-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I9choz142MLIHMaCXpLfJpu1o5jPvL9mqZlFVh6IJp6RonxhYuNfcsMDrPYJINxc AXwl92LKFW3DTESnoLk0pw== 0001023714-99-000003.txt : 19990315 0001023714-99-000003.hdr.sgml : 19990315 ACCESSION NUMBER: 0001023714-99-000003 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BULL & BEAR U S GOVERNMENT SECURITIES FUND INC CENTRAL INDEX KEY: 0001023714 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133907058 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07833 FILM NUMBER: 99564437 BUSINESS ADDRESS: STREET 1: 11 HANOVER SQ CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2127850900 MAIL ADDRESS: STREET 1: 11 HANOVER SQ CITY: NEW YORK STATE: NY ZIP: 10005 N-30D 1 ANNUAL REPORT U.S. GOVERNMENT SECURITIES FUND 11 Hanover Square New York, NY 10005 1-888-847-4200 American Stock Exchange Symbol: BXL Semi-Annual Report December 31, 1998 February 10, 1999 Fellow Shareholders: It is a pleasure to report that the Fund's market total returns to shareholders continue to be excellent and among the best of all 25 closed-end government bond funds tracked by Morningstar, Inc. (an independent financial analysis firm). According to Morningstar, 16.07% is the Fund's market total return for the 12 months ending December 31, 1998 (ranking #1 of 24 funds) (NAV return 6.35%). This compares favorably with the Lipper Government securities Index total return of +7.82%, and the Lipper Morgage Backed Securities Index total return of 6.43% for the same period in each case. Investment in Equities Commencing October 19, 1998, the Fund began investing in equity and other securities. Although as of December 31, 1998, these investments comprised less than 5% of total net assets, the performance of this sector of the Fund's portfolio has been very rewarding - with a 16.09% total return including dividends in the approximate two and a half month period. Over the course of 1999, the Fund anticipates making continued investments in equities and other securities to substantially increase this allocation. Review and Outlook Declining interest rates are most frequently associated with slowing growth and rising unemployment, but that was not the case last summer and fall. During this period, in response to distressed financial market conditions, the Federal Reserve pre-emptively lowered its Federal Funds rate target by a total of 0.75 %, but the U.S. economy grew at around a 4% rate, well above "trend," and unemployment fell to less than 4.5%. The injection of liquidity by the Federal Reserve and central bankers throughout the developed world restored financial market stability and caused a significant decline in U.S. interest rates. U.S. government debt prices also rose during this period due to their attraction as a safe haven during times of turmoil. Between the end of June and year end, 30 year Treasury bond rates fell by over 0.5%, and briefly yielded less than 4.75%. Shorter term assets, such as Treasury notes maturing in two years, declined briefly by almost a full percent, to as low as 3.75%, as investors sought safety and liquidity, and anticipated additional Federal Reserve easing. Since late autumn, as financial markets have recovered and the domestic economy has continued to expand, interest rates have risen moderately. Ironically, with consumer inflation up only 1.6% over the last year, and rising only 0.8% in the fourth quarter the lowest in 40 years - the 4.75% Federal Funds rate is still somewhat restrictive by historic measures. Despite the recent eases, the economy continues to perform well, growing at a robust 5.6% rate in the fourth quarter alone. Additionally, the $70 billion Federal budget surplus also exerts a fiscal drag on the economy. A variety of factors, including declining import and commodity prices, high levels of industrial capacity, and increases in productivity have all contributed to the strength of the expansion. In any event, the limited supply of new Treasury debt is a positive for the bond market. We do not anticipate currently a change in Federal Reserve policy in the short term. Should imbalances reemerge in financial markets, we have every confidence that the Federal Reserve will act decisively to maintain relative stability. 8% Dividend Distribution Policy Continued The adoption by the Fund's Board of Directors in December 1997 of a managed 8% dividend distribution policy has been well received. The policy is intended to provide shareholders with a stable cash flow and reduce or eliminate any market price discount to net asset value. The quarterly dividend distributions of approximately 8% on an annual basis of the Fund's net asset value will be paid primarily from ordinary income and any capital gains with the balance representing return of capital. For the twelve months ended December 31, 1998, actual distributions were 8.13% of average net assets with approximately 80% derived from net investment income and the balance from return of capital. We believe shares of the Fund are a sound value and an attractive investment for income oriented portfolios. Dividend Reinvestment Plan Offers Important Advantage The Fund's current net asset value is $14.20. With a recent closing market price of $13.00 per share, we believe this represents an important opportunity to purchase additional shares at an attractive discount from their underlying value. The Fund's Dividend Reinvestment Plan is particularly attractive because quarterly dividend distributions are reinvested without charge at the lower of net asset value per share or market price, which can contribute significantly to growing your investment over time. Please call toll 1-888-847-4200 and we will be happy to assist you. We appreciate your support and look forward to continuing to serve your investment needs. Sincerely, Thomas B. Winmill Steven A. Landis President Senior Vice President Portfolio Manager BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC. Schedule of Portfolio Investments - December 31, 1998 (Unaudited) Principal Market Amount Value U.S. Government Obligations (30.0%) $1,000,000 U.S. Treasury Note, 5.75%, due 10/31/02 $ 1,036,250 1,000,000 U.S. Treasury Note, 6.625%, due 5/15/07 1,125,000 1,000,000 U.S. Treasury Note, 4.75%, due 11/15/08 1,008,125 400,000 U.S. Treasury Note, 6.125%, due 11/15/27 448,125 Total U.S. Government Obligations (cost: $3,493,728) 3,617,500 U.S. Government Agencies (67.6%) 1,000,000 Federal Home Loan Bank, 6.46%, due 10/12/12 1,097,719 1,000,000 Federal National Mortgage Assn., 6.08%, due 9/25/00 1,018,262 1,000,000 Federal National Mortgage Assn., 6.41%, due 11/13/12 1,091,991 660,391 Government National Mortgage Assn., 6.50%, due 7/15/08 672,774 997,461 Government National Mortgage Assn., 6.50%, due 1/15/28 988,156 1,595,032 Government National Mortgage Assn., 7.0%, due 11/15/10 1,640,890 572,747 Government National Mortgage Assn., 7.0%, due 6/15/23 586,527 114,788 Government National Mortgage Assn., 7.0%, due 5/15/24 117,550 889,386 Government National Mortgage Assn., 7.25%, due 1/15/27 913,984 Total U.S. Government Agencies (cost: $7,860,511) 8,127,853 Shares Common Stocks (2.4%) 1,500 Federal National Mortgage Association 111,000 1,900 Federal Home Loan Mortgage Corporation 122,431 2,000 Northwestern Corporation 52,875 Total Common Stocks (cost: $247,582) 286,306 Total Investments (cost: $11,601,821) (100.0%) $12,031,659 See accompanying notes to financial statements. Notes to Financial Statements (1) The Fund, a Maryland corporation, is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end management investment company. The Fund's shares are listed on the American Stock Exchange. The investment objective of the Fund is to provide investors with a high level of income, liquidity, and safety of principal. The Fund seeks to achieve its investment objective by investing primarily in securities backed by the full faith and credit of the United States, as set forth in its prospectus. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. With respect to security valuation, securities listed or traded on a national securities exchange or the Nasdaq National Market System ("NMS") are valued at the last quoted sales price on the day the valuations are made. Such listed securities that are not traded on a particular day and securities traded in the over-the-counter market that are not on the NMS are valued at the mean between the current bid and asked prices. Securities for which quotations from the national securities exchange or the NMS are not readily available or reliable and other assets may be valued based on over-the-counter quotations or at fair value as determined in good faith by or under the direction of the Board of Directors. Debt obligations with remaining maturities of 60 days or less are valued at cost adjusted for amortization of premiums and accretion of discounts. