Edgar Filing: BOULDER GROWTH & INCOME FUND

PROSPECTUS

5,663,892 RIGHTS FOR 5,663,892 SHARES
BOULDER GROWTH & INCOME FUND, INC.
Common Stock

The Boulder Growth & Income 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 one
Right you receive, you will be entitled to buy one new share of the Common
Stock. You will receive one Right for each outstanding Fund share you own on
November 29, 2002 (the "Record Date"). The number of Rights to be issued to a
shareholder on the Record Date will be rounded down to the nearest whole number
of Rights in cases where shareholders own fractional shares. Also, 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.

The Rights are transferable and will be listed for trading on the New York Stock
Exchange ("NYSE") under the symbol "BIF RT". 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 "BIF." On November 15, 2002, the last reported net
asset value per share of the Fund's shares was $6.32 and the last reported sales
price of a share on the NYSE was $5.35. The subscription price per share (the
"Subscription Price") will be 95% of the lesser of (a) the NAV on the date of
the expiration of the Offering (the "Pricing Date"), or (b) the average
volume-weighted closing sales price of a share on the NYSE on the Pricing Date
and the four immediately preceding trading days.

SHAREHOLDERS WHO CHOOSE TO EXERCISE THEIR RIGHTS WILL NOT KNOW THE SUBSCRIPTION
PRICE PER SHARE AT THE TIME THEY EXERCISE SUCH RIGHTS SINCE THE CLOSE OF THE
OFFERING ON THE EXPIRATION DATE IS 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 DECEMBER 20, 2002 (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.

Boulder Growth & Income Fund, Inc. is a closed-end, non-diversified 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 common stocks of U.S.-based
companies, although it is not limited to investing in the U.S. stock market.

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 7 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 $5.09(1) None $28,611,313

Total $5.09 None $28,611,313
====================================================================================================================

(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 on November 15, 2002 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 November 15,
2002 or (b) the average volume-weighted closing sales price of the Fund's shares
on the NYSE on November 15, 2002, and the four preceding trading days) (the
"Estimated Subscription Price"). The average volume-weighted closing sales price
of the Fund's shares on November 15, 2002 was $5.36 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 which are estimated to be $229,225. Funds received
by check prior to the final due date of this Offer 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 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 will
experience an immediate dilution, which could

The Date of this Prospectus is November 22, 2002

be substantial, of the aggregate net asset value of your shares. This is because
the Subscription Price per share and/or the net proceeds to the Fund for each
new share sold are likely to 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. The Ernest Horejsi Trust No. 1B, which holds
20.68% 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 10 of this Prospectus and in
the Statement of Additional Information), may be deemed to control the Fund and
may purchase shares in the Offering through the primary subscription and the
over-subscription privilege in such manner and on the same terms as other
shareholders.

This Prospectus sets forth concisely 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
November 20, 2002 (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 29 of this Prospectus, may be obtained without charge by contacting the
Fund's Sub-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, the Fund's Information
Agent, at 1-800-732-6518.

TABLE OF CONTENTS

PROSPECTUS SUMMARY 3
PURPOSE AND SUMMARY OF THE OFFERING 3
BOARD CONSIDERATIONS; SHAREHOLDER APPROVED RIGHTS OFFERING 3
IMPORTANT TERMS OF THE OFFERING 4
IMPORTANT DATES FOR THE OFFERING 5
KEY ELEMENTS OF THE OFFERING 5
INFORMATION REGARDING THE FUND 8
RISK FACTORS AND SPECIAL CONSIDERATIONS 8
DILUTION 8
DISCOUNT FROM NET ASSET VALUE 9
REPURCHASE AND CHARTER PROVISIONS 9
NON-DIVERSIFIED STATUS 9
INDUSTRY RISKS AND RISKS ASSOCIATED WITH THE FUND'S INVESTMENTS 9
FOREIGN SECURITIES 9
DEPENDENCE ON KEY PERSONNEL 10
SIZE OF FUND 10
LEVERAGING 10
FEE TABLE 10
SHAREHOLDER TRANSACTION EXPENSES 10
ANNUAL FUND EXPENSES 10
FINANCIAL HIGHLIGHTS 11
THE OFFERING 12
TERMS OF THE OFFERING 12
PURPOSE OF THE OFFERING 13
REASONS FOR CONDUCTING THE OFFERING 13
THE SUBSCRIPTION PRICE 14
OVER-SUBSCRIPTION PRIVILEGE 14
EXPIRATION OF THE OFFERING 15
SALES BY SUBSCRIPTION AGENT 15
METHOD OF TRANSFERRING RIGHTS 15
METHOD OF EXERCISING RIGHTS 15
SUBSCRIPTION AGENT 16
PAYMENT FOR SHARES 16
DELIVERY OF STOCK CERTIFICATES 17
FOREIGN RESTRICTIONS 17
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE OFFERING 18
EMPLOYEE PLAN CONSIDERATIONS 19
INFORMATION ABOUT THE FUND 20
THE FUND 20
MANAGEMENT OF THE FUND 20
BOARD OF DIRECTORS 20
INFORMATION REGARDING THE ADVISERS AND ADMINISTRATOR 20
BOULDER INVESTMENT ADVISERS, LLC 20
STEWART INVESTMENT ADVISERS 20
PORTFOLIO MANAGERS 20
FUND ADMINISTRATIVE SERVICES, LLC 21
THE INVESTMENT CO-ADVISORY AGREEMENTS 21
ADMINISTRATION AGREEMENT 22
USE OF PROCEEDS 22
INVESTMENT OPPORTUNITIES 22
BENEFIT TO THE ADVISERS AND ADMINISTRATOR 22
EXPENSES OF THE FUND 23
MARKET PRICE AND NET ASSET VALUE INFORMATION 23
INVESTMENT OBJECTIVE AND POLICIES 23
INVESTMENT OBJECTIVE 23
INVESTMENT POLICIES 23
OTHER INVESTMENT TECHNIQUES 24
RISKS ASSOCIATED WITH THE FUND'S INVESTMENTS 24
INVESTMENTS IN COMMON STOCKS 24
INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS 25
INVESTMENTS IN OTHER REGISTERED INVESTMENT COMPANIES 25
INVESTMENTS IN BONDS 25
INVESTMENT PHILOSOPHY 25
COMMON STOCKS 25
CASH AND CASH EQUIVALENTS 25
FIXED INCOME INVESTMENTS 25
DIVIDENDS AND DISTRIBUTIONS 25
DIVIDEND REINVESTMENT PLAN 26
TAXATION OF THE FUND 26
TAXATION OF SHAREHOLDERS 27
STATE AND LOCAL TAX MATTERS 28
DETERMINATION OF NET ASSET VALUE 28
CAPITALIZATION OF THE FUND AND OTHER MATTERS 28
REPURCHASE OF COMMON SHARES 28
CAPITALIZATION 28
RIGHTS WITH REGARD TO DIVIDENDS, VOTING AND LIQUIDATION 28
COMMON STOCK 28
PREFERRED STOCK 29
ANTI-TAKEOVER PROVISIONS OF THE CHARTER AND BY-LAWS 29
OTHER SERVICE PROVIDERS 29
CUSTODIAN 29
TRANSFER AGENT 29
INDEPENDENT ACCOUNTANTS 30
LEGAL MATTERS 30
REPORTS TO SHAREHOLDERS 30
AVAILABLE INFORMATION 30
STATEMENT OF ADDITIONAL INFORMATION 31
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS 31

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 Board of Directors of the Fund (the
"Board") has determined that it would be in the best interests of the Fund and
its existing shareholders to increase the assets of the Fund so that the Fund
may be in a better position to take advantage of investment opportunities that
may arise. In addition, the Board believes that increasing the size of the Fund
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. There can be no
assurance that by increasing the size of the Fund, the Fund's expense ratio will
be lowered. The Board also believes that a larger number of outstanding shares
and a larger number of beneficial owners of shares 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. 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" below.
At a meeting on July 22, 2002, the Board recommended that shareholders approve a
transferable rights offering (the "Offering"), the substantive terms of which
would permit shareholders to acquire one new share of the Fund for each share
held (i.e., a one-for-one rights offering) for a subscription price equal to 95%
of the lesser of net asset value ("NAV") or the volume-weighted average market
price on the expiration date of the Offering and the four immediately preceding
trading days.

BOARD CONSIDERATIONS; SHAREHOLDER APPROVED RIGHTS OFFERING. On April 26, 2002,
at a regularly scheduled meeting of the Board, Management recommended that the
Board consider conducting a rights offering and distributed extensive materials
regarding an overview of rights offerings as well as the legal, practical and
financial issues that the Board must consider in coming to a decision to approve
a rights offering or to recommend such a proposal to shareholders. 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 the April 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 April meeting, the Independent Directors interviewed qualified
financial consultants with experience in the closed-end fund industry and, after
unanimous agreement among the Independent Directors, selected and engaged Thomas
J. Herzfeld, Inc. ("Herzfeld"), an organization recognized as an expert in the
field of closed-end investment companies, 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 in July 2002, Management provided
additional requested analysis 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 July meeting, representatives of Herzfeld presented to
the Board and Management a written analysis of rights offerings and specific
recommendations regarding the proposed Offering. Representatives of Herzfeld
also attended the July meeting and made an oral presentation of their 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 BIF to
raise capital at this time, if this additional capital will allow the Fund to
take advantage of investment opportunities, reduce expenses (emphasis added),
and in general help the Fund achieve its particular long-term investment
objectives." 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% (rather than the 90% 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.

