SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (ss.) 240.14a-12
LCM INTERNET GROWTH FUND, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
LCM INTERNET GROWTH FUND, INC.
223 W. Lake Street, Chicago, Illinois 60606
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on July 9, 2002
TO THE SHAREHOLDERS:
An annual meeting ("Meeting") of shareholders of LCM Internet Growth Fund, Inc.
("Fund"), will be held at 223 W. Lake Street, Chicago, Illinois 60606, on
Tuesday, July 9, 2002 at 10 a.m., Central Time, for the following purposes:
1. To consider and vote upon the approval of a new investment management
agreement between the Fund and CEF Advisers, Inc.;
2. To elect four Directors;
3. To approve an amendment to the Fund's Articles of Incorporation; and
4. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
Shareholders of Record at the close of business on May 1, 2002 are entitled to
receive notice of and to vote at the Meeting or any adjournments.
All shareholders are cordially invited to attend the Meeting in person. However,
whether or not you expect to attend the Meeting in person, you are urged to
complete, date and sign the enclosed proxy card and return it as soon as
possible in the enclosed envelope which has been provided for your convenience
and which requires no postage if mailed in the United States. The prompt return
of proxy cards will ensure a quorum. If you send in your proxy card and then
decide to attend the Meeting to vote your shares in person, you may still do so.
You may revoke your proxy by following the procedures described in the Proxy
Statement.
By Order of the Board of Directors,
Barry J. Glasgow, Secretary
May __, 2002
LCM INTERNET GROWTH FUND, INC.
223 W. Lake Street, Chicago, Illinois 60606
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held on July 9, 2002
Unless the context requires otherwise, all references to "LCM," the "Fund," "we"
or "our" refers to LCM Internet Growth Fund, Inc. Our fiscal year ends on March
31. In this proxy statement, we refer to fiscal years by reference to the
calendar year in which they end (e.g., the fiscal year ended March 31, 2002 is
referred to as "fiscal 2002").
This Proxy Statement is furnished by the Board of Directors of the Fund for the
solicitation of proxies from the holders of our common stock, $0.01 par value
(the "Common Stock"), to be voted at the Annual Meeting of Shareholders to be
held at the offices of LCM at 223 W. Lake St., Chicago, Illinois 60606, on
Tuesday, July 9, 2002 at 10 a.m., Central Time, and at any adjournment thereof
(the "Meeting"). It is expected that this Proxy Statement and the enclosed proxy
card will first be mailed to shareholders commencing on or about May 30, 2002.
Shareholders can ensure that their shares are voted at the Meeting by signing
and returning the enclosed proxy card in the envelope provided. The submission
of a signed proxy will not affect a shareholder's right to attend the Meeting
and vote in person. Shareholders who execute proxies retain the right to revoke
them at any time before they are voted by filing with our Secretary a written
revocation or a proxy bearing a later date. The presence at the Meeting of a
shareholder who has signed a proxy does not itself revoke that proxy unless the
shareholder attending the Meeting files a written notice of revocation of the
proxy with our Secretary at any time prior to the voting of the proxy.
Proxies will be voted as specified by the shareholders. Where specific choices
are not indicated, proxies will be voted FOR the election of each of the
individuals nominated to serve as directors and FOR approval of the proposals.
The Board of Directors knows of no other matters to be presented for shareholder
action at the Meeting. If any matters properly come before the Meeting, the
persons named as proxies will vote on them in accordance with their best
judgment.
All costs and expenses incurred by the Fund in connection with the proxy
solicitation will be borne by CEF Advisers, Inc. ("CEF Advisers"). Except for
the Fund, all parties bear their own expenses. In addition to the use of the
mails, proxies may be solicited personally, by telephone, or by other means, and
CEF Advisers may pay persons holding the Fund's shares in their names or those
of their nominees for their expenses in sending soliciting materials to their
principals. CEF Advisers will retain N.S. Taylor & Associates, Inc. ("N.S.
Taylor"), 15 North Street, 2nd Floor, P.O. Box 358 Dover-Foxcroft, ME 04426, to
solicit proxies for a fee estimated at $_________ plus expenses, primarily by
contacting shareholders by telephone and mail. Authorizations to execute proxies
may be obtained by telephonic instructions in accordance with procedures
designed to authenticate the shareholder's identity. In all cases where a
telephonic proxy is solicited, the shareholder will be asked to provide his or
her address, social security number (in the case of an individual) or taxpayer
identification number (in the case of an entity) or other identifying
information and the number of shares owned and to confirm that the shareholder
has received the Fund's Proxy Statement and
3
proxy card in the mail. Within 72 hours of receiving a shareholder's telephonic
voting instructions and prior to the Meeting, a confirmation will be sent to the
shareholder to ensure that the vote has been taken in accordance with the
shareholder's instructions and to provide a telephone number to call immediately
if the shareholder's instructions are not correctly reflected in the
confirmation. Shareholders requiring further information with respect to
telephonic voting instructions or the proxy generally should contact N.S. Taylor
toll-free at 1-866-470-4500.
Only shareholders of record at the close of business on May 1, 2002 (the "Record
Date") are entitled to receive notice of and to vote the shares of Common Stock
registered in their name at the Meeting. As of the Record Date, we had
outstanding 2,602,847 shares of Common Stock. Each share of Common Stock
entitles its holder to cast one vote on each matter to be voted upon at the
Meeting.
The presence of a quorum is required to transact business at the Meeting. A
quorum is defined as the presence, either in person or by proxy, of the holders
of shares entitled to cast one-third of the votes entitled to be cast at the
Meeting. The shares represented at the Meeting by proxies that are marked
"withhold authority" or "abstain" will be counted as shares present for the
purpose of determining whether a quorum is present. Broker non-votes will also
be counted as shares present for purposes of determining a quorum. If a quorum
is not present, or if a quorum is present at the Meeting but sufficient votes to
approve a proposal are not received, the Secretary intends to adjourn the
meeting to permit further solicitation of proxies.
If such a quorum is represented at the Meeting, the approval of a new investment
management agreement between the Fund and CEF Advisers requires the affirmative
vote of the lesser of (a) 67% of the Common Stock present at the Meeting, if the
holders of more than 50% of the Common Stock are present in person or
represented by proxy, or (b) more than 50% of the Common Stock. Approval of
Proposal 2, which relates to the election of directors, requires the affirmative
vote of a plurality of Common Stock represented in person or by proxy at the
meeting and entitled to vote thereon. Approval of Proposal 3, which relates to
the amendment to the Articles of Incorporation, requires the affirmative vote of
two-thirds of all votes entitled to be cast at the meeting. If Proposal 1 is not
approved by shareholders of the Fund, no election of Directors will be held as
described in Proposal 2 and the Articles of Incorporation will not be amended as
described in Proposal 3. Implementation of Proposal 1 will not occur unless
shareholders also approve Proposal 2.
SHARE OWNERSHIP
The following table sets forth information regarding the beneficial ownership of
the Fund's outstanding shares as of the Record Date by (i) each director and
executive officer and (ii) all directors and executive officers as a group. As
of the Record Date, the nominees set forth in Proposal 2 did not own any shares
of the Fund.
4
- ------------------------------------------------------------------------------
Percent of
Name and Address(1) Number of Shares Outstanding Shares
- ------------------------------------------------------------------------------
Michael R. Grady 10,347.15 *
- ------------------------------------------------------------------------------
Barry J. Glasgow 0 0
- ------------------------------------------------------------------------------
Michael Radnor 2,740.50 *
- ------------------------------------------------------------------------------
George D. Kraft 1,126.73 *
- ------------------------------------------------------------------------------
Lawrence E. Harb 0 0
- ------------------------------------------------------------------------------
Total shares held by directors and 14,214.38 *
officers as a group
- ------------------------------------------------------------------------------
* Less than 1% of the outstanding shares
(1) The address of Messrs. Grady and Glasgow is 223 W. Lake Street, Chicago,
Illinois 60606. The address of Dr. Radnor is Northwestern University, 2001
Sheridan Road, Evanston, Illinois 60208. The address of Dr. Kraft is I.I.T.