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable investment income and net capital gains, if any, after utilization of any capital loss carryforward, to its shareholders and therefore no Federal income tax provision is required. At June 30, 1997, the Fund had an unused capital loss carryforward of approximately $2,508,000, of which $1,716,000 expires in 1998, $361,000 in 2003, $202,000 in 2004 and $229,000 in 2005. Based on Federal income tax cost of $13,721,354, gross unrealized appreciation and gross unrealized depreciation were $128,390 and $76,832, respectively at June 30,1997. (3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under the terms of the Investment Management Agreement, the Investment Manager receives a management fee, payable monthly, based on the average weekly net assets of the Fund, at the annual rate of 7/10 of 1% of the first $250 million, 5/8 of 1% from $250 million to $500 million, and 1/2 of 1% over $500 million. The Investment Manager has agreed to waive all or part of its fee or reimburse the Fund monthly if and to the extent the aggregate operating expenses of the Fund exceed the most restrictive limit imposed by any state in which shares of the Fund are qualified for sale, although currently the Fund is not subject to any such limits. Certain officers and directors of the Fund are officers and directors of the Investment Manager and Investor Service Center, Inc., the Fund's former distributor. The Fund reimbursed the Investment Manager $4,003 for providing certain administrative and accounting services at cost for the year ended June 30, 1997. The Fund had a plan of distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "12b-1 Plan"). Pursuant to the 12b-1 Plan, the Fund paid the Distributor a fee in an amount of one-quarter of one percent per annum of the Fund's average daily net assets as compensation for distribution and service activities. The fee was intended to cover personal services provided to shareholders in the Fund and the maintenance of shareholder accounts and all other activities and expenses primarily intended to result in the sale of the Fund's shares. Effective with the conversion of the Fund to a closed-end management investment company, the 12b-1 plan was terminated. Investor Service Center also received $3,357 for shareholder administration services which it provided to the Fund at cost for the period from July 1, 1996 to October 4, 1996. (4) Purchases and proceeds of sales of U.S. government obligations other than short term investments aggregated $30,406,318 and $28,090,166, respectively, for the year ended June 30, 1997. Under an agreement with the custodian, custodian fees are reduced by credits for cash balances. Such reductions amounted to $6,480 during the year ended June 30, 1997 (5) The Fund has a committed bank line of credit for temporary or emergency purposes. At June 30, 1997, there was no balance outstanding and the interest rate was equal to the Federal Reserve Funds Rate plus 1.75 percentage points. For the year ended June 30, 1997, the weighted average interest rate was 5.12% based on the balances outstanding from the line of credit and the reverse repurchase agreement during the year and the weighted average amount outstanding was $405,632. (6) Effective October 4, 1996, the Fund converted from an open-end management investment company to a closed-end management investment company. In connection with the conversion, costs of approximately $73,428 have been charged against paid-in capital. In addition, the Fund has adopted a Dividend Reinvestment Plan (the "Plan"). Under the Plan, each dividend and capital gain distribution, if any, declared by the Fund on outstanding shares will, unless elected otherwise by each shareholder by notifying the Fund in writing at any time prior to the record date for a particular dividend or distribution, be paid on the payment date fixed by the Directors in additional shares in accordance with the following: whenever the Market Price (as defined below) per share is equal to or exceeds the net asset value per share at the time shares are valued for the purpose of determining the number of shares equivalent to the cash dividend or capital gain distribution (the "Valuation Date"), participants will be issued additional shares equal to the amount of such dividend divided by the Fund's net asset value per share. Whenever the Market Price per share is less than such net asset value on the Valuation Date, participants will be issued additional shares equal to the amount of such dividend divided by the Market Price. The Valuation Date is the dividend or distribution payment date or, if that date is not an American Stock Exchange trading day, the next trading day. For all purposes of the Plan: (a) the Market Price of the shares on a particular date shall be the average closing market price on the five trading days the shares traded ex-dividend on the Exchange prior to such date or, if no sale occurred on the Exchange prior to such date, then the mean between the closing bid and asked quotations for the shares on the Exchange on such date, and (b) net asset value per share on a particular date shall be as determined by or on behalf of the Fund. STATEMENT OF ASSETS AND LIABILITIES December 31, 1998 (Unaudited) ASSETS: Investments at market value (cost: $11,601,821) (note 1) ...... $12,031,659 Interest receivable ........................... 94,652 Other assets .................................. 958 Total assets ...................... 12,127,269 LIABILITIES: Payables: Borrowings - reverse repurchase agreement .................... 1,007,500 Demand note payable to bank (note 5) ......................... 190,431 Interest ..................................................... 241 Accrued expenses ................................................ 8,576 Total liabilities .......................................... 1,206,748 NET ASSETS: (applicable to 755,079 outstanding shares: 250,000,000 shares of $.01 par value authorized) ........................ $10,920,521 NET ASSET VALUE PER SHARE: ($10,920,521 / 755,079 shares outstanding) ........... $14.46 At December 31, 1998, net assets consisted of: Paid-in capital ...................................... $11,486,760 Accumulated net realized loss on investments ........................... (675,590) Accumulated deficit in investment income ............. (320,486) Net unrealized appreciation on investments ........... 429,837 $10,920,521 STATEMENT OF OPERATIONS For the Six Months Ended December 31, 1998 (Unaudited) INVESTMENT INCOME: Interest ....................................................... $383,137 Dividend ....................................................... 1,103 Total investment income ............................ 384,240 EXPENSES: Legal (note 7) ................................................. 163,026 Investment management (note 3) ................................. 38,890 Interest ....................................................... 38,143 Directors ...................................................... 16,685 Custodian ...................................................... 13,698 Transfer agent ................................................. 8,106 Accounting and audit (note 3) .................................. 6,352 Printing ....................................................... 5,546 Registration (note 3) .......................................... 4,335 Other .......................................................... 914 Expenses ........................................... 295,695 Investment management fees waived (note 3) ......... (38,890) Fee reduction (note 4) ............................. (1,600) Net expenses ....................................... 255,205 Net investment income .................. 129,035 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from security transactions .................... 117,027 Unrealized appreciation of investments during the period ........ 224,378 Net realized and unrealized gain on investments .......... 341,405 Net increase in net assets resulting from operations ..... $470,440
STATEMENTS OF CHANGES IN NET ASSETS For the Six Months Ended December 31, 1998 (Unaudited) and for the Year Ended June 30, 1998 31-Dec-98 June 30, 1998 OPERATIONS: Net investment income ................................................. 129,035 186,230 Net realized gain from security transactions .......................... 117,027 311,085 Unrealized appreciation of investments during the period .............. 224,378 153,901 Net change in net assets resulting from operations ..... 470,440 651,216 Subtractions from paid in capital (note 6) ............................ - -39,253 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income ($0.44 and $0.25 per share, respectively) .................................................. -332,494 -186,230 Distributions in excess of net realized gains ($0.16 and $0.42 per share, respectively) .............................................. -117,027 -311,085 Distributions from paid in capital ($0.42 per share) - -307,240 CAPITAL SHARE TRANSACTIONS: Change in net assets resulting from reinvestment of distributions (7,843 and 14,896 shares, respectively) (note 6) ....... 105,477 195,513 Total increase in net assets ........................... 126,396 2,921 NET ASSETS: Beginning of period ................................................... 10,794,125 10,791,204 End of period ......................................................... $10,920,521 $10,794,125
