SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____________)
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-11(c) or ss. 240.14a-12
Babson Enterprise Fund, Inc.
Babson Enterprise Fund II, Inc.
Babson Value Fund, Inc.
D.L. Babson Tax-Free Income Fund, Inc.
Shadow Stock Fund, Inc.
-----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
(specify)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] Fee computed on table below per Exchange Act Rules 14a96(i)(4) and O-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 by written 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:
[EFFECTIVE DATE]
Dear Shareholder:
As a shareholder in a Babson fund, you are being asked to vote on several
important matters that would affect your fund. These matters will be considered
at a special meeting of shareholders of your fund, which has been scheduled for
March 15, 2004.
As part of a broader integration initiative, you are being asked to approve the
reorganization of your fund as a separate series of the Tamarack Funds Trust.
The reorganization would be accomplished through a Reorganization transaction
that has been approved by your fund's Board. If you and your fellow shareholders
approve the Reorganization, your fund would be reorganized as a Tamarack Fund on
or about March 31, 2004. The Reorganization would consist of the transfer of all
of the assets of your fund to the corresponding Tamarack Fund in exchange for
Class S shares of the Tamarack Fund, the assumption by the Tamarack Fund of all
liabilities of your fund, and the distribution of Tamarack Fund Class S shares
to the accounts of the shareholders of your fund in complete liquidation of your
fund. The total net asset value of your Class S shares in the Tamarack Fund
would be the same as the total net asset value of your shares in your fund.
Voyageur, the investment advisor to both your fund and the Tamarack Funds, is
paying all of the ordinary costs of the Reorganization and the transaction is
expected to qualify as a tax-free reorganization for federal income tax
purposes.
David L. Babson will continue to act as sub-advisor to Babson Enterprise Fund,
Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc. and Shadow Stock
Fund, Inc. Voyageur's continuing relationship with David L. Babson is important
to Voyageur and to you as a shareholder in these funds. Voyageur believes that
the capabilities of David L. Babson's portfolio team in the equity value style
is a complement to Voyageur's growth and fixed income expertise and provides a
range of solid portfolio management skills for the shareholders of these funds.
You are also being asked to elect nine nominees to serve on the board of
directors of your fund. In addition, you are being asked to approve the
modification of your fund's fundamental investment polices/restrictions.
Furthermore, shareholders of certain Babson funds are being asked to approve the
reclassification as non-fundamental of certain investment policies/restrictions
that are no longer legally required to be classified as fundamental. These
changes are intended to streamline and make uniform the policies/restrictions
applicable to all funds in order to promote ease of administration of the
investment program of each fund and to modernize the investment limitations
currently applicable to the funds. Furthermore, you are being asked to ratify
the Board's selection of Deloitte & Touche LLP as the independent auditors of
your fund for the current fiscal year.
The enclosed materials include detailed information about these five proposals.
To assist you in understanding these proposals we have provided a Definitions of
Key Terms page and a Questions and Answers section.
As a valued shareholder, your vote is very important. Please review the enclosed
materials carefully. After reviewing the materials, please complete, date and
sign the enclosed proxy card(s), and return it in the postage-paid,
self-addressed envelope. Please be aware that if you hold shares in more than
one account, you may receive more than one proxy package. Separate proxy cards
are required for each account. If you would like to attend the shareholder
meeting, you may vote your shares in person. If you expect to attend the
meeting, please notify us in advance by calling [TELEPHONE NUMBER].
Alternatively, you may vote your shares by telephone by following the
instructions on your proxy card(s). Because your vote is important, if we have
not heard from you by [February 20, 2004], you may be contacted by [a
representative of Voyageur or [SOLICITOR NAME]].
If you have any questions, please call your fund's toll-free number (800)
422-2766, and ask to speak with a representative, who will be happy to help you.
Sincerely,
Jennifer Lammers
President
Babson Funds
DEFINITIONS OF KEY TERMS
USED IN THE QUESTIONS & ANSWERS
AND LETTER TO SHAREHOLDERS
BOARD: The current board of directors of your fund. The
members of the Board of your fund may change if
shareholders of your fund approve the proposal
described in the enclosed materials to elect a new
board of directors. Shareholders of the other funds
are being asked to elect the same new board of
directors for their funds. The independent directors
nominated to serve on the new boards of directors
have been selected from among the independent
directors currently serving on the boards of your
fund and the other funds.
DAVID L. BABSON: David L. Babson & Company Inc. is the registered
investment advisor that is currently serving as
sub-advisor to your fund.
INTEGRATION INITIATIVE: Voyageur's effort to integrate its financial services
operations by simplifying the existing lineup of
funds and standardizing current investment
operations. Specifically, this involves reducing the
number of funds (by combining similar portfolios),
closing under-performing portfolios, and simplifying
administration by integrating the funds under a
single legal entity and a single board of trustees. A
final step is to rename all the funds with a common
name, the Tamarack Funds. This renaming will allow
the funds' distributor to provide improved marketing
and sales support to the funds by focusing resources
on supporting a single name in the marketplace.
PLAN: The Agreement and Plan of Reorganization under which
your fund would be reorganized as a separate
portfolio of the Tamarack Funds Trust.
REORGANIZATION: The proposed reorganization of your fund as a
separate portfolio of the Tamarack Funds Trust, which
would be accomplished through a reorganization
transaction that would be carried out in accordance
with the terms of the Plan.
TAMARACK FUNDS TRUST: The new legal entity (a Delaware statutory trust)
under which Voyageur has proposed to integrate all
the funds as separate portfolios of this trust.
Organizing as a Delaware statutory trust is a common
legal structure for mutual fund companies. As
mentioned above, the Tamarack Funds would become the
new name for the funds if the Integration Initiative
proposals are approved.
THE BABSON FUNDS: The mutual funds involved in this Proxy Statement:
Babson Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., D. L. Babson
Tax-Free Income Fund, Inc., and Shadow Stock Fund,
Inc.
THE FUNDS: The Babson Group of Funds, the Great Hall Funds, the
J&B Funds and the RBC Funds are a collection of
twenty-two individual mutual funds and/or portfolios.
Voyageur serves as investment advisor to all of these
funds and portfolios.
VOYAGEUR: Voyageur Asset Management Inc. is an SEC registered
investment advisor and subsidiary of RBC Dain
Rauscher Corporation, currently serving as advisor to
your fund and all the funds. For over 20 years,
Voyageur has provided equity, fixed income and
balanced asset management services to clients
throughout the U.S. and in Canada. Currently,
Voyageur manages client assets totaling over $23
billion.
YOUR FUND: The Babson fund in which you currently hold shares.
IMPORTANT NEWS FOR
BABSON FUND SHAREHOLDERS
On May 1, 2003, Jones & Babson, Inc., was acquired by RBC Dain Rauscher
Corporation. At the time of this acquisition, Jones & Babson, Inc. was the
investment advisor and David L. Babson was the sub-advisor for your fund.
As a result of the acquisition, Jones & Babson, Inc. became an affiliate of
Voyageur. Like Jones & Babson, Inc., Voyageur is also a subsidiary of RBC Dain
Rauscher Corporation and a registered investment advisor. On December 31, 2003,
for ease of administration, RBC Dain Rauscher Corporation consolidated the
investment advisory activities of its two subsidiaries (Jones & Babson, Inc. and
Voyageur) into a single entity, which continues to use the Voyageur name.
Voyageur became the advisor to your fund at that time, while David L. Babson
remained your fund's sub-advisor. This change did not impact the investment
style or portfolio management of your fund.
You are being asked to consider several proposals to be voted upon at an
upcoming shareholder meeting of your fund. A brief overview of these proposals
and related matters is provided below. We suggest that you review the
Definitions of Key Terms page before reading the information below. In addition,
we encourage you to read the full text of the enclosed Proxy Statement before
voting.
Q & A: QUESTIONS AND ANSWERS
Q: WHAT IS HAPPENING?
A: Voyageur, your fund's investment advisor, currently serves as the
investment advisor for twenty-two individual mutual funds or
portfolios. Among these twenty-two funds, there is some
duplication of investment objectives and administrative
requirements. Voyageur has undertaken an initiative to simplify
the existing fund lineup and reduce the administrative burden of
these overlapping requirements. Voyageur believes that this will
allow your fund and all the funds for which it serves as
investment advisor to be more efficiently administered. Voyageur
also believes that combining certain funds with comparable
investment objectives will either reduce shareholder expenses or
maintain them at the current levels. Therefore, Voyageur has
recommended, and the boards of directors/trustees of the funds
have approved, certain changes, which include: (1) standardizing
the fundamental investment policies/restrictions for the funds,
(2) creating a single board of directors/trustees for the funds,
(3) combining certain funds that have similar investment
objectives, (4) liquidating certain funds that have not grown as
quickly as originally anticipated and that are not expected to
attract substantial assets in the future, and (5) simplifying the
organizational structure for the funds by reorganizing all of the
funds (other than those that are being liquidated or combined into
other funds) into a single legal entity to be named the Tamarack
Funds Trust.
As part of this integration initiative, Voyageur has proposed, and
your fund's Board has approved, the reorganization of your fund as
a separate series of the Tamarack Funds Trust. This would be
accomplished through the proposed Reorganization. Also as part of
this integration initiative, your fund's Board has nominated nine
individuals to serve on the Board. These same individuals are
being nominated to serve on the boards of directors/trustees for
each of the other funds so that a single, unitary board of
directors/trustees would be elected for all of the funds. The
independent directors/trustees nominated to serve on the unitary
board have been selected from among the independent
directors/trustees currently serving on the boards of the funds.
In addition, as part of this initiative, your fund's Board is
recommending that shareholders approve the modification of your
fund's fundamental investment policies/restrictions and the
reclassification of your fund's general investment policies as
non-fundamental policies in order to streamline and make uniform
the policies/restrictions applicable to all the funds. These
modifications are intended to promote ease of administration of
the investment program of each fund and to modernize the
investment limitations currently applicable to each fund.
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are asked to vote in favor of five proposals:
Proposal 1: The election of each of the nine individuals
nominated to serve on the Board of Directors of your
fund;
Proposal 2: The approval of the Plan, which would result in your
fund being reorganized as a separate series of the
Tamarack Funds Trust through the Reorganization;
Proposal 3: The approval of the modification of your fund's
fundamental investment policies/restrictions;
Proposal 4: The approval of the reclassification of your fund's
general investment policies as non-fundamental
policies; and
Proposal 5: The ratification of the selection of Deloitte &
Touche LLP as independent auditors of your fund.
Q: HOW DOES MY FUND'S BOARD RECOMMEND THAT I VOTE?
A: After carefully considering the proposals, your fund's Board
unanimously recommends that you vote FOR the nominees listed in
Proposal 1 and FOR Proposals 2, 3, 4 and 5.
Q: WHY HAS MY FUND'S BOARD RECOMMENDED THAT I VOTE IN FAVOR OF THE
REORGANIZATION?
A: After carefully considering the Reorganization proposal, your
fund's Board determined that it is advisable and in the best
interests of your fund and its shareholders. In reaching this
determination, the Board considered multiple factors, including:
(1) Voyageur has informed the Board that it believes that by
reorganizing your fund and the other funds as separate series of a
single entity, the Tamarack Funds Trust, the funds should be able
to realize greater operating efficiencies; (2) Voyageur has
informed the Board that it believes that the proposed Delaware
statutory trust form provides a cost efficient and flexible method
of operating your fund for the benefit of its shareholders; (3)
the terms of the current expense limitation agreement for your
fund, which is in place through May 1, 2005, would continue to be
applied to the corresponding Tamarack Fund; (4) your fund will not
bear any ordinary costs of the Reorganization; (5) the investment
objective of your fund will be identical to that of the
corresponding Tamarack Fund, and the Tamarack Fund will be managed
by the same personnel and, with a few exceptions that are the
subject of Proposals 3 and 4, in accordance with the same
investment strategies and techniques utilized in the management of
your fund immediately prior to the Reorganization; (6)
shareholders of your fund will continue to receive the same level
of services currently provided by your fund; (7) the
Reorganization is intended to be tax-free for federal income tax
purposes; (8) shareholders' ownership interests will not be
diluted as a result of the Reorganization; (9) Voyageur's
resources, capabilities and experience with respect to its
management of the Tamarack Fund corresponding to D.L. Babson
Tax-Free Income Fund, Inc.; and (10) Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson Value Fund, Inc. and
Shadow Stock Fund, Inc.'s current investment advisor, Voyageur,
and current sub-advisor, David L. Babson, will serve as investment
advisor and sub-advisor, respectively, to the Tamarack Funds
corresponding to Babson Enterprise Fund, Inc., Babson Enterprise
Fund II, Inc., Babson Value Fund, Inc. and Shadow Stock Fund, Inc.
Q: WHEN WOULD THE REORGANIZATION OF MY FUND AS A SERIES OF THE
TAMARACK FUNDS TRUST TAKE PLACE?
A: It is expected that the Reorganization would occur on March 31,
2004. You would receive notice of any material changes to this
schedule.
Q: WOULD THE REORGANIZATION AFFECT MY ACCOUNT VALUE?
A: The value of your fund account would not change as a result of the
Reorganization. Shares of your fund would be exchanged for Class S
shares of the corresponding Tamarack Fund in the Reorganization.
The total value of the shares you hold will not be affected. The
value of your investment would be the same immediately before and
after the Reorganization.
Q: WHO WOULD PAY FOR THE REORGANIZATION?
A: Voyageur has agreed to bear all ordinary costs and expenses of the
Reorganization, and there are not expected to be any extraordinary
costs or expenses. Any costs incurred by an individual
shareholder, such as traveling to the shareholder meeting or
seeking personal financial advice, would be the individual
shareholder's responsibility.
Q: WHY AM I BEING ASKED TO ELECT A NEW BOARD OF DIRECTORS FOR MY
FUND?
A: You are being asked to vote in favor of this proposal in case the
Reorganization is not approved. If the Reorganization is approved,
the board of trustees of the Tamarack Funds Trust will oversee the
operations of the Tamarack Funds. The composition of the board of
trustees of the Tamarack Funds Trust would be the same as the
board of directors you are being asked to approve for your fund.
A mutual fund's board of directors/trustees represents shareholder
interests and oversees the management and operations of the fund.
As part of the broader integration initiative to simplify the
existing fund lineup and standardize key elements of current
investment operations, which is mentioned above, Voyageur has
proposed the creation of a single board of directors/trustees for
all of the funds managed by Voyageur. Your fund's Board of
Directors has voted in favor of this proposal and has nominated
nine individuals to serve on the unitary board. Information about
each nominee is contained in the enclosed Proxy Statement. You are
being asked to approve the election of each of these nine
individuals to the Board. Your fund's Board believes that a
unitary board of directors/trustees for all of the funds has the
potential to increase efficiencies and enhance the effectiveness
of governance.
Q: WHY AM I BEING ASKED TO APPROVE CHANGES TO MY FUND'S INVESTMENT
POLICIES/RESTRICTIONS?
A: The proposed changes to your fund's fundamental investment
policies/restrictions are intended to streamline and make uniform
the policies/restrictions applicable to all of the funds in order
to promote ease of administration of the investment program of
each fund and to modernize the investment limitations currently
applicable to each fund.
Q: WHY AM I BEING ASKED TO APPROVE THE RECLASSIFICATION OF MY FUND'S
GENERAL INVESTMENT POLICIES AS NON-FUNDAMENTAL POLICIES?
A: Your fund's general investment policies are currently classified
as matters of "fundamental" policy, which means that they cannot
be modified by your fund's Board without a shareholder
vote. The proposed reclassification of the general investment
policies as non-fundamental policies will provide your fund's
Board with the flexibility in the future to modify your fund's
investment policies without the costs and delays associated with
shareholder meetings. This flexibility will enable your fund's
Board and management to respond more quickly to circumstances that
warrant changes in the types of investments, strategies or
approaches that are employed to seek the fund's investment
objective. The reclassification would not affect your fund's
investment objective, which will remain a fundamental policy.
Q: WHERE CAN I OBTAIN ADDITIONAL INFORMATION ABOUT THESE FIVE
PROPOSALS?
A: The proposals are discussed in more detail in the enclosed Proxy
Statement, which we encourage you to read. If you have any
questions about the matters discussed in the enclosed materials or
need assistance completing your proxy card(s), please call [PROXY
SOLICITOR TELEPHONE NUMBER].
BABSON ENTERPRISE FUND, INC.
BABSON ENTERPRISE FUND II, INC.
BABSON VALUE FUND, INC.
D.L. BABSON TAX-FREE INCOME FUND, INC.
SHADOW STOCK FUND, INC.
60 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402
(800) 422-2766
---------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 15, 2004
---------------------------
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders ("Meeting") of
Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value
Fund, Inc., D. L. Babson Tax-Free Income Fund, Inc., and Shadow Stock Fund, Inc.
(each a "Fund," and collectively the "Funds") will be held at the offices of RBC
Dain Rauscher Corporation, 60 South Sixth Street, Minneapolis, Minnesota at 9:00
a.m. Central Time, for the following purposes:
PROPOSAL 1: To approve the election of each of the nine individuals
nominated to serve on the Board of Directors of each Fund;
PROPOSAL 2: To approve an Agreement and Plan of Reorganization, pursuant
to which each Fund would be reorganized as a separate
portfolio of the Tamarack Funds Trust, a newly-created
Delaware statutory trust;
PROPOSAL 3: To approve the modification or reclassification as
non-fundamental of certain of the Funds' fundamental
investment policies/restrictions in order to modernize such
investment policies/restrictions and increase the Funds'
investment flexibility;
PROPOSAL 4: To approve the reclassification of each Funds' general
investment policies as non-fundamental policies; and
PROPOSAL 5: To ratify the selection of Deloitte & Touche LLP as the
independent auditors of the Funds for the current fiscal year.
The attached Proxy Statement provides additional information about these
proposals. Shareholders of record of a Fund as of the close of business on
January 15, 2004 are entitled to vote at the Meeting and any adjournment(s) or
postponement(s) thereof. Whether or not you plan to attend the Meeting in
person, please vote your shares. In addition to voting by mail, you may also
vote by telephone, as follows:
TO VOTE BY TELEPHONE:
==================================================
(1) Read the Proxy Statement and have your
proxy card at hand.
(2) Call the toll-free 1-[800/888] number
that appears on your proxy card.
(3) Enter the control number set forth on the
proxy card and follow the instructions.
--------------------------------------------------
We encourage you to vote by telephone using the control number that appears on
your enclosed proxy card. Voting by telephone will reduce the time and costs
associated with this proxy solicitation. Whichever method of voting you choose,
please read the enclosed Proxy Statement carefully before you vote.
The persons named as proxies will vote in their discretion on any other business
that may properly come before the Meeting or any adjournments or postponements
thereof.
If the necessary quorum to transact business or the vote required to approve any
proposal is not obtained at the Meeting, the persons named as proxies may
propose one or more adjournments of the Meeting in accordance with applicable
law to permit further solicitation of proxies. Any adjournment as to a matter
being voted on by shareholders of a Fund will require the affirmative vote of
the holders of a majority of such Fund's shares present in person or by proxy at
the Meeting. The persons named as proxies will vote FOR any such adjournment
those proxies which they are entitled to vote in favor of that Proposal and will
vote AGAINST any such adjournment those proxies to be voted against that
Proposal.
PLEASE RESPOND -- WE ASK THAT YOU VOTE PROMPTLY IN ORDER TO AVOID
THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION.
YOUR VOTE IS IMPORTANT.
By Order of the Boards of Directors,
Laura Moret
[EFFECTIVE DATE] Secretary
BABSON ENTERPRISE FUND, INC.
BABSON ENTERPRISE FUND II, INC.
BABSON VALUE FUND, INC.
D. L. BABSON TAX-FREE INCOME FUND, INC.
SHADOW STOCK FUND, INC.
---------------------------
PROXY STATEMENT
---------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 15, 2004
This document is a proxy statement (the "Proxy Statement"). This Proxy Statement
is being furnished to shareholders of Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Inc., D. L. Babson Tax-Free Income
Fund, Inc. and Shadow Stock Fund, Inc. (each a "Fund," and collectively the
"Funds") in connection with five proposals ("Proposals"). This Proxy Statement
sets forth concisely the information that shareholders should know in order to
evaluate the Proposals.
Voyageur Asset Management Inc. ("Voyageur") is the Funds' investment advisor. On
May 1, 2003, Jones & Babson, Inc. ("J&B"), was acquired by RBC Dain Rauscher
Corporation. At the time of this acquisition, J&B was the investment advisor and
David L. Babson & Company Inc. ("David L. Babson") was the sub-advisor for the
Funds. Subsequent to the acquisition, J&B became an affiliate of Voyageur. Like
J&B, Voyageur is also a subsidiary of RBC Dain Rauscher Corporation and a
registered investment advisor. On December 31, 2003, for ease of administration,
RBC Dain Rauscher Corporation consolidated the investment advisory activities of
its two subsidiaries (J&B and Voyageur) into a single entity, which continues to
use the Voyageur name. Voyageur became the advisor to the Funds at that time,
while David L. Babson remained the Funds' sub-advisor. In addition to the Funds,
Voyageur currently serves as the investment advisor for each of the other funds
constituting the Babson Group of Funds, Great Hall Investment Funds, Inc., J&B
Funds and RBC Funds, Inc., a collection of twenty-two individual mutual funds
and/or portfolios ("funds"). Voyageur has undertaken an initiative to integrate
its financial services operations by simplifying the existing fund lineup and
standardizing key elements of current investment operations (the "integration
initiative").
