ENGEX, Inc. Directors J. Morton Davis Jerome Fisch Dov Perlysky Howard Spindel Leonard Toboroff

Transcription

1 Directors J. Morton Davis Jerome Fisch Dov Perlysky Howard Spindel Leonard Toboroff Officers J. Morton Davis, Chairman of the Board and President David Nachamie, Secretary Michael Siciliano, Treasurer ENGEX, Inc. Custodian Bank of America 100 Federal Street, 17 th Floor FINANCIAL STATEMENTS Boston, Massachusetts and ANNUAL REPORT Transfer Agent American Stock Transfer & Trust Co. 59 Maiden Lane September 30, 2010 New York, New York Toll Free: (800) Website: Independent Accountants ENGEX, INC. is listed on the Raich Ende Malter & Co. LLP American Stock Exchange 1375 Broadway NYSE Amex New York, New York Symbol - EGX Engex, Inc. 44 Wall Street New York, New York (212)

2 Engex, Inc. 44 Wall Street New York, NY November 22, 2010 Dear Engex Shareholder: As the largest shareholder in the Fund I am, like you, looking forward to a rewarding year ahead. As a continued indication of both my confidence and hope that our Fund will experience significant capital appreciation in the future, I reiterate, I purchased 161,101 additional shares at the end of the 2009 fiscal year to provide the Fund the capital needed to retire its margin loan*, for which shares I paid a purchase price that was a significant premium to both the asset value and the market price. Hopefully, the upcoming year will be a better one for all of you as well as for Engex. With best wishes for a happy, healthy and prosperous new year and everything great always, I am Sincerely, * Today the Fund is debt free. J. Morton Davis

3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Engex, Inc. In planning and performing our audit of the financial statements of Engex, Inc. ( the Fund ) as of and for the year ended September 30, 2010, in accordance with the standards of the Public Company Accounting Oversight Board (United States), we considered the Fund s internal control over financial reporting, including controls over safeguarding securities, as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements and to comply with the requirements of Form N-SAR, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control over financial reporting. Accordingly, we express no such opinion. The management of the Fund is responsible for establishing and maintaining effective internal control over financial reporting. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP). A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Our consideration of the Fund s internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily disclose all deficiencies in internal control that might be material weaknesses under standards established by the Public Company Accounting Oversight Board (United States). However, we noted no deficiencies in the Fund s internal control over financial reporting and its operation, including controls over safeguarding securities that we consider to be a material weakness as defined above as of September 30, This report is intended solely for the information and use of management and the Board of Directors of Engex, Inc. and the Securities and Exchange Commission and is not intended to be and should not be used by anyone other than these specified parties. RAICH ENDE MALTER & CO. LLP New York, New York November 17, 2010

4 STATEMENT OF ASSETS AND LIABILITIES September 30, 2010 Assets: Investment in securities at fair value (identified cost, $9,074,217) $4,247,839 Private investments at fair value (identified cost, $2,909,329) 650,574 Cash and cash equivalents 488,992 Prepaid expenses 18,250 TOTAL ASSETS $5,405,655 Liabilities: Accrued expenses 30,015 TOTAL LIABILITIES 30,015 COMMITMENTS AND CONTINGENCIES NET ASSETS APPLICABLE TO OUTSTANDING SHARES $5,375,640 NET ASSET VALUE PER SHARE $ 3.30 NET ASSETS APPLICABLE TO OUTSTANDING SHARES: Common stock - $0.10 par value: Authorized 2,500,000 shares, Issued 1,626,938 shares $162,693 Additional paid-in capital 17,390,890 Unrealized depreciation on investments (7,085,132) Cumulative net realized loss from investment transactions (2,743,076) Accumulated net investment loss (2,349,735) NET ASSETS $5,375,640 The accompanying notes are an integral part of this statement. 1

5 SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2010 COMMON STOCK* (79.02%)** Biotechnology (77.96%)** Number of Shares Fair Value Enzo Biochem, Inc. 934,596 $3,551,465 Keryz Biopharmaceuticals Inc. 85, ,255 MiMedx Group Inc. 282, ,133 Technology (0%)** $4,190,853 Silverstar Holdings Ltd. 51, Gaming Industry (1.06%)** American Vantage Company 474,500 56,940 TOTAL INVESTMENT IN MARKETABLE SECURITIES (IDENTIFIED COST, $9,074,217) $4,247,839 PRIVATE INVESTMENTS* (12.10%)** LifeSync Holdings, Inc. 4,675 0 Corente, Inc. 11,793 0 Surgivision, Inc. 75,000*** 337,500 GFK AG 3 rd Closing Price Receivable 313,074 TOTAL PRIVATE INVESTMENTS (IDENTIFIED COST, $2,909,329) $ 650,574 *Non income-producing securities **The percentage shown for each investment category in the Portfolio of Investments is based on net assets ***Reflects 1 for 4 reverse stock split The accompanying notes are an integral part of this statement. 2

