Edgar Filing: BOULDER TOTAL RETURN FUND INC

As filed with the Securities and Exchange Commission on May 16, 2003

Securities Act Registration No. 333-

Investment Company Registration No. 811- 7390

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. ___ [_]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 9 |X|

Boulder Total Return Fund, Inc.

(Exact Name of Registrant as Specified In Charter)

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

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

Stephen C. Miller, Esq.
1680 38th Street, Suite 800
Boulder, Colorado 80301

(Name and Address of Agent for Service)

Copies to:

Rose F. DiMartino, Esq.
Willkie Farr and Gallagher
787 Seventh Avenue
New York, NY 10019-6099

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of this Registration Statement.

If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [X]

It is proposed that the filing will become effective when declared
effective pursuant to Section 8(c). [x]

This amendment designates a new effective date for a previously filed
registration statement. [ ]

This Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is ___________________. [ ]

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

===================================================================================================================================

Proposed Proposed
Title of Securities
Maximum Offering Maximum Aggregate Amount of
Being Registered Amount Being
Registered Price per Unit Offering Price (1) Registration Fee
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------

Shares of Common Stock, par value $.01 per share.... 3,150,000 shares $13.07 $41,170,500.00 $3,330.69
-----------------------------------------------------------------------------------------------------------------------------------

(1) As calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended. Based on the average of the high and low prices reported the New York
Stock Exchange on May 14, 2003 (i.e., a specified date within 5 business days
prior to the date of filing this registration statement).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

BOULDER TOTAL RETURN FUND, INC.

Form N-2

CROSS REFERENCE SHEET

Parts A and B of Prospectus

Item Caption Location in Prospectus

Item 1. Outside Front Cover.................................................. Front Cover Page

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

Item 3. Fee Table and Synopsis............................................... Prospectus Summary and Fee Table

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

Item 5. Plan of Distribution................................................. Not Applicable

Item 6. Selling Shareholders................................................. Not Applicable

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

Item 8. General Description of the Registrant................................ Cover Page; Prospectus Summary; The Fund; Risk
Factors and Special Considerations; Capital Stock
and Other Matters; Investment Objective and
Policies

Item 9. Management........................................................... Prospectus Summary; Management of the Fund;
Portfolio Transactions; Custodians and Transfer
Agency;

Item 10. Capital Stock , Long-Term Debt, and Other Securities................. The Offer; Capital Stock and Other Matters;
Dividends and Distributions; Automatic Dividend
Reinvestment and Voluntary Cash Purchase Plan;
Taxation

Item 11. Defaults and Arrears on Senior Securities........................... Not Applicable

Item 12. Legal Proceedings.................................................... Not Applicable

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

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

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

Item 16. General Information and History.................................... Not Applicable

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

Item 18. Management......................................................... Management of the Fund

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

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

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

Item 22. Tax Status......................................................... Taxation

Item 23. Financial Statements............................................... Financial Statements

Part C - Other Information

Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.

PROSPECTUS

9,450,000 Rights for 3,150,000 Shares
BOULDER TOTAL RETURN FUND, INC.

Common Stock

The Boulder Total Return Fund, Inc. (the "Fund") is issuing transferable rights
("Rights") to its shareholders. These Rights will allow you to subscribe for new
shares of common stock of the Fund (the "Common Stock"). For every three (3)
Rights you receive, you will be entitled to buy one (1) new share of the Common
Stock. You will receive one Right for each outstanding Fund share you own on
June 25, 2003 (the "Record Date"). The number of Rights issued to a shareholder
on the Record Date will be rounded up to the nearest number of Rights evenly
divisible by three. In the case of shares of common stock held of record by a
Nominee (defined below), the number of Rights issued to the Nominee will be
adjusted to permit rounding up (to the nearest number of Rights evenly divisible
by three) of the Rights to be received by beneficial owners for whom the Nominee
is the holder of record only if the Nominee provides to the Fund on or before
the close of business on June 26, 2003 a written representation of the number of
Rights required for such rounding. The term "Nominee" shall mean, collectively,
Cede & Co. ("Cede"), as nominee for the Depository Trust Company ("DTC"), or any
other depository or nominee. Shareholders on the Record Date may purchase shares
not acquired by other shareholders in this Rights offering (the "Offering"),
subject to limitations discussed in this Prospectus. See "Oversubscription
Privilege" below.

The Rights are transferable and will be listed for trading on the New York Stock
Exchange ("NYSE") under the symbol "BTF RT" for the duration of the Offering.
The Fund's shares of Common Stock are also listed, and the shares issued
pursuant to this Offering will be listed, on the NYSE under the symbol "BTF." On
May 9, 2003, the last reported net asset value per share of the Fund's shares
was $15.36 and the last reported sales price of a share on the NYSE was $12.98.
The subscription price per share (the "Subscription Price") will be 95% of the
lesser of (a) the Fund's per-share net asset value ("NAV") on the date of
expiration of the Offering (referred to herein as the "Pricing Date" or
"Expiration Date"), or (b) the average volume-weighted sale price of a share of
the Common Stock on the NYSE on the Pricing Date and the four immediately
preceding trading days. The "average-volume weighted sale price" takes into
consideration the volume and sale price of each and every sale of the Fund's
shares during a 5-day period.

SHAREHOLDERS WHO CHOOSE TO EXERCISE THEIR RIGHTS WILL NOT KNOW THE SUBSCRIPTION
PRICE PER SHARE AT THE TIME THEY EXERCISE SUCH RIGHTS SINCE THE OFFERING WILL
EXPIRE (I.E., CLOSE) PRIOR TO THE AVAILABILITY OF THE FUND'S NAV AND OTHER
RELEVANT MARKET INFORMATION ON THE PRICING DATE. ONCE YOU SUBSCRIBE FOR YOUR
SHARES AND THE FUND RECEIVES PAYMENT OR GUARANTEE OF PAYMENT, YOU WILL NOT BE
ABLE TO CHANGE YOUR DECISION. THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON July 16, 2003 (THE "EXPIRATION DATE"), UNLESS THE OFFERING IS EXTENDED
AS DISCUSSED IN THIS PROSPECTUS.

For more information, please call Georgeson Shareholder Communications Inc. (the
"Information Agent") toll free at 1-800-732-6518.

The Fund is a closed-end, diversified management investment company. The Fund's
investment objective is total return. The Fund seeks to achieve its objective by
investing in common stocks for long-term capital appreciation. These stocks may
or may not pay a dividend. The Fund may also invest in income producing
securities, namely dividend paying common stocks (e.g., real estate investment
trusts ("REITs"), utilities and other registered investment companies ("RICs")),
as well as corporate bonds, corporate preferred stock, government securities, or
other income producing securities, to achieve current income consistent with
preservation of capital. The income component is secondary to the long-term
capital appreciation component. No assurance can be given that the Fund will
achieve its investment objective. The Fund typically invests in securities of
U.S.-based companies, though it is not limited to investing in the U.S. stock
market. The Fund anticipates a low turnover rate in its portfolio of common
stocks and, with respect to common stocks held for capital appreciation rather
than income, seeks to invest in stocks that have a proven track record of
earnings and the prospect of increased future value through growth in revenues
and profits. The Fund has the flexibility to invest in companies of any size;
however, it is expected that it will not make significant investments in
start-up companies, initial public offerings, non-public companies, or companies
with little or no operating history.

Boulder Investment Advisers, LLC ("BIA") and Stewart Investment Advisers ("SIA")
(collectively the "Advisers") act as the investment advisers to the Fund. The
address of the Fund and BIA is 1680 38th Street, Suite 800, Boulder, Colorado
80301. SIA, whose legal name is Stewart West Indies Trading Company, Ltd.,
resides at Bellerive, Queen Street, St. Peter, Barbados.

An investment in the Fund is not appropriate for all investors. No assurances
can be given that the Fund's objective will be achieved. FOR A DISCUSSION OF
CERTAIN RISK FACTORS AND SPECIAL CONSIDERATIONS WITH RESPECT TO OWNING SHARES OF
THE FUND, SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS" ON PAGE 11 OF THIS
PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

============================== ============================= ============================ ============================
Estimated Subscription Price Estimated Sales Load Estimated Proceeds to the
Fund (2)
============================== ============================= ============================ ============================

Per Share $12.26(1) None $38,485,075
Total $12.26 None $38,485,075
============================== ============================= ============================ ============================

(1) Since the Subscription Price will not be determined until after printing and
distribution of this Prospectus, the Subscription Price above is estimated based
on the closing price of a share of the Common Stock on May 9, 2003 and applying
the pricing formula set forth on the Cover Page and described below under
"Subscription Price" (i.e., 95% of the lesser of (a) the NAV on the Pricing Date
or (b) the average volume-weighted sale price of a share of the Common Stock on
the NYSE on the Pricing Date and the four immediately preceding trading days)
(the "Estimated Subscription Price"). The average volume-weighted closing sales
price of the Fund's shares on May 9, 2003 was $12.90 per share. See
"Subscription Price" and "Payment For Shares" below.

(2) Proceeds to the Fund before deduction of expenses incurred by the Fund in
connection with the Offering. Offering expenses are estimated to be
approximately $140,000. Funds received by check prior to the final due date of
this Offering will be deposited in a segregated interest-bearing account pending
allocation and distribution of shares. Interest on subscription monies will be
paid to the Fund regardless of whether shares are issued by the Fund.

Shareholders who do not fully exercise their Rights should expect that they
will, at the completion of the Offering, own a smaller proportional interest in
the Fund than if they exercised their Rights (i.e., dilution). As a result of
the Offering you will experience an immediate dilution, which could be
substantial, of the aggregate net asset value of your shares. This is because
the Subscription Price per share (and thus the net proceeds to the Fund for each
new share sold) will be less than the Fund's net asset value per share on the
Expiration Date. The Fund cannot state precisely the extent of this dilution at
this time because the Fund does not know what the net asset value or market
value per share will be when the Offering expires or what proportion of the
Rights will be exercised. Trusts and other entities affiliated with the Horejsi
family hold 41.84% of the Fund's common stock, and certain other persons
affiliated with the Fund and the Advisers (collectively referred to herein as
the "Horejsi Affiliates" and more specifically described on Page 15 of this
Prospectus and the in the SAI (defined below)), may be deemed to control the
Fund. The Horejsi Affiliates have indicated that they intend to fully subscribe
in the Offering's primary subscription and may participate in the
over-subscription privilege in such manner and on the same terms as other
shareholders.

This Prospectus concisely sets forth certain information about the Fund that a
prospective investor should know before investing. Investors are advised to read
and retain it for future reference. A Statement of Additional Information dated
June 15, 2003 (the "SAI") containing additional information about the Fund has
been filed with the SEC and is incorporated by reference in its entirety into
this Prospectus. A copy of the SAI, the table of contents of which appears on
Page 46 of this Prospectus, may be obtained without charge by contacting the
Fund's co-administrator (PFPC Inc.) at (800) 331-1710. The SAI will be sent
within two business days of receipt of a request. All other shareholder
inquiries should be directed to Georgeson Shareholder Communications, Inc., the
Fund's Information Agent, at 1-800-732-6518.

TABLE OF CONTENTS

Table of Contents 3

Prospectus Summary 3

Purpose and Summary of the Offering 3

Board Considerations. 3

Important Terms of the Offering 4

Important Dates for the Offering 5

Key Elements of the Offering 5

Fee Table 9

Financial Highlights 10

Information Regarding the Fund 11

Risk Factors and Special Considerations 11

Dilution 11

Discount From Net Asset Value 12

Repurchase and Charter Provisions 12

Diversified Status 13

Industry Risks and Risks Associated With the Fund's Investments 13

Foreign Securities 13

Dependence on Key Personnel 13

Leveraging 13

The Offering 14

Terms of the Offering 14

Purpose of the Offering 16

Reasons for Conducting the Offering 17

The Subscription Price 19

Over-Subscription Privilege 19

Expiration of the Offering 20

Sales By Subscription Agent 20

Method of Transferring Rights 21

Method of Exercising Rights 21

Subscription Agent 21

Payment for Shares 22

Delivery of Stock Certificates. 24

Foreign Restrictions 24

Federal Income Tax Consequences Associated With the Offering 24

Employee Plan Considerations 26

Use of Proceeds 27

Investment Opportunities 27

Benefit to the Advisers and Co-Administrator 27

Expenses of the Fund 28

Information About the Fund 28

Management of the Fund 28

Board of Directors 28

Information Regarding the Advisers and Co-Administrator 29

Boulder Investment Advisers, L.L.C 29

Stewart Investment Advisers 29

Portfolio Managers 29

Fund Administrative Services, Llc 30

The Investment Co-Advisory Agreements 30

Co-Administration Agreement 31

Investment Objective and Policies 32

Investment Objective 32

Diversification 32

Investment Policies 32

Other Investment Techniques 33

Risks Associated With the Fund's Investments 33

Investments In Common Stocks 33

Investments In Real Estate Investment Trusts 34

Investments In Other Registered Investment Companies 34

Investments In Preferred Stocks and Bonds 34

Amps and Amps Auction Risk 34

Investment Philosophy 35

Common Stocks 35

Cash and Cash Equivalents 35

Fixed Income Investments 35

Dividends and Distributions 35

Dividend Reinvestment Plan 36

Taxation of the Fund 36

Taxation of Shareholders 37

State and Local Tax Matters 38

Determination of Net Asset Value 38

Capital Stock and Other Matters 39

Capitalization 39

Market Price and Net Asset Value Information 39

Preferred Stock 40

Effects of Leverage 41

Voting Rights Associated With the Amps 42

Repurchase of Common Shares 43

Rights With Regard to Dividends, Voting and Liquidation 43

Anti-Takeover Provisions of the Charter and By-Laws 43

Other Service Providers. 45

Custodian 45

Transfer Agent 45

Independent Accountants 45

Legal Matters 45

Reports To Shareholders 45

Available Information 45

SAI - Table of Contents 46

PROSPECTUS SUMMARY

This summary highlights some information that is described more fully elsewhere
in this Prospectus. It may not contain all of the information that is important
to you. To understand the Offering fully, you should read the entire document
carefully, including the risk factors.

PURPOSE AND SUMMARY OF THE OFFERING. The Fund has determined that it would be in
the best interests of the Fund and its existing shareholders to increase the
assets of the Fund . The primary reasons are as follows:

o The increase in assets will result in the Fund's exceeding the
asset-coverage ratio requirements under its Articles Supplementary by
a wider margin, thus giving the Fund greater flexibility to buy and
hold investments without violating those requirements.

o Raising more cash will better position the Fund to take advantage of
investment opportunities that may arise.

o Increasing Fund assets may lower the Fund's expenses as a proportion
of net assets because the Fund's fixed costs would be spread over a
larger asset base. There can be no assurance that by increasing the
size of the Fund, the Fund's expense ratio will be lowered.

o Since the Offering will increase the Fund's outstanding shares, it
will likely increase the number of beneficial owners of Fund shares,
which could increase the level of market interest in and visibility of
the Fund and improve the trading liquidity of the Fund's shares on the
NYSE.

o By increasing the Fund's total assets, the Offering will reduce the
Fund's leverage as a percentage of assets from 35.5% to approximately
30% (assuming the Offering is fully subscribed). The Fund is currently
leveraged with $77.5 million of Taxable Auction Market Preferred Stock
(the "AMPS") and the Fund intends to maintain this amount of leverage.
Because leveraging increases risk, the additional assets from the
Offering will mitigate risks commonly associated with leverage.

The Offering seeks to reward existing shareholders by giving them the right to
purchase additional shares at a price below market and/or net asset value
without incurring any commission or other transaction charges. The distribution
to shareholders of transferable rights, which themselves may have intrinsic
value, will also afford non-subscribing shareholders the potential of receiving
a cash payment upon sale of such Rights, receipt of which may be viewed as
partial compensation for the possible dilution of their interests in the Fund.
See "Reasons for Conducting the Offering" and "Key Elements of the Offering -
Transferable Rights" below.

BOARD CONSIDERATIONS. At a meeting held on April 22, 2003, the Board of
Directors of the Fund (the "Board") approved a transferable rights offering, the
substantive terms of which would permit shareholders to acquire one new share of
the Fund for every three rights held (i.e., a one-for-three rights offering) for
a subscription price equal to 95% of the lesser of (a) the NAV on the Pricing
Date or (b) the average volume-weighted sale price of a share of the Common
Stock on the NYSE on the Pricing Date and the four immediately preceding trading
days. Following is a brief background of the Board's consideration of the
Offering.

On January 21, 2003, at a regularly scheduled meeting of the Board, Management
recommended the Board's consideration of a rights offering and distributed
extensive materials regarding an overview of rights offerings as well as the
legal, practical and financial issues the Board should consider in coming to a
decision to approve a rights offering. At this meeting, although the Board
considered the viability of a rights offering for the Fund in general terms, it
nonetheless resolved to have Management supplement and expand its analysis and
present a formal and more detailed proposal for a rights offering at the next
regularly scheduled meeting. At this meeting, the independent members of the
Board (the "Independent Directors") also resolved to engage an independent and
disinterested consultant to advise the Board, and particularly the Independent
Directors, on the viability and appropriateness of a rights offering for the
Fund. After the January meeting, the Independent Directors interviewed
representatives of Thomas J. Herzfeld, Inc. ("Herzfeld"), a consulting firm
recognized as an expert in the field of closed-end investment companies. The
Independent Directors selected and engaged Herzfeld to prepare an extensive
analysis of rights offerings and their viability and appropriateness vis-a-vis
the Fund.

At the Board's regularly scheduled meeting on April 22, 2003, Management
provided additional analysis (e.g., previously requested by the Board and its
counsel prior to the April meeting) and a formal proposal for the Offering. At
the request of counsel for the Independent Directors, Management provided
additional requested research, analysis and background material regarding the
proposed Offering. Prior to the April meeting, representatives of Herzfeld
presented to the Board and Management a written analysis of rights offerings and
specific recommendations regarding the proposed offering. A representative of
Herzfeld also attended the April meeting and made an oral presentation of the
Herzfeld materials, entertained questions from the Board, Management, the
Advisers, the Fund's counsel and counsel for the Independent Directors, and met
privately with the Independent Directors, their counsel and the Fund's counsel
to discuss the Offering. In summary, Herzfeld advised the Board that in its view
a

well-structured and well-timed rights offering can be a good way for
[the Fund] to raise capital, if this additional capital will allow the
fund to take advantage of investment opportunities, reduce expenses and
maintain asset coverage which would ensure continued high Moody's
ratings of the fund's preferred shares and unencumbered trading of the
portfolio . . .

In the current depressed market environment new capital would give the
adviser assets to invest at bargain prices, and an increase in assets
would allow greater realization of economies of scale and a reduction
of expense ratio (emphasis added).

Following those discussions, and based on recommendations from Herzfeld, the
Board, including all of the Independent Directors, determined that the pricing
of the Offering should be 95% (as recommended by Fund Management) of the lower
of NAV or market price, taking into account the lower dilution likely to result
from the higher price and historical information supplied by Herzfeld supporting
a conclusion that the higher price should not jeopardize the success of the
Offering.

Finally, the Independent Directors conditioned their approval of the Offering on
the Advisers agreeing to waive one-half of any advisory fees which would be
charged against the proceeds from the Offering until such time as 50% or more of
the sum of (i) the proceeds of the Offering and (ii) any cash or cash
equivalents held by the Fund on April 22, 2003 (approximately $22 million) have
been invested in common stock equities in accordance with the Fund's investment
objective. The Advisers agreed to this condition.

At a special telephonic meeting of the Board on June 16, 2003, after review of a
draft of this Prospectus in substantially its final form, the Board, including
the Independent Directors voting separately, unanimously approved the issuance
of this Prospectus and the final terms of the Offering. The Offering does not
require shareholder approval.

Notwithstanding the above, there can be no assurances that the Offering will be
successful nor can there be any assurance that, by increasing the assets of the
Fund, the above noted benefits will be realized.

IMPORTANT TERMS OF THE OFFERING
--------------------------------------------------------------------------------

Total number of shares available for 3,150,000
primary subscription

Number of Rights you will receive for each One Right for each share(+)
outstanding share you own on the Record Date

Subscription Price 95% of the lesser of (a) the
NAV on the Pricing Date or (b) the
average volume-weighted sale price
of a share of the Common Stock on
the NYSE on the Pricing Date and
the four immediately preceding
trading days.

Estimated Subscription Price $12.26

+ The number of Rights to be issued to a Record Date Shareholder (defined below)
will be rounded up to the nearest number of Rights evenly divisible by three.

IMPORTANT DATES FOR THE OFFERING
--------------------------------------------------------------------------------

Record Date June 25, 2003

Subscription Period June 25, 2003 to July 16, 2003

Expiration Date and Pricing Date of the July 16, 2003++
Offering

Deadline for delivery of Subscription July 16, 2003
Certificate and payment of shares, or
Notice of Guaranteed Delivery (*)

Deadline for payment pursuant to Notice of July 23, 2003
Guaranteed Delivery (*)

Confirmation to participants July 28, 2003

Deadline for final payment for shares (if August 8, 2003
any)**

++ Unless the Offering is extended to a date no later than July 29, 2003.

* Record Date Shareholders (defined below) exercising Rights must deliver to
the Subscription Agent by the Expiration Date either (i) the Subscription
Certificate together with the estimated payment or (ii) a Notice of
Guaranteed Delivery.

** Since the actual Subscription Price due from subscribing shareholders
(vis-a-vis the Estimated Subscription Price above) will not be determined
until after printing and distribution of this Prospectus, additional monies
may be owed by subscribers.

KEY ELEMENTS OF THE OFFERING
--------------------------------------------------------------------------------

o ONE-FOR-THREE OFFERING

The Offering will give shareholders of record the "right" to
purchase one new share of the Fund for every three rights
held. For example, if you own 300 shares on the announced
record date, you will receive 300 Rights entitling you to
purchase 100 new shares of the Fund. Shareholders will be
able to exercise all or some of their Rights. However,
Record Date Shareholders who do not exercise all of their
Rights will not be able to participate in the
Over-Subscription Privilege. See "Over-Subscription
Privilege" below.

o TRANSFERABLE RIGHTS

The Rights issued in the Offering will be "transferable",
will be traded on the NYSE and will afford non-subscribing
shareholders the option of selling their Rights on the NYSE
or through the Subscription Agent. Selling the Rights allows
a non-exercising shareholder (i.e., a shareholder who does
not wish to purchase additional shares in the Offering) the
ability to offset some of the dilution which would otherwise
occur. See discussion of "Dilution" below. In contrast, in a
non-transferable rights offering (i.e., an offering where
the rights cannot be traded), non-exercising shareholders
would experience full dilution.

There can be no assurance that a liquid trading market will
develop for the Rights or that the price at which such
Rights trade will approximate the amount of dilution
otherwise realized by a non-exercising shareholder. The
period during which Rights will trade will be limited and,
upon expiration of the Offering, the Rights will cease to
trade and will have no residual value. See "Sale of Rights"
below.

o SUBSCRIPTION PRICE

Under the Offering, new shares will be sold at a price equal
to 95% of the lesser of (a) the NAV on the Pricing Date or
(b) the average volume-weighted sale price of a share of the
Common Stock on the NYSE on the Pricing Date and the four
immediately preceding trading days. Management believes that
this pricing formula (versus a higher or lower percentage
discount or a pre-determined fixed price) will provide an
incentive to shareholders (as well as others who might trade
in the transferable Rights) to participate in the Offering.

o OVER-SUBSCRIPTION PRIVILEGE

If all of the Rights initially issued are not exercised by
Record Date Shareholders, any unsubscribed shares will be
offered to other Record Date Shareholders who have fully
exercised the Rights initially issued to them and who wish
to acquire additional shares. If shares are insufficient to
honor all over-subscriptions, the available shares will be
allocated pro-rata among those who over-subscribe based on
the number of Rights originally issued to them.

o METHOD FOR EXERCISING RIGHTS

Except as described below, subscription certificates
evidencing the Rights ("Subscription Certificates") will be
sent to Record Date Shareholders or their nominees. If you
wish to exercise your Rights, you may do so in the following
ways:

1. Complete and sign the Subscription Certificate. Enclose
it in the envelope provided, together with payment in
full and mail or deliver the envelope to Colbent
Corporation (the "Subscription Agent") at the address
indicated on the Subscription Certificate, calculating
the total payment on the basis of the Estimated
Subscription Price of $12.26 per share (i.e., the
estimated subscription price based on the Fund's NAV
and market price on May 9, 2003). Your completed and
signed Subscription Certificate and payment must be
received by the Expiration Date. A PAYMENT PURSUANT TO
THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY
ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE UNITED
STATES, MUST BE PAYABLE TO THE BOULDER TOTAL RETURN
FUND, INC. AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION
CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE
ACCEPTED.