Voyageur believes that this will allow the Funds and all the funds for which
Voyageur serves as investment advisor to be more efficiently administered.
Voyageur also believes that combining certain funds with comparable investment
objectives will either reduce shareholder expenses or maintain them at the
current levels. As part of this integration initiative, Voyageur has
recommended, and the boards of directors/trustees of the applicable funds have
approved, the following changes: (1) standardizing the fundamental investment
policies/restrictions for the funds, (2) creating boards of directors/trustees
for the funds with uniform members, (3) combining certain funds that have
similar investment objectives and policies, (4) liquidating certain funds that
have not grown as quickly as originally anticipated and that are not expected to
attract substantial assets in the future, and (5) simplifying the organizational
structure for the funds by reorganizing all of the funds (other than those which
are being liquidated or combined into another fund) into portfolios (series) of
a single legal entity to be named the Tamarack Funds Trust. The Tamarack Funds
Trust would be organized as a Delaware statutory trust, a common form of
organization for mutual funds, and would consist of seventeen separate
portfolios. The funds would be referred to as the Tamarack Funds.
The following Proposals will be considered and acted upon at the Meeting:
PROPOSAL FUND(S) AFFECTED PAGE
===============================================================================================================================
1. To approve the election of each of the nine individuals nominated to ALL FUNDS [ ]
serve on the Board of Directors of the Fund.
2. To approve an Agreement and Plan of Reorganization, pursuant to which ALL FUNDS [ ]
each Fund would be reorganized as a separate portfolio of Tamarack Funds
Trust, a newly-created Delaware statutory trust.
3. To approve the modification/reclassification of certain fundamental [ ]
investment policies/restrictions
Modification of policies that must remain fundamental:
3.A Diversification ALL FUNDS
3.B Borrowing ALL FUNDS
3.C Senior Securities ALL FUNDS
3.D Underwriting Securities ALL FUNDS
3.E Real Estate ALL FUNDS
3.F Making Loans ALL FUNDS
3.G Concentration of Investments ALL FUNDS
3.H Commodities ALL FUNDS
Reclassification of certain fundamental investment
policies/restrictions as non-fundamental:
3.I Investments for Control ALL FUNDS
3.J Investments in Other Investment Companies ALL FUNDS
3.K Margin Activities and Short Selling ALL FUNDS
3.L Unseasoned Companies ALL FUNDS
3.M Investments in Securities of Related Issuers ALL FUNDS
3.N Making Loans to Related Parties BABSON ENTERPRISE FUND,
BABSON ENTERPRISE FUND II,
BABSON VALUE FUND,
SHADOW STOCK FUND
3.O Entering into Dealings with Related Parties BABSON ENTERPRISE FUND,
BABSON ENTERPRISE FUND II,
BABSON VALUE FUND,
SHADOW STOCK FUND
3.P Liability for Debt of Others BABSON ENTERPRISE FUND,
BABSON ENTERPRISE FUND II,
BABSON VALUE FUND,
SHADOW STOCK FUND
3.Q Investments in Assessable or Unlimited Liability BABSON ENTERPRISE FUND,
Securities BABSON ENTERPRISE FUND II,
BABSON VALUE FUND,
SHADOW STOCK FUND
3.R Pledging, Mortgaging and Hypothecating Fund Assets D.L. BABSON TAX-FREE INCOME FUND
3.S Investments in Options D.L. BABSON TAX-FREE INCOME FUND
2
PROPOSAL FUND(S) AFFECTED PAGE
===============================================================================================================================
3.T Investments in Equity Securities D.L. BABSON TAX-FREE INCOME FUND
3.U Investments in Publicly Issued Debt Obligations. D.L. BABSON TAX-FREE INCOME FUND
4. To approve the reclassification of the Funds' general investment ALL FUNDS [ ]
policies as non-fundamental policies.
5. To ratify the selection of Deloitte & Touche LLP as the ALL FUNDS [ ]
independent auditors of the Funds for the current fiscal year.
The Board, on behalf of each Fund, is soliciting proxies from shareholders of
the Funds for the special meeting of shareholders to be held on March 15, 2004,
at the offices of RBC Dain Rauscher Corporation, 60 South Sixth Street,
Minneapolis, Minnesota, at 9:00 a.m. Central Time, and at any and all
adjournment(s) or postponement(s) thereof (the "Meeting"). This Proxy Statement,
the Notice of Special Meeting and the proxy card(s) are first being mailed to
shareholders on or about January 22, 2004, or as soon as practicable thereafter.
This Proxy Statement should be kept for future reference. The most recent annual
report of each Fund, including financial statements, for the fiscal year ended
June 30, 2003 has been mailed previously to shareholders. If you would like to
receive additional copies of these shareholder reports free of charge, or copies
of any subsequent shareholder report, please contact the appropriate Fund by
writing to the address set forth on the first page of this proxy statement or by
calling 800-422-2677. Shareholder reports will be sent by first class mail
within three business days of the receipt of the request.
THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE NOMINEES LISTED IN PROPOSAL 1
AND FOR PROPOSALS 2, 3, 4 AND 5.
3
---------------------------
PROPOSAL 1 -- ALL FUNDS
ELECTION OF THE DIRECTORS
---------------------------
The purpose of this proposal is to elect a Board of Directors for each Fund in
case the Plan, as described in Proposal 2, is not approved by shareholders of
each Fund. It is intended that the enclosed proxy will be voted for the election
as Directors of each Fund of the nine nominees listed below ("Nominees"). Four
of the Nominees named below are currently Directors of each Fund and each has
served in that capacity since originally elected or appointed.
In order to create uniform boards of directors/trustees for all of the funds
advised by Voyageur, the same Nominees are also being proposed for election to
the boards of directors/trustees of the other funds involved in the proposed
reorganization described below in Proposal 2 (the "Reorganization"). If the
Reorganization takes place, the Nominees will be nominated to serve as the
Trustees of the Tamarack Funds Trust. The Report of the Advisory Group on Best
Practices for Fund Directors issued in 1999 by the Investment Company Institute
recommends that mutual fund boards of directors generally be organized either as
a unitary board for all the funds in a complex or as cluster boards for groups
of funds within a complex, rather than as separate boards for each individual
fund.
THE NOMINEES TO THE BOARD
Information about the Nominees, including their business addresses, ages and
principal occupations during the past five years, and other current
directorships of publicly traded companies or funds, are set forth in the table
below. A Nominee is deemed to be "independent" to the extent the Nominee is not
an "interested person" of the Fund, as that term is defined in Section 2(a)(19)
of the Investment Company Act of 1940, as amended ("1940 Act"). For purposes of
this Proxy Statement, "Fund Complex" means: Babson Enterprise Fund, Inc.; Babson
Enterprise Fund II, Inc.; Babson-Stewart Ivory International Fund, Inc.; Babson
Value Fund, Inc.; David L. Babson Growth Fund, Inc.; the series of D.L. Babson
Bond Trust; D.L. Babson Money Market Fund, Inc.; D.L. Babson Tax-Free Income
Fund, Inc.; Shadow Stock Fund, Inc.; the series of RBC Funds, Inc.; the series
of Great Hall Investment Funds, Inc.; the series of J&B Funds; and the series of
Investors Mark Series Fund, Inc.
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) COMPLEX(2) OTHER
POSITION(S) LENGTH OF TIME DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS(1) AND AGE WITH THE FUNDS SERVED PAST 5 YEARS NOMINEE HELD BY NOMINEE
====================================================================================================================================
INDEPENDENT NOMINEES
T. Geron Bell Director Indefinite(3); President of Twins Sports, 25(9) None
34 Kirby Puckett Place since May 1, 2003 Inc. (the parent company of
Minneapolis, Minnesota Minnesota Twins and Victory
55415 Sports) since November, 2002;
Age: 62 prior thereto President of the
Minnesota Twins Baseball Club
Incorporated since 1987.
4
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) COMPLEX(2) OTHER
POSITION(S) LENGTH OF TIME DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS(1) AND AGE WITH THE FUNDS SERVED PAST 5 YEARS NOMINEE HELD BY NOMINEE
====================================================================================================================================
Ronald James Director Indefinite(3); President and Chief Executive 25(9) None
Age: 52 since May 1, 2003 Officer, Center for Ethical
Business Cultures since 2000;
President and Chief Executive
Officer of the Human Resources
Group, a division of Ceridian
Corporation, from 1996-1998.
Ceridian Corporation is an
information services company
specializing in human resources
outsourcing solutions.
H. David Rybolt Director Indefinite(3); Consultant, HDR Associates, 18(4) None
6501 W. 66th Street twelve years of (management consulting).
Overland Park, Kansas service as a
66202 Director
Age: 61
Jay H. Wein Director Indefinite(3); Independent investor and 25(9) None
5305 Elmridge Circle since May 1, 2003 business consultant since 1989.
Excelsior, Minnesota
55331
Age: 71
Lucy Hancock Bode Nominee Indefinite(3) Lobbyist. 6(5) None
2518 White Oak Road
Raleigh, North Carolina
27609
Age: 51
Leslie H. Garner, Jr. Nominee Indefinite(3) President, Cornell College. 6(5) None
600 First Street
West Mount Vernon, Iowa
52314-1098
Age: 53
John A. MacDonald Nominee Indefinite(3) CIO, Hall Family Foundation. 1(6) None
P.O. Box 419580
Mail Drop 323
Kansas City, Missouri
64141
Age: 54
James R. Seward Nominee Indefinite(3) Private Investor/Consultant, 10(7) Director,
Age: 51 2000 to present; Financial Syntroleum Corp.,
Consultant, Seward & Company, Lab One, Inc.,
LLC 1998-2000. Concorde Career
Colleges.
5
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) COMPLEX(2) OTHER
POSITION(S) LENGTH OF TIME DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS(1) AND AGE WITH THE FUNDS SERVED PAST 5 YEARS NOMINEE HELD BY NOMINEE
====================================================================================================================================
INTERESTED NOMINEE
Michael T. Lee(8) Nominee Indefinite(3) Chief Operating Officer and None Director, Royal
Age: 40 Senior Vice President, Bank of Canada.
Voyageur, 2003 to present;
Senior Portfolio Manager,
Voyageur, 2000 to present;
Vice President, Senior
Research Analyst and Equity
Portfolio Manager, Voyageur,
1999-2003.
- ----------
(1) Unless otherwise specified, the address of each Director/Nominee is 90
South Seventh Street, Suite 4300, Minneapolis, Minnesota 55402.
(2) The Tamarack Funds Trust consists of 17 "shell" series as of the date of
this Proxy Statement. The Tamarack Funds Trust was formed solely for the
purposes of completing the Reorganization. Accordingly, the series of the
Tamarack Funds Trust have not been included in the totals in this column.
(3) The Director/Nominee may serve until his or her resignation, removal, or
death, or until his or her successor is duly elected and qualified.
(4) Director/Trustee of each of the Babson Funds except Babson-Stewart Ivory
International Fund, Inc. Director of Investors Mark Series Fund, Inc.,
which consists of nine series.
(5) Director of RBC Funds, Inc., which consists of six series.
(6) Trustee of J&B Funds, which consists of a single series, J&B Small-Cap
International Fund.
(7) Trustee of J&B Funds, which consists of a single series, J&B Small-Cap
International Fund; also, Director, Investors Mark Series Fund, Inc., which
consists of nine series.
(8) Mr. Lee is an "interested person" of the Funds as defined in the 1940 Act.
He is an officer of Voyageur, the Funds' investment advisor.
(9) Director/Trustee of each of the Babson Funds. Director of Great Hall
Investment Funds, Inc., which consists of five series. Director of
Investors Mark Series Fund, Inc., which consists of nine series. Trustee of
J&B Funds, which consists of a single series, J&B Small-Cap International
Fund.
EXECUTIVE OFFICERS
Officers of each Fund are elected by the Board of Directors to oversee the
day-to-day activities of each Fund. Information about the executive officers of
each Fund, including their principal occupations during the past five years, are
set forth in EXHIBIT B. Each of these officers are also officers and/or
employees of Voyageur.
SHARE OWNERSHIP
As of [DATE], the Nominees, Directors and officers of each Fund beneficially
owned as a group less than 1% of the outstanding shares of each Fund, except as
follows:
6
NAME AMOUNT AND NATURE OF
OF BENEFICIAL OWNER/FUND RECORD OR BENEFICIAL OWNERSHIP PERCENT OF FUND
============================================================================================================
[Insert executive officers,
directors, nominees as needed]
The following table sets forth the aggregate dollar range of equity securities
owned by each Nominee of each Fund and of all funds in the Fund Complex as of
December 31, 2003. The information as to beneficial ownership is based on
statements furnished by each Nominee.
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN OR
DOLLAR RANGE OF EQUITY TO BE OVERSEEN BY DIRECTOR/NOMINEE
SECURITIES IN THE FUNDS IN FAMILY OF INVESTMENT COMPANIES
============================================================================================================
INDEPENDENT NOMINEES
T. GERON BELL $[ ]
[Name of Babson fund] $[ ]
LUCY HANCOCK BODE $[ ]
[Name of Babson fund] $[ ]
LESLIE H. GARNER, JR. $[ ]
[Name of Babson fund] $[ ]
RONALD JAMES $[ ]
[Name of Babson fund] $[ ]
JOHN A. MACDONALD $[ ]
[Name of Babson fund] $[ ]
H. DAVID RYBOLT $[ ]
[Name of Babson fund] $[ ]
JAMES R. SEWARD $[ ]
[Name of Babson fund] $[ ]
JAY H. WEIN $[ ]
[Name of Babson fund] $[ ]
INTERESTED NOMINEE
MICHAEL T. LEE $[ ]
[Name of Babson fund] $[ ]
All of the current Directors of the Funds are considered not to be "interested
persons" of the Funds, as that term is defined in the 1940 Act ("Independent
Directors"). During the fiscal year ended June 30, 2003, the Board of Directors
met four times. It is expected that the Board will meet at least quarterly at
regularly scheduled meetings.
COMPENSATION
The Independent Directors' fees, including travel and other expenses related to
the Board meetings for the Funds, are paid for by the Funds. The Independent
Directors also receive the following compensation from the Funds [ ]. Directors
who are directors, officers or employees of Voyageur do not receive
7
compensation from the Funds. Currently there are no Directors who are directors,
officers or employees of Voyageur.
The following table summarizes the compensation paid to the Directors of the
Funds, including committee fees, for the twelve-month period ended June 30,
2003.(1)
PENSION OR
RETIREMENT ESTIMATED
AGGREGATE BENEFITS ANNUAL TOTAL
COMPENSATION ACCRUED AS BENEFITS COMPENSATION FOR
FOR THE PART OF BABSON UPON FUND COMPLEX PAID
NAME OF DIRECTOR BABSON FUND FUND EXPENSES RETIREMENT TO DIRECTOR
============================================================================================
T. Geron Bell $[ ] None None $1,250
Sandra J. Hale $[ ] None None $1,250
Ronald James $[ ] None None $1,250
William H. Russell $[ ] None None $13,875
H. David Rybolt $[ ] None None $13,875
Jay H. Wein $[ ] None None $1,250
- ----------
(1) For the period ended May 1, 2003, the Independent Directors were paid a
$4,000 annual retainer by the Funds if they served as a director on one
to four funds in the Babson Group of Funds or a $7,000 annual retainer
by the Funds if they served on five or more funds in the Babson Group
of Funds. The Independent Directors also received from Voyageur out of
its management fees a fee of $125 for each board meeting of each fund
in the Babson Group of Funds attended.
To facilitate the creation of a unitary board of directors/trustees as part of
the integration initiative discussed above, certain Independent Directors agreed
not to stand for re-election. Independent Directors are not entitled to benefits
under any pension or retirement plan. However, the Board determined that,
particularly given the benefits that would accrue to the Funds from the creation
of unitary boards of directors/trustees, it was appropriate to provide the two
Independent Directors who are not standing for re-election a one-time benefit.
Given that Voyageur will also benefit from the administrative efficiencies of
unitary boards of directors/trustees, Voyageur has agreed to bear the costs of
this one-time benefit.
The amount of the benefit being paid to Ms. Hale is $13,250 in the aggregate for
all of the Babson Funds, the J&B Funds, and the Great Hall Funds for which she
serves as an independent director/trustee. The amount of the benefit being paid
to Mr. Russell is $4,250 in the aggregate for all of the Babson Funds for which
he serves as an independent director/trustee.
STANDING COMMITTEES
Each Fund has a standing Audit Committee currently consisting of the Independent
Directors. As set forth in its charter, the primary duties of each Fund's Audit
Committee are:
(1) in its capacity as a committee of the Board, to be directly
responsible for the appointment, compensation, retention and oversight
of the work of any independent auditor (including resolution of
disagreements between the auditor and Voyageur and/or the Funds'
administrator regarding financial reporting);
(2) to review information concerning the independence of the auditors,
including (i) whether the auditors provide any consulting services to
RBC affiliates, and (ii) all non-audit services provided by the
auditor to the "investment company complex" (as defined in Rule
2-01(f)(14) of Regulation S-X) that were not pre-approved by the Audit
Committee or its delegate(s), and to receive the auditors' specific
representations as to their independence;
8
(3) to meet with the Funds' independent auditors, including private
meetings, as necessary (i) to review the arrangements for, procedures
to be utilized, and scope of the annual audit and any special audits,
including all critical accounting policies and practices to be used;
(ii) to review in advance the staffing of the annual independent audit
with the auditor and obtain a satisfactory representation from the
auditor that such staffing complies with all applicable laws,
regulations and rules regarding the rotation of audit partners; (iii)
to discuss any matters of concern relating to the Funds' financial
statements, including any adjustments to such statements recommended
by the auditors, or other results of audit(s); (iv) to discuss all
alternative treatments within Generally Accepted Accounting Principles
for policies and practices related to material items that have been
discussed with Voyageur and/or the Funds' administrator, including:
(1) ramifications of the use of such alternative disclosures and
treatments, and (2) the treatment preferred by the auditor; (v) to
discuss other material written communications between the outside
auditor and Voyageur and/or the Funds' administrator, such as any
management letter or schedule of unadjusted differences; (vi) to
discuss the annual financial statements of the Funds and the auditors'
views regarding significant accounting policies underlying the
statements and their presentation to the public in the Annual Report
and Form N-SAR; (vii) to consider the auditors' comments with respect
to the Funds' financial policies, procedures and internal accounting
controls and Voyageur and/or the Fund's administrator's responses
thereto; and (viii) to review with the auditors the form of opinion
the auditors propose to render to the Board and shareholders;
(4) to investigate any reports from Fund officers regarding (i)
significant deficiencies in the internal controls that could adversely
affect the Funds' ability to record, process, summarize, and report
financial data and any material weaknesses in the Funds' internal
controls; and (ii) any fraud, whether or not material, that involves
Voyageur and/or the Funds' administrator or other employees who play a
significant role in the Funds' internal controls;
(5) to consider the effect upon the Funds of any changes in accounting
principles or practices proposed by Voyageur and/or the Funds'
administrator or the auditors;
(6) to review the fees charged by the independent auditors for audit and
non-audit services;
(7) to investigate improprieties or suspected improprieties in Fund
financial and accounting operations that are called to their
attention;
(8) to report its activities to the full Board on a regular basis and to
make such recommendations with respect to the above and other matters
as the Audit Committee may deem necessary or appropriate; and
(9) to pre-approve, and/or delegate the authority to pre-approve, audit
and permissible non-audit services.
The Audit Committee met three times during the fiscal year ended June 30, 2003.
No Director attended less than 75% of the Board meetings, including committee
meetings.
As described above, the integration initiative includes proposals to create a
single board of directors/trustees for the funds. As part of this initiative,
the Board has nominated nine individuals to serve on the board of directors of
the Funds. These same individuals are being nominated to serve on the boards of
directors/trustees for each of the other funds so that a single, unitary board
of directors/trustees would be elected for all of the funds.
The eight independent directors/trustees nominated to serve on the single,
unitary board have been selected from among the independent directors/trustees
currently serving on the boards of the funds. In this
9
connection, the independent directors/trustees of the existing boards of the
funds determined to create an ad hoc board consolidation committee (the
"Committee") of four independent directors/trustees. An independent board member
from each of the four fund families was selected to serve on the Committee. The
Committee was assigned the responsibility of evaluating each existing board
member's professional background and work experience, professional competencies,
time availability and commitment, and overall past contribution to the board of
an existing fund within the fund complex. The Committee was also responsible for
developing recommendations for the size and actual membership of the new board.
Among the core professional competencies and abilities that the Committee
considered relevant in making its recommendations on board membership were a
person's investment background, accounting/finance background,
academic/theoretical background, marketing perspective, technology/systems
background, leadership abilities, business acumen and entrepreneurial talent. In
addition, the Committee took into account the age distribution, diversity and
impact of regulatory requirements in its recommendations on the composition of
the new board.
Based on the recommendations of the Committee, the independent
directors/trustees of each of the funds' boards determined to fix the number of
board members at nine, eight of whom would be independent board members and one
of whom would be an inside board member. Each of the boards also approved the
Committee's recommendations on the eight independent board member nominees and
management's recommendation on the inside board member nominee.
The Committee does not have a charter. The Funds do not have a stated policy
with regard to the consideration of board candidates nominated by shareholders.
As part of the creation of the new Tamarack Funds Trust, which is being proposed
as part of the integration initiative described above, it is expected that the
Trust's board of trustees will establish various committees as part of the
organization process for the Trust. As part of that process, the board of
trustees will determine whether to establish a formal nominating committee,
prepare a written charter for the committee, include a formal policy on
consideration of shareholder nominations to serve on the board of trustees,
define the material elements that would be included in any such policy, identify
the process to be followed by such committee in identifying and evaluating
nominees (including those recommended by shareholders), specify minimum
qualifications for any committee-recommended nominees, including any specific
qualities or skills, and establish a process for shareholders to send
communications to the board of trustees.