The Board then determined to submit the Offering to shareholders for approval at
the annual meeting of the Fund scheduled for October 1, 2002. Under the
Investment Company Act of 1940 (the "1940 Act"), because the Offering would be
at an exchange ratio of one-share-for-each-right-issued, a ratio that is higher
than most rights offerings by other investment companies (e.g.,
one-share-for-three-rights-issued), the Offering would require approval by a
"majority of the shareholders" (i.e., a per capita majority or "head-count"
majority) which contrasts with the typical voting requirement of a "majority of

the shares". In a "head-count" majority, each shareholder, regardless of the
shares held, counts as one vote. In addition to the required "head-count" vote,
the Board voluntarily imposed an additional voting requirement that the Offering
also be approved by an "absolute majority of the outstanding shares" (i.e., 50%
of the outstanding shares would also have to support the Offering).

Finally, the Independent Directors conditioned their approval of the Offering on
(1) the Advisers agreeing to waive one-half of any advisory fees which would be
charged against the uninvested proceeds from the Offering until such time as 50%
or more of the proceeds have been invested in common stock equities in
accordance with the Fund's investment objective and (2) the Fund's administrator
agreeing to cap the Fund's expense ratio for the one-year period following the
Offering at the level in effect on the expiration of the Offering, excluding
extraordinary expenses. The Advisers and the Fund's administrator have agreed to
both of these conditions.

In determining to recommend a one-for-one rights offering to shareholders, the
Board considered, among other things, the costs of doing a smaller offering
(e.g., one-for-three) in relation to the costs of a one-for-one offering, the
reduced impact of a smaller offering on the Fund's expense ratio, the current
favorable climate for investing the proceeds of a larger offering and the
increased potential for a second rights offering to enhance the ongoing
viability of the Fund should a smaller amount of assets be raised.

On September 3, 2002, subject to the voting requirements and conditions
mentioned above, the Fund issued its Annual Proxy recommending, among other
things, that shareholders approve the Offering. As the Fund has experienced in
the past, shareholder participation in the proxy process has been generally low
and thus additional solicitation of shareholder support of the Offering was
required, especially in light of the relatively short solicitation period. On
the meeting date, October 1, 2002, the Offering had received the requisite
absolute majority (54.36% of outstanding shares) and had received overwhelming
support of those shares voting (e.g., 81%). Nonetheless, the proposal fell short
of the requisite per capita or head-count vote (e.g., 50%-plus-one).
Consequently, shareholders present at the meeting resolved to adjourn with
respect to the proposed Offering until such time as the requisite head-count
could be achieved.

At a reconvened meeting held on October 15, 2002, shareholders approved the
Offering, the substantive terms of which would permit shareholders to acquire
one new share of the Fund for each share held (i.e., a one-for-one rights
offering) for a subscription price equal to 95% of the lesser of (a) the NAV on
the date of the expiration of the Offering or (b) the average volume-weighted
closing sales price of the Fund's shares on the NYSE on the date of the
expiration of the Offering and the four preceding trading days. At this
meeting, the Offering received supporting votes from 61.76% of the outstanding
shares, 79.88% of the shares voting, and 50.44% of the shareholders (i.e., the
per capita vote or head-count) and opposing votes from 12.4% of the outstanding
shares, 16.0% of the shares voting and 17.2% of the shareholders.

At the regularly scheduled Board meeting held on October 14, 2002, in
anticipation that the required per-capita vote would be achieved, the
Independent Directors asked Management whether, notwithstanding shareholder
support of the Offering, market conditions and the Fund's economics had changed
sufficiently to warrant either a delay or abandonment of the Offering. At this
meeting Management offered additional data supporting the proposition that the
Offering would reduce the Fund's expense ratio and that market conditions had
changed (i.e., declined) in such a way as to present the Fund and its Advisers
with more investment opportunities. Notwithstanding a decline in the Fund's NAV
and consequently a reduction in the net proceeds expected to be raised in the
Offering, the Board, including the unanimous support of the Independent
Directors, resolved to approve and move forward with the Offering. Nonetheless,
there can be no assurances that the Offering will be successful or that by
increasing the shares of the Fund, its expense ratio will be reduced. Also at
this meeting, the Board, including the unanimous approval by the Independent
Directors, approved this Prospectus and the final terms of the Offering, subject
to its being approved by shareholders.

IMPORTANT TERMS OF THE OFFERING

--------------------------------------------------------------------------------
Total number of shares available for 5,663,892
primary subscription

Number of Rights you will receive for each One Right for every one share('D')
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
closing sales price of the Fund's
shares on the NYSE on the Pricing
Date, and the four preceding
trading days.

Estimated Subscription Price $5.09

'D'The number of Rights to be issued to a shareholder on the Record Date will be
rounded down to the nearest whole number of Rights.

IMPORTANT DATES FOR THE OFFERING

-----------------------------------------------------------------------------------
Record Date November 29, 2002

Subscription Period December 2, 2002 to December 20, 2002

Expiration Date and Pricing Date of the December 20, 2002'DD'
Offering

Deadline for delivery of Subscription December 20, 2002
Certificate and payment of shares, or
Notice of Guaranteed Delivery (*)

Deadline for payment pursuant to Notice December 26, 2002
of Guaranteed Delivery (*)

Confirmation to participants December 29, 2002

Deadline for final payment for shares (if January 11, 2003
any)**

'DD' Unless the Offering is extended to a date no later than December 29,
2002.

* 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-ONE OFFERING The Offering will give shareholders of record the "right" to purchase one new share
of the Fund for each full share held. For example, if you own 100 shares on the
announced record date, you will receive 100 Rights entitling you to purchase 100 new
shares of the Fund. Shareholders will be able to exercise all or some of their
Rights. However, 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) 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 expiration date of the Offering (the "Pricing Date") or (b) the
volume-weighted average closing sales price of a share on the NYSE on the Pricing
Date and the four immediately preceding trading days. Management believes that this
pricing formula (versus a higher 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 shareholders on the
Record Date, 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. 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 the Offering, the trading of
the Rights and the over-subscription privilege), the Horejsi Affiliates could
substantially increase their percentage ownership in the Fund at an advantageous
price.

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 $5.09 per share (i.e., the estimated subscription price based on the Fund's
NAV and market price on November 15, 2002). 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 GROWTH & INCOME 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 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
December 19, 2002, 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 $229,225 of expenses in connection with the
Offering. See "Fees and Expenses of The Offering" below.

o RESTRICTIONS ON FOREIGN The Fund will not mail Subscription Certificates to shareholders whose record
addresses are outside the United States or who have an APO or FPO

SHAREHOLDERS 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 $28,611,313. This
figure is based on the Estimated Subscription Price per share of $5.09 and assumes
all shares offered are sold and that the expenses related to the Offering estimated
at approximately $229,225 are paid. The Advisers anticipate that it will take
approximately 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.

INFORMATION REGARDING THE FUND

Boulder Growth & Income Fund, Inc. is a non-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 investments in 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". No assurance can
be given that the Fund's investment objective will be achieved. As of November
15, 2002, the Fund had 5,663,892 shares of Common Stock outstanding. The Fund's
common shares are traded on the NYSE under the symbol "BIF." The average weekly
trading volume of the Common Stock on the NYSE during the period from January 1,
2002 through September 30, 2002 was 9,700 shares. As of November 15, 2002, the
net assets of the Fund were approximately $35,791,465. Also see "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/or the net proceeds to the Fund for each new share sold are likely
to 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 $5.09,
which is 95% of the lesser of the Fund's weighted-average closing sale price or
its net asset value on November 15, 2002, the Fund's net asset value per share
(after payment of solicitation fees and estimated offering expenses) would be
$5.69, representing a reduction (dilution) of approximately $0.63 per share (or
10.04%). 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 of 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
dilutive impact of a one-for-one rights offering (like the Offering) is greater
than the dilutive impact of a one-for-three offering, which have been conducted
by other closed-end funds. The comparative dilutive impact of each is shown in
Tables 1 & 2 below:

Table 1

1-for-1 Offering

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

Expenses of Dilutive Dilutive
Discount from Average Subscription Shareholder's Rights Effect in Effect in
NAV Market Price* (95% NAV Offering Fund's NAV $ on 100 % on 100
Price of Col B) Pre-Offering Post-Offering Post-Offering Shares Shares
---------------- ----------- --------------- ------------- -------------- --------------- ------------ ----------

5% $6.00 $5.70 $6.32 ($0.02) $5.99 ($32.83) 5.20%
10% $5.69 $5.40 $6.32 ($0.02) $5.84 ($47.84) 7.57%
15% $5.37 $5.10 $6.32 ($0.02) $5.69 ($62.85) 9.95%
20% $5.06 $4.80 $6.32 ($0.02) $5.54 ($77.85) 12.32%
25% $4.74 $4.50 $6.32 ($0.02) $5.39 ($92.86) 14.70%

Table 2

1-for-3 Offering

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

5% $6.00 $5.70 $6.32 ($0.03) $6.13 ($18.44) 2.92%
10% $5.69 $5.40 $6.32 ($0.03) $6.06 ($25.94) 4.11%
15% $5.37 $5.10 $6.32 ($0.03) $5.98 ($33.45) 5.29%
20% $5.06 $4.80 $6.32 ($0.03) $5.91 ($40.95) 6.48%
25% $4.74 $4.50 $6.32 ($0.03) $5.83 ($48.45) 7.67%

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 (a "Discount"). The possibility that the Fund's shares will trade at a
Discount from net asset value 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 has concluded that, subsequent to a
rights offering, 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 Fund also has elected to become subject to certain provisions of
the Maryland General Corporation Law that 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."