2. Contact your broker, banker or trust company, which can
arrange, on your behalf, to guarantee delivery of
payment and delivery of a properly completed and
executed Subscription Certificate pursuant to a notice
of guaranteed delivery ("Notice of Guaranteed
Delivery") by the close of business on the third
Business Day (defined below) after the Expiration Date.
Your broker, banker or trust company may charge a fee
for this service. The Notice of Guaranteed Delivery
must be received by the Expiration Date.

Rights holders will have no right to rescind a purchase
after the Subscription Agent has received the Subscription
Certificate or Notice of Guaranteed Delivery. See "The Offer
- Method of Exercising Rights" and "The Offer - Payment for
Shares."

The Subscription Agent will deposit all checks received by
it prior to the final due date into a segregated interest
bearing account at Eastern Bank pending distribution of the
shares from the Offering. All interest will accrue to the
benefit of the Fund and investors will not earn interest on
payments submitted.

-------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES SHOULD BE DIRECTED TO GEORGESON
SHAREHOLDER COMMUNICATIONS, INC., THE FUND'S INFORMATION
AGENT, AT 1-800-732-6518.
-------------------------------------------------------------------------------

o SALE OF RIGHTS

The Rights are transferable until the Expiration Date and
will be admitted for trading on the NYSE. Although no
assurance can be given that a market for the Rights will
develop, trading in the Rights on the NYSE will begin three
Business Days prior to the Record Date and may be conducted
until the close of trading on the last NYSE trading day
prior to the Expiration Date. The value of the Rights, if
any, will be reflected by the market price. Rights may be
sold by individual holders or may be submitted to the
Subscription Agent for sale. Any Rights submitted to the
Subscription Agent for sale must be received by the
Subscription Agent on or before Tuesday, July 15, 2003, one
business day prior to the Expiration Date, due to normal
settlement procedures. Trading of the Rights on the NYSE
will be conducted on a when-issued basis until and including
the date on which the Subscription Certificates are mailed
to Record Date shareholders and thereafter will be conducted
on a regular way basis until and including the last NYSE
trading day prior to the Expiration Date. The shares will
begin trading ex-Rights two Business Days prior to the
Record Date. If the Subscription Agent receives Rights for
sale in a timely manner, it will use its best efforts to
sell the Rights on the NYSE. Any commissions will be paid by
the selling Rights holders. Neither the Fund nor the
Subscription Agent will be responsible if Rights cannot be
sold and neither has guaranteed any minimum sales price for
the Rights. For purposes of this Prospectus, a "Business
Day" shall mean any day on which trading is conducted on the
NYSE.

-------------------------------------------------------------------------------
SHAREHOLDERS ARE URGED TO OBTAIN A RECENT TRADING PRICE FOR
THE RIGHTS ON THE NYSE FROM THEIR BROKER, BANK, FINANCIAL
ADVISOR OR THE FINANCIAL PRESS.
-------------------------------------------------------------------------------

o OFFERING FEES AND EXPENSES

The Fund expects to incur approximately $140,000 of expenses
in connection with the Offering. See "Fees and Expenses of
The Offering" below.

o RESTRICTIONS ON FOREIGN SHAREHOLDERS

The Fund will not mail Subscription Certificates to
shareholders whose record addresses are outside the United
States or who have an APO or FPO address. Shareholders whose
addresses are outside the United States or who have an APO
or FPO address and who wish to subscribe to the Offering
either partially or in full should contact the Subscription
Agent by written instruction or recorded telephone
conversation no later than three Business Days prior to the
Expiration Date. If the Subscription Agent has received no
instruction by such date, the Subscription Agent will
attempt to sell all Rights and remit the net proceeds, if
any, to such shareholders. If the Rights can be sold, sales
of these Rights will be deemed to have been effected at the
weighted average price received by the Subscription Agent on
the day the Rights are sold, less any applicable brokerage
commissions, taxes and other expenses.

o USE OF PROCEEDS

The net proceeds of the Offering are estimated to be
approximately $38,485,075. This figure is based on the
Estimated Subscription Price per share of $12.26 and assumes
all shares offered are sold and that the expenses related to
the Offering estimated at approximately $140,000 are paid.
The Advisers anticipate that it may take up to six months
for the Fund to invest these proceeds in accordance with its
investment objective and policies under current market
conditions. Pending investment, the proceeds will be
invested in certain short-term debt instruments. See "Use of
Proceeds" below.

o RISK FACTORS

See "Risk Factors and Special Considerations" below.

FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
------------------------------------------------------------------------------------------------- ----------------------------

Sales Load (as a percentage of the Offering price) $0
Dividend Reinvestment Plan Fees $0

ANNUAL FUND EXPENSES (as a percentage of net assets attributable to common shares) 5 months Ending 04/30/2003
Annualized
------------------------------------------------------------------------------------------------- ----------------------------

Management Fees 1.95%
Administration Fees 0.29%
Other Expenses 0.37%
Total Annual Fund Expense 2.61%

EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------- -------------- --------------- -------------- --------------

You would pay the following expenses on a $1,000 investment $26.44 $81.25 $138.74 $295.03
assuming a 5% annual return.

The purpose of the foregoing table and example is to assist Rights holders in
understanding the various costs and expenses that an investor in the Fund bears,
directly or indirectly, BUT SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES OF THE FUND MAY BE
GREATER OR LESS THAN THOSE SHOWN. The figures provided under "Other Expenses"
are based upon estimated amounts for the current fiscal year. For more complete
descriptions of certain of the Fund's cost and expenses, see "Management of the
Fund" in this Prospectus and the SAI. Also see "Expenses of the Fund" below.

As stated above, the Independent Directors conditioned their approval of the
Offering on the Advisers agreeing to waive one-half of any advisory fees which
would be charged against the proceeds from the Offering until such time as 50%
or more of the sum of (i) the proceeds of the Offering and (ii) any cash or cash
equivalents held by the Fund on April 22, 2003 (approximately $22 million) have
been invested in common stock equities in accordance with the Fund's investment
objective. The Advisers agreed to this condition, although it is not reflected
in the foregoing table and example.

FINANCIAL HIGHLIGHTS

The table below sets forth selected financial data for a share of Common Stock
outstanding throughout the period presented. The below per share operating
performance and ratios for the year ended November 30, 2000 and prior years,
were audited by the Fund's previous independent accountants. The below per share
operating performance and ratios for the year ended November 30, 2002, were
audited by KPMG LLP, the Fund's independent accountants, as stated in their
report which is incorporated by reference into the SAI. The following
information should be read in conjunction with the Financial Statements and
Notes thereto, which are incorporated by reference into the SAI. The Table below
contains per share operating performance data, total investment returns, ratios
to average net assets and other supplemental data.

Financial Highlights

-------------------------------------------------------------------------------------------
Year Ended November 30
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998 1997 1996 1995 1994 1993***
-------------------------------------------------------------------------------------------
OPERATING PERFORMANCE:

Net asset value, beginning of year $17.36 $14.81 $13.32 $16.06 16.33 $15.31 $14.54 $12.22 $14.36 $13.95
-------------------------------------------------------------------------------------------
Net investment income
0.49 0.63 0.75 1.29 1.33 1.36 1.41 1.39 1.40 0.83
Net realized and unrealized
gain/(loss) on investments (2.51) 2.35 1.50 (1.93) 0.13 1.10 0.72 2.46 (1.94) 0.54
-------------------------------------------------------------------------------------------
Total from investment operations (2.02) 2.98 2.25 (0.64) 1.46 2.46 2.13 3.85 (0.54) 1.37
-------------------------------------------------------------------------------------------
Offering costs and MMP* underwriting
commissions charged to paid in
capital - - - - - - - - - (0.22)

DISTRIBUTIONS: PREFERRED STOCK

Dividends Paid from net investment
income to MMP* Shareholders - - (0.42) (0.35) (0.25) (0.26) (0.34) (0.36) (0.28) (0.09)
Distributions paid from net realized
capital gains to MMP*Shareholders - - - (0.03) (0.14) (0.06) (0.02) - - (0.01)
Dividends paid from net investment
income to AMP** Shareholders (0.16) (0.40) (0.13) - - - - - - -
Change in accumulated undeclared
dividends on MMP*/AMP** Shareholders - 0.02 0.04 (0.06)+ 0.02 (0.02) 0.02 (0.02) 0.01 (0.03)
-------------------------------------------------------------------------------------------
Net Increase/Decrease from operations
applicable to common shares (2.18) 2.60 1.74 (1.08) 1.09 2.12 1.79 3.47 (0.81) 1.02
-------------------------------------------------------------------------------------------
DISTRIBUTIONS: COMMON SHARES
Dividends paid from net investment
income to Common Shareholders (0.14) (0.05) (0.19) (1.02) (1.07) (1.05) (1.02) (1.15) (1.09) (0.61)
Distributions paid from net realized
capital gains to Common Shareholders - - - (0.64) (0.29) (0.05) - - (0.24) -
-------------------------------------------------------------------------------------------
Net Increase/Decrease in Common Net
Asset Value (2.32) 2.55 1.55 (2.74) (0.27) 1.02 0.77 2.32 (2.14) 0.41
-------------------------------------------------------------------------------------------
Costs of AMP** Stock issued - - (0.06) - - - - - - -
------------------------------------------------------------------------------------------

Net asset value, end of year $15.04 $17.36 $14.81 $13.32+ $16.06 $16.33 $15.31 $14.54 $12.22 $14.36
===========================================================================================
Market value, end of year $12.79 $16.05 $12.00 $10.1875 $13.625 $15.625 $14.625 $13.125 $11.125 $14.25

===========================================================================================
Total investment return based on net
asset value(a) (12.62)% 17.68% 13.27% (5.17)% 7.65% 14.66% 13.89% 30.38% (5.79)% 7.40%
===========================================================================================
Total investment return based on
market value(a) (19.62)% 34.27% 20.00% (14.51)% (4.55)% 14.84% 20.50% 29.28% (13.55)% (0.89)%
===========================================================================================
RATIOS TO AVERAGE NET ASSETS AVAILABLE
TO COMMON STOCK SHAREHOLDERS
Operating expenses 2.42% 2.47% 2.55% 1.97% 1.83% 1.60% 1.84% 1.89% 1.91% 1.66%(c)
Net investment income (b 1.85% 1.52% 1.82% 6.08% 5.92% 6.51% 7.44% 7.81% 8.35% 6.59%(c)

PREFERRED STOCK:
Liquidation Value, end of period (in
000s) $77,500 $77,500 $77,500 $77,500 $77,500 $77,500 $77,500 $77,500 $77,500 $77,500
Total Shares Outstanding 775 775 775 775 775 775 775 775 775 775
Asset Coverage 283% 311% 280% 263% 295% 299% 286% 275% 249% 274%
Liquidation preference per share $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Average Market Value per share $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000

SUPPLEMENTAL DATA:
Portfolio turnover rate 38% 16% 85% 69% 86% 77% 98% 93% 110% 135%

Net assets, end of year $219,211 $241,120 $217,310 $203,609 $228,829 $231,572 $221,840 $212,827 $192,795 $212,577
(in 000's)

Ratio of operating expenses to Total
Average Net Assets including
MMP*/AMP** (a) 1.65% 1.66% 1.57% 1.26% 1.22% 1.05% 1.17% 1.16% 1.18% 1.15%(c)

* Money Market Cumulative Preferred(TM) Stock

** Taxable Auction Market Preferred Stock.

*** The Fund commenced operations on February 19, 1993.

(a) Assumes reinvestment of distributions at the price obtained by the Fund's
Dividend Reinvestment Plan.

(b) The net investment income ratios reflect income net of operating expenses
and payments and change in undeclared dividends to MMP*/AMP** Shareholders.

+ Includes effect of additional distribution available to MMP* Shareholders
(.04 per Common share).

INFORMATION REGARDING THE FUND

Boulder Total Return Fund, Inc. is a closed-end, diversified management
investment company. The Fund's investment objective is total return. The Fund
seeks to achieve its objective by investing in common stocks for long-term
capital appreciation. These stocks may or may not pay a dividend. The Fund may
also invest in income producing securities, namely dividend paying common stocks
(e.g., REITs, utilities and other RICs), as well as corporate bonds, corporate
preferred stock, government securities, or other income producing securities, to
achieve current income consistent with preservation of capital. The income
component is secondary to the long-term capital appreciation component. No
assurance can be given that the Fund will achieve its investment objective. As
of May 9, 2003, the Fund had 9,416,743 shares of Common Stock and 775 shares of
AMPS (the Fund's Taxable Auction Market Preferred Stock) outstanding. The Fund's
common shares are traded on the NYSE under the symbol "BTF." The average weekly
trading volume of the Common Stock on the NYSE during the period from May 1,
2002 through April 30, 2003 was 52,000 shares. As of May 9, 2003 the net assets
of the Fund available to Common Stock shareholders was approximately
$144,641,172. Also see "Capital Stock and Other Matters" below and "Management
of the Fund" in the SAI.

RISK FACTORS AND SPECIAL CONSIDERATIONS

Following is a summary of some of the matters that you should consider before
investing in the Fund through the Offering:

DILUTION. Shareholders who do not exercise their Rights should expect that they
will, at the completion of the Offering, own a smaller proportional interest in
the Fund than if they exercised their Rights. As a result of the Offering you
may experience an immediate dilution, which could be substantial, of the
aggregate net asset value of your shares. This is because the Subscription Price
per share (and thus the net proceeds to the Fund for each new share sold) will
be less than the Fund's net asset value per share on the Expiration Date. The
Fund cannot state precisely the extent of this dilution at this time because the
Fund does not know what the net asset value per share will be when the Offering
expires or what proportion of the Rights will be exercised. For example,
assuming that all Rights are exercised and the Subscription Price is $12.26,
which is 95% of the lesser of the Fund's average volume-weighted sale price or
its NAV on May 9, 2003, the Fund's net asset value per share (after payment of
solicitation fees and estimated offering expenses) would be $14.57, representing
a reduction (dilution) of approximately $0.79 per share (or 5.13%). If you do
not wish to exercise your Rights, you should consider selling these Rights as
set forth in this Prospectus. Any cash you receive from selling your Rights will
partially offset any possible dilution of your interest in the Fund. The Fund
cannot give any assurance, however, that a market for the Rights will develop or
that the Rights will have any marketable value. The comparative dilutive effect
of the Offering is shown in Table 1 below.

Table 1
Dilutive Effect for Non-Exercising Shareholders in Dollars and Percent Based on 100 Shares

Col A Col B Col C
Volume
Weighted Expenses of
Discount Average Subscription Shareholder's Rights Dilutive Effect Dilutive
from NAV Market Price (95% of NAV Offering - Fund's NAV Post in Dollars on Effect in
Price Col B) Pre-Offering Post Offering Offering 100 Shares Percent

5% $14.59 $13.86 $15.36 ($0.014) $14.97 ($38.60) -2.51%
10% $13.82 $13.13 $15.36 ($0.014) $14.79 ($56.89) -3.70%
15% $13.06 $12.40 $15.36 ($0.014) $14.61 ($75.18) -4.89%
20% $12.29 $11.67 $15.36 ($0.014) $14.43 ($93.47) -6.09%
25% $11.52 $10.94 $15.36 ($0.014) $14.24 ($111.76) -7.28%

DISCOUNT FROM NET ASSET VALUE. Shares of closed-end funds frequently trade at a
market price that is less than the value of the net assets attributable to those
shares. This is commonly referred to as "trading at a discount from NAV" and is
referred to in this Prospectus as a "Discount". The possibility that the Fund's
shares will trade at a Discount is a risk separate and distinct from the risk
that the Fund's net asset value will decrease. The risk of purchasing shares of
a closed-end fund that might trade at a Discount or unsustainable premium is
more pronounced for investors who wish to sell their shares in a relatively
short period of time because, for those investors, realization of a gain or loss
on their investments is likely to be more dependent upon the existence of a
premium or Discount than upon portfolio performance.

Based on an analysis of Herzfeld, the Discount of a fund typically widens during
a rights offering and sometimes even before the offering begins. The Discount
that may occur after the completion of a rights offering (or in particular the
Offering) is difficult to analyze because there are so many other factors aside
from merely conducting a rights offering that could influence the Fund's
Discount. Based on its research, Herzfeld suggests that there is no reason to
expect a long-term widening of the Discount as a result of the Offering and that
the Discount should "normalize" shortly after the Offering, although there is no
way to predict with any degree of certainty what will happen to the Discount
after the Offering. Nonetheless, there is no evidence that discounts widen or
become persistent simply because a rights offering was conducted. For reference
we have provided data about the Fund's Discount. See "Market Price and Net Asset
Value Information" below.

REPURCHASE AND CHARTER PROVISIONS. You may sell your shares on the NYSE but,
because the Fund is a closed-end fund, you do not have the right to redeem your
shares. The Fund is authorized to repurchase its shares on the open market when
the shares are trading at a discount from net asset value as determined by the
Board from time to time. In addition, certain provisions of the Fund's charter
(the "Charter") and by-laws (the "By-Laws") may be regarded as "anti-takeover"
provisions. The overall effect of these provisions is to render the
accomplishment of a merger or the assumption of control by a principal
shareholder more difficult. These provisions may have the effect of depriving
you of an opportunity to sell your shares at a premium above the prevailing
market price. See "Anti-Takeover Provisions of the Charter and By-Laws."

DIVERSIFIED STATUS. The Fund operates as a "diversified" management investment
company, as defined in the Investment Company Act of 1940, as amended (the "1940
Act"). Under this definition, at least 75% of the value of the Fund's total
assets must, at the time of investment, consist of cash and cash items
(including receivables), U.S. Government securities, securities of other
investment companies, and other securities limited in respect of any one issuer
to an amount not greater in value than 5% of the value of the Fund's total
assets and to not more than 10% of the voting securities of a single issuer.
This limit does not apply, however, to 25% of the Fund's assets, which may be
invested in a single issuer. Notwithstanding its diversified status, the Fund
intends to concentrate its common stock investments in a few issuers and to take
large positions in those issuers, consistent with being a "diversified" fund. As
a result, the Fund is subject to a greater risk of loss than an investment
company that diversifies its investments more broadly. Taking larger positions
is also likely to increase the volatility of the Fund's net asset value
reflecting fluctuation in the value of its large holdings.

INDUSTRY RISKS AND RISKS ASSOCIATED WITH THE FUND'S INVESTMENTS. The Fund from
time to time invests a significant portion of its assets in a narrow range of
companies and industries. The Fund's most notable and largest investment is in
Berkshire Hathaway, Inc. As of May 9, 2003 approximately 33.7% of the Funds
total assets were invested in this single company. The Fund also has a
significant investment in the real estate industry indirectly through its
investments in real estate investment trusts or "REITs". At the time of
investment, the percentage investment in REITs was less than 25%, but since
then, due to both appreciation in the REITs and depreciation of other
investments in the Fund, the Fund's investment in REITs was 26.5% as of May 9,
2003. Because the Fund does not have a fundamental policy of concentrating in
REITs (i.e. requiring the Fund to invest more than 25% in that particular
industry), it is precluded from making any further investments in REITs. As a
result of its existing investments, and with respect to future concentrated
investments, the value of the Fund's shares may be more susceptible to factors
affecting the particular industry (e.g., the REIT industry or industries in
which Berkshire Hathaway participates such as insurance), including government
regulation, greater price volatility for the overall market, rapid obsolescence
of products and services, intense competition and strong market reactions to
technological developments. See "Risks Associated with the Fund's Investments"
below.

FOREIGN SECURITIES. There is no limitation on the amount of foreign securities
in which the Fund may invest, although the Fund has no present intention to make
any significant investment in foreign securities. Investing in securities of
foreign companies and foreign governments, which generally are denominated in
foreign currencies, may involve certain risk and opportunity considerations not
typically associated with investing in domestic companies and could cause the
Fund to be affected favorably or unfavorably by changes in currency exchange
rates and revaluations of currencies. See "Investment Objectives and Policies"
and "Risk Factors and Special Considerations."

DEPENDENCE ON KEY PERSONNEL. The Advisers are dependent upon the expertise of
Stewart Horejsi in providing advisory services with respect to the Fund's
investments. If the Advisers were to lose the services of Mr. Horejsi, their
ability to service the Fund could be adversely affected. There can be no
assurance that a suitable replacement could be found for Mr. Horejsi in the
event of his death, resignation, retirement or inability to act on behalf of the
Advisers.

LEVERAGING. The Fund is currently leveraged through its issuance of $77.5
million par value of the AMPS. Use of leverage may have a number of adverse
effects on the Fund and its shareholders including: (i) leverage may magnify
market fluctuations in the Fund's underlying holdings thus causing a
disproportionate change in the Fund's net asset value; (ii) the Fund's cost of
leverage may exceed the return on the underlying securities acquired with the
proceeds of the leverage, thereby diminishing rather than enhancing the return
to shareholders and generally making the Fund's total return to such
shareholders more volatile; (iii) the Fund may be required to sell investments
in order to meet dividend or interest payments on the debt or preferred stock it
has issued when it may be disadvantageous to do so; (iv) leveraging through the
issuance of preferred stock requires that the holders of the preferred stock
have class voting rights on various matters that could make it more difficult
for the holders of the Common Stock to change the investment objective or
fundamental policies of the Fund, to convert it to an open-end fund or make
certain other changes; and (v) the Fund may be forced to redeem some or all of
the AMPS at inopportune times due to a decline in market value of Fund
investments.

The Offering will have a "de-leveraging" effect with respect to the Common
Stock. Since the proceeds of the Offering will add assets to the Fund with no
proportional or corresponding increase in leverage, it necessarily will decrease
the Fund's leverage-to-equity ratio. This de-leveraging has the effect of
decreasing risk to shareholders of the Common Stock based on the simple fact
that more highly leveraged instruments are riskier (i.e., the higher the ratio
of leverage to equity, the greater the magnification of market fluctuations). Or
on the other hand, while decreasing the Fund's leverage will result in less risk
and volatility, it similarly decreases the beneficial effects that leverage
might otherwise have on the Fund. So long as the Fund is able to invest the
leverage in securities that provide a higher net return than the then current
dividends paid on the AMPS and related expenses, the effect of the leverage will
be to cause the Common Stock shareholders to realize a higher rate of return
than if the Fund were not leveraged. That impact will be reduced if the amount
of leverage is reduced. Nonetheless, Management believes that this reduced
amount of leverage is appropriate given that the Fund invests primarily in
equity securities and that equity funds tend to be less leveraged than funds
that invest primarily in bonds and other income-producing securities. See
""Capital Stock and Other Matters" below and "Leverage" and "Risk Associated
with Leverage" in the SAI.

You should carefully consider your ability to assume the foregoing risks before
making an investment in the Fund. An investment in shares of the Fund is not
appropriate for all investors.