Stuart School of Business, 565 West Adams Street, Chicago, Illinois 60631.
The address of Mr. Harb is 3520 Okemos Road, Suite 120, Okemos, Michigan
48864.
The Fund does not know of any person who owns beneficially more than 5% of the
Fund's outstanding shares as of the Record Date:
Background Information Regarding the Proposals
The investment adviser to the Fund, LCM Capital Management, Inc. ("LCMCM"), and
CEF Advisers have entered into an agreement (the "Asset Purchase Agreement")
whereby CEF Advisers will purchase certain assets relating to the business of
LCMCM, subject to certain conditions, including shareholder approval of a new
investment management agreement and shareholder approval of a new Board of
Directors for the Fund, as provided for in this proxy statement. (Approval of
Proposal 3 is not a condition to the aforementioned purchase although the
inclusion of Proposal 3 in the proxy statement is a condition.) The management
of LCMCM believes that the proposed transaction offers shareholders of the Fund
potential benefits, including management by a firm that LCMCM believes to be
strong and well-established within the fund management industry. If Proposal 1
is approved by shareholders of the Fund, LCMCM will serve in a consulting
capacity for a period of three months from the closing of the asset purchase and
will assist CEF Advisers in the orderly transition of Fund management from LCMCM
to CEF Advisers.
As described in more detail in Proposal 1, shareholders of the Fund are being
asked to approve a new investment management agreement with CEF Advisers. LCMCM
has advised CEF Advisers that it will terminate the existing investment
management agreement between the Fund and LCMCM, subject to the completion of
the transaction in accordance with certain agreements between LCMCM and CEF
Advisers. The Asset Purchase Agreement between those parties is described in
more detail in Proposal 1. If Proposal 1 is approved by shareholders of the
Fund, an election of directors will be held as described in Proposal 2 and
approval will be sought to amend the Articles of Incorporation, as described in
Proposal 3.
5
PROPOSAL 1. APPROVAL OF THE NEW INVESTMENT MANAGEMENT
AGREEMENT BETWEEN THE FUND AND CEF ADVISERS
Summary of the Proposed Transaction
On March 22, 2002, LCMCM, the Fund's investment adviser, entered into an Asset
Purchase Agreement with CEF Advisers which provides for the sale to CEF Advisers
of certain assets relating to the management of the Fund. Approval of this
Proposal 1 by shareholders of the Fund is a condition precedent to the
consummation of the transaction contemplated by the Asset Purchase Agreement.
Upon completion of the proposed transaction, CEF Advisers will become the
investment adviser to the Fund. The provisions of the proposed investment
management agreement between CEF Advisers and the Fund ("Proposed Agreement")
are similar to the Fund's current agreement with LCMCM ("Current Agreement") and
the fee schedules under both agreements are identical. For detailed information
about the Proposed Agreement, see "The Proposed Investment Management Agreement"
herein.
Under the terms of the Asset Purchase Agreement, CEF Advisers has agreed to make
a payment to LCMCM of $425,000 at Closing in consideration for the purchased
assets. The Asset Purchase Agreement specifically provides that CEF Advisers
will not assume any of the liabilities of LCMCM.
In late 2001, while LCMCM was evaluating whether to concentrate on the
individual managed account operation of its business, which was separate from
its operations as an investment adviser for the Fund, it was approached by CEF
Advisers, an established, registered investment adviser that, along with its
affiliated companies, was experienced in providing investment advisory services
to registered investment companies. LCMCM believes that CEF Advisers is
well-positioned to manage the Fund.
CEF Advisers, 11 Hanover Square, New York, NY 10005, is a wholly-owned
subsidiary of Winmill & Co. Incorporated ("Winco"), and provides investment
advisory services to another closed-end fund - Global Income Fund, Inc. CEF
Advisers also provided investment advisory services to two additional closed-end
funds, Bexil Corporation and Tuxis Corporation. In 2001 these funds converted to
internalized management. Personnel of CEF Advisers continue to serve as officers
of and perform services for those companies. Midas Management Corporation
("Midas Management"), another wholly owned subsidiary of Winco, is a registered
investment adviser that provides services to three mutual funds ("Midas Funds").
The three closed-end funds and the three mutual funds advised by CEF Advisers or
its affiliates, are collectively referred to herein as the "CEF Investment
Company Complex". The other principal subsidiary of Winco is Investor Service
Center, Inc., a registered broker dealer and distributor of the Midas Funds.
Winco is a publicly-owned company whose securities are listed on the Nasdaq
Stock Market and traded in the over-the-counter market. Bassett S. Winmill may
be deemed a controlling person of Winco on the basis of his ownership of 100% of
Winco's voting stock and, therefore, of Midas Management and CEF Advisers.
In the Asset Purchase Agreement, CEF Advisers has agreed to take all action
within its control, and use its reasonable best efforts to cause the Fund to
take all action necessary to satisfy the conditions for reliance by LCMCM on
Section 15(f) of the 1940 Act as it relates to (i) the Proposed
6
Agreement; (ii) the requirement that the Fund have, for a period of three years
after the Closing, at least 75 per cent of the members of its board of directors
who are not "interested" persons of CEF Advisers or LCMCM; and (iii) the
requirement that, for a period of two years after the Closing, CEF Advisers or
its successor shall not receive or be entitled to receive any compensation
directly or indirectly (A) from any person in connection with the purchase or
sale of securities or other property to, from, or on behalf of the Fund, other
than bona fide ordinary compensation as principal underwriter for the Fund, or
(B) from the Fund or its securityholders for other than bona fide investment
advisory or other services.
If Proposal 1 is approved by shareholders of the Fund, the daily portfolio
management of the Fund will be provided by the Investment Policy Committee of
CEF Advisers, which is comprised of Thomas B. Winmill as Chairman, Bassett S.
Winmill as Chief Investment Strategist, and Marion E. Morris as Director of
Fixed Income.
The transaction is expected to be close on or about July __, 2002 (the
"Closing"). The Closing is subject to the fulfillment of certain conditions,
including, among other things, the following actions by the shareholders of the
Fund: (1) approval of the Proposed Agreement; and (2) election of successor
Directors for the Fund. Certain closing conditions may be waived in whole or in
part by either or both of the parties. Upon completion of the transaction, CEF
Advisers will become the investment adviser to the Fund.
LCMCM was organized as an Illinois corporation on June 4, 1998 and is registered
with the SEC as an investment adviser under the Investment Advisers Act of 1940,
as amended ("Advisers Act"). Michael Grady is Chairman of the Board of LCMCM.
Michael Grady, Jack McDermott, Chairman of LaSalle St. Securities, LLC, and
Byron Crowe, a director of LCMCM, each own a controlling interest in LCMCM.
Messrs. Grady and Glasgow serve as officers and directors of LCMCM and the Fund.
CEF Advisers was organized as a Delaware corporation in 1986 and is registered
with the SEC as an investment adviser under the Advisers Act. The individuals
listed below are directors and/or principal executive officers of CEF Advisers.
The address for each individual is 11 Hanover Square, New York, NY 10005.
BASSETT S. WINMILL - He is Chairman of the Board of CEF Advisers and
of its direct parent, Winco. He is a member of the New York Society of
Security Analysts, the Association for Investment Management and
Research, and the International Society of Financial Analysts. He
serves as portfolio manager of Midas Special Equities Fund, and is
Chief Investment Strategist of the Investment Policy Committee.