NON-DIVERSIFIED STATUS. As a non-diversified investment company under the 1940
Act, the Fund is not as limited as a diversified fund would be in the proportion
of its assets that may be invested in securities of a single issuer. As a result
of investing a greater proportion of its assets in the securities of a smaller
number of issuers, the Fund may be more vulnerable to events affecting a single
issuer and therefore subject to greater volatility than a fund that is more
broadly diversified. Accordingly, an investment in the Fund may present greater
risk to an investor than an investment in a diversified company.

INDUSTRY RISKS AND RISKS ASSOCIATED WITH THE FUND'S INVESTMENTS. The Fund may
from time to time invest a significant portion of its assets in companies in
various industries including, but not limited to, insurance, real estate,
financial and utilities and, as a result, the value of the Fund's shares would
be more susceptible to factors affecting those particular types of industries,
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. Although the Fund is limited as to the amount of foreign
securities in which it may invest (e.g., generally the Fund may invest up to 20%
of its assets in the securities of foreign companies), 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 or revaluations of currencies. The Fund does not expect to make
significant investments in foreign securities.

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.

SIZE OF FUND. As of November 15, 2002, the Fund had net assets of approximately
$35.8 million. As a fund with a relatively small asset base, the Fund may be
subject to certain operational inefficiencies including: higher expense ratio,
less coverage by analysts and the marketplace in general which can contribute to
a less active trading market for the Fund's shares and consequently a wider
discount, more limited ability to attract new investors and/or take advantage of
investment opportunities and less ability to take advantage of lower transaction
costs available to larger investors.

LEVERAGING. Although the Fund is not currently leveraged, under the 1940 Act and
subject to certain exceptions, the Fund has the authority to issue debt or
preferred stock, so long as the Fund's total assets immediately after such
issuance, less certain ordinary course liabilities, exceed 300% of the amount of
the debt outstanding and exceed 200% of the sum of the amount of preferred stock
and debt outstanding. The Board has had discussions regarding the leveraging of
the Fund's common shares. Use of leverage may magnify the impact on the holders
of Common Stock of changes in net asset value and the cost of leverage may
exceed the return on the securities acquired with the proceeds of leverage,
thereby diminishing rather than enhancing the return to such shareholders and
generally making the Fund's total return to such shareholders more volatile. In
addition, 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. 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. See "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.

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)
------------------------------------------------------------------------------------------------------------

Management Fees 1.25%
Administration Fees 0.30%
Other Expenses 1.08%

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

You would pay the following expenses on a $1,000 investment $26.30 $80.78 $137.85 $292.89
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 (1) the Advisers' agreeing to waive one-half of any advisory fees
which would be charged against the uninvested proceeds from the Offering until
such time as 50% or more of the proceeds have been invested in common stock
equities in accordance with the Fund's investment objective and (2) the Fund's
administrator agreeing to cap the Fund's expense ratio for the one-year period
following the Offering at the Fund's actual expense ratio in effect on the
expiration of the Offering, excluding extraordinary expenses. The Advisers and
the Fund's administrator have agreed to both of these conditions, neither of
which is 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 period ending June 30, 2001 and prior years, were
audited by the Fund's previous independent accountants. The below per share
operating performance and ratios for the period ended June 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.

--------------------------------------------------------------------------------------
Year Ended June 30
--------------------------------------------------------------------------------------
2002 2001 2000 1999 1998 1997 1996 1995 1994 1993
--------------------------------------------------------------------------------------

OPERATING PERFORMANCE:
Net asset value, beginning of year $8.65 $8.96 $10.07 $10.75 $10.17 $9.62 $10.07 $9.39 $10.28 $9.67
--------------------------------------------------------------------------------------
Net investment income 0.58 0.70 0.67 0.78 0.75 0.73 0.76 0.76 0.75 0.91
Net realized and unrealized gain/
(loss) on investments (1.49) (0.31) (1.02) (0.70) 0.59 0.62 (0.41) 0.72 (0.77) 0.60
--------------------------------------------------------------------------------------
Total from investment operations (0.91) 0.39 (0.35) 0.08 1.34 1.35 0.35 1.48 (0.02) 1.51
--------------------------------------------------------------------------------------
DISTRIBUTIONS:
Dividends paid from net investment
income to shareholders (0.59) (0.70) (0.76) (0.76) (0.76) (0.80) (0.80) (0.80) (0.87) (0.90)
Net asset value, end of year $7.15 $8.65 $8.96 $10.07 $10.75 $10.17 $9.62 $10.07 $9.39 $10.28
--------------------------------------------------------------------------------------
Market value, end of year $6.78 $8.50 $8.25 $9.63 $9.63 $9.13 $9.00 $9.25 $9.38 $10.75
======================================================================================
Total investment return based on net
asset value('D') -11.36% 4.41% -3.70% 0.64% 13.57% 15.19% 3.64% 17.08% (0.60%) 16.36%
======================================================================================
Total investment return based on
market value('D') -14.47% 11.77% -6.81% 7.85% 14.01% 10.48% 5.56% 7.72% (5.10%) 20.69%
======================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets 1.95%(*) 1.82%(*) 2.51%(*) 1.12% 1.12% 1.19% 1.17% 1.22% 1.16% 1.23%
Ratio of net investment income to
average net assets 6.96% 8.03% 7.08% 7.46% 7.11% 7.43% 7.49% 7.99% 7.38% 9.13%
SUPPLEMENTAL DATA:
Portfolio turnover rate 180% 83% 53% 58% 73% 26% 30% 30% 47% 45%
Net assets, end of year (in 000's) $40,514 $48,990 $50,591 $56,841 $60,670 $57,000 $54,000 $57,000 $53,000 $56,000
---------------------------------------------------------------------------------------
Number of shares outstanding at end
of year (in 000's) 5,664 5,664 5,644 5,644 5,644 5,644 5,644 5,644 5,638 5,528

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

(*) For the years ended June 30, 2002, 2001 and 2000, the ratio of expenses
to average net assets excluding the costs attributable to a proxy
contest and related matters was 1.65%, 1.26% and 1.55%, respectively.

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 each
share of Common Stock owned on the Record Date. The Rights entitle the holder to
acquire one Share at the Subscription Price for each one Right held. The number
of Rights to be issued to a Record Date Shareholder will be rounded down to the
nearest number of Rights evenly divisible by one. Rights may be exercised at any
time during the period which commences on December 2, 2002, and ends at 5:00
p.m., New York time, on December 20, 2002 (the "Subscription Period"), unless
extended by the Fund to a date not later than December 29, 2002, at 5:00 p.m.,
New York time. See "Expiration of the Offering." The Right to acquire one
additional Share for each one Right 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 him 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 Cede & Co., Inc. ("Cede"),
nominee for The Depository Trust Company, or by any other depository or nominee,
will be deemed to be the holders of the Rights that are issued to Cede or such
other depository or 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 Ernest Horejsi Trust No. 1B, a South Dakota grantor trust established by
Stewart R. Horejsi's father (the "EH Trust"), is the Fund's largest shareholder,
holding 20.68% of the Fund's commons stock. The EH Trust and certain other
trusts and entities affiliated with the Horejsi family (collectively defined on
Page 2 above as the "Horejsi Affiliates") may be deemed

to control the Fund (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 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 20.7%
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 20.7% to 25%
(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 Board of Directors of 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 available for investment, thereby permitting the Fund to
be in a better position to more fully take advantage of investment opportunities
that may arise. In addition, the Board believes that increasing the size of the
Fund may lower the Fund's expenses as a proportion of average net assets because
the Fund's fixed costs can be spread over a larger asset base. 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 two primary
reasons:

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., 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. In the case of the Fund, since its initial public
offering in 1974, it has shrunk from its original size of $70 million to
around $35.8 million as of November 15, 2002. Management believes that,
even at $70 million, the Fund would lack the critical mass to be considered
an efficiently run closed-end fund.