THE OFFERING

TERMS OF THE OFFERING. The Fund is issuing to shareholders on the Record Date
("Record Date Shareholders") Rights to subscribe for shares of the Common Stock.
Each Record Date Shareholder is being issued one transferable Right for every
share of Common Stock owned on the Record Date. The Rights entitle the holder to
acquire one share of Common Stock at the Subscription Price for every three
Rights held. Fractional shares will not be issued upon the exercise of the
Rights. Accordingly, shares may be purchased only pursuant to the exercise of
Rights in integral multiples of three. The number of Rights issued to a
shareholder on the Record Date will be rounded up to the nearest number of
Rights evenly divisible by three. In the case of shares of common stock held of
record by a Nominee (e.g., Cede & Co. ("Cede") as nominee for the Depository
Trust Company ("DTC"), or any other depository or nominee), the number of Rights
issued to the Nominee will be adjusted to permit rounding up (to the nearest
number of Rights evenly divisible by three) of the Rights to be received by
beneficial owners for whom the Nominee is the holder of record only if the
Nominee provides to the Fund on or before the close of business on June 26, 2003
a written representation of the number of Rights required for such rounding.
Rights may be exercised at any time during the period which commences on
Wednesday, June 25, 2003, and ends at 5:00 p.m., New York time, on Wednesday,
July 16, 2003 (the "Subscription Period"), unless extended by the Fund to a date
not later than Tuesday, July 29, 2003, at 5:00 p.m., New York time. See
"Expiration of the Offering." The Right to acquire one additional share of
Common Stock for every three Rights held during the Subscription Period at the
Subscription Price is hereinafter referred to as the "Primary Subscription."

In addition, any Record Date Shareholder who fully exercises all Rights
initially issued to such shareholder is entitled to subscribe for shares which
were not otherwise subscribed for by others in the Primary Subscription (the
"Over-Subscription Privilege"). For purposes of determining the maximum number
of shares a Record Date Shareholder may acquire pursuant to the Offering,
broker-dealers whose shares are held of record by any Nominee will be deemed to
be the holders of the Rights that are issued to such Nominee on their behalf.
Shares acquired pursuant to the Over-Subscription Privilege are subject to
allotment, which is more fully discussed below under "Over-Subscription
Privilege."

The following Table 2 sets forth certain information regarding the
ownership of the Fund's Common Stock as of May 9, 2003 by each person who is
known by the Fund to beneficially own 5% or more of the Fund's Common Stock.

TABLE 2

Ownership of Fund Shares

Name of Owner Number of Percentage
Shares Ownership
---------------------------------------------------------- -------------- ---------------

Badlands Trust Company 12,735 0.14%
Ernest Horejsi Trust No. 1B 2,462,353 26.15%
Lola Brown Trust No. 1B 1,027,886 10.92%
Evergreen Atlantic LLC 257,811 2.74%
Stewart West Indies Trust 78,470 0.83%
Susan L. Ciciora Trust 54,132 0.57%
John S. Horejsi Trust 27,075 0.29%
Evergreen Trust 19,273 0.20%
Aggregate Shares Owned by Horejsi Affiliates (defined 3,939,735 41.84%
below)

Alter Asset Management, Inc.(1) 1,616,745 17.17%

(1) Alter Asset Management is not an affiliate of the Horejsi Affiliates. This
information was obtained from a Schedule 13G filed with the Securities and
Exchange Commission on December 31, 2002.

Evergreen Atlantic, LLC ("EALLC"), The Evergreen Trust (the "Evergreen Trust"),
John S. Horejsi Trust ("John Trust"), Susan L. Ciciora Trust ("Susan Trust"),
Stewart West Indies Trust ("SWI Trust"), the Lola Brown Trust No. 1B (the "Brown
Trust"), the Ernest Horejsi Trust No. 1B (the "EH Trust"), Badlands Trust
Company ("Badlands") and Stewart R. Horejsi are, as a group, considered to be a
"control person" of the Fund (as that term is defined in Section 2(a)(9) of the
1940 Act). EALLC, the Evergreen Trust, John Trust, Susan Trust, SWI Trust, the
Brown Trust, the EH Trust and Badlands (collectively, the "Horejsi Affiliates")
directly own the shares indicated for such entity in the table above, totaling
3,939,735 (41.84%). The EH Trust, a South Dakota grantor trust established by
Stewart R. Horejsi's father, is the Fund's largest shareholder, holding 26.15%
of the Fund's common stock. For further information regarding Fund ownership,
see "Security Ownership by Certain Beneficial Owners" in the SAI. Stewart R.
Horejsi, the Fund's primary investment manager (see "Information Regarding the
Advisers and Co-Administrator" below), is a beneficiary under the EH Trust as
well as under various other trusts comprising part of the Horejsi Affiliates.
Mr. Horejsi is also the primary investment manager for all of the Horejsi
Affiliates.

The Horejsi Affiliates may or may not exercise their Over-Subscription
Privilege. If the Horejsi Affiliates fully exercise their Over-Subscription
Privilege, under certain circumstances (e.g., low shareholder participation in
both the Offering and the Over-Subscription Privilege), the Horejsi Affiliates
could substantially increase their percentage ownership in the Fund at an
advantageous price. For example, with Horejsi Affiliates presently owning 41.84%
of the Fund's shares, if shareholder participation was such that 30% of the
shares in the Offering were unsubscribed or the Rights were not traded, thus
permitting the Affiliates as well as other participating shareholders to
over-subscribe in proportion to their ownership in the Fund, the Horejsi
Affiliates could increase their ownership position in the Fund from 41.84% to
45.98% (or possibly more if shareholder participation in the over-subscription
privilege was low) at an advantageous price.

Any shares acquired in the Offering by the Horejsi Affiliates as "affiliates" of
the Fund as that term is defined under the Securities Act of 1933, as amended
(the "Securities Act"), may only be sold in accordance with Rule 144 under the
Securities Act or another applicable exemption or pursuant to an effective
registration statement under the Securities Act. In general, under Rule 144, as
currently in effect, an "affiliate" of the Fund is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock or the average weekly reported
trading volume of the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain restrictions on the
manner of sale, to notice requirements and to the availability of current public
information about the Fund. In addition, any profit resulting from the sale of
shares so acquired, if the shares are held for a period of less than six months,
will be returned to the Fund.

Rights will be evidenced by Subscription Certificates. The number of Rights
issued to each holder will be stated on the Subscription Certificates delivered
to the holder. The method by which Rights may be exercised and shares paid for
is set forth below in "Method of Exercising Rights" and "Payment for Shares." A
Rights holder will have no right to rescind a purchase after the Subscription
Agent has received payment. See "Payment for Shares" below. Shares issued
pursuant to an exercise of Rights will be listed on the NYSE.

The Rights are transferable until the Expiration Date and have been admitted for
trading on the NYSE. Assuming a market exists for the Rights, the Rights may be
purchased and sold through usual brokerage channels and sold through the
Subscription Agent. Although no assurance can be given that a market for the
Rights will develop, trading in the Rights on the NYSE will begin three Business
Days before the Record Date and may be conducted until the close of trading on
the last NYSE trading day prior to the Expiration Date. Trading of the Rights on
the NYSE will be conducted on a when issued basis until and including the date
on which the Subscription Certificates are mailed to Record Date Shareholders
and thereafter will be conducted on a regular way basis until and including the
last Exchange trading day prior to the Expiration Date. The method by which
Rights may be transferred is set forth below in "Method of Transferring Rights."
The underlying shares will also be admitted for trading on the NYSE and will
begin trading ex-Rights two Business Days prior to the Record Date.

PURPOSE OF THE OFFERING. The Fund has determined that it would be in the best
interests of the Fund and the shareholders to increase the assets of the Fund
primarily for the following reasons:

o Raising more cash will better position the Fund to take advantage of
investment opportunities that may arise.

o Increasing Fund assets may lower the Fund's expenses as a proportion
of average net assets because the Fund's fixed costs would be spread
over a larger asset base, although there can be no assurance that by
increasing the size of the Fund, the Fund's expense ratio will be
lowered.

o By increasing the Fund's total assets, the Offering will reduce the
Fund's leverage as a percentage of assets from 35.5% to approximately
30% (assuming the Offering is fully subscribed). The Fund is currently
leveraged with $77.5 million of AMPS and the Fund intends to maintain
this amount of leverage. Because leveraging increases risk, the
additional assets from the Offering will mitigate risks commonly
associated with leverage.

The Offering seeks to reward existing shareholders by giving them the right to
purchase additional shares at a price that may be below market and/or net asset
value without incurring any commission charge. The distribution to shareholders
of transferable Rights, which themselves may have intrinsic value, will also
afford non-subscribing shareholders the potential of receiving a cash payment
upon sale of such Rights, receipt of which may be viewed as partial compensation
for the possible dilution of their interests in the Fund. See "Reasons for
Conducting the Offering" below.

REASONS FOR CONDUCTING THE OFFERING. Although there are numerous reasons for the
Fund's conducting a rights Offering, Management has emphasized four primary
reasons:

1. INCREASING ASSET COVERAGE OF THE FUND. As of May 9, 2003, the Fund's
total assets were $222,141,000 (based on an NAV of $15.36). This
consists of $144,641,000 of Common Stock equity, and $77.5 million of
leverage. As a percentage of total assets, leverage currently
represents 35.5%, and shareholders' equity is 64.5%. Assuming the
Offering is fully subscribed, the Fund will issue approximately $38.49
million of new equity, and the leverage amount will remain the same.
Therefore, after the Offering, the AMPS leverage will represent about
30% of total assets and shareholders' equity will be 70%. Furthermore,
under its Articles Supplementary, the Fund is required to meet certain
asset coverage tests with respect to the AMPS. If the Fund fails to
meet these requirements and does not correct such failure, the Fund
may be required to redeem the AMPS, in part or in full. Additionally,
failure to meet the foregoing asset coverage requirements would
restrict the Fund's ability to pay dividends to Common Stock
shareholders and could lead to sales of portfolio securities at
inopportune times. With the decline in the overall markets over the
last 12 months, the Fund's total net assets have declined thus causing
the AMPS leverage to increase as a percentage of total assets and
causing the coverage ratio required under the Articles Supplementary
to similarly decrease. The Offering would substantially increase the
Fund's "eligible assets" (i.e., assets which the Articles
Supplementary count when calculating the AMPS coverage ratios) and
thus provide substantially more cushion and comfort vis-a-vis these
coverage obligations in the future. It is impossible to predict with
any meaningful accuracy the effect that the Offering will have on the
coverage ratio required under the Articles Supplementary since its
calculation is dependent on the type of security purchased and held by
the Fund and the various discount factors applied to each security by
the rating agencies. However, the 1940 Act requires the Fund to meet
similar coverage ratios, but without the variable discount factors.
Assuming the Offering is fully subscribed, the 1940 Act leverage ratio
will increase from 2.86:1 to 3.31:1 (the minimum required coverage is
2.0:1 or 200%) based on market data as of May 9, 2003. The Fund has
determined that the AMPS have benefited the Common Stock shareholders.
Notably, the current dividend rate paid by the Fund for its AMPS
leverage is 1.38% as of the auction held on April 22, 2003. Because
the AMPS leverage has been a profitable investment technique in the
past, and because it would result in considerable expense to reissue
once redeemed, the Fund has determined that raising additional assets
through the Offering (and thus increasing eligible assets) is
warranted. The increase in asset coverage will give the Fund greater
investment flexibility to own and hold investments without violating
applicable asset coverage requirements.

2. TAKING ADVANTAGE OF INVESTMENT OPPORTUNITIES. The decline in the stock
market over the last 2 years has resulted, in some instances, in lower
equity prices on good companies which have not been available during
the recent past. The Offering would provide additional cash permitting
the Fund to take advantage of such opportunities if they arise,
without necessarily having to liquidate Fund holdings to raise cash.
In addition, by avoiding the necessity of selling investments, Common
Stock shareholders defer tax consequences which might otherwise arise
from such sales. When Management sees an opportunity, it wants to be
able to take advantage of it quickly and make a significant
investment, without having to sell current holdings in the process.
Having the cash resources to accomplish this is very important.

3. SPREADING EXPENSES ACROSS MORE ASSETS. As a closed-end mutual fund
gets smaller, its expense ratio (i.e., the ratio of expenses to fund
assets) necessarily increases. This is because all funds have certain
fixed costs (e.g., director fees, travel expenses, fidelity bonds,
insurance, legal, accounting and printing costs, etc.) which are not
charged in proportion to the fund's size. As a fund gets smaller,
these fixed costs get spread over fewer assets, thus resulting in a
higher expense ratio. The opposite occurs as a fund's assets increase,
that is, the fixed costs are spread across a larger asset base thus
resulting in a lower expense ratio. The current actual expense ratio
("Current Actual Expense Ratio") is estimated by Management to be
[2.57%] on an annualized basis based on current net assets available
to Common Stock shareholders of approximately $144,641,000 as of May
9, 2003, of which [2.25%] consists of advisory and administration fees
charged as a percentage of assets.1 The expense ratios in this section
are calculated based on the Fund's "net assets" (total assets minus
leverage and expenses). Since advisory and administrative fees are
charged against "total net assets" (i.e., net assets plus leverage
less liabilities), their ratio as a percentage of "net assets" appears
higher than the contracted fee. For example, the contracted advisory
and administrative fees are 1.43% in the aggregate and are applied
against the Fund's total assets (i.e., including leverage). These same
fees equal 2.25% of the Fund's "net assets". The remaining component
of the Current Actual Expense Ratio (i.e., [0.33]%) consists primarily
of expenses charged as a fixed-dollar amount (e.g., director fees,
legal fees, customary proxy related expenses, and insurance). These
expenses are not charged on percentage-of-assets basis, so they do not
tend to be significantly affected by increases or decreases in the
Fund's net assets. Using the actual expenses incurred by the Fund
during fiscal year ending November 30, 2002, the fixed-dollar expenses
totaled $[450,022] or [0.33%] of the Fund's current net assets. It is
this fixed-dollar amount that would be spread over the larger asset
base from the Offering and thus result in a decrease in the Current
Actual Expense Ratio.

Assuming that (i) the Subscription Price is $12.26 (i.e., 95% of the
lower of the Fund's NAV or average 5-day volume-weighted sale price on
May 9, 2003), and (ii) the Offering is fully subscribed, the Fund's
estimated expense ratio would be [2.32%]. This compares favorably to
the Current Actual Expense Ratio of 2.57% - a difference of 0.25% per
annum - representing a significant increase in operating efficiency.
When the expense ratio is calculated as a function of total net
assets, the difference is 0.03%.

4. INCREASED INCOME. The Offering would permit the Fund to invest in
additional dividend-paying securities (e.g., REITs, although only to
the extent they comprise less than 25% of the Fund's total net assets)
which could increase the Fund's net investment income available to
Common Stock shareholders. The Fund's objective of total return may
include a component of income. While the Advisers do not believe high
current income to be a tax-efficient means of return for shareholders
(e.g., due to the fact that income is typically taxable at a
shareholder's maximum tax rate), current income can still be an
effective means of achieving a high total return relative to the
performance of the overall market, especially when non-dividend-paying
equities are declining in value or remaining flat. It is likely that
the Advisers will use a portion of the proceeds to invest in such
income producing securities.

Other reasons supporting the Offering include the following:

INCREASING LIQUIDITY. By conducting the Offering, the liquidity of the
Fund's shares in the market may increase based solely on the fact that there
would be more shares outstanding. In addition, by making the Rights
transferable, there is a good probability that the number of Fund
shareholders will increase after the Offering, which would also increase the
likelihood of greater liquidity in the Fund's shares.

REDUCED TRANSACTION COSTS. A rights offering rewards existing shareholders
with an opportunity to purchase additional shares of Common Stock at a price
that is below market value and net asset value without the transaction costs
that would be associated with open-market purchases or initial public
offerings (e.g., brokerage commissions and underwriting fees).

MORE INFLUENCE. A rights offering permits a fund to grow, and as it grows, a
fund can exert more influence in effecting changes (or preventing changes)
within the companies in which it invests.

INVESTING FOR CONTROL. Although investing for control is not a primary
strategy of the Fund, at those times when Management sees an opportunity and
sees it being in the best interest of shareholders, it wants the Fund to be
big enough and thus have the financial wherewithal to buy the requisite
controlling shares.

BETTER TREATMENT FROM BROKERS. Larger funds can buy "in quantity" and can
sometimes receive better execution and lower commissions from brokers
because of their size.

IMPROVING ANALYST COVERAGE. Increasing the Fund's size may increase analyst
coverage which may in turn stimulate investor interest in the Fund and
ultimately result in narrowing and maintaining a narrow discount.

THE SUBSCRIPTION PRICE. The Subscription Price for the shares to be issued under
the Offering will be equal to 95% of the lesser of (a) the NAV on the Pricing
Date or (b) the average volume-weighted sale price of a share of the Common
Stock on the NYSE on the Pricing Date and the four immediately preceding trading
days (the "Average Closing Price"). For example, if the Offering were held using
a pricing date of May 9, 2003, at which time the NAV was $15.36, the market
price on such date was $12.98, the discount was 15.49%, and the Average Closing
Price for the week was $12.90, then the Subscription Price would be $12.26 per
share.

OVER-SUBSCRIPTION PRIVILEGE. If all of the Rights initially issued are not
exercised, any shares for which subscriptions have not been received will be
offered, by means of the Over-Subscription Privilege, to Record Date
Shareholders who have exercised all the Rights initially issued to them and who
wish to acquire more than the number of shares for which the Rights issued to
them are exercisable. Record Date Shareholders who exercise all the Rights
initially issued to them will have the opportunity to indicate on the
Subscription Certificate how many shares they are willing to acquire pursuant to
the Over-Subscription Privilege. If sufficient shares remain after the Primary
Subscriptions have been exercised, all over-subscriptions will be honored in
full. If sufficient shares are not available to honor all over-subscriptions,
the available shares will be allocated among those who over-subscribe based on
the number of Rights originally issued to them by the Fund. The percentage of
remaining shares each over-subscribing shareholder may acquire will be rounded
down to result in delivery of whole shares. The allocation process may involve a
series of allocations in order to assure that the total number of shares
available for over-subscriptions is distributed on a pro rata basis.

The method by which shares will be distributed and allocated pursuant to the
Over-Subscription Privilege is as follows. Shares will be available for purchase
pursuant to the Over-Subscription Privilege only to the extent that the maximum
number of shares is not subscribed for through the exercise of the Primary
Subscription by the Expiration Date. If the shares so available ("Excess
Shares") are not sufficient to satisfy all subscriptions pursuant to the
Over-Subscription Privilege, the Excess Shares will be allocated pro rata
(subject to the elimination of fractional shares) among those holders of Rights
exercising the Over-Subscription Privilege, in proportion, not to the number of
shares requested pursuant to the Over-Subscription Privilege, but to the number
of shares held on the Record Date; provided, however, that if this pro rata
allocation results in any holder being allocated a greater number of Excess
Shares than the holder subscribed for pursuant to the exercise of such holder's
Over-Subscription Privilege, then such holder will be allocated only such number
of Excess Shares as such holder subscribed for and the remaining Excess Shares
will be allocated among all other holders exercising Over-Subscription
Privileges. The formula to be used in allocating the Excess Shares is as
follows:

Holder's Record Date Position x Excess Shares Remaining
--------------------------------------
Total Record Date Position by All
Over-Subscribers

The Fund will not offer or sell any shares which are not subscribed for under
the Primary Subscription or the Over-Subscription Privilege.

EXPIRATION OF THE OFFERING. The Offering will expire at 5:00 p.m., New York
time, on the Expiration Date (Wednesday, July 16, 2003), unless extended by the
Fund to a date not later than Tuesday, July 29, 2003 at 5:00 p.m., New York time
(the "Extended Expiration Date"). Rights will expire on the Expiration Date (or
Extended Expiration Date as the case may be) and thereafter may not be
exercised.

SALES BY SUBSCRIPTION AGENT. Holders of Rights who do not wish to exercise any
or all of their Rights may instruct the Subscription Agent to sell any
unexercised Rights. The Subscription Certificates representing the Rights to be
sold by the Subscription Agent must be received on or before the Expiration Date
(unless extended). Upon the timely receipt of appropriate instructions to sell
Rights, the Subscription Agent will use its best efforts to complete the sale
and will remit the proceeds of sale, net of commissions, if any, to the holders.
If the Rights can be sold, sales of the Rights will be deemed to have been
effected at the weighted average price received by the Subscription Agent on the
day such Rights are sold. The selling Rights holder will pay all brokerage
commissions incurred by the Subscription Agent on a prorata basis with other
selling Rights holders. These sales may be effected by the Subscription Agent
through independent registered broker-dealers. The Subscription Agent will
attempt to sell all Rights that remain unclaimed as a result of Subscription
Certificates being returned by the postal authorities as undeliverable as of the
fourth Business Day prior to the Expiration Date. These sales will be made net
of commissions on behalf of the non-claiming shareholders. Proceeds from those
sales will be held by Eastern Bank for the account of the non-claiming
shareholder until the proceeds are either claimed or escheat. There can be no
assurance that the Subscription Agent will be able to complete the sale of any
of these Rights and neither the Fund nor the Subscription Agent has guaranteed
any minimum sales price for the Rights. All of these Rights will be sold at the
market price, if any, on the NYSE.

METHOD OF TRANSFERRING RIGHTS. The Rights evidenced by a single Subscription
Certificate may be transferred in whole by endorsing the Subscription
Certificate for transfer in accordance with the accompanying instructions. A
portion of the Rights evidenced by a single Subscription Certificate (but not
fractional Rights) may be transferred by delivering to the Subscription Agent a
Subscription Certificate properly endorsed for transfer, with instructions to
register the portion of the Rights evidenced thereby in the name of the
transferee (and to issue a new Subscription Certificate to the transferee
evidencing the transferred Rights). In this event, a new Subscription
Certificate evidencing the balance of the Rights will be issued to the Rights
holder or, if the Rights holder so instructs, to an additional transferee.

Holders wishing to transfer all or a portion of their Rights (but not fractional
Rights) should allow at least three Business Days prior to the Expiration Date
for (i) the transfer instructions to be received and processed by the
Subscription Agent, (ii) a new Subscription Certificate to be issued and
transmitted to the transferee or transferees with respect to transferred Rights,
and to the transferor with respect to retained rights, if any, and (iii) the
Rights evidenced by the new Subscription Certificates to be exercised or sold by
the recipients thereof. Neither the Fund nor the Subscription Agent shall have
any liability to a transferee or transferor of Rights if Subscription
Certificates are not received in time for exercise or sale prior to the
Expiration Date.

Except for the fees charged by the Subscription Agent (which will be paid by the
Fund as described below), all commissions, fees and other expenses (including
brokerage commissions and transfer taxes) incurred in connection with the
purchase, sale or exercise of Rights will be for the account of the transferor
of the Rights, and none of these commissions, fees or expenses will be paid by
the Fund or the Subscription Agent.

The Fund anticipates that the Rights will be eligible for transfer through, and
that the exercise of the Primary Subscription and Over-Subscription may be
effected through, the facilities of DTC. Rights exercised through DTC are
referred to as "DTC Exercised Rights".

METHOD OF EXERCISING RIGHTS. Rights may be exercised by filling in and signing
the reverse side of the Subscription Certificate and mailing it in the envelope
provided, or otherwise delivering the completed and signed Subscription
Certificate to the Subscription Agent, together with payment for the shares as
described below under "Payment for Shares." Rights may also be exercised through
a Rights holder's broker, who may charge the Rights holder a servicing fee in
connection with such exercise.

Completed Subscription Certificates must be received by the Subscription Agent
prior to 5:00 p.m., New York time, on the Expiration Date (unless payment is
effected by means of a notice of guaranteed delivery as described below under
"Payment for Shares"). The Subscription Certificate and payment should be
delivered to Colbent Corporation at the following address:

If By Mail: If By Hand: If By Overnight Courier:
----------- ----------- -----------------------
Colbent Corporation Securities Transfer & Reporting Services, Colbent Corporation
Attn: Corporate Actions Inc. Attn: Corporate Actions
P.O. Box 859208 c/o Colbent Corporation 40 Campanelli Drive
Braintree, MA 02185-9208 Attn: Corporate Actions Braintree, MA 02184
100 William Street, Galleria
New York, New York 10038

SUBSCRIPTION AGENT. The Subscription Agent is Colbent Corporation, Attn:
Corporate Actions, P.O. Box 859208, Braintree, MA 02185-9208. The Subscription
Agent will receive from the Fund an amount estimated to be $25,000, comprised of
the fee for its services and the reimbursement for certain expenses related to
the Offering. INQUIRIES BY ALL HOLDERS OF RIGHTS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT 1-800-732-6518; HOLDERS MAY ALSO CONSULT THEIR BROKERS OR
NOMINEES.