* * *
SHAREHOLDER APPROVAL: Election of the Nominees to the Board of Directors of each
Fund must be approved by a plurality of the votes cast in person or by proxy at
the Meeting.
THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD OF
DIRECTORS OF SUCH FUND.
10
---------------------------
PROPOSAL 2 -- ALL FUNDS
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
---------------------------
At a meeting of each Board held on November 24, 2003, each Board approved on
behalf of each Fund an Agreement and Plan of Reorganization ("Plan")
substantially in the form attached to this Proxy Statement as EXHIBIT A. Fund
shareholders are now being asked to approve the Plan. If shareholders of a Fund
approve the proposal, the Directors and officers of such Fund will execute and
implement the Plan on behalf of such Fund. If approved, the Reorganization is
expected to take effect on or about March 31, 2004 ("Closing Date"), although
that date may be adjusted in accordance with the Plan.
OVERVIEW OF THE PROPOSAL
Shareholders of each Fund are asked to consider the proposed Plan for their
Fund, which contemplates:
o the transfer of all of the assets of the Fund to the corresponding
Tamarack Fund and the assumption by the corresponding Tamarack Fund of
all of the liabilities of the Fund in exchange for Class S shares of
the corresponding Tamarack Fund having an aggregate net asset value
equal to the transferred net assets of the Fund;
o the distribution to each shareholder of the Fund of the same number of
Class S shares of the corresponding Tamarack Fund having an aggregate
net asset value equal to the aggregate net asset value of the shares
of the Fund held by that shareholder on the Closing Date; and
o the subsequent complete liquidation of the Fund.
The following table presents the name of the Tamarack Fund corresponding to each
Fund.
BABSON FUND CORRESPONDING TAMARACK FUND
=============================================================================
Babson Enterprise Fund, Inc. Tamarack Enterprise Fund
Babson Enterprise Fund II, Inc. Tamarack Enterprise Small Cap Fund
Babson Value Fund, Inc. Tamarack Value Fund
D.L. Babson Tax-Free Income Fund, Inc. Tamarack Tax-Free Income Fund
Babson Shadow Stock Fund, Inc. Tamarack Microcap Value Fund
For a more detailed discussion of the terms of the Plan, please refer to
"Additional Information About the Plan," below.
Prior to Class S shares of the Tamarack Funds being distributed to the Funds'
shareholders, the Funds, as shareholders of the Tamarack Funds Trust, will be
asked to vote on certain issues regarding the organization of the Tamarack Funds
Trust. A Fund will vote in favor of such matters regarding the organization of
the Tamarack Funds Trust only to the extent that the shareholders of that Fund
have voted in favor of the proposed Reorganization. Thus, shareholders of the
Funds, in approving the proposed Reorganization, will also, in effect, be
approving the following matters with respect to the Tamarack Funds Trust:
11
o Election of the nine Trustees described in Proposal 1;
o Approval of investment advisory agreements with Voyageur, which will
be substantially similar to the investment advisory agreements
currently in place with respect to the Funds, except as noted below;
o Approval of an investment sub-advisory agreement between Voyageur and
David L. Babson with respect to Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Inc., and Shadow Stock
Fund, Inc., which will be substantially identical to the investment
sub-advisory agreements currently in place between Voyageur and David
L. Babson with respect to such Funds, except as noted below; and
o Approval of the liquidation and dissolution of each Fund, to the
extent such approval is required.
Shareholders of the Funds are not being asked to vote separately on these
issues. More information on each of these items is discussed below under
"Matters on Which the Tamarack Funds Will Vote."
BOARD CONSIDERATION OF THE PLAN
The primary purposes of the proposed Reorganization are to seek future economies
of scale and to eliminate certain costs associated with operating eight
different business entities--Babson Enterprise Fund, Inc., Babson Enterprise
Fund II, Inc., Babson Value Fund, Inc., D. L. Babson Tax-Free Income Fund, Inc.,
Shadow Stock Fund, Inc., RBC Funds, Inc., J&B Funds and Great Hall Investment
Funds, Inc.--in three different states. In unanimously approving the
Reorganization, the Directors of each Fund determined that the proposed
Reorganization would be in the best interests of the applicable Fund and its
shareholders and that the ownership interests of such Fund's shareholders would
not be diluted as a result of the Reorganization. Key factors considered by the
Board are summarized below:
o Voyageur has informed the Directors that it believes that by
reorganizing each Fund and the other funds advised by Voyageur as
separate series of a single entity, the Tamarack Funds Trust, the
funds should be able to realize greater operating efficiencies.
o Voyageur has informed the Directors that it believes that the proposed
Delaware statutory trust form provides a cost efficient and flexible
method of operating the Funds for the benefit of Fund shareholders. In
recent years, many mutual funds have reorganized as Delaware statutory
trusts.
o The terms of the current expense limitation agreement for each Fund,
which is in place through May 1, 2005, would continue to be applied to
the corresponding Tamarack Fund.
o The Funds will not bear any ordinary costs of the Reorganization.
o The investment objective of each Fund will be identical to that of the
corresponding Tamarack Fund, and the Tamarack Fund will be managed by
the same personnel and, with a few exceptions that are the subject of
Proposals 3 and 4, in accordance with the same investment strategies
and techniques utilized in the management of the Fund immediately
prior to the Reorganization.
o Shareholders of each Fund will continue to receive the same level of
services currently provided by each Fund.
o Each Reorganization is intended to be tax-free for federal income tax
purposes.
o Shareholders' ownership interests will not be diluted as a result of
the applicable Reorganization.
12
o The Directors considered Voyageur's resources, capabilities and
experience with respect to its management of the Tamarack Fund
corresponding to D.L. Babson Tax-Free Income Fund, Inc.
o The Directors considered that Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Inc. and Shadow Stock
Fund, Inc.'s current investment advisor, Voyageur, and current
sub-advisor, David L. Babson, will serve as investment advisor and
sub-advisor, respectively, to the Tamarack Funds corresponding to
Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson
Value Fund, Inc. and Shadow Stock Fund, Inc.
EFFECTS OF THE REORGANIZATION ON THE FUNDS AND THEIR SHAREHOLDERS
Immediately after the Reorganization, shareholders of each Fund will own Class S
shares of the corresponding Tamarack Fund that are equal in number and in value
to the shares of the Fund that were held by those shareholders immediately prior
to the closing of the Reorganization (the "Closing"). For example, a shareholder
who owns 100 Class S shares of a Fund immediately prior to the Closing would
own, immediately after the Closing, 100 Class S shares of the corresponding
Tamarack Fund having the same net asset value as those 100 Class S shares of the
Fund held immediately prior to the Closing.
The Tamarack Funds corresponding to the Funds will have Class A, B, C, R and S
shares. Class A shares are not subject to any sales charge (load); they are
subject to annual distribution and shareholder servicing fees of up to 0.50%.
Class B shares are closed to new investors. [Class C shares are subject to a
deferred sales charge (load) of [ ]% and annual distribution and shareholder
servicing fees of up to [ ]%.] Class R shares will only be available to
participants in certain retirement plans. Class S shares are not subject to any
sales charge (load) or Rule 12b-1 distribution or service fees. Class S shares
will be closed to new investors as of March 31, 2004. Class S shares will be
open only to investment by shareholders who owned shares of Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc., D.L.
Babson Tax-Free Income Fund, Inc., Shadow Stock Fund, Inc., David L. Babson
Growth Fund, Inc., D.L. Babson Money Market Fund, Inc., the series of D.L.
Babson Bond Trust or J&B Small-Cap International Fund immediately prior to the
Closing.
As a result of the Reorganization, shareholders of the Funds, which are Maryland
corporations, will become Class S shareholders of the Tamarack Funds, each of
which is a series of a Delaware statutory trust. For a comparison of certain
attributes of these entities that may affect shareholders of the Funds, please
see "Comparison of Each Fund and the Tamarack Funds Trust" below.
THE REORGANIZATION WILL NOT RESULT IN ANY CHANGE IN THE INVESTMENT OBJECTIVE,
PRINCIPAL INVESTMENT STRATEGIES OR INVESTMENT ADVISOR OF ANY OF THE FUNDS. IF
PROPOSALS 3 OR 4 ARE APPROVED, WHETHER OR NOT THIS REORGANIZATION PROPOSAL IS
APPROVED, CERTAIN CHANGES MAY BE MADE TO CURRENT INVESTMENT RESTRICTIONS OR
POLICIES OF THE FUNDS, AS FURTHER DESCRIBED IN THOSE PROPOSALS. FOLLOWING THE
REORGANIZATION, DAVID L. BABSON WILL SERVE AS THE SUB-ADVISOR TO THE TAMARACK
FUNDS CORRESPONDING TO BABSON ENTERPRISE FUND, INC., BABSON ENTERPRISE FUND II,
INC., BABSON VALUE FUND, INC. AND SHADOW STOCK FUND, INC. EACH TAMARACK FUND
WILL OFFER THE SAME SHAREHOLDER SERVICES AS ITS CORRESPONDING FUND.
NO SALES LOAD, COMMISSION OR OTHER TRANSACTIONAL FEE IN CONNECTION WITH THE
REORGANIZATION
The full value of your shares of a Fund will be exchanged for Class S shares of
the corresponding Tamarack Fund without any sales load, commission or other
transactional fee being imposed.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to each Fund's obligation to consummate the Reorganization, the
Fund and the Tamarack Fund will receive an opinion from legal counsel to the
Funds to the effect that, on the basis of the existing
13
provisions of the Internal Revenue Code of 1986, as amended ("Code"), current
administrative rules and court decisions, the transactions contemplated by the
Plan constitute a tax-free reorganization for federal income tax purposes.
EXPENSES RELATED TO THE REORGANIZATION
Voyageur, the Funds' investment advisor, will bear all ordinary expenses
associated with the Reorganization, other than any expenses individually
incurred by shareholders. No extraordinary expenses are expected.
ADDITIONAL INFORMATION ABOUT THE PLAN
SUMMARY OF TERMS
The following is a summary of the Plan. This summary is subject in all respects
to the provisions of, and is qualified in its entirety by reference to, the
Plan, which is attached as EXHIBIT A.
As stated above, with respect to each Fund and its corresponding Tamarack Fund,
the Plan provides that all of the assets of the Fund will be transferred to the
Tamarack Fund, which will assume all of the Fund's liabilities. Fund
shareholders will receive that number of full and fractional Class S shares of
the Tamarack Fund which is equivalent in number and value to the shares of the
Fund held as of the close of business on the Closing Date. Immediately following
the Reorganization, shareholders of the Fund will be shareholders of its
corresponding Tamarack Fund, and the Tamarack Fund will have no other
shareholders. The Fund's shareholders will not pay a sales charge, commission or
other transaction costs in connection with their receipt of shares of the
Tamarack Fund.
With respect to each Fund, the Plan must be approved separately by shareholders
of that Fund. In the event that shareholders of a particular Fund do not approve
the Reorganization of that Fund with and into the corresponding Tamarack Fund,
the Plan will continue to remain in full force and effect with respect to any
reorganization transactions approved by the shareholders of the other Funds.
Moreover, the Plan provides that the benefits and obligations attendant to the
Reorganization are severable with respect to each Fund and the corresponding
Tamarack Fund.
Each Reorganization is subject to a number of conditions, including the
following: (1) approval of the Plan and the transactions contemplated thereby as
described in this Proxy Statement by the shareholders of the Fund; (2) the
receipt of certain legal opinions described in the Plan; (3) the receipt of
certain certificates from the parties concerning the continuing accuracy of the
representations and warranties in the Plan and other matters; and (4) the
parties' performance in all material respects of their agreements and
undertakings in the Plan. For a complete description of the terms and conditions
of the Reorganization, please refer to the Plan in EXHIBIT A.
If the shareholders approve the Plan and the various other conditions required
for the Closing are satisfied, the Closing is expected to occur on or about
March 31, 2004, or such other date as is agreed to by the Funds, on the basis of
values calculated as of the close of regular trading on the New York Stock
Exchange as of the close of business on the Closing Date.
The Plan may be terminated (i) by the mutual agreement of the parties, or (ii)
by either party if the Closing shall not have occurred on or before July 15,
2004, unless such date is extended by mutual agreement of the parties, (iii) by
either party if the other party shall have materially breached its obligations
under the Plan or made a material and intentional misrepresentation in the Plan
or in connection with the Plan, or (iv) at any time prior to the Closing Date if
circumstances should develop that, in the opinion of the Board or the board of
trustees of the Tamarack Fund make proceeding with the Reorganization
inadvisable with respect to the Fund or the Tamarack Fund, respectively. The
Plan may also be amended by mutual agreement of the parties in writing. However,
no amendment may be made following the shareholder meeting if such amendment
would have the effect of changing the provisions for determining the number of
shares of the
14
Tamarack Fund to be issued to the Fund under the Plan to the detriment of the
Fund's shareholders without their approval.
TAX CONSIDERATIONS
It is anticipated that each Reorganization will be a tax-free reorganization
within the meaning of Section 368(a) of the Code. With respect to each
Reorganization, the Fund and its corresponding Tamarack Fund will receive an
opinion from Dechert LLP substantially to the effect that, based on certain
facts, assumptions and representations, for federal income tax purposes: (1) the
Reorganization will constitute a "reorganization" within the meaning of Code
Section 368(a); (2) the shareholders will recognize no gain or loss on their
receipt of voting shares of the Tamarack Fund in exchange for their voting
shares of the Fund pursuant to the Reorganization; (3) the Fund will not
recognize gain or loss on the transfer of all of its assets to the Tamarack Fund
solely in exchange for voting shares of the Tamarack Fund and the assumption by
the Tamarack Fund of the Fund's liabilities pursuant to the Reorganization; (4)
the Fund will not recognize gain or loss on its distribution of voting shares of
the Tamarack Fund to its shareholders pursuant to the liquidation of the Fund;
(5) the Tamarack Fund will not recognize gain or loss on its acquisition of all
of the assets of the Fund solely in exchange for voting shares of the Tamarack
Fund and the assumption by the Tamarack Fund of the Fund's liabilities; (6) the
tax basis of the voting shares of the Tamarack Fund received by each of the
Fund's shareholders pursuant to the Reorganization will equal the tax basis of
the voting shares of the Fund surrendered in exchange therefor; (7) the holding
period of the voting shares of the Tamarack Fund received by each of the
shareholders pursuant to the Reorganization will include the period that the
shareholder held the voting shares of the Fund exchanged therefor, provided that
the shareholder held such shares as capital assets on the date of the
Reorganization; (8) the Tamarack Fund's basis in the assets of the Fund received
pursuant to the Reorganization will equal the Fund's basis in the assets
immediately before the Reorganization; and (9) the Tamarack Fund's holding
period in the Fund's assets received pursuant to the Reorganization will include
the period during which the Fund held the assets. No opinion will be expressed
by Dechert LLP, however, as to whether any gain or loss will be recognized by
any Fund or Tamarack Fund in connection with any disposition of assets by the
Fund or the Tamarack Fund prior to or following the Reorganization.
Shareholders of the Fund should consult their tax advisors regarding the effect,
if any, of the Reorganization in light of their individual circumstances and,
since the foregoing discussion only relates to the federal income tax
consequences of the Reorganization, should consult their tax advisors as to
state and local tax consequences, if any, of the Reorganization.
COMPARISON OF EACH FUND AND THE TAMARACK FUNDS TRUST
Each Fund is a Maryland corporation governed by its Articles of Incorporation,
By-Laws and Board of Directors. The Tamarack Funds Trust is a Delaware statutory
trust governed by its Agreement and Declaration of Trust, By-Laws and Board of
Trustees. The operations of the Tamarack Funds Trust and each Fund are also
governed by applicable state and Federal law.
Certain differences and similarities between the Tamarack Funds Trust and each
Fund are summarized below, although this is not a complete list of comparisons.
Shareholders should refer to the provisions of these governing documents and the
relevant state law directly for a more thorough comparison. Copies of these
governing documents are available to shareholders without charge upon written
request.
Under the Agreement and Declaration of Trust and By-Laws of the Tamarack Funds
Trust, the Trustees of the Tamarack Funds Trust will have more flexibility than
Directors of each Fund and, subject to applicable requirements of the 1940 Act
and Delaware law, broader authority to act. The increased flexibility may allow
the Trustees of the Tamarack Funds Trust to react more quickly to changes in
competitive and regulatory conditions and, as a consequence, may allow the
Tamarack Funds Trust to operate in a more efficient and economical manner.
Delaware law also promotes ease of administration by permitting the
15
Board of the Tamarack Funds Trust to take certain actions, for example,
establishing new investment series of the Tamarack Funds Trust, without filing
additional documentation with the state and incurring the additional preparation
time and costs.
Importantly, the Trustees of the Tamarack Funds Trust will effectively have the
same fiduciary obligations to act with due care and in the interest of the
Tamarack Funds and their shareholders as do the Directors with respect to the
Funds and their shareholders.
For more detailed information, please refer to the comparison of the Tamarack
Funds Trust and each Fund in EXHIBIT C to this Proxy Statement.
MATTERS ON WHICH THE TAMARACK FUNDS WILL VOTE
As noted above, in approving the Plan, shareholders of each Fund will also be
authorizing that Fund to vote on various actions regarding the corresponding
Tamarack Funds and the Tamarack Funds Trust. Fund shareholders are not being
asked to vote separately on these actions. One of these actions will be to
approve the election of Trustees of the Tamarack Funds Trust. The nominees for
election will be the same Nominees elected under Proposal 1 at the Meeting. In
addition, each Fund, while it is the sole shareholder of the corresponding
Tamarack Fund, will approve a new investment advisory agreement with Voyageur.
The new investment advisory agreement will be substantially similar to the
current investment advisory agreement for such Fund, except as noted in EXHIBIT
D to this Proxy Statement. Furthermore, while each of Babson Enterprise Fund,
Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc., and Shadow Stock
Fund, Inc. is the sole shareholder of the corresponding Tamarack Fund, each Fund
will approve a new sub-advisory agreement between Voyageur and David L. Babson
with respect to such Fund. The new sub-advisory agreement for each Fund will be
substantially identical to the sub-advisory agreement currently in effect for
such Fund. For information about the new investment advisory agreements and the
new sub-advisory agreements, please refer to EXHIBIT D to this Proxy Statement.
Shareholders of each Fund approving of the Reorganization will also be approving
the liquidation and dissolution of that Fund.
INVESTMENT ADVISOR
Voyageur is a wholly-owned subsidiary of RBC Dain Rauscher Corporation, which
maintains its offices at Dain Bosworth Plaza, 60 South Sixth Street,
Minneapolis, Minnesota 55402. RBC Dain Rauscher Corporation is a wholly-owned
subsidiary of Royal Bank of Canada ("RBC"), which maintains its offices at 200
Bay Street, Toronto, Ontario, Canada M5J 2J5 A6 00000. RBC is a diversified
financial services company that provides personal and commercial banking, wealth
management services, insurance, corporate and investment banking, online banking
and transaction processing on a global basis. As of October 31, 2003, RBC
employs approximately 60,000 people who serve approximately 12 million personal,
business and public sector customers in North America and in some 30 countries
around the world.
Voyageur has been registered with the Securities and Exchange Commission ("SEC")
as an investment advisor since 1983, and has been a portfolio manager of
publicly-offered mutual funds since 1986. Voyageur maintains its offices at 90
South Seventh Street, Suite 4300, Minneapolis, Minnesota 55402. Voyageur employs
an experienced staff of professional investment analysts, portfolio managers and
traders, and uses several proprietary computer-based systems in conjunction with
fundamental analysis to identify investment opportunities.
On December 31, 2003, Voyageur succeeded to its affiliate, Jones & Babson, Inc.
("J&B"), as investment advisor to each Fund. Following the Reorganization,
Voyageur will serve as investment advisor to each of the Tamarack Funds.
Voyageur was formed in 1983 and currently provides investment advisory and
administrative services to Great Hall Investment Funds, Inc., a series company
that currently consists of five separately managed
16
money market portfolios; RBC Funds, Inc., a series company that currently
consists of six separately managed equity and fixed income portfolios; and J&B
Funds, a series company that currently consists of a single equity portfolio.
The portfolios of Great Hall Investment Funds, Inc. serve principally as money
market sweep vehicles for brokerage customers of RBC Dain Rauscher Inc. Voyageur
also provides fixed income, equity and balanced portfolio management services to
a variety of wrap programs, insurance company separate accounts, and private
account clients, including individuals, public entities, Taft-Hartley plans,
corporations, private nonprofits, foundations, endowments and healthcare
organizations. As of October 31, 2003, Voyageur had approximately $23 billion in
assets under management, approximately $10.7 billion of which was represented by
the net assets of Great Hall Investment Funds, Inc., $317 million of which was
represented by the net assets of RBC Funds, Inc., $1.2 billion of which was
represented by the net assets of the Babson Funds, and $12 million of which was
represented by the net assets of J&B Funds.
EXHIBIT E to this Proxy Statement sets forth the amount of fees paid by the
Funds to Voyageur under the current investment advisory agreements during the
most recently completed fiscal years. The Funds' advisory fees are subject to
reduction pursuant to an Expense Limitation Agreement to maintain each Fund's
total expenses at those rates that were in effect on May 1, 2003 until May 1,
2005. EXHIBIT E also sets forth information concerning the amount and purpose of
payments made by each Fund to Voyageur or any affiliated person of Voyageur for
services provided to the Funds (other than under the current investment advisory
agreements or for brokerage commissions) during the most recently completed
fiscal years.
