in
the securities of a single issuer. This limit does not apply, however, to 25% of
the Company's assets, which may be invested in a single issuer. The Company
intends to concentrate its common stock investments in a few issuers and to take
large positions in those issuers, consistent with being a "diversified" fund. As
a result, the Company is subject to a greater risk of loss than a fund that
diversifies its investments more broadly. Taking larger positions is also likely
to increase the volatility of the Company's net asset value reflecting
fluctuation in the value of its large holdings.

Investment Restrictions

A number of the Company's investment policies are "fundamental" policies
("Fundamental Policies"). No Fundamental Policy may be changed without approval
by the vote of a majority of the Company's outstanding voting securities, voting
as a single class, and a majority of the Company's outstanding shares of
preferred stock, voting as a separate class. A "majority of the Fund's
outstanding voting securities" for this purpose means the lesser of (1) 67% or
more of the shares of common stock and shares of 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 (2)
more than 50% of the outstanding shares of common stock and shares of the
preferred stock, voting as a single class. A majority of the Company's
outstanding shares of preferred stock for this purpose is determined in a
similar manner, by applying the percentages in the previous sentence to shares
of preferred stock. With the exception of the Fundamental Policies and the
Company's investment objective, all other policies, statements, terms and
conditions may be changed by the Company's Board of Directors without
shareholder approval, unless provided to the contrary in the Company's Articles
of Incorporation.

Pursuant to the Fundamental Policies:

1. The Company may not purchase securities (other than Government
Securities) of any issuer if as a result of the purchase more than 5%
of the value of the Company's total assets would be invested in the
securities of that issuer, except that up to 25% of the value of the
Company's total assets may be invested without regard to this 5%
limitation.

2. The Company may not 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
Company's investments in Government Securities and (ii) up to 25% of
the value of the Company's total assets may be invested without regard
to this 10% limitation.

3. The Company may not borrow except as permitted by law; provided that,
as long as the Company's money market cumulative preferred stock
("MMP(R)") are outstanding, the Company may not borrow except (1) (a)
for temporary or emergency purposes or (b) in connection with
repurchases of its shares or (c) 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 or (2) for the purpose of redeeming all of the outstanding
MMP. When the Company's borrowings under (1)(a), (b) and (c) exceed 5%
of the value of its total assets, the Company will not make any
additional investments.

4. The Company may not sell securities short or purchase securities on
margin, except for such short-term credits as are necessary for the
clearance of transactions, but the Company may make margin deposits in

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<PAGE>

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. The Company may not underwrite any issue of securities, except to the
extent that the sale of portfolio securities may be deemed to be an
underwriting.

6. The Company may not purchase, hold or deal in real estate or oil and
gas interests, except that the Company may invest in securities
secured by real estate or interests in real estate.

7. The Company may not invest in commodities, except that the Company 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. The Company may not lend any funds or other assets, except through
purchasing debt securities, lending portfolio securities and entering
into repurchase agreements consistent with the Company's investment
objective.

9. The Company may not issue senior securities other than preferred stock
or as permitted by the Company's borrowing limitation.

10. The Company may not invest more than 25% of its total assets in the
securities of issuers in any single industry, except that this
limitation will not be applicable to the purchase of Government
Securities.

Although certain investment techniques are permitted by the restrictions set
forth above, the Company's ability to engage in them may nonetheless be limited
or prohibited by the Company's Articles of Incorporation or guidelines of
organizations rating the AMPS.

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Company's investment
objective, policies and techniques in the Prospectus.

Portfolio Investments

Under normal market conditions, the Company invests primarily in a portfolio of
common stocks and income producing securities such as REITs, RICs, bonds and
preferred stocks.

Common Stocks. The Company may invest all or any portion of its assets in common
stock. Common stock is defined as shares of a corporation that entitle the
holder to a pro rata share of the profits of the corporation, if any, without
preference over any other shareholder or class of shareholders, including
holders of the corporation's preferred stock and other senior equity. Common
stock usually carries with it the right to vote and frequently an exclusive
right to do so. Holders of common stock also have the right to participate in
the assets of the corporation after all other claims are paid.

In selecting investments, the Company expects to focus primarily on U.S.
companies, although there are no prohibitions on possible investment
opportunities outside the United States. Generally, target companies (other than
those common stocks purchased primarily for their income-producing potential)
will have a consistent high return on equity, while using modest amounts of debt
relative to their industry. The Company will seek investments in businesses SIA
understands, which have fairly predictable and improving future earnings, and
most importantly, are priced reasonably relative to the business' earnings and
anticipated growth in earnings. The Company will not necessarily focus its
investments in "large-cap", "mid-cap" or "small-cap" companies since SIA
believes it would be unwise to impose such investment restrictions. When the
Company makes an investment in a common stock, it will likely make a significant
investment and typically hold onto it for a long period of time. These
investment criteria will preclude the Company's investing in some of the
market's latest high flyers, but in the long run, the Company believes that
value-type investing will produce the best overall total return.

Investments in Real Estate Investment Trusts ("REITs"). REITs, or real estate
investment trusts, are securities of companies whose primary objective is
investment in real property. Most REITs are trusts under Sections 856 through
860 of the Internal Revenue Code of 1986 (the "Code"). The Company may invest up
to 25% of its assets in REIT securities. The Company intends to invest in REIT
securities primarily for income. As of April 28, 2000, the Company had 6.1% of
its assets invested in REITs.

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<PAGE>

There are risks associated with investing in REITs, including the potential for
loss of value if the underlying properties in which the REIT invests decline in
value. Property valuations may rise and fall with either the local economy
conditions or with the national economy. Furthermore, the dividend income paid
out by the REIT may be reduced or eliminated, depending on the income produced
by the underlying properties owned by the REITs.

In the normal course of business, REITs face risks that are either non-financial
or non-quantifiable. These risks principally include credit risk as well as
legal risk. Because most REITs are typically financed with debt instruments,
they are also interest rate sensitive.

Investments in Other Registered Investment Companies ("RICs") The Company may
invest up to 10% of its assets in other investment companies registered under
the 1940 Act. The Company intends to invest in closed-end RICs having an income
objective when they are trading at a discount, and when market conditions seem
appropriate to SIA. As of April 28, 2000, the Company had 3.3% of its assets
invested in RICs.

The Company intends to normally invest in RICs that pay dividends. There are
risks associated with investments in RICs, including the risk that the dividend
paid by the RIC could be reduced or eliminated. Dividend paying closed-end RICs
can also trade at substantial discounts to their net asset value. RICs typically
own interest rate sensitive securities, which tend to increase in value when
interest rates decline, and decrease in value when interest rates increase. RICs
also have expenses associated with their management and administration. To the
extent that the Company invests in other RICs, the Company's shareholders will
be incurring expenses for both the Company and, indirectly, for that portion of
the Company's assets invested in other RICs. However, even operating companies
also incur expenses in their daily operations. Profits are reported net of these
expenses, and RICs are no different in that respect. RICs fall under the
auspices of the 1940 Act, which requires disclosure of expenses and calculation
of net asset value ("NAV") net of expenses.

Additionally, in the case of bond fund RICs, the primary risk is interest rate
risk. The NAV and market value of RICs will fluctuate with the value of the
underlying assets.

Preferred Stocks. Prior to August 27, 1999, the Company was called "Preferred
Income Management Fund" and was virtually 100% invested in preferred stocks. As
of May 31, 2000, the Company had only 25% of its assets in preferred stocks.
Generally, preferred stock receives dividends prior to distributions on common
stock and usually has a priority of claim over common stockholders if the issuer
of the stock is liquidated. Unlike common stock, preferred stock does not
usually have voting rights; preferred stock, in some instances, is convertible
into common stock.

