RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
8080 North Central Expressway, Suite 210, LB-59
Dallas, Texas 75206-1857
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On Friday, May 17, 2002
To the Shareholders of
Renaissance Capital Growth & Income Fund III, Inc.:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Shareholders (the
"Annual Meeting") of Renaissance Capital Growth & Income Fund III, Inc. (the
"Fund"), a Texas corporation which has elected to be treated as a business
development company under the Investment Company Act of 1940, will be held at
the Renaissance Dallas Hotel, Dallas, Texas, on Friday, May 17, 2002, at 8:00
a.m., local time, for the following purposes:
1. To elect two Class Two directors of the Fund, to hold office for
terms of three years or until their successors are elected and qualified;
2. To ratify the appointment by the Fund's Board of Directors of Ernst
& Young LLP as the auditor of the Fund for the fiscal year ending December
31, 2002; and
3. To transact any and all other business that may properly be
presented at the Annual Meeting or any adjournment(s).
A copy of the Fund's 2001 Annual Report to shareholders is enclosed for
your review. Shareholders will have the opportunity to meet the principal
officers of selected Portfolio Companies and to hear their business reviews.
The close of business on March 29, 2002 has been fixed as the record date
for determining shareholders entitled to notice of, and to vote at the Annual
Meeting or any adjournment. The enclosed proxy card is being solicited on behalf
of the Board of Directors.
You are cordially invited to attend the Annual Meeting. You may vote your
shares (1) in person at the Annual Meeting, (2) by telephone, (3) via the
Internet, or (4) by completing, signing, dating and returning the accompanying
proxy card in the enclosed, self-addressed, postage-paid envelope. Specific
instructions for voting by telephone or via the Internet are on the accompanying
proxy card. You may revoke your proxy at any time prior to the Annual Meeting.
If you decide to attend the Annual Meeting and wish to change your vote, you may
do so by voting in person at the Annual Meeting. Prompt response by our
shareholders will reduce the time and expense of solicitation.
By Order of the Board of Directors
/S/ Barbe Butschek
Barbe Butschek, Secretary
Dallas, Texas
April 17, 2002
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
PROXY STATEMENT
For
2002 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, MAY 17, 2002
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of Renaissance
Capital Growth & Income Fund III, Inc.(the "Fund"), a Texas corporation which
has elected to be treated as a business development company under the Investment
Company Act of 1940 (the "1940 Act"). The Fund's Board of Directors is
soliciting proxies to be voted at the 2002 Annual Meeting of Shareholders (the
"Annual Meeting") to be held on Friday, May 17, 2002, at the Renaissance Dallas
Hotel, Dallas, Texas, at 8:00 a.m., local time and at any adjournment(s). This
Proxy Statement is first being sent to shareholders on or about April 17, 2002.
The accompanying proxy card is designed to permit each Fund shareholder to
vote for or against or to abstain from voting on the proposals described in this
Proxy Statement, and to authorize the persons serving as proxies to vote in
their discretion with respect to any other proposal properly presented at the
Annual Meeting. When a shareholder's executed proxy card specifies a choice with
respect to a voting matter, the shares will be voted accordingly. If no
specifications are made, then the proxy will be voted by the persons serving as
proxies at the Annual Meeting FOR (i) the election of the two Class Two
directors, and (ii) the ratification of the appointment of Ernst & Young LLP as
the auditor for the Fund for the current fiscal year.
The Board of Directors encourages the shareholders to attend the Annual
Meeting personally. Executing and returning the accompanying proxy card will not
affect a shareholder's right to attend the Annual Meeting and to vote in person.
Any shareholder given a proxy has the right to revoke it at any time before it
is voted by giving written notice of revocation to Ms. Barbe Butschek,
Secretary, Renaissance Capital Growth & Income Fund III, Inc., 8080 North
Central Expressway, Suite 210, LB-59, Dallas, Texas 75206-1857, by executing and
delivering a later-dated proxy, or by attending the Annual Meeting and voting in
person. No revocation notice or later-dated proxy, however, will be effective
until received by the Fund at or prior to the Annual Meeting. Revocation will
not affect a vote on any matters taken prior to the receipt of the revocation.
Mere attendance at the Annual Meeting will not by itself revoke the proxy.