EXHIBIT F to this Proxy Statement sets forth information regarding other
registered investment companies with investment objectives similar to the Funds
for which Voyageur acts as investment advisor, including the rate of Voyageur's
compensation.
EXHIBIT G to this Proxy Statement sets forth information regarding the principal
executive officer and directors of Voyageur.
INVESTMENT SUB-ADVISOR
Voyageur employs at its own expense David L. Babson to serve as investment
sub-advisor for each Fund. Founded in 1940, David L. Babson, an SEC registered
investment advisor, provides investment advisory services to a substantial
number of institutional and other investors, including other registered
investment companies. Its principal locations are One Memorial Drive, Cambridge,
Massachusetts 02142, and 1500 Main Street, Springfield, Massachusetts 01115.
Lance F. James has been the manager of Babson Enterprise Fund II, Inc. since its
inception in 1991 and manager of Babson Enterprise Fund, Inc. since 1999. He
joined David L. Babson in 1986. Lorene K. Heebner, who is a CFA Charterholder,
acts as co-manager for Babson Enterprise Fund, Inc. Ms. Heebner joined David L.
Babson in 1987. Anthony M. Maramarco is a CFA Charterholder, and he has been the
manager of Babson Value Fund, Inc. and Shadow Stock Fund, Inc. since 1999. He
joined David L. Babson in 1996 and has over 19 years investment management
experience. Mr. Maramarco was previously at Concert Capital Management, Inc., an
investment advisory firm, from 1993 to 1996. A team of investment professionals
is primarily responsible for the day-to-day management of D.L. Babson Tax-Free
Income Fund, Inc. David L. Babson is a wholly owned subsidiary of DLB
Acquisition Corporation, an indirect, majority-owned subsidiary of Massachusetts
Mutual Life Insurance Company ("MassMutual"), which is headquartered in
Springfield, Massachusetts. MassMutual is an insurance organization founded in
1851 and is considered to be a controlling person of David L. Babson under the
1940 Act. Following the Reorganization, David L. Babson will serve as
sub-advisor to the Tamarack Funds corresponding to Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson Value Fund, Inc. and Shadow Stock Fund,
Inc.
EXHIBIT G to this Proxy Statement sets forth information regarding the principal
executive officer and directors of David L. Babson. EXHIBIT E to this Proxy
Statement sets forth the amount of fees paid by Voyageur to David L. Babson
under the current sub-advisory agreements during the fiscal year ended June 30,
2003. EXHIBIT E to this Proxy Statement also sets forth information concerning
the amount and purpose
17
of payments made by the Funds to David L. Babson or any affiliated person of
David L. Babson for services provided to the Funds (other than under the current
sub-advisory agreement or for brokerage commissions) during the fiscal year
ended June 30, 2003.
* * *
SHAREHOLDER APPROVAL: Approval of Proposal 2 with respect to each Fund will
require the favorable vote of the holders of a majority of that Fund's
outstanding shares.
THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF SUCH FUND APPROVE THE PLAN.
18
---------------------------
PROPOSAL 3 -- ALL FUNDS
APPROVAL OF THE MODIFICATION OR RECLASSIFICATION AS NON-FUNDAMENTAL OF
CERTAIN FUNDAMENTAL INVESTMENT POLICIES/RESTRICTIONS
---------------------------
The 1940 Act requires each Fund to adopt policies governing certain specified
activities, which can be changed only by a shareholder vote. Policies that
cannot be changed or eliminated without a shareholder vote are referred to in
this Proxy Statement as "fundamental" policies or restrictions. The purposes of
this Proposal are to eliminate the requirement of shareholder approval to change
policies/restrictions except where required by the 1940 Act and to provide the
maximum permitted flexibility in those policies/restrictions that do require
shareholder approval. Voyageur has informed the Boards that some of the Funds'
fundamental policies/restrictions that are not required to be fundamental under
the 1940 Act were adopted in the past as a result of now rescinded regulatory
requirements and no longer serve any useful purpose. Voyageur believes that
other fundamental policies/restrictions are unnecessary because the provisions
of the 1940 Act or federal tax law, together with the disclosure requirements of
the federal securities laws, provide adequate safeguards for a Fund and its
shareholders. The Proposal is described in more detail below.
Many of the Funds' current fundamental investment policies/restrictions can be
traced back to certain legal and regulatory requirements that were in effect
when the Funds were organized or were adopted for other reasons (for example,
then prevailing industry conditions or practices). These policies/restrictions
have subsequently been made less restrictive or are no longer applicable to the
Funds. For example, the National Securities Markets Improvement Act of 1996
preempted many investment policies/restrictions formerly imposed by state
securities laws and regulations, so those state requirements no longer apply. As
a result, certain of the current policies/restrictions unnecessarily limit the
investment strategies available to Voyageur and David L. Babson & Co. in
managing a Fund's assets. In addition, the lack of uniform standards applicable
to all of the Funds leads to operating inefficiencies and increases the costs of
compliance monitoring.
In general, under this Proposal only those investment policies/restrictions that
the 1940 Act specifically requires to be fundamental (that is, those from which
registered investment companies cannot deviate without shareholder
authorization) will remain fundamental investment policies/restrictions of the
Funds. However, shareholders are being asked to approve amendments to these
investment policies/restrictions. Investment policies/restrictions that are
currently designated fundamental by a Fund, but which the 1940 Act does not
require to be classified as fundamental, are proposed to be reclassified as
non-fundamental.
This Proposal is sub-divided into the following two sections:
(1) Revision of Policies That Must Remain Fundamental. Each of the fundamental
policies/restrictions proposed for revision in this section relates to an
activity that the 1940 Act only permits to be changed by shareholder approval.
Each proposed revision is, in general, intended to provide the Funds' Boards
with the maximum flexibility permitted under the 1940 Act, and to promote
consistency among the Funds' policies/restrictions. Those fundamental investment
policies/restrictions that will remain fundamental are set forth in Proposals
3.A - 3.H.
(2) Elimination of Shareholder Approval Requirement to Change Other Fundamental
Policies. The proposed revisions in this section seek to eliminate the
requirement of shareholder approval to change the policies/restrictions that are
not required to be classified as fundamental under the 1940 Act. Any
19
policy/restriction that is not designated as fundamental can be modified or
eliminated by the Funds' Boards. Accordingly, reclassifying these fundamental
policies/restrictions as non-fundamental will permit the Funds to minimize the
costs and delays associated with holding future shareholder meetings to revise
policies/restrictions that become outdated or unnecessary under current
conditions. Those fundamental investment policies/restrictions that are proposed
to be reclassified as non-fundamental are addressed in Proposals 3.I - 3.U.
Each Fund's current fundamental policies/restrictions are set forth in EXHIBIT H
to this Proxy Statement. Changes in fundamental policies/restrictions that are
approved by shareholders, as well as changes in non-fundamental
policies/restrictions that are adopted by the Boards, will be reflected in each
Fund's Prospectus and other disclosure documents. Any change in the method of
operation of a Fund will require prior approval by the appropriate Board. Should
shareholders approve the Proposal, the Funds would continue to be managed
subject to the limitations imposed by the 1940 Act and the rules and
interpretive guidance provided thereunder.
Approval of each item of this Proposal with respect to any Fund requires the
affirmative vote of a majority of that Fund's outstanding voting securities (as
that term is defined in the 1940 Act). In addition, approval of changes to the
Funds' fundamental investment policies/restrictions will not be dependent upon
your vote on Proposal 2 regarding the Reorganization. Therefore, if approved by
shareholders, these changes would take effect regardless of the vote with
respect to the Reorganization. Should shareholders also approve the proposed
Reorganization, each Tamarack Fund would have as its fundamental investment
policies/restrictions those revised fundamental investment policies/restrictions
approved by the corresponding Fund's shareholders. Should a Fund's shareholders
not approve an item of this Proposal to amend or reclassify a particular
fundamental investment policy/restriction, the Fund's current fundamental
investment policy/restriction, as set forth in EXHIBIT H, would continue to
apply unchanged.
REVISION OF POLICIES THAT MUST REMAIN FUNDAMENTAL
-------------------------------------------------
PROPOSAL 3.A -- DIVERSIFICATION
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's sub-classification as a diversified or
non-diversified Fund would read:
Each Fund has elected to be classified as a diversified series of an
open end management investment company and will invest its assets only
in a manner consistent with this classification under applicable law.
DISCUSSION OF PROPOSED MODIFICATION
Section 8(b) of the 1940 Act requires each series of an investment company to
state whether it is "diversified" or "non-diversified," as those terms are
defined in the 1940 Act. Under the 1940 Act, a diversified fund generally is
required to have 75% of its total assets invested in (1) cash and cash items
(including receivables), obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or securities of other investment
companies; or (2) other securities limited for any one issuer to an amount (x)
not greater than 5% of the total assets of the fund, and (y) not more than 10%
of the outstanding voting securities of such issuer.
Each Fund is currently classified as a diversified series of an open-end
investment company. However, each Fund has adopted a more restrictive
diversification policy (applying the diversification requirements to 100% of the
value of its assets) than what is required by the 1940 Act. No change is being
proposed to a Fund's designation as a diversified Fund. Instead, the proposed
change would modify the Funds'
20
fundamental investment policies/restrictions regarding diversification to rely
on the definition of the term "diversified" in the 1940 Act rather than stating
relevant percentage limitations that exceed those required by the 1940 Act.
Thus, this investment policy/restriction will apply to each Fund the
requirements of the 1940 Act, as they may be amended from time to time, (which
are applicable in any case) without the appropriate Funds' Board or shareholders
having to take further action.
PROPOSAL 3.B -- BORROWING
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's fundamental investment policy/restriction
regarding borrowing would read:
Each Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder, or as may otherwise be permitted from time to
time by a regulatory authority having jurisdiction.
DISCUSSION OF PROPOSED MODIFICATION
Unless further restricted, all investment companies are limited in the amount
they may borrow by the 1940 Act. At the present time, the 1940 Act permits a
Fund to borrow from banks in an amount up to 33-1/3% of the Fund's assets,
including the amount borrowed. The proposed policy/restriction would permit the
Funds to borrow in a manner and to the full extent permitted under applicable
law and regulation. Therefore, no further Board or shareholder action would be
needed to conform the borrowing policy/restriction to future changes in the 1940
Act, and interpretations thereunder, that govern borrowing by investment
companies. This change is sought for administrative convenience. None of the
Funds currently anticipates changing its existing practices on borrowing or
expanding those practices.
PROPOSAL 3.C -- SENIOR SECURITIES
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's fundamental investment policy/restriction
regarding issuing senior securities would read:
Each Fund will not issue any class of senior securities, except as
permitted under the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder, or as may otherwise be permitted
from time to time by a regulatory authority having jurisdiction.
DISCUSSION OF PROPOSED MODIFICATION
The 1940 Act prohibits Funds from issuing senior securities, except for
borrowings where certain conditions are met. Each Fund, other than Babson Value
Fund, Inc., currently has a fundamental investment policy/restriction
prohibiting it from issuing senior securities, except in certain circumstances
permissible under the 1940 Act or SEC interpretation. The current fundamental
policy/restriction for D.L. Babson Tax-Free Income Fund, Inc. does not provide
for such an exception. The proposed policy/restriction rewords the current
policies/restrictions and permits the Funds to issue senior securities to the
full extent permitted under applicable law and regulation. Therefore, no further
Board or shareholder action would be needed to conform this policy/restriction
to future changes in the 1940 Act, and interpretations thereunder, that govern
issuing senior securities by investment companies.
21
PROPOSAL 3.D -- UNDERWRITING SECURITIES
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's fundamental investment policy/restriction
regarding underwriting securities would read:
Each Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter under applicable laws in connection with the
disposition of portfolio securities.
DISCUSSION OF PROPOSED MODIFICATION
The proposed policy/restriction with respect to underwriting securities has been
reworded without making any material changes. In addition, the proposed
policy/restriction will identify the general exception from the restriction on
underwriting securities whereby purchasing securities directly from an issuer or
selling portfolio securities may technically cause a Fund to be considered an
underwriter. The current investment policies/restrictions for the Funds
currently do not mention this exception. Identifying the general exception will
clarify its application for the Funds.
PROPOSAL 3.E -- REAL ESTATE
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's fundamental investment policy/restriction
regarding investments in real estate would read:
Each Fund will not purchase or sell real estate, unless acquired as a
result of ownership of securities or other instruments, although it
may purchase securities secured by real estate or interests therein,
or securities issued by companies which invest, deal or otherwise
engage in transactions in real estate or interests therein.
DISCUSSION OF PROPOSED MODIFICATION
The proposed real estate policy/restriction rewords and maintains the current
policy/restriction on purchasing or selling real estate, but excepts certain
real estate-related activities from the general policy/restriction. The proposed
policy/restriction is intended to standardize the fundamental investment
policies/restrictions among the Funds, the J&B Funds, the RBC Funds and the
Great Hall Funds.
PROPOSAL 3.F -- MAKING LOANS
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's fundamental investment policy/restriction
regarding making loans would read:
Each Fund will not make loans, except as permitted under, or to the
extent not prohibited by, the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder, or as may otherwise
be permitted from time to time by a regulatory authority having
jurisdiction.
22
DISCUSSION OF PROPOSED MODIFICATION
The proposed policy/restriction, unlike the current policies/restrictions, does
not list exceptions or specify the particular types of lending in which a Fund
is permitted to engage. Instead, it would permit the Funds to engage in
purchasing debt obligations or securities lending to the full extent permitted
under applicable law and regulation. Therefore, should the SEC staff modify the
requirements governing an investment company's loan of its securities in the
future, under the proposed policy/restriction, each Fund would be able to take
advantage of that increased flexibility without requiring further shareholder
action. The proposed policy/restriction is intended to standardize the
fundamental investment policies/restrictions among the Funds, the J&B Funds, the
RBC Funds and the Great Hall Funds.
PROPOSAL 3.G -- CONCENTRATION OF INVESTMENTS
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's fundamental investment policy/restriction
regarding concentration of investments would read:
Each Fund will not concentrate its investments in the securities of
issuers primarily engaged in the same industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted
or modified from time to time by a regulatory authority having
jurisdiction, except that this restriction will not apply to the
Fund's investments in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
DISCUSSION OF PROPOSED MODIFICATION
Each Fund currently has, and will continue to have, a fundamental investment
policy/restriction that prohibits the Fund from concentrating its investments in
any one industry. While the 1940 Act does not define what constitutes
"concentration" in an industry, the SEC staff has taken the position that
investment of more than 25% of a Fund's total assets in one or more issuers
conducting their principal business activities in the same industry (excluding
the U.S. Government, its agencies or instrumentalities) constitutes
concentration. The proposed policy/restriction would permit investment in an
industry up to the most recently prescribed limits under the 1940 Act and
accompanying SEC interpretations. The proposed policy/restriction is intended to
standardize the fundamental investment policies/restrictions among the Funds,
the J&B Funds, the RBC Funds and the Great Hall Funds.
PROPOSAL 3.H -- COMMODITIES
APPLICABLE FUNDS -- ALL FUNDS
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY/RESTRICTION: If this Proposal item is
approved by shareholders, each Fund's fundamental investment policy/restriction
regarding investments in commodities would read:
Each Fund will not purchase or sell physical commodities or contracts
relating to physical commodities, except as permitted under the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder, or as may otherwise be permitted from time to
time by a regulatory authority having jurisdiction.
23
DISCUSSION OF PROPOSED MODIFICATION
The current fundamental investment policies/restrictions prohibit the Funds from
investing in commodities, and in the case of Babson Enterprise Fund II, Inc.,
futures contracts, and in the case of D.L. Babson Tax-Free Income Fund, Inc.,
commodity contracts. The proposed policy/restriction prohibits only the purchase
of physical commodities or contracts relating to physical commodities, and
permits the Funds to purchase or sell commodities to the full extent permitted
under applicable law and regulation.
RECLASSIFICATION OF CERTAIN FUNDAMENTAL INVESTMENT POLICIES/RESTRICTIONS
------------------------------------------------------------------------
OF THE FUNDS
------------
Each of the investment policies/restrictions listed below was based on
policies/restrictions formerly imposed by legal and regulatory requirements, or
then prevailing industry conditions or practices, which have become outdated or
unnecessary under current requirements and conditions. As stated above, the
Proposal items in this section seek to eliminate the requirement of shareholder
approval to change each of these policies/restrictions that are not required to
be classified as fundamental under the 1940 Act. Accordingly, each Fund's Board
of Directors unanimously recommends that shareholders approve the
reclassification as non-fundamental of each of the Proposal items listed in
Proposal 3.I-3.U.
PROPOSAL 3.I -- INVESTMENTS FOR CONTROL
APPLICABLE FUNDS -- ALL FUNDS
PROPOSAL
It is proposed that the fundamental investment policy/restriction on investments
made for purposes of exercising control over, or management of, the issuer be
reclassified as a non-fundamental investment policy/restriction.
PROPOSAL 3.J -- INVESTMENTS IN OTHER INVESTMENT COMPANIES
APPLICABLE FUNDS -- ALL FUNDS
PROPOSAL
It is proposed that the fundamental investment policy/restriction on investments
in other investment companies be reclassified as a non-fundamental investment
policy/restriction.
PROPOSAL 3.K -- MARGIN ACTIVITIES AND SHORT SELLING
APPLICABLE FUNDS -- ALL FUNDS
PROPOSAL
It is proposed that the fundamental investment policy/restriction on margin
activities and selling securities short be reclassified as a non-fundamental
investment policy/restriction.
24
PROPOSAL 3.L -- UNSEASONED COMPANIES
APPLICABLE FUNDS -- ALL FUNDS
PROPOSAL
It is proposed that the fundamental investment policy/restriction on investments
in securities of issuers which, with their predecessors, have a record of less
than three years of continuous operation be reclassified as a non-fundamental
investment policy/restriction.
PROPOSAL 3.M -- INVESTMENTS IN SECURITIES OF RELATED ISSUERS
APPLICABLE FUNDS -- ALL FUNDS
PROPOSAL
It is proposed that the fundamental investment policy/restriction on investments
in securities of related issuers be reclassified as a non-fundamental investment
policy/restriction.
PROPOSAL 3.N -- MAKING LOANS TO RELATED PARTIES
APPLICABLE FUNDS -- BABSON ENTERPRISE FUND, INC., BABSON ENTERPRISE FUND II,
INC., SHADOW STOCK FUND, INC. AND BABSON VALUE FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction on making
loans to any of a Fund's officers, directors, or employees, or to its manager,
or general distributor, or officers or directors thereof, be reclassified as a
non-fundamental investment policy/restriction.
PROPOSAL 3.O -- ENTERING INTO DEALINGS WITH RELATED PARTIES
APPLICABLE FUNDS -- BABSON ENTERPRISE FUND, INC., BABSON ENTERPRISE FUND II,
INC., SHADOW STOCK FUND, INC. AND BABSON VALUE FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction on entering
into dealings with a Fund's officers or directors, its manager or underwriter,
or their officers or directors or any organization in which such persons have a
financial interest, be reclassified as a non-fundamental investment
policy/restriction.
PROPOSAL 3.P -- LIABILITY FOR DEBT OF OTHERS
APPLICABLE FUNDS -- BABSON ENTERPRISE FUND, INC., BABSON ENTERPRISE FUND II,
INC., SHADOW STOCK FUND, INC. AND BABSON VALUE FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction prohibiting
each Fund from making itself or its assets liable for the indebtedness of others
be reclassified as a non-fundamental investment policy/restriction.
25
PROPOSAL 3.Q -- INVESTMENTS IN ASSESSABLE OR UNLIMITED LIABILITY SECURITIES
APPLICABLE FUNDS -- BABSON ENTERPRISE FUND, INC., BABSON ENTERPRISE FUND II,
INC., SHADOW STOCK FUND, INC. AND BABSON VALUE FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction on investments
in securities which are assessable or involve unlimited liability be
reclassified as a non-fundamental investment policy/restriction.
PROPOSAL 3.R -- PLEDGING, MORTGAGING AND HYPOTHECATING FUND ASSETS
APPLICABLE FUND -- D.L. BABSON TAX-FREE INCOME FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction on pledging,
mortgaging and hypothecating a Fund's assets be reclassified as a
non-fundamental investment policy/restriction.
PROPOSAL 3.S -- INVESTMENTS IN OPTIONS
APPLICABLE FUND -- D.L. BABSON TAX-FREE INCOME FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction on investments
in options and similar financial instruments be reclassified as a
non-fundamental investment policy/restriction.
PROPOSAL 3.T -- INVESTMENTS IN EQUITY SECURITIES
APPLICABLE FUND -- D.L. BABSON TAX-FREE INCOME FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction on investments
in equity securities or securities convertible into equity securities be
reclassified as a non-fundamental investment policy/restriction.
PROPOSAL 3.U -- INVESTMENTS IN PUBLICLY ISSUED DEBT OBLIGATIONS
APPLICABLE FUND -- D.L. BABSON TAX-FREE INCOME FUND, INC.
PROPOSAL
It is proposed that the fundamental investment policy/restriction on purchasing
more than 10% of the outstanding publicly issued debt obligations of any issuer
be reclassified as a non-fundamental investment policy/restriction.