PAYMENT FOR SHARES. Payment for shares shall be calculated by multiplying the
Estimated Subscription Price of $12.26 per share times the sum of (i) the number
of Rights held and intended to be exercised in the Primary Subscription, plus
(ii) the number of additional shares for which a shareholder wishes to
over-subscribe under the Over-Subscription Privilege. For example, if a
shareholder receives 300 Rights and wishes to subscribe for 100 shares in the
Primary Subscription, and also wishes to over-subscribe for 50 additional shares
under the Over-Subscription Privilege, he would send in $12.26 x 100 ($1,226.00)
plus $12.26 x 50 ($613.00). Holders of Rights who wish to acquire shares on
Primary Subscription or pursuant to the Over-Subscription Privilege may choose
between the following methods of payment:

1. If, prior to 5:00 p.m., New York time, on the Expiration Date, the
Subscription Agent shall have received a notice of guaranteed delivery
by telegram or otherwise, from a bank or trust company or a NYSE
member firm guaranteeing delivery of (i) payment of the Estimated
Subscription Price of $12.26 per share for the shares subscribed for
in the Primary Subscription and any additional shares subscribed for
pursuant to the Over-Subscription Privilege and (ii) a properly
completed and executed Subscription Certificate, the subscription will
be accepted by the Subscription Agent. The Subscription Agent will not
honor a notice of guaranteed delivery unless a properly completed and
executed Subscription Certificate is received by the Subscription
Agent prior to 5:00 p.m., New York time, on the third (3rd) Business
Day after the Expiration Date (the "Protect Period").

2. Alternatively, a shareholder can, together with the properly completed
and executed Subscription Certificate, send payment for the shares
acquired in the Primary Subscription and any additional shares
subscribed for pursuant to the Over-Subscription Privilege, to the
Subscription Agent based on the Estimated Subscription Price of $12.26
per share. To be accepted, such payment, together with the
Subscription Certificate, must be received by the Subscription Agent
prior to 5:00 p.m., New York time, on the Expiration Date.

If the Estimated Subscription Price is greater than the actual per share
purchase price, the excess payment will be applied toward the purchase of
additional shares to the extent that there remain sufficient unsubscribed shares
available after the Primary and Over-Subscription allocations are completed. To
the extent that sufficient unsubscribed shares are not available to apply all of
the excess payment toward the purchase of additional shares, available shares
will be allocated in the manner consistent with that described in the section
entitled "Over-Subscription Privilege" above. Any excess payment will be
refunded to you to the extent that additional shares are not available.

A PAYMENT, PURSUANT TO THE SECOND METHOD DESCRIBED ABOVE, MUST
ACCOMPANY ANY SUBSCRIPTION CERTIFICATE FOR SUCH
SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.

Within five (5) business days following the completion of the Protect Period, a
confirmation will be sent by the Subscription Agent to each shareholder (or, if
the Fund's shares on the Record Date are held by Cede or any other depository or
nominee, to Cede or such other depository or nominee). The date of the
confirmation is referred to as the "Confirmation Date." The confirmation will
show (i) the number of shares acquired pursuant to the Primary Subscription;
(ii) the number of shares, if any, acquired pursuant to the Over-Subscription
Privilege; (iii) the per share and total purchase price for the shares; and (iv)
any additional amount payable by such shareholder to the Fund (e.g., if the
Estimated Subscription Price was less than the Subscription Price on the Pricing
Date) or any excess to be refunded by the Fund to such shareholder (e.g., if the
Estimated Subscription Price was more than the Subscription Price on the Pricing
Date). Any additional payment required from a shareholder must be received by
the Subscription Agent prior to 5:00 p.m., New York time, on the tenth (10th)
Business Day after the Confirmation Date, and any excess payment to be refunded
by the Fund to such shareholder will be mailed by the Subscription Agent within
ten (10) Business Days after the Confirmation Date. All payments by a
shareholder must be made in United States Dollars by money order or by checks
drawn on banks located in the continental United States payable to Eastern Bank
acting on behalf of the Subscription Agent.

Whichever of the above two methods is used, issuance and delivery of
certificates for the shares subscribed for are subject to collection of funds
and actual payment pursuant to any notice of guaranteed delivery.

The Subscription Agent will deposit all checks received by it prior to the final
due date into a segregated interest bearing account at Eastern Bank pending
distribution of the shares from the Offering. All interest will accrue to the
benefit of the Fund and investors will not earn interest on payments submitted.

YOU WILL HAVE NO RIGHT TO RESCIND YOUR SUBSCRIPTION AFTER THE SUBSCRIPTION
AGENT HAS RECEIVED THE SUBSCRIPTION CERTIFICATE OR NOTICE OF
GUARANTEED DELIVERY.

If a holder of Rights who acquires shares pursuant to the Primary Subscription
or the Over-Subscription Privilege does not make payment of any amounts due, the
Fund reserves the right to take any or all of the following actions: (i) find
other purchasers for such subscribed-for and unpaid-for shares; (ii) apply any
payment actually received by it toward the purchase of the greatest whole number
of shares which could be acquired by such holder upon exercise of the Primary
Subscription or the Over-Subscription Privilege; (iii) sell all or a portion of
the shares purchased by the holder in the open market, and apply the proceeds to
the amounts owed; and (iv) exercise any and all other rights or remedies to
which it may be entitled, including, without limitation, the right to set off
against payments actually received by it with respect to such subscribed shares
and to enforce the relevant guaranty of payment.

Holders who hold shares of Common Stock for the account of others, such as
brokers, trustees or depositaries for securities, should notify the respective
beneficial owners of the shares as soon as possible to ascertain the beneficial
owners' intentions and to obtain instructions with respect to the Rights. If the
beneficial owner so instructs, the record holder of the Rights should complete
Subscription Certificates and submit them to the Subscription Agent with the
proper payment. In addition, beneficial owners of Common Stock or Rights held
through such a holder should contact the holder and request the holder to effect
transactions in accordance with the beneficial owner's instructions.

The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
FUND.

The method of delivery of Subscription Certificates and payment of the
Subscription Price to the Subscription Agent will be at the election and risk of
the Rights Holders, but if sent by mail it is recommended that the certificates
and payments be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the Subscription Agent and clearance of payment prior to 5:00 p.m., New York
time, on the Expiration Date. Because uncertified personal checks may take at
least five business days to clear, you are strongly urged to pay, or arrange for
payment, by means of a certified or cashier's check or money order.

All questions concerning the timeliness, validity, form and eligibility of any
exercise of Rights will be determined by the Fund, whose determinations will be
final and binding. The Fund in its sole discretion may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Fund determines
in its sole discretion. Neither the Fund nor the Subscription Agent will be
under any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Certificates or incur any liability for
failure to give such notification.

DELIVERY OF STOCK CERTIFICATES. Certificates representing shares purchased
pursuant to the Primary Subscription will be delivered to subscribers as soon as
practicable after the corresponding Rights have been validly exercised and full
payment for the shares has been received and cleared. Certificates representing
shares purchased pursuant to the Over-Subscription Privilege will be delivered
to subscribers as soon as practicable after the Expiration Date and after all
allocations have been effected.

FOREIGN RESTRICTIONS. Subscription Certificates will only be mailed to Record
Date Shareholders whose addresses are within the United States (other than an
APO or FPO address). Record Date Shareholders whose addresses are outside the
United States or who have an APO or FPO address and who wish to subscribe to the
Offering either in part or in full should contact the Subscription Agent
(Colbent Corporation), by written instruction or recorded telephone conversation
at 781-843-1833 ext 203, no later than three (3) Business Days prior to the
Expiration Date. The Fund will determine whether the Offering may be made to any
such shareholder. If the Subscription Agent has received no instruction by the
third business day prior to the Expiration Date or the Fund has determined that
the Offering may not be made to a particular shareholder, the Subscription Agent
will attempt to sell all of such shareholder's Rights and remit the net
proceeds, if any, to such shareholders. If the Rights can be sold, sales of
these Rights will be deemed to have been effected at the weighted average price
received by the Subscription Agent on the day the Rights are sold, less any
applicable brokerage commissions, taxes and other expenses.

FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE OFFERING. The following is a
general summary of the significant federal income tax consequences of the
receipt of Rights by a Record Date Shareholder and a subsequent lapse, exercise
or sale of such Rights. The discussion also addresses the significant federal
income tax consequences to a holder that purchases Rights in a secondary-market
transaction (e.g., on the NYSE). The discussion is based upon applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Regulations promulgated thereunder and other authorities currently in
effect but does not address any state, local or foreign tax consequences of the
Offering. The discussion assumes, as is expected, that the fair market value of
the Rights distributed to all of the Record Date Shareholders will be less than
15% of the total fair market value of all of the Fund's Common Stock as of the
Record Date.

For purposes of the following discussion, the term "Old Share" shall mean a
currently outstanding share of the Fund's Common Stock with respect to which a
Right is issued and the term "New Share" shall mean a newly issued share of the
Fund's Common Stock that is received upon the exercise of a Right.

FOR ALL RECORD DATE SHAREHOLDERS.

Neither the receipt nor the exercise of Rights by a Record Date
Shareholder will result in taxable income to such shareholder for federal
income tax purposes regardless of whether or not the shareholder makes
the below-described election which is available under Section 307(b)(2)
of the Code (a "Section 307(b)(2) Election").

If a Record Date Shareholder makes a Section 307(b)(2) Election, the
shareholder's federal income tax basis in any Right received pursuant to
the Offering will be equal to a portion of the shareholder's existing
federal income tax basis in the related Old Share. If made, a Section
307(b)(2) Election is effective with respect to all Rights received by a
Record Date Shareholder. A Section 307(b)(2) Election is made by
attaching a statement to the Record Date Shareholder's federal income tax
return for the taxable year which includes the Record Date. Record Date
Shareholders should carefully review the differing federal income tax
consequences described below before deciding whether or not to make a
Section 307(b)(2) Election.

FOR RECORD DATE SHAREHOLDERS MAKING A SECTION 307(b)(2) ELECTION.

LAPSE OF RIGHTS. If a Record Date Shareholder makes a Section 307(b)(2)
Election, no taxable loss will be realized for federal income tax
purposes if the shareholder retains a Right but allows it to lapse
without exercise. Moreover, the existing federal income tax basis of the
related Old Share will not be reduced as a result of such lapse.

EXERCISE OF RIGHTS. If an electing Record Date Shareholder exercises a
Right, the shareholder's existing federal income tax basis in the related
Old Share must be allocated between such Right and the Old Share in
proportion to their respective fair market values as of the Record Date.
Upon such exercise of the shareholder's Rights, the New Shares received
by the shareholder pursuant to such exercise will have a federal income
tax basis equal to the sum of the basis of such Rights as described in
the previous sentence and the Subscription Price paid for the New Shares
(as increased by any servicing fee charged to the shareholder by his
broker, bank or trust company and other similar costs). If the Record
Date Shareholder subsequently sells such New Shares (and holds such
shares as capital assets at the time of their sale), the shareholder will
recognize a capital gain or loss equal to the difference between the
amount received from the sale of the New Shares and the shareholder's
federal income tax basis in the New Shares as described above. Such
capital gain or loss will be long-term capital gain or loss if the New
Shares are sold more than one year after the date that the New Shares are
acquired by the Record Date Shareholder. In addition, if a Record Date
Shareholder exercises a Right and later sells the related Old Share, his
gain on the sale of the Old Share will be increased (or his loss
decreased) by the amount of the shareholder's original basis in the Old
Share that was allocated to the related Right as described above.

SALE OF RIGHTS. If an electing Record Date Shareholder sells a Right, he
will recognize a gain or loss equal to the difference between the amount
received for such Right and the federal income tax basis of the Right
computed as set forth above under "Exercise of Rights". Any such gain or
loss will be capital gain or loss (if the Right is held as a capital
asset at the time of its sale) and the Record Date Shareholder's holding
period for the Right will include the shareholder's holding period for
the related Old Share. Any such capital gain or loss will thus be
long-term capital gain or loss if the related Old Share has been held by
the Record Date Shareholder for more than one year at the time the Right
is sold. In addition, if a Record Date Shareholder sells a Right and
later sells the related Old Share, his gain on the sale of the Old Share
will be increased (or his loss decreased) by the amount of the
shareholder's original basis in the Old Share that was allocated to the
Right as described above.

FOR RECORD DATE SHAREHOLDERS NOT MAKING A SECTION 307(b)(2) ELECTION

LAPSE OF RIGHTS. If a Record Date Shareholder does not make a Section
307(b)(2) Election, no taxable loss will be realized for federal income
tax purposes if the shareholder retains a Right but allows it to lapse
without exercise. Moreover, the federal income tax basis of the related
Old Share will not be reduced as a result of such lapse.

EXERCISE OF RIGHTS. If a non-electing Record Date Shareholder exercises
his Rights, the federal income tax basis of the related Old Shares will
remain unchanged and the New Shares will have a federal income tax basis
equal to the Subscription Price paid for the New Shares (as increased by
any servicing fee charged to the shareholder by his broker, bank or trust
company and other similar costs). If the Record Date Shareholder
subsequently sells such New Shares (and holds such shares as capital
assets at the time of their sale), the shareholder will recognize a
capital gain or loss equal to the difference between the amount received
from the sale of the New Shares and the shareholder's federal income tax
basis in the New Shares as described above. Such capital gain or loss
will be long-term capital gain or loss if the New Shares are sold more
than one year after the Record Date Shareholder acquires the New Shares.

SALE OF RIGHTS. If a non-electing Record Date Shareholder sells a Right,
he will recognize a gain equal to the entire amount received for such
Right. Any such gain will be a capital gain (if the Right is held as a
capital asset at the time of its sale) and the Record Date Shareholder's
holding period for the Right will include the shareholder's holding
period for the related Old Share. Any such capital gain will thus be
long-term capital gain if the related Old Share has been held for more
than one year at the time the Right is sold. In addition, the Record Date
Shareholder's federal income tax basis in the related Old Share will
remain unchanged.

FOR SECONDARY-MARKET PURCHASERS OF RIGHTS. The exercise of Rights by a purchaser
who acquires such Rights on the NYSE or in another secondary-market transaction
will not result in taxable income to such purchaser.

LAPSE OF RIGHTS. A taxable loss will be realized by a purchaser who
allows his Rights to expire without exercise. Such taxable loss will be
equal to the purchaser's cost for the Rights (as increased by any
brokerage costs and similar costs) and will be a short-term capital loss
if the purchaser holds the Rights as capital assets at the time of their
lapse.

EXERCISE OF RIGHTS. A purchaser's basis for determining gain or loss upon
the sale of a New Share acquired through the exercise of his Rights will
be equal to the sum of the Subscription Price for the New Share plus the
purchase price of the Rights that were exercised in order to acquire such
New Share (with such Subscription Price and purchase price each being
increased by any applicable servicing fees charged to the purchaser by
his broker, bank or trust company and other similar costs). A purchaser's
holding period for a New Share acquired upon exercise of a Right begins
with the date of exercise of the Right. A taxable gain or loss recognized
by a purchaser upon a sale of a New Share will be a capital gain or loss
(assuming the New Share is held as a capital asset at the time of its
sale) and will be a long-term capital gain or loss if the New Share has
been held at the time of its sale for more than one year.

SALE OF RIGHTS. A taxable gain or loss recognized by a purchaser upon a
sale of a Right will be a short-term capital gain or loss if the Right is
held as a capital asset at the time of its sale.

EMPLOYEE PLAN CONSIDERATIONS. Shareholders that are employee benefit plans
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including corporate savings and 401(k) plans, Keogh Plans of
self-employed individuals and Individual Retirement Accounts ("IRA") (each a
"Benefit Plan" and collectively, "Benefit Plans"), should be aware that
additional contributions of cash in order to exercise Rights may be treated as
Benefit Plan contributions and, when taken together with contributions
previously made, may subject a Benefit Plan to excise taxes for excess or
nondeductible contributions. In the case of Benefit Plans qualified under
Section 401(a) of the Code, additional cash contributions could cause the
maximum contribution limitations of Section 415 of the Code or other
qualification rules to be violated. Benefit Plans contemplating making
additional cash contributions to exercise Rights should consult with their
counsel prior to making such contributions.

Benefit Plans and other tax exempt entities, including governmental plans,
should also be aware that if they borrow in order to finance their exercise of
Rights, they may become subject to the tax on unrelated business taxable income
("UBTI") under Section 511 of the Code. If any portion of an IRA is used as
security for a loan, the portion so used is also treated as distributed to the
IRA depositor.

ERISA contains prudence and diversification requirements and ERISA and the Code
contain prohibited transaction rules that may impact the exercise of Rights.
Among the prohibited transaction exemptions issued by the Department of Labor
that may exempt a Benefit Plan's exercise of Rights are Prohibited Transaction
Exemption 84-24 (governing purchases of shares in investment companies) and
Prohibited Transaction Exemption 75-1 (covering sales of securities).

Due to the complexity of these rules and the penalties for noncompliance,
Benefit Plans should consult with their counsel regarding the consequences of
their exercise of Rights under ERISA and the Code.

USE OF PROCEEDS

INVESTMENT OPPORTUNITIES. Management estimates the net proceeds of the Offering
to be approximately $38.49 million based on an Estimated Subscription Price of
$12.26 per share, assuming the Offering is fully subscribed and the expenses
related to the Offering are approximately $140,000. The foregoing estimates are
based on the closing price of the Fund's shares on May 9, 2003. Accordingly, the
assumptions and projections contained in this Prospectus are subject to change
significantly depending on changes in market conditions for the Fund's shares
and performance of the Fund's portfolio.

As of the date of this Prospectus, the Fund is fully invested in accordance with
its investment objective. As of May 9, 2003, 89.28% of the Fund's assets are
invested in common stocks or fixed income securities consistent with the Fund's
objective. The Advisers have indicated that, at the present time, the market
offers some attractive investment opportunities that, in some instances, have
not existed for years and which, if taken advantage of, could yield positive
results to shareholders over the long term. The Advisers have indicated that, if
the Offering is implemented as contemplated by this Prospectus, there should be
ample opportunities in which to invest the proceeds of the Offering within 6
months of receipt. As a condition to conducting the Offering, the Advisers have
agreed to waive one-half of any advisory fees which would be charged against the
proceeds from the Offering until such time as 50% or more of the sum of (i) the
proceeds of the Offering and (ii) any cash or cash equivalents held by the Fund
on April 22, 2003, have been invested in common stock equities in accordance
with the Fund's investment objective (which include shares of REITs and
investment companies).

BENEFIT TO THE ADVISERS AND CO-ADMINISTRATOR. The Advisers and FAS will benefit
from the Offering because their fees are based on the average total net assets
of the Fund.

It is not possible to state precisely the amount of additional compensation the
Advisers and FAS will receive as a result of the Offering because the proceeds
of the Offering will be invested in additional portfolio securities which will
fluctuate in value. However, if all Rights are exercised at the Estimated
Subscription Price of $12.26 (i.e., the estimated subscription price based on
the Fund's NAV and share price on May 9, 2003), the annual compensation to be
received by the Advisers and FAS would be increased by approximately $520,000.
This does not reflect the impact of the initial fee waiver by the Advisers (see
"Effect of Offering on Expense Ratio" above and "Use of Proceeds" below). Two of
the Fund's Directors who voted to approve the Offering are "interested persons"
of the Advisers within the meaning of the 1940 Act. One of these Directors,
Susan L. Ciciora, could benefit indirectly from the Offering because of her
beneficial interest in the Advisers and FAS. See "Information Regarding the
Advisers and Co-Administrator" above. While it was cognizant of the benefit to
the Advisers and FAS and indirect benefit to Ms. Ciciora, the Board nevertheless
concluded that the Offering was in the best interest of shareholders.

The Fund may, in the future and at its discretion, choose to make additional
rights Offerings from time to time for a number of shares and on terms which may
or may not be similar to the Offering. Any such future rights Offerings will be
made in accordance with the 1940 Act. Under the laws of Maryland, the state in
which the Fund is incorporated, under certain circumstances, the Board is
authorized to approve rights Offerings without obtaining shareholder approval.
The staff of the SEC has interpreted the 1940 Act as not requiring shareholder
approval of a rights Offering at a price below the then current net asset value
so long as certain conditions are met, including a good faith determination by
the fund's board of directors that such Offering would result in a net benefit
to existing shareholders. Such future Offerings would similarly benefit the
Advisers and FAS.

EXPENSES OF THE FUND. The Fund will pay all of its expenses, including fees of
the directors not affiliated with the Advisers and board meeting expenses; fees
of the Advisers, FAS and PFPC; interest charges; franchise and other taxes;
organizational expenses; charges and expenses of the Fund's legal counsel and
independent accountants; expenses of repurchasing shares; expenses of issuing
any preferred shares or indebtedness; expenses of printing and mailing share
certificates, stockholder reports, notices, proxy statements and reports to
governmental offices; brokerage and other expenses connected with the execution,
recording and settlement of portfolio security transactions; expenses connected
with negotiating, effecting purchase or sale, or registering privately issued
portfolio securities; expenses of calculating and publishing the net asset value
of the Fund's shares; expenses of membership in investment company associations;
expenses of fidelity bonding and other insurance expenses including insurance
premiums; expenses of shareholders meetings; SEC and state registration fees;
New York Stock Exchange listing fees; and fees payable to the National
Association of Securities Dealers, Inc. in connection with this Offering and
fees of any rating agencies retained to rate any preferred shares issued by the
Fund.

INFORMATION ABOUT THE FUND

The Fund is a closed-end, diversified management investment company. The Fund's
investment objective is total return. The Fund seeks to achieve its objective by
investing in common stocks for long-term capital appreciation. These stocks may
or may not pay a dividend. The Fund may also invest in income producing
securities, namely dividend paying common stocks (e.g., REITs, utilities and
other RICs), as well as corporate bonds, corporate preferred stock, government
securities, or other income producing securities, to achieve current income
consistent with preservation of capital. The income component is secondary to
the long-term capital appreciation component. No assurance can be given that the
Fund will achieve its investment objective. The Fund typically invests in
securities of U.S.-based companies, though it is not limited to investing in the
U.S. stock market. The Fund anticipates a low turnover rate in its portfolio of
common stocks and, with respect to common stocks held for capital appreciation
rather than income, seeks to invest in stocks that have a proven track record of
earnings and the prospect of increased future value through growth in revenues
and profits. The Fund has the flexibility to invest in companies of any size;
however, it is expected that it will not make significant investments in
start-up companies, initial public offerings, non-public companies, or companies
with little or no operating history. See "Investment Objectives and Policies"
below. The address of the Fund is 1680 38th Street, Suite 800, Boulder, Colorado
80301 and its telephone number is (303) 444-5483.

The Fund commenced investment operations on February 19, 1993, upon the closing
of the initial public offering of 8,000,000 of its common shares. The net
proceeds of such offering were approximately $111.6 million. Prior to August,
1999, the Fund's investment objective was "high current income consistent with
preservation of capital". On August 27, 1999, a special shareholders meeting was
held at which the Fund's shareholders approved, among other things, a change in
the Fund's investment objective from "high current income consistent with
preservation of capital" to "total return". The Fund has outstanding 775 shares
of Taxable Auction Market Preferred Stock (previously defined as the AMPS). The
AMPS were issued with a liquidation preference per share of $100,000, plus
accumulated and unpaid dividends. The AMPS will remain outstanding after the
Offering. See "Capital Stock and Other Matters" below.

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS. The Board of Directors of the Fund is responsible for
overseeing the overall management and operations of the Fund. The SAI contains
additional information about the Fund's directors. Subject to the general
supervision of the Board of Directors, the Advisers manage the Fund's portfolio,
make decisions with respect to and place orders for all purchases and sales of
the Fund's securities, and maintain records relating to such purchases and
sales. Stewart R. Horejsi and Carl D. Johns have been primarily responsible for
the day-to-day management of the Fund's portfolio since March of 1999. See
"Information Regarding the Advisers and Co-Administrator" below.