Notes to Financial Statements (Unaudited) (1) The Fund, a Maryland corporation, is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end management investment company. The Fund's shares are listed on the American Stock Exchange. The investment objective of the Fund is to provide investors with a high level of income, liquidity, and safety of principal. The Fund seeks to achieve its investment objective by investing primarily in securities backed by the full faith and credit of the United States, as set forth in its prospectus. On August 17, 1998, the Fund announced that it intends to invest up to 35% of its total assets in equity and other securities, commencing on October 19, 1998. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. With respect to security valuation, securities listed or traded on a national securities exchange or the Nasdaq National Market System ("NMS") are valued at the last quoted sales price on the day the valuations are made. Such listed securities that are not traded on a particular day and securities traded in the over-the-counter market that are not on the NMS are valued at the mean between the current bid and asked prices. Securities for which quotations from the national securities exchange or the NMS are not readily available or reliable and other assets may be valued based on over-the-counter quotations or at fair value as determined in good faith by or under the direction of the Board of Directors. Debt obligations with remaining maturities of 60 days or less are valued at cost adjusted for amortization of premiums and accretion of discounts. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. Premiums and discounts are amortized in accordance with income tax regulations. In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable investment income and net capital gains, if any, after utilization of any capital loss carryforward, to its shareholders and therefore no Federal income tax provision is required. At June 30, 1998, the Fund had an unused capital loss carryforward of approximately $772,000, of which $361,000 expires in 2003, $202,000 in 2004 and $209,000 in 2005. Based on Federal income tax cost of $11,601,821, gross unrealized appreciation was $429,837at December 31, 1998. (3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager pursuant to an investment management agreement. As compensation for the services provided pursuant to such agreement, the Fund pays to the Investment Manager a fee from its assets, such fee to be computed weekly and payable monthly in arrears at the annual rate of 0.70% of the first $250 million, 0.625% from $250 million to $500 million, and 0.50% over $500 million of the Fund's assets. This fee is calculated by determining net assets on each Friday and applying the applicable rate to such amount for the number of days in the week. The Investment Manager has agreed to waive all or part of its fee or reimburse the Fund monthly if and to the extent the aggregate operating expenses of the Fund exceed the most restrictive limit imposed by any state in which shares of the Fund are qualified for sale, although currently the Fund is not subject to any such limits. The Investment Manager voluntarily waived $38,890 of its management fee during the six months ended December 31, 1998. Certain officers and directors of the Fund are officers and directors of the Investment Manager. The Fund reimbursed the Investment Manager $2,226 for providing certain administrative and accounting services at cost for the six months ended December 31, 1998. At the Annual Meeting of Shareholders ("Annual Meeting") of the Fund held on December 18, 1998, shareholders were asked to elect a director, to ratify the selection of independent auditors for the fiscal period ending December 31, 1998, and to approve amending the Fund's Articles of Incorporation to change the Fund's name. Shareholders elected Frederick A. Parker, Jr. director of the Fund with 232,930 shares voting in favor, 271,848 shares voting to withhold authority, and 1,681 shares not voting. The names of each other director whose term of office continued after the meeting are Bassett S. Winmill, Mark C. Winmill, Thomas B. Winmill, and Douglas Wu. Regarding ratification of independent auditors, 227,627 shares voted in favor, 252,182 shares voted against, 24,969 shares voted to abstain, and 1,681 did not vote. Regarding amendment of the Fund's Articles of Incorporation to change the Fund's name; 183,014 shares voted in favor, 289,144 shares voted against, 32,620 shares voted to abstain, and 1,681 shares did not vote. Although not properly brought before the Annual Meeting and subject to the Fund's objections and reservations in connection therewith, stockholder proposals were made to adjourn the meeting and to terminate the Investment Management Agreement. With respect to the first adjournment proposal, 100,890 shares voted in favor, 264,571 shares voted against, 0 shares voted to abstain, and 140,998 shares did not vote. With respect to the second adjournment proposal, 100,890 shares voted in favor, 264,571 shares voted against, 0 shares voted to abstain, and 140,998 shares did not vote. With respect to the termination proposal, 234,505 shares voted in favor, 2,770 shares voted against, 2,932 shares voted to abstain, and 266,252 did not vote. (4) The Fund has entered into an arrangement with its custodian whereby interest earned on uninvested cash balances was used to offset a portion of the Fund's expenses. During the period, the Fund's custodian fees were reduced by $1,600, under such arrangements. Purchases and proceeds of sales of U.S. government obligations other than short term investments aggregated $8,484,769 and $9,353,672, respectively, for the six months ended December 31, 1998. (5) The Fund has a committed bank line of credit. At December 31, 1998, the balance outstanding was $190,431 and the interest rate was equal to the Federal Reserve Funds Rate plus 1.00 percentage point. For the six months ended December 31, 1998, the annualized weighted average interest rate was 4.34% based on the balances outstanding from the line of credit and the reverse repurchase agreement during the year and the weighted average amount outstanding was $1,742,234. (6) Effective October 4, 1996, the Fund converted from an open-end management investment company to a closed-end management investment company. In connection with the conversion, costs of approximately $39,300 were charged against paid-in capital during the year ended June 30, 1998. In addition, the Fund has adopted a Dividend Reinvestment Plan (the "Plan"). Under the Plan, each dividend and capital gain distribution, if any, declared by the Fund on outstanding shares will, unless elected otherwise by each shareholder by notifying the Fund in writing at any time prior to the record date for a particular dividend or distribution, be paid on the payment date fixed by the Board of Directors or a committee thereof in additional shares in accordance with the following: whenever the Market Price (as defined below) per share is equal to or exceeds the net asset value per share at the time shares are valued for the purpose of determining the number of shares equivalent to the cash dividend or capital gain distribution (the "Valuation Date"), participants will be issued additional shares equal to the amount of such dividend divided by the Fund's net asset value per share. Whenever the Market Price per share is less than such net asset value on the Valuation Date, participants will be issued additional shares equal to the amount of such dividend divided by the Market Price. The Valuation Date is the dividend or distribution payment date or, if that date is not an American Stock Exchange trading day, the next trading day. For all purposes of the Plan: (a) the Market Price of the shares on a particular date shall be the average closing market price on the five trading days the shares traded ex-dividend on the Exchange prior to such date or, if no sale occurred on the Exchange prior to such date, then the mean between the closing bid and asked quotations for the shares on the Exchange on such date, and (b) net asset value per share on a particular date shall be as determined by or on behalf of the Fund. (7) A group called Karpus Investment Management ("KIM") at the 1997 annual meeting of the Fund sought to elect its slate of nominees in opposition to management and at the 1998 annual meeting of the Fund made a counter solicitation on all management proposals and a solicitation to terminate the investment management agreement. On February 19, 1998, KIM filed a lawsuit against the Fund in the Circuit Court for Baltimore City, Maryland, Case No. 9805005, which was dismissed with prejudice on October 1, 1998. On February 19, 1998, the Fund filed a lawsuit against KIM in the United States District Court for the Southern District of New York, 98 Civ. 1190. On December 22, 1998, KIM filed a lawsuit against the Fund in the United States District Court for the District of Maryland Court, 98-CV-4161 and the Fund has made counterclaims. In connection with these and related matters, legal expenses borne by the Fund was $163,026 for the six months ended December 31, 1998. In addition, KIM has filed proxy materials to remove the Investment Manager of the Fund. The outcome of these matters and their effect on the Fund or the management agreement with the Investment Manager cannot be predicted with certainty.