The current actual expense ratio ("Current Actual Expense Ratio") is
estimated by Management to be 2.63% on an annualized basis based on total
current net assets of approximately $35.8 million (as of November 15, 2002).
1.55% of this Current Actual Expense Ratio consists of the fees paid to the
Advisers and Administrator. These percentages are not expected to change,
regardless of any potential increase in net assets from the Offering. The
remaining component of the Current Actual Expense Ratio (i.e., 1.08%)
consists primarily of expenses charged as a fixed-dollar amount (e.g., legal
fees, customary proxy related expenses, and insurance). Since these expenses
are not charged on a percentage basis, they do not tend to be significantly
affected by increases or decreases in the Fund's total net assets. Using the
actual expenses incurred by the Fund during fiscal year ending June 30,
2002, the fixed-dollar expenses totaled $410,400 or 1.08% of current total
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 $5.09 (i.e., 95% of the lower of
the Fund's NAV or average 5-day volume-weighted closing sale price on
November 15, 2002), and (ii) the Offering is fully subscribed, the Fund's
estimated expense ratio would be 1.94%. This compares favorably to the
Current Actual Expense Ratio of 2.63% - a difference of 0.73% per annum -
representing a significant increase in operating efficiency. This difference
is much smaller if certain expenses that Management does not consider to be
typical operating expenses are excluded. For example, during its last fiscal
year, the Fund incurred a high level of legal and proxy related expenses in
connection with a proxy contest that occurred during the Fall of 2001 and a
special shareholders' meeting in April 2002 to change the Fund's adviser and
objective. Management does not anticipate this type or level of expense to
typically occur in the future. Excluding the higher expenses incurred in the
proxy contest and special shareholders meeting, Management estimates that
the Fund's expense ratio will be 2.23% annualized. Based on this "adjusted"
expense ratio, the above example would indicate an annualized savings of
0.29%. The Administrator has agreed to reimburse expenses for the one-year
period beginning on the Expiration Date to the extent necessary to maintain
the net average annualized expense ratio of the Fund at its level on the
Expiration Date, excluding any out of the ordinary expenses (e.g.,
litigation costs) incurred by the Fund after the Offering.

TAKING ADVANTAGE OF INVESTMENT OPPORTUNITIES. As of the date of this
Prospectus, the Fund is fully invested in accordance with its investment
objective. The recent 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. In addition, lower stock
prices are sometimes seen toward year-end due to investors selling portfolio
holdings to recognize tax losses. The Offering may permit the Fund to take
advantage of such opportunities if they arise, without necessarily having to
liquidate Fund holdings to raise cash. 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.

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.

RETAINING GOOD INVESTMENTS. In a closed-end fund like the Fund, there are
limits on the Fund's ability to take advantage of new, possibly better
opportunities as they may arise in the future. Rather than sell a good
company to free up cash to take advantage of these new opportunities, the
Advisers believe that shareholders are better served by raising more cash
through a rights offering. This approach in the long-term tends to be more
tax-efficient.

REDUCED TRANSACTION COSTS. A rights offering rewards existing shareholders
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
chooses to do so, 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 volume-weighted average closing sale price of a share on the
NYSE for the Pricing Date and the four preceding trading days (the "Average
Closing Price").

For example, if the Offering were held using a pricing date of November 15,
2002, at which time the NAV was $6.32, the market price on such date was $5.35,
the discount was 15.34%, and the Average Closing Price for the week was $5.36,
then the Subscription Price would be $5.09.

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
--------------------------------------
Total Record Date Position by All x Excess Shares Remaining.
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 (December 20, 2002), unless extended by the Fund to
a date not later than December 29, 2002, 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, Inc. Colbent Corporation
Attn: Corporate Actions c/o Colbent Corporation Attn: Corporate Actions
P.O. Box 859208 Attn: Corporate Actions 40 Campanelli Drive
Braintree, MA 02185-9208 100 William Street, Galleria Braintree, MA 02184
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 $62,500, 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 $5.09 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 100 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 $5.09 x 100 ($509.00)
plus $5.09 x 50 ($255). 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 $5.09 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 $5.09 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.

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 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.

INFORMATION ABOUT THE FUND

THE FUND. The Fund is a non-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 investment in both dividend paying common stocks and fixed
income securities. The Fund typically invests in securities of U.S.-based
companies. See "Investment Objectives and Policies". From its inception in 1972,
the Fund had been managed to provide "a high level of current income". However,
in April 2002, shareholders approved a change in the Fund's investment objective
to "total return". See "The Fund" in the SAI.

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 January 23, 2002. See
"Information Regarding the Advisers and Administrator" below.

INFORMATION REGARDING THE ADVISERS AND 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
January of 2002, the Advisers have been providing advisory services to the Fund
and, since March of 1999, to the Boulder Total Return Fund, Inc. As of October
31, 2002, the Advisers had a total of $268.7 million in assets under management.
The Fund's administrator is Fund Administrative Services, LLC ("FAS" or the
"Administrator").

BOULDER INVESTMENT ADVISERS, LLC. 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 Boulder Total
Return Fund, Inc. 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 fixed income 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. Since 1999, he has been Chief Financial Officer, Chief
Accounting Officer, Vice President and Treasurer of the Boulder Total Return
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
January of 2002, FAS has been providing certain administrative and executive
management services to the Fund and, since March of 1999, to the Boulder
Total Return 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 net asset value (the "Adviser Fee") (including the
principal amount of leverage, if any). 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 35% and 65%, 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).

ADMINISTRATION AGREEMENT. The Fund and FAS (Fund Administrative Services,
L.L.C.) (also referred to as the "Administrator") are parties to an
Administration Agreement dated January 23, 2002 (the "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 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. In addition, FAS is responsible for engaging service providers for
and paying all fees associated with Fund's transfer agency and custody
requirements. FAS currently delegates the provision of accounting and certain
administrative services to third parties. Pursuant to the Administration
Agreement, the Fund pays FAS a monthly fee, calculated at an annual rate of .30%
of the value of the Fund's average monthly net assets. As previously mentioned,
pursuant to the Administration Agreement, FAS pays and is solely responsible for
custody and transfer agency fees incurred by the Fund, as well as the fees
payable to any third parties retained by it to provide services to the Fund.

USE OF PROCEEDS

INVESTMENT OPPORTUNITIES. Management estimates the net proceeds of the Offering
to be approximately $28.6 million based on an Estimated Subscription Price of
$5.09 per share, assuming the Offering is fully subscribed and the expenses
related to the Offering are approximately $229,225. The foregoing estimates are
based on the closing price of the Fund's shares on November 15, 2002.
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 November 15, 2002, 96.8% of the Fund's assets
are invested in common stocks or corporate bonds 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 120
days of receipt. The Advisers have agreed to waive one-half of any advisory fees
which would be charged against the uninvested proceeds from the Offering until
such time as 50% of the proceeds have been invested in common stock equities,
which include shares of real estate investment trusts and investment companies,
in accordance with the Fund's investment objective.

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

It is not possible to state precisely the amount of additional compensation the
Advisers and Administrator 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 $5.09 (i.e., the estimated subscription price
based on the Fund's NAV and share price on November 15, 2002), the annual
compensation to be received by the Advisers and Administrator would be increased
by approximately $446,000. This does not reflect the impact of the expense
reimbursement agreement by the Administrator and 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 recommend the Offering to
shareholders 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 the
Administrator. See "Information Regarding the Advisers and Administrator" above.
While it was cognizant of the benefit to the Advisers and Administrator 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 Administrator.

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 and Administrator; 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.

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:

Boulder Growth & Income Fund, Inc.(1)

Share Price Data

NAV of Fund Low Closing NAV of Fund
High Closing Preceding High Premium/Discount Sales Preceding Low Discount as %
Quarter Ended Sales Price(2) Sales Price as % of NAV Price(2) Sales Price of NAV
-------------------- ----------------- ---------------- ------------------ -------------- --------------- ---------------

9/30/2002 $6.65 $7.15 -7.0% $5.21 $6.49 -19.7%
6/30/2002 $7.90 $8.09 -2.3% $6.40 $7.66 -16.4%
3/31/2002 $8.09 $8.29 -2.4% $7.22 $8.11 -11.0%
12/31/2001 $8.29 $8.50 -2.5% $7.61 $8.38 -9.2%
9/30/2001 $8.80 $8.83 -0.3% $7.71 $8.25 -6.5%
6/30/2001 $8.85 $8.75 1.1% $8.21 $8.61 -4.6%
3/31/2001 $9.02 $9.03 -0.1% $8.45 $8.75 -3.4%
12/31/2000 $8.56 $8.51 0.6% $7.94 $8.51 -6.7%

(1) Prior to April 26, 2002, the name of the Fund was USLife Income Fund, Inc.
(2) As reported by the NYSE

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE. 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 investments in both dividend paying common stocks
and income producing securities such as the common stocks of utilities, closed
end funds ("RICs"), real estate investment trusts ("REITs"), as well as U.S.
Government securities, preferred stocks and bonds. No assurance can be given
that the Fund will achieve its investment objective.

INVESTMENT POLICIES. The Fund operates as a "non-diversified" investment
company, as defined in the 1940 Act. As a result of being "non-diversified",
with respect to 50% of the Fund's portfolio, the Fund must limit to 5% the
portion of its assets invested in the securities of a single issuer. There are
no such limitations with respect to the balance of the Fund's portfolio,
although no single investment can exceed 25% of the Fund's total assets at the
time of purchase. 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 "non-diversified" fund. As a result, the Fund is subject to a greater
risk of loss than a diversified fund or a fund that has diversified 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
large Fund holdings.