Credit Quality of Preferred Issuers. Preferred stock that the Company owns will
be rated investment grade (at least "baa" by Moody's or "BBB" by S&P) at the
time of investment or will be preferred stocks of issuers whose senior debt is
rated investment grade by Moody's or S&P at the time of investment. In addition,
the Company may acquire unrated issues that the Adviser deems to be comparable
in quality to rated issues in which the Company is authorized to invest. The
Company will limit to 15% of its assets the portion of its portfolio invested in
preferred stock rated below investment grade (which preferred stock must be at
least "ba" by Moody's or "BB" by S&P) or judged to be comparable in quality at
the time of purchase; however, any such securities must be issued by an issuer
having a class of senior debt rated investment grade outstanding. Securities
rated "baa" by Moody's or "BBB" by S&P, although investment grade, are
considered to have speculative elements and a greater vulnerability to default
than higher rated securities.

Money Market Instruments. Under normal conditions, the Company may hold up to
10% of its assets in cash or money market instruments. The Company intends to
invest in money market instruments to help defray operating expenses, to serve
as collateral in connection with certain investment techniques, to hold as a
reserve pending the payment of dividends to investors and to meet the liquidity
requirements of Moody's, S&P or other rating agencies that rate the Company's
outstanding auction rate preferred stock. When SIA believes that economic
circumstances warrant a temporary defensive posture, the Company may invest
without limitation in short-term money market instruments.

Money market instruments that the Company may acquire will be securities rated
in the highest short-term rating category by Moody's or S&P or the equivalent
from another major rating service, securities of issuers that have received such
ratings with respect to other short-term debt or comparable unrated securities.
Money market instruments in which the Company typically expects to invest
include: Government Securities; bank obligations (including certificates of
deposit, time deposits and bankers' acceptances of U.S. or foreign banks);
commercial paper rated P-l by Moody's or A-I by S & P; and repurchase
agreements.

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<PAGE>

Repurchase Agreements. The Company may invest temporarily, without limitation,
in repurchase agreements, which are agreements pursuant to which securities are
acquired by the Company from a third party with the understanding that they will
be repurchased by the seller at a fixed price on an agreed date. These
agreements may be made with respect to any of the portfolio securities in which
the Company is authorized to invest. Repurchase agreements may be characterized
as loans secured by the underlying securities. The Company may enter into
repurchase agreements with (i) member banks of the Federal Reserve System having
total assets in excess of $500 million and (ii) securities dealers, provided
that such banks or dealers meet certain creditworthiness standards established.
The Adviser will monitor the continued creditworthiness of qualified
institutions. The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or date of
maturity of the purchased security. The collateral is marked to market daily.
Such agreements permit the Company to keep all its assets earning interest while
retaining "overnight" flexibility in pursuit of investments of a longer-term
nature.

The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Company will seek to dispose of such securities, which action
could involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Company's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Company may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued interest.
If the seller fails to repurchase the securities, the Company may suffer a loss
to the extent proceeds from the sale of the underlying securities are less than
the repurchase price.

Government Securities. The Company may invest in government securities that
include direct obligations of the United States and obligations issued by U.S.
Government agencies and instrumentalities ("Government Securities"). Included
among direct obligations of the United States are Treasury Bills, Treasury Notes
and Treasury Bonds, which differ principally in terms of their maturities.
Included among the securities issued by U.S. Government agencies and
instrumentalities are: securities that are supported by the full faith and
credit of the United States (such as Government National Mortgage Association
certificates); securities that are supported by the right of the issuer to
borrow from the U.S. Treasury (such as securities of Federal Home Loan Banks);
and securities that are supported by the credit of the instrumentality (such as
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
bonds).

Zero Coupon Securities. The Company may invest up to 10% of its total assets in
zero coupon securities issued by the U.S. Government, its agencies or
instrumentalities as well as custodial receipts or certificates underwritten by
securities dealers or banks that evidence ownership of future interest payments,
principal payments or both on certain government securities. Zero coupon
securities pay no cash income to their holders until they mature and are issued
at substantial discounts from their value at maturity. When held to maturity,
their entire return comes from the difference between their purchase price and
their maturity value. Because interest on zero coupon securities is not paid on
a current basis, the values of securities of this type are subject to greater
fluctuations than are the values of securities that distribute income regularly
and may be more speculative than such securities. Accordingly, the values of
these securities may be highly volatile as interest rates rise or fall. In
addition, the Company's investments in zero coupon securities will result in
special tax consequences. Although zero coupon securities do not make interest
payments, for tax purposes a portion of the difference between a zero coupon
security's maturity value and its purchase price is taxable income of the
Company each year.

Custodial receipts evidencing specific coupon or principal payments have the
same general attributes as zero coupon Government Securities but are not
considered to be Government Securities. Although typically under the terms of a
custodial receipt the Company is authorized to assert its rights directly
against the issuer of the underlying obligation, the Company may be required to
assert through the custodian bank such rights as may exist against the
underlying issuer. Thus, in the event the underlying issuer fails to pay
principal and/or interest when due, the Company may be subject to delays,
expenses and risks that are greater than those that would have been involved if
the Company had purchased a direct obligation of the issuer. In addition, in the
event that the trust or custodial account in which the underlying security has
been deposited is determined to be an association taxable as a corporation,
instead of a non-taxable entity, the yield on the underlying security would be
reduced in respect of any taxes paid.

S-5

<PAGE>

Borrowings

Although it has no present intention of doing so, the Company reserves the right
to borrow funds to the extent permitted as described under the caption
"Investment Objective and Policies(Y)(Y)Investment Restrictions." The proceeds
of borrowings may be used for any valid purpose including, without limitation,
liquidity, investing and repurchases of capital stock of the Company. Borrowing
is a form of leverage and, in that respect, entails risks, including volatility
in net asset value, market value and income available for distribution.

Lending of Securities

The Company is authorized to lend securities it holds to brokers, dealers and
other financial organizations, although it has no current intention of doing so.
Loans of the Company's securities, if and when made, may not exceed 33 1/3% of
the Company's assets taken at value. The Company's loans of securities will be
collaterized by cash, letters of credit or Government Securities that will be
maintained at all times in a segregated account with the Company's custodian in
an amount at least equal to the current market value of the loaned securities.
From time to time, the Company may pay a part of the interest earned from the
investment of collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Company and that is acting as a
"finder."

By lending its portfolio securities, the Company can increase its income by
continuing to receive interest on the loaned securities, by investing the cash
collateral in short-term instruments or by obtaining yield in the form of
interest paid by the borrower when Government Securities are used as collateral.
The risk in lending portfolio securities, as with other extensions of credit,
consists of the possible delay in recovery of the securities or the possible
loss of rights in the collateral should the borrower fail financially. The
Company will adhere to the following conditions whenever it lends its
securities: (i) the Company must receive at least 100% cash collateral or
equivalent securities from the borrower, which will be maintained by daily
marking-to-market; (ii) the borrower must increase the collateral whenever the
market value of the securities loaned rises above the level of the collateral;
(iii) the Company must be able to terminate the loan at any time; (iv) the
Company must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions on the loaned securities and any increase in
market value; (v) the Company may pay only reasonable custodian fees in
connection with the loan; and (vi) voting rights on the loaned securities may
pass to the borrower, except that, if a material event adversely affecting the
investment in the loaned securities occurs, the Board must terminate the loan
and regain the Company's right to vote the securities.