ROBERT D. ANDERSON - He is Vice Chairman of CEF Advisers, and of its
direct parent, Midas Management and Winco, and certain of their
affiliates. He was a member of the Board of Governors of the Mutual
Fund Education Alliance, and of its predecessor, the No-Load Mutual
Fund Association. He has also been a member of the District #12,
District Business Conduct and Investment Companies Committees of the
NASD.
THOMAS B. WINMILL - He is President, Chief Executive Officer, and
General Counsel of CEF Advisers, Midas Management, Winco, and their
affiliates. He is a
7
member of the New York State Bar and the SEC Rules Committee of the
Investment Company Institute. He serves as portfolio manager of Midas
Fund, and is Chairman of the Investment Policy Committee.
WILLIAM VOHRER - He is Treasurer, Chief Accounting Officer and Chief
Financial Officer of CEF Advisers and the other investment companies
in the CEF Investment Company Complex and Winco and certain of their
affiliates. He joined the company in February 2001. From 1999 to 2001,
he consulted on accounting matters. From 1994 to 1999, he was Chief
Financial Officer and Financial Operations Principal for Nafinsa
Securities, Inc., a Mexican securities broker/dealer.
MARION MORRIS - Since November 2000, she has served as Senior Vice
President of CEF, Winco, and each of the Funds in the CEF Investment
Company Complex. She is Director of Fixed Income and a member of the
Investment Policy Committee of CEF. From 1997 to 2000, she acted as
general manager of Michael Trapp, a landscape designer. Previously,
she served as Vice President of Salomon Brothers, The First Boston
Corporation and Cantor Fitzgerald.
Factors Considered by Board of Directors of the Fund in Approving the
Investment Management Agreement
At a meeting of the entire Board of the Fund, including the Independent
Directors, held on March 14, 2002, the Directors considered the proposed
transaction and the implications of the transaction for the Fund and its
shareholders. All of the Independent Directors participated in the meeting in
person.
The Directors considered, among other factors, the Fund's historical
relationship with its investment adviser, the services provided to the Fund
under the Current Agreement and the structure of the Proposed Agreement and the
transaction. The Board reviewed the fees payable under the Current and Proposed
Agreements and noted that the fees payable under both Agreements are the same.
The Board considered the investment advisory experience of CEF Advisers and its
affiliated companies, Midas Management, and Winco. The Board noted that, CEF
Advisers is an established company, and a wholly owned subsidiary of Winco, and
that CEF Advisers and Midas Management share management and operational staff.
Winco is a public company with a net worth approximating $7.75 million as of
December 31, 2001. The Board noted that the affiliated companies of CEF Advisers
currently provide investment management services to three investment companies,
and have total assets under management of $75 million as of March 31, 2002 and
that CEF Advisers serves as an adviser to one closed-end fund with assets of $29
million as of December 31, 2001. The Board also considered the consulting
services to be provided to CEF Advisers by LCMCM for a three month period
following the Closing.
The Directors further considered the impact the proposed transaction would
likely have on shareholders of the Fund. The Board focused on the costs
associated with the transaction and the representations of LCMCM and CEF
Advisers that each party to the transaction would bear its own costs, except for
all costs and expenses incurred by the Fund in connection with the proxy
solicitation, which would be borne by CEF Advisers. The Board also considered
CEF Advisers' representations regarding its commitments to shareholder services,
as well as compliance oversight. The Directors considered various additional
relevant factors, including the nature of the anticipated
8
benefits to be derived from the proposed transaction by the Fund and its
shareholders. The Board noted CEF Advisers' commitment to compliance with
regulatory issues.
In the course of its review of the proposed transaction, the Board, including
the Independent Directors, met with Mr. Thomas B. Winmill of CEF Advisers. It is
anticipated that in order to comply with Rule 35d-1 of the Investment Company
Act of 1940, on or before July 31, 2002, the new Board will take action to adopt
a non-fundamental policy that, under normal market conditions, at least 80% of
the Fund's assets will be invested in equity securities of companies that engage
in Internet and Internet-related activities and shareholders will be provided
with at least 60 days prior notice of any change in that policy. Currently,
under unusual circumstances, as a defensive technique, the Fund may retain a
larger portion of the cash and/or invest more assets in U.S. government
securities and/or money market securities deemed by the adviser to be consistent
with a temporary defensive posture.
After considering these and other factors, the Board, including the Independent
Directors, determined that the terms of the Proposed Agreement were reasonable,
fair and in the best interests of the Fund and its shareholders, and that the
fees payable thereunder were fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and quality.
Accordingly, the Board concluded that the appointment of CEF Advisers to serve
as investment adviser to the Fund was desirable and in the best interests of the
Fund and its shareholders. The Board approved the submission of the Proposed
Agreement to shareholders of the Fund in light of the proposed transaction
between LCMCM and CEF Advisers and recommended approval of the Proposed
Agreement, subject to the completion of the transaction. If shareholder approval
is obtained for Proposal 1, the Current Agreement will remain in effect until
the Closing and the effectiveness of the Proposed Agreement will occur
simultaneously with the Closing. If Proposal 1 is approved by shareholders of
the Fund, an election of directors will be held as described in Proposal 2 and
approval will be sought to amend the Fund's Articles of Incorporation, as set
forth in Proposal 3. Implementation of Proposal 1 will not occur unless
shareholders also approve Proposal 2.
The Proposed Investment Management Agreement
If approved by the shareholders of the Fund, the Proposed Agreement will become
effective at the Closing. The following summary of the terms of the Proposed
Agreement is qualified in its entirety by reference to the form of such
agreement which is attached to this proxy statement as Exhibit A. Although there
are differences in the Agreements, unless otherwise noted, the provisions of the
Proposed Agreement set forth below are substantially similar to the provisions
of the Current Agreement.
Under the Proposed Agreement, CEF Advisers will act as the investment adviser
for the Fund and will manage the investment and reinvestment of the Fund's
assets, including the regular furnishing of advice with respect to the Fund's
portfolio transactions, subject at all times to the control and oversight of the
Fund's Board of Directors. Expenses not assumed by CEF Advisers and required for
the conduct of the Fund's own business will be paid by the Fund, including, but
not limited to, salaries of administrative and clerical personnel, brokerage
commissions, taxes, insurance, fees of the transfer agent, custodian, legal
counsel and auditors, association fees, costs of filing, printing and mailing
proxies, reports and notices to shareholders, preparing, filing and printing the
prospectus and statement of additional information, payment of dividends, costs
of stock certificates, costs of shareholder meetings, fees of the independent
directors, necessary office space
9
rental, all expenses relating to the registration or qualification of shares of
the Fund under applicable Blue Sky laws and reasonable fees and expenses of
counsel in connection with such registration and qualification and such
non-recurring expenses as may arise, including, without limitation, actions,
suits or proceedings affecting the Fund and the legal obligation which the Fund
may have to indemnify its officers and directors with respect thereto. Under the
Current Agreement all expenses related to the rental and maintenance of the
principal offices of the Fund are paid by LCMCM.
Under the Proposed Agreement, the Fund will pay to CEF Advisers a fee at the
annual rate of 1.00% of the Fund's average daily net assets. The Current
Agreement provides for the same fee structure.
The Proposed Agreement provides that CEF Advisers may delegate some or all of
its duties with respect to the Fund to a sub-adviser. Although CEF Advisers does
not currently expect to enter into any sub-advisory relationships with respect
to the Fund, any sub-advisory agreement would be subject to the approval of the
shareholders of the Fund. The Current Agreement does not contain a similar
provision.
The Proposed Agreement also provides that if requested by the Fund's Board of
Directors, CEF Advisers may provide other services to the Fund such as, without
limitation, the functions of billing, accounting, certain shareholder
communications and services, administering state and Federal registrations,
filings and controls and other administrative services. Any services so
requested and performed will be for the account of the Fund and the costs of CEF
Advisers in rendering such services shall be reimbursed by the Fund, subject to
examination by those directors of the Fund who are not interested persons of CEF
Advisers or any affiliate thereof.