INFORMATION REGARDING THE ADVISERS AND CO-ADMINISTRATOR. The Fund is co-advised
by Boulder Investment Advisers, L.L.C. ("BIA") and Stewart Investment Advisers
("SIA"). BIA and SIA are collectively referred to as the "Advisers". Since March
of 1999, the Advisers have been providing advisory services to the Fund and,
since January of 2002, to the Boulder Growth & Income Fund, Inc. As of May 9,
2003, the Advisers had a total of $310.10 million in assets under management.
One of the Fund's co-administrators is Fund Administrative Services, LLC ("FAS"
or the "Co-Administrator"). Following is a summary of the Advisers and FAS:

BOULDER INVESTMENT ADVISERS, L.L.C. BIA was formed on April 8, 1999, as a
Colorado limited liability company and is registered as an investment
adviser under the Investment Advisers Act of 1940. Stewart R. Horejsi is
an employee of and investment manager for both Advisers and has extensive
experience managing common stocks for the Fund as well as for the Horejsi
Affiliates and other family interests. The members of BIA are Evergreen
Atlantic, LLC, whose address is 1680 38th Street, Suite 800, Boulder,
Colorado 80301 and the Lola Brown Trust No. 1B, whose address is PO Box
801, Yankton, South Dakota 57078 (the "Members"). The Members each hold a
50% interest in BIA. The Members are "affiliated persons" of the Fund (as
that term is defined in the 1940 Act). Both Mr. Horejsi and Susan
Ciciora, Mr. Horejsi's daughter and one of the Fund's "interested"
directors, are discretionary beneficiaries under the Lola Brown Trust No.
1B as well as under other Horejsi family affiliated trusts which own
Evergreen Atlantic, LLC. Accordingly, as a result of this relationship,
both Mr. Horejsi and Ms. Ciciora may directly or indirectly benefit from
the relationship between the Fund and BIA.

STEWART INVESTMENT ADVISERS. SIA (or Stewart West Indies Trading Company,
Ltd. d/b/a Stewart Investment Advisers) is a Barbados international
business company, incorporated on November 12, 1996, and is wholly owned
by the Stewart West Indies Trust, an irrevocable South Dakota trust,
established by Mr. Horejsi in 1996 primarily to benefit his issue (the
"West Indies Trust"), whose address is PO Box 801, Yankton, South Dakota
57078. Mr. Horejsi is not a beneficiary under the West Indies Trust.
However, Susan Ciciora, Mr. Horejsi's daughter and one of the Fund's
"interested" directors, as well as members of her family, are
discretionary beneficiaries under the West Indies Trust and thus, as a
result of this relationship, may directly or indirectly benefit from the
relationship between SIA and the Fund.

SIA is not domiciled in the United States and substantially all of its
assets are located outside the United States. As a result, it may be
difficult to realize judgments of courts of the United States predicated
upon civil liabilities under federal securities laws of the United
States. The Fund has been advised that there is substantial doubt as to
the enforceability in Barbados of such civil remedies and criminal
penalties as are afforded by the federal securities laws of the United
States. Pursuant to the advisory agreement between SIA and the Fund, SIA
has appointed the Secretary of the Fund (i.e., presently Stephanie Kelley
in Boulder, Colorado) as its agent for service of process in any legal
action in the United States, thus subjecting it to the jurisdiction of
the United States courts.

PORTFOLIO MANAGERS. Stewart R. Horejsi is an employee of both BIA and
SIA. He is the primary investment manager and, together with Carl D.
Johns (see below), the Fund's Vice President and Treasurer, is
responsible for the day-to-day management of the Fund's assets and is
primarily responsible for the Fund's asset allocation. Mr. Horejsi was a
director of the Fund until November, 2001; General Manager, Brown Welding
Supply, LLC (sold in 1999), since April 1994; Director, Sunflower Bank
(resigned); and the President or Manager of various subsidiaries of the
Horejsi Affiliates since June 1986. Mr. Horejsi has been the investment
adviser for various Horejsi Affiliates since 1982. Mr. Horejsi has been
the Director and President of the Horejsi Charitable Foundation, Inc.
since 1997. Mr. Horejsi received a Masters Degree in Economics from
Indiana University in 1961 and a Bachelor of Science Degree in Industrial
Management from the University of Kansas in 1959.

Carl D. Johns, the Fund's Vice President and Treasurer, is also Vice
President and Treasurer for BIA and, together with Mr. Horejsi, is
responsible for the Fund's portfolio and BIA's day-to-day advisory
activities. Mr. Johns received a Bachelors degree in Mechanical
Engineering at the University of Colorado in 1985, and a Masters degree
in Finance from the University of Colorado in 1991. He worked at Flaherty
& Crumrine, Incorporated, from 1992 to 1998. During that period he was an
Assistant Treasurer for the Preferred Income Fund Incorporated, the
Preferred Income Opportunity Fund Incorporated, and the Preferred Income
Management Fund (the Fund's former name). Since 1999, he has been Chief
Financial Officer, Chief Accounting Officer, Vice President and Treasurer
of the Fund and, since January of 2002, has held the same positions with
the Boulder Growth & Income Fund, Inc.

FUND ADMINISTRATIVE SERVICES, LLC. FAS (formerly Boulder Administrative
Services, L.L.C.) is a Colorado limited liability company whose principal
place of business is 1680 38th Street, Suite 800, Boulder, Colorado
80301. The members of FAS are Lola Brown Trust No. 1B (50%) and Evergreen
Atlantic, L.L.C. (50%) (the "Members"). The officers of FAS are Stephen
C. Miller, manager; Carl Johns, assistant manager; Laura Rhodenbaugh,
secretary/treasurer; and Stephanie Kelley, assistant secretary. Since
March of 1999, FAS has been providing certain administrative and
executive management services to the Fund and, since January of 2002, to
the Boulder Growth & Income Fund, Inc.

THE INVESTMENT CO-ADVISORY AGREEMENTS. The Advisers and the Fund are parties to
investment co-advisory agreements dated as of April 26, 2002 (the "Advisory
Agreements"). Under the terms of the Advisory Agreements, the Advisers provide
advisory services regarding asset allocation, manage the investment of the
Fund's assets and provide such investment research, advice and supervision, in
conformity with the Fund's investment objective and policies, as necessary for
the operations of the Fund. The Advisory Agreements provide, among other things,
that the Advisers will bear all expenses in connection with the performance of
their services under the Advisory Agreements, although the Fund will bear
certain other expenses to be incurred in its operation, including organizational
expenses, taxes, interest, brokerage costs and commissions and stock exchange
fees; fees of Directors of the Fund who are not also officers, directors or
employees of the Advisers; Securities and Exchange Commission fees; state Blue
Sky qualification fees; insurance premiums; outside auditing and legal expenses;
costs of maintenance of the Fund's existence; membership fees in trade
associations; stock exchange listing fees and expenses; and litigation and other
extraordinary or non-recurring expenses.

The Advisory Agreements provide that the Fund shall pay to the Advisers for
their services an aggregate monthly fee at the annual rate of 1.25% of the
Fund's average monthly total net assets (the "Adviser Fee") (including the
principal amount of leverage, if any (e.g., the AMPS)). Under the terms of the
Advisory Agreements, the Advisers split the Adviser Fee as determined by the
Advisers and approved by the Board from time to time. Presently, the Adviser Fee
is split between BIA and SIA 25% and 75%, respectively. Although the Advisers
intend to devote such time and effort to the business of the Fund as is
reasonably necessary to perform their respective duties to the Fund, the
services of the Advisers are not exclusive and the Advisers may provide similar
services to other investment companies and other clients and may engage in other
activities.

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

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

CO-ADMINISTRATION AGREEMENT. The Fund and FAS (Fund Administrative Services,
LLC) (also referred to as the "Co-Administrator") are parties to a
Co-Administration Agreement dated March 22, 1999 (the "Co-Administration
Agreement"). FAS is owned by the Members, who, as indicated above, are also the
owners of BIA and are included in the group referred to herein as the Horejsi
Affiliates. FAS is headquartered at 200 S. Santa Fe, #4, PO Box 6043, Salina, KS
67401 and has offices in Colorado at 1680 38th Street, Suite 800, Boulder,
Colorado 80301. As previously mentioned, both Mr. Horejsi and Ms. Ciciora, one
of the Fund's "interested" directors, are discretionary beneficiaries under the
Lola Brown Trust No. 1B, one of the Members of FAS, and under the trusts who own
Evergreen Atlantic, LLC, the other Member of FAS.

Under the Co-Administration Agreement, FAS provides administrative, accounting
oversight, executive management and certain other services to the Fund
including: providing the Fund's principal offices in Colorado and executive
officers, overseeing the operations of the Fund, overseeing and administering
all contracted service providers, making recommendations to the Board regarding
policies of the Fund, conducting shareholder relations, authorizing expenses and
other tasks. Pursuant to the Co-Administration Agreement, the Fund pays FAS a
monthly fee, calculated at an annual rate of 0.10% of the value of the Fund's
average monthly total net assets. PFPC Inc. ("PFPC"), an indirect,
majority-owned subsidiary of The PNC Financial Services Group Inc., serves as
the Fund's co-administrator and transfer agent. As co-administrator, PFPC
calculates the net asset value of the Fund's shares and generally assists in all
aspects of the Fund's administration and operation. The Fund pays PFPC a fee on
a monthly basis based on average total net assets. PFPC Trust Company, an
indirect subsidiary of The PNC Financial Services Group, Inc. serves as the
Fund's custodian. As compensation to PFPC Trust Company, the Fund pays PFPC
Trust Company a monthly fee based on the Fund's average monthly total net
assets. PFPC also serves as the Fund's common stock servicing agent (transfer
agent), dividend-paying agent and registrar, and as compensation for PFPC's
services as such, the Fund pays PFPC a monthly fee plus certain out-of-pocket
expenses.

Deutsche Bank Trust Company Americas, a wholly-owned subsidiary of Deutsche Bank
AG ("Auction Agent") serves as the Fund's AMPs transfer agent, registrar,
dividend disbursing agent and redemption agent.

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE. The Fund's investment objective is total return. The
Fund's investment objective is total return. The Fund seeks to achieve its
objective by investing in common stocks for long-term capital appreciation.
These stocks may or may not pay a dividend. The Fund may also invest in income
producing securities, namely dividend paying common stocks (e.g., REITs,
utilities and other RICs), as well as corporate bonds, corporate preferred
stock, government securities, or other income producing securities, to achieve
current income consistent with preservation of capital. The income component is
secondary to the long-term capital appreciation component. No assurance can be
given that the Fund will achieve its investment objective. The Fund typically
invests in securities of U.S.-based companies, though it is not limited to
investing in the U.S. stock market. The Fund anticipates a low turnover rate in
its portfolio of common stocks and, with respect to common stocks held for
capital appreciation rather than income, seeks to invest in stocks that have a
proven track record of earnings and the prospect of increased future value
through growth in revenues and profits. The Fund has the flexibility to invest
in companies of any size; however, it is expected that it will not make
significant investments in start-up companies, initial public offerings,
non-public companies, or companies with little or no operating history.

DIVERSIFICATION. The Fund operates as a "diversified" management investment
company, as defined in the 1940 Act. Under this definition, at least 75% of the
value of the Fund's total assets must at the time of investment consist of cash
and cash items (including receivables), U.S. Government securities, securities
of other investment companies, and other securities limited in respect of any
one issuer to an amount not greater in value than 5% of the value of the Fund's
total assets and to not more than 10% of the voting securities of a single
issuer. This limit does not apply, however, to 25% of the Fund's assets, which
may be invested in a single issuer. The Fund intends to concentrate its common
stock investments in a few issuers and to take large positions in those issuers,
consistent with being a "diversified" fund. As a result, the Fund is subject to
a greater risk of loss than a fund that diversifies its investments more
broadly. Taking larger positions is also likely to increase the volatility of
the Fund's net asset value reflecting fluctuation in the value of its large
holdings.

INVESTMENT POLICIES. Under normal market conditions, the Fund intends to invest
in a portfolio of common stocks and income securities. The portion of the Fund's
assets invested in each can vary depending on market conditions. The term
"common stocks" includes both stocks acquired primarily for their appreciation
potential and stocks acquired for their income potential, such as
dividend-paying RICs and REITs. The term "income securities" includes bonds,
U.S. Government securities, notes, bills, debentures, preferred stocks,
convertible securities, bank debt obligations, repurchase agreements and
short-term money market obligations.

As of May 9, 2003 the Fund's portfolio is invested primarily in common stocks
(89.28%) (including 26.43% invested in REITs and 0.0% in RICs) and
10.47% in cash equivalents. The Fund currently intends to invest in RICs and
REITs primarily in order to generate sufficient income to pay interest on the
AMPS when due and pay Fund expenses. Under the 1940 Act, the Fund must limit to
10% the portion of its assets invested in RICs and, absent an amendment to the
Fund's industry concentration policy, must limit to 25% the portion of its
assets invested in REITs. Each of these percentage limitations are calculated at
the time of investment and the Fund will not be required to dispose of assets if
holdings increase above these levels due to appreciation. Depending on market
conditions, it is expected that the Fund will have investments in REITs close to
such 25% limitation as long as the AMPS or other leverage is outstanding.

The volatility of common stock prices has historically been greater than
fixed-income securities, and as the Fund has shifted a greater portion of its
assets into common stocks, the volatility of the Fund's net asset value may also
have increased. The time horizon for the Fund to achieve its objective of total
return will likely be longer than for a fund that invests solely for income.

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

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

A number of the Fund's investment policies are "fundamental" policies, none of
which may be changed without approval by the vote of a majority of the Fund's
outstanding voting securities, voting as a single class, and a majority of the
Fund's outstanding shares of preferred stock, voting as a separate class. See
"Capital Stock and Other Matters" below and the SAI under "Investment Objective
and Policies - Investment Restrictions".

OTHER INVESTMENT TECHNIQUES. The Fund may engage in other types of transactions,
including, but not limited to investment in restricted and illiquid securities,
other closed-end investment companies or REITs, repurchase agreements,
when-issued and forward commitment transactions, borrowing, securities lending
and other transactions. For a description of such types of transactions, see
"Investment Policies and Techniques" and "Other Investment Policies and
Techniques" in the SAI.

RISKS ASSOCIATED WITH THE FUND'S INVESTMENTS. Risk is inherent in all investing.
Investing in any investment company security involves risk, including the risk
that you may receive little or no return on your investment or that you may lose
part or all of your investment. Therefore, before investing you should consider
carefully the following risks that you assume when you invest in the Fund
through the Offering.

INVESTMENTS IN COMMON STOCKS. The Fund expects to invest, under normal
market conditions, in excess of 80% of its assets in publicly traded
common stocks. Common stocks generally have greater risk exposure and
reward potential over time than bonds or preferred stock. The volatility
of common stock prices has historically been greater than bonds and
preferred stock, and as the Fund invests primarily in common stocks, the
Fund's net asset value may also be volatile. Further, because the time
horizon for the Fund's investments in common stock is longer, the time
necessary for the Fund to achieve its objective of total return will
likely be longer than for a fund that invests solely for income.

The Fund presently has invested a significant percentage of its portfolio
in low-dividend or non-dividend paying common stocks such as Berkshire
Hathaway, Inc. As of May 9, 2003, the Fund held 750 Berkshire Hathaway,
Inc. "A" shares and 9,010 "B" shares. At the time of investment, the
aggregate of the Berkshire Hathaway shares represented less than 25% of
the Fund's assets. However, primarily because of appreciation of the
Berkshire Hathaway stock and depreciation of other assets in the Fund, as
of May 9, 2003, these positions represented 33.89% of the Fund's assets.
The Advisers do not currently intend to liquidate any portion of the
Fund's position in Berkshire Hathaway. Though not an insurance company
itself, Berkshire Hathaway owns Geico Insurance and General Re Insurance
companies, and therefore derives a significant portion of its income, and
its value, from these two insurance companies. The insurance business can
be significantly affected by interest rates as well as price competition
within the industry. In addition, an insurance company may experience
significant changes in its year to year operating performance based both
on claims paid and on performance of invested assets. Insurance companies
can also be affected by government regulations and tax laws, which may
change from time to time. A significant decline in the market price of
Berkshire Hathaway or any other company in which the Fund has made a
significant common stock investment (i) would result in a significant
decline in the Fund's net asset value, (ii) may result in a proportionate
decline in the market price of the Fund's common shares, and (iii) may
result in greater risk and market fluctuation than a fund that has a more
diversified portfolio.

INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS. REITs, or Real Estate
Investment Trusts, are companies dedicated to owning, and usually
operating, income producing real estate, or to financing real estate. The
Fund may invest up to 25% of its assets in REIT securities. The Fund
intends to invest in REIT securities primarily for income. As of May 9,
2003, the Fund had 26.43% of its assets invested in REITs. There are
risks associated with investing in REITs. Property values may fall due to
increasing vacancies or declining rents resulting from economic, legal,
cultural or technological developments. REIT prices also may drop because
of the failure of borrowers to pay their loans and poor management. Many
REITs utilize leverage which increases investment risk and could
adversely affect a REIT's operations and market value in periods of
rising interest rates as well as risks normally associated with debt
financing. In addition, there are risks associated with particular
sectors of real estate investments (e.g., retail, office, hotel,
healthcare and multifamily properties), although the Fund does not intend
to focus on any particular sector of real estate investments.
Furthermore, the dividend income paid out by the REIT may be reduced or
eliminated.

INVESTMENTS IN OTHER REGISTERED INVESTMENT COMPANIES. The Fund may invest
up to 10% of its assets in other investment companies registered under
the 1940 Act. The Fund may, from time to time, invest in other closed-end
RICs when market conditions seem appropriate to the Advisers. Although
the Fund has invested in and held RICs in the past, as of May 9, 2003,
the Fund had 0.00% of its assets invested in RICs. The Fund normally
would invest in RICs that pay dividends, although it is not limited to
such RICs. There are risks associated with investments in RICs, including
the risk that the dividend paid by the RIC could be reduced or
eliminated. As a shareholder in another fund, the Fund will bear its
ratable share of that fund's expenses, including management fees, and
will remain subject to the Fund's advisory and administrative fees with
respect to the assets so invested.

INVESTMENTS IN PREFERRED STOCKS AND BONDS. The Fund currently owns no
positions in preferred stocks or corporate bonds. Preferred stocks and
corporate bonds may be substantially less liquid than many other
securities such as common stocks or U.S. Government securities. In
addition, preferred stocks and bonds purchased by the Fund may be subject
to risk with respect to the issuing entity and to market fluctuations. In
particular, such preferred stocks and bonds may be subject to "credit
risk", which refers to an issuer's ability to make timely payments of
interest and principal. The Fund does not expect to make substantial
investments in preferred stocks or bonds in the future.

AMPS AND AMPS AUCTION RISK. The Fund is leveraged with the AMPS and thus
its ability to maximize its total return objective is in part dependent
on the continued success and performance of its AMPS auctions. The
dividend rate for the AMPS normally is set through an auction process. In
the auction, holders of AMPS indicate the dividend rate at which they
would be willing to hold or sell their AMPS or purchase additional AMPS
and potential investors indicate the rate at which they would be willing
to purchase AMPS. As the dividend rate for the AMPS is set on a 28-day
cycle, the dividend rate, and thus the Fund's variable expenses
associated with the AMPS are subject to substantial change, possibly
resulting in a diminished total return to Common Stock shareholders.
Also, if an auction fails (e.g., because there are more AMPS for sale
than there are buyers), the Fund may be required to, among other things,
pay a punitive default rate of interest on its AMPS until such time as a
subsequent successful auction occurs. Also, under its Articles
Supplementary, the Fund is required to meet certain asset coverage tests
with respect to the AMPS. If the Fund fails to meet these requirements
and does not correct such failure, the Fund may be required to redeem the
AMPS, in part or in full, in which case they cannot be reissued.
Additionally, failure to meet the foregoing asset coverage requirements
could restrict the Fund's ability to pay dividends to Common Stock
shareholders and could lead to sales of portfolio securities at
inopportune times. See "Capital Stock and Other Matters" below.

INVESTMENT PHILOSOPHY. Following is a brief description of the investment
philosophy of the Fund and its Advisers. See also "Investment Policies and
Techniques" in the SAI.

COMMON STOCKS. With respect to the common stock portfolio (other than
common stocks purchased primarily for their income-producing potential),
the Advisers use an "intrinsic value" approach to selecting and managing
the Fund's assets. The Advisers define intrinsic value as the discounted
value of the cash that can be taken out of a business during its
remaining life. Accordingly, in its securities selection process, the
Advisers put primary emphasis on analysis of balance sheets, cash flows,
the quality of management and their ability to efficiently and
effectively allocate capital, various internal returns which indicate
profitability, and the relationships that these factors have to the price
of a given security. The intrinsic value approach is based on the belief
that the securities of certain companies may sell at a discount from the
Advisers' estimate of such companies' "intrinsic value". The Advisers
will attempt to identify and invest in such securities, with the
expectation that such value discount will narrow over time and thus
provide capital appreciation for the Fund.

CASH AND CASH EQUIVALENTS. As of May 9, 2003, the Fund had a cash
position equal to 10.47% of assets, including investments in U.S.
Treasury securities. Under normal market conditions, the Fund's cash
position will typically be less than 10% of the Fund's total assets.

FIXED INCOME INVESTMENTS. In seeking its total return objective, the Fund
may invest a portion of its assets in U.S. Treasuries, preferred stocks,
bonds and other income producing securities. In selecting individual
investments, the Advisers will consider, among other things, current
yield, price variability and the underlying fundamental characteristics
of the issuer, with particular emphasis on debt to equity and debt
coverage ratios.

DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income, if any, will
be declared and paid annually. Shares issued in connection with the Offering
will receive dividends in the same manner and same proportions as any other
shares of the Fund. Any net realized short-term capital gains will be
distributed to shareholders at least annually. Any net realized long-term
capital gains may be distributed to shareholders at least annually or may be
retained by the Fund as determined by the Board. Capital gains retained by the
Fund are subject to tax at the corporate tax rate. Subject to the Fund
qualifying as a registered investment company, any taxes paid by the Fund on
such net realized long-term gains may be used by the Fund's shareholders as a
credit against their own tax liabilities.

The Fund qualified during its last taxable year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code") and
intends to continue to so qualify. This qualification relieves the Fund of
liability for federal income taxes to the extent the Fund's earnings are
distributed in accordance with the Code. Qualification as a regulated investment
company under the Code for a taxable year requires, among other things, that the
Fund distribute to its shareholders an amount equal to at least 90% of its
investment company taxable income for such taxable year (before taking into
account the deduction for such distributions). In general, the Fund's investment
company taxable income will be its taxable income, including dividends, interest
and the excess, if any, of net short-term capital gain over net long-term
capital loss, subject to certain adjustments, and excluding the excess, if any,
of net long-term capital gain for the taxable year over net short-term capital
loss.

Distributions by the Fund are taxable to the shareholders to the extent paid out
of the Fund's current or accumulated earnings and profits, regardless of whether
such distributions are received in cash or reinvested in additional shares of
Common Stock. Such distributions constitute ordinary income to the shareholders
except to the extent they are designated as capital gain dividends, as discussed
below. Any distributions by the Fund, if any, in excess of its current and
accumulated earnings and profits would constitute a nontaxable return of capital
to shareholders to the extent of each shareholder's tax basis in his or her
shares (causing a reduction of such basis), and thereafter, to the extent of any
excess over such basis, capital gain. The dividends received deduction for
corporations which own shares in the Fund will apply to ordinary income
distributions from the Fund to the extent of such shareholders' ratable share of
the total qualifying dividends received by the Fund from domestic corporations
for the taxable year. The Fund intends to designate as capital gain dividends
any distributions by the Fund of the excess of net long-term capital gain over
net short-term capital loss. Such capital gain dividends will be taxable to
shareholders as long-term capital gain, regardless of how long the shareholder
has held the shares and whether such distributions are received in cash or
reinvested in additional shares of common stock. Such distributions are not
eligible for the dividends received deduction for corporations.

To the extent that the Fund distributes amounts in a given year that exceed the
Fund's investment company taxable income and excess of net long-term capital
gain over net short-term capital loss (after taking into account capital loss
carryovers), such excess distributions may nonetheless cause shareholders to
recognize taxable income under the federal income tax principles described
above.