Under normal market conditions, the Fund intends to invest at least 80% of its
net assets in common stocks. Common stocks include dividend-paying closed-end
funds and REITs. The portion of the Fund's assets that are not invested in
common stocks may be invested in fixed income securities, cash equivalents and
income-producing common stocks. The term "income-producing common stocks"
includes RICs whose objective is income, REITs and other dividend-paying common
stocks; while the term "fixed income securities" includes bonds, U.S. Government
securities, notes, bills, debentures, preferred stocks, convertible securities,
bank debt obligations, repurchase agreements and short-term money market
obligations.

The 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
circumstances, the Fund will not have more than 10% of its assets in cash or
cash equivalents.

The Fund's portfolio currently is, and the Fund expects it to continue to be,
invested primarily in common stocks. 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 or any other industry. Each of these percentage
limitations is 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. 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 has also 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.

Except for the Fund's investment objective and the Fund's fundamental investment
restrictions described in the SAI, the percentage limitations and investment
policies set forth in this Prospectus can be changed by the Board of Directors
without shareholder approval.

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. The volatility of common stock prices has
historically been greater than bonds, 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. The Fund will not generate income at its historic levels,
thus resulting in a decreased distribution of investment income to the
holders of the Fund's common stock. As of November 15, 2002, the Fund held
144 Berkshire Hathaway, Inc. "A" shares. At the time of investment, this
represented less than 25% of the Fund's assets. However, primarily because
of depreciation of other assets in the Fund, as of November 15, 2002, these
positions represented 29.8% of the Fund's assets. The Advisers do not
currently intend to liquidate any portion of the Fund's position in
Berkshire Hathaway, Inc. Though not an insurance company itself, Berkshire
Hathaway owns Geico Insurance and General Re Insurance companies, and
therefore derives a significant portion of its income, and its value, from
these two insurance companies. The insurance 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,
Inc. 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
NAV, (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 November
15, 2002, the Fund had 19.3% of its assets invested in REITs. There are
risks associated with investing in REITs, including the potential for loss
of value if the underlying properties in which the REIT invests decline in
value. Property valuations may rise and fall with either the local economy
conditions or with the national economy. Furthermore, the dividend income
paid out by the REIT may be reduced or eliminated.

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. As of November 15,
2002, the Fund had 0% of its assets invested in RICs. The Fund intends to
normally 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 BONDS. As of November 15, 2002 bonds constituted
approximately 5.2% of the Fund's assets. This ratio is down significantly
from January 23, 2002 (the date the Advisers were engaged to manage the
Fund's portfolio) when the Fund held almost 100% of its assets in corporate
bonds. Corporate bonds may be substantially less liquid than many other
securities such as common stocks or U.S. Government securities. In
addition, bonds purchased by the Fund may be subject to risk with respect
to the issuing entity and to market

fluctuations. In particular, such 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
securities rated less than investment grade. Lower-quality fixed-income
securities in the Fund's portfolio may be subject to greater risk than
higher rated securities.

INVESTMENT PHILOSOPHY.

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 November 15, 2002, the Fund had a cash
position equal to 3.2% of assets, including investments in U.S. Treasury
securities. Under normal market conditions, the Fund's cash position will
typically be less than 20% 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. Prior to the Fund's change in objective to "total
return" in April 2002, it was the Fund's policy to make quarterly dividend
distributions. However, with the change in the Fund's objective to "total
return", and its ability to invest in non-dividend paying common stocks, the
Board resolved to make only annual distributions to holders of its common stock.
Accordingly, 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. At a meeting held on July 22, 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 shares 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
shares of the Fund 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 common shares and corporate bonds 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.

CAPITALIZATION OF THE FUND AND OTHER MATTERS

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.

CAPITALIZATION. The Charter authorizes the issuance of 250,000,000 shares of
Common Stock, par value $0.01 per share. Shareholders recently approved an
amendment to the Charter which authorizes the Board, without shareholder
approval, to increase the Fund's authorized capital. Pursuant to such amendment,
and in connection with the Offering, the Board resolved to increase the
authorized capital of the Fund to an aggregate of 250,000,000 shares and to
reduce the par value to $0.01 per share. Under the Offering, the Fund will offer
5,663,892 additional shares.

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.

COMMON STOCK. 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 has traded on the NYSE from between January of 1974 to April
29, 2002, under the symbol "UIF". From April 30, 2002 to the present, the Common
Stock has traded on the NYSE under the symbol "BIF". On November 15, 2002, there
were 5,663,892 common shares of the Fund issued and outstanding and the net
asset value per common share was $6.32 and the closing price per common share on
the NYSE was $5.09.

PREFERRED STOCK. The Board is authorized to classify and reclassify any unissued
shares of Common Stock as part of an issuance of 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. 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 shares and outstanding preferred shares of the Fund have no preemptive
right to purchase any preferred shares that might be issued.

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 The Charter classifies the Board 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.

o The Charter requires the affirmative vote of at least 75% of the votes
entitled to be cast by holders of Common Stock to approve, adopt or
authorize the following:

(1) Any conversion from a closed-end to an open-end investment
company;

(2) Any merger or consolidation of the Fund with or into any other
person;

(3) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or
with any other person of any assets of the Fund except for
portfolio transactions of the Fund effected in the ordinary course
of the Fund's business;

(4) The issuance or transfer by the Fund (in one transaction or a
series of transactions) of any shares of the Fund to any other
person in exchange for cash, securities or other property (or a
combination thereof) excluding sales of any shares of the Fund in
connection with a public offering thereof; or

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

o The Fund has elected to become subject to certain provisions of the
Maryland General Corporation Law that may be regarded as anti-takeover
provisions. Under these provisions, among other things (i) a majority
of shareholders is required in order for shareholders to call a meeting
of shareholders, (ii) Board members cannot be removed without cause,
(iii) two-thirds of the votes entitled to be cast is necessary to
remove any director, (iv) only remaining Board members can fill a
vacancy on the Board resulting from an increase in the size of the
Board or from the death, resignation or removal of a director and (v)
directors elected by the Board to fill a vacancy serve for the full
term of the class of directors in which the vacancy occurred.

o The Fund's By-laws 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, make it more
difficult to effect a change in the Fund's business or management and could 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 State Street Bank and Trust Company (the "Custodian"),
located at 225 Franklin Street, Boston, MA 02110, 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. All customary fees of the Custodian are paid by
the Administrator.

TRANSFER AGENT. The transfer agent, dividend disbursing agent and registrar
for the common shares of the Fund is Mellon Investor Services LLC. All
customary fees of the transfer agent are paid by the Administrator.

INDEPENDENT ACCOUNTANTS. The data in the "Financial Highlights" section of
this Prospectus are based upon financial statements for the year ending
June 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 ADVISER. 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. Additional information about the Fund is
contained in a Statement of Additional Information, which is available upon
request without charge by contacting the Fund's Sub-Administrator, PFPC, Inc. at
(800) 331-1710. Following is the Table of Contents for the Statement of
Additional Information:

STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS

THE FUND ....................................................................S-1
INVESTMENT OBJECTIVE AND POLICIES ...........................................S-1
INVESTMENT POLICIES AND TECHNIQUES ..........................................S-3
MANAGEMENT OF THE FUND ......................................................S-6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS .............................S-9
OWNERSHIP OF THE FUND BY DIRECTORS .........................................S-10
DIRECTOR COMPENSATION ......................................................S-10
COMMITTEES OF THE BOARD OF DIRECTORS .......................................S-11
CODES OF ETHICS ............................................................S-12
BROKERAGE ALLOCATION AND OTHER PRACTICES ...................................S-12
REPURCHASE OF SHARES .......................................................S-13
TAX STATUS .................................................................S-14
FINANCIAL STATEMENTS .......................................................S-15
ADDITIONAL INFORMATION .....................................................S-15

BOULDER GROWTH & INCOME FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

Boulder Growth & Income Fund, Inc. (the "Fund") is a closed-end, non-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 November 22, 2002 (the "Prospectus"). This Statement of
Additional Information does not include all information that a prospective
investor should consider before participating in the rights 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
sub-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 November 22, 2002.

TABLE OF CONTENTS

THE FUND....................................................................S-1
INVESTMENT OBJECTIVE AND POLICIES...........................................S-1
INVESTMENT POLICIES AND TECHNIQUES..........................................S-3
MANAGEMENT OF THE FUND......................................................S-6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.............................S-9
OWNERSHIP OF THE FUND BY DIRECTORS.........................................S-10
DIRECTOR COMPENSATION......................................................S-10
COMMITTEES OF THE BOARD OF DIRECTORS.......................................S-11
CODES OF ETHICS............................................................S-12
BROKERAGE ALLOCATION AND OTHER PRACTICES...................................S-12
REPURCHASE OF SHARES.......................................................S-13
TAX STATUS.................................................................S-14
FINANCIAL STATEMENTS.......................................................S-15
ADDITIONAL INFORMATION.....................................................S-15

THE FUND

The Fund is a non-diversified, closed-end registered 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". From its inception in 1972, the Fund was managed to
provide "a high level of current income". However, at a special shareholder
meeting held in April 2002, shareholders approved a change in the Fund's
investment objective to "total return" as well as a change of the Fund to
non-diversified status, and eliminated or changed 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 produce both long-term capital appreciation through investment in
common stocks and income from both dividend paying common stocks, including
utilities, real estate investment trusts ("REITs"), registered closed end
investment companies ("RICs") and fixed

S-1

income securities, such as U.S. government securities, preferred stocks and
bonds. No assurance can be given that the Fund will achieve its investment
objective.