FINANCIAL HIIGHLIGHTS Six Months Ended December 31, PER SHARE DATA 1998** 1998 1997 1996 1995 1994 Net asset value at beginning of period ................... $14.45 $14.74 $14.74 $15.20 $14.63 $15.53 Income from investment operations: Net investment income ................................... 0.17 0.25 0.7 0.64 0.73 0.78 Net realized and unrealized ............................. 0.44 0.55 0.01 -0.46 0.6 -1.03 gain (loss) on investments Total from investment ................................... 0.61 0.8 0.71 0.18 1.33 -0.25 operations Less distributions: Distributions from net investment income ................ -0.44 -0.25 -0.71 -0.64 -0.76 -0.65 Distributions in excess of net realized gains ........... -0.16 -0.42 _ _ _ _ Distributions from paid in capital ...................... _ -0.42 _ _ _ _ Increase (decrease) in net asset value .................. 0.01 -0.29 _ -0.46 0.57 -0.90 Net asset value at end of period ......................... $14.46 $14.45 $14.74 $14.74 $15.20 $14.63 Per share market value at end of period .................. $13.75 $13.13 $12.63 TOTAL RETURN ON NET ASSET VALUE BASIS .................... 4.58% 6.43% 5.58% 1.18% 9.40% -1.76% TOTAL RETURN ON MARKET VALUE BASIS (a) ................... 9.44% 12.87% -9.57% RATIOS/SUPPLEMENTAL DATA Net assets at end of period (000's omitted) .............. $10,921 $10,794 $10,791 $13,035 $16,377 $17,777 Ratio of expenses to average net assets (b)(c)(d) ........ 4.62%* 5.77% 2.13% 2.10% 2.00% 1.85% Ratio of net investment income to average net assets (e) . 2.32%* 1.69% 4.48% 4.25% 4.96% 4.16% Portfolio turnover rate .................................. 68% 168.00% 246% 762% 482% 261%
* Annualized. ** Unaudited (a) Effective October 4, 1996, the Fund converted from an open-end management investment company to a closed-end management investment company. The Fund has calculated total return based upon purchases and sales of shares of the Fund at current market values and reinvestment of dividends and distributions at the lower of the per share net asset value on the payment date or the average of the closing market price for the five days preceding the payment date. (b) Ratio after custodian credits was 4.59%* and 2.07% for the six months ended December 31, 1998 and the year ended June 30, 1997, respectively. Prior to July 1,1996, there were no reductions in custodian fees. There were no custodian credits for the year ended June 30, 1998. (c) Ratio excluding interest expense was 3.94%*, 4.93% and 1.94% for the six months ended December 31, 1998 and the years ended June 30, 1998 and 1997, respectively (d) Ratio prior to reimbursement was 5.32%* and 5.82% for the six months ended December 31, 1998 and the year ended June 30, 1998, respectively. (e) Ratio prior to reimbursement was 3.02%* and 1.64% for the six months ended December 31, 1998 and the year ended June 30, 1998, respectively. EX-3.(II) 2 BY-LAWS Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 AMENDED BY-LAWS OF BULL & BEAR U.S. GOVERNMENT SECURITIES FUND, INC. (A MARYLAND CORPORATION) ARTICLE I -- NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL Section 1.1. Name. The name of the Corporation is Bull & Bear U.S. Government Securities Fund, Inc. Section 1.2. Principal Offices. The principal office of the Corporation in the State of Maryland shall be located in Baltimore, Maryland. The Corporation may, in addition, establish and maintain such other offices and places of business as the board of directors may, from time to time, determine. Section 1.3. Seal. The corporate seal of the Corporation shall consist of two (2) concentric circles, between which shall be the name of the Corporation, and in the center shall be inscribed the year of its incorporation, and the words "Corporate Seal". The form of the seal shall be subject to alteration by the board of directors and the seal may be used by causing it or a facsimile to be impressed or affixed or printed or otherwise reproduced. Any officer or director of the Corporation shall have authority to affix the corporate seal of the Corporation to any document requiring the same. ARTICLE II -- STOCKHOLDERS Section 2.1. Annual Meetings. There shall be no stockholders' meetings for the election of directors and the transaction of other proper business except as required by the Investment Company Act of 1940, the listing requirements of the stock exchange or market where the Corporation's stock is listed, or as hereinafter provided, in which case the annual meeting shall be held in December of each year. Section 2.2. Special Meetings. Special meetings of stockholders may be called at any time by the board of directors, the chairman of the board, or the president or a co-president and shall be held at such time and place as may be stated in the notice of the meeting. The secretary shall call a special meeting of the stockholders on the written request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on thereat, and no other business shall be transacted at any such special meeting. The secretary shall inform such stockholders of the reasonably estimated costs of preparing and mailing the notice of the meeting, and upon payment to the Corporation of such costs, the secretary shall give not less than ten nor more than 90 days' notice of the time, place and purpose of the meeting in the manner provided in Section 2.3 of this Article II. Section 2.3. Notice of Meetings. The secretary shall cause notice of the place, date and hour and, in the case of a special meeting or as otherwise required by law, the purpose or purposes for which the 1 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 meeting is called, to be served personally or to be mailed, postage prepaid, not less than 10 nor more than 90 days before the date of the meeting, to each stockholder entitled to vote at such meeting at his address as it appears on the records of the Corporation at the time of such mailing. Notice shall be deemed to be given when deposited in the United States mail addressed to the stockholders as aforesaid. Notice of any stockholders meeting need not be given to any stockholder who shall sign a written waiver of such notice whether before or after the time of such meeting, which waiver shall be filed with the records of such meeting, or to any stockholder who is present at such meeting in person or by proxy. Notice of adjournment of a stockholders meeting to another time or place need not be given if such time and place are announced at the meeting. Irregularities in the notice of any meeting to, or the nonreceipt of any such notice by, any of the stockholders shall not invalidate any action otherwise properly taken by or at any such meeting. Section 2.4. Quorum and Adjournment of Meetings. In the absence of a quorum, the stockholders present in person or by proxy or, if no stockholder entitled to vote is present in person or by proxy, any officer present entitled to preside or act as secretary of such meeting may adjourn the meeting without determining the date of the new meeting or from time to time without further notice to a date not more than 120 days after the original record date. Any business that might have been transacted at the meeting originally called may be transacted at any such adjourned meeting at which a quorum is present. Section 2.5. Voting and Inspectors. Unless statute or the Articles of Incorporation, as amended and/or restated from time to time (the "Charter") provide otherwise, at every stockholders meeting, each stock holder shall be entitled to one vote for each share and a fractional vote for each fraction of a share of stock of the Corporation validly issued and outstanding and standing in his name on the books of the Corporation on the record date fixed in accordance with Section 7.4 hereof, either in person or by proxy appointed by instrument in writing subscribed by such stockholder or his duly authorized attorney, except that no shares held by the Corporation shall be entitled to a vote. If no record date has been fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of the close of business on the day on which notice of the meeting is mailed or the 30th day before the meeting, or, if notice is waived by all stockholders, at the close of business on the 11th day preceding the day on which the meeting is held. Except as otherwise specifically provided in the Charter or these By-laws or as required by applicable law, all matters shall be decided by a vote of the majority of the votes validly cast at a meeting at which a quorum is present. The vote upon any question shall be by ballot whenever requested by any person entitled to vote, but, unless such a request is made, voting may be conducted in any way approved by the meeting. At any meeting at which there is an election of directors, the chairman of the meeting may appoint two inspectors of election who shall first subscribe an oath or affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall, after 2 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 the election, make a certificate of the result of the vote taken. No candidate for the office of director shall be appointed as an