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made each year. Dividends declared during any
month of any year payable to shareholders of record as of a specified date in
such month will be deemed to have been received by shareholders and paid by the
Fund on December 31 of such year if such dividends are actually paid during
January of the following year.

Prior to purchasing shares, a purchaser should carefully consider the impact of
distributions which are expected to be declared or have been declared, but have
not been paid. Any such distributions, although in effect a return of capital,
are subject to tax as discussed above.

A taxable gain or loss may be recognized by a shareholder upon his or her sale
of shares of the Fund depending upon the tax basis and their price at the time
of sale. Generally, a shareholder may include brokerage costs incurred upon the
purchase and/or sale of Fund shares in his or her tax basis for such shares for
the purpose of determining gain or loss on a sale of such shares. Any such
capital gain or loss will be long-term or short-term depending on the
shareholder's holding period for the shares sold, except that any loss
recognized with respect to shares held six months or less will be treated as
long-term capital loss to the extent of any capital gain dividends received on
those shares.

The foregoing discussion summarizes some of the important federal tax
considerations generally affecting the Fund and its shareholders who are U.S.
citizens or residents or domestic corporations, and is not intended as a
substitute for careful tax planning. Accordingly, investors in the Fund should
consult their tax advisors with specific reference to their own tax situations.
Shareholders are also advised to consult their tax advisors concerning state and
local taxes, which may differ from the federal income taxes described above.

DIVIDEND REINVESTMENT PLAN. In 2002, the Board determined to eliminate the
Fund's Automatic Dividend Reinvestment Plan.

TAXATION OF THE FUND. The Fund has qualified and elected to be taxed as a
regulated investment company under Subchapter M of the Code. Accordingly, the
Fund must, among other things, (a) derive in each taxable year at least 90% of
its gross income (including tax-exempt interest) from dividends, interest,
payments with respect to certain securities loans, and gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including but not limited to gains from options, futures and forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at the end of each quarter
of the Fund's taxable year (i) at least 50% of the market value of the Fund's
total assets is represented by cash and cash items, U.S. Government securities,
the securities of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer, to an amount
not greater than 5% of the value of the Fund's total assets and to not more than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the market value of the Fund's total assets is invested in the securities
of any one issuer (other than U.S. Government securities and the securities of
other regulated investment companies) or of any two or more issuers that the
Fund controls and which are determined to be engaged in the same trade or
business or similar or related trades or businesses.

As a regulated investment company, the Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes each taxable year to
its shareholders, if at least 90% of the sum of the Fund's (i) investment
company taxable income (which includes, among other items, dividends, interest
and any excess of net short-term capital gains over net long-term capital losses
and other taxable income other than any net capital gain (as defined below)
reduced by deductible expenses) determined without regard to the deduction for
dividends paid and (ii) its net tax-exempt interest (the excess of its gross
tax-exempt interest over certain disallowed deductions). The Fund intends to
distribute at least annually substantially all of such income.

Amounts not distributed on a timely basis in accordance with a calendar-year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid this tax, the Fund must distribute during each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year (unless, an election is made by a fund with a November or
December year-end to use the fund's fiscal year), and (3) certain undistributed
amounts from previous years on which the Fund paid no U.S. federal income tax.
While the Fund intends to distribute any income and capital gains in the manner
necessary to minimize imposition of the 4% excise tax, there can be no assurance
that sufficient amounts of the Fund's taxable income and capital gains will be
distributed to avoid entirely the imposition of the tax. In that event, the Fund
will be liable for the tax only on the amount by which it does not meet the
foregoing distribution requirement.

If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gains) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits.

TAXATION OF SHAREHOLDERS. Distributions paid to you by the Fund from its
ordinary income or from an excess of net short-term capital gains over net
long-term capital losses (together referred to hereinafter as "ordinary income
dividends") are taxable to you as ordinary income to the extent of the Fund's
earning and profits. Distributions made to you from an excess of net long-term
capital gains over net short-term capital losses ("capital gain dividends"),
including capital gain dividends credited to you but retained by the Fund, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Fund shares. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of your shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gains to you
(assuming the shares are held as a capital asset). Generally, not later than 60
days after the close of its taxable year, the Fund will provide you with a
written notice designating the amount of any ordinary income dividends or
capital gain dividends and other distributions.

The sale or other disposition of common shares of the Fund will generally result
in capital gain or loss to you, and will be long-term capital gain or loss if
the shares have been held for more than one year at the time of sale. Any loss
upon the sale or exchange of Fund shares held for six months or less will be
treated as long-term capital loss to the extent of any capital gain dividends
received (including amounts credited as an undistributed capital gain dividend)
by you. A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Present law taxes both long-term and short-term capital gains
of corporations at the rates applicable to ordinary income. For individual
(non-corporate) taxpayers, however, short-term capital gains and ordinary income
are taxed at a maximum rate of 38.6% for 2002 while long-term capital gains
generally will be taxed at a maximum rate of 20% and 10% for taxpayers in the
15% bracket. The 20% capital gains rate and the 10% capital rate will be reduced
to 18% and 8% respectively, for capital assets held for more than five years if
the holding period begins after December 31, 2000.

Dividends and other taxable distributions are taxable to you even though they
are reinvested in additional shares of the Fund. Although the Fund does not
intend to pay dividends in January, if it does pay such a dividend which was
declared in the previous October, November or December to shareholders of record
on a specified date in one of such months, then such dividend will be treated
for tax purposes as being paid by the Fund and received by you on December 31 of
the year in which the dividend was declared. The Fund intends to distribute all
net investment income and any capital gains during the month of December of each
year.

The Fund is required in certain circumstances to backup withhold on taxable
dividends and certain other payments paid to non-corporate holders of the Fund's
shares who do not furnish the Fund with their correct taxpayer identification
number (in the case of individuals, their Social Security number) and certain
certifications, or who are otherwise subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld from payments made to
you may be refunded or credited against your U.S. federal income tax liability,
if any, provided that the required information is furnished to the Internal
Revenue Service.

The foregoing is a general and abbreviated summary of the provisions of the Code
and the Treasury regulations in effect as they directly govern the taxation of
the Fund and its shareholders. These provisions are subject to change by
legislative or administrative action, and any such change may be retroactive.
Shareholders are urged to consult their tax advisers regarding specific
questions as to U.S. federal, foreign, state, local income or other taxes.

STATE AND LOCAL TAX MATTERS. You should consult with your tax advisor about
state and local tax matters.

DETERMINATION OF NET ASSET VALUE

The net asset value of Common Stock of the Fund is computed based upon the value
of the Fund's portfolio securities and other assets. Net asset value per common
share of the Fund is determined as of the close of the regular trading session
on the NYSE no less frequently than Friday of each week and the last business
day of each month, provided, however, that if any such day is a holiday or
determination of net asset value on such day is impracticable, the net asset
value is calculated on such earlier or later day as determined by the Advisers.
The Fund calculates net asset value per common share of the Fund by subtracting
the Fund's liabilities (including accrued expenses, dividends payable and any
borrowings of the Fund) and the liquidation value of any outstanding preferred
stock from the Fund's total assets (the value of the securities the Fund holds
plus cash or other assets, including interest accrued but not yet received) and
dividing the result by the total number of common shares of the Fund
outstanding.

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

CAPITAL STOCK AND OTHER MATTERS

CAPITALIZATION. The Fund was incorporated under the laws of the State of
Maryland on December 21, 1992. The Charter authorizes the Fund to issue two
hundred fifty million (250,000,000) shares, of which 240,000,000 shares are
classified as common stock, par value one cent ($.01) per share, and l0,000,000
shares are classified as preferred stock, par value one cent ($.01) per share.
The aggregate par value of all shares of all classes that the Fund is authorized
to issue is $2,500,000. As of May 9, 2003 there were 9,416,743 shares of Common
Stock issued and outstanding. Under the Offering, the Fund will offer 3,150,000
additional shares and, if the Offering is fully subscribed, after the Offering
there will be 12,566,743 shares of Common Stock issued and outstanding.

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

The Common Stock was traded on the NYSE from between February of 1993 to August
30, 1999, under the symbol "PFM". From August 30, 1999 to the present, the
Common Stock has traded on the NYSE under the symbol "BTF". On May 9, 2003,
there were 9,416,743 common shares of the Fund issued and outstanding and the
net asset value per common share was $15.36 and the closing price per common
share on the NYSE was $12.98.

As of May 9, 2003, the Fund's issued and outstanding shares were as follows:

Amount Held by Fund
Title and Class Amount Authorized or for Its Account Amount Outstanding

Common Stock 240,000,000 0 9,416,743
Preferred Stock 10,000,000 0 775

MARKET PRICE AND NET ASSET VALUE INFORMATION. The Fund's Common Stock is
publicly held and is listed and traded on the NYSE. The following Table sets
forth, for the periods indicated, the high and low closing sales prices for the
shares on the NYSE, the net asset values per share that immediately preceded the
high and low closing sales prices, and the discount or premium that each sales
price represented as a percentage of the preceding net asset value:

NAV of Fund NAV of Fund
High Closing Preceding High Discount as % Low Closing Preceding Low Discount as %
Quarter Ended Sales Price (1) Sales Price of NAV Sales Price (1) Sales Price of NAV
-------------------- ----------------- ------------------ ---------------- ------------------ --------------- ---------------
-------------------- ----------------- ------------------ ---------------- ------------------ --------------- ---------------

03/31/2003 $13.02 $15.01 -13.26% $11.05 $13.22 -16.41%
12/31/2002 $13.40 $14.18 -5.50% $12.15 $14.73 -17.52%
9/30/2002 $15.75 $17.52 -10.10% $13.23 $15.37 -13.92%
6/30/2002 $18.55 $20.38 -8.98% $15.95 $18.34 -13.03%
3/31/2002 $16.80 $19.98 -15.92% $15.63 $18.83 -16.99%
12/31/2001 $16.24 $18.29 -11.21% $14.96 $16.34 -8.45%
9/30/2001 $16.70 $17.57 -4.95% $13.25 $17.05 -22.29%
6/30/2001 $16.05 $18.07 -11.18% $13.60 $16.17 -15.89%
3/31/2001 $14.93 $17.40 -14.20% $12.63 $15.95 -20.85%
12/31/2000 $12.875 $15.94 -19.23% $10.75 $14.02 -23.32%

(1) As reported by the NYSE.

PREFERRED STOCK. The Charter authorizes the issuance of 10,000,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock"). The Board is
also authorized to set or change the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of such shares of stock. Exercise of such
authority may materially limit and/or qualify the rights of the holders of the
Common Stock. Under the 1940 Act, the Fund is permitted to have outstanding more
than one series of preferred shares so long as no single series has a priority
over another series as to the distribution of assets of the Fund or the payment
of dividends. Holders of Common Stock and outstanding Preferred Stock have no
preemptive right to purchase any preferred shares that might be issued. As of
April 30, 2003, the Fund has outstanding 775 shares Auction Market Preferred
Stock (previously defined herein as the AMPS) which are senior securities of the
Fund. The AMPS were issued on August 14, 2000 and will normally have a dividend
period consisting of twenty-eight (28) days. The Board may, from time to time,
declare a different dividend period upon giving notice to the holders of the
AMPS. Dividends on the AMPS are cumulative from the date they are first issued
and are payable when, as and if declared by the Board, out of funds legally
available therefor. The dividend rate for the AMPS is determined by auction. The
dividend rate for the initial dividend period was [6.57%] and the first auction
was held on August 15, 2000. The current dividend rate paid by the Fund for its
AMPS leverage is 1.38% as of the auction held on April 22, 2003.

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

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

The 1940 Act requires that the holders of any preferred shares, voting together
as a single class separate from the holders of common shares, have the right to
elect at least two directors of the Fund at all times and to elect a majority of
the directors at any time if two years' dividends on the AMPS have not been paid
and the Fund has not eliminated all dividend arrearages. The holders of AMPS and
any other outstanding preferred shares will vote as a separate class on certain
other matters as required under the Charter, the 1940 Act and Maryland law. Each
AMPS share carries one vote with respect to matters on which AMPS can be voted.
AMPS, when issued against payment therefor, will be fully paid and non
assessable and have no preemptive, conversion or cumulative voting rights.

EFFECTS OF LEVERAGE. The only obligation that the Fund has to the AMPS
shareholders is to pay the agreed-upon dividend rate as set by auction every 28
days. Any income earned in excess of such dividend rate and Fund expenses would
directly benefit Common Stock shareholders. The Fund may not pay any ordinary
dividend to Common Stock shareholders until after all dividends have been paid
due to the AMPS shareholders. The following table is designed to assist you in
understanding the effects of leverage on your investment in the Fund. The
figures appearing in the table are hypothetical and actual returns may be
greater or less than those appearing in the table.

Assumed Return on Portfolio Assets (Net of Expenses) -10% -5% 0% 5% 10%
Corresponding Actual Returns to Common Stock Shareholders -17.9% -10.2% -2.5% 5.2% 12.9%
Under Current Capital Structure (i.e., prior to Offering)
Corresponding Expected Returns to Common Stock -16.6% -9.4% -2.3% 4.8% 11.9%
Shareholders Post Offering

The following factors associated with leveraging could increase the investment
risk and volatility of the price of the Fund's shares: (1) leveraging
exaggerates any increase or decrease in the value of the Fund's shares; (2) the
dividend requirements on preferred stock may exceed the income from the
portfolio securities purchased with the proceeds from the issuance of preferred
stock; (3) a decline in net asset value results if the investment performance of
the additional securities purchased fails to cover their cost to the Fund
(including any dividend requirements of preferred stock) to the Fund; (4) a
decline in net asset value could affect the ability of the Fund to make Common
Stock dividend payments; (5) a failure to pay dividends or make distributions
could result in the Fund's ceasing to qualify as a regulated investment company
under the Code; and (6) if the asset coverage for preferred stock or debt
securities declines to less than two hundred percent or three hundred percent,
respectively (as a result of market fluctuations or otherwise), the Fund may be
required to sell a portion of its investments when it may be disadvantageous to
do so.

Pursuant to Section 18 of the 1940 Act, it is unlawful for the Fund, as a
registered closed-end investment company, to issue any class of senior security,
or to sell any such security of which it is an issuer, unless it can satisfy
certain "asset coverage" ratios. The asset coverage ratio means the ratio of the
value of the total assets of such investment company (less all liabilities and
indebtedness not represented by senior securities) to the aggregate amount of
debt securities of such investment company (plus the involuntary liquidation
preference of the preferred stock of such company).
If the senior securities are stock, such as the AMPS, such stock must have an
asset coverage of at least 200% immediately after issuance or sale of such
stock. If the senior securities represent an indebtedness (i.e., "debt
securities"), such debt securities must have an asset coverage of at least 300%
immediately after issuance or sale of such debt securities. Subject to certain
exceptions, if the Fund fails to satisfy these asset coverage ratios, it will,
among other things, be prohibited from declaring any dividend (except a dividend
payable in stock issued by the Fund) or declaring any other distribution.
Notwithstanding the foregoing, a registered investment company may, to the
extent permitted by the 1940 Act, segregate assets or "cover" transactions in
order to avoid the creation of a class of senior security.

The rating received by the Fund on its AMPS, or on any other senior security
which it may issue, is an assessment of the capacity of the Fund to satisfy its
obligations on the AMPS or such other senior security. However, the rating on
AMPS does not eliminate or mitigate the risks associated with investing in the
Fund's securities. In addition, should the rating on the AMPS be lowered or
withdrawn by the relevant rating agency, there may be an adverse effect on the
market value of the AMPS. The Fund may also be required to redeem all or part of
the AMPS. If such partial or whole redemption of the AMPS occurs, as a result of
the change in or withdrawal of the rating, the Common Stock of the Fund will
lose any potential benefits associated with a leveraged capital structure.

VOTING RIGHTS ASSOCIATED WITH THE AMPS. Except as otherwise indicated in this
Prospectus and in the SAI, or as provided in the Charter and Articles
Supplementary or as otherwise required by law, holders of AMPS will have equal
voting rights with holders of Common Stock and any other Preferred Stock (one
vote per share) and will vote together with holders of Common Stock and any
other preferred shares as a single class. Holders of outstanding Preferred
Stock, including AMPS, voting as a separate class, are entitled to elect two of
the Fund's directors. The remaining directors are elected by holders of
outstanding Common Stock voting as a separate class. In addition, if at any time
dividends (whether or not earned or declared) on AMPS are due and unpaid in an
amount equal to two full years of dividends, and sufficient cash or specified
securities have not been deposited with the auction agent for the payment of
such dividends, the sole remedy of holders of outstanding Preferred Stock is
that the number of directors constituting the Board will be automatically
increased by the smallest number that, when added to the two directors elected
exclusively by the holders of Preferred Stock as described above, would
constitute a majority of the Board. The holders of Preferred Stock will be
entitled to elect that smallest number of additional directors at a special
meeting of shareholders held as soon as possible and at all subsequent meetings
at which directors are to be elected, unless such special voting rights are
terminated as explained below. The terms of office of the persons who are
directors at the time of that election will continue unless the election of
additional directors by holders of Preferred Stock would cause the number of
directors to exceed 12. If the Fund thereafter pays in full all accumulated and
unpaid dividends on all outstanding Preferred Stock, the special voting rights
stated above will cease and the terms of office of the additional directors
elected by the holders of the Preferred Stock will automatically terminate.

The affirmative vote of a majority of the votes entitled to be cast by the
holders of the outstanding shares of AMPS or such higher percentage as may be
required by the Charter, voting as a separate class, will be required to amend
the Charter so as to adversely affect in any material respect any contract right
of the AMPS or the holders thereof expressly set forth in the Charter. The
affirmative vote of at least 80% of the votes entitled to be cast by the
outstanding holders of AMPS, voting as a separate class, will be required to
issue any shares of Preferred Stock ranking prior to or on a parity with the
AMPS as to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund (other than
previously authorized and unissued shares of AMPS, including any shares of AMPS
purchased or redeemed by the Fund), or increase the authorized amount of AMPS or
any other Preferred Stock. The affirmative vote of a majority of the votes
entitled to be cast by holders of the AMPS, voting as a separate class with
holders of other preferred stock entitled to vote on the matter, will be
required to approve certain other matters which, under the Charter, require the
approval of a majority of the votes entitled to be cast by stockholders if 80%
of the "Continuing Directors" (defined as a Director who (1) is not a person or
affiliate of a person who enters or proposes to enter a Business Combination (as
defined in the Articles) with the Fund (such person or affiliate, an "Interested
Party"), (2) has been a member of the Board of Directors for a period of at
least 12 months or (3) is a successor to a Continuing Director who is
unaffiliated with an Interested Party and is recommended to succeed a Continuing
Director by a majority of Continuing Directors then on the Board) or certain
other requirements specified in the Charter are met. Unless a higher percentage
is provided for in the Charter, the affirmative vote of a majority of the votes
entitled to be cast by holders of the AMPS (as determined in accordance with the
1940 Act), voting as a separate class, will be required to approve any plan or
reorganization adversely affecting the shares or any action requiring a vote of
security holders under Section 13(a) of the 1940 Act including, among other
things, changes in the Fund's investment objective or changes in certain
restrictions described above under "Investment Objective and Policies" and in
the SAI under "Investment Objective and Policies - Investment Restrictions". The
class vote of holders of shares of AMPS described above will in each case be in
addition to a separate vote of the requisite percentage of the votes entitled to
be cast by holders of shares of Common Stock and outstanding AMPS, voting as a
single class, necessary to authorize the action in question.

The voting provisions with respect to the AMPS described in this Prospectus will
not apply if at, or prior to, the time at which the act with respect to which
the vote would otherwise be required is effected, all outstanding AMPS have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemptions.

REPURCHASE OF COMMON SHARES. Shares of closed-end investment companies often
trade at a discount to their net asset values, and the Fund's common shares have
in the past and may in the future trade at a discount to their net asset value.
The market price of the Fund's common shares is determined by such factors as
relative demand for and supply of such common shares in the market, the Fund's
net asset value, general market and economic conditions and other factors beyond
the control of the Fund. Although the Fund's common shareholders do not have the
right to have the Fund redeem their common shares, the Fund may take action,
from time to time, to repurchase common shares in the open market or make tender
offers for its common shares at their net asset value. This may, but will not
necessarily, have the effect of reducing any market discount from net asset
value. See "Repurchase of Common Stock" in the SAI.

RIGHTS WITH REGARD TO DIVIDENDS, VOTING AND LIQUIDATION. When issued, shares of
Common Stock are fully paid and non-assessable. The Fund's shares have no
pre-emptive, conversion, exchange or redemption rights. Each share of Common
Stock has one vote and shares equally in dividends and distributions when and if
declared by the Fund and in the Fund's net assets upon liquidation. All voting
rights for the election of directors are non-cumulative. Consequently, the
holders of more than 50% of the shares can elect 100% of the directors then
nominated for election if they choose to do so and, in such event, the holders
of the remaining shares will not be able to elect any directors.

ANTI-TAKEOVER PROVISIONS OF THE CHARTER AND BY-LAWS. The Fund presently has
provisions in its Charter and By-laws (commonly referred to as "anti-takeover"
provisions) which may have the effect of limiting the ability of other entities
or persons to acquire control of the Fund, to cause it to engage in certain
transactions or to modify its structure:

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

o The affirmative vote of at least 80% of the directors and of the
holders of at least 80% of the Fund's outstanding shares of common
stock and preferred shares (including the AMPS) entitled to be voted
on the matter, voting as a single class, and the affirmative vote of
80% of the outstanding preferred shares (including the AMPS) voting as
a separate class, will be required to authorize the Fund's conversion
from a closed-end to an open-end investment company, which conversion
would result in delisting of the common shares from the NYSE. If an
amendment providing for the conversion of the Fund to an open end
investment company has been previously approved by a vote of 80% of
the Continuing Directors of the Fund, only a majority of the votes
entitled to be cast by the holders of outstanding shares of common
stock and preferred shares (including the AMPS), voting as a single
class, and a majority of the votes entitled to be cast by the holders
of outstanding shares of preferred stock (including the AMPS), voting
as a separate class, would be required to approve the conversion.
Conversion to an open end investment company would require redemption
of all outstanding Preferred Stock.

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

o Subject to certain limited exceptions provided in the Charter, the
Charter also require the favorable vote of at least 80% of the
directors and at least 80% of the votes entitled to be cast by holders
of common stock and any outstanding preferred stock voting as a single
class, and at least 80% of the votes entitled to be cast by holders of
any outstanding preferred stock (including the AMPS), voting as a
separate class, to approve, adopt or authorize the following:

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

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

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

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

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

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

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

OTHER SERVICE PROVIDERS.

CUSTODIAN. The Fund's securities and cash are held under a Custodial
Agreement with PFPC Trust Company (the "Custodian"), located at 8800
Tinicum Blvd., Suite 200, Philadelphia PA 19153, pursuant to which the
Custodian holds the Fund's assets in compliance with the 1940 Act. For
its services, the Custodian will receive a monthly fee based upon the
average weekly value of the total assets of the Fund, plus certain
charges for securities transactions.

TRANSFER AGENT. The transfer agent, dividend disbursing agent and
registrar for the common shares of the Fund is PFPC, Inc. All customary
fees of the transfer agent are paid by the Fund.

INDEPENDENT ACCOUNTANTS. The data in the "Financial Highlights" section
of this Prospectus are based upon financial statements for the year
ending November 30, 2002, that have been audited by KPMG LLP, independent
accountants, located at 99 High Street, Boston, MA 02110, as indicated in
their reports with respect thereto, and are incorporated by reference
herein in reliance on their reports given on their authority as experts
in auditing and accounting.

LEGAL MATTERS. Certain legal matters will be passed on by Willkie Farr &
Gallagher, New York, New York, counsel to the Fund in connection with the
Offering.

REPORTS TO SHAREHOLDERS. The Fund sends unaudited semiannual reports and audited
annual reports, including a list of investments held, to shareholders.

AVAILABLE INFORMATION. The Fund is subject to the informational requirements of
the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith
is required to file reports, proxy statements and other information with the
SEC. Any such reports, proxy statements and other information can be inspected
and copied at the public reference facilities of the SEC, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and the SEC's New York Regional
Office at 233 Broadway, New York, New York 10279 and its Chicago Regional Office
at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Reports, proxy statements and other information concerning the
Fund can also be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.