The Fund is a "non-diversified" investment company, as defined in the Investment
Company Act of 1940 (the "1940 Act"). As a result, with respect to 50% of the
Fund's portfolio, the Fund must limit to 5% the portion of its assets invested
in the securities of a single issuer. There are no such limitations with respect
to the balance of the Fund's portfolio, although no single investment can exceed
25% of the Fund's total assets. 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 "non-diversified" fund. As a result, the Fund is subject
to a greater risk of loss than a diversified fund or a fund that has diversified
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 large Fund holdings.

Under normal market conditions, the Fund intends to invest at least 80% of its
net assets in common stocks.

INVESTMENT RESTRICTIONS. A number of the Fund's investment policies have been
defined as "fundamental" policies ("Fundamental Policies") by the Prospectus. No
Fundamental Policy may be changed without the vote of (i) 67% or more of the
shares present at a meeting, if the holders of more than 50% of the shares are
present or represented by proxy, or (ii) more than 50% of the shares, whichever
is less. With the exception of the Fundamental Policies, all other policies,
statements, objectives, terms and conditions may be changed by the Fund's Board
of Directors (the "Board") without shareholder approval. At a special
shareholder meeting held on April 26, 2002, shareholders approved proposals
eliminating or modifying Fundamental Policies regarding (i) prohibition on
investing in REITs, (ii) prohibition on borrowing, (iii) prohibition on pledging
assets, (iv) prohibition on issuing senior securities and (v) restrictions on
greater-than-5% holdings in a single issuer. Presently, after elimination or
modification of these policies, the Fund has the following investment
restrictions. It may not:

1. Issue any senior securities except as permitted under the 1940 Act.

2. Invest in the securities of issuers conducting their principal business
activity in the same industry if, immediately after such investment,
the value of its investments in such industry would exceed 25% of the
value of its total assets.

3. Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance
of transactions.

4. Write, purchase or sell puts, calls, or combinations thereof provided
that this shall not preclude the purchase and sale of warrants, rights
and convertible securities in accordance with the Fund's policies.

5. Participate on a joint or a joint and several basis in any trading
account in securities, except that the Fund may, to the extent
permitted by rules, regulations or orders of the SEC, combine orders
with others for the purchases and sales of securities in order to
achieve the best overall execution.

6. Invest no more than 20% of its assets in foreign securities, except
that the Fund may invest not more than 25% of the value of its total
assets in securities of, or guaranteed by, the Government of Canada or
of a Province of Canada or any instrumentality or political subdivision
thereof.

7. Purchase or sell interests in oil, gas or other mineral exploration or
development programs.

8. Purchase or sell real estate, except that the Fund may purchase or sell
real estate investment trusts and securities secured by real estate or
interests therein issued by companies owning real estate or interests
therein.

9. Purchase or sell commodities or commodity contracts.

10. Make loans other than through the purchase of debt securities in
private placements and the loaning of portfolio securities as described
under "Investment Objective and Policies".

11. Borrow money in an amount exceeding the maximum permitted under the
1940 Act.

12. Underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter in selling a portfolio security which may
require registration under the Securities Act of 1933.

13. Invest more than 30% of the value of its total assets in securities
which have been acquired through private placements.

S-2

14. Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, those officers and directors of the Fund or its investment
adviser who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more
than 5% of such outstanding securities.

15. Pledge, mortgage or hypothecate its assets except in connection with
permitted borrowing and to the extent related to transactions in which
the Fund is authorized to engage.

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 portfolio of common stocks and income producing securities such
as utilities, REITs, RICs, 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 November 15, 2002, the
Fund had 19.3% of its assets invested in REITs. There are risks associated with
investing in REITs, including the potential for loss of value if the underlying
properties in which the REIT invests decline in value. Property valuations may
rise and fall with either the local economy conditions or with the national
economy. Furthermore, the dividend income paid out by the REIT may be reduced or
eliminated, depending on the income produced by the underlying properties owned
by the REITs. In the normal course of business, REITs face risks that are either
non-financial or non-quantifiable. These risks principally include credit risk
as well as legal risk. Because most REITs are typically financed with debt
instruments, they are also interest rate sensitive.

INVESTMENTS IN OTHER REGISTERED INVESTMENT COMPANIES ("RICs"). The 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 November 15, 2002, the Fund had 0% of its
assets invested in RICs. The Fund intends to normally invest in RICs that pay
dividends. There are risks associated with investments in RICs, including the
risk that the dividend paid by the RIC could be reduced or eliminated. Dividend
paying closed-end RICs can also trade at substantial discounts to their net
asset value. 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, even
operating companies also incur expenses in their daily operations. Profits are
reported net of these expenses, and RICs are no different in that respect. RICs
fall under the auspices of the 1940 Act, which requires disclosure of expenses
and calculation of net asset value ("NAV") net of expenses. Despite this, the
Advisers deem the "double-expense" to have a minimal impact when compared to the
discount at which the Fund may buy other RICs. In the case of RICs that
specialize in bonds, the primary risk is interest rate risk. The NAV and market
value of RICs will fluctuate with the value of the underlying assets.

S-3

BONDS. Prior to April 26, 2002, the Fund was called USLife Income Fund,
Inc. and was virtually 100% invested in corporate bonds. After the Fund changed
its investment objective on April 26, 2002, the Advisers liquidated a
substantial portion all of the Fund's bond portfolio. As of November 15, 2002,
the Fund had only 5.2% of its assets invested in bonds. The Fund may continue to
liquidate most of its remaining bond holdings as appropriate and does not
anticipate making significant investments in bonds in the future.

PREFERRED STOCKS. The Fund may invest in preferred stocks. Generally,
preferred stockholders receive dividends prior to distributions on 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 have voting
rights; preferred stock, in some instances, is convertible into common stock.
The Fund may, from time to time, invest in preferred stocks that are rated
investment grade by Moody's Investment Services ("Moody's") and Standard &
Poor's ("S&P") at the time of investment or whose issuer's senior debt is rated
investment grade by Moody's or S&P at the time of investment, although the Fund
is not limited to investments in investment grade preferreds. In addition, the
Fund may acquire unrated issues that the Advisers deem to be comparable in
quality to rated issues in which the Fund is authorized to invest.

MONEY MARKET INSTRUMENTS. Under normal conditions, the Fund may hold up to
20% of its assets in cash or money market instruments. The Fund intends to
invest in money market instruments pending investments in common stocks, to
serve as collateral in connection with certain investment techniques, and to
hold as a reserve pending the payment of dividends to investors.. 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 will be securities rated in
the highest short-term rating category by Moody's or S&P or the equivalent from
another major rating service, securities of issuers that have received such
ratings with respect to other short-term debt or comparable unrated securities.
Money market instruments in which the 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 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

S-4

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. The Fund reserves the right to borrow funds to the extent permitted
by its Fundamental Policies. See "Investment Restrictions" 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.

OTHER INVESTMENT TECHNIQUES AND POLICIES

LEVERAGE. At a Special Meeting held in April 2002, shareholders approved the
elimination or modification of certain of the Fundamental Policies, thus
allowing the Fund to leverage its portfolio. At the annual meeting on October 1,
2002, shareholders approved an amendment to the Charter that would permit the
Fund to issue preferred stock which could be used to leverage the portfolio.
Management believes that well-managed leverage can have a beneficial effect on
shareholders' total return. If properly managed, leverage can provide enough
additional income to pay a substantial portion

S-5

of Fund expenses, if there is enough of a positive spread between the borrowed
money and the return on the assets acquired with such moneys. Although the Fund
will likely focus 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 by law, which is the limit contained in Section 18 of
the 1940 Act. The Fund would leverage through the issuance of preferred stock or
borrowing. Depending on how leverage might be structured, the leverage may, in
certain circumstances, require shareholder approval. Presently, although there
are no current proposals for leveraging the Fund, upon consideration and
approval by the Board, the Fund can borrow from banks, institutions or other
entities, such as through margin purchases or reverse repurchase agreements.

RISKS ASSOCIATED WITH LEVERAGE. The Fund is authorized to borrow money from
banks and other entities in an amount equal to up to 33-1/3% of the Fund's total
assets (including the amount borrowed), less all liabilities and indebtedness
other than the borrowing, and may use the proceeds of the borrowings for
investment purposes. Borrowings create leverage, which is a speculative
characteristic. Although the Fund may borrow continuously, it will do so only
when management believes that borrowing will benefit the Fund after taking into
account considerations such as the costs of the borrowing and the likely
investment returns on the securities purchased with the borrowed monies. The
extent to which the Fund will borrow will depend upon the availability of
credit. No assurance can be given that the Fund will be able to borrow on terms
acceptable to the Fund.