6 STATEMENT OF OPERATIONS For The Year Ended September 30, 2010 INVESTMENT INCOME: Dividends $ 417 EXPENSES: Professional fees 138,486 Insurance 19,743 Custodian and transfer agent fees 31,829 Directors fees and expenses 15,750 State and local taxes other than income taxes 10,301 Miscellaneous 4,999 TOTAL EXPENSES (221,108) NET INVESTMENT LOSS (220,691) REALIZED AND UNREALIZED GAINS(LOSSES) ON INVESTMENTS: NET REALIZED GAIN FROM SECURITIES TRANSACTIONS 232,652 NET CHANGE IN UNREALIZED DEPRECIATION ON INVESTMENTS (2,106,263) NET REALIZED GAIN AND UNREALIZED LOSS FROM INVESTMENTS (1,873,611) NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(2,094,302) The accompanying notes are an integral part of this statement. 3

7 STATEMENT OF CHANGES IN NET ASSETS For The Years Ended September 30, INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss $ (220,691) $ (297,309) Net realized gain on investments 232, ,581 Net change in unrealized depreciation on investments (2,106,263) (3,289,637) NET DECREASE IN NET ASSETS FROM OPERATIONS (2,094,302) (3,384,365) ASSETS CONTRIBUTED BY SHAREHOLDER 1,214, ,622 ADDITIONAL SHARES ISSUED 0 953,397 NET DECREASE IN NET ASSETS (879,881) (1,449,346) NET ASSETS BEGINNING OF PERIOD 6,255,521 7,704,867 NET ASSETS END OF PERIOD $5,375,640 $6,255,521 The accompanying notes are an integral part of this statement. 4

8 STATEMENT OF CASH FLOWS For The Year Ended September 30, 2010 CASH FLOWS FROM OPERATING ACTIVITIES: Net decrease in net assets from operations $(2,094,302) Adjustments to reconcile net decrease in net assets to net cash provided by operating activities: Unrealized depreciation on investments 2,106,263 Net realized gain on investments (232,652) Proceeds from disposition of common stock and private investments 542,824 Increase in prepaid expenses (11,687) Decrease in accrued expenses (111,487) Net cash provided by operating activities and net increase in cash and cash equivalents 198,959 Cash beginning of year 290,033 Cash end of year $488,992 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: NON CASH INVESTMENT AND FINANCING ACTIVITY Securities contributed as capital $1,214,421 The accompanying notes are an integral part of this statement. 5

9 NOTES TO FINANCIAL STATEMENTS NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Engex, Inc. (the Fund ) is registered under the Investment Company Act of 1940, as a nondiversified, closed-end investment company. The investment objective of the Fund is capital appreciation. The Fund has historically intended to seek investment opportunities in one or more additional companies in which it would acquire a controlling interest. While such acquisitions are likely to bring the Fund closer to its expressed intention of seeking to deregister under the Investment Company Act of 1940, they are likely to require a substantial investment of the Fund s assets and a further concentration of the Fund s investments in particular companies or industries. Such concentration might increase the risk of loss to the Fund as a result of the negative results or financial condition of any particular company and/or industry. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements: (a) (b) SECURITY TRANSACTIONS Security transactions are accounted for on the trade dates the securities are purchased or sold. Dividend income and distributions to stockholders are recorded on the ex-dividend date. SECURITY VALUATION Investments in securities traded on a national securities exchange are valued at the last reported sales price on September 30, Securities traded on the over-the-counter market and listed securities for which no sale was reported on that date are valued at the last reported bid price. Investments for which quotations are not readily available are valued at fair value, as determined by Management after taking into consideration market conditions and operational progress. These estimated values may not reflect amounts that could ultimately be realized upon sale. The estimated fair values also may differ from the values that would have been used had a liquid market existed, and such differences could be significant. (c) (d) (e) FEDERAL INCOME TAXES The Fund does not qualify under subchapter M of the Internal Revenue Code as a regulated investment company, and accordingly, is taxed as a regular corporation. USE OF ACCOUNTING ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS - The Fund considers cash on hand and marketable instruments with maturity of three months or less to be cash equivalents. NOTE 2. INVESTMENT ADVISER AND TRANSACTIONS WITH RELATED PARTY The Fund has entered into an investment advisory agreement (the Agreement ) with American Investors Advisors, Inc. ( Advisors ), which is wholly owned by the Chairman of the Fund (the Chairman ). Certain officers of Advisors are also officers of the Fund. Under this Agreement, Advisors will serve as an investment adviser of the Fund for a management fee computed at an annual rate of 1.0% of the Fund s average weekly net assets. On January 7, 2010, the Directors of the Fund met and voted to approve the continuation of the Agreement until the next annual meeting of the Directors, or approximately through January Simultaneously, Advisors agreed to extend the waiver of its management fee until further notice. Advisors had previously agreed to waive its management fee through September 30, Without the waiver of the management fee, the Fund s net investment loss for the year ended September 30, 2010 would have been approximately $54,463 greater, or a 2.6% increase over the loss as reported, which includes the benefit of the management fee waiver. For the period October 1, 2009 through September 30, 2010, the Chairman contributed to the Fund NYSE listed securities, valued at $1,214,421 when contributed, which was reflected as an increase in additional paid-in capital. 6