In addition to soliciting proxies by mail, officers and directors of the
Fund, and officers, directors and regular employees of Renaissance Capital
Group, Inc. ("Renaissance Group"), the investment advisor to the Fund, may
solicit the return of proxies by personal interview, mail, telephone and
facsimile. These persons will not receive additional compensation for their
services, but will be reimbursed for out-of-pocket expenses. Brokerage houses
and other custodians, nominees and fiduciaries will be requested by the Fund to
forward solicitation material to the beneficial owners of shares. The Fund will
pay all costs of solicitation.
The Fund's 2001 Annual Report to Shareholders is enclosed for the review of
all shareholders entitled to notice of and to vote at the Annual Meeting. The
Annual Report is not incorporated into this Proxy Statement and is not
considered proxy soliciting material.
The Fund's principal offices are located at 8080 N. Central Expressway,
Suite 210, LB-59, Dallas, Texas 75206-1857, and its telephone number is (214)
891-8294.
PURPOSES OF THE MEETING
At the Annual Meeting, Fund shareholders will have the opportunity to meet
principal officers of selected Portfolio Companies and to hear their business
reviews. In addition, the shareholders will consider and vote upon the following
matters:
1. The election of two Class Two directors of the Fund, to hold office
for terms of three years or until their successors are elected and
qualified;
2. Ratification of the Board of Director's appointment of Ernst &
Young LLP as the auditor for the Fund for the fiscal year ending December
31, 2002; and
3. Such other and further business as may properly be presented at the
Annual Meeting or any adjournment(s).
RECORD DATE AND SHARE OWNERSHIP
The close of business on March 29, 2002 has been fixed as the record date
(the "Record Date") for determining shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment. At the close of business on the
Record Date, the Fund had outstanding 4,361,618 shares of Common Stock and
approximately 809 record holders.
VOTING
Each share of Common Stock is entitled to one vote. The Common Stock is the
only class of securities of the Fund entitled to vote at the Annual Meeting. A
Shareholder is entitled to vote all shares of Common Stock held of record at the
close of business on the Record Date, in person or by proxy, at the Annual
Meeting. There are no cumulative voting rights. All votes will be tabulated by
the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
A quorum for the Annual Meeting will consist of the presence, in person or
by proxy, of the holders of a majority of the shares outstanding and entitled to
vote as of the Record Date. Shares that are voted "FOR," "AGAINST," OR "WITHHELD
FROM" a matter are treated as being present at the meeting for purposes of
determining the presence of a quorum and are also treated as shares "represented
and voting" at the Annual Meeting (the "Votes Cast") with respect to such
matter.
Broker non-votes and abstentions will be counted for purposes of
determining the presence of a quorum but will not be voted for or against a
proposal. Accordingly, abstentions and broker non-votes effectively will be a
vote against any proposal where the required vote is a percentage of the shares
present or outstanding. Abstentions and broker non-votes will not be counted as
votes cast for purposes of determining whether sufficient votes have been
received to approve a proposal.
If a quorum is not present at the Annual Meeting or, although a quorum is
present, an insufficient number of votes in favor of any of the proposals set
forth in the Notice of Meeting are not received by the date of the Annual
Meeting, the persons named as proxies may vote for one or more adjournment(s) of
the Annual Meeting with no other notice than announcement at the Annual Meeting.
Further solicitations of proxies with respect to these proposals may be made.
Broker non-votes and abstentions will not be voted for any adjournments.
VOTING ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE
Shareholders whose shares are registered in their own names may vote either
via the Internet or by telephone. Specific instructions to be followed by any
registered shareholder interested in voting via the Internet or by telephone are
set forth on the enclosed proxy card. The Internet and telephone voting
procedures are designed to authenticate the shareholder's identity and to allow
shareholders to vote their shares and confirm that their voting instructions
have been properly recorded.
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically over the Internet or by
telephone. A large number of banks and brokerage firms are participating in the
ADP Investor Communications Services online program. This program provides
eligible shareholders who receive a copy of this proxy statement the opportunity
to vote via the Internet or by telephone. If your bank or brokerage firm is
participating in ADP's program, your proxy card will provide instructions. If
your proxy card does not reference Internet or telephone information, please
complete and return the proxy card in the self-addressed, postage-paid envelope
provided.
PROPOSAL ONE
ELECTION OF DIRECTORS
Edward O. Boshell, Jr. and Charles C. Pierce, Jr. have been nominated as
the Class Two directors to serve for a term of three years or until respective
successors are elected and qualified. For information concerning Mr. Boshell and
Mr. Pierce, see "Information Concerning Directors," below.