The Proposed Agreement provides that in the absence of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or reckless
disregard of its obligations and duties thereunder, CEF Advisers will not be
liable to the Fund or any shareholder of the Fund for any error of judgment or
mistake of law or for any loss suffered in connection with the matters to which
the Proposed Agreement relates. The Current Agreement contains a similar
provision.
The Proposed Agreement may be terminated by CEF Advisers or by the Fund at any
time without penalty upon 60 days written notice to the other party. Termination
by the Fund must be approved by the vote of the Board of Directors or by a vote
of a majority of the outstanding voting securities of the Fund. The Proposed
Agreement will terminate in the event of an "assignment", as required by the
Investment Company Act of 1940. The Current Agreement contains similar
provisions.
Under the Proposed Agreement, CEF Advisers will direct portfolio transactions to
broker/dealers for execution on terms and at rates which it believes, in good
faith, to be reasonable in view of the overall nature and quality of services
provided by a particular broker/dealer, including brokerage and research
services and sales of shares of the Fund and shares of other investment
companies or series thereof for which CEF Advisers or an affiliate thereof
serves as investment adviser. CEF Advisers may also allocate portfolio
transactions to broker/dealers that remit a portion of their commissions as a
credit against Fund expenses. With respect to brokerage and research services,
CEF Advisers may consider in the selection of broker/dealers brokerage or
research provided and payment may be made of a fee higher than that charged by
another broker/dealer that does not furnish brokerage or research services or
which furnishes brokerage or research services deemed to be of a lesser value as
long as applicable laws are met. Although CEF Advisers may direct portfolio
10
transactions without necessarily obtaining the lowest price at which such
broker/dealer, or another, may be willing to do business, CEF Advisers shall
seek the best value for the Fund on each trade that circumstances in the
marketplace permit, including the value inherent in on-going relationships with
quality brokers. To the extent that any such brokerage or research services may
be deemed to be additional compensation to CEF Advisers from the Fund, it is
authorized under the Proposed Agreement. The Proposed Agreement recognizes that
an affiliated broker/dealer may act as one of the regular brokers for the Fund
provided that certain conditions set forth in the Proposed Agreement are
complied with and such brokerage is undertaken in compliance with applicable
law. The Current Agreement contains similar provisions, although it does not
expressly authorize the use of an affiliated broker.
The aggregate amount of the advisory fees paid by the Fund to LCMCM during the
Fund's last fiscal year was: $92,218.15.
The Current Agreement, dated October 15, 1999, was entered into in connection
with the organization of the Fund and was most recently approved by the Board of
Directors of the Fund, including a majority of the Fund's Independent Directors,
on May 23, 2001.
The Proposed Agreement is being submitted hereby to the shareholders in the Fund
for their approval. If the Proposed Agreement is approved by the required vote
of the shareholders of the Fund, the Current Agreement will terminate
immediately following the Closing and the Proposed Agreement, subject to
approval of Proposal 2 and other conditions of the Asset Purchase Agreement,
will immediately become effective and will continue in effect for a period of
two years and then it would be subject to approval on an annual basis. The
Proposed Agreement may then be continued annually for one-year terms until
terminated as provided therein. If the Proposed Agreement is not approved by the
shareholders of the Fund, the Current Agreement will continue in effect.
Each share of common stock is entitled to one vote. The presence, in person or
by proxy, at the meeting of the owners of one-third of the shares outstanding is
required for a quorum. If such a quorum is represented at the meeting, the vote
of a majority of the Fund's shares is required for approval of the Proposed
Agreement. For this purpose, the required vote is the lesser of: (i) 67% of the
shares of the Fund present at the meeting, if the owners of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (ii) more
than 50% of the outstanding shares of the Fund.
THE BOARD OF DIRECTORS OF THE FUND, INCLUDING THE DIRECTORS WHO
ARE NOT INTERESTED PERSONS OF THE FUND, UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS OF THE FUND VOTE TO APPROVE THE PROPOSED
AGREEMENT WITH CEF ADVISERS.
PROPOSAL 2. ELECTION OF DIRECTORS
The Board of Directors of the Fund proposes and recommends the election of four
new directors of the Fund in four separate classes, to constitute the entire
board of directors, as follows: Class I: George B. Langa, Class II: David R.
Stack, Class III: Peter K. Werner and Class IV: Thomas B. Winmill, each to serve
for terms expiring on the date of subsequent annual shareholders meetings as
follows - Class I in 2003, Class II in 2004, Class III in 2005, and Class IV in
2006 - or until his successor is duly elected and qualified. The following
individuals who currently serve as Directors
11
of the Fund are not standing for re-election and, upon Closing, their term of
office will end if their successors have been elected as proposed: Michael R.
Grady, Jr., Barry J. Glasgow, Michael Radnor, George D. Kraft, Lawrence E. Harb.
The Board of Directors has amended the Fund's By-Laws to reduce the number of
the Directors of the Fund from six to four, such amendment to take effect if and
when the nominees are elected. Shareholders will be asked to elect four new
directors of the Fund.
In Proposal 3, shareholders are being asked to approve an amendment to the
Fund's Articles of Incorporation to incorporate certain provisions to give the
Board greater control over the management of the Fund, including the adoption of
a classified board, as set forth herein. If Proposal 2 is approved by Fund
shareholders, but Proposal 3 is not approved, the Fund's By-Laws will be amended
by the newly elected Board of Directors in accordance with ss. 2- 110(b) of the
General Corporation Law of the State of Maryland nevertheless to adopt a
classified board structure.
All nominees have consented to being named in this proxy statement and have
agreed to serve if elected. Such election requires the affirmative vote of a
plurality of the shares of the Fund represented in person or by proxy at the
meeting and entitled to vote thereon. Unless you give contrary instructions on
the form of proxy, executed proxies timely received will be voted for the
election of the four nominees. Should any of the nominees withdraw or otherwise
become unavailable for election due to events not now known or anticipated, it
is intended that the proxy holders will vote for the election of such other
person or persons as the Board of Directors may designate.
Set forth below is certain information regarding each nominee for election as a
director of the Fund. None of the nominees hold any shares of the Fund.
Non-interested Nominees:
- -----------------------
Class I: George B. Langa
Age: 39
Mr. Langa is President and CEO of Langa Communications Corp., a niche marketing
company that he founded in 1986. He is also currently Chairman of the Board of
the Foundation of Hudson Valley Libraries. If elected, he would be the director
of three investment companies in the CEF Investment Company Complex. His address
is 2 LaGrange Avenue #209, Poughkeepsie, New York 12603.
Class II: David R. Stack
Age: 45
Mr. Stack has been a partner with the law firm of McLaughlin & Stern LLP,
specializing in trusts and estates, since 1994. If elected, he would be the
director of three investment companies in the CEF Investment Company Complex.
His address is Franklin Avenue, Millbrook, New York 12545.
12
Class III: Peter K. Werner
Age: 42
Mr. Werner has been a Teacher of History since 1998, Director of Communications
from 1997 to 1998, and Director of Admissions from 1996 to 1997, of The Governor
Dummer Academy. From 1995 to 1996, he attended Wesleyan University in the
graduate program in liberal studies. From 1993 to 1995, he was Director of
Annual Giving and Alumni Relations at The Williston Northampton School. From
1991 to 1993, he was Vice President - Money Market Trading at Lehman Brothers.
His address is The Governor Dummer Academy, 1 Elm Street, Byfield, Massachusetts
01922. If elected, he would be the director of three investment companies in the
CEF Investment Company Complex.