* * *
SHAREHOLDER APPROVAL: Approval of each item of Proposal 3.A-3.U for the
applicable Fund will require the affirmative vote of a majority of the
outstanding shares of such Fund, as that term is defined in the 1940 Act. Under
the 1940 Act, the vote of a "majority of the outstanding shares" means the vote
of (1) 67% or more of the voting securities entitled to vote on the proposal
that are present at the Meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (2) more than 50% of
the outstanding voting securities entitled to vote on the proposal, whichever is
less.
26
THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF SUCH FUND
APPROVE PROPOSALS 3.A THROUGH 3.U, AS APPLICABLE.
---------------------------
PROPOSAL 4 -- ALL FUNDS
APPROVAL OF RECLASSIFICATION OF GENERAL INVESTMENT POLICIES
(DISCLOSED IN FUND PROSPECTUS) AS NON-FUNDAMENTAL POLICIES
---------------------------
Each Fund's principal investment objective and general investment policies,
which are disclosed in its current prospectus, are classified as matters of
"fundamental" policy. Under the 1940 Act, this means that the investment
objective and policies cannot be modified by the Fund's Board of Directors
without a shareholder vote.
Shareholders are being asked to approve the reclassification each Fund's general
investment policies as non-fundamental. Each Fund's principal investment
objective, which is listed in EXHIBIT I, will remain a matter of fundamental
policy, and there currently are no plans to propose that shareholders consider
changing the classification of any investment objective.
Each Fund's general investment policies governs the manner in which the Fund
seeks to achieve its objective, by specifying the types of securities that may
be bought and sold by the Fund, as well as the various strategies, techniques or
approaches that will be employed by the Fund's investment adviser in managing
the Fund's portfolio investments. These general investment policies, which are
commonly referred to as principal investment strategies and techniques, are set
forth in the Fund's current prospectus within the section titled Principal
Investment Strategies, and are reproduced in EXHIBIT I.
This Proposal to reclassify the Fund's general investment policies as
non-fundamental will provide the Board of Directors with the flexibility in the
future to modify the Fund's investment policies without the costs and delays
associated with holding shareholder meetings. This flexibility will enable Fund
management and the Board to respond more quickly to circumstances that the
Fund's investment adviser or the Board believe warrant changes in types of
investments, strategies or approaches that are employed to seek the Fund's
investment objective. If this Proposal is approved, any proposed changes to
investment policies would still require Board consideration and approval, and
would be reflected in the Fund's prospectus and other disclosure documents.
Accordingly, shareholder interests would be protected by the Board and
shareholders would receive disclosure of any changes, but the Funds would have
added flexibility to react to changing circumstances or to make clarifying
changes to their existing disclosure documents. This is the arrangement used by
an overwhelming majority of mutual funds, and would enhance the competitive
position of the Funds.
For example, as part of the integration initiative and the renaming of the
current Babson Funds within the Tamarack Funds' structure, Fund management
believes that renaming the Enterprise II Fund the Tamarack Enterprise Small Cap
Fund and renaming the Shadow Stock Fund the Tamarack Microcap Value Fund would
more easily and precisely convey to investors the types of investments in which
each Fund currently invests. If this Proposal 4 is approved, the Board would
consider making changes to the prospectus disclosure for each of these two Funds
to describe more plainly the types of investments in which the Funds invest, as
reflected by their new names. Without approval of this Proposal 4, those types
of changes to the current prospectus, or similar changes in the future, could
not be accomplished without seeking separate shareholder approval for each
proposed change.
The 1940 Act does not require these types of general investment policies to be
matters of fundamental policy. Certain specific policies, as discussed above in
Proposal 3, must remain fundamental.
27
Voyageur and the Board believe that it is advisable and in the best interests of
shareholders to reclassify the general investment policies as non-fundamental
policies. This Proposal is consistent with the approach typically used in recent
years when creating new mutual funds and is consistent with the approach that
would be used by the Tamarack Funds when adding new portfolios in the future.
* * *
SHAREHOLDER APPROVAL: Approval of Proposal 4 by each Fund's shareholders will
require the affirmative vote of a majority of outstanding shares of such Fund,
as that term is defined in the 1940 Act. Under the 1940 Act, the vote of a
"majority of the outstanding shares" means the vote of (1) 67% or more of the
voting securities entitled to vote on the proposal that are present at the
Meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (2) more than 50% of the outstanding voting
securities entitled to vote on the proposal, whichever is less.
THE BOARD OF DIRECTORS OF EACH FUND
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
OF SUCH FUND APPROVE PROPOSAL 4.
-------------------------
PROPOSAL 5 -- ALL FUNDS
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
---------------------------
Upon the recommendation of the Audit Committee, the Board of Directors has
selected Deloitte & Touche LLP ("Deloitte") to serve as independent auditors of
each Fund with respect to its financial statements for its current fiscal year
and recommends that shareholders ratify such selection. Deloitte has confirmed
to the Audit Committee that they are independent auditors with respect to each
Fund. Representatives of Deloitte 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. Deloitte
also serves as independent auditors of the Great Hall Investment Funds, Inc.,
J&B Funds and RBC Funds, Inc.
The Audit Committee is required to pre-approve all audit services and non-audit
services that an independent auditor provides to the Funds. Furthermore, the
Audit Committee is required to pre-approve any engagement of a Fund's
independent auditor to provide non-audit services to Voyageur or any affiliate
of Voyageur that provides ongoing services to the Funds, if such engagement
would relate directly to the Funds' operations and financial reporting. The
Audit Committee may delegate to one or more of its members authority to
pre-approve the auditor's provision of audit and/or non-audit services to the
Funds, or the provision of non-audit services to Voyageur or any service
provider affiliated with Voyageur. The Audit Committee will also review at least
annually whether any receipt of non-audit fees by the Funds' independent auditor
from (i) the Fund, (ii) other funds advised by Voyageur or its affiliates, (iii)
Voyageur or any entity controlling or controlled by Voyageur, and (iv) any
investment advisor or investment company service provider under common control
with Voyageur is compatible with maintaining the independence of the independent
auditor.
PricewaterhouseCoopers LLP ("PwC") served as independent auditors of the Funds
for the fiscal year ended June 30, 2003. Representatives of PwC 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. For further information about the independent auditors
of the Funds, please refer to the "Independent Auditors" section under
"Information About the Funds" below.
28
* * *
SHAREHOLDER APPROVAL: Approval of Proposal 5 by each Fund's shareholders will
require the vote of the holders of a majority of the shares of the Fund present
in person or by proxy at the Meeting.
THE BOARD OF DIRECTORS OF EACH FUND
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
OF SUCH FUND APPROVE PROPOSAL 5.
OTHER BUSINESS
The Board does not intend to present any other business at the Meeting. If,
however, any other matters are properly brought before the Meeting, the persons
named in the accompanying form of proxy will vote thereon in accordance with
their judgment.
SHAREHOLDER PROPOSALS
The Funds are not required, and do not intend, to hold regular annual meetings
of shareholders. Shareholders wishing to submit proposals for consideration for
inclusion in a proxy statement for the next meeting of shareholders should send
their written proposals to the Funds' offices, 60 South Sixth Street,
Minneapolis, Minnesota 55402, so they are received within a reasonable time
before any such meeting. An opportunity will be provided at the Meeting for
shareholders present in person to present a motion to the Meeting. Should any
properly presented motion or any other matter requiring a vote of the
shareholders arise, including any question as to an adjournment or postponement
of the Meeting, the persons named as proxies will vote on such matters according
to their best judgment in the interests of the Funds.
VOTING INFORMATION
This Proxy Statement is furnished in connection with a solicitation of proxies
by the Board to be used at the Meeting. This Proxy Statement, along with a
Notice of the Meeting and proxy card(s), is first being mailed to shareholders
of the Funds on or about January 22, 2004. Only shareholders of record of a Fund
as of the close of business on January 15, 2004 ("Record Date"), will be
entitled to notice of, and to vote at, the Meeting for such Fund. If the
enclosed form of proxy card is properly executed and returned in time to be
voted at the Meeting, the proxies named therein will vote the shares represented
by the proxy in accordance with the instructions marked thereon. Unmarked but
properly executed proxy cards will be voted FOR the proposed Reorganization and
FOR any other matters deemed appropriate. A proxy may be revoked at any time on
or before the Meeting for a Fund at which the matter is voted on by written
notice to the Secretary of the Funds at the address on the cover of this Proxy
Statement or by attending and voting at such Meeting. Unless revoked, all valid
and executed proxies will be voted in accordance with the specifications thereon
or, in the absence of such specifications, for approval of the Plan and the
Reorganization contemplated thereby. Shareholders holding shares through a
broker-dealer who wish to vote or revoke their proxies in person will need to
present a valid proxy obtained from their broker-dealer. Each share of record of
a Fund on the Record Date is entitled to one vote on each matter presented at
the Meeting for such Fund, with proportionate votes for fractional shares.
The Funds request that broker-dealer firms, custodians, nominees and fiduciaries
forward proxy material to the beneficial owners of the shares held of record by
such persons. Voyageur may reimburse such broker-dealer firms, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
with such proxy solicitation. The cost of soliciting these proxies will be borne
by Voyageur. Voyageur has engaged [SOLICITOR NAME] to solicit proxies from
brokers, banks, other institutional holders and individual shareholders for an
approximate fee, including out-of-pocket expenses, of up to $[ ].
29
SHARE INFORMATION
The chart below lists the number of shares of the Funds that are outstanding as
of the Record Date:
NAME OF FUND NUMBER OF SHARES
OUTSTANDING
===========================================================================
Babson Enterprise Fund, Inc.
Babson Enterprise Fund II, Inc.
Babson Value Fund, Inc.
D.L. Babson Tax-Free Fund, Inc.
Shadow Stock Fund, Inc.
QUORUM
The Amended and Restated By-Laws of each Fund provide that a quorum shall be
present at a meeting with respect to that Fund, in person or by proxy, when a
majority of the aggregate shares of that Fund at the time outstanding are
present.
VOTING REQUIREMENT
In Proposal 1, Nominees for Director receiving a plurality of the votes cast in
person or by proxy with respect to a Fund at the Meeting at which a quorum
exists will be elected to the Board of Directors of such Fund. Proposal 2
requires the affirmative vote of the holders of a majority of a Fund's
outstanding shares. Proposals 3.A-3.U and 4 each require the vote of the
majority of a Fund's outstanding voting securities, which, for these purposes,
is the vote of (1) 67% or more of the voting securities entitled to vote on the
proposal that are present at the Meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (2) more than 50% of
the outstanding voting securities entitled to vote on the proposal, whichever is
less. Proposal 5 requires the vote of the holders of a majority of the shares of
a Fund present in person or by proxy at the Meeting.
ADJOURNMENT
In the event that a quorum to transact business or the vote required to approve
any Proposal is not obtained at the Meeting, the persons named as proxies may
propose one or more adjournments of the Meeting in accordance with applicable
law to permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of the holders of a majority of a Fund's shares present in
person or by proxy and entitled to vote at the Meeting. The persons named as
proxies will vote in favor of such adjournment with respect to any Proposal
those proxies which they are entitled to vote in favor of that Proposal and will
vote against any such adjournment with respect to any Proposal those proxies
required to be voted against that Proposal.
EFFECT OF ABSTENTIONS AND BROKER "NON-VOTES"
For purposes of determining the presence of a quorum for transacting business at
the Meeting, executed proxies marked as abstentions and broker "non-votes" (that
is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated as shares that are present for
quorum purposes but which have not been voted. Accordingly, abstentions and
broker non-votes will have no effect on Proposal 1, for which the required vote
is a plurality of the votes cast, and will effectively be a vote against
adjournment and against Proposals 2, 3, 4 and 5.
30
PROXY SOLICITATION
[Proxies are being solicited by mail. This Proxy Statement is first being mailed
on or about January 22, 2004 to shareholders of record as of January 15, 2004.
Additional solicitations may be made by telephone, e-mail, or other personal
contact by officers or employees of Voyageur and its affiliates or by proxy
soliciting firms retained by Voyageur. Voyageur has retained [SOLICITOR NAME] to
provide proxy solicitation services in connection with the Meeting at an
estimated cost of $[ ]. In addition, Voyageur may reimburse persons holding
shares in their names or names of their nominees for expenses incurred in
forwarding solicitation material to beneficial owners of Fund shares. The cost
of the solicitation will be borne by Voyageur. In addition to returning a
written proxy card, Fund shareholders may authorize Voyageur or [SOLICITOR NAME]
by telephone to execute proxies on their behalf. As the meeting date approaches,
shareholders of each Fund may receive a call from a representative of Voyageur
or [SOLICITOR NAME] if the Fund has not yet received their votes.
Proxies that are obtained will be recorded in accordance with the following
procedures. In all cases where a telephonic proxy is solicited, a Voyageur or
[SOLICITOR NAME] representative is required to ask the shareholder for the
shareholder's full name, address, social security number or employer
identification number, title (if the person giving the proxy is authorized to
act on behalf of an entity, such as a corporation), the number of shares owned
and to confirm that the shareholder has received this Proxy Statement in the
mail. A Voyageur or [SOLICITOR NAME] representative is required to verify the
identification information provided on the call against shareholder information
provided by a Fund. If the information solicited is successfully verified, the
Voyageur or [SOLICITOR NAME] representative has the responsibility to explain
the voting process, read the Proposals listed on the proxy card, and ask for the
shareholder's instructions on each Proposal. The Voyageur or [SOLICITOR NAME]
representative, although permitted to answer questions about the process, is not
permitted to recommend to the shareholder how to vote, other than to read any
recommendation set forth in this Proxy Statement. Voyageur or [SOLICITOR NAME]
will record the shareholder's instructions on the card. Within 72 hours,
Voyageur or [SOLICITOR NAME] will send the shareholder a letter or mailgram
confirming the shareholder's vote and asking the shareholder to call Voyageur or
[SOLICITOR NAME] immediately if the shareholder's instructions are not correctly
reflected in the confirmation. Voyageur believes that these procedures are
reasonably designed to ensure that the identity of the shareholder casting the
vote is accurately determined and that the voting instructions of the
shareholder are accurately determined.]
BENEFICIAL OWNERS
For a list of persons or entities that owned beneficially or of record 5% or
more of the outstanding shares of each Fund as of [DATE], to the best of each
Fund's knowledge, please refer to EXHIBIT J.
INFORMATION ABOUT THE FUNDS
Set forth below is a description of the current service providers of the Funds
and the proposed service providers of the Tamarack Funds Trust.
INVESTMENT ADVISOR AND SUB-ADVISOR
For information about Voyageur and David L. Babson, please refer to Proposal 2
above.
DISTRIBUTOR, ADMINISTRATOR, FUND ACCOUNTING AGENT, CUSTODIAN AND TRANSFER AGENT
Voyageur serves as the Funds' administrator. J&B, located at 90 South Seventh
Street, Minneapolis, Minnesota 55402, serves as the Funds' distributor. BISYS
Fund Services Limited Partnership ("BISYS LP") serves as the Funds'
sub-administrator and fund accounting agent. Boston Financial Data Services
("BFDS") serves as the Funds' transfer agent. Wells Fargo Bank Minnesota, N.A.
("Wells Fargo") serves as the Funds' custodian. These service providers will
provide the same services for the corresponding Tamarack Funds.
31
BISYS Fund Services Ohio, Inc., an affiliate of BISYS LP, will serve as the
transfer agent to certain other Tamarack Funds.
INDEPENDENT AUDITORS
On November 24, 2003, the Board of Directors selected Deloitte as independent
auditors of the Funds for the fiscal year ending June 30, 2004. Deloitte has
confirmed to the Audit Committee of the Board of Directors ("Audit Committee")
that they are independent auditors with respect to the Funds.
For the fiscal year ended June 30, 2003, PwC served as the Funds' independent
auditor. In July and August 2003, a PwC affiliate in Canada provided certain
prohibited non-audit services for the benefit of a Canadian subsidiary of Royal
Bank of Canada, the indirect parent company of J&B, the Funds' investment
advisor at that time. PwC represented to the Fund that although the provision of
these services may have impaired their independence under SEC rules, PwC
personnel working on the audit of the Funds for the fiscal years ended June 30,
2003 had no knowledge of the situation in Canada until after the audit of the
Funds had been completed and the audited financial statements had been sent to
Fund shareholders. As a result of the PwC affiliate in Canada's provision of
these services, PwC declined to seek appointment as independent auditors for the
Funds for the fiscal year ending June 30, 2004. During the Funds' fiscal year
ended June 30, 2003, PwC's audit reports concerning the Funds contained no
adverse opinion or disclaimer of opinion; nor were its reports qualified or
modified as to uncertainty, audit scope, or accounting principles. Further, in
connection with its audits for the fiscal year ended June 30, 2003, and through
October 9, 2003, there were no disagreements between the Funds and PwC on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which if not resolved to the satisfaction of PwC
would have caused it to make reference to the disagreements in its report on the
financial statements for such periods.
Ernst & Young, LLP ("E&Y") served as independent auditors of the Funds for the
fiscal year ended June 30, 2002. Due to the acquisition of J&B, the Funds'
investment advisor at the time, by RBC Dain Rauscher Corporation, a subsidiary
of RBC, E&Y determined that it was no longer independent of the Funds, and thus
resigned as the Funds' independent auditors as of May 1, 2003. During the Funds'
fiscal year ended June 30, 2002, E&Y's audit reports concerning the Funds
contained no adverse opinion or disclaimer of opinion; nor were its reports
qualified or modified as to uncertainty, audit scope, or accounting principles.
Further, in connection with its audits for the fiscal year ended June 30, 2002,
and through May 1, 2003, there were no disagreements between the Funds and E&Y
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which if not resolved to the
satisfaction of E&Y would have caused it to make reference to the disagreements
in its report on the financial statements for such periods.
Certain information concerning the fees and services provided by E&Y and PwC to
the Babson Group of Funds and to Voyageur and its affiliates for each entity's
two most recent fiscal years is provided below.
2003 AUDIT FEES. The aggregate fees billed by PwC for professional services
rendered for the audit of the Funds' annual financial statements for the fiscal
year ended June 30, 2003 were $125,000.
2003 TAX FEES. The aggregate fees billed by PwC for professional services
rendered for tax compliance, tax advice and tax planning for the fiscal year
ended June 30, 2003 were $47,500.
2002 AUDIT FEES. The aggregate fees billed by E&Y for professional services
rendered for the audit of the Funds' annual financial statements for the fiscal
year ended June 30, 2002 were $106,400.
2002 TAX FEES. The aggregate fees billed by E&Y for professional services
rendered for tax compliance, tax advice and tax planning for the fiscal year
ended June 30, 2002 were $11,700.
32
The Audit Committee of each Fund considered whether the services described above
were compatible with PwC's and E&Y's independence for such Fund. The Audit
Committee also considered whether the provision of all other non-audit services
rendered to Voyageur, or an affiliate thereof that provides ongoing services to
the each Fund, was compatible with maintaining the independence of PwC and E&Y
for such Fund, respectively. The Audit Committee of each Fund has adopted
pre-approval policies and procedures pursuant to which the engagement of any
independent auditor is approved. Such procedures provide that: (1) before an
auditor is engaged by a Fund to render audit services, the Audit Committee shall
review and approve the engagement; (2) the Audit Committee shall review and
approve in advance any proposal (with the exception of proposals that fall under
a de minimis exception permitted by applicable law) that a Fund employs its
auditor to render "permissible non-audit services" to a Fund, or any proposal
(with the exception of proposals that fall under a de minimis exception
permitted by applicable law) that Voyageur, and any entity controlling,
controlled by, or under common control with Voyageur that provides ongoing
services to a Fund, employ a Fund's auditor to render non-audit services, if
such engagement would relate directly to the operations and financial reporting
of a Fund; (3) as a part of any such review, the Audit Committee shall consider
whether the provision of such services is consistent with the auditor's
independence; and (4) the Audit Committee may delegate to one or more of its
members ("Delegates") authority to pre-approve the auditor's provision of audit
services or permissible non-audit services to a Fund, or the provision of
non-audit services to Voyageur or any Voyageur-affiliated service provider,
provided that any pre-approval determination made by a Delegate is presented to
the full Audit Committee at its next meeting. The pre-approval procedures do not
include delegation of the Audit Committee's responsibilities to management.
Pre-approval has not been waived with respect to services described above under
"Tax Fees" since the date on which the aforementioned pre-approval procedures
were adopted by the Audit Committee.
SHAREHOLDER INFORMATION
To help lower the impact of operating costs, the Funds attempt to eliminate
mailing duplicate documents to the same address. When two or more Fund
shareholders have the same last name and address, the Fund may send only one
prospectus, annual report, semiannual report, general information statement or
proxy to that address rather than mailing separate documents to each
shareholder. Shareholders may opt out of this single mailing at any time by
calling the Fund at (800) 422-2766 or writing to the Fund at 60 South Sixth
Street, Minneapolis, Minnesota 55402 and requesting the additional copies of
Fund documents. Shareholders sharing a single mailing address who are currently
receiving multiple copies of Fund documents can request delivery of a single
copy instead by calling the same telephone number or writing to the same
address.
LEGAL MATTERS
Certain legal matters concerning the federal income tax consequences of the
Reorganization and the issuance of shares of the Tamarack Funds Trust will be
passed upon by Dechert LLP, 200 Clarendon Street, 27th Floor, Boston,
Massachusetts 02116.