Pursuant to the Fund's Articles of Incorporation and Bylaws, the Board of
Directors consists of five directors and is divided into three classes. Each
class serves for a three-year term. The term of office of the Class Two
directors expire at the Annual Meeting to be held this year, and the term of
office of the Class Three directors expires at the Annual Meeting of
shareholders to be held in 2003, the term of office of the Class One directors
expires at the Annual Meeting of shareholders to be held in 2004.
Because the Board is divided into classes, only those directors in a single
class may be changed in any one year. Consequently, changing a majority of the
Board of Directors would require two years (although under Texas law, procedures
are available to remove directors even if they are not then standing for re-
election and, under Securities and Exchange Commission regulations, procedures
are available for including appropriate shareholder proposals in the annual
proxy statement). Having a classified Board of Directors, which may be regarded
as an "anti-takeover" provision, may make it more difficult for shareholders to
change the majority of directors and thus have the effect of maintaining the
continuity of management.
The nominees for the Class Two directors receiving the vote of a plurality
of the shares present in person or by proxy and entitled to vote at the Annual
Meeting will be elected as a directors.
The Board of Directors recommends a vote FOR the election of the nominees for
the Class Two directors.
Information Concerning Directors
Certain information concerning the Fund's directors is set forth below:
Number of
Portfolios
Director's in Fund
Position(s) Held with Fund, Term of Complex
Principal Occupation(s) During Office and Overseen Dollar
Name, Address* Past 5 Years, and Length of by Range of Shares
and Age Other Directorships Held by Director Time Served Director in Fund
----------------- ------------------------------------ ----------- -------- -------
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
Independent
Directors:
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
Edward O. Boshell, Jr. Director Class Two 1 over
Age 66 Director since $100,000
Retired Chairman of the Board and CEO of 1998. Term
Columbia General Corporation and a private expires 2002.
investor.
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
Charles C. Pierce, Jr. Director. Class Two 1 $10,001 to
Age 67 Director since $50,000
Retired Vice Chairman of Dain Rauscher, 2002. Term
Inc. and a private investor expires 2002.
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
Ernest C. Hill Director Class Three 1 0
Age 62 Director since
Ernest C. Hill has a broad background in 1994. Term
convertible securities analysis with major expires 2003.
NYSE brokerage firms and institutional
investors. He specializes in computer-aided
investment analysis and administrative
procedures. Mr. Hill was awarded a Ford
Fellowship to the Stanford School of
Business, where he received an MBA, with
honors, in Investment and Finance. Mr.
Hill's prior experience includes service as
Assistant Professor of Finance, Southern
Methodist University and Associate Director
of the Southwestern Graduate School of
Banking.
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
Peter Collins Director Class One 1 $10,001 to
Age 56 Director since $50,000
Peter Collins has been a financial and 1994. Term
management consultant to closely-held expires 2004.
businesses for the last ten years in the USA,
the UK, and Europe, in areas of finance,
start-ups, joint ventures and mergers and
acquisitions. He has advised companies in
every segment of industry (including
manufacturing, distribution, service,
agriculture, construction and multimedia)
and in all stages of development (from start-
up to bankruptcy). Mr. Collins was educated
in England, where he received a B.Sc. in
Civil Engineering from Liverpool University
and an M.Sc. in Business Administration
from The City University, London.
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
Interested Director:
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
Russell Cleveland President, Chief Executive Officer and Class Three 3 over
Age 63 Director Director since $100,000
1994. Term
President, Chief Executive Officer, the sole expires 2003.
Director and the majority shareholder of
Renaissance Group. He has served as
President, and Chief Executive Officer of the
Fund since 1994. He is a Chartered
Financial Analyst with over 35 years
experience as a specialist in investments in
smaller capitalization companies. A
graduate of the Wharton School of Business,
Russell Cleveland has served as President of
the Dallas Association of Investment
Analysts. Mr. Cleveland is also the
President, Chief Executive Officer, the sole
director and the majority shareholder of
Renaissance Group, the investment advisor
to the Fund and the investment manager of
Renaissance US Growth and Income Trust
PLC ("RUSGIT") and BFSUS Special
Opportunities Trust PLC ("BFSUS"),
investment trusts listed on the London Stock
Exchange. Mr. Cleveland also serves on the
Boards of Directors of RUSGIT, BFSUS,
Tutogen Medical, Inc., Cover-All
Technologies, Inc., Integrated Security
Systems, Inc. and Digital Recorders, Inc.