10 NOTES TO FINANCIAL STATEMENTS NOTE 3. SALES OF FUND COMMON STOCK TO RELATED PARTY On September 30, 2009, the Chairman entered into a Stock Purchase Agreement with the Fund, purchasing 161,101 shares of the Fund s common stock, for $953,397, which was reflected as increases in: (a) common stock, par value $16,110, and (b) additional paid-in capital $937,287. Proceeds from the Stock Purchase Agreement were used to retire the Fund s margin loan outstanding at September 30, NOTE 4. INVESTMENT TRANSACTIONS For the year ended September 30, 2010, sales of investment securities were $542,824. During fiscal 2009 Etilize, one of the Fund s private investment interests was acquired by a foreign company (the Purchaser ). The purchase price called for three Closing Price Payments from the Purchaser. The First Closing Price Payment was for $355,134, of which the Fund received cash of $275,094 on January 7, 2009, and received an interest in $80,040 escrowed from sale proceeds that was subsequently used for legal fees and therefore will not be forthcoming. The Second Closing Price Payment is contingent upon earnings before interest and taxes ( EBIT ) of the Purchaser and Etilize for the fiscal years ending December 31, 2009 and Based on the contingent nature of this payment, with no minimum payment defined, the Fund did not recognize any gain under the Second Closing Price Payment. The Third Closing Price Payment established a minimum payout to the Fund of $341,200, and is expected to be paid in At September 30, 2010, the Fund has cumulatively recognized a fair market value receivable of $313,074 attributable to the 2013 expected payment, and has an unamortized discount balance of $27,761 remaining at September 30, 2010, reducing the maturity value to its reported estimated fair market value at September 30, The rate initially used in establishing the discount was 3.5%, and has not been modified. NOTE 5. FAIR VALUE MEASUREMENTS Investments in securities are carried at estimated fair value. Fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. Fair Value Measurements The applicable accounting pronouncement on fair value measurements clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosure about the use of the fair value measurements. Under the pronouncement, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the exit price ) in an orderly transaction between market participants. The most significant element of the fair value standard is the development of a three-level fair value hierarchy. The three levels of the hierarchy and the material input considerations are as follows: Fair Value Hierarchy Level 1 Inputs include unadjusted quoted prices for identical investments or liabilities in active markets (e.g., exchangetraded securities). An active market is defined as a market in which transactions for the investment or liability occur with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. Level 2 Inputs include quoted prices for identical assets in markets that are not active (e.g., thinly traded securities), quoted prices for similar assets (e.g., restricted securities, private investments in public companies, etc.) or market inputs other than directly observable quoted price. These other market inputs are often used in conjunction with valuation models and include interest rates, yield curves, prepayment speeds, default rates and other market-corroborated inputs. Level 3 Inputs valuations are based on unobservable inputs, which include option-pricing models using historical volatility, the Fund s own data or assumptions as a multiple of earnings or discounted cash flow, projections and forecasts made available to the Fund by the private investment entities and other similar financial and operational information not available to, or observable by the public domain. 7