33
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this _____day of _____, 2004, by Tamarack Funds Trust ("New Acquiring
Trust"), a Delaware statutory trust, with its principal place of business at
_____, on behalf of _____ ("Acquiring Fund"), a separate series of New Acquiring
Trust, and [Babson Fund] ("Target Fund" and together with Acquiring Fund, each a
"Fund" and collectively the "Funds"), a Maryland corporation, with its principal
place of business at _____. Acquiring Fund has been organized to hold the assets
of Target Fund and Acquiring Fund has had no assets (other than the seed capital
required by Section 14(a) of the Investment Company Act of 1940, as amended
("1940 Act")) and has carried on no business activities prior to the date first
shown above and will have had no assets (other than the required seed capital)
and will have carried on no business activities prior to the consummation of
this transaction described herein.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization
("Reorganization") will consist of the transfer of all of the assets of Target
Fund to Acquiring Fund in exchange solely for Class S shares ($0.01 par value
per share) of Acquiring Fund (the "Acquiring Fund Shares"), the assumption by
Acquiring Fund of all of the liabilities of Target Fund and the distribution of
Acquiring Fund Shares to the shareholders of Target Fund in complete liquidation
of Target Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement. All references in this Agreement to action taken by
Acquiring Fund shall be deemed to refer to action taken by New Acquiring Trust
on behalf of Acquiring Fund.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF TARGET FUND TO ACQUIRING FUND IN EXCHANGE FOR
ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL TARGET FUND LIABILITIES AND THE
LIQUIDATION OF TARGET FUND
1.1. Subject to the terms and conditions set forth herein and on
the basis of the representations and warranties contained herein, Target Fund
agrees to transfer to Acquiring Fund all of Target Fund's assets as set forth in
section 1.2, and Acquiring Fund agrees in exchange therefor (i) to deliver to
Target Fund that number of full and fractional Acquiring Fund Shares
corresponding to Target Fund shares as of the time and date set forth in Section
2.1; and (ii) to assume all of the liabilities of Target Fund, as set forth in
section 1.2. All Acquiring Fund Shares delivered to Target Funds shall be
delivered at net asset value without a sales load, commission or other similar
fee being imposed. Such transactions shall take place at the closing provided
for in section 3.1 (the "Closing").
1.2. The assets of Target Fund to be acquired by Acquiring Fund
(the "Assets") shall consist of all assets, including, without limitation, all
cash, cash equivalents, securities, commodities and futures interests and
dividends or interest or other receivables that are owned by Target Fund and any
deferred or prepaid expenses shown as an asset on the books of Target Fund on
the Valuation Time (as defined in Section 2.1). The liabilities of Target Fund
to be assumed by Acquiring Fund (the "Liabilities") shall
A-1
consist of all liabilities of Target Fund existing at the Valuation Time,
whether accrued or contingent, known or unknown.
1.3. Immediately upon delivery to Target Fund of the Acquiring Fund
Shares, Target Fund, as the then sole shareholder of the corresponding Acquiring
Fund, shall (i) elect trustees of the New Acquiring Trust, (ii) approve the
advisory and any sub-advisory agreements, (iii) approve the distribution and
service plan pursuant to Rule 12b-1 under the 1940 Act, as applicable, (iv)
ratify the selection of the New Acquiring Trust's independent accountants, and
(v) take such other steps related to the inception of operations of such
Acquiring Fund as deemed necessary or appropriate by the Trustees of New
Acquiring Trust.
1.4. Immediately following the action contemplated by Section 1.3,
Target Fund will distribute to Target Fund's shareholders of record (the "Target
Fund Shareholders"), determined as of the Valuation Time (as defined in section
2.1), on a pro rata basis, Acquiring Fund Shares received by Target Fund
pursuant to section 1.1 and will completely liquidate. Such distribution and
liquidation will be accomplished with respect to Target Fund by the transfer of
Acquiring Fund Shares then credited to the account of Target Fund on the books
of Acquiring Fund to open accounts on the share records of Acquiring Fund in the
names of Target Fund Shareholders. Acquiring Fund shall have no obligation to
inquire as to the validity, propriety or correctness of such records, but shall
assume that such transaction is valid, proper and correct. The aggregate net
asset value of the Acquiring Fund Shares to be so credited to the Target Fund
Shareholders shall be equal to the aggregate net asset value of the Target Fund
shares owned by such shareholders on the Closing Date. All issued and
outstanding shares of Target Fund will simultaneously be cancelled on the books
of Target Fund. Acquiring Fund will not issue certificates representing
Acquiring Fund Shares in connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the books
of Acquiring Fund.
1.6. Any reporting responsibility of Target Fund including, without
limitation, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of Target Fund.
1.7. All books and records of Target Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations thereunder, shall be
available to Acquiring Fund from and after the Closing Date and shall be turned
over to Acquiring Fund as soon as practicable following the Closing Date.
2. VALUATION
2.1. The value of the Assets shall be computed as of the date and
time ("Valuation Time") that is the close of regular trading on the New York
Stock Exchange (the "NYSE") on the Closing Date (as defined in section 3.1)
after the declaration and payment of any dividends and/or other distributions on
the Closing Date, using such valuation procedures as are disclosed in the
then-current prospectus and/or statement of additional information for Acquiring
Fund and as have been approved by its Board of Trustees, copies of which have
been delivered to Target Fund.
2.2. All computations of value hereunder shall be made by or under
the direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act, and
shall be subject to confirmation by each Fund's respective independent
accountants upon the reasonable request of the other Fund.
A-2
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement
shall be March 31, 2004, or such later date as the parties may agree in writing
(the "Closing Date"). All acts taking place at the Closing shall be deemed to
take place immediately after 4:00 p.m., Eastern time, on the Closing Date,
unless otherwise agreed to by the parties. The Closing shall be held at the
offices of New Acquiring Trust, _____, or at such other place and time as the
parties may agree.
3.2. Target Fund shall deliver to Acquiring Fund on the Closing
Date a schedule of Assets.
3.3. Target Fund shall direct Wells Fargo Bank Minnesota, N.A., as
custodian for Target Fund, to deliver at the Closing a certificate of an
authorized officer stating that (a) the Assets shall have been delivered in
proper form to Wells Fargo Bank Minnesota, N.A., as custodian for Acquiring
Fund, prior to or on the Closing Date and (b) all necessary taxes in connection
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made. Target Fund's portfolio securities represented by a certificate or other
written instrument shall be presented by the custodian for Target Fund to the
custodian for Acquiring Fund for examination no later than five business days
preceding the Closing Date and transferred and delivered by Target Fund as of
the Closing Date by Target Fund for the account of Acquiring Fund duly endorsed
in proper form for transfer in such condition as to constitute good delivery
thereof. Target Fund's portfolio securities and instruments deposited with a
securities depository, as defined in Rule 17f-4 under the 1940 Act, shall be
delivered as of the Closing Date by book entry in accordance with the customary
practices of such depositories and the custodian for Acquiring Fund. The cash to
be transferred by Target Fund shall be delivered by wire transfer of federal
funds on the Closing Date.
3.4. Target Fund shall direct Boston Financial Data Services
("Transfer Agent"), as transfer agent for Target Fund, to deliver at the Closing
a certificate of an authorized officer stating that its records contain the
names and addresses of Target Fund Shareholders and the number and percentage
ownership (to three decimal places) of outstanding Target Fund shares, as
applicable, owned by each such shareholder immediately prior to the Closing.
Acquiring Fund shall issue and deliver a confirmation evidencing Acquiring Fund
Shares to be credited on the Closing Date to Target Fund or provide evidence
satisfactory to Target Fund that such Acquiring Fund Shares have been credited
to that Target Fund's account on the books of Acquiring Fund. At the Closing,
each party shall deliver to the other such bills of sale, checks, assignments,
share certificates, if any, receipts or other documents as such other party or
its counsel may reasonably request to effect the transactions contemplated by
this Agreement.
3.5. In the event that immediately prior to the Valuation Time (a)
the NYSE or another primary trading market for portfolio securities of Acquiring
Fund or a Target Fund shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading thereupon or elsewhere
shall be disrupted so that, in the judgment of the Board members of either party
to this Agreement, accurate appraisal of the value of the net assets with
respect to the Acquiring Fund Shares or the shares of Target Fund is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
3.6. The liabilities of Target Fund shall include all of such
Target Fund's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Closing Date,
A-3
and whether or not specifically referred to in this Agreement, including but not
limited to any deferred compensation to such Target Fund's board members.
4. REPRESENTATIONS AND WARRANTIES
4.1. Except as has been fully disclosed to Acquiring Fund prior to
the date of this Agreement in a written instrument executed by an appropriate
officer of Target Fund, Target Fund represents and warrants to Acquiring Fund as
follows:
(a) Target Fund is a corporation duly organized and
validly existing under the laws of the State of Maryland, with power
under its Articles of Incorporation, as amended and supplemented from
time to time, to own all of its Assets and to carry on its business as
it is now being conducted and, subject to approval of shareholders of
Target Fund, to carry out this Agreement. Target Fund is qualified to
do business in all jurisdictions in which it is required to be so
qualified, except jurisdictions in which the failure to so qualify
would not reasonably be expected to have a material adverse effect on
Target Fund. Target Fund has all material federal, state and local
authorizations necessary to own all of its Assets and to carry on its
business as now being conducted, except authorizations that the failure
to so obtain would not reasonably be expected to have a material
adverse effect on Target Fund;
(b) Target Fund is registered with the Commission as an
open-end management investment company under the 1940 Act, and such
registration is in full force and effect and Target Fund is in
compliance in all material respects with the 1940 Act and the rules and
regulations thereunder;
(c) No consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
Target Fund of the transactions contemplated herein, except such as
have been obtained under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934
Act") and the 1940 Act and such as may be required by state securities
laws;
(d) Target Fund is not, and the execution, delivery and
performance of this Agreement by Target Fund, will not, (i) result in a
material violation of Maryland law or of its Articles of Incorporation
or By-Laws; (ii) result in a material violation or breach of, or
constitute a default under, any material agreement, indenture,
instrument, contract, lease or other undertaking to which Target Fund
is a party or by which it is bound, or the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which
Target Fund is a party or by which it is bound; or (iii) result in the
creation or imposition of any lien, charge or encumbrance or any
property or assets of Target Fund;
(e) All material contracts or other commitments of Target
Fund (other than this Agreement and any contracts listed on Schedule A)
will terminate without liability to Target Fund on or prior to the
Closing Date. Each contract listed on Schedule A is a valid, binding
and enforceable obligation of each party thereto and the assignment by
Target Fund to Acquiring Fund of each such contract will not result in
the termination of such contract, any breach or default thereunder or
the imposition of any penalty thereunder;
A-4
(f) No material litigation or administrative proceeding
or investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against Target Fund or
any properties or assets held by it. Target Fund knows of no facts that
might form the basis for the institution of such proceedings that would
materially and adversely affect its business and is not a party to or
subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein
contemplated;
(g) The Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights
of Target Fund at and for the fiscal year ended June 30, 2003, have
been audited by PricewaterhouseCoopers LLP ("PwC"), and are in
accordance with GAAP consistently applied, and such statements (a copy
of each of which has been furnished to Acquiring Fund) present fairly,
in all material respects, the financial position of Target Fund as of
such date in accordance with GAAP, and there are no known contingent
liabilities of Target Fund required to be reflected on a balance sheet
(including the notes thereto) in accordance with GAAP as of such date
not disclosed therein;
(h) Since June 30, 2003, there has not been any material
adverse change in Target Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or any incurrence by Target Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred except as otherwise disclosed to and accepted in writing by
Acquiring Fund. For purposes of this subsection (h), a decline in net
asset value per share of Target Fund due to declines in market values
of securities in Target Fund's portfolio, the discharge of Target Fund
liabilities, or the redemption of Target Fund shares by Target Fund
Shareholders shall not constitute a material adverse change;
(i) At the date hereof and at the Closing Date, all
federal and other tax returns and reports of Target Fund required by
law to have been filed by such dates (including any extensions) shall
have been filed and are or will be correct in all material respects,
and all federal and other taxes shown as due or required to be shown as
due on said returns and reports shall have been paid or provision shall
have been made for the payment thereof, and, to the best of Target
Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) For each taxable year of its operation (including the
taxable year that includes the Closing Date), Target Fund has met the
requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has elected to be
treated as such, and has been eligible to and has computed its federal
income tax under Section 852 of the Code;
(k) All issued and outstanding shares of Target Fund (i)
have been offered and sold in every state and the District of Columbia
in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws, (ii) are, and
on the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable and not subject to preemptive or
dissenter's rights, and (iii) will be held at the time of the Closing
by the persons and in the amounts set forth in the records of the
Transfer Agent, as provided in section 3.4. Target Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of Target Fund shares, nor is there outstanding any
security convertible into any of Target Fund shares;
A-5
(l) At the Closing Date, Target Fund will have good and
marketable title to the Assets to be transferred to Acquiring Fund
pursuant to section 1.2 and full right, power and authority to sell,
assign, transfer and deliver such Assets hereunder free of any liens or
other encumbrances and upon delivery and payment for such Assets,
Acquiring Fund will acquire good and marketable title thereto, subject
to no restrictions on the full transfer thereof, including such
restrictions as might arise under the 1933 Act and the 1940 Act;
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by
all necessary action on the part of the Board members of Target Fund
(including the determinations required by Rule 17a-8(a) under the 1940
Act), and, subject to the approval of Target Fund Shareholders, this
Agreement constitutes a valid and binding obligation of Target Fund,
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights
and to general equity principles;
(n) The information to be furnished by Target Fund for
use in applications for orders, registration statements or proxy
materials or for use in any other document filed or to be filed with
any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc. (the "NASD")), which
may be necessary in connection with the transactions contemplated
hereby, shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other
laws and regulations applicable thereto;
(o) At the Closing Date, the then current prospectus and
statement of additional information of Target Fund conform in all
material respects to the applicable requirements of the 1933 Act and
the 1940 Act and the rules and regulations of the Commission thereunder
and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not materially misleading; and
(p) The Proxy Statement (as defined in section 5.7),
insofar as it relates to Target Fund, will, on the effective date of
the Registration Statement and on the Closing Date, (i) comply in all
material respects with the provisions and Regulations of the 1933 Act,
1934 Act and 1940 Act, as applicable, and (ii) not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements are made, not
materially misleading; provided, however, that the representations and
warranties in this section shall not apply to statements in or
omissions from the Proxy Statement and the Registration Statement made
in reliance upon and in conformity with information that was furnished
or should have been furnished by Acquiring Fund for use therein.
4.2. Except as has been fully disclosed to Target Fund prior to the
date of this Agreement in a written instrument executed by an appropriate
officer of New Acquiring Trust, New Acquiring Trust, on behalf of Acquiring
Fund, represents and warrants to Target Fund as follows:
A-6
(a) Acquiring Fund is duly organized as a series of New
Acquiring Trust, which is a statutory trust duly organized and validly
existing under the laws of the State of Delaware with the power under
New Acquiring Trust's Declaration of Trust to own all of its properties
and assets and to carry on its business as contemplated by this
Agreement;
(b) New Acquiring Trust is registered with the Commission
as an open-end management investment company under the 1940 Act, and
such registration is in full force and effect and Acquiring Fund is in
compliance in all material respects with the 1940 Act and the rules and
regulations thereunder, and the registration of Acquiring Fund Shares
will be in full force and effect on the Closing Date;
(c) No consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
Acquiring Fund of the transactions contemplated herein, except such as
have been obtained under the 1933 Act, the 1934 Act and the 1940 Act
and such as may be required by state securities laws;
(d) Acquiring Fund is not, and the execution, delivery
and performance of this Agreement by Acquiring Fund will not, (i)
result in a material violation of Delaware law or its then current
Declaration of Trust or By-Laws; (ii) result in a material violation or
breach of or constitute a default under, any material agreement,
indenture, instrument, contract, lease or other undertaking to which
New Acquiring Trust, on behalf of Acquiring Fund, is a party or by
which it is bound, or (ii) the acceleration of any obligation, or the
imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which New Acquiring Trust, on
behalf of the Acquiring Fund, is a party or by which it is bound; nor
(iii) result in the creation or imposition of any lien, charge or
encumbrance on any property or assets of Acquiring Fund;
(e) No material litigation or administrative proceeding
or investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against Acquiring Fund
or any properties or assets held by it. Acquiring Fund knows of no
facts that might form the basis for the institution of such proceedings
that would materially and adversely affect its business and is not a
party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions
herein contemplated;
(f) Acquiring Fund will meet the requirements of
Subchapter M of the Code for qualification as a regulated investment
company for its first taxable year that ends after the Closing Date and
will be eligible to, and will for such taxable year, compute its
Federal income tax under Section 852 of the Code;
(g) Upon consummation of the Reorganization, all issued
and outstanding Acquiring Fund Shares will be duly and validly issued
and outstanding, fully paid and non-assessable by the New Acquiring
Trust and will have been offered and sold in every state, territory and
the District of Columbia in compliance in all material respects with
applicable registration requirements of the 1933 Act and other
securities laws. The Acquiring Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any
Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares;
A-7
(h) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by
all necessary action on the part of the Board members of New Acquiring
Trust (including the determinations required by Rule 17a-8(a) under the
1940 Act), and this Agreement will constitute a valid and binding
obligation of New Acquiring Trust, on behalf of Acquiring Fund,
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights
and to general equity principles;
(i) The information to be furnished by Acquiring Fund for
use in applications for orders, registration statements or proxy
materials or for use in any other document filed or to be filed with
any federal, state or local regulatory authority (including the NASD),
which may be necessary in connection with the transactions contemplated
hereby, shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other
laws and regulations applicable thereto;
(j) At the Closing Date, the then current prospectus and
statement of additional information of Acquiring Fund conform in all
material respects to the applicable requirements of the 1933 Act and
the 1940 Act and the rules and regulations of the Commission thereunder
and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not materially misleading;
(k) Prior to the Closing Date, the Acquiring Fund will
have carried on no business activity and will have had no assets or
liabilities other than the seed capital required by Section 14(a) of
the 1940 Act.
5. COVENANTS OF ACQUIRING FUND OR TARGET FUND OR BOTH
5.1. Target Fund covenants to operate its business in the ordinary
course between the date hereof and the Closing Date, it being understood that
(a) such ordinary course of business will include (i) the declaration and
payment of customary dividends and other distributions and (ii) such changes as
are contemplated by the Fund's normal operations.
5.2. Target Fund covenants that, upon reasonable notice, Acquiring
Fund's officers and agents shall have reasonable access to Target Fund's books
and records necessary to maintain current knowledge of Target Fund and to ensure
that the representations and warranties made by Target Fund are accurate.
5.3. Target Fund covenants to call a meeting of Target Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
than June 30, 2004.
5.4. Target Fund covenants that Acquiring Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.5. Target Fund covenants that it will assist Acquiring Fund in
obtaining such information as Acquiring Fund reasonably requests concerning the
beneficial ownership of Target Fund shares.
A-8
5.6. Each of Acquiring Fund and Target Fund, on behalf of itself,
covenants that, subject to the provisions of this Agreement, it will take, or
cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper and/or advisable to consummate and make effective
the transactions contemplated by this Agreement.
5.7. Target Fund covenants that it will prepare, file with the
Commission, and deliver to the Acquired Fund Shareholders in connection with
such meeting, a proxy statement on Schedule 14A ("Proxy Statement") in
compliance in all material respects with the provisions of the 1934 Act and the
rules and regulations thereunder.
5.8. Acquiring Fund covenants that it will provide Target Fund with
information reasonably necessary for the preparation of the Proxy Statement in
compliance with the 1934 Act and 1940 Act and the rules and regulations
thereunder.
5.9. Target Fund covenants that it will, from time to time, as and
when reasonably requested by Acquiring Fund, execute and deliver or cause to be
executed and delivered all such assignments and other instruments, and will take
or cause to be taken such further action as Acquiring Fund may reasonably deem
necessary or desirable in order to vest in and confirm Acquiring Fund's title to
and possession of all the Assets and otherwise to carry out the intent and
purpose of this Agreement.
5.10. Acquiring Fund covenants to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act and 1940 Act,
and such of the state securities laws as it deems appropriate in order to
continue its operations after the Closing Date and to consummate the
transactions contemplated herein; provided, however, that Acquiring Fund may
take such actions it reasonably deems advisable after the Closing Date as
circumstances change.
5.11. Each Fund shall use its reasonable best efforts to fulfill or
obtain the fulfillment of the conditions precedent to effect the transactions
contemplated by this Agreement as promptly as practicable.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF TARGET FUND
With respect to the Reorganization, the obligations of Target Fund to
consummate the transactions provided for herein shall be subject, at its
election, to the performance by Acquiring Fund of all the obligations to be
performed by it hereunder on or before the Closing Date, and, in addition
thereto, the following further conditions:
6.1. All representations and warranties of New Acquiring Trust, on
behalf of Acquiring Fund, contained in this Agreement shall be true and correct
in all material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of the Closing
Date, with the same force and effect as if made on and as of the Closing Date.
6.2. Acquiring Fund shall have delivered to Target Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to New Acquiring Trust, on behalf
of Target Fund, and dated as of the Closing Date, to the effect that the
representations and warranties of New Acquiring Trust with respect to Acquiring
Fund made in this Agreement are true and correct on and as of the Closing Date,
except as they may be affected by the
A-9
transactions contemplated by this Agreement, and as to such other matters as
Target Fund shall reasonably request.
6.3. Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by Acquiring Fund on or before the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUND
With respect to the Reorganization, the obligations of Acquiring Fund
to consummate the transactions provided for herein shall be subject, at its
election, to the performance by Target Fund of all of the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the following further conditions:
7.1. All representations and warranties of Target Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date.
7.2. Target Fund shall have delivered to Acquiring Fund a statement
of Target Fund's Assets and liabilities as of the Closing Date, certified by the
Treasurer of Target Fund.