Short Sales Against the Box

The Company may make short sales of securities in order to reduce market
exposure and/or to increase its income if at all times when a short position is
open, the Company owns an equal or greater amount of such securities or owns
preferred stock, debt or warrants convertible or exchangeable into an equal or
greater number of the shares of common stocks sold short. Short sales of this
kind are referred to as short sales "against the box." The broker-dealer that
executes a short sale generally invests the cash proceeds of the sale until they
are paid to the Company. Arrangements may be made with the broker-dealer to
obtain a portion of the interest earned by the broker on the investment of short
sale proceeds. The Company will segregate the securities against which short
sales against the box have been made in a special account with its custodian.
Not more than 10% of the Company's net assets (taken at current value) may be
held as collateral for such sales at any one time.

MANAGEMENT OF THE COMPANY

Officers and Directors

The officers of the Company manage its day-to-day operations. The officers are
directly responsible to the Board which sets broad policies for the Company and
chooses its officers. The following is a list of the members of the Board and
officers of the Company and a brief statement of their present positions and
principal occupations during the past five years. Board members who are
interested persons of the Company (as defined in the 1940 Act) are denoted by an
asterisk (*). The business address of the Adviser, the Company, members of the
Board and officers is 1680 38th Street, Suite 800, Boulder, Colorado 80301,
unless specified otherwise below.

S-6

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Name, Address and Age Position held with Principal Occupations
--------------------- the Company During the Past Five
----------- Years and Other Affiliations
----------- ----------------------------
<S> <C> <C>
Stephen C. Miller * Director, Chairman of President, Chief Executive Officer and Chairman of
1680 38th Street the Board, President the Board of the Company since April 1999; vice
Suite 800 and Chief Executive president and secretary of Stewart Investment
Boulder CO 80301 Officer Advisers, sub-adviser to the Company; Director and
Age: 47 President of Horejsi, Inc. (liquidated in 1999);
Director, Vice President and Assistant Secretary of
Badlands Trust Company; Of Counsel to Krassa, Madsen
& Miller, LLC since 1991; and Manager of Boulder
Administrative Services, L.L.C., a co-administrator
to the Company. Mr. Miller received a Bachelor of
Science Degree from the University of Georgia in 1976
and a law degree from the University of Denver Law
School in 1987.

Stewart R. Horejsi * Director Investment Manager for Stewart Investment Advisers,
Bellerive a sub-adviser to the Company; Director of the
Queen Street Company since July 1997; General Manager, Brown
St. Peter Barbados Welding Supply, LLC (assets sold in 1999) since
Age: 62 April 1994; and the President or Manager of various
subsidiaries of Horejsi, Inc. since June, 1986;
investment adviser for the Horejsi family trusts
(i.e., the Lola Brown Trust, the Ernest Horejsi
Trust, the Stewart R. Horejsi Trust No. 2, and
certain related trusts) since 1982; Director and
President of the Horejsi Charitable Foundation, Inc.
since 1997. Mr. Horejsi received a Masters Degree in
Economics from Indiana University in 1961 and a
Bachelor of Science Degree in Industrial Management
from the University of Kansas in 1959.

James G. Duff Director Director of the Company since 1997; retired since
7544 South Dunn's Farm Road January 1997; prior to January 1997, Chairman and
Maple City MI 49644 CEO of USL Capital, Inc. (commercial financing).
Age: 62

Alfred G. Aldridge, Jr. Director Director of the Company since April 1999; Sales
6831 E. Presidio Road Manager of Shamrock Foods Company since 1982;
Scottsdale AZ 85254 Director of the Fiesta Bowl, Tempe AZ; retired
Age: 63 Brigadier General, CA Air National Guard.

Richard I. Barr Director Retired; until January 2000 Director of the Company
2502 E. Solano Drive since January 1999; Manager of Advantage Sales and
Phoenix AZ 85016 Marketing since 1963.
Age: 62

Carl D. Johns Chief Financial Chief Financial Officer, Chief Accounting Officer,
1680 38th Street Officer, Chief Vice President and Treasurer of the Company since
Suite 800 Accounting Officer, January 1999; Vice President and Treasurer of
Boulder CO 80301 Vice President, and Boulder Investment Advisers, LLC, sub-adviser to

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<PAGE>

Age: 37 Treasurer the Company; prior to December 1998, employee of
Flaherty & Crumrine Incorporated, former adviser to
the Company; Assistant Treasurer to the Company,
Preferred Income Fund and Preferred Income
Opportunity Fund prior to December 1998. Mr. Johns
received a Bachelors Degree in Mechanical Engineering
at the University of Colorado in 1985, and a Masters
Degree in Finance from the University of Colorado in
1991.

Laura Rhodenbaugh Secretary Secretary of the Company since ______ 1999;
200 S. Santa Fe secretary and treasurer of various Horejsi family
Salina, KS 67401 affiliates since June 1986.
Age: 49
</TABLE>

As of ______ __, 2000 [within 30 days of filing], except as set forth in the
Prospectus (see "Beneficial Ownership and Control Persons"), no person is known
to the Company to own of record or beneficially 5% or more of the Company's
outstanding common shares or preferred shares. As of ______ __, 2000, all
directors and executive offices of the Company as a group owned __% of the
outstanding common stock; none of such persons owned any of the Company's
preferred shares.

Audit Committee

The Board has an Audit Committee consisting of Messrs. Aldridge, Barr and Duff,
who were appointed to the Audit Committee on January 15, 1999. The Audit
Committee reviews the scope and results of the Company's annual audit with the
Company's independent accountants and recommends the engagement of such
accountants. The Audit Committee met twice during the fiscal year ended November
30, 1999.

Nominating Committee

The Board has a Nominating Committee consisting of Messrs. Aldridge, Barr and
Duff which is responsible for considering candidates for election to the Board
in the event a position is vacated or created. The Nominating Committee would
consider recommendations by shareholders if a vacancy were to exist. Such
recommendations should be forwarded to the Secretary of the Company. The
Nominating Committee did not meet during the fiscal year ended November 30,
1999.

Compensation to Directors

No officer or employee of the Company, or officer or employee of the Adviser or
Sub-adviser to the Company, receives any compensation from the Company for
serving as an officer or director of the Company. Mr. Horejsi's compensation was
paid for services as a Director of the Company prior to the date that Boulder
Administrative Services, L.L.C. became co-administrator of the Company. The
annual fee paid to each Director is $6,000; the fee for each attended in-person
meeting is $2,000 per meeting; and the fee for each meeting attended by
telephone is $1,000. The aggregate remuneration paid to the members of the Board
for acting as such during the fiscal year ended November 30, 1999 amounted to
$65,574.97. Directors and executive officers of the Company do not receive
pension or retirement benefits from the Company. Independent directors receive
reimbursement for travel and other out-of-pocket expenses incurred in connection
with board meetings.

COMPENSATION TABLE

Name of person and Aggregate Compensation
Position with the Fund from the Fund Paid to Directors*
---------------------- --------------------------------
Alfred G. Aldridge, Jr. $17,652.17
Director

Richard I. Barr $21,148.90
Director

James G. Duff $22,573.90

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<PAGE>

Director

Steward R. Horejsi $ 4,200.00
Director

Stephen C. Miller $0
President of the Fund,
Chairman of the Board and Director

-------------------------------------

* Reflects information relating to the Company (and not of two other funds
that, until August 1999, had had the same investment adviser as the
Company), because the Company is no longer in the same fund complex as
those funds. In addition to the amounts shown above that were paid to
persons currently serving as Directors, the Company paid Morgan Gust and
Robert F. Wulf $1,450 each for their services as Directors of the Fund
prior to their resignations effective January 15, 1999.