Interested Nominee:
- ------------------
Class IV: Thomas B. Winmill, Esq.*
Age: 43
Mr. Winmill is President, Chief Executive Officer, and General Counsel of the
CEF Investment Company Complex, and of Winco, certain of its affiliates, and CEF
Advisers. He is a member of the New York State Bar and the SEC Rules Committee
of the Investment Company Institute. He serves as portfolio manager of one of
the Midas Funds, and is Chairman of the Investment Policy Committee. If elected
he would be director of seven investment companies in the CEF Investment Company
Complex.
* This nominee would, upon completion of the transaction described in
Proposal 1 and election as Director, be an "interested person" of the Fund,
as defined in the 1940 Act because of his affiliation with CEF Advisers, as
noted above.
There have been no purchases or sales of securities of CEF Advisers or Winco
since the beginning of the most recently completed fiscal year by any director
or executive officer, or any nominee for election as a director of the Fund. No
director or nominee for election as a director of the Fund had any substantial
interest, direct or indirect in any material transaction since the beginning of
the most recently completed fiscal year, or in any proposed material
transactions, to which CEF Advisers, the principal underwriter, or any parent or
subsidiary of such entities (other than the Fund) was or is to be a party, other
than the proposed transaction between LCMCM and CEF Advisers described above.
The following table sets forth information describing the dollar range of equity
securities beneficially owned by each nominee in the Fund and, on an aggregate
basis, the CEF Investment Company Complex, which the Fund will be a part of if
Proposal 1 is approved by Fund shareholders, as of March 31, 2002.
13
Non-interested Nominees:
- -----------------------
- --------------------------------------------------------------------------------
Aggregate Dollar Range of
Equity Securities in all Investment
Companies to be Overseen by
Dollar Range of Equity Nominee in the CEF Investment
Nominee Securities in the Fund Company Complex
- --------------------------------------------------------------------------------
George B. Langa None $1-10,000
- --------------------------------------------------------------------------------
David R. Stack None $1-10,000
- --------------------------------------------------------------------------------
Peter K. Werner None $1-10,000
- --------------------------------------------------------------------------------
Interested Nominee:
- ------------------
- --------------------------------------------------------------------------------
Aggregate Dollar Range of
Equity Securities in all Investment
Companies to be Overseen by
Dollar Range of Equity Nominee in the CEF Investment
Nominee Securities in the Fund Company Complex
- --------------------------------------------------------------------------------
Thomas B. Winmill None Over $100,000
- --------------------------------------------------------------------------------
The Board of Directors has a standing Audit Committee. The Board of Directors
does not have a Nominating Committee or a Compensation Committee. The Board of
Directors held four meetings in fiscal 2002. Each director attended 100% of the
meetings of the Board of Directors held in fiscal 2002.
The Audit Committee presently consists of Messrs. Radnor, Kraft and Harb, each
of who is independent as defined in Section 121(A) of the listing standards of
the American Stock Exchange. The Audit Committee's primary duties and
responsibilities are to: (i) monitor the integrity of the Fund's financial
reporting process and systems of internal controls regarding finance, accounting
and legal compliance; (ii) monitor the independence and performance of the
Fund's independent public accountants and monitor the overall performance of the
fund accounting agent; and (iii) provide an avenue of communication among the
independent public accountants, management, the fund accounting agent and the
Board of Directors. The Audit Committee met one time in fiscal 2002.
Audit Committee Report
In accordance with its written charter adopted by the Board of Directors, the
Audit Committee assists the Board of Directors in fulfilling its responsibility
for oversight of the quality and integrity of the Fund's financial reporting
practices.
In discharging its oversight responsibility as to the audit process, the Audit
Committee discussed with the independent auditors their independence from the
Fund and its management. In addition, the independent auditors provided the
Audit Committee with written disclosure respecting their independence and the
letter required by Independence Standards Board Standard No. 1.
14
The Audit Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61 ("Communication with
Audit Committees") and, with and without management present, discussed and
reviewed the results of the independent auditors' examination of the Fund's
financial statements. The Audit Committee reviewed the audited financial
statements of the Fund for the fiscal year ended March 31, 2002 with management
and the independent auditors. Management has the responsibility for the
preparation of the Fund's financial statements and the independent auditors have
the responsibility for the examination of those statements.
Based upon the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board of Directors
that the Fund's audited financial statements be included in its Annual Report
for the fiscal year ended March 31, 2002 for filing with the Securities and
Exchange Commission. This report shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under
such Acts.
Director Compensation
Directors and officers of the Fund who are also officers, directors or employees
of LCMCM do not receive any remuneration from the Fund for serving as directors
or officers of LCM. Accordingly, neither Mr. Grady nor Mr. Glasgow receives any
remuneration from LCM for their services as directors and officers of LCM.
However, the remaining directors received the following fees for their services
as directors of LCM during fiscal 2002.
- --------------------------------------------------------------------------------
Aggregate Pension or Total
Name and Position Compensation Retirement Benefits Compensation
- --------------------------------------------------------------------------------
David von Vistauxx, $6,000 $0 $6,000
Director resigned as of
February 27, 2002
- --------------------------------------------------------------------------------
Michael Radnor, Director $8,000 $0 $8,000
- --------------------------------------------------------------------------------
George D. Kraft, Director $8,000 $0 $8,000
- --------------------------------------------------------------------------------
Lawrence E. Harb, Director $8,000 $0 $8,000
- --------------------------------------------------------------------------------
For fiscal 2003, each proposed director who is not deemed an "interested person"
of the Fund, as defined in the 1940 Act, is expected to receive $500 per year,
consisting of an annual retainer of $100 plus a fee of $100 per quarterly
meeting attended. The Fund would also reimburse the disinterested directors for
their reasonable meeting expenses and would pay such directors $50 per special
telephonic meeting attended and per committee meeting attended.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended ("1934 Act")
requires the Fund's directors and officers, among others, to file reports with
the Securities and Exchange Commission disclosing their ownership, and changes
in their ownership, of stock in the Fund. Copies of these
15
reports must also be furnished to the Fund. Based solely on a review of these
copies, the Fund believes that during fiscal 2002, all filing requirements were
met.
Upon closing, it is anticipated that the current officers of the Fund will
resign from their positions and that CEF Advisers will propose to the Board that
Thomas B. Winmill be elected Chairman of the Fund, that William G. Vohrer be
elected Treasurer and Chief Financial Officer, that Monica Pelaez be elected
Secretary and Vice President, and Marion E. Morris be elected Senior Vice
President. The address of each officer is 11 Hanover Square, New York, NY 10005.
The following table provides information about the proposed officers.
- --------------------------------------------------------------------------------
Name and Age Principal Occupation During Past 5 Years
- --------------------------------------------------------------------------------
William Vohrer Mr. Vohrer is Treasurer, Chief Accounting Officer
and Chief Financial Officer of CEF Advisers and
Age: 51 the other investment companies in the CEF
Investment Company Complex and Winco and certain
of their affiliates. He joined the company in
February 2001. From 1999 to 2001, he consulted on
accounting matters. From 1994 to 1999, he was
Chief Financial Officer and Financial Operations
Principal for Nafinsa Securities, Inc., a Mexican
securities broker/dealer.
- --------------------------------------------------------------------------------
Marion E. Morris Since November 2000, Ms. Morris has served as
Senior Vice President of CEF, Winco, and the CEF
Age: 56 Investment Company Complex. She is Director of
Fixed Income and a member of the Investment Policy
Committee of CEF. From 1997 to 2000, she acted as
general manager of Michael Trapp,a landscape
designer. Previously, she served as Vice President
of Salomon Brothers, The First Boston Corporation
and Cantor Fitzgerald.
- --------------------------------------------------------------------------------
Monica Pelaez, Esq. Ms. Pelaez is Vice President, Secretary and Chief
Compliance Officer of CEF Advisers, Midas
Age: 30 Management, Winco and their affiliates as well as
of the Midas Funds. From 1998 to 2000 she was
Special Assistant Corporation Counsel to New York
City Administration for Children's Services, and
from 1997-1998 she was an attorney with Debevoise
& Plimpton. She is a member of the New York State
Bar.