7.3. Target Fund shall have delivered to Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to Acquiring Fund, and dated as of
the Closing Date, to the effect that the representations and warranties of
Target Fund made in this Agreement are true and correct on and as of the Closing
Date, except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as Acquiring Fund shall reasonably
request.
7.4. Target Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by Target Fund on or before the Closing Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUND AND
TARGET FUND
If any of the conditions set forth below have not been met on or before
the Closing Date with respect to Target Fund or Acquiring Fund, the other party
to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
A-10
8.1. This Agreement and the transactions contemplated herein, with
respect to Target Fund, shall have been approved by the requisite vote of the
holders of the outstanding shares of Target Fund in accordance with the
provisions of Target Fund's Articles of Incorporation and By-Laws, applicable
Maryland law and the 1940 Act, and certified copies of the resolutions
evidencing such approval shall have been delivered to Acquiring Fund.
Notwithstanding anything herein to the contrary, neither Acquiring Fund nor
Target Fund may waive the conditions set forth in this section 8.1.
8.2. On the Closing Date, no action, suit or other proceeding shall
be pending or to its knowledge threatened before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain material damages
or other relief in connection with, this Agreement or the transactions
contemplated herein.
8.3. All consents of other parties and all other consents, orders
and permits of federal, state and local regulatory authorities deemed necessary
by Acquiring Fund or Target Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
Acquiring Fund or Target Fund, provided that either party hereto may for itself
waive any of such conditions.
8.4. The Registration Statement with respect to Acquiring Fund
Shares shall have become effective under the 1933 Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the best
knowledge of the parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated under the
1933 Act.
8.5. With respect to the Reorganization, the parties shall have
received an opinion of Dechert LLP addressed to each of Acquiring Fund and
Target Fund, in a form reasonably satisfactory to each such party, substantially
to the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the transfer to Acquiring Fund
of all of the assets of Target Fund in exchange solely for Acquiring Fund Shares
and the assumption by Acquiring Fund of all of the liabilities of Target Fund,
followed by the distribution of such shares to Target Fund Shareholders in
exchange for their shares of Target Fund in complete liquidation of Target Fund,
will constitute a "reorganization" within the meaning of Section 368(a)(1) of
the Code, and Acquiring Fund and Target Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by Target Fund upon the transfer of all of its assets
to Acquiring Fund in exchange solely for Acquiring Fund Shares and the
assumption by Acquiring Fund of all of the liabilities of Target Fund; (iii) the
basis of the assets of Target Fund in the hands of Acquiring Fund will be the
same as the basis of such assets of Target Fund immediately prior to the
transfer; (iv) the holding period of the assets of Target Fund in the hands of
Acquiring Fund will include the period during which such assets were held by
Target Fund; (v) no gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of all of the liabilities of Target Fund; (vi)
no gain or loss will be recognized by Target Fund Shareholders upon the receipt
of Acquiring Fund Shares solely in exchange for their shares of Target Fund as
part of the transaction; (vii) the basis of Acquiring Fund Shares received by
Target Fund Shareholders will be the same as the basis of the shares of Target
Fund exchanged therefor; and (viii) the holding period of Acquiring Fund Shares
received by Target Fund Shareholders will include the holding period during
which the shares of Target Fund exchanged therefor were held, provided that at
the time of the exchange the shares of Target Fund were held as capital assets
in the hands of Target Fund Shareholders. The delivery of such opinion is
conditioned upon receipt by Dechert LLP of representations it shall request of
New Acquiring Trust and Target Fund. Notwithstanding anything herein to the
A-11
contrary, neither Acquiring Fund nor Target Fund may waive the condition set
forth in this section 8.5. No opinion will be expressed by Dechert LLP, however,
as to whether any gain or loss will be recognized by Target Fund or Acquiring
Fund in connection with any dispositions of assets by such Fund prior to or
following its Reorganization.
8.6. Target Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares to be issued in connection
with the Reorganization after such number has been calculated in accordance with
paragraph 1.1.
9. INDEMNIFICATION
9.1. Acquiring Fund agrees to indemnify and hold harmless Target
Fund and each of such Target Fund's Board members and officers from and against
any and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, Target Fund or any of its Board
members or officers may become subject, insofar as any such loss, claim, damage,
liability or expense (or actions with respect thereto) arises out of or is based
on any breach by Acquiring Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
9.2. Target Fund agrees to indemnify and hold harmless Acquiring
Fund and each of Acquiring Fund's Board members and officers from and against
any and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, Acquiring Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by Target Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
10. FEES AND EXPENSES
10.1. Each of New Acquiring Trust, on behalf of Acquiring Fund, and
Target Fund, represents and warrants to the other that it has no obligations to
pay any brokers or finders fees in connection with the transactions provided for
herein.
10.2. Voyageur Asset Management, Inc. ("Voyageur") will bear all the
expenses associated with the Reorganization, except that Acquiring Fund will
bear all SEC registration fees (which are currently estimated to be $_____. Any
such expenses which are so borne by Voyageur will be solely and directly related
to the Reorganization within the meaning of Revenue Ruling 73-54, 1973-1 C.B.
187. Target Fund Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. Each Fund agrees that no party has made any representation,
warranty or covenant not set forth herein and that this Agreement constitutes
the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this
section 11.2, the representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
The covenants to be performed after the Closing and the obligations of each of
Acquiring Fund and Target Funds in sections 9.1 and 9.2 shall survive the
Closing.
A-12
12. TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by any party as it relates to the transaction applicable
to such party (i) by the mutual agreement of the parties, or (ii) by either
party if the Closing shall not have occurred on or before July 15, 2004, unless
such date is extended by mutual agreement of the parties, or (iii) by either
party if the other party shall have materially breached its obligations under
this Agreement or made a material and intentional misrepresentation herein or in
connection herewith; or (iv) upon the resolution of either of the Board of
Trustees of New Acquiring Trust or the Board of Directors of Target Fund, at any
time prior to the Closing Date, if circumstances should develop that, in the
opinion of that Board, make proceeding with the Agreement inadvisable with
respect to Acquiring Fund or Target Fund, respectively. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective Board members or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by any authorized officer of Target
Funds and any authorized officer of Acquiring Fund; provided, however, that
following the meeting of Target Fund Shareholders called by Target Funds
pursuant to section 5.3 of this Agreement, no such amendment may have the effect
of changing the provisions for determining the number of Acquiring Fund Shares
to be issued to Target Fund Shareholders under this Agreement to the detriment
of such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to Target
Fund, _____, with a copy to Dechert LLP, 200 Clarendon Street, Boston,
Massachusetts 02116, Attention: Joseph R. Fleming, Esq., or to Acquiring Fund,
_____, with a copy to Dechert LLP, 200 Clarendon Street, Boston, Massachusetts
02116, Attention: Joseph R. Fleming, Esq., or to any other address that Target
Funds or Acquiring Fund shall have last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or
A-13
corporation, other than the parties hereto and the shareholders of Acquiring
Fund and Target Fund and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
15.4. Notwithstanding anything to the contrary contained in this
Agreement, the obligations, agreements, representations and warranties with
respect to each Fund shall constitute the obligations, agreements,
representations and warranties of that Fund only (the "Obligated Fund"), and in
no event shall any other series of New Acquiring Trust or the assets of any such
series be held liable with respect to the breach or other default by the
Obligated Fund of its obligations, agreements, representations and warranties as
set forth herein.
15.5. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to its principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by an authorized officer and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
Attest: TAMARACK FUNDS TRUST,
on behalf of Acquiring Fund
By:
-----------------------
Its:
- -------------------------- -----------------------
Secretary
Attest: [BABSON FUND]
By:
-----------------------
Its:
- -------------------------- -----------------------
Secretary
A-14
Schedule A
----------
A-15
EXHIBIT B
CURRENT EXECUTIVE OFFICERS OF EACH FUND
TERM OF OFFICE
NAME, ADDRESS(1) POSITION(S) WITH AND LENGTH OF PRINCIPAL OCCUPATION(S)
AND AGE EACH FUND TIME SERVED DURING PAST 5 YEARS
==========================================================================================================================
Jennifer Lammers President and One year term; Managing Director, Voyageur Asset Management (2000 to
Chief Executive served since July present); Mutual Fund Services Director, Voyageur Asset
Age: 42 Officer 2003 Management (2003 to present); Chief Financial Officer,
Great Hall Investment Funds, Inc. (2001-2003);
Compliance Officer, Great Hall Investment Funds, Inc.
(2000-2001); Director of Finance, Voyageur Asset
Management (2000-2003); Vice President and Manager,
Financial Reporting, RBC Dain Rauscher (1998-2000);
President and Chief Executive Officer(2).
Christopher J. Tomas Treasurer, Chief One year term; Vice President and Finance Manager, RBC Dain Rauscher
Financial Officer served since July (2001 to present); Senior Financial Analyst, RBC Dain
Age: 33 and Principal 2003 Rauscher (1999-2001); Financial Analyst, RBC Dain
Accounting Officer Rauscher (1997-1999); Treasurer, Chief Financial Officer
and Principal Accounting Officer(2).
Martin A. Cramer Vice President, One year term; Legal and Regulatory Affairs Vice President, Chief
Assistant twelve years of Compliance Officer and Secretary, Jones & Babson, Inc.
Age: 53 Secretary, Chief service (mutual fund management company and distributor of the
Compliance Officer Funds); Vice President, Assistant Secretary, Chief
and AML Compliance Compliance Officer and AML Compliance Officer(2); and
Officer formerly, Vice President, Chief Compliance Officer and
Secretary, Buffalo Fund Complex and Secretary, Gold
Bank Funds(3).
Laura Moret Secretary One year term; Vice President and Senior Associate Counsel, RBC Dain
served since July Rauscher (2002 to present); Vice President and Group
Age: 49 2003 Counsel, American Express Financial Advisors
(1995-2002); Secretary(2).
(1) The address for each officer is 60 South Sixth Street, Minneapolis,
Minnesota 55402.
(2) Great Hall Investment Funds, Inc., RBC Funds, Inc., J&B Funds,
Babson-Stewart Ivory International Fund, Inc., David L. Babson Growth Fund,
Inc., D.L. Babson Bond Trust, D.L. Babson Money Market Fund, Inc. and
Investors Mark Series Fund, Inc.
(3) The Buffalo Fund Complex consists of Buffalo Balanced Fund, Inc., Buffalo
Large Cap Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo Small Cap
Fund, Inc., Buffalo USA Global Fund, Inc. and the Buffalo Funds, which is a
series fund consisting of Buffalo Science & Technology Fund and Buffalo Mid
Cap Fund. Gold Bank Funds is a series fund consisting of Gold Bank Equity
and Gold Bank Money Market Fund.
B-1
EXHIBIT C
COMPARISON OF THE TAMARACK FUNDS TRUST AND EACH FUND
The following is a summary of certain characteristics of the operations of the
Tamarack Funds Trust (the "New Trust"), a Delaware statutory trust, and each
Fund, a Maryland corporation, their respective corporate governance documents
and relevant state law. The following is not a complete description of the
documents cited. Shareholders should refer to the provisions of such documents
and state laws governing the Tamarack Funds Trust and each Fund for a more
thorough description.
SHAREHOLDER LIABILITY
NEW TRUST
The Declaration of Trust of the New Trust provides that shareholders are not
personally liable for the debts, liabilities, obligations and expenses incurred
by, contracted for, or otherwise existing with respect to the New Trust, the
Tamarack Funds or any class of shares. In addition, shareholders have the same
limitation of personal liability as is extended to shareholders of a Delaware
for-profit corporation.
FUND
Each Fund is organized as a Maryland corporation, and as such, its shareholders
generally have no personal liability for its acts or obligations.
LIABILITY OF DIRECTORS/TRUSTEES
NEW TRUST
Absent willful misfeasance, bad faith, gross negligence or reckless disregard of
a Trustee's duties, a Trustee acting in such capacity shall not be personally
liable to any person other than the New Trust or a beneficial owner for any act,
omission or obligation of the New Trust or any Trustee. A Trustee or officer of
the New Trust will be indemnified by the New Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him or in connection with the defense of any proceeding in which he
or she becomes involved by virtue of being or having been a Trustee or officer.
FUND
With the exception of Babson Enterprise Fund II, Inc., the Articles of
Incorporation of each Fund provide that the Fund generally will indemnify any
Director or officer who is a party, or is threatened to be made a party, to any
action against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such Director or
officer in connection with such action if such Director or officer acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action,
had no reasonable cause to believe his or her conduct was unlawful.
Notwithstanding the foregoing, the Articles of Incorporation provide that no
Director or officer will be indemnified against any liability to the Fund that
such Director or officer would otherwise be subject by reason of willful
misfeasance, gross negligence or reckless disregard of the duties involved in
the conduct of such Director's or officer's office.
The Articles of Incorporation of Babson Enterprise Fund II, Inc. provide that,
to the fullest extent permitted by Maryland law, no Director of officer will
have any liability to the Fund or its shareholders for money damages. The
Articles of Incorporation also provide that the corporation will indemnify and
advance expenses to its current and former Directors and officers to the fullest
extent permitted by Maryland law. The Articles of Incorporation further state
that no provision of the article regarding liability and indemnification will be
effective to protect or purport to protect any Director or officer of the Fund
against any liability to the Fund or its shareholders to which the Director or
officer would otherwise by subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
that Director's or officer's office.
C-1
INSURANCE
NEW TRUST
The Agreement and Declaration of Trust of the New Trust provides that, to the
fullest extent permitted by applicable law, the officers and Trustees are
entitled and have the authority to purchase with Trust property, insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee or officer in connection with any claim, action, suit or
proceeding in which such Trustee or officer becomes involved by virtue of such
person's capacity or former capacity with the Trust, whether or not the Trust
would have the power to indemnify such Person against such liability under the
provisions of the Article of the Agreement and Declaration of Trust regarding
the limitation of liability of officers and Trustees.
FUND
The Articles of Incorporation of each Fund provide that the Fund may purchase
and maintain insurance on its behalf and on behalf of any person who is or was a
Director or officer of the Fund against any liability asserted against the
Director or officer and incurred by the Director or officer in such capacity.
LIQUIDATION OR DISSOLUTION
Generally, in the event of the liquidation or dissolution of any of the Funds or
Tamarack Funds, as the case may be, the shareholders of that Fund/Tamarack Fund
are entitled to receive, when and as declared by the Board, the excess of the
assets over the liabilities belonging to the Fund/Tamarack Fund. The assets so
distributed to shareholders of a Fund/Tamarack Fund would be distributed among
the shareholders in proportion to the number of shares of that Fund/Tamarack
Fund held by them and recorded on the books of the Fund/Tamarack Fund.
NEW TRUST
The Declaration of Trust of the New Trust permits a majority of the Trustees to
liquidate the New Trust, or any class or series of the New Trust, upon written
notice to shareholders, without submitting the matter for shareholder approval.
FUND
Maryland law requires shareholder approval of a dissolution of a Fund. If no
shares of a class or series are outstanding, a majority of the Directors may
vote to liquidate such class or series without shareholder approval. Otherwise,
subject to the redemption requirements contained in each Fund's Articles of
Incorporation, a Fund may first redeem all of the shares outstanding of each
applicable series and/or class, and then liquidate the series or class without
shareholder approval.
RIGHTS OF INSPECTION
NEW TRUST
Shareholders shall have the right to inspect the New Trust's accounts, books or
documents only to the extent such right is conferred by the Trustees.
FUND
Under each Fund's Articles of Incorporation, except as required by Maryland law,
shareholders of the Fund have only such right to inspect their respective
corporation's records, documents, accounts and books as may be authorized by
resolution of the Board of Directors or of the shareholders. Maryland corporate
law provides that one or more persons who together have owned at least 5% of the
outstanding shares of a corporation for at least six months may, on written
request, inspect the books of account and stock ledger of the corporation.
SHAREHOLDER MEETINGS
Neither the New Trust nor the Funds are required to hold annual meetings of
shareholders (other than in a year in which the election of directors is
required by the 1940 Act), although the New Trust and the Funds may hold
C-2
special meetings at any time. With respect to the Funds, on any matters
submitted to a vote of the shareholders, all shares entitled to vote are voted
in the aggregate. With respect to the New Trust, on any matters submitted to a
vote of the shareholders, all shares entitled to vote are voted in the
aggregate, except when (1) required by the 1940 Act, shares are voted by the
individual Tamarack Fund; (2) the matter involves any action that the Trustees
have determined will affect only the interests of one or more Tamarack Funds,
then only the shareholders of such series shall be entitled to vote thereon; and
(3) the matter involves any action that the Trustees have determined will affect
only the interests of one or more classes, then only the shareholders of such
class or classes shall be entitled to vote thereon.
NEW TRUST
The By-Laws for the New Trust permit special meetings of the shareholders to be
called by shareholders holding at least 10% of the outstanding shares of the New
Trust entitled to vote at such meeting. Shareholders may also take action in
lieu of a meeting by written instrument signed by the holders of outstanding
shares representing the minimum number of votes that would be necessary to
authorize or take that action at a meeting.
Delaware law provides greater flexibility with regard to shareholder voting
rights, quorums, and proxy requirements. The Declaration of Trust provides that
33-1/3% of the shares entitled to vote at any meeting must be present in person
or by proxy to establish a proper quorum for voting purposes, unless a larger
quorum is required by applicable law, by the By-Laws of the Trust, or by the
Declaration of Trust. Further, when a quorum is present, a majority of votes
cast shall decide any issues, and a plurality shall elect a Trustee of the New
Trust, unless a larger vote is required by the governing documents or under
applicable law. The effect of the quorum and voting provisions is to make it
easier for the New Trust to seek appropriate shareholder approvals for many
actions not related to regulatory issues without experiencing the added costs or
delays of soliciting additional proxies or votes and without being disadvantaged
by abstentions or broker non-votes. Delaware law also affords trustees the
ability to adapt a Delaware statutory trust to future contingencies. For
example, trustees have the authority to incorporate a Delaware statutory trust,
to merge or consolidate a Delaware statutory trust or its series with another
entity, to cause multiple series of a Delaware statutory trust to become
separate trusts, to change the state of domicile or to liquidate a Delaware
statutory trust, all without having to obtain a shareholder vote.
FUND
Under the By-Laws of each Fund, a special meeting of shareholders of a Fund
shall be called by the President or Secretary of the Fund upon the written
request of holders of shares entitled to cast not less than 10% of all the votes
entitled to be cast at such meeting. Under Maryland law, no special shareholder
meeting shall be called upon the request of shareholders to consider any matter
that is substantially the same as a matter voted upon at any special meeting
held during the preceding 12 months, unless requested by the holders of a
majority of all shares entitled to be voted at such meeting. Written shareholder
consents in lieu of a meeting are required to be signed by all shareholders.
Under each Fund's By-Laws, the presence in person or by proxy of the holders of
a majority of the aggregate shares of stock at the time outstanding constitutes
a quorum. Maryland law requires a plurality of all votes cast at a meeting at
which a quorum is present to elect directors unless a corporation's Articles of
Incorporation or By-Laws require a larger vote. For most other stockholder
votes, Maryland law provides that a majority of all votes cast at a meeting at
which a quorum is present is sufficient to approve any matter, unless the
corporation's Articles of Incorporation provide otherwise. Certain other
matters, such as amendments to a corporation's Articles of Incorporation,
consolidations, mergers, share exchanges and transfers of assets, require the
affirmative vote of two-thirds of all votes entitled to be cast on the matter
for approval of the measure. However, under Maryland law, the Articles of
Incorporation may include a provision that requires less than a two-thirds vote,
provided that the Articles of Incorporation require at least a majority vote.
Each Fund's Articles of Incorporation provide that notwithstanding any provision
of Maryland law requiring more than a majority vote to approve any action, the
action shall be effective if approved by the affirmative vote of the holders of
a majority of the outstanding shares of common stock.
C-3
REORGANIZATION/COMBINATION TRANSACTIONS
NEW TRUST
Under the Declaration of Trust and Delaware law, the Trustees may generally
authorize mergers, consolidations, share exchanges and reorganizations of a
Tamarack Fund or the New Trust with another trust, series or other business
organization without shareholder approval, although such approval may be
separately required under the federal securities laws and rules thereunder. For
example, the 1940 Act and rules thereunder may require a shareholder vote of a
proposed merger involving affiliated funds under certain circumstances, such as
when the merging funds have materially different advisory contracts or
fundamental investment policies/restrictions.
FUND
A majority of the outstanding shares of a Fund must approve a merger of the Fund
with another business organization.
AMENDMENT OF CHARTER DOCUMENT
NEW TRUST
The Trustees may generally restate, amend or otherwise supplement the Trust's
governing instrument, which includes the Declaration of Trust and the By-Laws,
without the approval of shareholders, subject to limited exceptions (such as
amendments affecting shareholders' voting rights).
FUND
Each Fund's Articles of Incorporation provide that the Fund reserves the right
to amend, alter, change or repeal any provision of the Articles of
Incorporation, and all rights conferred upon shareholders are granted subject to
this reservation. Under Maryland law, in general, amendments to the articles of
incorporation of a corporation must be approved by two-thirds of all votes
entitled to be cast, unless such percentage is reduced in the corporation's
articles of incorporation, provided that the articles of incorporation require
at least a majority vote. Each Fund's Articles of Incorporation provide that a
majority of the outstanding shares of common stock will be sufficient to approve
an amendment.