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

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR THE FUND'S ADVISERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE FACTS AS SET FORTH IN THE PROSPECTUS OR IN THE
AFFAIRS OF THE FUND SINCE THE DATE HEREOF.

STATEMENT OF ADDITIONAL INFORMATION; sai - TABLE OF CONTENTS. STATEMENT OF
ADDITIONAL INFORMATION. Additional information about the Fund is contained in a
Statement of Additional Information, which is available upon request without
charge by contacting the PFPC Inc. at (800) 331-1710. Following is the Table of
Contents for the Statement of Additional Information:

THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 2
INVESTMENT POLICIES AND TECHNIQUES 4
MANAGEMENT OF THE FUND 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 11
OWNERSHIP OF THE FUND BY DIRECTORS. 12
OWNERSHIP OF THE FUND BY DIRECTORS 13
DIRECTOR COMPENSATION 13
COMMITTEES OF THE BOARD OF DIRECTORS 14
CODES OF ETHICS 15
BROKERAGE ALLOCATION AND OTHER PRACTICES 15
REPURCHASE OF COMMON STOCK 16
TAX STATUS 18
FINANCIAL STATEMENTS 19
ADDITIONAL INFORMATION 20

BOULDER TOTAL RETURN FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

Boulder Total Return Fund, Inc. (the "Fund") is a closed-end, diversified
management investment company. This statement of additional information does not
constitute a prospectus, but should be read in conjunction with the Prospectus
relating hereto dated [June ___, 2003] (the "Prospectus"). This Statement of
Additional Information does not include all information that a prospective
investor should consider before participating in the Offering described in the
Prospectus or otherwise purchasing the Fund's common stock. A copy of the
Prospectus may be obtained without charge by calling the Fund's co-administrator
(PFPC Inc.) at (800)-331-1701. You may also obtain a copy of the Prospectus on
the Securities and Exchange Commission's web site (http://www.sec.gov).
Capitalized terms used but not defined in this Statement of Additional
Information have the meanings given to them in the Prospectus.

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

This Statement of Additional Information is dated [June ___, 2003].

TABLE OF CONTENTS

THE FUND 1

INVESTMENT OBJECTIVE AND POLICIES 2

INVESTMENT POLICIES AND TECHNIQUES 4

MANAGEMENT OF THE FUND 8

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 11

OWNERSHIP OF THE FUND BY DIRECTORS. 12

OWNERSHIP OF THE FUND BY DIRECTORS 13

DIRECTOR COMPENSATION 13

COMMITTEES OF THE BOARD OF DIRECTORS 14

CODES OF ETHICS 15

BROKERAGE ALLOCATION AND OTHER PRACTICES 15

REPURCHASE OF COMMON STOCK 16

TAX STATUS 18

FINANCIAL STATEMENTS 19

ADDITIONAL INFORMATION 20

THE FUND

The Fund is a diversified, closed-end management investment company. The Fund's
investment objective is total return. The Fund seeks to produce both long-term
capital appreciation through investment in common stocks and income from both
dividend paying common stocks and fixed income securities. The Fund typically
invests in securities of U.S.-based companies. See "Investment Objective and
Policies". At its inception in 1993, the Fund was managed to provide "a high
level of current income consistent with preservation of capital". However, at a
special shareholder meeting held August 27, 1999, shareholders approved a change
in the Fund's investment objective to "total return" as well as the elimination
or amendment of certain of the Fund's fundamental investment policies. See
"Investment Restrictions" below.

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE. The Fund's investment objective is total return. The Fund
seeks to achieve its objective by investing in common stocks for long-term
capital appreciation. These stocks may or may not pay a dividend. The Fund may
also invest in income producing securities, namely dividend paying common stocks
(e.g., real estate investment trusts ("REITs"), utilities and other registered
investment companies ("RICs")), as well as corporate bonds, corporate preferred
stock, government securities, or other income producing securities, to achieve
current income consistent with preservation of capital. The income component is
secondary to the long-term capital appreciation component. No assurance can be
given that the Fund will achieve its investment objective. The Fund typically
invests in securities of U.S.-based companies, though it may invest in
securities of non-U.S. companies. The Fund anticipates a low turnover rate in
its portfolio of common stocks and, with respect to common stocks held for
capital appreciation rather than income, seeks to invest in stocks that have a
proven track record of earnings and the prospect of increased future value
through growth in revenues and profits. The Fund has the flexibility to invest
in companies of any size; however, it generally does not investment in start-up
companies, initial public offerings, non-public companies, or companies with
little or no operating history.

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

Under normal market conditions, the Fund intends to invest in a portfolio of
common stocks and income securities. The portion of the Fund's assets invested
in each can vary depending on market conditions. The term "common stocks"
includes both stocks acquired primarily for their appreciation potential and
stocks acquired for their income potential, such as dividend-paying RICs and
REITs. The term "income securities" includes bonds, Government Securities,
notes, bills, debentures, preferred stocks, convertible securities, bank debt
obligations, repurchase agreements and short-term money market obligations.

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

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

2. The Fund may not purchase more than 10% of the voting securities of
any one issuer, or more than 10% of the securities of any class of any
one issuer, except that (i) this limitation is not applicable to the
Fund's investments in government securities and (ii) up to 25% of the
value of the Fund's total assets may be invested without regard to
this 10% limitation.

3. The Fund may not borrow except as permitted by law; provided that, as
long as the Fund's preferred stock is outstanding, the Fund may not
borrow except (1) (a) for temporary or emergency purposes or (b) in
connection with repurchases of its shares or (c) for clearance of
transactions, and then only in amounts not exceeding 10% of its total
assets (not including the amount borrowed) and as otherwise described
in the Prospectus or (2) for the purpose of redeeming all of the
outstanding preferred stock of the Fund. When the Fund's borrowings
under (1)(a), (b) and (c) exceed 5% of the value of its total assets,
the Fund will not make any additional investments.

4. The Fund may not sell securities short or purchase securities on
margin, except for such short-term credits as are necessary for the
clearance of transactions, but the Fund may make margin deposits in
connection with transactions in futures contracts, options on futures
contracts and options on securities and securities indices, and may
make short sales of securities "against the box."

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

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

7. The Fund may not invest in commodities, except that the Fund may enter
into futures contracts, including interest rate and stock index
futures contracts, and may purchase options and write covered options
on futures contracts, securities and stock indices, as described in
the Prospectus.

8. The Fund may not lend any funds or other assets, except through
purchasing debt securities, lending portfolio securities and entering
into repurchase agreements consistent with the Fund's investment
objective.

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

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

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

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Fund's investment
objective, policies and techniques that are described in the Prospectus.

PORTFOLIO INVESTMENTS. Under normal market conditions, the Fund invests
primarily in a balanced portfolio of common stocks and income producing
securities such as utilities, REITs (defined below), RICs (defined below), bonds
and preferred stocks.

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

In selecting common stocks for investment, the Fund expects to focus primarily
on domestic United States companies, although the Fund is permitted to invest in
companies outside the U.S. subject to the restriction stated above (i.e., no
more than 20% of the Fund's assets may be invested in foreign companies).
Generally, target companies will have a consistent high return on equity, while
using modest amounts of debt relative to their industry. The Fund will seek
investments in businesses the Advisers (defined below) understand, which have
fairly predictable and improving future earnings, and most importantly, are
priced reasonably relative to the business' earnings and anticipated growth in
earnings. The Fund will not necessarily focus its investments in "large-cap",
"mid-cap" or "small-cap" companies since Boulder Investment Advisers, LLC
("BIA") and Stewart Investment Advisers ("SIA") (collectively, the "Advisers")
believe it would be unwise to impose such investment limitations. When the Fund
makes an investment in a common stock, it will likely make a significant
investment and typically hold onto it for a long period of time. In the long
run, the Fund believes that value-type investing will produce the best overall
total return.

INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS ("REITs"). REITs, or Real Estate
Investment Trusts, are companies dedicating to owning, and usually operating,
income producing real estate or to financing real estate. Most REITs are trusts
under Sections 856 through 860 of the Internal Revenue Code of 1986 (the
"Code"). The Fund may invest up to 25% of its assets in REITs. The Fund intends
to invest in REITs primarily for income. As of May 9, 2003, the Fund had 26.43%
of its assets invested in REITs. There are risks associated with investing in
REITs, including the potential for loss of value because of the decline in value
of the underlying properties in which the REIT invests. Property valuations may
rise and fall with either the condition of the local economy or the national
economy. Furthermore, the dividend income paid out by the REIT may be reduced or
eliminated, depending on the income produced by the underlying properties owned
by the REITs. In the normal course of business, REITs face risks that are either
non-financial or non-quantifiable. These risks principally include credit risk
as well as legal and environmental risk. Because most REITs are typically
financed with debt instruments, they are also interest rate sensitive.

INVESTMENTS IN OTHER REGISTERED INVESTMENT COMPANIES ("RICs") . The Fund may
invest up to 10% of its assets in other investment companies registered under
the 1940 Act. The Fund may, from time to time, invest in other closed-end RICs
when they are trading at a discount, and when market conditions seem appropriate
to the Advisers. As of May 9, 2003, the Fund had 0.00% of its assets invested in
RICs. There are risks associated with investments in RICs, including the risk
that the dividend paid by the RIC could be reduced or eliminated. Dividend
paying closed-end RICs can also trade at substantial discounts to their net
asset value. Such RICs typically own interest rate sensitive securities, which
tend to increase in value when interest rates decline, and decrease in value
when interest rates increase. RICs also have expenses associated with management
of the fund. To the extent that the Fund invests in other RICs, the Fund's
shareholders will indirectly be incurring expenses for both the Fund and for
that portion of the Fund's assets invested in other RICs. However, in this
regard it should be noted that operating companies also incur expenses in their
daily operations. Profits are reported net of (among other things) these
expenses, and RICs are no different in that respect. RICs fall under the
auspices of the 1940 Act, which requires disclosure of expenses and calculation
of net asset value ("NAV") net of expenses.

PREFERRED STOCKS. Prior to August 27, 1999, the Company was called "Preferred
Income Management Fund" and was virtually 100% invested in preferred stocks.
However, as of May 9, 2003, the Fund held 0.00% of its assets in preferred
stocks and, although the Fund is authorized to do so, the Fund has no present
intention of investing in preferred stocks. Generally, preferred stockholders
receive dividends prior to distributions with respect to common stock and have a
priority of claim over common stockholders if the issuer of the stock is
liquidated. Unlike common stock, preferred stock does not usually carry voting
rights; preferred stock, in some instances, is convertible into common stock.

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

Money market instruments that the Fund may acquire are those securities rated in
the highest short-term rating category by Moody's or S&P or the equivalent from
another major rating service, securities of issuers that have received such
ratings with respect to other short-term debt or comparable unrated securities.
Money market instruments in which the Fund typically expects to invest include:
Government Securities; bank obligations (including certificates of deposit, time
deposits and bankers' acceptances of U.S. or foreign banks); commercial paper
rated P-l by Moody's or A-1 by S&P ; and repurchase agreements.

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

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

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

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

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

BORROWINGS Although it has no present intention of doing so, the Fund reserves
the right to borrow funds to the extent permitted as described under the caption
"Investment Objective and Policies--Investment Restrictions" on Page 3 above.
The proceeds of borrowings may be used for any valid purpose including, without
limitation, liquidity, investing and repurchases of capital stock of the Fund.
Borrowing is a form of leverage and, in that respect, entails risks, including
volatility in net asset value, market value and income available for
distribution.

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

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

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

AMPS lEVERAGE. The Fund is leveraged with 775 shares of Taxable Auction Market
Preferred Stock ("AMPS"). The AMPS are senior to the Common Stock and results in
the financial leveraging of the common stock. Dividends on shares of AMPS are
cumulative. The Fund is required to meet certain asset coverage tests with
respect to the AMPS. If the Fund fails to meet these requirements and does not
correct such failure, the Fund may be required to redeem, in part or in full,
the AMPS at a redemption price of $100,000 per share plus an amount equal to the
accumulated and unpaid dividends on such shares in order to meet these
requirements. Additionally, failure to meet the foregoing asset requirements
could restrict the Fund's ability to pay dividends to Common Stock shareholders
and could lead to sales of portfolio securities at inopportune times.
Nevertheless, the Fund's Management believes that well-managed leverage can have
a beneficial effect on Common Stock shareholders' total return. Leverage can
provide enough additional income to pay a substantial portion of Fund expenses,
if there is enough of a positive spread between the borrowed money and the
return on the assets acquired with such monies. Use of leverage may have a
number of adverse effects on the Fund and its shareholders, including: (i)
Leverage may magnify market fluctuations in the Fund's underlying holdings thus
causing a disproportionate change in the Fund's net asset value; (ii) The Fund's
cost of leverage may exceed the return on the underlying securities acquired
with the proceeds of the leverage, thereby diminishing rather than enhancing the
return to shareholders and generally making the Fund's total return to such
shareholders more volatile; (iii) the Fund may be required to sell investments
in order to meet dividend or interest payments on the debt or preferred stock
when it may be disadvantageous to do so; and (iv) Leveraging through the
issuance of preferred stock requires that the holders of the preferred stock
have class voting rights on various matters that could make it more difficult
for the holders of the Common Stock to change the investment objective or
fundamental policies of the Fund, to convert it to an open-end fund or make
certain other changes.

Although the Fund has focused its use of leverage on producing income, the Fund
may also purchase other income producing securities (e.g., RICs, REITs and
dividend-paying common stocks) or non-dividend-paying common stocks for
long-term appreciation. The Fund is limited in its use of leverage to the
maximum amount permitted pursuant to Section 18 of the 1940 Act.

RISKS ASSOCIATED WITH LEVERAGE. The AMPS leverage creates an opportunity for
increased return but, at the same time, will involve special risk
considerations. Leveraging resulting from the AMPS will magnify declines as well
as increases in the net asset value of the Common Stock and in the net return on
the Fund's portfolio. Although the principal of the Fund's AMPS will be fixed,
the Fund's assets may change in value during the time the AMPS are outstanding,
thus increasing exposure to capital risk. To the extent the return derived from
the assets obtained with the AMPS proceeds exceeds the interest and other
expenses that the Fund will have to pay, the Fund's net return will be greater
than if AMPS leverage was not used. Conversely, however, if the return from the
assets obtained with the AMPS proceeds is not sufficient to cover the cost of
borrowing, the net return of the Fund will be less than if AMPS leverage was not
used, and therefore the amount available for distribution to the Fund's
shareholders as dividends will be reduced.

BORROWING THROUGH REPURCHASE AGREEMENTS. The Fund may borrow by entering into
reverse repurchase agreements with any member bank of the Federal Reserve System
and any broker-dealer or any foreign bank that has been determined by the
Advisers to be creditworthy. Under a reverse repurchase agreement, the Fund
would sell securities and agree to repurchase them at a mutually agreed date and
price. At the time the Fund enters into a reverse repurchase agreement, it will
establish and maintain a segregated account, with its custodian or a designated
sub-custodian containing cash or liquid obligations having a value not less than
the repurchase price (including accrued interest). Reverse repurchase agreements
involve the risk that the market value of the securities purchased with the
proceeds of the sale of securities received by the Fund may decline below the
price of the securities the Fund is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, the buyer or its trustee or receiver may receive an extension
of time to determine whether to enforce the Fund's obligation to repurchase the
securities, and the Fund's use of the proceeds of the reverse repurchase
agreement may effectively be restricted pending the decision. Any reverse
repurchase agreements entered into by the Fund will be treated as borrowings for
purposes of calculating the Fund's borrowing limitation.

MANAGEMENT OF THE FUND

The Fund's board of directors (the "Board") is responsible for the overall
management of the Fund, including supervision of the duties performed by the
Advisers. There are five directors of the Fund. Two of the directors are
"interested persons" (as defined in the 1940 Act). The names and business
addresses of the directors and officers of the Fund and their principal
occupations and other affiliations during the past five years are set forth in
the tables below.

------------------------------ ------------------------ ---------------------------------------------- ------------------
Name, Address*, Age Position, Length of Principal Occupation(s) and Other Number of Funds
Term Served, and Term Directorships held in Fund Complex
of Office During the Past Five Years Overseen by
Director
------------------------------ ------------------------ ---------------------------------------------- ------------------

Disinterested Directors
------------------------------ ------------------------ ---------------------------------------------- ------------------

Alfred G. Aldridge, Jr. Director of the Fund Retired; from 1982-2002, Sales Manager of 2
Brig. Gen. (Retired) since 1999. Current Shamrock Foods Fund; Director of the Fiesta
Cal. Air National Guard term expires at the Bowl, Tempe, AZ since 1997; Director,
Age: 65 2006 Annual Meeting Boulder Growth & Fund, Inc., since 2002.

Richard I. Barr Director of the Fund Retired; from 1963-2001, Manager of 2
Age: 64 since 1999. Current Advantage Sales and Marketing, Inc.;
term expires at the Director, Boulder Growth & Income Fund,
2005 Annual Meeting Inc., since 2002; Director, First Financial
Fund, Inc., since 2001.

Joel W. Looney Director of the Fund Partner, Financial Management Group, LLC 2
Age: 41 since January, 2001. since July 1999; CFO, Bethany College from
Current term expires 1995-1999; Director, Boulder Growth & Income
at the 2004 Annual Fund, Inc., since January 2002.
Meeting
Interested Directors**
------------------------------ ------------------------ ---------------------------------------------- ------------------

Susan L. Ciciora Director of the Fund Owner, Superior Interiors (interior design 2
Age: 39 since November 2001. for custom homes) since 1995; Corporate
Current term expires Secretary, Ciciora Custom Builders, LLC
at the 2004 Annual since 1995; Trustee of the Brown Trust and
Meeting the EH Trust; Director, Boulder Growth &
Income Fund, Inc., since January 2002.

Stephen C. Miller Director and Chairman President of and General Counsel for 2
Age: 50 of the Board since Boulder Investment Advisers, LLC ("BIA");
1999. President of Manager, Fund Administrative Services, LLC
the Fund. Current ("FAS"); Vice President of Stewart
term expires at the Investment Advisers ("SIA"); Director,
2005 Annual Meeting Chairman of the Board and President of
Boulder Growth & Income Fund, Inc., since
2002. President and General Counsel,
Horejsi, Inc. (liquidated in 1999); General
Counsel, Brown Welding Supply, LLC (sold in
1999); Of Counsel, Krassa & Miller, LLC
since 1991.

* Unless otherwise specified, the Directors' respective addresses are c/o
Boulder Total Return Fund, Inc., 1680 38th Street, Suite 800, Boulder, Colorado
80301.

** Mr. Miller is an "interested person" because he is an officer of BIA and SIA,
the Fund's investment advisers. Ms. Ciciora is an "interested person" because of
the extent of her beneficial ownership of Fund shares and by virtue of her
indirect beneficial ownership of BIA and FAS. See "Security Ownership of Certain
Beneficial Owners" below.

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

From the late 1980's until January, 2001, Mr. Looney had served, without
compensation, as one of three trustees of the Mildred Horejsi Trust, an
affiliate of the EH Trust.

The names of the executive officers of the Fund (other than Mr. Miller, who is
described above) are listed in the table below. Each officer was elected to
office by the Board at a meeting held on April 22, 2003. This table also shows
certain additional information. Each officer will hold such office until a
successor has been elected by the Board.

------------------------------ -------------------------- ----------------------------------------------------------
Position, Length of
Name, Address, Age Term Served, and Term of Principal Occupation(s) and Other Directorships held
Office During the Past Five Years
------------------------------ -------------------------- ----------------------------------------------------------
------------------------------ -------------------------- ----------------------------------------------------------

Carl D. Johns Chief Financial Officer, Vice President and Treasurer of BIA and Assistant
1680 38th Street, Chief Accounting Manager of FAS, since April, 1999; Vice President, Chief
Suite 800 Officer, Vice President Financial Officer and Chief Accounting Officer, Boulder
Boulder, CO 80301 and Treasurer since Growth & Income Fund, Inc., since 2002; Employee of
Age: 40 1999. Appointed Flaherty & Crumrine Incorporated prior to December 31,
annually. 1998; Assistant Treasurer of Preferred Income Management Fund
Incorporated, Preferred Income Fund Incorporated and
Preferred Income Opportunity Fund Incorporated prior to
December 31, 1998.

Stephanie Kelley Secretary since 2000. Secretary, Boulder Growth & Income Fund, Inc., since
1680 38th Street, Appointed annually. 2002; Assistant Secretary and Assistant Treasurer of
Suite 800 various Horejsi Affiliates (defined below); employee of
Boulder, CO 80301 FAS since March 1999.
Age: 46

Compensation to the Advisers and Administrators. Information is provided in the
Prospectus concerning the Advisers and Administrator and their agreements with
the Fund. The amounts paid to such persons during the last three fiscal years
or, if shorter, the period during which the entity was retained to provide
services to the Fund are as follows:

Fees Paid
-------------------------------------------------------
-------------------------------------
Name of Entity 2000 2001 2002
---------------------------------------------------------------------------------------------------------------------

Boulder Investment Advisers, LLC $313,182 $847,182 $840,967

Stewart Investment Advisers (aka Stewart West Indies Trading $1,252,729 $1,811,141 $2,214,168
Company, Ltd.)

Fund Administrative Services, LLC $201,992 $234,721 $244,411

PFPC Inc. $262,589 $214,389 $206,646

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information regarding the
beneficial ownership of the Fund's shares as of April 30, 2003, by each person
who is known by the Fund to beneficially own 5% or more of the Fund's Common
Stock. To the Fund's knowledge, there are no 5% or greater beneficial owners of
the AMPs.

Number of
Name of Owner* Shares Number of Shares
Directly Beneficially Percentage
Owned (1) Owned (2) Beneficially Owned
------------------------------------------- ------------------------ -------------------------- ----------------------
------------------------------------------- ------------------------ -------------------------- ----------------------

Badlands Trust Company (1)(3) 12,735 3,939,735 41.84%
Stewart R. Horejsi Trust No. 2 (4) 0 3,939,735 41.84%
Ernest Horejsi Trust No. 1B (1) 2,462,353 2,462,353 26.15%
Lola Brown Trust No. 1B (1) 1,027,886 1,027,886 10.92%
Evergreen Atlantic LLC (1) 257,811 257,811 2.74%
Stewart West Indies Trust (1)(2) 78,470 191,907 2.04%
Susan L. Ciciora Trust (1)(2) 54,132 131,475 1.40%
John S. Horejsi Trust (1)(2) 27,075 65,747 0.70%
Evergreen Trust (1)(2) 19,273 47,632 0.51%

------------------------ -------------------------- ----------------------
Aggregate Shares Owned by 3,939,735 3,939,735 41.84%
Horejsi Affiliates (defined below) **

------------------------------------------- ------------------------ -------------------------- ----------------------
Alter Asset Management, Inc.*** 1,616,745 1,616,745 17.20%

* The address of Evergreen Atlantic LLC is 1680 38th Street, Suite 800,
Boulder, Colorado 80301. The address of each other listed owner is c/o
Badlands Trust Company, POB 801, 614 Broadway, Yankton, South Dakota
57078.

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

*** As stated in a Schedule 13G filed with the Securities and Exchange
Commission on December 31, 2002.

(2) Direct Ownership. Evergreen Atlantic, LLC ("EALLC"), The Evergreen
Trust (the "Evergreen Trust"), John S. Horejsi Trust ("John Trust"),
Susan L. Ciciora Trust ("Susan Trust"), Stewart West Indies Trust ("SWI
Trust"), the Lola Brown Trust No. 1B (the "Brown Trust"), the Ernest
Horejsi Trust No. 1B (the "EH Trust"), Badlands Trust Company
("Badlands"), the Stewart R. Horejsi Trust No. 2 (the "SRH Trust") and
Stewart R. Horejsi are, as a group, considered to be a "control person"
of the Fund (as that term is defined in the 1940 Act). EALLC, the
Evergreen Trust, John Trust, Susan Trust, SWI Trust, the Brown Trust,
the EH Trust and Badlands (collectively, the "Horejsi Affiliates")
directly own the shares indicated for such entity in the table above,
totaling 3,939,735 (41.84%). However, these entities and other trusts
or companies with interlocking management and/or common ownership may
be deemed to indirectly own additional Fund shares, which are included
in the table above.