- -------------------------------------------------------------------------------
Thomas B. Winmill, Esq. Mr. Winmill is President, Chief Executive Officer,
11 Hanover Square and General Counsel of CEF Advisers, Midas
New York, NY 10005 Management, Winco, and their affiliates. He is a
member of the New York State Bar and the SEC Rules
Age: 43 Committee of the Investment Company Institute. He
serves as portfolio manager of one of the Midas
Funds, and is Chairman of the Investment Policy
Committee.
- --------------------------------------------------------------------------------
Approval of Proposal 2 requires the affirmative vote of a plurality of the
shares of the Fund represented in person or by proxy at the meeting and entitled
to vote thereon. If Proposal 1 is not approved by shareholders of the Fund, no
election of Directors will be held as described in Proposal
16
2 and approval of the amendment to the Articles of Incorporation, as set forth
in Proposal 3, will not be sought.
THE BOARD OF DIRECTORS OF THE FUND, INCLUDING THE DIRECTORS WHO ARE
NOT INTERESTED PERSONS OF THE FUND, UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE TO ELECT EACH OF THE NOMINEES.
PROPOSAL 3. APPROVAL OF AN AMENDMENT TO
THE FUND'S ARTICLES OF INCORPORATION
The Board of Directors of the Fund has proposed an amendment ("Amendment") to
the Fund's Articles of Incorporation ("Articles") to divide the Board of
Directors into four separate classes with staggered terms so that in any one
year only one class of directors is subject to election by Fund shareholders.
Specifically, the Class I, II, III, and IV directors will be elected for an
initial term of one, two, three and four years, respectively. After the
expiration of its initial term, each class of directors will be elected for
successive four-year terms so that in any given year only one class of directors
will be subject to election by Fund shareholders. The Amendment also provides
that under certain circumstances vacancies on the Board can be filled for the
remainder of the full term of the class by a majority of the Continuing
Directors (defined as the directors elected in Proposal 2 and directors whose
election is approved by a majority of the Continuing Directors then on the
Board) and that Directors may be removed only for cause and by action taken by
at least 80% of the outstanding shares entitled to vote on the matter. The
Articles currently provide that Directors may be removed with or without cause
by action of at least 66 2/3% of the shares entitled to vote on that matter. The
proposed Amendment is attached as Exhibit B to this Proxy.
The Amendment is being proposed by the Board of Directors in order to provide
for a more stable Board and to make it more difficult for any shareholder of the
Fund to change the management of the Fund without the consent of the Fund's
Board of Directors. This Amendment will give the Board of Directors greater
control and the Fund's shareholders less control over the management of the Fund
and it will ensure continuity on the Board. Although the Fund has not
experienced any problems with turnover or continuity of Fund management, the
Board believes the Amendment is desirable to avoid problems that may be
encountered in the future. Any future amendment or repeal of the Amendment would
only be able to be made by the affirmative vote of the holders of at least 66
2/3% of the outstanding shares of capital stock of the Fund entitled to vote on
the matter.
The Board of Directors believes that the Amendment is in the best interests of
the Fund and its shareholders because it will provide for less turnover in the
Board at any one time, it will make it more difficult for any one shareholder or
group of shareholders not currently involved in the management of the Fund to
assume control of the Board of Directors, and it will result in the incumbent
Board of Directors of the Fund having greater control over management. Pursuant
to Section 3.1 of the By-Laws, the business and affairs of the Fund are managed
under the direction of the Board and all powers of the Fund may be exercised by
or under the authority of the Board. Each Board member is subject to fiduciary
duties under state and federal law.
The General Corporation Law of the State of Maryland permits, but does not
require, classified board provisions to be contained in either the articles of
incorporation or the by-laws of a corporation. If Proposals 1 and 2 are approved
by Fund shareholders but Proposal 3 is not approved by Fund shareholders, the
By-Laws of the Fund will be amended by the newly elected Board of
17
Directors to add provisions substantially similar to those contained in Exhibit
B. In any event, the newly elected Board of Directors will amend the By-Laws to
(1) require that any directors not nominated by the Continuing Directors of the
Fund be approved by 66 2/3% of the shareholders of the Fund; (2) provide that
50%, rather than 25%, of Fund shareholders must make a written request in order
to call a special meeting of shareholders; and (3) require shareholders to
comply with certain advance notice provisions in order to nominate directors or
transact business at an annual meeting of the Fund. Amendments to the Fund's
By-Laws can be made by the Board of Directors without the approval of Fund
shareholders pursuant to Section 6.7 of the Articles and the General Corporation
Law of the State of Maryland.
The Board of Directors has approved an amendment to the Articles to change the
name of the Fund to Internet Growth Fund, Inc., effective at Closing. This
change will not affect the Fund's trading symbol, which will continue to be FND.
Shareholder approval is not required to change the name of the Fund.
The Board approved the proposed Amendment by unanimous consent resolution on May
9, 2002, and advises that the shareholders approve the Amendment, for the
reasons set forth above.
Approval of Proposal 3 requires the affirmative vote of two-thirds of all votes
entitled to be cast at the Meeting. If adopted, the Amendment would become
effective upon the filing with the State Department of Assessments and Taxation
of Maryland of Articles of Amendment to the Fund's Articles.
THE BOARD OF DIRECTORS OF THE FUND, INCLUDING THE DIRECTORS WHO ARE
NOT INTERESTED PERSONS OF THE FUND, UNANIMOUSLY ADVISES THAT THE
SHAREHOLDERS VOTE TO AMEND THE FUND'S ARTICLES OF INCORPORATION.
OTHER BUSINESS
Although no business may come before the Meeting other than that specified in
the Notice of Annual Meeting of Shareholders, shares represented by executed and
unrevoked proxies will confer discretionary authority to vote on matters which
the Fund did not have notice of by April 15, 2002 pursuant to Rule 14a-4(c)(1)
of the 1934 Act. The deadline for submitting shareholder proposals for inclusion
in the Fund?s proxy statement and form of proxy for the Fund's next annual
meeting is January 31, 2003 pursuant to Rule 14a-8(e)(2) of the 1934 Act.
ANNUAL REPORT
The Fund's annual report for the fiscal year ended March 31, 2002, including
financial statements, will be mailed to shareholders on or about May 30, 2002.
The Fund will furnish, without charge, a copy of its annual report and the most
recent semi-annual report succeeding the annual report to a shareholder upon
request directed to LCM Internet Growth Fund, 223 W. Lake St., Chicago, Illinois
60606, Attn: Will Thimes.
INDEPENDENT ACCOUNTANTS
Tait, Weller & Baker ("Tait, Weller") has been selected as independent
accountants for the Fund. Tait, Weller also acts as independent accountants of
Winco and the CEF Investment Company Complex since 1990. PricewaterhouseCoopers
LLP served as independent accountants for the Fund
18
since inception through March 14, 2002. Representatives of Tait, Weller are not
expected to be present at the Meeting but have been given the opportunity to
make a statement if they so desire and will be available should any matter arise
requiring their presence. Tait, Weller, in accordance with the Independence
Standards Board Standard No. 1, has confirmed to the Fund's Audit Committee that
they are independent accountants with respect to the Fund.
On March 14, 2002, PricewaterhouseCoopers LLP resigned as independent
accountants for the Fund. Prior to this resignation, PricewaterhouseCoopers LLP
was engaged by the Fund as the principal accountants to audit the Fund's
financial statements.
The reports of PricewaterhouseCoopers LLP on the financial statements for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principle.
In connection with audits for the two most recent fiscal years and through March
14, 2002, the Fund has had no disagreements with PricewaterhouseCoopers LLP on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused
PricewaterhouseCoopers LLP to make reference thereto in their report on the
financial statements for such years.