inspector. The determination of such inspectors as to all matters relating to the form or validity of proxies, ballots, and voting directions thereon, and all other matters upon which their certificate would be based shall be deemed final and conclusive, and such inspectors' determinations shall not be subject to challenge or review prior to the issuance of their certificate, unless such challenge or review is approved by the vote of a majority of the Board of Directors. The certificate of the result of the vote taken shall be deemed final and conclusive, and such inspectors' decisions shall not be judicially reviewable, unless such judicial review is approved by the vote of a majority of the Board of Directors. Section 2.6. Validity of Proxies. The right to vote by proxy shall exist only if the instrument authorizing such proxy to act shall have been signed by the stockholder or by his duly authorized attorney. Unless a proxy provides otherwise, it shall not be valid more than 11 months after its date. All proxies shall be delivered to the secretary of the Corporation or to the person acting as secretary of the meeting before being voted, who shall decide all questions concerning qualification of voters, the validity of proxies, and the acceptance or rejection of votes. If inspectors of election have been appointed by the chairman of the meeting, such inspectors shall decide all such questions. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Corporation receives from any one of them a specific written notice to the contrary and a copy of the instrument or order which so provides. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise. Section 2.7. Stock Ledger and List of Stockholders. It shall be the duty of the secretary or assistant secretary of the Corporation to cause an original or duplicate stock ledger containing the names and addresses of all the stockholders and the number of shares held by them, respectively, to be maintained at the office of the Corporation's transfer agent. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. Section 2.8. Action Without Meeting. Any action required or permitted to be taken by stockholders at a meeting of stockholders may be taken without a meeting if (a) all stockholders entitled to vote on the matter consent to the action in writing, (b) all stockholders entitled to notice of the meeting but not entitled to vote at it sign a written waiver of any right to dissent, and (c) the consents and waivers are filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at the meeting. Section 2.9. Election of Directors. Subject to the Charter, the election of any director by stockholders requires the affirmative vote of at least eighty percent (80%) of the outstanding shares of all classes of voting stock, voting together, in person or by proxy at a meeting at which a quorum is present ("Meeting"), unless such action is approved by the vote of a majority of the Board of Directors, in which case such action requires the affirmative vote of a plurality of the votes cast at the Meeting. 3 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 Section 2.10. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Charter of the Corporation with respect to the right, if any, of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.10 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 2.10 . In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than sixty (60) calendar days nor more than ninety (90) calendar days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) calendar days before or sixty (60) calendar days after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of the sixtieth (60th) calendar day prior to such annual meeting or the tenth (10th) calendar day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) calendar day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. For purposes of this Section 2.10, the date of a public disclosure shall include, but not be limited to, the date on which such disclosure is made in a press release reported by the Dow Jones News Services, the Associated Press or any comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and regulations thereunder) of the Securities Exchange Act of 1934, as amended, or pursuant to Section 30 (or the rules and regulations thereunder) of the Investment Company Act of 1940, as amended. To be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares 4 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.10. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. Section 2.11. Business at Annual Meeting. No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.11 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 2.11. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) calendar days nor more than ninety (90) calendar days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) calendar days before or sixty (60) calendar days after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of the sixtieth (60th) calendar day prior to such annual meeting or the tenth (10th) calendar day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs. For purposes of this Section 2.11, the date of a public disclosure shall include, but not be limited to, the date on which such disclosure is made in a press release reported by the Dow Jones News Services, the Associated Press or any comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and regulations thereunder) of the Securities Exchange Act of 1934, as amended, or pursuant to Section 30 (or the rules and regulations thereunder) of the Investment Company Act of 1940, as amended. 5 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 To be in proper written form, a stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii)the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.11, provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.11 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. ARTICLE III -- BOARD OF DIRECTORS Section 3.1. General Powers. Except as otherwise provided by operation of law, by the Charter, or by these By-laws, the business and affairs of the Corporation shall be managed under the direction of and all the powers of the Corporation shall be exercised by or under authority of its board of directors. Section 3.2. Power to Issue and Sell Stock. The board of directors may from time to time issue and sell or cause to be issued and sold any of the Corporation's authorized shares to such persons and for such consideration as the board of directors shall deem advisable, subject to the provisions of the Charter. Section 3.3. Power to Authorize Dividends. The board of directors, from time to time as they may deem advisable, may authorize and pay dividends in stock, cash or other property of the Corporation, out of any source available for dividends, to the stockholders according to their respective rights and interests in accordance with the provisions of the Charter. The board of directors may prescribe from time to time that dividends may be payable at the election of any of the stockholders (exercisable before or after the declaration of the dividend), either in cash or in shares of the Corporation, provided that the sum of the cash dividend actually paid to any stockholder and the asset value of the shares received (determined as of such time as the board of directors shall have prescribed, pursuant to the Charter, with respect to shares sold on the date of such election) shall not exceed the full amount of cash to which the stockholder would be entitled if he elected to receive only cash. Section 3.4. Number and Term of Directors. Except for the initial board of directors, the board of directors shall consist of not fewer than three nor more than fifteen directors, as specified by a resolution of a majority of the entire board of directors. Each director shall hold office until his successor is elected 6 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 and qualified or until his earlier death, resignation or removal. Any vacancy created by an increase in directors may be filled in accordance with Section 3.6 of this Article III. All acts done at any meeting of the directors or by any person acting as a director, so long as his successor shall not have been duly elected or appointed, shall, notwithstanding that it be afterwards discovered that there was some defect in the election of the directors or of such person acting as a director or that they or any of them were disqualified, be as valid as if the directors or such other person, as the case may be, had been duly elected and were or was qualified to be directors or a director of the Corporation. Directors need not be stockholders of the Corporation. Section 3.5. Election. The initial director or directors shall be that person or persons named as such in the Charter. At each annual meeting, the stockholders shall elect directors to hold office. Section 3.6. Vacancies and Newly Created Directorships. Any vacancies in the board of directors, whether arising from death, resignation, removal, an increase in the number of directors or otherwise, shall be filled by a vote of the board of directors in accordance with the Charter. Section 3.7. [Reserved.] Section 3.8. Regular Meetings. The