Code of Ethics

The Company and its investment adviser and sub-adviser have each adopted a Code
of Ethics under Rule 17j-1 under the 1940 Act, which permits personnel subject
to the Code to invest in securities, including securities that may be purchased
or held by the Company. Each Code also contains pre-clearance and reporting
requirements and other restrictions designed to prevent conduct by personnel
disadvantageous to the Company. These Codes of Ethics can be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1-202-942-8090. These Codes are also available on
the EDGAR Database on the Commission's Internet site at http://www.sec.gov;
copies of these Codes may be obtained, after paying a duplicating fee, by
electronic request at the following E-mail address: [email protected], or by
writing the Commission's Public Reference Section, Washington, D.C. 20549-0102.

Compensation to the Advisers and Co-Administrators

Information is provided in the Prospectus concerning the advisers and
co-administrators and their agreements with the Company. The amounts paid to
such persons during the last three fiscal years or, if shorter, the period
during which the entity was retained to provide services to the Company are as
follows:

Fees Paid
------------------------------------

Name of Entity 1997 1998 1999
-------------- ---- ---- ----
Boulder Investment Advisers, L.L.C.

Stewart Investment Advisers, Ltd.

Flaherty & Crumrine Incorporated

Spectrum Asset Management, Inc.

Boulder Administrative Services, L.L.C.

PFPC Inc.

PORTFOLIO TRANSACTIONS AND BROKERAGE

SIA is responsible for decisions to buy and sell securities for the Company, the
selection of brokers and dealers to effect the transactions and the negotiation
of prices and any brokerage commissions. The Company may purchase certain money
market instruments directly from an issuer in which case no commissions or
discounts are paid. Purchases and sales of debt securities on a stock exchange
are effected through brokers who charge a commission for their services. During
the last three fiscal years, the Company paid $______, $______ and $______ in
brokerage commissions. The increase in brokerage commissions in the last fiscal
year is due to the change in the Company's investment focus from primarily
preferred stocks to a combination of common stocks and preferred stocks. No

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<PAGE>

separate brokerage commission is typically paid on preferred stock transactions,
which are typically executed on a principal basis, in contrast to common stock
transactions, where brokerage commissions are the norm.

SIA will effect securities transactions of the Company in a manner deemed fair
and reasonable to shareholders of the Company and not according to any formula.
The primary considerations in selecting the manner of executing securities
transactions for the Company will be prompt execution of orders, the size and
breadth of the market for the security, the reliability, integrity and financial
condition and execution capability of the firm, the amount of difficulty in
executing the order, and the best net price. There are many instances when, in
the judgment of the Adviser or Sub-Adviser, as the case may be, more than one
firm can offer comparable execution services. In selecting among such firms,
consideration is given to those firms which supply research and other services
in addition to execution services. Consideration may also be given to the sale
of shares of the Company. However, it is not the policy of the Adviser or the
Sub-Adviser, absent special circumstances, to pay higher commissions to a firm
because it has supplied such research or other services.

The Adviser and SIA are able to fulfill their obligations to furnish a
continuous investment program to the Company without receiving research from
brokers; however, they consider access to such information to be an important
element of financial management. Although such information is considered useful,
its value is not determinable, as it must be reviewed and assimilated by the
Adviser and SIA, and does not reduce the Adviser's or SIA's normal research
activities in rendering investment advice. It is possible that the Adviser's or
SIA's expenses could be materially increased if either attempted to purchase
this type of information or generate it through its own staff.

Currently, the Adviser and SIA manage only the Company's assets. However, if
either were to manage another account, investment decisions for the Company
would be made independently from those of such other accounts; however, from
time to time, the same investment decision might be made for more than one
company or account. If two or more accounts were to seek to purchase or sell the
same securities, the securities actually purchased or sold would be allocated
among the companies and accounts on a good faith equitable basis by the Adviser
or Sub-Adviser, as the case may be, in its discretion in accordance with the
accounts' various investment objectives. In some cases, this system may
adversely affect the price or size of the position obtainable for the Company.
In other cases, however, the ability of the Company to participate in volume
transactions may produce better execution for the Company.

Although the Company has no restrictions on portfolio turnover, it is not the
Company's policy to engage in transactions with the objective of seeking profits
from short-term trading. It is expected that the annual portfolio turnover rate
of the Company will be less than 100% excluding securities having a maturity of
one year or less. Because it is difficult to accurately predict portfolio
turnover rates, actual turnover may be higher or lower. Higher portfolio
turnover results in increased Company expenses, including brokerage commissions,
dealer mark-ups and other transaction costs on the sale of securities and on the
reinvestment in other securities. For the fiscal years ended November 30, 1998
and 1999, the Company's portfolio turnover rates were 86% and 69%.

ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR AMPS

General

Auction Agency Agreement. The Company will enter into an auction agency
agreement with the auction agent (currently, Bankers Trust Company) which
provides, among other things, that the auction agent will follow the auction
procedures for purposes of determining the applicable rate for the AMPS shares.

Broker-Dealer Agreements. Each auction requires the participation of one or more
Broker-Dealers. The auction agent will enter into broker-dealer agreements with
several Broker-Dealers selected by the Company, which provide for the
participation of those Broker-Dealers in auctions for AMPS shares.

Securities Depository. The Depository Trust Company ("DTC") will act as
securities depository for the Agent Members with respect to the AMPS. One
certificate for all of the AMPS shares will be registered in the name of Cede &
Co., as nominee of DTC. Such certificate will bear a legend to the effect that
such certificate is issued subject to the provisions restricting transfers of
shares of AMPS contained in the Articles Supplementary. The Company will also
issue stop-transfer instructions to the transfer agent for AMPS. Prior to the
commencement of the right of holders of preferred shares of the Company to elect
a majority of the Board, as described under "Description of AMPS - Voting
Rights" in the Prospectus, Cede & Co. will be the holder of record of all AMPS
shares and owners of such shares will not be entitled to receive certificates
representing their ownership interest in such shares.

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<PAGE>

DTC, a New York-chartered limited purpose trust company, performs services for
its participants (including the Agent Members), some of whom (and/or their
representatives) own DTC. DTC maintains lists of its participants and will
maintain the positions (ownership interests) held by each such participant (the
"Agent Member") in AMPS, whether for its own account or as a nominee for another
person.

Concerning the Auction Agent

The auction agent will act as agent for the Company in connection with auctions.
In the absence of bad faith or negligence on its part, the auction agent will
not be liable for any action taken, suffered, or omitted or for any error of
judgment made by it in the performance of its duties under the auction agency
agreement and will not be liable for any error of judgment made in good faith
unless the auction agent will have been negligent in ascertaining the pertinent
facts.

The auction agent may rely upon, as evidence of the identities of the existing
holders of AMPS, the auction agent's registry of existing holders, the results
of auctions and notices from any Broker-Dealer (or other person, if permitted by
the Company) with respect to transfers described under "The Auction" in the
Prospectus and notices from the Company. The auction agent is not required to
accept any such notice for an auction unless it is received by the auction agent
by 3:00 p.m., New York City time, on the business day preceding such auction.

The auction agent may terminate the auction agency agreement upon notice to the
Company on a date no earlier than 60 days after such notice. If the auction
agent should resign, the Company will use its best efforts to enter into an
agreement with a successor auction agent containing substantially the same terms
and conditions as the auction agency agreement. The Company may remove the
auction agent provided that prior to such removal the Company shall have entered
into such an agreement with a successor auction agent.

