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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
LCM Internet Growth Fund, Inc.
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(Name of Registrant as Specified in its Charter)
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(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:
LCM INTERNET GROWTH FUND, INC.
223 W. Lake Street, Chicago, Illinois 60606
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 9, 2002
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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,
/s/ Barry J. Glasgow
Barry J. Glasgow, Secretary
May 30, 2002
LCM INTERNET GROWTH FUND, INC.
223 W. Lake Street, Chicago, Illinois 60606
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PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held on July 9, 2002
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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 and voting 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 $5,000 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 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 move to adjourn
the meeting to a later date to permit further solicitation of proxies. The
persons named as proxies intend to vote all shares, including broker non-votes
and abstentions, in favor of motions to adjourn the Meeting to a later date.
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.
Interested Directors:
Percent of
Name and Address(1) Number of Shares Outstanding Shares
- ------------------ ---------------- -----------------
Michael R. Grady 10,347.15 *
Barry J. Glasgow 0 0
Non-Interested Directors:
Percent of
Name and Address(1) Number of Shares Outstanding Shares
- ------------------ ---------------- ------------------
Michael Radnor 2,740.50 *
George D. Kraft 1,126.73 *
Lawrence E. Harb 0 0
Total shares held by directors
and officers as a group 14,214.38 *
* 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 4295 Okemos Road, Suite 120, Okemos, Michigan
48864.
Except as set forth below, as of the Record Date, the Fund does not know of
any person who owns beneficially more than 5% of the Fund's outstanding shares:
Percent
Shareholder's Name/Address Number of Shares Owned Beneficial Ownership
- ------------------------- ---------------------- --------------------
Financial & Investment 153,347 5.89%
Management Group LTD
417 St. Joseph Street
Suttons Bay, MI 49682
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. The Asset Purchase Agreement provides that LCMCM in its
consulting capacity will provide no services that would cause it to be an
"investment adviser" to the Fund within the meaning of the Investment Company
Act of 1940 (the "1940 Act").
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.
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 (goodwill and intangibles but no rights with respect
to the current investment management agreement between the Fund and LCMCM)
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 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 10, 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 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. 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.
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 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.
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 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. Although not obligated to do so under the
Proposed Agreement, CEF Advisers has advised the Fund that it will pay all
expenses related to the rental and maintenance of the principal offices of the
Fund for at least two years following the Closing.
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 1940 Act. 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
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 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.
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.
Non-interested Nominees:
Aggregate Dollar Range
of Equity Security
in all Investment
Companies to be Overseen
Dollar Range of Equity by Nominee the CEF
Nominee Securities in the Fund Investment 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 Security
in all Investment
Companies to be Overseen
Dollar Range of Equity by Nominee the CEF
Nominee Securities in the Fund Investment 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.
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.
Pension or
Aggregate Retirement Total
Name and Position Compensation Benefits Compensation
- ----------------- ------------ ---------- -------------
David von Vistauxx,
Director resigned as of
February 27, 2002 $6,000 $0 $6,000
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 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
Age: 51 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 E. Morris Since November 2000, Ms. Morris has served as Senior
Age: 56 Vice President of CEF, Winco, and 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.
Monica Pelaez, Esq. Ms. Pelaez is Vice President, Secretary and Chief
Age: 30 Compliance Officer of CEF Advisers, Midas
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
Age: 43 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.
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 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. As
a consequence, adoption of the proposed Amendment may delay the replacement of
Directors. 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 proposed Amendment may have the effect of
discouraging a prospective acquirer from making a tender offer or otherwise
attempting to obtain control of the Fund. To the extent it does, it could
deprive Fund shareholders of opportunities to realize takeover premiums for
their shares or depress the market price of the shares of Common Stock.
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 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 Advised 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. The deadline for submitting other shareholder proposals for the Fund's next
annual meeting is April 6, 2003 pursuant to Rule 14a-4(c)(1) 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 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.
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,
/s/ Barry J. Glasgow
Barry J. Glasgow, Secretary
-----------------------------------------
YOU ARE URGED TO DATE, SIGN, COMPLETE
AND RETURN YOUR PROXY IMMEDIATELY
-----------------------------------------
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 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 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.
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: ____________________________________
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 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.
Proxy Card
LCM INTERNET GROWTH FUND, INC.
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 10:00 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.
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.
PLEASE DETACH BELOW, COMPLETE, SIGN, DATE AND RETURN PROMPTLY USING THE ENVELOPE
PROVIDED
LCM INTERNET GROWTH INC. 2002 ANNUAL MEETING - JULY 9, 2002
X PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
- -
1. To consider and vote upon the approval of a new investment management
agreement between the Fund and CEF Advisers, Inc.,
__ FOR __ AGAINST __ ABSTAIN
2. To elect four Directors; 1 - George B. Langa 2 - David R. Stack
3 - Peter K. Werner 4 - Thomas B. Winmill
__ FOR all nominees __ WITHHOLD AUTHORITY
listed to the left (except to vote for all nominees
as specified below). listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)
__________________________
3. To approve an amendment to the Fund's Articles of Incorporation.
__ FOR __ AGAINST __ ABSTAIN
Check appropriate box Indicate changes below:
__ Address Change? __ Name Change?
NO. OF SHARES _____________
Date ________________, 2002
- ----------------------------------
Signature(s) in Box
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.