meeting of the board of directors for choosing officers and transacting other proper business, and all other meetings, shall be held at such time and place, within or outside the state of Maryland, as the board may determine and as provided by resolution. Notice of such meetings need not be given, following the annual meeting of stockholders, provided that notice of any change in the time or place of such meetings shall be sent promptly to each director not present at the meeting at which such change was made, in the manner provided for notice of special meetings. Members of the board of directors or any committee designated thereby may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment that allows all persons participating in the meeting to hear each other at the same time; and participation by such means shall constitute presence in person at a meeting. Section 3.9. Special Meetings. Special meetings of the board of directors shall be held whenever called by the chairman of the board or the president or a co-president (or, in the absence or disability of the chairman of the board or the president or a co-president, by any officer or director, as they so designate) at the time and place (within or outside of the State of Maryland) specified in the respective notice or waivers of notice of such meetings. At least three days before the day on which a special meeting is to be held, notice of special meetings, stating the time and place, shall be (a) mailed to each director at his residence or regular place of business or (b) delivered to him personally or transmitted to him by telegraph, telefax, telex, cable or wireless. Section 3.10. Waiver of Notice. No notice of any meeting need be given to any director who is present at the meeting or who waives notice of such meeting in writing (which waiver shall be filed with the records of such meeting), either before or after the time of the meeting. 7 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 Section 3.11. Quorum and Voting. At all meetings of the board of directors, the presence of a majority of the number of directors then in office shall constitute a quorum for the transaction of business, provided that there shall be present at least two directors. In the absence of a quorum, a majority of the directors present may adjourn the meeting, from time to time, until a quorum shall be present. The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the board of directors, unless concurrence of a greater proportion is required for such action by law, by the Charter or by these By-laws. Section 3.12. Action Without a Meeting. As amended, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if a written consent to such action is signed by all members of the board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. Section 3.13. Compensation of Directors. Directors may receive such compensation for their services as may from time to time be determined by resolution of the board of directors. ARTICLE IV -- COMMITTEES Section 4.1. Organization. By resolution adopted by the board of directors, the board may designate one or more committees of the board of directors, including an Executive Committee, each consisting of at least one director. Each member of a committee shall be a director and shall hold committee membership at the pleasure of the board. The chairman of the board, if any, shall be a member of the Executive Committee. The board of directors shall have the power at any time to change the members of such committees and to fill vacancies in the committees. Section 4.2. Powers of the Executive Committee. Unless otherwise provided by resolution of the board of directors, when the board of directors is not in session the Executive Committee shall have and may exercise all powers of the board of directors in the direction of the management of the business and affairs of the Corporation that may lawfully be exercised by an Executive Committee except the power to declare a dividend on stock, authorize the issuance of stock (except as permitted by the Maryland General Corporation Law), recommend to stockholders any action requiring stockholders approval, amend these By-laws, approve any merger or share exchange which does not require stockholder approval or approve or terminate any contract with an "investment adviser" or "principal underwriter," as those terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). Notwithstanding the above, such Executive Committee may make such dividend calculations and payments as are consistent with applicable law, including the Maryland General Corporation Law. Section 4.3. Powers of Other Committees of the Board of Directors. To the extent provided by resolution of the board, other committees of the board of directors shall have and may exercise any of the powers that may lawfully be granted to the Executive Committee. Section 4.4. Proceedings and Quorum. In the absence of an appropriate resolution of the board of directors, each committee may adopt such rules and regulations governing its proceedings, quorum and 8 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 manner of acting as it shall deem proper and desirable, provided that a quorum shall not be less than two directors. In the event any member of any committee is absent from any meeting, the members thereof present at the meeting, whether or not they constitute a quorum, may appoint a member of the board of directors to act in the place of such absent member. ARTICLE V -- OFFICERS Section 5.1. Officers. The officers of the Corporation shall be a president or co-presidents, a secretary, and a treasurer, and may include one or more vice presidents (including executive and senior vice presidents), assistant secretaries or assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.11 hereof. The board of directors may, but shall not be required to, elect a chairman and vice chairman of the board. Section 5.2. Election, Tenure and Qualifications. The officers of the Corporation (except those appointed pursuant to Section 5.11 hereof) shall be elected by the board of directors at its first meeting or such subsequent meetings as shall be held prior to its first annual meeting, and thereafter at regular board meetings, as required by applicable law. If any officers are not elected at any annual meeting, such officers may be elected at any subsequent meetings of the board. Except as otherwise provided in this Article V, each officer elected by the board of directors shall hold office until his or her successor shall have been elected and qualified. Any person may hold one or more offices of the Corporation except that no one person may serve concurrently as both the president or a co-president and vice president. A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed,. acknowledged, or verified by more than one officer. The chairman of the board shall be chosen from among the directors of the Corporation and may hold such office only so long as he continues to be a director. No other officer need be a director. Section 5.3. Vacancies and Newly Created Offices. If any vacancy shall occur in any office by reason of death, resignation, removal, disqualification or other cause, or if any new office shall be created, such vacancies or newly created offices may be filled by the chairman of the board at any meeting or, in the case of any office created pursuant to Section 5.11 hereof, by any officer upon whom such power shall have been conferred by the board of directors. Section 5.4. Removal and Resignation. At any meeting called for such purpose, the Executive Committee may remove any officer from office (either with or without cause) by the affirmative vote, given at the meeting, of a majority of the members of the Committee. Any officer may resign from office at any time by delivering a written resignation to the board of directors, the president or a co-president, the secretary, or any assistant secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery. Section 5.5. Chairman of the Board. The chairman of the board, if there be such an officer, shall be the senior officer of the Corporation, shall preside at all stockholders meetings and at all meetings of the board of directors and shall be ex officio a member of all committees of the board of directors. He shall 9 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 have such other powers and perform such other duties as may be assigned to him from time to time by the board of directors. Section 5.6. Vice Chairman of the Board. The board of directors may from time to time elect a vice chairman who shall have such powers and perform such duties as from time to time may be assigned to him by the board of directors, chairman of the board or the president or a co-president. At the request of, or in the absence or in the event of the disability of the chairman of the board, the vice chairman may perform all the duties of the chairman of the board or the president or a copresident and, when so acting, shall have all the powers of and be subject to all the restrictions upon such respective officers. Section 5.7. President, Co-President. The president or co-presidents shall be the chief executive officer or co-chief