Broker-Dealers

After each auction for AMPS, the auction agent will pay to each Broker-Dealer,
from funds provided by the Company, a service charge at the annual rate of 0.25%
in the case of any auction immediately preceding a dividend period of 28 days or
less, or a percentage agreed to by the Company and the Broker-Dealers in the
case of any auction immediately preceding a dividend period of 35 days or
longer, of the purchase price of shares of AMPS placed by such Broker-Dealer at
such auction. For the purposes of the preceding sentence, AMPS will be placed by
a Broker-Dealer if such shares were (a) the subject of hold orders deemed to
have been submitted to the auction agent by the Broker-Dealer and were acquired
by such Broker-Dealer for its own account or were acquired by such Broker-Dealer
for its customers who are beneficial owners or (b) the subject of an order
submitted by such Broker-Dealer that is (i) a submitted bid of an existing
holder that resulted in such existing holder continuing to hold such shares as a
result of the auction or (ii) a submitted bid of a potential holder that
resulted in such potential holder purchasing such shares as a result of the
auction or (iii) a valid hold order. The Company may request the auction agent
to terminate one or more Broker-Dealer Agreements at any time, provided that at
least one Broker-Dealer Agreement is in effect after such termination.

The Broker-Dealer agreements provide that a Broker-Dealer (other than an
affiliate of the Company) may submit orders in auctions for its own account,
unless the Company notifies all Broker-Dealers that they may no longer do so, in
which case Broker-Dealers may continue to submit hold orders and sell orders for
their own accounts. Any Broker-Dealer that is an affiliate of the Company may
submit orders in auctions, but only if such orders are not for its own account.
If a Broker-Dealer submits an order for its own account in any auction, it might
have an advantage over other bidders because it would have knowledge of all
orders submitted by it in that auction; such Broker-Dealer, however, would not
have knowledge of orders submitted by other Broker-Dealers in that auction.

REPURCHASE OF COMMON SHARES

The Company is a closed-end investment company and as such its common
shareholders do not have the right to cause the Company to redeem their shares.
Instead, the Company's common shares trade in the open market at a price that is
a function of several factors, including dividend levels (which are in turn
affected by expenses), net asset value, dividend stability, relative demand for
and supply of such shares in the market, general market and economic conditions
and other factors. Because shares of a closed-end investment company may
frequently trade at prices lower than net asset value, the Board may consider
actions that might be taken to reduce or eliminate any material discount from
net asset value in respect of common shares, which may include the repurchase of
such shares in the open market or in private transactions, the making of a
tender offer for such shares at net asset value, or the conversion of the
Company to an open-end investment company. The Board may not decide to take any
of these

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<PAGE>

actions. In addition, there can be no assurance that share repurchases or tender
offers, if undertaken, will reduce market discount.

The Prospectus describes the Company's current policy with respect to
repurchasing shares of the Company's common stock in the open market or in
private transactions, or tendering for shares, in an attempt to reduce or
eliminate a market value discount from net asset value. Upon the issuance of the
AMPS, the Company's ability to repurchase shares of, or tender for, its common
stock may be limited by the asset coverage requirements of the 1940 Act and by
asset coverage and other requirements imposed by Moody's and S&P as a condition
to rating the AMPS. No assurance can be given that the Board will decide to
undertake share repurchases or tenders or, if undertaken, that repurchases
and/or tender offers will result in the Company's common stock trading at a
price that is close to, equal to or above net asset value. The Company may
borrow to finance repurchases and/or tender offers. Any tender offer made by the
Company for its shares may be at a price equal to or less than the net asset
value of such shares. Any service fees incurred in connection with any tender
offer made by the Company will be borne by the Company and will not reduce the
stated consideration to be paid to tendering shareholders.

Subject to its investment limitations, the Company may borrow to finance any
repurchase of common shares or to make any tender offer. Interest on any
borrowings to finance share repurchase transactions or the accumulation of cash
by the Company in anticipation of share repurchases or tenders will reduce the
Company's net income. Any share repurchase, tender offer or borrowing that might
be approved by the Board would have to comply with the Securities Exchange Act
of 1934 and the 1940 Act and the rules and regulations under each of those acts.

Although the decision to take action in response to a discount from net asset
value will be made by the Board at the time it considers such issue, it is the
Board's present policy, which may be changed by the Board, not to authorize
repurchases of common shares or a tender offer for such shares if (1) such
transactions, if consummated, would (a) result in the delisting of the common
shares from the NYSE, or (b) impair the Company's status as a regulated
investment company under the Internal Revenue Code (which would make the Company
a taxable entity, causing the Company's income to be taxed at the corporate
level in addition to the taxation of shareholders who receive dividends from the
Company) or as a registered closed-end investment company under the 1940 Act;
(2) the Company would not be able to liquidate portfolio securities in an
orderly manner and consistent with the Company's investment objective and
policies in order to repurchase shares; or (3) there is, in the board's
judgment, any (a) material legal action or proceeding instituted or threatened
challenging such transactions or otherwise materially adversely affecting the
Company, (b) general suspension of or limitation on prices for trading
securities on the NYSE, (c) declaration of a banking moratorium by Federal or
state authorities or any suspension of payment by United States banks in which
the Company invests, (d) material limitation affecting the Company or the
issuers of its portfolio securities by Federal or state authorities on the
extension of credit by lending institutions or on the exchange of foreign
currency, (e) commencement of war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, or (f)
other event or condition which would have a material adverse effect (including
any adverse tax effect) on the Company or its shareholders if shares were
repurchased. The Board may in the future modify these conditions in light of
experience.

The repurchase by the Company of its common shares at prices below net asset
value will result in an increase in the net asset value of those shares that
remain outstanding. However, there can be no assurance that share repurchases or
tenders at or below net asset value will result in the Company's common shares
trading at a price equal to their net asset value. Nevertheless, the fact that
the Company's shares may be the subject of repurchase or tender offers at net
asset value from time to time, or that the Company may be converted to an
open-end company, may be helpful in reducing any spread between market price and
net asset value that might otherwise exist.

In addition, a purchase by the Company of its common shares will decrease the
Company's total assets which would likely have the effect of increasing the
Company's expense ratio. Any purchase by the Company of its common shares at a
time when preferred shares are outstanding will increase the leverage applicable
to the outstanding common shares then remaining and decrease the asset coverage
of the preferred shares.

Before deciding whether to take any action if the common shares trade below net
asset value, the Board would likely consider all relevant factors, including the
extent and duration of the discount, the liquidity of the Company's portfolio,
the impact of any action that might be taken on the Company or its shareholders
and market considerations. Based on these considerations, even if the Company's
shares should trade at a discount, the Board may determine that, in the interest
of the Company and its shareholders, no action should be taken.

S-12

<PAGE>

TAX MATTERS

The Company has qualified and elected, and intends to continue to qualify under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), as a
regulated investment company. To qualify for tax treatment as a regulated
investment company, the Company must, among other things: (a) distribute to its
shareholders at least an amount equal to the sum of (i) 90% of its net
investment income (which is its investment company taxable income as that term
is defined in the Code but determined without regard to the deduction for
dividends paid) and (ii) 90% of its net tax-exempt interest income and (b)
diversify its holdings so that, at the end of each fiscal quarter of the Company
(i) at least 50% of the market value of the Company's assets is represented by
cash, cash items, U.S. government securities and securities of other regulated
investment companies, and other securities, with these other securities limited,
with respect to any one issuer, to an amount not greater in value than 5% of the
Company's total assets, and to not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the market value of the
Company's assets is invested in the securities of any one issuer (other than
U.S. government securities or securities of other regulated investment
companies). In meeting these requirements, the Company may be restricted in the
utilization of certain of the investment techniques described above and in the
Prospectus. If in any year the Company should fail to qualify for tax treatment
as a regulated investment company, the Company would incur a regular Federal
corporate income tax upon its taxable income for that year, and distributions to
its shareholders would be taxable to such holders as ordinary income to the
extent of the Company's earnings and profits. A regulated investment company
that fails to distribute, by the close of each calendar year, at least an amount
equal to the sum of 98% of its ordinary taxable income for such year and 98% of
its capital gain net income for the one year period ending October 31 in such
year, plus any shortfalls from the prior year's required distribution, is liable
for a 4% excise tax on the portion of the undistributed amount of such income
that is less than the required amount for such distributions. To avoid the
imposition of this excise tax, the Company generally makes the required
distributions of its ordinary taxable income, if any, and its capital gain net
income, to the extent possible, by the close of each calendar year.