(3) Indirect Ownership Through EALLC. Numbers shown in the table include
shares held directly (see Footnote No. 1) and shares that may be deemed
to be beneficially owned indirectly through ownership of EALLC. The
outstanding membership interests in EALLC are owned by the Evergreen
Trust, the Susan Trust, the John Trust and the SWI Trust in the
following percentages: 11%, 30%, 15% and 44% respectively. The Trustees
of the Evergreen Trust are Stephen C. Miller, Larry Dunlap and
Badlands. Badlands is the sole trustee for each of the Susan Trust, the
John Trust and the SWI Trust. Stewart Horejsi is not a beneficiary
under any of the foregoing trusts. Badlands has sole discretion with
respect to the Susan Trust, John Trust and SWI Trust while any action
by the Evergreen Trust requires a majority vote of the trustees.
Consequently, both the trusts and each trustee disclaim beneficial
ownership of shares owned by EALLC. Stewart Horejsi is the manager of
EALLC.

(4) Ownership by Badlands. The number shown in the table includes shares
held directly by Badlands (see Footnote No. 1) and shares that may be
deemed to be beneficially owned indirectly by Badlands through direct
or indirect ownership by the Brown Trust, the EH Trust, EALLC,
Evergreen Trust, the Susan Trust, the John Trust and the SWI Trust.
Badlands is the sole trustee of the Susan Trust, the John Trust and the
SWI Trust, which together with the Evergreen Trust control EALLC (see
Footnote No. 2), the other two trustees of Evergreen Trust being
Stephen C. Miller and Larry Dunlap. Badlands, together with Larry
Dunlap and Susan Ciciora (Stewart Horejsi's daughter), is one of three
trustees of both the Brown Trust and the EH Trust. Badlands is a trust
company organized under the laws of South Dakota, which is wholly owned
by the SRH Trust, an irrevocable trust organized by Stewart Horejsi for
the benefit of his issue. The directors of Badlands are Larry Dunlap,
Stephen C. Miller, Robert Ciciora, who is the brother of Stewart
Horejsi's son-in-law (John Ciciora), Gail G. Gubbels and Marty Jans.
Badlands and its directors disclaim beneficial ownership of shares
owned directly by the EALLC, the Evergreen Trust, the Susan Trust, the
John Trust, the SWI Trust, the Brown Trust and the EH Trust.

(5) Indirect Ownership by SRH Trust. The number shown in the table reflects
shares that may be deemed to be beneficially owned indirectly through
ownership of Badlands. The trustees of the SRH Trust are Badlands,
Robert Ciciora and Brian Sippy. Both the Trust and its trustees
disclaim beneficial ownership of shares beneficially owned directly or
indirectly by Badlands.

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

Information as to beneficial ownership in the above table and previous
footnotes has been obtained from a representative of the beneficial owners; all
other information as to beneficial ownership is based on reports filed with the
Securities and Exchange Commission (the "SEC") by such beneficial owners.

As of May 9, 2003, Cede & Co., a nominee partnership of the Depository
Trust Company, held of record, but not beneficially, 9,337,951 shares or 99.2%
of Common Stock outstanding and 775 shares or 100% of AMPs outstanding of the
Fund.

As of May 9, 2003, the executive officers and directors of the Fund, as
a group, owned 3,962,191 shares of the Common Stock (this amount includes the
aggregate shares of Common Stock owned by the Horejsi Affiliates set forth
above) and 0 shares of AMPs of the Fund, representing 42.08% of the Common Stock
and 0.0% of AMPs.

OWNERSHIP OF THE FUND BY DIRECTORS.

Set forth in the following table are the Directors of the Fund,
together with the dollar range of equity securities beneficially owned by each
Director or nominee in the Fund as of May 9, 2003, as well as the aggregate
dollar range of equity securities in all funds overseen or to be overseen in a
family of investment companies (i.e., funds managed by the Advisers).

OWNERSHIP OF THE FUND BY DIRECTORS
Directors and Nominees Dollar Range of Equity Aggregate Dollar Range of
Securities in the Fund Equity Securities in All Funds
in the Family of Investment
Companies
-------------------------------------- -------------------------------- ---------------------------------

Independent Directors and Nominee
-------------------------------------- -------------------------------- ---------------------------------

Alfred G. Aldridge, Jr. $10,001 to $50,000 $10,001 to $50,000
Richard I. Barr Over $100,000 Over $100,000
Joel W. Looney $10,001 to $50,000 $10,001 to $50,000

Interested Directors
-------------------------------------- -------------------------------- ---------------------------------

Susan L. Ciciora Over $100,000+ Over $100,000
Stephen C. Miller Over $100,000++ Over $100,000

+ 2,462,353, 257,811 and 1,027,886 Shares of the Fund are held by the EH Trust, EALLC, and Lola Brown Trust,
respectively. Accordingly, Ms. Ciciora may be deemed to have indirect beneficial ownership of such Shares. Ms. Ciciora
disclaims all such beneficial ownership. Ms. Ciciora directly owns 4,700 shares of the Fund.

++Mr. Miller indirectly owns and controls 2,000 shares of the Funds through
his membership in Erma Miller, LLC. Mr. Miller is also a (i) trustee of
Evergreen Trust and (ii) director and officer of Badlands Trust Company. By
virtue of such relationships, Mr. Miller may be deemed to share the indirect
power to vote and direct the disposition of the Shares directly and beneficially
held by Evergreen Trust and Badlands Trust Company. Mr. Miller disclaims
beneficial ownership of such Shares.

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

None of the independent Directors or their family members owned
beneficially or of record any securities of the Advisers or any person directly
or indirectly controlling, controlled by, or under common control with the
Advisers.

DIRECTOR COMPENSATION

The following table sets forth certain information regarding the compensation of
the Fund's Directors for the fiscal year ended November 30, 2002. No persons
(other than the "independent" Directors, as set forth below) currently receive
compensation from the Fund for acting as a Director or officer. Directors and
executive officers of the Fund do not receive pension or retirement benefits
from the Fund. Directors receive reimbursement for travel and other out of
pocket expenses incurred in connection with Board meetings.

Aggregate Compensation
Name of Person and from the Fund Paid to Directors
Position with the Fund Fiscal Year Ending 6/30/02 Total Compensation from the Fund
and Fund Complex Paid to Director
--------------------------------------- ---------------------------------- ---------------------------------

Alfred G. Aldridge, Jr., Director $23,500 $37,000 (2 funds)

Richard I. Barr, Director $23,500 $36,500 (2 funds)

Joel W. Looney, Director $23,500 $37,000 (2 funds)

Susan L. Ciciora, Director $0 $0

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

Prior to January 28, 2002, each Director of the Fund who was not a Director,
officer or employee of one of the Advisers, or any of their affiliates, received
a fee of $6,000 per annum plus $4,000 for each in-person meeting, and $1,000 for
each telephonic meeting. As of January 28, 2002, the Board of Directors reduced
the fee for telephonic meetings to $500 for each meeting. Each Director of the
Fund is reimbursed for travel and out-of-pocket expenses associated with
attending Board and committee meetings. The Board held five meetings during the
fiscal year ended November 30, 2002. Each Director currently serving in such
capacity attended at least 75% of the meetings of Directors and any committee of
which he is a member. The aggregate remuneration paid to the Directors of the
Fund for acting as such during the fiscal year ended November 30, 2002 amounted
to $70,500.

COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE; REPORT OF AUDIT COMMITTEE. The Audit Committee reviews the
scope and results of the Fund's annual audit with the Fund's independent
accountants and recommends the engagement of such accountants. Management,
however, is responsible for the preparation, presentation and integrity of the
Fund's financial statements, and the independent accountants are responsible for
planning and carrying out proper audits and reviews. The Board adopted a written
charter for the Audit Committee on January 21, 2000. A copy of the Audit
Committee Charter was incorporated in the proxy statement filed for the
shareholder meeting held April 27, 2001. The Audit Committee met three times
during the fiscal year ended November 30, 2002.

In connection with the audited financial statements as of and for the year ended
November 30, 2002 included in the Fund's Annual Report for the year ended
November 30, 2002 (the "Annual Report"), at a meeting held on January 21, 2003,
the Audit Committee considered and discussed the audited financial statements
with management and the independent accountants, and discussed the audit of such
financial statements with the independent accountants.

The Audit Committee has received the written disclosures and letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed with
independent accountants their independence.

The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not employed by the Fund for
accounting, financial management or internal control. Moreover, the Audit
Committee relies on and makes no independent verification of the facts presented
to it or representations made by management or the independent accountants.
Accordingly, the Audit Committee does not provide an independent basis for
determining that management has maintained appropriate accounting and financial
reporting principles and policies, or internal controls and procedures, designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to above do not provide assurance that the audit of the Fund's
financial statements has been carried out in accordance with generally accepted
accounting standards or that the financial statements are presented in
accordance with generally accepted accounting principles.

NOMINATING COMMITTEE. The Board has a Nominating Committee consisting of Messrs.
Looney, Aldridge and Barr which is responsible for considering candidates for
election to the Board in the event a position is vacated or created. The
Nominating Committee would consider recommendations by shareholders if a vacancy
were to exist. Such recommendations should be forwarded to the Secretary of the
Fund. The Nominating Committee of the Fund did not meet during the fiscal year
ended November 30, 2002. The Fund does not have a compensation committee.

CODES OF ETHICS

The Fund and the Advisers have adopted codes of ethics pursuant to Rule 17j-1
under the 1940 Act that permits investment personnel subject to their particular
codes of ethics to invest in securities, including securities that may be
purchased or held by the Fund, for their own accounts. The codes of ethics are
on public file with, and are available from, the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 1-(202)-942-8090 and these codes of ethics are available on the EDGAR
database on the Commission internet site at http://www.sec.gov. Copies of these
codes of ethics may be obtained, after paying a duplicating fee, by electronic
request at the following e-mail address: publicinfo@sec.gov or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0102.

BROKERAGE ALLOCATION AND OTHER PRACTICES

The Advisers are responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions. The Fund may purchase
certain money market instruments directly from an issuer in which case no
commissions or discounts are paid. From May 1, 2002 through April 30, 2003, the
Fund paid $91,200.28 in brokerage commissions.

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

The Advisers are able to fulfill their obligations to furnish a continuous
investment program to the Fund without receiving research from brokers and
normally does not rely on broker research. However, from time to time, it
considers access to such information as an element of financial management.
Although such information is considered useful, its value is not determinable,
as it must be reviewed and assimilated by the Advisers, and does not reduce the
Advisers' normal research activities in rendering investment advice.

Currently, the Advisers manage two investment companies: the Fund and the
Boulder Growth & Income Fund, Inc. The Advisers also manage one private account
and may manage other investment companies and other private accounts from time
to time in the future. In managing the Fund and such other accounts, investment
decisions for the Fund would be made independently from those of such other
accounts; however, from time to time, the same investment decision might be made
for more than one company or account. If two or more accounts were to seek to
purchase or sell the same securities, the securities actually purchased or sold
would be allocated among the companies and accounts on an equitable basis by the
Advisers in good faith in their discretion in accordance with the accounts'
various investment objectives. In some cases, this system may adversely affect
the price or size of the position obtainable for the Fund. In other cases,
however, the ability of the Fund to participate in volume transactions may
produce better execution for the Fund.

Although the investment co-advisory agreements contain no restrictions on
portfolio turnover, it is not the Fund's policy to engage in transactions with
the objective of seeking profits from short-term trading. It is expected that
the annual portfolio turnover rate of the Fund will be less than 50% excluding
securities having a maturity of one year or less. Because it is difficult to
accurately predict portfolio turnover rates, actual turnover may be higher or
lower. Higher portfolio turnover results in increased Fund expenses, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of securities and on the reinvestment in other securities. For the fiscal years
ended November 30, 2001 and November 30, 2002, the Fund's portfolio turnover
rates were 16% and 38%. See "Financial Highlights" in the Prospectus.

REPURCHASE OF COMMON STOCK

The Fund is a closed-end investment company and as such its common shareholders
do not have the right to cause the Fund to redeem their shares. Instead, the
Common Stock trades on the New York Stock Exchange ("NYSE") at a price that is a
function of several factors, including net asset value, dividend stability,
relative demand for and supply of such shares in the market, general market and
economic conditions, dividend levels (which are in turn affected by expenses),
and other factors. Because shares of a closed-end investment company may
frequently trade at prices lower than net asset value (a "Discount"), the Board
may consider actions that might be taken to reduce or eliminate any material
Discount in respect of the Common Stock, which may include the repurchase of
such shares in the open market or in private transactions, the making of a
tender offer for such shares at net asset value, or the conversion of the Fund
to an open-end investment company. The Board may decide not to take any of these
actions. In addition, there can be no assurance that share repurchases or tender
offers, if undertaken, will reduce any Discount.

Because the Fund has issued AMPS, its ability to repurchase shares of, or tender
for, its Common Stock may be limited by the asset coverage requirements of the
1940 Act and by asset coverage and other requirements imposed by Moody's and S&P
as a condition to rating the AMPS. No assurance can be given that the Board will
decide to undertake share repurchases or tenders or, if undertaken, that
repurchases and/or tender offers will result in the Fund's common stock trading
at a price that is close to, equal to or above net asset value. The Fund is
permitted under its Fundamental Policies to borrow to finance repurchases and/or
tender offers. Any tender offer made by the Fund for its shares may be at a
price equal to or less than the net asset value of such shares. Any service fees
incurred in connection with any tender offer made by the Fund will be borne by
the Fund and will not reduce the stated consideration to be paid to tendering
shareholders.

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

The Fund has given notice to shareholders by publishing in its annual and
semi-annual reports that it may from time to time repurchase shares of Common
Stock in the open market at the option of the Board and upon such terms as the
Board shall determine.

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

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

In addition, repurchase by the Fund of its Common Stock will decrease the Fund's
total assets, which would likely have the effect of increasing the Fund's
expense ratio. Any repurchase by the Fund of its Common Stock at a time when the
AMPS are outstanding will increase the leverage applicable to the outstanding
the Common Stock then remaining and decrease the asset coverage of the AMPS.

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

TAX STATUS

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

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

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

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

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

The Fund is required in certain circumstances to backup withhold 30% of taxable
dividends and certain other payments paid to non-corporate registered holders of
the Fund's shares who do not furnish to the Fund their correct taxpayer
identification number (in the case of individuals, their social security number)
and certain certifications, or who are otherwise subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld from payments
made to a shareholder may be refunded or credited against such shareholder's
United States federal income tax liability, if any, provided that the required
information is furnished to the IRS.

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

FINANCIAL STATEMENTS

INDEPENDENT ACCOUNTANTS. KPMG LLP ("KPMG"), at 99 High Street, Boston, MA 02110,
has served as independent accountants for the Fund since January 2001, and has
been selected to serve in such capacity for the Fund's fiscal year ending
November 30, 2003. The financial statements and independent auditors report
incorporated by reference into this Statement of Additional Information have
been so incorporated and the financial highlights included in the Prospectus
have been so included in reliance upon the report of KPMG given on their
authority as experts in auditing and accounting.

INCORPORATION BY REFERENCE. The Fund's Portfolio of Investments, dated November
30, 2002 (audited); Statement of Assets and Liabilities, dated November 30, 2002
(audited); Statement of Operations for the year ended November 30, 2002
(audited); Statement of Changes in Net Investment Assets for the two years ended
November 30, 2002 (audited) and the independent auditors report included in the
Fund's Annual Report for the fiscal year ended November 30, 2002, which
accompany this statement of additional information, are incorporated herein by
reference. The Fund will furnish, without charge, a copy of the Annual Report
upon written request to PFPC Inc., P.O. Box 43027, Providence, Rhode Island
02940-3027 or by calling 1-800-331-1710.

ADDITIONAL INFORMATION

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

Part C. Other Information.

Item 24. Financial Statements and Exhibits

1. Financial Statements:

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

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

i. Report of Independent Accountants. (1)

ii. Statement of assets and liabilities as of November 30, 2002. (1)

iii. Statement of operations for the year ended November 30, 2002. (1)

iv. Statement of cash flows for the year ended November 30, 2002. (1)

v. Statement of changes in net assets for each of the years ended
November 30, 2002 and 2001. (1)

vi. Schedule of Investments as of November 30, 2002. (1)

2. Exhibits

a. Fund's Charter

i. Articles of Incorporation of the Fund dated December 15, 1992 (2)

ii. Articles of Amendment dated August 27, 1999 (2)

iii. Articles Supplementary dated August 11, 2000 (3)

b. Amended and Restated By-laws of the Fund (5)

c. Not applicable

d. Share certificate and Subscription Documents

i. Specimen certificate for common shares (5)

ii. Notice of Intent (4)

iii. Subscription Certificate (4)

iv. Broker Split Request (4)

v. Beneficial Owner Certification (4)

vi. Nominee Over-subscription Form (4)

vii. DTC Over-subscription Form (4)

viii. Notice of Guaranteed Delivery (4)

e. Not applicable

f. Not applicable

g. Investment Advisory Agreements

i. Amended and Restated Investment Advisory between the Fund and
Boulder Investment Advisers, L.L.C. ("BIA") dated April 26, 2002
(5)

ii. Amended and Restated Investment Advisory Agreement between the
Fund and Stewart Investment Advisers, Ltd. ("SIA") dated April
26, 2002 (5)

h. Form of Purchase Agreement between the Fund, BIA and Merrill Lynch (2)

i. Not applicable

j. Custody Agreement between the Fund and PFPC Trust Company (5)

k. Other Agreements

i. Transfer Agency Agreement between the Fund and PFPC, Inc. (5)

ii. Administration Agreement between the Fund and PFPC, Inc. (5)

iii. Co-Administration Agreement between the Fund and Boulder
Administrative Services, LLC (now known as Fund Administrative
Services LLC (the "Co-Administration Agreement") (2)

iv. Auction Agency Agreement between the Fund and Bankers Trust
Company (now known as Deutsche Bank Americas Trust Company) (5)

v. Form of Broker-Dealer Agreement between the Fund, Bankers Trust
Company & Merrill Lynch (2)

vi. Form of Master Purchaser's Letter (2)

vii. Broker-Dealer Agreement between the Fund, Bankers Trust Company &
Salomon Smith Barney, Inc. (5)

viii.Broker-Dealer Agreement between the Fund, Bankers Trust Company
& Paine Webber, Inc. (5)

ix. Broker-Dealer Agreement between the Fund, Bankers Trust Company &
Oppenheimer (5)

x. Broker-Dealer Agreement between the Fund, Deutsche Bank Americas
Trust Company & Bear Stearns & Co. (5)

xi. Broker-Dealer Agreement between the Fund, Deutsche Bank Americas
Trust Company & Fahnestock & Co., Inc. (5)

xii. Information Agent Fee Agreement among the Fund and Georgeson
Shareholder Communication. (4)

xiii.Subscription Agent Fee Agreement among the Fund and Equiserve,
Inc. (4)

l. Opinions of Counsel

i. Opinion and consent of Willkie Farr & Gallagher (4)

ii. Opinion and consent of Venable, Baetjer and Howard, LLP (4)

m. Consent to Service of Process with respect to Stewart West Indies
Trading Company, Ltd. (SIA) (5)

n. Consent of KPMG L.L.P. (4)

o. Not applicable

p. Not applicable

q. Not applicable

r. Code of Ethics of the Fund, BIA and SIA (5)

s. Power of attorney (included on signature page)

t. Financial Data Schedule (EDGAR version only)

(1) Incorporated herein by reference to the Registrant's Form N-30D filed on
January 27, 2003, for year ending November 30, 2002 (Investment Company Act
File No. 811-07390; EDGAR Accession No. 0000935069-03-000070).

(2) Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-2 of the Registrant filed on August 7,
2000 (Securities Act File No. 33-37008; EDGAR Accession No.
0000899140-00-000353).

(3) Incorporated herein by reference to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-2 of the Registrant filed on August 11,
2000 (Securities Act File No. 33-37008; EDGAR Accession No.
0000950130-00-004441).

(4) To be filed by amendment.

(5) Filed herewith.

Item 25. Marketing Arrangements. Not Applicable.

Item 26. Other Expenses of Issuance and Distribution. The Fund expects to incur
approximately $133,925 of expenses in connection with the Offering. The
following table identifies the significant expenses associated with the
Offering.

NYSE Fees $ 11,000
Printing Costs $ 14,000
Fees and Expenses of Qualification Under State
Securities Laws $ -
Auditing Fees and Expenses $ 5,000
Legal Fees and Expenses $ 50,000
Subscription Agent Expense $ 20,000
Information Agent Expenses $ 10,800
Street Account Proxy - Direct Bill from ADP $ 8,125
Underwriter Expenses $ -
Postage and Delivery Charges $ 5,000
Miscellaneous $ 10,000
TOTAL ESTIMATED COSTS $ 133,925

Item 27. Persons controlled by or under common control with the Fund. None.

Item 28. Number of Holders of Shares.

--------------------------------------------- -----------------------------------
Title of Class Record Holders as of May 9, 2003
--------------------------------------------- -----------------------------------

Common Stock, par value $.01 per share

Taxable Auction Market Preferred Stock,
Par value $.01 per share 775

Item 29. Indemnification. Section 2-418 of the General Corporation Law of the
State of Maryland, Article VIII of the Registrant's Articles of Incorporation
(incorporated by reference as an Exhibit to this Registration Statement),
Article 5.2 of the Registrant's By-laws (to be filed as an Exhibit to this
Registration), the Investment Advisory Agreements (to be filed as Exhibits to
this Registration Statement) provide for indemnification. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

Item 30. Business and Other Connections of the Investment Adviser. Registrant is
fulfilling the requirement of this Item 30 to provide a list of the officers and
directors of its investment advisers, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by that entity or those of its officers and directors during the past two years,
by incorporating herein by reference the information contained in the current
Form ADV filed with the Securities and Exchange Commission by each of BIA and
SIA on March 12, 2003 pursuant to the Investment Advisers Act of 1940, as
amended.

Item 31. Location of Accounts and Records.

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

PFPC Inc. Administrator
P.O. Box 1376
Boston, MA 02104

PFPC, Inc. Transfer Agent for
400 Bellevue Parkway Common Shares
Wilmington, DE 19809

PFPC Trust Company Custodian
800 Tinicum Blvd
3rd Floor, Suite 200
Philadelphia, PA 19153

Deutsche Bank Trust Company Americas Transfer Agent for AMPs
280 Park Avenue, 9th Floor
New York, NY 10017

Item 32. Management Services. Not applicable.

Item 33. Undertakings

1. The Registrant hereby undertakes to suspend the offering of the Rights
until it amends its Prospectus if (a) subsequent to the effective date
of its Registration Statement, the net asset value per share declines
more than 10 percent from its net asset value per share as of the
effective date of the Registration Statement or (b) the net asset
value per share increases to an amount greater than the estimated net
proceeds from the Offering as stated in the Prospectus.

2. Not applicable.

3. Not applicable.

4. Not applicable.

5. The Registrant hereby undertakes that:

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

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

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boulder and the State of
Colorado, on the 15th day of May, 2003.

BOULDER TOTAL RETURN FUND, INC.

By: /s/ Stephen C. Miller
President

POWER OF ATTORNEY

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

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

Signature Title Date
---------------------------------------- --------------------------------------------------- ---------------------------------
---------------------------------------- --------------------------------------------------- ---------------------------------

/s/ Stephen C. Miller Director, Chief Executive Officer, May 15, 2003
President and Chairman of the Board

/s/ Susan L. Ciciora Director May 15, 2003

/s/ Joel L. Looney Director May 15, 2003

/s/ Alfred G. Aldridge, Jr. Director May 15, 2003

/s/ Richard I. Barr Director May 15, 2003

/s/ Carl D. Johns Chief Financial Officer, Chief May 15, 2003
Accounting Officer, Vice President and Treasurer

ENDNOTE:
--------

1 Paid to the Advisers and the Administrator, both Horejsi Affiliates, and to
PFPC Inc. the Fund's co-administrator.