executive officers, as the case may be, of the Corporation and, in the absence of the chairman of the board or vice chairman or if no chairman of the board or vice chairman has been chosen, shall preside at all stockholders meetings and at all meetings of the board of directors and shall in general exercise the powers and perform the duties of the chairman of the board. Subject to the supervision of the board of directors, the president or the co-presidents shall have general charge of the business, affairs and property of the Corporation and general supervision over its officers, employees and agents. Except as the board of directors may otherwise order, the president or a co-president may sign in the name and on behalf of the Corporation all deeds, bonds, contracts, or agreements. The president or a co-president shall exercise such other powers and perform such other duties as from time to time may be assigned by the board of directors. Section 5.8. Vice President. The board of directors may from time to time elect one or more vice presidents (including executive and senior vice presidents) who shall have such powers and perform such duties as from time to time may be assigned to them by the board of directors or the president or co-presidents. At the request of, or in the absence or in the event of the disability of, the president or both co-presidents, the vice president (or, if there are two or more vice presidents, then the senior of the vice presidents present and able to act) may perform all the duties of the president or co-presidents and, when so acting, shall have all the powers of and be subject to all the restrictions upon the president or co-presidents. Section 5.9. Treasurer and Assistant Treasurers. The treasurer shall be the chief accounting officer of the Corporation and shall have general charge of the finances and books of account of the Corporation. The treasurer shall render to the board of directors, whenever directed by the board, an account of the financial condition of the Corporation and of all transactions as treasurer; and as soon as possible after the close of each financial year he shall make and submit to the board of directors a like report for such financial year. The treasurer shall cause to be prepared annually a full and complete statement of the affairs of the Corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be submitted at the annual meeting of stockholders and filed within 20 days thereafter at the principal office of the Corporation in the state of Maryland. The treasurer shall perform all acts incidental to the office of treasurer, subject to the control of the board of directors. Any assistant treasurer may perform such duties of the treasurer as the treasurer or the board of directors may assign, and, in the absence of the treasurer, may perform all the duties of the treasurer. 10 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 Section 5.10. Secretary and Assistant Secretaries. The secretary shall attend to the giving and serving of all notices of the Corporation and shall record all proceedings of the meetings of the stockholders and directors in books to be kept for that purpose. The secretary shall keep in safe custody the seal of the Corporation, and shall have responsibility for the records of the Corporation, including the stock books and such other books and papers as the board of directors may direct and such books, reports, certificates and other documents required by law to be kept, all of which shall at all reasonable times be open to inspection by any director. The secretary shall perform such other duties which appertain to this office or as may be required by the board of directors. Any assistant secretary may perform such duties of the secretary as the secretary or the board of directors may assign, and, in the absence of the secretary, may perform all the duties of the secretary. Section 5.11. Subordinate Officers. The chairman of the board from time to time may appoint such other officers or agents as he may deem advisable, each of whom shall have such title, hold office for such period, have such authority and perform such duties as the board of directors may determine. The chairman of the board from time to time may delegate to one or more officers or agents the power to appoint any such subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. Any officer or agent appointed in accordance with the provisions of this Section 5.11 may be removed, either with or without cause, by any officer upon whom such power of removal shall have been conferred by the board of directors. Section 5.12. Remuneration. The salaries or other compensation of the officers of the Corporation shall be fixed from time to time by resolution of the board of directors, except that the board of directors may by resolution delegate to any person or group of persons the power to fix the salaries or other compensation of any subordinate officers or agents appointed in accordance with the provisions of Section 5.11 hereof. Section 5.13. Surety Bonds. The board of directors may require any officer or agent of the Corporation to execute a bond (including, without limitation, any bond required by applicable law, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder) to the Corporation in such sum and with such surety or sureties as the board of directors may determine, conditioned upon the faithful performance of his or her duties to the Corporation, including responsibility for negligence and for the accounting of any of the Corporation's property, funds or securities that may come into his hands. ARTICLE VI -- EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES Section 6.1. Checks, Notes, Drafts, Etc. So long as the Corporation shall employ a custodian to keep custody of the cash and securities of the Corporation, all checks and drafts for the payment of money by the Corporation may be signed in the name of the Corporation by the custodian. Promissory notes, checks or drafts payable to the Corporation may be endorsed only to the order of the custodian or its nominee and only by any two of the following: the treasurer, the president or a co-president, a vice president (including executive and senior vice presidents) or by such other person or persons as shall be authorized by the board of directors, provided that no one person may sign in the capacity of two such officers. Except as 11 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 otherwise authorized by the board of directors, all requisitions or orders for the assignment of securities standing in the name of the custodian or its nominee, or for the execution of powers to transfer the same, shall be signed in the name of the Corporation by any two of the following: the president or a co-president, vice president (including executive and senior vice presidents), treasurer or an assistant treasurer, provided that no one person may sign in the capacity of two such officers. Section 6.2. Voting of Securities. Unless otherwise ordered by the board of directors, the president or a co-president, or any vice president (including executive and senior vice presidents) shall have full power and authority on behalf of the Corporation to attend and to act and to vote, or in the name of the Corporation to execute proxies to vote, at any meeting of stockholders of any company in which the Corporation may hold stock. At any such meeting such officer shall possess and may exercise (in person or by proxy) any and all rights, powers and privileges incident to the ownership of such stock. The board of directors may by resolution from time to time confer like powers upon any other person or persons in accordance with the laws of the State of Maryland. ARTICLE VII -- CAPITAL STOCK Section 7.1. Certificates of Stock. The interest of each stockholder of the Corporation may be, but shall not be required to be, evidenced by certificates for shares of stock in such form not inconsistent with the Charter as the board of directors may from time to time authorize. No certificate shall be valid unless it is signed in the name of the Corporation by a president or a co-president or a vice president and countersigned by the secretary or an assistant secretary or the treasurer or an assistant treasurer of the Corporation and sealed with the seal of the Corporation, or bears the facsimile signatures of such officers and a facsimile of such seal. In case any officer who shall have signed any such certificate, or whose facsimile signature has been placed thereon, shall cease to be such an officer (because of death, resignation or otherwise) before such certificate is issued, such certificate may be issued and delivered by the Corporation with the same effect as if he were such officer at the date of issue. The number of each certificate issued, the name and address of the person owning the shares represented thereby, the number of such shares and the date of issuance shall be entered upon the stock ledger of the Corporation at the time of issuance. Every certificate exchanged, surrendered for redemption or otherwise returned to the Corporation shall be marked "canceled" with the date of cancellation. Section 7.2. Transfer of Shares. Shares of the