--------------------------- ----------------------------------------------- ------------------ --------------- -----------------
------------------------
*The address of all such persons is c/o Renaissance Capital Group, Inc., 8080
North Central Expressway, Suite 210 LB-59, Dallas, Texas 75206.
OWNERSHIP OF SHARES
The following table sets forth certain information known to the Fund with
respect to beneficial ownership of the Fund's Common Stock as of March 1, 2002
(i) for all persons who are beneficial owners of 5% or more of the outstanding
shares of the Fund's Common Stock, (ii) each director and nominee for director
of the Fund, and (iii) all executive officers and directors of the Fund as a
group:
Number of Shares
Beneficially Owned Percent
Name of Beneficial Owner Directly or Indirectly of Class
--------------------------------------- ---------------------- ------------
Edward O. Boshell, Jr., Director 42,200(1) 0.97%
--------------------------------------- ---------------------- ------------
Ernest C. Hill, Director 0 -
--------------------------------------- ---------------------- ------------
Peter Collins, Director 1,900 0.04%
Charles C. Pierce, Jr., Director 966 0.02%
--------------------------------------- ---------------------- ------------
Russell Cleveland, President, Chief 242,375(3) 5.59%
Executive Officer and Director(2)
--------------------------------------- ---------------------- ------------
All directors and officers of the 301,945 6.95%
Fund as a group (8 persons)
--------------------------------------- ---------------------- ------------
-----------------
(1) Shares owned indirectly through Columbia General Investments, L.P.
(2) Mr. Cleveland's address is c/o Renaissance Capital Group, 8080 North
Central Expressway, Suite 210 LB-59, Dallas, Texas 75206.
(3) Includes 20,089 shares owned by the Cleveland Family Limited Partnership
and 211,969 shares owned by Renaissance Investment Limited Partnership.
Committees and Meetings
The Board of Directors held sixteen (16) meetings or executed consent
actions in lieu of meetings in 2001, and each director attended or executed at
least 75% of these meetings and consent actions. The Audit Committee consists of
Ernest C. Hill, Peter Collins and Edward O. Boshell, Jr. and held two meetings
in 2001.
Director Compensation
Directors who are not employees of either the Fund or Renaissance Group
receive a monthly fee of $1,500, plus $750 and out-of-pocket expenses for each
meeting held. The Fund does not pay any fees to, or reimburse expenses of, its
directors who are considered "interested persons" of the Fund. The aggregate
compensation for the period from January 1 to December 31, 2001, that the Fund
paid each director, and the aggregate compensation paid to each director for the
most recently completed fiscal year by other funds to which Renaissance Group
provided investment advisory services (collectively, the "Renaissance Fund
Complex") is set forth below:
Pension or
Retirement Total 2001
Benefits Estimated Compensation
Aggregate 2001 Accrued as Part Annual Benefits from Fund and
Compensation of Fund upon Renaissance
Name of Director from Fund Expenses Retirement Fund Complex
----------------------- ----------------- ----------------- ----------------- -----------------
Russell Cleveland (1) $ 0 $0 $0 $ 13,126
----------------------- ----------------- ----------------- ----------------- -----------------
Peter Collins $ 21,000 $0 $0 $ 21,000
----------------------- ----------------- ----------------- ----------------- -----------------
Ernest C. Hill $ 21,000 $0 $0 $ 21,000
----------------------- ----------------- ----------------- ----------------- -----------------
Edward O. Boshell, Jr. $ 20,250 $0 $0 $ 20,250
----------------------- ----------------- ----------------- ----------------- -----------------
-----------------------
(1) For 2001, Renaissance Group earned $912,544 as its management fee from the
Fund, $919,429 as its incentive fee from the Fund, and $13,126 in
director's fees from affiliate funds with respect to Mr. Cleveland's
services as a director. Mr. Cleveland is President and Chief Executive
Officer of Renaissance Group. See "Information about the Fund's Principal
Officers and Investment Advisor."
Executive Compensation and Options
Officers of the Fund receive no compensation from the Fund. The Fund has
never issued options or warrants to officers or directors of the Fund.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF AUDITOR
The Board of Directors has selected Ernst & Young LLP, independent public
accountants, to audit the Fund for the fiscal year ending December 31, 2002.