11 NOTES TO FINANCIAL STATEMENTS A summary of the inputs used at September 30, 2010 in valuing each of the Fund s assets and liabilities were: Level 1 Quoted prices Level 2- Other Significant Observable Inputs * Level 3- Significant Unobservable Inputs Total Fair Value at September 30, 2010 Marketable Securities: Enzo Biochem, Inc. $3,551,465 $-- $-- $3,551,465 Keryx Biopharmaceuticals, Inc. 411, ,255 Mimedx Group Inc , ,133 Silverstar Holdings Ltd American Vantage Companies -- 56, ,940 Total Investment in Marketable Securities $3,962,766 $285,073 $-- $4,247,839 Private Investments: LifeSync Holdings, Inc. $-- $-- $-- $-- Corente Inc Surgivision Inc , ,500 GFK AG 3 rd Closing Price Receivable , ,074 Total Private Investments $-- $-- $650,574 $650,574 * For Level 2 securities, management has applied a 20.00% discount against the available quoted market price in its fair market value determination. The following table sets forth the changes in fair value measurements attributable to Level 3 investments during the year ended September 30, 2010: Beginning Balance September 30, 2009 Net Purchases (Sales and Settlements Accrued Discounts Total Realized Gain (Loss) on amortization of discount Total Change In Unrealized Appreciation/ Depreciation Transfers And/or out of Level 3 Ending Balance September 30, 2010 Surgivision, Inc. $300,000 $-- $-- $-- $ 37,500 $-- $ 337,500 GFK AG 3 rd Closing Price Receivable 302, , ,074 $602,487 $-- $-- $ 10,587 $ 37,500 $-- $ 650,574 8

12 NOTES TO FINANCIAL STATEMENTS NOTE 6. INCOME TAXES The Fund accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Fund s assets and liabilities and the related tax basis for such assets and liabilities. This method may generate a net deferred income tax asset or liability for the Fund as of the end of the year, as measured by the statutory tax rate in effect as enacted. The Fund derives its net deferred income tax charge/benefit by recording a change in net deferred income tax assets or liabilities for the year. At September 30, 2010, all deferred tax assets have been fully reserved through the valuation allowance. The Fund recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a more-likely-than-not threshold, the amount recognized in the financial statements is the benefit expected to be realized upon settlement with tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of September 30, 2010, the Fund has had no uncertain tax positions. The Fund recognizes interest and penalties, if any, related to uncertain tax positions as operating expenses. The Fund currently has no federal or state tax examinations in progress. All of the Fund s tax years are subject to federal and state tax examination subject to the applicable jurisdictions related statutes of limitations. At September 30, 2010, the Fund had a gross deferred tax asset of $4,191,000. The deferred tax asset arose from tax net operating loss and capital loss carry forwards of realized and unrealized transactions of approximately $10,890,000 for federal income tax purposes and approximately $12,710,000 for state tax purposes. The capital loss carryforwards of $991,000 expire in 2012 and 2013 and the net operating loss carryforwards of $3,300,000 expire during the years 2024 through The net unrealized losses on securities investments are approximately $7,085,000. The Fund has established a valuation allowance of $4,191,000 since management is unable to determine if the utilization of all of the future tax benefits is more likely than not to occur, and accordingly, the deferred federal, state and local tax assets of $3,702,000 and $489,000, respectively, have been fully reserved. The effective tax rate for the Fund s income tax liability is reconcilable to the federal statutory rate, as follows: Statutory rate 34% State, net of federal tax benefit 1% Tax benefit of net operating loss (35%) 0% The components of the net deferred tax asset are as follows: Deferred Tax Asset: Net operating and capital loss carryforwards $ 2,587,000 Unrealized depreciation on securities investments 1,604,000 4,191,000 Less: Valuation allowance (4,191,000) Net Deferred Tax Asset $ -0-9