Corporation shall be transferable on the books of the Corporation by the holder of record thereof (in person or by his duly authorized attorney or legal representative) (a) if a certificate or certificates have been issued, upon surrender duly endorsed or accompanied by proper instruments of assignment and transfer, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require, or (b) as otherwise prescribed by the board of directors. Except as otherwise provided in the Charter, the shares of stock of the Corporation may be freely transferred, subject to the charging of customary transfer fees, and the board of directors may, from time to time, adopt rules and regulations with reference to the method of transfer of the shares 12 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 of stock of the Corporation. The Corporation shall be entitled to treat the holder of record of any share of stock as the absolute owner thereof for all purposes, and accordingly shall not be bound to recognize any legal, equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law or the statutes of the State of Maryland. Section 7.3. Transfer Agents and Registrars. The board of directors may from time to time appoint or remove transfer agents or registrars of transfers for shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made all certificates representing shares of capital stock thereafter issued shall be countersigned by one of such transfer agents or by one of such registrars of transfers or by both and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only one countersignature by such person shall be required. Section 7.4. Fixing of Record Date. The board of directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any stockholders meeting or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, provided that (a) such record date shall be within 90 days prior to the date on which the particular action requiring such determination will be taken, except that a meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than 120 days after the original record date; (b) the transfer books shall not be closed for a period longer than 20 days; and (c) in the case of a meeting of stockholders, the record date shall be at least 10 days before the date of the meeting. Section 7.5. Lost, Stolen or Destroyed Certificates. Before issuing a new certificate for stock of the Corporation alleged to have been lost, stolen or destroyed, the board of directors or any officer authorized by the board may, in its discretion, require the owner of the lost, stolen or destroyed certificate (or his legal representative) to give the Corporation a bond or other indemnity, in such form and in such amount as the board or any such officer may direct and with such surety or sureties as may be satisfactory to the board or any such officer, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VIII -- CONFLICT OF INTEREST TRANSACTIONS Section 8.1. Validity of Contract or Transactions. In the event that any officer or director of the Corporation shall have any interest, direct or indirect, in any other firm, association or corporation as officer, employee, director or stockholder, no transaction or contract made by the Corporation with any such other firm, association or corporation shall be valid unless such interest shall have been disclosed or made known to all of the directors or to a majority of the directors and such transaction or contract shall 13 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 have been approved by a majority of a quorum of directors, which majority shall consist of directors not having any such interest or a majority of the directors in office, including directors having such an interest. ARTICLE IX -- FISCAL YEAR AND ACCOUNTANT Section 9.1. Fiscal Year. The fiscal year of the Corporation shall, unless otherwise ordered by the board of directors, be twelve calendar months ending on the 30th day of June. ARTICLE X -- INDEMNIFICATION AND INSURANCE Section 10.1. Indemnification of Officers, Directors, Employees and Agents. In accordance with applicable law, including the Maryland General Corporation Law, the Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative ("Proceeding"), by reason of the fact that he or she is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, partner, trustee or agent of another corporation, partnership, joint venture, trust, or other enterprise, against all reasonable expenses (including attorneys' fees) actually incurred, and judgments, fines, penalties and amounts paid in settlement in connection with such Proceeding to the maximum extent permitted by law, now existing or hereafter adopted. Notwithstanding the foregoing, the following provisions shall apply with respect to indemnification of the Corporation's directors, officers, and investment manager (as defined in the 1940 Act): (a) Whether or not there is an adjudication of liability in such Proceeding, the Corporation shall not indemnify any such person for any liability arising by reason of such person's willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office or under any contract or agreement with the Corporation ("disabling conduct"). (b) The Corporation shall not indemnify any such person unless: (1) the court or other body before which the Proceeding was brought (a) dismisses the Proceeding for insufficiency of evidence of any disabling conduct, or (b) reaches a final decision on the merits that such person was not liable by reason of disabling conduct; or (2) absent such a decision, a reasonable determination is made, based upon a review of the facts, by (a) the vote of a majority of a quorum of the directors of the Corporation who are neither interested persons of the Corporation as defined in the 1940 Act, nor parties to the Proceeding, or (b) if such quorum is not obtainable, or even if obtainable, if a majority of a quorum of directors described 14 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 above so directs, based upon a written opinion by independent legal counsel, that such person was not liable by reason of disabling conduct. (c) Reasonable expenses (including attorneys' fees) incurred in defending a Proceeding involving any such person will be paid by the Corporation in advance of the final disposition thereof upon an undertaking by such person to repay such expenses unless it is ultimately determined that he or she is entitled to indemnification, if: (1) such person shall provide adequate security for his or her undertaking; (2) the Corporation shall be insured against losses arising by reason of such advance; or (3) a majority of a quorum of the directors of the Corporation who are neither interested persons of the Corporation as defined in the 1940 Act, nor parties to the Proceeding, or independent legal counsel in a written opinion, shall determine, based on a review of readily available facts, that there is reason to believe that such person will be found to be entitled to indemnification. Section 10.2. Insurance of Officers, Directors, Employees and Agents. The Corporation may purchase and maintain insurance or other sources of reimbursement to the extent permitted by law on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, partner, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in or arising out of his position. Section 10.3. Non-exclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article X shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Charter, these By-laws, agreement, vote of stockholders or directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. Section 10.4. Amendment. Notwithstanding anything to the contrary herein, no amendment, alteration or repeal of this Article or the adoption, alteration or amendment of any other provisions to the Charter or these By-laws inconsistent with this Article shall adversely affect any right or protection of any person under this Article with respect to any act or failure to act which occurred prior to such amendment, alteration, repeal or adoption. 15 Bull & Bear U.S. Government Securities Fund, Inc. By-laws As Amended March 3, 1999 ARTICLE XI -- AMENDMENTS Section 11.1. General. Except as provided in Section 11.2 of this Article XI, all By-laws of the Corporation, whether adopted by the board of directors or the stockholders, shall be subject to amendment, alteration or repeal, and new By-laws may be made only by the affirmative vote of a majority of directors, at any meeting the notice or waiver of notice of which shall have specified or summarized the proposed amendment, alteration, repeal or new By-law. No amendment of any Section of these By-laws shall be made by the stockholders of the Corporation except as set forth in Section 11.2 of this Article XI. Section 11.2. By Stockholders Only. No amendment of any section of these By-laws shall be made except by the stockholders of the Corporation if the By-laws provide that such section may not be amended, altered or repealed except by the stockholders. From and after the issuance of any shares of the capital stock of the Corporation no amendment, alteration or repeal of this Article XI shall be made except by the stockholders of the Corporation. 16 -----END PRIVACY-ENHANCED MESSAGE-----