Their selection was approved by the vote of a majority of the Board of
Directors, including a majority of the directors who are not "interested
persons" of the Fund, as defined in the 1940 Act. Ernst & Young LLP has
performed audit services for the Fund since 1999. A representative of Ernst &
Young LLP is expected to attend the Annual Meeting. The Ernst & Young LLP
representative will respond to appropriate questions from the shareholders and
will be given the opportunity to make a statement, should the representative
desire to do so. Audit fees for the fiscal year ended December 31, 2001, were
$54,000. There were no fees paid for financial system design and implementation,
and $3,000 in other fees were paid to Ernst & Young LLP during the fiscal year
ended December 31, 2001.
The affirmative role of a majority of shares present, in person or by
proxy, and entitled to vote at the Annual Meeting is required for the
ratification of the selection of the Fund's independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE FUND'S AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2002.
INFORMATION ABOUT THE FUND'S OFFICERS AND THE INVESTMENT ADVISOR
Officers
Set forth below is certain information regarding the officers of
Renaissance Group, the Fund's investment advisor:
Russell Cleveland, age 63, is the President, Chief Executive Officer, the
sole Director and the majority shareholder of Renaissance Group. He is also
President, Chief Executive Officer and a Class Three director of the Fund. He is
a Chartered Financial Analyst with over 35 years experience as a specialist in
investments for smaller capitalization companies. A graduate of the Wharton
School of Business, Russell Cleveland has served as President of the Dallas
Association of Investment Analysts. Mr. Cleveland serves on the Boards of
Directors of Renaissance US Growth and Income Trust PLC, BFSUS Special
Opportunities Trust PLC, Integrated Security Systems, Inc., Tutogen Medical,
Inc., Digital Recorders, Inc., and Cover-All Technologies, Inc. He has served as
an officer and director of the Fund since 1994.
Barbe Butschek, age 47, has been associated with Renaissance Group and its
predecessor companies since 1977, and is a shareholder of Renaissance Group. As
Senior Vice President and Secretary/Treasurer of Renaissance Group, she has been
responsible for office management, accounting management, and records management
of several investment funds. Ms. Butschek supervises investor records and
information with respect to Renaissance Group and its funds. She also prepares
and maintains investor tax and information reports. Ms. Butschek has served as
Secretary and Treasurer of the Fund since 1994.
Robert C. Pearson, age 66, joined Renaissance Group in April 1997 and is
Senior Vice President - Investments. He is also Vice President of the Fund. Mr.
Pearson brings over thirty years of experience to Renaissance Group's corporate
finance function. From May 1994 to May 1997, Mr. Pearson was an independent
financial management consultant. From May 1990 to May 1994, he served as Chief
Financial Officer and Executive Vice President of Thomas Group, Inc., a
management consulting firm, where he was instrumental in moving a small
privately held company from a start-up to a public company with over $40 million
in revenues. Prior to 1990, Mr. Pearson was responsible for all administrative
activities for the Superconducting Super Collider Laboratory. In addition, from
1960 to 1985, Mr. Pearson served in a variety of positions at Texas Instruments
in financial planning and analysis, holding such positions as Vice
President-Controller and Vice President-Finance. Mr. Pearson holds a BS in
Business from the University of Maryland and was a W.A. Paton Scholar with an
MBA from the University of Michigan. He is a director of e-Original, Inc., Poore
Brothers, Inc., CaminoSoft Corp., and Advanced Power Technologies, Inc.
John A. Schmit, age 34, joined Renaissance Group in 1997, and is Vice
President - Investments. Mr. Schmit is responsible for portfolio analysis and
monitoring. From September 1992 to September 1994, he practiced law with the law
firm of Gibson, Ochsner & Adkins, Tulsa, Oklahoma. He holds a BBA in Finance
from Texas Christian University, a JD from the University of Oklahoma College of
Law and an LLM in International and Comparative Law from The Georgetown
University Law Center. He is a director of Obsidian Enterprises, Inc.
Renaissance Group
Renaissance Group provides investment advisory services to the Fund
pursuant to the Investment Advisory Agreement, as amended, between the Fund and
Renaissance Group (the "Agreement"). Renaissance Group is also the Investment
Manager of BFSUS Special Opportunities Trust PLC and Renaissance US Growth and
Income Trust, PLC, investment trusts listed on the London Stock Exchange.