As of March 14, 2002, the Fund has engaged Tait, Weller as its new independent
accountants, to act as the principal accountants in auditing the Fund's
financial statements. During the two most recent fiscal years and through March
14, 2002, the Fund did not consult with Tait, Weller on any matters. The
decision to retain Tait, Weller as the Fund's independent accountants was
approved by the Fund's Board of Directors, and the Audit Committee has
subsequently approved Tait, Weller as the Fund's independent accountants.
The fees to be paid to Tait, Weller for the fiscal year ended March 31, 2002 are
set forth in the table below:
- -----------------------------------------------------------------------------
Financial Information
Systems Design and
Audit Fees Implementation Fees* All Other Fees*
- -----------------------------------------------------------------------------
$10,000 --
- -----------------------------------------------------------------------------
* The provision of these services is compatible with maintaining Tait, Weller's
independence.
FUND INFORMATION
The investment adviser for the Fund is LCM Capital Management, Inc., 223 West
Lake Street, Chicago, Illinois 60606.
19
The current administrator for the Fund is U.S. Bancorp Fund Services, LLC, 615
East Michigan Street, Milwaukee, Wisconsin 53202.
By Order of the Board of Directors,
Barry J. Glasgow, Secretary
-----------------------------------------
YOU ARE URGED TO DATE, SIGN, COMPLETE
AND RETURN YOUR PROXY IMMEDIATELY
-----------------------------------------
20
Exhibit A
---------
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made on ________ __, 2002, by and between Internet Growth
Fund, Inc., a Maryland corporation (the "Fund") and CEF Advisers, Inc., a
Delaware corporation (the "Investment Manager").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a closed-end management investment
company; and
WHEREAS, the Fund desires to retain the Investment Manager to furnish
certain investment advisory and portfolio management services to the Fund, and
the Investment Manager desires to furnish such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of its assets, including the regular furnishing of
advice with respect to the Fund's portfolio transactions subject at all times to
the control and oversight of the Fund's Board of Directors, for the period and
on the terms set forth in this Agreement. The Investment Manager hereby accepts
such employment and agrees during such period to render the services and to
assume the obligations herein set forth, for the compensation herein provided.
The Investment Manager shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way, or
otherwise be deemed an agent of the Fund. The Investment Manager may enter into
a contract ("Subadvisory Agreement") with an investment adviser in which the
Investment Manager delegates to such investment adviser any or all of its duties
specified in this Paragraph 1, provided that such Subadvisory Agreement meets
all requirements of the 1940 Act and rules thereunder.
2. The Fund assumes and shall pay all the expenses required for the
conduct of its business including, but not limited to, salaries of
administrative and clerical personnel, brokerage commissions, taxes, insurance,
fees of the transfer agent, custodian, legal counsel and auditors, association
fees, costs of filing, printing and mailing proxies, reports and notices to
shareholders, preparing, filing and printing the prospectus and statement of
additional information, payment of dividends, costs of stock certificates, costs
of shareholders meetings, fees of the independent directors, necessary office
space rental, all expenses relating to the registration or qualification of
shares of the Fund under applicable Blue Sky laws and reasonable fees and
expenses of counsel in connection with such registration and qualification and
such non-recurring expenses as may arise, including, without limitation,
actions, suits or proceedings
21
affecting the Fund and the legal obligation which the Fund may have to indemnify
its officers and directors with respect thereto.
3. If requested by the Fund's Board of Directors, the Investment
Manager may provide other services to the Fund such as, without limitation, the
functions of billing, accounting, certain shareholder communications and
services, administering state and Federal registrations, filings and controls
and other administrative services. Any services so requested and performed will
be for the account of the Fund and the costs of the Investment Manager in
rendering such services shall be reimbursed by the Fund, subject to examination
by those directors of the Fund who are not interested persons of the Investment
Manager or any affiliate thereof.
4. The services of the Investment Manager are not to be deemed
exclusive, and the Investment Manager shall be free to render similar services
to others in addition to the Fund so long as its services hereunder are not
impaired thereby.
5. The Investment Manager shall create and maintain all necessary
books and records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the 1940 Act
and the rules thereunder, as the same may be amended from time to time,
pertaining to the investment management services performed by it hereunder and
not otherwise created and maintained by another party pursuant to a written
contract with the Fund. Where applicable, such records shall be maintained by
the Investment Manager for the periods and in the places required by Rule 31a-2
under the 1940 Act. The books and records pertaining to the Fund which are in
the possession of the Investment Manager shall be the property of the Fund. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during the Investment Manager's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Investment Manager to the Fund or the Fund's authorized
representatives.
6. The Fund will pay the Investment Manager a fee for its services
(the "Advisory Fee") at the annual rate of 1.00% of the Fund's average daily net
assets. The Advisory Fee shall be accrued each calendar day during the term of
this Agreement and the sum of the daily fee accruals shall be paid monthly as
soon as practicable following the last day of each month. The daily fee accruals
will be computed by multiplying 1/365 by the annual rate and multiplying the
product by the net asset value of the Fund as determined in accordance with the
Fund's registration statement as of the close of business on the previous day on
which the American Stock Exchange (or such other exchange on which the Fund's
shares are principally traded) was open for business, or in such other manner as
the parties agree. The Investment Manager may from time to time and for such
periods as it deems appropriate reduce its compensation and/or assume expenses
of the Fund. If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be pro-rated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
7. The Investment Manager shall direct portfolio transactions to
broker/dealers for execution on terms and at rates which it believes, in good
faith, to be
22
reasonable in view of the overall nature and quality of services provided by a
particular broker/dealer, including brokerage and research services and sales of
shares of the Fund and shares of other investment companies or series thereof
for which the Investment Manager or an affiliate thereof serves as investment
adviser. The Investment Manager may also allocate portfolio transactions to
broker/dealers that remit a portion of their commissions as a credit against
Fund expenses. With respect to brokerage and research services, the Investment
Manager may consider in the selection of broker/dealers brokerage or research
provided and payment may be made of a fee higher than that charged by another
broker/dealer which does not furnish brokerage or research services or which
furnishes brokerage or research services deemed to be of lesser value, so long
as the criteria of Section 28(e) of the Securities Exchange Act of 1934, as
amended, or other applicable laws are met. Although the Investment Manager may
direct portfolio transactions without necessarily obtaining the lowest price at
which such broker/dealer, or another, may be willing to do business, the
Investment Manager shall seek the best value for the Fund on each trade that
circumstances in the market place permit, including the value inherent in
on-going relationships with quality brokers. To the extent any such brokerage or
research services may be deemed to be additional compensation to the Investment
Manager from the Fund, it is authorized by this Agreement. The Investment
Manager may place brokerage for the Fund through an affiliate of the Investment
Manager, provided that: the Fund not deal with such affiliate in any transaction
in which such affiliate acts as principal; the commissions, fees or other
remuneration received by such affiliate be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time; and such brokerage be
undertaken in compliance with applicable law. The Investment Manager's fees
under this Agreement shall not be reduced by reason of any commissions, fees or
other remuneration received by such affiliate from the Fund.
8. A. This Agreement shall become effective upon the date hereinabove
written provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of the Directors of the Fund who are
not parties to this Agreement, or interested persons of any such party and (ii)
by vote of a majority of the Fund's outstanding voting securities.
B. Unless sooner terminated as provided herein, this Agreement
shall continue in effect for two years from the above written date. Thereafter,
if not terminated, this Agreement shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Directors of the
Fund who are not parties to this Agreement, or interested persons of any such
party and (ii) by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting securities of the Fund.
C. This Agreement may be terminated without penalty at any time
either by vote of the Board of Directors of the Fund or by vote of a majority of
the Fund's outstanding voting securities on 60 days' written notice to the
Investment Manager, or by the Investment Manager on 60 days' written notice to
the Fund. This Agreement shall immediately terminate in the event of its
assignment.