Borrowing by the Fund will create an opportunity for increased return but, at
the same time, will involve special risk considerations. Leveraging resulting
from borrowing 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 borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding, thus increasing exposure to
capital risk. To the extent the return derived from the assets obtained with
borrowed funds exceeds the interest and other expenses that the Fund will have
to pay, the Fund's net return will be greater than if borrowing was not used.
Conversely, however, if the return from the assets obtained with borrowed funds
is not sufficient to cover the cost of borrowing, the net return of the Fund
will be less than if borrowings were not used, and therefore the amount
available for distribution to the Fund's shareholders as dividends will be
reduced.

The Fund expects that, if it determines to borrow, some or all of its borrowings
may be made on a secured basis. If they are, the Fund's custodian will either
segregate the assets securing the Fund's borrowings for the benefit of the
Fund's lenders or arrangements will be made with a suitable sub-custodian, which
may include a lender. If the assets used to secure the borrowing decrease in
value, the Fund may be required to pledge additional collateral to the lender in
the form of cash or securities to avoid liquidation of those assets. The rights
of any lenders to the Fund to receive payments of interest on and repayments of
principal of borrowings will be senior to the rights of the Fund's shareholders,
and the terms of the Fund's borrowings may contain provisions that limit certain
activities of the Fund and could result in precluding the purchase of
instruments that the Fund would otherwise purchase.

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 investment adviser 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. Reverse repurchase agreements will be
treated as borrowings for purposes of calculating the Fund's borrowing
limitation.

The Fund may, in addition to engaging in the transactions described above,
borrow money from banks for temporary or emergency purposes (including, for
example, clearance of transactions, share repurchases, tender offers or payments
of dividends to shareholders) in an amount not exceeding 5% of the value of the
Fund's total assets (including the amount borrowed).

S-6

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:

INFORMATION ABOUT DIRECTORS AND OFFICERS. Set forth in the following table is
information about the Directors of the Fund, together with their address, age,
position with the Fund, term of office, length of time served and principal
occupation during the last five years.

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

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 January 2002. Shamrock Foods Fund; Director of the Fiesta
Cal. Air National Guard Current term expires Bowl, Tempe, AZ since 1997. Director,
Age: 65 at Annual Meeting for Boulder Total Return Fund, Inc., since 1999.
2004

Richard I. Barr Director of the Fund Retired; from 1963-2001, Manager of 2
Age: 64 since January 2002. Advantage Sales and Marketing, Inc.
Current term expires Director, Boulder Total Return Fund, Inc.,
at Annual Meeting for since 1999; Director, First Financial Fund,
2004 Inc., since 2001.

Joel W. Looney Director of the Fund Partner, Financial Management Group, LLC 2
Age: 40 since January, 2002. since July 1999. Director, Boulder Total
Current term expires Return Fund, Inc., since January 2001.
at Annual Meeting for
2003

Interested Directors**
------------------------------ ------------------------ ---------------------------------------------- ------------------
Susan L. Ciciora Director of the Fund Owner, Superior Interiors (interior design 2
Age: 38 since January 2002. for custom homes) since 1995; Corporate
Current term expires Secretary, Ciciora Custom Builders, LLC
at Annual Meeting for since 1995; Trustee of the Brown Trust and
2003 the EH Trust. Director, Boulder Total
Return Fund, Inc., since November 2001.

Stephen C. Miller Director and Chairman President and General Counsel of Boulder 2
Age: 49 of the Board since Investment Advisers, LLC ("BIA"); Manager,
January 2002. Fund Administrative Services, LLC ("FAS");
President of the Vice President of Stewart Investment
Fund. Current term Advisers ("SIA"); Director, Chairman of the
expires at Annual Board and President of Boulder Total Return
Meeting for 2005 Fund, Inc., since 1999. 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 Growth & Income 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" as a
result of the extent of her beneficial ownership of Fund shares and by virtue of
her indirect beneficial ownership of the BIA and FAS. See "Benefit to Advisers
and Administrator" below.

S-7

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 Mildred Horejsi Trust, the EH Trust and the other
trusts and business entities affiliated with the Horejsi family are referred to
herein as the "Horejsi Affiliates".

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 January 23, 2002. 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 Total Return Fund, Inc., since 1999; Employee of
Age: 39 January 2002. 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 January Secretary, Boulder Total Return Fund, Inc., since
1680 38th Street, 2002. Appointed October 27, 2000; Assistant Secretary and Assistant
Suite 800 annually. Treasurer of various Horejsi Affiliates; employee of FAS
Boulder, CO 80301 since March 1999.
Age: 45

In January 2002, the Board was presented with and considered an extensive
proposal from the Advisers (then, the proposed advisers) recommending, among
other things, a change in the Fund's investment adviser (the "Advisory
Proposal"). The Advisory Proposal represented the recommendation by the Advisers
and Stewart R. Horejsi on behalf of the Horejsi Affiliates. Throughout the
process of considering the Advisory Proposal, the Board was advised by counsel
to the Fund and separate counsel retained by the non-interested members of the
Board.

The Advisory Proposal presented the Board with extensive written materials
concerning BIA and SIA, their personnel, financial condition, compliance and
systems capability and related matters. The Board also reviewed extensive
audited and unaudited performance data with respect to the Advisers' management
of Boulder Total Return Fund, Inc. ("BTF"), including calendar year, fiscal year
and 12-month total returns, returns on NAV and returns on market, and BTF's
performance rank with Lipper Analytical Services ("Lipper") in a broad range of
closed and open-end fund categories. In addition, the Board reviewed a report
prepared by an independent accounting firm showing the investment performance
achieved by Stewart R. Horejsi (the Advisers' primary portfolio manager), with
respect to his family's portfolio of securities over a 10-year period ending
12/31/98. Cognizant of the fact that the Advisers had a relatively limited
operating history with respect to advising a registered investment company, the
Board carefully considered the capability of those parties to advise the Fund.
The Board noted that the past performance of the Advisers is not necessarily
indicative of future performance.

The Board also considered the reasonableness of the proposed fees to be paid to
the Advisers. In this regard, the Board took note that the fee proposed under
the Advisory Proposal was identical to that paid to the Advisers by BTF and that
the Fund was expected to be managed over time in much the same way as BTF (i.e.,
with "total return" being the Fund's objective), although some of the Fund's
investment policies vis-a-vis BTF may differ. The Board also reviewed materials
and reports supporting the reasonableness of the proposed fee, including data
prepared by Lipper showing fees charged by funds investing in common stocks,
expense ratios for those funds and profitability data of SIA and BIA assuming
the approval of the proposed fee. In light of the possibly extended timetable
for investing Fund assets in common stocks, the Board negotiated a waiver of a
portion of the proposed fee until such time as at least 50% of Fund assets were
invested in common stocks, which included investments in REITs and common stock
of registered investment companies ("RICs").

Prior to and throughout the process of considering the Advisory Proposal, the
Board held extensive discussions with Mr. Horejsi and other representatives of
the Advisers. In the final analysis, the Board gave considerable weight to the
views of Mr. Horejsi as a representative of the Fund's largest shareholder.
Nonetheless, the Board carefully evaluated the impact of the Advisory Proposal
on other holders of the Fund's common stock. The Board recognized that the
Fund's expense ratio would increase as a result of implementing the Advisory
Proposal. The Board considered this, as well as other possible disadvantages
under the Advisory Proposal, to be outweighed by the potential long-term
benefits to be derived from engaging the Advisers and shifting the Fund's focus
to common stock investing. The Board also believed that engagement

S-8

of the Advisers, as well as the other changes contemplated under the Advisory
Proposal, were an appropriate and reasonable response to the recommendations of
the Horejsi Affiliates. On January 23, 2002, the Directors of the Fund,
including the non-interested directors, unanimously approved the Advisory
Proposal. At the same meeting, the Board approved interim advisory agreements
engaging the Advisers to manage the Fund's assets on an interim basis pending
the outcome of shareholder support of the Advisory Proposal. On April 26, 2002,
shareholders approved the Advisers consistent with the 1940 Act.

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 $0 $0 $87,145.48
Stewart Investment Advisers (aka Stewart West Indies Trading $0 $0
Company, Ltd.) $261,436.42
Fund Administrative Services, LLC** $0 $0 $97,149.44

*From January 23, 2002 (the date the Advisers and Administrator commenced
providing services to the Fund) through October 31, 2002.

**From fees received under the Administrative Agreement, the Administrator is
required to pay substantially all fees charged by any sub-administrators and
certain other out-source service providers providing services to the Fund. PFPC,
Inc. is a sub-administrator to the Fund under a sub-administration agreement
between the PFPC, Inc. and the Administrator. Under the terms of this agreement,
the Administrator paid PFPC, Inc. $38,859.78 for services provided from January
23, 2002 through October 31, 2002. Also from fees received under the
Administrative Agreement, the Administrator is required to pay customary fees
charged the Fund by its custodian and transfer agent. During the period from
January 23, 2002, through October 31, 2002, the Administrator paid custodian and
transfer agency fees in the amount of $24,068.74.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information regarding the beneficial
ownership of the Fund's shares as of August 23, 2002 by each person who is known
by the Fund to beneficially own 5% or more of the Fund's Common Stock.