Certain of the Company's investment practices are subject to special provisions
of the Code that, among other things, may defer the use of certain deductions or
losses of the Company, affect the holding period of securities held by the
Company and alter the character of the gains or losses realized by the Company.
These provisions may also require the Company to recognize income or gain
without receiving cash with which to make distributions in the amounts necessary
to satisfy the requirements for maintaining regulated investment company status
and for avoiding income and excise taxes. The Company will monitor its
transactions and may make certain tax elections in order to mitigate the effect
of these rules and prevent disqualification of the Company as a regulated
investment company.

Distributions to shareholders by the Company of net income received, if any,
from taxable temporary investments and net short-term capital gains, if any,
realized by the Company will be taxable to its shareholders as ordinary income.
Distributions by the Company of net capital gain (which is the excess of net
long-term capital gain over net short-term capital loss), if any, are taxable as
long-term capital gain, regardless of the length of time the shareholder has
owned common shares or AMPS. Distributions, if any, in excess of the Company's
earnings and profits will first reduce the adjusted tax basis of a shareholder's
shares and, after that basis has been reduced to zero, will constitute capital
gains to the shareholder (assuming the shares are held as a capital asset).

The Internal Revenue Service (the "IRS") requires that a regulated investment
company that has two or more classes of shares designate to each such class
proportionate amounts of each type of its income for each tax year based upon
the percentage of total dividends distributed to each class for such year. The
Company intends each year to allocate, to the fullest extent practicable, net
interest income, net capital gain and other taxable income, if any, between its
common shares and preferred shares, including the AMPS, in proportion to the
total dividends paid to each class with respect to such year. To the extent
permitted under applicable law, the Company reserves the right to make special
allocations of income within a class, consistent with the objective of the
Company. The Company may, at its election, notify the auction agent of the
amount of any net capital gain or other income taxable for Federal income tax
purposes to be included in any dividend on shares of its AMPS prior to the
auction establishing the applicable rate for such dividend.

If at any time when the AMPS are outstanding the Company fails to meet the
Eligible Asset Coverage and the 1940 Act Asset Coverage, the Company will be
required to suspend distributions to holders of its common shares until such
maintenance amount or asset coverage, as the case may be, is restored. This may
prevent the Company from distributing at least an amount equal to the sum of 90%
of its investment company taxable income and 90% of its net tax-exempt interest
income, and may therefore jeopardize the Company's qualification for taxation as
a regulated

S-13

<PAGE>

investment company or cause the Company to incur a tax liability or a
non-deductible 4% excise tax on the undistributed taxable income (including
gain), or both. Upon failure to meet the Eligible Asset Coverage or the 1940 Act
Asset Coverage, the Company will be required to redeem its AMPS in order to
maintain or restore such maintenance amount or asset coverage and avoid the
adverse consequences to the Company and its shareholders of failing to qualify
as a regulated investment company. There can be no assurance, however, that any
such redemption would achieve such objective.

The Company may, at its option, redeem the AMPS in whole or in part, and is
required to redeem AMPS to the extent required to maintain the Eligible Asset
Coverage Amount and the 1940 Act Asset Coverage. Gain or loss, if any, resulting
from a redemption of AMPS will be taxed as gain or loss from the sale or
exchange of the AMPS under Section 302 of the Code rather than as a dividend,
but only if the redemption distribution (a) is deemed not to be essentially
equivalent to a dividend, (b) is in complete redemption of an owner's interest
in the Company, (c) is substantially disproportionate with respect to the owner,
or (d) with respect to a non-corporate owner, is in partial liquidation of the
owner's interest in the Company. For purposes of (a), (b) and (c) above, a
shareholder's ownership of common shares will be taken into account.

The sale or other disposition of common shares or AMPS will normally result in
capital gain or loss to shareholders. Present law taxes both long-term and
short-term capital gains of corporations at the rates applicable to ordinary
income. For non-corporate taxpayers, however, under current law short-term
capital gains and ordinary income will be taxed at a maximum rate of 39.6% while
long-term capital gains generally will be taxed at a maximum rate of 20%.
However, because of the limitations on itemized deductions and the deduction for
personal exemptions applicable to higher income taxpayers, the effective rate of
tax may be higher in certain circumstances. Losses realized by a shareholder on
the sale or exchange of shares of the Company held for six months or less are
disallowed to the extent of any distribution of exempt- interest dividends
received with respect to such shares, and, if not disallowed, such losses are
treated as long-term capital losses to the extent of any distribution of net
capital gain received with respect to such shares. A shareholder's holding
period is suspended for any periods during which the shareholder's risk of loss
is diminished as a result of holding one or more other positions in
substantially similar or related property, or through certain options or short
sales. Any loss realized on a sale or exchange of shares of the Company will be
disallowed to the extent those shares of the Company are replaced by other
shares within a period of 61 days beginning 30 days before and ending 30 days
after the date of disposition of the original shares. In that event, the basis
of the replacement shares of the Company will be adjusted to reflect the
disallowed loss.

Nonresident alien individuals and certain foreign corporations and other
entities ("foreign investors") generally are subject to U.S. withholding tax at
the rate of 30% (or possibly a lower rate provided by an applicable tax treaty)
on distributions of net investment income (which includes net short-term capital
gain). To the extent received by foreign investors, exempt-interest dividends,
distributions of net capital gain and gain from the sale or other disposition of
the AMPS generally are exempt from United States Federal income taxation.
Different tax consequences may result if the owner is engaged in a trade or
business in the United States or, in the case of an individual, is present in
the United States for 183 or more days during a taxable year.

The Company is required in certain circumstances to backup withhold 31% of
taxable dividends and certain other payments paid to non-corporate holders of
the Company's shares who do not furnish to the Company their correct taxpayer
identification number (in the case of individuals, their social security number)
and certain certifications, or who are otherwise subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld from payments
made to a shareholder may be refunded or credited against such shareholder's
United States Federal income tax liability, if any, provided that the required
information is furnished to the IRS.

The foregoing is a general summary of the provisions of the Code and regulations
thereunder presently in effect as they directly govern the taxation of the
Company and its shareholders. These provisions are subject to change by
legislative or administrative action, and any such change may be retroactive.
Moreover, the foregoing does not address many of the factors that may be
determinative of whether an investor will be liable for the Federal alternative
minimum tax. Shareholders are advised to consult their own tax advisers for more
detailed information concerning the Federal income tax consequences of
purchasing, holding and disposing of Company shares.

FINANCIAL STATEMENTS

Independent Auditors

PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), at One Post Office
Square, Boston, Massachusetts 02109, has served as independent accountants for
the Company since its commencement of operations and has been

S-14

<PAGE>

selected to serve in such capacity for the Company's fiscal year ending November
30, 2000. The financial statements and independent auditors report incorporated
by reference into this statement of additional information have been so
incorporated and the financial highlights included in the Prospectus have been
so included in reliance upon the report of PricewaterhouseCoopers given on their
authority as experts in auditing and accounting.