23
9. The Investment Manager shall not be liable to the Fund or any
shareholder of the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund or the Fund's shareholders in connection with the
matters to which this Agreement relates, but nothing herein contained shall be
construed to protect the Investment Manager against any liability to the Fund or
the Fund's shareholders by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under this Agreement.
10. As used in this Agreement, the terms "interested person,"
"assignment," and "majority of the outstanding voting securities" shall have the
meanings provided therefor in the 1940 Act, and the rules and regulations
thereunder.
11. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement, with respect to the subject
hereof whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency, decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
12. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York, provided, however, that nothing herein
shall be construed in a manner inconsistent with the 1940 Act or any rule or
regulation promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
ATTEST: INTERNET GROWTH FUND, INC.
_____________________________________ By:____________________________________
ATTEST: CEF ADVISERS, INC.
_____________________________________ By:____________________________________
24
Exhibit B
---------
PROPOSED AMENDMENT TO THE FUND'S ARTICLES OF INCORPORATION
Current Articles 6.1, 6.2 and 6.3 shall be deleted and the current Articles,
6.4, 6.5, 6.6, 6.7 and 6.8 shall be renumbered 6.5, 6.6, 6.7, 6.8 and 6.9,
respectively. The deleted Articles 6.1, 6.2 and 6.3 shall be replaced in their
entirety with the language set forth below:
6.1 Number of Directors. The number of directors of the Corporation shall
be four (4), which number may be increased or decreased by or pursuant
to the By-Laws of the Corporation but shall never be less than three
nor more than fifteen. Unless otherwise provided by the By-Laws of the
Corporation, the directors of the Corporation need not be stockholders
of the Corporation
6.2 Names of Directors. The names of the persons who shall act as directors
until the next annual meeting of the Board of Directors after
effectiveness of this Amendment to the Articles of Incorporation and
until their successors are duly elected and qualify are (the "Initial
Directors"):
Class I: George B. Langa
Class II: David R. Stack
Class III: Peter K. Werner
Class IV: Thomas B. Winmill.
6.3 Classification of Directors. Upon effectiveness of this Amendment to
the Articles of Incorporation, the directors shall be divided into four
classes, designated Class I, Class II, Class III, and Class IV. Prior
to any change in the number of directors, each Class shall consist of
one director. At the first annual meeting of the stockholders approving
the effectiveness of this Amendment to the Articles of Incorporation,
the Class I director shall be elected for an initial term of one year,
the Class II director for an initial term of two years, the Class III
director for an initial term of three years, and the Class IV directors
for an initial term of four years. Upon the expiration of the initial
term of each class, such class of directors shall be elected for
successive four-year terms. A director elected at an annual meeting
shall hold office until the annual meeting for the year in which his or
her term expires and until his or her successor shall be elected and
shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
If the number of directors is changed, any increase or decrease shall
be apportioned among the classes, as of the annual meeting of
stockholders next succeeding any such change, so as to maintain a
number of directors in each class as nearly equal as possible. In no
case shall a decrease in the number of directors shorten the term of
any incumbent director. Any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled by a
majority of the Continuing Directors (defined as
25
the Initial Directors and directors whose election is approved by a
majority of the Continuing Directors then on the Board), provided that
a quorum is present, and any other vacancy occurring in the Board of
Directors may be filled by a majority of the Continuing Directors then
in office, whether or not sufficient to constitute a quorum, or by a
sole remaining Continuing Director; provided, however, that if the
stockholders of any class of the Corporation's capital stock are
entitled separately to elect one or more directors, a majority of the
remaining Continuing Directors elected by that class or the sole
remaining Continuing Director elected by that class may fill any
vacancy among the number of directors elected by that class.
At any annual meeting of stockholders, any director elected to fill any
vacancy in the Board of Directors that has arisen since the preceding
annual meeting of stockholders (whether or not any such vacancy has
been filled by election of a new director by the Continuing Directors)
shall hold office for a term which coincides with the remaining term of
the class to which such directorship was previously assigned, if such
vacancy arose other than by an increase in the number of directors, and
until his or her successor shall be elected and shall qualify. In the
event such vacancy arose due to an increase in the number of directors,
any director so elected to fill such vacancy at an annual meeting shall
hold office for a term which coincides with that of the class to which
such directorship has been apportioned as heretofore provided, and
until his or her successor shall be elected and shall qualify.
6.4 Removal of Directors. A director may be removed for cause only, and not
without cause, and only by action taken by the holders of at least
eighty percent (80%) of the outstanding shares of all classes of voting
stock then entitled to vote in an election of such director.
26
Your vote is important!
Please sign and date the proxy/voting instructions card above and return it
promptly in the enclosed postage-paid envelope or otherwise to LCM Internet
Growth Fund, Inc., c/o Corporate Election Services, 200 Corporate Center Drive,
Suite 175 Moon Township, PA 15108 so that your shares can be represented at the
Meeting.
Please fold and detach card at perforation before mailing.
LCM Internet Growth Fund, Inc. Proxy/Voting Instruction Card
This proxy is solicited by and on behalf of the Fund's Board of Directors for an
Annual Meeting of Shareholders on July 9, 2002 and at any postponement or
adjournment thereof.
The undersigned shareholder of LCM Internet Growth Fund, Inc. (the "Fund")
hereby appoints Michael R. Grady, Jr. and Barry J. Glasgow and each of them, the
attorneys and proxies of the undersigned, with full power of substitution in
each of them, to attend an Annual Meeting of Shareholders to be held at the
offices of the Fund at 223 West Lake Street, Chicago, Illinois 60606 on July 9,
2002 at 10 a.m., and at any postponement or adjournment thereof ("Meeting") to
cast on behalf of the undersigned all votes that the undersigned is entitled to
cast at the Meeting and otherwise to represent the undersigned at the Meeting
with all of the powers the undersigned possesses and especially (but without
limiting the general authorization and power hereby given) to vote as indicated
on the proposals, as more fully described in the proxy statement for the
Meeting. The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and the accompanying Proxy Statement and revokes any proxy heretofore
given for the Meeting. The above-named proxies agree to vote the shares in
accordance with the instructions of the undersigned set forth below. If no
directions are given, the proxies will vote FOR all proposals and in their
discretion on any other matter that may properly come before the Meeting.
Sign here as name(s) appear to the left.
------------------------------------------
------------------------------------------
Signature(s)should be exactly the same as the name or names appearing
on this form. Please sign this proxy and return it promptly
whether or not you plan to attend the Meeting. If signing for
a corporation or partnership or as agent, attorney or
fiduciary, indicate the capacity in which you are signing. If
you do attend the Meeting and decide to vote by ballot, such
vote will supersede this proxy.
Dated: ______________, 2002
2
Proxy to be signed and dated on the reverse side.
Please fold and detach card at perforation before mailing.
LCM Internet Growth Fund, Inc. Please mark your votes as in this example:
Please sign, date and return this proxy/voting instructions card promptly in the
enclosed postage-paid envelope. If no direction is given on a proposal, the
proxies will vote FOR the proposal, in accordance with the Fund Board's
recommendations.
1. To consider and vote upon the approval of FOR AGAINST ABSTAIN
a new investment management agreement /__/ /__/ /__/
between the Fund and CEF Advisers, Inc.
2. To elect four Directors. FOR all nominees WITHHOLD authority
(01) George B. Langa listed (except to vote for all
(02) David R. Stack as marked to the nominees listed
(03) Peter K. Werner contrary at left) at left
(04) Thomas B. Winmill, Esq. /__/ /__/
(Instruction: To withhold authority to
vote for any individual nominee,
write that nominee(s) name(s) in the
space provided below.)
- --------------------------------------
3. To approve an amendment to the Fund's FOR AGAINST ABSTAIN
Articles of Incorporation. /__/ /__/ /__/
3