Number of Shares Number of Shares Percentage
Name of Owner* Directly Owned Beneficially Owned Beneficially Owned
------------------------------------- ------------------ ---------------------- -----------------------

Ernest Horejsi Trust No. 1B 1,171,400 20.68%
Badlands Trust Company ---** 20.68%
Stewart R. Horejsi Trust No. 2 ---** 20.68%
Aggregate Shares Owned** 1,171,400 20.68%

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

* The address of each listed owner is c/o Badlands Trust Company, POB 801, 614
Broadway, Yankton, South Dakota 57078.

** Excludes shares owned by the Ernest Horejsi Trust No. 1B (the "EH Trust").
Badlands Trust Company ("Badlands") is one of three trustees of the EH Trust.
Badlands is a trust company organized under the laws of South Dakota and is
wholly owned by the Stewart R. Horejsi Trust No. 2, an irrevocable trust
organized by Stewart R. Horejsi for the benefit of his issue. The directors of
Badlands are Larry Dunlap, Stephen C. Miller, Robert Ciciora, who is the brother
of Mr. Horejsi's son-in-law (John Ciciora), Gail G. Gubbels and Marty Jans.
Badlands and its directors disclaim beneficial ownership of shares owned by the
EH Trust. Together with Larry Dunlap and Badlands, Ms. Ciciora is a trustee of
the EH Trust and also one of the beneficiaries of the EH Trust. Mr. Miller is an
officer and director of Badlands. Because two of the Trust's trustees are
required in order for the Trust to vote or exercise dispositive authority with
respect to shares owned by the Trust, Ms. Ciciora and Mr. Miller each disclaim
beneficial ownership of such shares.

The EH Trust, Badlands and the Stewart R. Horejsi Trust No. 2, as well as other
Horejsi affiliated trusts and entities are collectively referred to herein as
the "Horejsi Affiliates". Information as to beneficial ownership in the previous
paragraph 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 October 31, 2002, Cede & Co., a nominee partnership of the Depository
Trust Fund, held of record, but not beneficially, 4,429,471 shares or 78.2% of
Common Stock outstanding of the Fund.

As of October 18, 2002, the executive officers and directors of the Fund, as a
group, owned 1,189,200 shares of the Common Stock (this amount includes the
aggregate shares of Common Stock owned by the Horejsi Affiliates set forth
above), representing 20.93% of Common Stock.

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 October 18, 2002, 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).

S-9

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

Disinterested 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
-------------------------------------- -------------------------------- ---------------------------------

Alfred G. Aldridge, Jr. Under $10,000 $10,001 to $50,000

Richard I. Barr Under $10,000 Over $100,000

Joel W. Looney Under $10,000 $10,001 to $50,000

Interested Directors and Nominees
-------------------------------------- -------------------------------- ---------------------------------
Susan L. Ciciora Over $100,000'D' Over $100,000

Stephen C. Miller Over $100,000'D''D' Over $100,000

'D' 1,171,400 shares of the Fund are held by the EH Trust. 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 2,500
shares of the Fund.

'D''D' Mr. Miller directly owns 5,600 shares of the Fund and indirectly owns and
controls 2,800 shares of the Fund through his membership in Erma Miller, LLC.
Mr. Miller is also a director and officer of Badlands Trust Fund. 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 EH
Trust and Badlands Trust Fund. Mr. Miller disclaims beneficial ownership of such
shares.

None of the disinterested Directors or their family members owned beneficially
or of record any securities of the Fund's advisers or any person directly or
indirectly controlling, controlled by, or under common control with the
advisers.

As of October 18, 2002, the officers and members of the Board owned, in the
aggregate, 1,189,200 shares of the Fund's common stock.

DIRECTOR COMPENSATION.

The following table sets forth certain information regarding the compensation of
the Fund's Directors for the fiscal year ended June 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.

S-10

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

Alfred G. Aldridge, Jr., Director $6,000 $29,500 (2 funds)
Richard I. Barr, Director $6,000 $29,500 (2 funds)
Joel W. Looney, Director $6,000 $29,500 (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 an officer of
the Fund received a fee of $2,000 per annum plus $1,000 for each in-person
meeting, and $250 for each telephone meeting. In addition, the Audit Committee
and Nominating Committee members received an additional $250 for each committee
meeting attended. Committee chairs received an additional $375 for each
committee meeting chaired.

As of January 28, 2002, each Director of the Fund who is not a Director, officer
or employee of the Advisers, or any of their affiliates, receives a fee of
$3,000 for each in-person meeting, and $500 for each telephone meeting,
constituting their full compensation. Each Director of the Fund is reimbursed
for travel and out-of-pocket expenses associated with attending Board and
committee meetings. The Board held seven meetings (three of which were held by
telephone conference call) during the fiscal year ended June 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 June 30, 2002 amounted to $49,706.(1)

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 23, 2002. The Audit Committee met
three times during the fiscal year ended June 30, 2002.

In connection with the audited financial statements as of and for the year ended
June 30, 2002 included in the Fund's Annual Report for the year ended June 30,
2002 (the "Annual Report"), at a meeting held on August 12, 2002, 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 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.

--------
(1) Former Directors of the Fund (i.e., prior to January 28, 2002) were Timothy
J. Ebner, Gustavo E. Gonzales, Jr., Ben H. Love , Judith L. Craven, Dr. Norman
Hackerman, John W. Lancaster and F. Robert Paulsen. Between July 1, 2001 and
December 31, 2001 such directors were paid $31,706.

S-11

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 June 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 January 23, 2002 through October 31,
2002, the Fund paid $44,744.00 in brokerage commissions. The increase in
brokerage commissions in the last fiscal year is due to the change in the Fund's
investment focus from primarily corporate bonds to a combination of common
stocks and fixed income securities. No separate brokerage commission is
typically paid on bond transactions, which are typically executed on a principal
basis, in contrast to common stock transactions, where brokerage commissions are
the norm.

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 which supply 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

S-12

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; however,
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. It is
possible that the Advisers' expenses could be materially increased if it
attempted to purchase this type of information or generate it through its own
staff.

Currently, the Advisers manage two investment companies: the Fund and the
Boulder Total Return Fund, Inc. However, if the Advisers were to manage 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 a good faith equitable basis by the Advisers 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 June 30, 2001 and June 30, 2002, the Fund's portfolio turnover rates were
83% and 180%. The increase in turnover rate is due to a transitioning of the
Fund's corporate bond investments to common stocks consistent with the Fund's
new investment objective.

REPURCHASE OF SHARES

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
Fund's common shares trade in the open market 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 stability, 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 common shares, which may include the repurchase
of such shares in the open market or in private transactions, the making of a
tender offer for such shares at net asset value, or the conversion of the Fund
to an open-end investment company. The Board may not decide 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.

If the Fund should issue preferred stock in the future, the Fund's ability to
repurchase shares of, or tender for, its common stock may be limited by the
asset coverage requirements of the 1940 Act and by asset coverage and other
requirements imposed by various rating agencies. 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 may 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 common shares 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.

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 by the Board, not to authorize repurchases of common shares
or a tender offer for such shares if (1) such transactions, if consummated,
would (a) result in the delisting of the common shares from the NYSE, or (b)
impair the Fund's status as a regulated investment company under the Internal
Revenue Code (which

S-13

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 shares at prices below net asset value
will result in an increase in the net asset value of those shares that remain
outstanding. However, there can be no assurance that share repurchases or
tenders at or below net asset value will result in the Fund's common shares
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, a purchase by the Fund of its common shares will decrease the
Fund's total assets, which would likely have the effect of increasing the Fund's
expense ratio. Any purchase by the Fund of its common shares at a time when
preferred shares are outstanding will increase the leverage applicable to the
outstanding common shares then remaining and decrease the asset coverage of the
preferred shares.

Before deciding whether to take any action if the common shares trade below net
asset value, the Board would likely consider all relevant factors, including the
extent and duration of the discount, the liquidity of the 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, 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

S-14

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 common shares 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 common shares 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. 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 23, 2002, and
has been selected to serve in such capacity for the Fund's fiscal year ending
November 30, 2002. The Board recently approved a change in the Fund's fiscal
year end from June 30th to November 30th. 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.

S-15

Incorporation by Reference. The Fund's Portfolio of Investments, dated June 30,
2002 (audited); Statement of Assets and Liabilities, dated June 30, 2002
(audited); Statement of Operations for the year ended June 30, 2002 (audited);
Statement of Changes in Net Investment Assets for the two years ended June 30,
2002 (audited) and the independent auditors report included in the Fund's Annual
Report for the fiscal year ended June 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 1376, Boston, Massachusetts 02104 or by calling
1-800-331-1710.

ADDITIONAL INFORMATION

A Registration Statement on Form N-2, including amendments thereto, relating to
the shares offered hereby, has been filed by the 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.

S-16

STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as..................... 'D'
The double dagger symbol shall be expressed as.............. 'DD'