Incorporation by Reference

The Company's Portfolio of Investments, dated November 30, 1999 (audited);
Statement of Assets and Liabilities, dated November 30, 1999 (audited);
Statement of Operations for the year ended November 30, 1999 (audited);
Statement of Changes in Net Investment Assets for the two years ended November
30, 1999 (audited) and the independent auditors report included in the Company's
Annual Report for the fiscal year ended November 30, 1999, which accompany this
statement of additional information, are incorporated herein by reference. The
Company will furnish, without charge, a copy of the Annual Report upon written
request to PFPC Inc., P.O. Box 1376, Boston, Massachusetts 02104 or by calling
1-800-331-1710.

ADDITIONAL INFORMATION

A Registration Statement on Form N-2, including amendments thereto, relating to
the shares offered hereby, has been filed by the Company with the Securities and
Exchange Commission, Washington, D.C. The Prospectus and this statement of
additional information do not contain all of the information set forth in the
Registration Statement, including any exhibits and schedules thereto. For
further information with respect to the Company and the shares offered hereby,
reference is made to the Registration Statement. Statements contained in the
Prospectus and this statement of additional information as to the contents of
any contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.

S-15

<PAGE>

PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(1) Financial Statements:

Financial Statements included in Part A (Prospectus) of this Registration
Statement:

Financial Highlights for each of the years ended November 30, 1999, 1998,
1997, 1996, 1995, 1994 and 1993 and for the six months ended May 31, 2000.

Financial Statements included in Part B (Statement of Additional
Information) of this Registration Statement:

Report of Independent Accountants.*

Statement of assets and liabilities as of November 30, 1999.*

Statement of operations for the year ended November 30, 1999.*

Statement of cash flows for the year ended November 30, 1999.

Statement of changes in net assets for each of the years ended November 30,
1998 and 1999.*

Financial highlights for each of the years ended November 30, 1996, 1997,
1998 and 1999.*

Schedule of Investments as of May 31, 2000.**

----------
* Incorporated by reference.
** To be filed by amendment.

(2) Exhibits

(a)* --Articles of Incorporation of the Fund
(b)* --Amended and Restated By-laws of the Fund
(c) --Not applicable
(d)* --Form of Articles Supplementary for the AMPS
(e)* --Dividend Reinvestment Plan
(f) --Not applicable
(g)(1)* --Investment Advisory Agreement between the Fund and Boulder
Investment Advisers, L.L.C. ("BIA")

<PAGE>

(2)* --Investment Sub-Advisory Agreement between the Fund, BIA and
Stewart Investment Advisers, Ltd. ("SIA")
(3)* --Investment Sub-Advisory Agreement between the Fund, BIA and
Spectrum Asset Management, Inc. ("Spectrum")
(h)* --Form of Purchase Agreement between the Fund, BIA and Merrill
Lynch & Co.
(i) --Not Applicable
(j)* --Custody Agreement between the Fund and Mellon Bank, N.A.
(k)(1)* --Transfer Agency Agreement between the Fund and PFPC Inc.
(2)* --Form of Auction Agency Agreement between the Fund and Bankers
Trust Company
(3)* --Form of Broker-Dealer Agreement between the Fund and Merrill
Lynch & Co.
(4)* --Form of Master Purchaser's Letter
(l)(1)* --Opinion and consent of Willkie Farr & Gallagher
(2)* --Opinion and consent of Venable, Baetjer and Howard, LLP
(m)* --Not applicable

(n)* --Consent of PricewaterhouseCoopers L.L.P.
(o) --Not applicable
(p) --Not applicable
(q) --Not applicable
(r)(1)* --Code of Ethics of the Fund, BIA and SIA
(2)* --Code of Ethics of Spectrum

(s) --Power of Attorney (included on signature page to this
Registration Statement)
(t)* --Financial Data Schedule (EDGAR version only)

----------
* To be filed by amendment.

Item 25. Marketing Arrangements

Reference is made to the Form of Purchase Agreement for the AMPS to be filed by
amendment to this Registration Statement.

Item 26. Other Expenses of Issuance and Distribution

The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement.

Registration fees...........................$ 20,460
Printing and engraving...................... *
Accounting fees and expenses................ *
Legal fees and expenses..................... *

<PAGE>

Rating Agency fees.......................... *
Miscellaneous............................... *
------------
Total....................................... *
============
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*To be completed by amendment.

Item 27. Persons controlled by or under common control with the Fund

The following table sets forth certain information regarding the beneficial
ownership of the Company's shares as of May 31, 2000, by each person who is
known by the Company to beneficially own 5% or more of the Company's common
stock. To the Company's knowledge, there are no 5% or greater beneficial owners
of MMP Shares.

Number % of Shares
Name of Owner Beneficially Owned
------------- ------------------
EALLC 257,811 ( 2.74%)
John S. Horejsi Trust 65,747 ( 0.70%)
Susan L. Ciciora Trust 131,475 ( 1.40%)
Stewart West Indies Trust 191,907 ( 2.04%)
Lola Brown Trust 1,028,001 (10.92%)
Ernest Horejsi Trust 2,468,053 (26.21%)
Badlands Trust Company 3,945,550 (41.9%)
Stewart R. Horejsi Trust No. 2 3,945,550 (41.9%)
Aggregate Shares Owned 3,945,550 (41.9%)

* The address of each listed owner is 122 South Phillips Avenue, Suite 220,
Sioux Falls, South Dakota 57104.

** Aggregate number and percentage are less than the sum total of amounts
shown for each owner because the same shares may be deemed beneficially owned by
more than one party (see Footnotes 1 through 4).

(1) DIRECT OWNERSHIP. Evergreen Atlantic, L.L.C. ("EALLC"), John S. Horejsi
Trust ("John Trust"), Susan L. Ciciora Trust ("Susan Trust"), Stewart West
Indies Trust ("SWIT"), Lola Brown Trust ("Lola Brown Trust"), the Ernest Horejsi
Trust No. 1B ("Ernest Trust") and Badlands Trust Company ("Badlands") directly
own 257,811; 27,075; 54,132; 78,470; 1,028,001; 2,468,053; and 12,735,
respectively, of the Company's common stock shares, totaling 3,945,550 shares or
41.9% of the outstanding shares of the Company.

<PAGE>

(2) INDIRECT OWNERSHIP THROUGH EVERGREEN. Numbers shown in the table include
shares held directly (see Footnote No 2) and shares that may be deemed to be
beneficially owned indirectly through ownership of EALLC. The outstanding equity
membership of EALLC is owned by SWIT, the John Trust, the Susan Trust and the
Evergreen Trust in the following percentages - 44%, 15%, 30% and 11%. The sole
trustee of SWIT, the John Trust and the Susan Trust is Badlands. Steward R.
Horejsi is not a beneficiary under any of these trusts. The trustees of
Evergreen Trust are Badlands, Stephen C. Miller and Larry Dunlap. Any action by
the Evergreen Trust requires a majority vote of the trustees.

(3) OWNERSHIP BY BADLANDS. Numbers shown in the table includes shares held
directly by Badlands (see Footnote No. 1) and shares that may be deemed to be
beneficially owned indirectly by Badlands through direct or indirect ownership
by the Lola Brown Trust and the Ernest Trust, SWIT, the John Trust, the Susan
Trust and the Evergreen Trust. Badlands is the sole trustee of three of the four
trusts that control EALLC (see Footnote No. 2) and, together with Larry Dunlap
and Susan Ciciora, one of three trustees of the Lola Brown Trust and the Ernest
Trust. Badlands is a trust company organized under the laws of South Dakota,
which is wholly owned by the SRH Trust, an irrevocable trust organized by Mr.
Stewart Horejsi for the benefit of his children. The directors of Badlands are
Larry Dunlap, Stephen C. Miller, Robert Ciciora, who is the brother of Mr.
Horejsi's son-in-law (John Ciciora), Ann M. Hartmann and Carol Jorgensen.