Renaissance Group is a registered investment adviser under the Investment
Advisers Act of 1940, as amended, and is subject to the reporting and other
requirements of that Act. Renaissance Group and its officers and employees
devote such time to the Fund's business as is necessary for the conduct of its
operations. Pursuant to the Agreement, Renaissance Group is entitled to receive
a management fee of 1.75% of the Funds' assets, which is determined and paid on
a quarterly basis, and an incentive fee equal to 20% of the Fund's realized
capital gains net of realized capital losses and unrealized capital
depreciation, which is accrued and paid on a quarterly basis. In 2001, the Fund
paid Renaissance Group $912,544 as its management fee and $919,429 as its
incentive fee. The Fund also received $13,126 in director's fees from affiliate
funds with respect to Mr. Cleveland's services as a director. Neither
Renaissance Group nor its affiliates are prohibited from engaging in activities
outside the Fund's business. Officers and employees of Renaissance Group are
compensated solely by Renaissance Group. Russell Cleveland and Barbe Butschek
own 80% and 20%, respectively, of the Common Stock of Renaissance Group. The
sole director of Renaissance Group is Russell Cleveland.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Agreement, Renaissance Group serves as investment adviser
to the Fund, subject to the supervision of the Board of Directors. Services
provided to the Fund include assisting the Fund in the determination of the net
assets, recommending the valuation of assets of the Fund to the Board subject to
the Board of Directors determination, upon which the management fee and
incentive fee paid to Renaissance Group are based in part. The valuations of
portfolio securities are performed in accordance with generally accepted
accounting principles and financial reporting policies of the Securities and
Exchange Commission. In addition, from time to time, the Board of Directors
reviews the valuation policies to determine their appropriateness.
Renaissance Group has formed, and may form in the future, other investment
funds to make investments in companies similar to those in which the Fund
invests. The determination regarding the existence of a conflict of interest
between these affiliated investment funds and the Fund, and the resolution of
any such conflict, vests in the Board of Directors, subject to the provisions of
the 1940 Act.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") is
comprised of three directors, all of whom meet the independence and experience
requirements of NASD Rule 4200(a)(15). The Audit Committee responsibilities are
described in a written charter adopted by the Board of Directors. The Audit
Committee has reviewed and discussed the Fund's audited financial statements for
the fiscal year ended December 31, 2001, with the Fund's management. The Audit
Committee has discussed with Ernst & Young LLP, the Fund's independent auditors,
the matters required to be discussed by Statement on Auditing Standards No. 61.
The Audit Committee has received the written disclosures and the letter from
Ernst & Young LLP required by Independence Standards Board Standard No. 1 and
has discussed with Ernst & Young LLP its independence. Based on the review and
discussions described above, among other things, the Audit Committee recommended
to the Board of Directors that the audited financial statements of the Fund be
included in the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.
Ernest C. Hill, Chairman
Edmond O. Boshell, Jr.
Peter Collins
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than 10% beneficial owners are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. The Fund believes that during the fiscal year ended December 31,
2001, all Section 16(a) filings relating to the Fund's Common Stock applicable
to its officers, directors and greater than 10% beneficial owners were timely
filed, except a Form 4 for Mr. Boshell's purchase of shares through the Fund's
dividend reinvestment plan was filed on April 4, 2002.
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, shareholders may present proper proposals for inclusion in the Fund's
proxy statement for consideration at its 2001 Annual Meeting of shareholders by
submitting proposals to the Fund in a timely manner. To be included in the proxy
statement for the 2001 Annual Meeting of Shareholders, shareholder proposals
must be received by the Fund by December 15, 2002 and must otherwise comply with
the requirements of Rule 14a-8.
OTHER BUSINESS
Management knows of no other business to be presented at the Annual Meeting
that will be voted on by the shareholders. If other matters properly come before
the Annual Meeting or any adjournment(s), then the persons serving as proxies
will vote the proxies as in their discretion they may deem appropriate.
THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. IF YOU WOULD LIKE A COPY
OF THE REPORT, PLEASE CHECK THE APPROPRIATE BOX ON THE PROXY CARD AND ENCLOSE
THE CARD IN THE SELF-ADDRESSED, POSTAGE-PAID ENVELOPE. A COPY OF THE REPORT WILL
BE FORWARDED TO YOU FREE OF CHARGE BY FIRST CLASS MAIL.
By Order of the Board of Directors,
/S/ Barbe Butschek
Barbe Butschek, Secretary
Dallas, Texas
April 17, 2002
IMPORTANT: PLEASE RETURN PROXY PROMPTLY. SHAREHOLDERS WHO DO NOT EXPECT TO
ATTEND THE ANNUAL MEETING AND WISH THEIR SHARES OF COMMON STOCK TO BE VOTED
SHOULD DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.