13 NOTES TO FINANCIAL STATEMENTS NOTE 7. CONTINGENCIES On August 7, 2009, the Fund received a letter from NYSE Amex LLC ( NYSE Amex ) which is the exchange on which the Fund is listed. The letter indicated that the Fund was not in compliance with continued listing requirements set forth in: (1) Section 1003(a)(ii) of the NYSE Amex Company Guide (related to stockholders equity of less than $4,000,000 and losses from continued operations and net losses in three of the Fund s four most recent fiscal years); (2) Section 1003(a)(iii) of the Company Guide (related to stockholders equity of less than $6,000,000 and losses from continued operations and net losses in the Fund s five most recent fiscal years); and (3) Section 1003(b)(v)(A) of the Company Guide (related to total market value of publicly held shares and net assets of less than $5,000,000 for more than 60 consecutive days). On March 3, 2010 the NYSE Amex Staff ( Staff ) acknowledged that the Fund s net assets met the $5,000,000 requirement under Section 1003(b)(v)(A) of the Company Guide by the deadline of February 8, 2010, but that the Fund remains noncompliant with the stockholders equity requirements under Section 1003 of the Company Guide. The Fund had supplied the NYSE Amex with information (the Plan ) which was deemed by NYSE Amex to be a reasonable demonstration of the Fund s ability to regain compliance with the above referenced Sections of the Company Guide. The Staff will continue to monitor the Fund s compliance with the continued listing standards in Section 1003 of the Exchange. As provided in Section 1009(f) of the Exchange Guide, if, prior to February 7, 2011, which is the end of the Plan Period ( Plan Period - a period that commenced February 8, 2010 and runs for a 12 month period terminating February 7, 2011, as determined and set forth in accordance with the provisions of Section 1009(f)), the Fund is able to demonstrate compliance with the continued listing standards for a period of two consecutive quarters, the Staff will deem the Plan Period over. However, if the Fund cannot demonstrate compliance over the next two quarters, the Plan Period will remain open and the Staff will continue to monitor the Fund throughout the Plan Period, which the Staff previously determined to be no later than February 7, At any time during the Plan Period, the Staff may initiate delisting proceedings based on its evaluation of the Fund. In the event the Fund does not comply with all continued listing standards as of February 7, 2011, the Staff has stated that it will promptly initiate delisting procedures. 10

14 FINANCIAL HIGHLIGHTS Years Ended September 30, Per share operating performance (For a share of capital stock outstanding throughout the period): Net asset value beginning of period $3.84 $5.26 $6.05 $5.79 $8.84 Income from operations: Net investment (loss) (0.14) (0.20) (0.30) (0.45) (0.44) Net realized and unrealized gain (loss) on investment transactions (1.15) (2.11) (0.70) 0.40 (2.61) Total from operations (1.29) (2.31) (1.00) (0.05) (3.05) Increase in net asset value due to conversion of debt to capital stock Assets contributed by shareholder Additional shares issued to shareholder Total (decrease) increase in net asset value for the period (.54) (1.42) (0.79) 0.26 (3.05) Net asset value end of period $3.30 $3.84 $5.26 $6.05 $5.79 Number of shares outstanding at end of period 1,626,938 1,626,938 1,465,837 1,465, ,223 Market value at end of period Average debt per share Ratios*: Expense to average net assets 4.19%* 8.97%* 5.42% 6.16% 6.87% Net investment (loss) to average net assets (4.18%)* (8.12%)* (5.45%) (6.14%) (6.37%) Portfolio turnover 0.00% 0.55% 17.03% 5.47% 0.00% Total Return (a) (38.48%)* 1.89%* (9.74%) (22.52%) (28.44%) Ratios including waived Management Fee*: Expense to average net assets 5.22% 9.67% Net investment (loss) to average net assets (5.21%) (8.82%) (a) Total Return. A periodic measure of a fund s overall change in market value, which assumes the reinvestment of dividends and capital gain distributions. * Effective June 26, 2009, the Advisor agreed to waive its 1.00% management fee, and simultaneously waive any and all accrued and unpaid management fees (see Note 2 to the financial statements). 11

15 SUPPLEMENTAL INFORMATION (unaudited) Board of Directors Name and Age Position(s) Held with the Fund Length of Time Served September 30, 2010 Principal Occupation During Past 5 Years Other Directorships Held in Public Companies Directors Considered to be Interested Persons J. Morton Davis, 81 Chairman of the Board and President Since Chairman, President, Director and sole stockholder of D.H. Blair Investment Banking Corp.; President, Chairman and CEO of the Investment Adviser. Dov Perlysky, 48 Director Since Managing member, Nesher, LLC (financial services). None Highlands State Bank; Oak Tree Educational Partners, Inc.; Pharma-Bio Serv, Inc. Directors Considered to be Independent Jerome Fisch, 84 Director Since Retired. None Howard Spindel, 65 Director Since Senior Managing Director, Integrated Management Solutions (consulting). Leonard Toboroff, 78 Director Since Private Investor: Director/Vice Chair, Allis-Chalmers Energy, Incorporated (oil and gas equipment and services) until Oak Tree Educational Partners, Inc.; Pharma-Bio Serv, Inc. NOVT Corporation Portfolio Holdings The Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission ( SEC ) for the first and third quarters of each fiscal year on Form N-Q. The Fund s Forms N-Q are available on the SEC s website at and may be reviewed and copied at the SEC s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling SEC Proxy Voting A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, by calling , and can also be found on the SEC s website at Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2010 is available, without charge, by calling , and can also be found on the SEC s website at 12

16 THIS PAGE INTENTIONALLY LEFT BLANK 13