EALLC, the John Trust, the Susan Trust, SWIT, the Lola Brown Trust, the Ernest
Trust, Badlands, the Stewart R. Horejsi Trust No. 2 ("SRH Trust") and Stewart R.
Horejsi are, as a group, considered to be a "control person" of the Company (as
that term is defined in Section 2(a)(9) of the Investment Company Act of 1940,
as amended (the "1940 Act")). These entities and other trusts or companies with
interlocking management and/or common ownership (collectively, the "Horejsi
Affiliates") may be deemed to indirectly own additional Company shares, which
are included in the table above. Further, Stewart R. Horejsi, the investment
manager for SIA, is also the primary investment consultant for the Horejsi
Affiliates and, on a discretionary basis, implements and directs their
investment objective and asset allocation.

<PAGE>

Each of EALLC, the John Trust, the Susan Trust, SWIT, the Lola Brown Trust, the
Earnest Trust, Badlands and the SRH Trust are organized or formed under the laws
of the state of South Dakota.

Except for the persons noted above that may be deemed to control the Registrant,
no other person is under common control with the Registrant.

The financial statements of the Registrant are not consolidated with those of
any of the persons noted above that may be deemed to control or be under common
control with the Registrant.

Item 28. Number of Holders of Shares

At June 30, 2000 (within 90 days prior to filing):

Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, $.01 par value 9,416,742

Cumulative Money Market 775
Preferred Stock, $.01 par value

Item 29. Indemnification

Section 2-418 of the General Corporation Law of the State of Maryland, Article
VIII of the Registrant's Articles of Incorporation (to be filed as an Exhibit to
this Registration Statement), Article 5.2 of the Registrant's By-laws (to be
filed as an Exhibit to this Registration), the Investment Advisory Agreement (to
be filed as an Exhibit to this Registration Statement) and the Purchase
Agreement (to be filed as an Exhibit to this Registration Statement) provide for
indemnification. In addition, the Registrant has entered into an agreement with
each director providing for indemnification and has purchased directors and
officers disability insurance.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant, pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the

<PAGE>

Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 30. Business and Other Connections of the Investment Adviser

Registrant is fulfilling the requirement of this Item 30 to provide a list of
the officers and directors of its investment advisers, together with information
as to any other business, profession, vocation or employment of a substantial
nature engaged in by that entity or those of its officers and directors during
the past two years, by incorporating herein by reference the information
contained in the current Form ADV filed with the Securities and Exchange
Commission by each of BIA, SIA and Spectrum pursuant to the Investment Advisers
Act of 1940, as amended.

Item 31. Location of Accounts and Records

PFPC Inc. Administrator and Common
P.O. Box 1376 Stock Transfer Agent
Boston, MA 02104

Boulder Administrative Services, L.L.C. Co-Administrator
1680 38th Street (Suite 800)
Boulder, CO 80301

Boston Safe Deposit and Trust Company Custodian
One Boston Place
Boston, MA 02108

Bankers Trust Company AMPS Transfer Agent
4 Albany Street
New York, New York 10006

Item 32. Management Services

Not applicable.

Item 33. Undertakings

(1) The Registrant hereby undertakes to suspend the offering of AMPS until it
amends its Prospectus if (a) subsequent to the

<PAGE>

effective date of its Registration Statement, the net asset value declines more
than 10 percent from its net asset value as of the effective date of the
Registration Statement or (b) the net asset value increases to an amount greater
than its net proceeds as stated in the Prospectus.

(2) Not applicable.

(3) Not applicable.

(4) Not applicable.

(5) The Registrant hereby undertakes that:

(a) for the purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance on Rule 430A and contained in the form of
prospectus filed by the Registrant under Rule 497(h) under the Securities Act of
1933 shall be deemed to be part of the Registration Statement as of the time it
was declared effective.

(b) for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering thereof.

(6) The Registrant hereby undertakes to send by first class mail or other
means designed to ensure equally prompt delivery, within two business days of
receipt of an oral or written request, any Statement of Additional Information.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver and the State of
Colorado, on the 30th day of June, 2000.

BOULDER TOTAL RETURN FUND ,INC.

By: /s/ Stephen C. Miller
-------------------------------
Stephen C. Miller
President

POWER OF ATTORNEY

KNOW ALL PEOPLE BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen C. Miller and Carl D. Johns, and each and
any of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement for the Boulder Total Return Fund,
Inc. on Form N-2, and to sign any registration statement that is to be effective
upon filing pursuant to Rule 462 promulgated under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done; hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen C. Miller Director, Chief Executive Officer, June 30, 2000
----------------------------- President and Chairman of the Board
Stephen C. Miller Chairman of the Board

<PAGE>

/s/ Steward R. Horejsi Director June 30, 2000
-----------------------------
Steward R. Horejsi

/s/ James G. Duff Director June 30, 2000
-----------------------------
James G. Duff

/s/ Alfred G. Aldridge, Jr. Director June 30, 2000
-----------------------------
Alfred G. Aldridge, Jr.

/s/ Richard I. Barr Director June 30, 2000
-----------------------------
Richard I. Barr

/s/ Carl D. Johns Chief Financial Officer, Chief June 30, 2000
----------------------------- Accounting Officer, Vice President
Carl D. Johns and Treasurer
</TABLE>

<PAGE>

EXHIBIT INDEX

Page in
Sequential
Numbering
System
------

(a)* --Articles of Incorporation of the Fund................................
(b)* --Amended and Restated By-laws of the Fund.............................
(c) --Not applicable.......................................................
(d)* --Form of Articles Supplementary for the AMPS..........................
(e)* --Dividend Reinvestment Plan...........................................
(f) --Not applicable.......................................................
(g)(1)* --Investment Advisory Agreement between the Fund and BIA...............
(2)* --Investment Sub-Advisory Agreement between the Fund, BIA and SIA......
(3)* --Investment Sub-Advisory Agreement between the Fund, BIA and
Spectrum.............................................................
(h)* --Form of Purchase Agreement between the Fund, BIA and Merrill
Lynch & Co...........................................................
(i) --Not Applicable.......................................................
(j)* --Custody Agreement between the Fund and Mellon Bank, N.A..............
(k)(1)* -- Transfer Agency Agreement between the Fund and PFPC Inc.............
(2)* --Form of Auction Agency Agreement between the Fund and Bankers
Trust Company........................................................
(3)* --Form of Broker-Dealer Agreement between the Fund and Merrill Lynch
& Co.................................................................
(4)* --Form of Master Purchaser's Letter....................................
(l)(1)* --Opinion and consent of Willkie Farr & Gallagher......................
(2)* --Opinion and consent of Venable, Baetjer and Howard, LLP..............
(m)* --Not applicable.......................................................
(n)* --Consent of Pricewaterhouse Coopers L.L.P.............................
(o) --Not applicable.......................................................
(p) --Not applicable.......................................................
(q) --Not applicable.......................................................
(r)(1)* --Code of Ethics of the Fund, BIA and SIA..............................
(2)* --Code of Ethics of Spectrum...........................................
(s) --Power of Attorney (included on signature page to this
Registration Statement...............................................
(t)* --Financial Data Schedule (EDGAR version only).........................

* To be filed by amendment.