DERIVATIVE ACTIONS
NEW TRUST
Shareholders of the New Trust or any Tamarack Fund may not bring a derivative
action to enforce the right of the New Trust or Tamarack Fund unless certain
conditions are satisfied. The conditions include, among others, that (1) the
complaining shareholder submit a written demand to the Board of Trustees and
that demand must be refused, and (2) at least 10% of the shareholders of the New
Trust or the Tamarack Fund, as applicable, join in bringing the derivative
action. A shareholder of a particular Tamarack Fund is not entitled to
participate in a derivative action on behalf of any other Tamarack Fund of the
New Trust.
FUND
Under Maryland law, in general, shareholders may not bring a derivative action
unless they have first made a demand upon the corporation to sue in its own name
and the demand was refused. If the directors of a corporation improperly refuse
to bring a derivative suit or if the demand upon the directors is excused, then
a plaintiff generally must then make the demand upon the corporation's other
shareholders before commencing suit.
C-4
EXHIBIT D
INFORMATION ON CERTAIN MATTERS ON WHICH THE TAMARACK FUNDS WILL VOTE
INVESTMENT ADVISORY AGREEMENTS
EACH FUND, WHILE IT IS THE SOLE SHAREHOLDER OF THE CORRESPONDING TAMARACK FUND,
WILL APPROVE AN INVESTMENT ADVISORY AGREEMENT THAT IS SUBSTANTIALLY THE SAME AS
THE EXISTING INVESTMENT ADVISORY AGREEMENT FOR EACH OF THE FUNDS, EXCEPT AS
NOTED BELOW. THE CURRENT INVESTMENT ADVISORY AGREEMENT IS REFERRED TO HEREIN AS
THE "CURRENT ADVISORY AGREEMENT." THE NEW INVESTMENT ADVISORY AGREEMENT IS
REFERRED TO HEREIN AS THE "NEW ADVISORY AGREEMENT."
THE TERMS OF THE NEW ADVISORY AGREEMENT
GENERALLY. The principal terms of the New Advisory Agreement, including the
advisory fee provisions, are the same as those of the Current Advisory
Agreement, except for the dates of execution and termination. Other changes have
been made to the New Advisory Agreement to provide that each Fund pays its
advisory fees monthly in arrears, rather than daily, as provided by the Current
Advisory Agreement and to make minor editorial revisions. As noted above, there
will be no change in rate of advisory fees charged to your Fund or in the types
of advisory services required to be provided to your Fund. Under the New
Advisory Agreement, Voyageur will provide investment advisory services with
respect to each Tamarack Fund.
VOYAGEUR'S RESPONSIBILITIES. The New Advisory Agreement provides that Voyageur
will make investments for the account of each Fund in accordance with Voyageur's
best judgment and within the investment objectives and policies/restrictions set
forth in the registration statements applicable to the Funds, the 1940 Act and
the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to regulated investment companies, subject to policy decisions adopted
by the Board. Voyageur will determine the securities to be purchased or sold by
each Fund and will place orders with broker-dealers pursuant to its
determinations. Voyageur will also comply with all reasonable requests of the
Fund for information.
AGGREGATION AND ALLOCATION OF TRADES BY VOYAGEUR. On occasions when Voyageur
deems the purchase or sale of a security to be in the best interest of a Fund as
well as other customers, the New Advisory Agreement permits Voyageur, to the
extent permitted by applicable law, to aggregate the securities to be so sold or
purchased in order to obtain the best execution or lower brokerage commissions,
if any. Voyageur also may purchase or sell a particular security for one or more
customers in different amounts. On either occasion, and to the extent permitted
by applicable law and regulations, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by
Voyageur in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Fund involved and to such other customers.
EXPENSES OF THE FUND. The New Advisory Agreement provides that the Fund will be
responsible for all of its expenses and liabilities, including: (1) compensation
of the Directors who are not affiliated with Voyageur, the Funds' administrator,
distributor, or any of their affiliates; (2) taxes and governmental fees; (3)
interest charges; (4) fees and expenses of the Fund's independent accountants
and legal counsel; (5) trade association membership dues; (6) fees and expenses
of any custodian (including maintenance of books and accounts and calculation of
the net asset value of shares of the Funds); (7) fees and expenses of any
administrator, transfer agent, fund accountant or dividend paying agent of the
Fund; (8) expenses of any plan adopted with respect to the Funds pursuant to
Rule 12b-1 under the 1940 Act; (9) shareholder servicing expenses; (10) expenses
of issuing, redeeming, registering and qualifying for sale shares of common
stock in the Fund; (11) expenses of preparing and printing share certificates,
prospectuses and reports to shareholders, notices, proxy statements and reports
to regulatory agencies; (12) the cost of office supplies, including stationery;
(13) travel expenses of all officers, Directors and employees; (14) insurance
premiums; (15) brokerage and other expenses of executing portfolio transactions;
(16) expenses of shareholders' meetings; (17) organizational expenses; and
D-1
(18) extraordinary expenses.
LIMITATION OF LIABILITY OF VOYAGEUR. Pursuant to the New Advisory Agreement,
Voyageur will give the Fund the benefit of Voyageur's best judgment and efforts
in rendering investment advisory services. The New Advisory Agreement states
that Voyageur will not be liable under the New Advisory Agreement for any
mistake in judgment or in any other event whatsoever, provided that nothing in
the New Advisory Agreement will be deemed to protect or purport to protect
Voyageur against any liability to the Fund or its shareholders to which Voyageur
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of Voyageur's duties under the New Advisory
Agreement or by reason of Voyageur's reckless disregard of its obligations and
duties under the New Advisory Agreement.
COMPENSATION PAID TO VOYAGEUR. The New Advisory Agreement provides that for
Voyageur's provision of investment advisory services, each Fund will pay
Voyageur a monthly fee on the first business day of each month at the annual
rates set forth in EXHIBIT E to this Proxy Statement. The fee rate payable by
each Fund pursuant to the New Advisory Agreement is the same as that Fund's rate
payable under the Current Advisory Agreement. Each Fund's advisory fees are
subject to reduction pursuant to an Expense Limitation Agreement to maintain
each Fund's total expenses at those rates that were in effect on May 1, 2003
until May 1, 2005.
TERM AND TERMINATION. The New Advisory Agreement also provides that it will
continue in effect as to a Fund only if its continuance as to that Fund is
specifically approved at least annually (i) by the vote of a majority of the
outstanding voting securities of that Fund (as defined in the 1940 Act) or by a
majority of the Board, and (ii) by the vote, cast in person at a meeting called
for that purpose, of a majority of the Fund's Directors who are not parties to
the New Advisory Agreement or "interested persons" (as defined in the 1940 Act)
of any such party. The New Advisory Agreement also provides that it may be
terminated with respect to a Fund at any time, without the payment of any
penalty, by a vote of a majority of the outstanding voting securities of that
Fund (as defined in the 1940 Act) or by a vote of a majority of the entire Board
on 60 days' written notice to Voyageur, or by Voyageur on 60 days' written
notice to the Fund. The New Advisory Agreement provides that it will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
NON-EXCLUSIVITY. The New Advisory Agreement further provides that nothing
contained in the New Advisory Agreement will limit the freedom of Voyageur or
any affiliated person of Voyageur to engage in any other business or to devote
time and attention to the management or other aspects of any other business or
to render services of any kind to any other corporation, firm, individual or
association.
GOVERNING LAW. Finally, the New Advisory Agreement provides that it will be
construed in accordance with the laws of the State of Minnesota provided that
nothing in the New Advisory Agreement will be construed in a manner inconsistent
with the 1940 Act.
INVESTMENT SUB-ADVISORY AGREEMENTS
EACH OF BABSON ENTERPRISE FUND, INC., BABSON ENTERPRISE FUND II, INC., BABSON
VALUE FUND, INC., AND SHADOW STOCK FUND, INC., WHILE IT IS THE SOLE SHAREHOLDER
OF THE CORRESPONDING TAMARACK FUND, WILL APPROVE AN INVESTMENT SUB-ADVISORY
AGREEMENT BETWEEN VOYAGEUR AND DAVID L. BABSON THAT IS SUBSTANTIALLY THE SAME AS
THE EXISTING INVESTMENT SUB-ADVISORY AGREEMENT FOR EACH OF THE FUNDS, EXCEPT AS
NOTED BELOW. THE CURRENT INVESTMENT SUB-ADVISORY AGREEMENT IS REFERRED TO HEREIN
AS THE "CURRENT INVESTMENT COUNSEL AGREEMENT." THE NEW INVESTMENT SUB-ADVISORY
AGREEMENT IS REFERRED TO HEREIN AS THE "NEW INVESTMENT COUNSEL AGREEMENT."
CURRENT INVESTMENT COUNSEL AGREEMENTS. The Current Investment Counsel Agreements
between Voyageur and David L. Babson provide for David L. Babson to provide
research, analysis, advice and recommendations with respect to the purchase or
sale of securities and the making of investment commitments for each Fund.
Voyageur pays David L. Babson a sub-advisory fee with respect to each Fund at
the annual rates set forth in EXHIBIT E to this Proxy Statement. The Current
Investment Counsel Agreements also provide that, in the
D-2
absence of willful misfeasance, bad faith or gross negligence in the performance
of its duties, David L. Babson shall not be liable for error of judgment or
losses related to its sub-advisory services to the Funds. Voyageur is permitted
under the Current Investment Counsel Agreements to terminate the Agreements upon
60 days notice.
Under the Current Investment Counsel Agreements, the Funds are granted an
exclusive license to use the Babson name. However, in the event that
shareholders, the Board, Voyageur, or its successor in interest, elects to
terminate David L. Babson as sub-advisor to a Fund, David L. Babson has the
right to withdraw the right of that Fund to use the Babson name and that Fund is
no longer authorized to use the Babson name. Under the Current Investment
Counsel Agreements, in the event that David L. Babson resigns as sub-advisor to
a Fund (except Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc. or
Babson Value Fund, Inc.), that Fund may only continue to use the Babson name for
a year. In addition, David L. Babson would not be restricted from using the name
for another SEC-registered mutual fund after two years.
The Current Investment Counsel Agreements contain a provision that gives David
L. Babson the right to withdraw the right of a Fund to use the Babson name and
mandates that the Fund promptly cease using the Babson name in the event that
shareholders, the Board, Voyageur, or its successor in interest, elects to:
(1) terminate David L. Babson as sub-advisor to any of Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc. or Babson Value Fund,
Inc., or
(2) remove the Babson name from the name of any of Babson Enterprise Fund,
Inc., Babson Enterprise Fund II, Inc. or Babson Value Fund, Inc.
Since the same provision was approved by shareholders of all of the Babson
Funds, the effect of the provision described above, therefore, is that if David
L. Babson is terminated from Babson Enterprise Fund, Inc., Babson Enterprise
Fund II, Inc. or Babson Value Fund, Inc., or if the Babson name is removed from
the name of any one of these three Funds, then David L. Babson has the right to
withdraw the use of the name from all Funds.
Each Fund's Board approved the Current Investment Counsel Agreements on [ ].
All of the Current Investment Counsel Agreements are dated [ ] and were last
approved by shareholders on [ ], in connection with a change in control of
Jones & Babson, Inc.
NEW INVESTMENT COUNSEL AGREEMENTS. Each of the New Investment Counsel Agreements
is substantially similar to the Current Investment Counsel Agreements, with the
exception of effectiveness and termination dates [and the removal of the
provisions related to the use of the Babson name].
D-3
EXHIBIT E
INFORMATION REGARDING CERTAIN PAYMENTS TO JONES & BABSON, INC.
AND DAVID L. BABSON & COMPANY INC.
The following table provides the amounts paid by each Fund to J&B under previous
Management Agreements (in effect until April 30, 2003) and the Current Advisory
Agreements (in effect from May 1, 2003) during the Fund's most recent fiscal
year, as well as the annual fee rate of each Fund under the Current Advisory
Agreements.
FEES PAID TO J&B UNDER THE MANAGEMENT AND ADVISORY AGREEMENTS
ADVISORY FEES
RECEIVED BY J&B FOR
ADVISORY FEES RECEIVED THE FISCAL YEAR ENDED
BY J&B FOR THE FISCAL JUNE 30, 2003 AS A
YEAR ENDED PERCENTAGE OF AVERAGE
JUNE 30, 2003(1) NET ASSETS(1) APPLICABLE FEE RATE(1)
==========================================================================================================================
Babson Enterprise Fund, Inc. $2,154,000 1.06% 1.40% of the first $30
million of average daily net
assets;
0.90% of amounts in excess
of $30 million.
Babson Enterprise Fund II, Inc. $644,000 1.28% 1.40% of the first $30
million of average daily net
assets;
0.90% of amounts in excess
of $30 million.
Babson Value Fund, Inc. $3,411,000 0.93% 0.85% of average daily net
assets
D.L. Babson Tax-Free Income $355,000 0.93% 0.85% of average daily net
Fund, Inc. assets
Shadow Stock Fund, Inc. $822,000 0.98% 0.90% of average daily net
assets
- --------------------------
(1) Prior to May 1, 2003, the Funds paid J&B a unified fee for advisory and
non-advisory services rendered to the Funds. Each Fund's advisory fee is subject
to reduction pursuant to an expense limitation agreement to limit the each
Fund's total operating expenses as follows until May 1, 2005: for Babson
Enterprise Fund, Inc., 1.06%; for Babson Enterprise II Fund, Inc., 1.28%; for
Babson Value Fund,
E-1
Inc., 0.93%; for D.L. Babson Tax-Free Income Fund, Inc., 0.93%; and for Shadow
Stock Fund, Inc. 0.98%. The expense limitation agreement will be extended to the
corresponding Tamarack Funds until May 1, 2005.
OTHER FEES PAID TO J&B
For the period May 1, 2003 to June 30, 2003, the Funds paid J&B $[ ] pursuant to
the Administrative Services Agreement between the Fund and J&B.
FEES PAID TO DAVID L. BABSON UNDER THE INVESTMENT COUNSEL AGREEMENTS
The following table provides the amounts paid by Voyageur to David L. Babson
under the previous Investment Counsel Agreements (in effect until April 30,
2003) and the Current Investment Counsel Agreements (in effect from May 1, 2003)
between Voyageur and David L. Babson with respect to each Fund during the Fund's
most recent fiscal year, as well as David L. Babson's sub-advisory fee rate
under the Current Investment Counsel Agreements.
SUB-ADVISORY FEES
PAID BY J&B TO DAVID
SUB-ADVISORY FEES PAID L. BABSON FOR THE
BY J&B TO FISCAL YEAR ENDED
DAVID L. BABSON FOR THE JUNE 30, 2003 AS A
FISCAL YEAR ENDED PERCENTAGE OF AVERAGE
JUNE 30, 2003 NET ASSETS APPLICABLE FEE RATE
========================================= ========================= ======================= ==============================
Babson Enterprise Fund, Inc. $1,078,518 [ ]% 0.70% of the first $30
million of average daily net
assets;
0.50% of amounts in excess
of $30 million.
Babson Enterprise Fund II, Inc. $311,590 [ ]% 0.70% of the first $30
million of average daily net
assets;
0.50% of amounts in excess
of $30 million.
Babson Value Fund, Inc. $1,279,539 [ ]% 0.35% of average daily net
assets
D.L. Babson Tax-Free Income $95,240 [ ]% 0.25% of average daily net
Fund, Inc. assets
Shadow Stock Fund, Inc. $209,230 [ ]% 0.25% of average daily net
assets
E-2
EXHIBIT F
OTHER INVESTMENT COMPANIES ADVISED BY VOYAGEUR
Voyageur acts as advisor to the following funds that have investment objectives
similar to the Funds:
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
NAME OF FUND INVESTMENT OBJECTIVE NET ASSETS VOYAGEUR'S ROLE RATE OF COMPENSATION
(AS OF OCT. 31,
2003)
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
RBC Government Income Fund Relatively high current $23,793,707 investment advisor 0.30% (not waived or
income consistent with otherwise reduced)
relative stability of
principal and safety.
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
RBC Large Cap Equity Fund Long-term capital $42,342,419 investment advisor 0.70% (not waived or
appreciation. otherwise reduced)
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
RBC Mid Cap Equity Fund Long-term capital $168,756,989 investment advisor 0.70% (not waived or
appreciation. otherwise reduced)
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
RBC North Carolina Tax-Free High current income that $22,585,688 investment advisor 0.35% (not waived or
Bond Fund is free from both federal otherwise reduced)
income tax and North
Carolina personal income
tax, together with
relative safety with
principal.
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
RBC Quality Income Fund Current income and capital $39,453,944 investment advisor 0.60% (not waived or
appreciation. otherwise reduced)
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
RBC Small Cap Equity Fund Long-term capital $19,831,191 investment advisor 0.70% (not waived or
appreciation. otherwise reduced)
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
J& B Small-Cap International Long-term growth of $4,119,993 investment advisor 1.45%(1)
Fund capital.
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
Delaware Core Equity Fund Long-term capital $28,381,284 investment 0.325% (not waived or
appreciation. sub-advisor otherwise reduced)
- ------------------------------- ---------------------------- ------------------- ------------------- ------------------------
- --------------
(1) Voyageur has contractually agreed to waive fees and/or make payments in
order to keep total operating expenses of the J&B Small-Cap International
Fund (which includes other expenses in addition to management fees) to
1.60% through May 1, 2005.
F-1
EXHIBIT G
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF VOYAGEUR ASSET MANAGEMENT INC.
AND DAVID L. BABSON & COMPANY INC.
VOYAGEUR ASSET MANAGEMENT INC.
NAME AND ADDRESS* PRINCIPAL OCCUPATION
===========================================================================
John G. Taft Chief Executive Officer and Director
Lisa Ferris Director
Raye C. Kanzenbach Senior Managing Director; Senior
Portfolio Manager
----------
* The address for each officer and director is 90 South
Seventh Street, Suite 4300, Minneapolis, Minnesota 55402.
DAVID L. BABSON & COMPANY INC.
NAME AND ADDRESS* PRINCIPAL OCCUPATION
===========================================================================
Stuart H. Reese Director, Chairman, Chief Executive
Officer and President
William H. Glavin, Jr. Director, Chief Operating Officer
and Chief Compliance Officer
Kevin W. McClintock Director and Managing Director
Roger W. Crandall Director and Managing Director
Robert Ligouri Director
Kenneth L. Hargreaves Managing Director
Efrem Marder Managing Director
James E. Masur Managing Director and Chief
Financial Officer
----------
* The address for each officer and director is One Memorial
Drive, Cambridge, Massachusetts, 02142.
G-1
EXHIBIT H
CURRENT FUNDAMENTAL INVESTMENT POLICIES/RESTRICTIONS
The Funds are currently subject to the following fundamental investment
policies/restrictions:
BABSON ENTERPRISE FUND, INC.; BABSON ENTERPRISE FUND II, INC.; AND SHADOW STOCK
FUND, INC.
Babson Enterprise Fund, Babson Enterprise Fund II and Shadow Stock Fund will
not: (1) purchase the securities of any one issuer, except the United States
government, if immediately after and as a result of such purchase (a) the value
of the holdings of the Fund in the securities of such issuer exceeds 5% of the
value of the Fund's total assets, or (b) the Fund owns more than 10% of the
outstanding voting securities, or any other class of securities, of such issuer;
(2) engage in the purchase or sale of real estate or commodities or, with
respect to Enterprise Fund II, futures contracts; (3) underwrite the securities
of other issuers; (4) make loans to any of its officers, directors, or
employees, or to its manager, or general distributor, or officers or directors
thereof; (5) make loans to other persons, except by the purchase of debt
obligations which are permitted under its investment policy; (6) invest in
companies for the purpose of exercising control of management; (7) purchase
securities on margin or sell securities short; (8) purchase shares of other
investment companies except in the open market at ordinary broker's commission,
but not in excess of 5% of the Fund's assets, or pursuant to a plan of merger or
consolidation; (9) invest in the aggregate more than 5% of the value of its
gross assets in the securities of issuers (other than federal, state,
territorial, or local governments, or corporations, or authorities established
thereby), which including predecessors, have not had at least three years'
continuous operations nor invest more than 25% of the Fund's assets in any one
industry; (10) enter into dealings with its officers or directors, its manager
or underwriter, or their officers or directors or any organization in which such
persons have a financial interest except for transactions in the Fund's own
shares or other securities through brokerage practices which are considered
normal and generally accepted under circumstances existing at the time; (11)
purchase or retain securities of any company in which any Fund officers or
directors, or Fund manager, its partner, officer, or director beneficially owns
more than 1/2 of 1% of said company's securities, if all such persons owning
more than 1/2 of 1% of such company's securities own in the aggregate more than
5% of the outstanding securities of such company; (12) borrow or pledge its
credit under normal circumstances, except up to 10% of its gross assets
(computed at the lower of fair market value or cost) for temporary or emergency
purposes, and not for the purpose of leveraging its investments, and provided
further that any borrowing in excess of 5% of the total assets of the Fund shall
have asset coverage of at least 3 to 1; (13) make itself or its assets liable
for the indebtedness of others; (14) invest in securities which are assessable
or involve unlimited liability; or (15) issue senior securities except for those
investment procedures permissible under the Fund's other policies/restrictions.
BABSON VALUE FUND, INC.
Babson Value Fund will not: (1) purchase the securities of any one issuer,
except the United States government, if immediately after and as a result of
such purchase (a) the value of the holdings of the Fund in the securities of
such issuer exceeds 5% of the value of the Fund's total assets, or (b) the Fund
owns more than 10% of the outstanding voting securities, or any other class of
securities, of such issuer; (2) engage in the purchase or sale of real estate or
commodities; (3) underwrite the securities of other issuers; (4) make loans to
any of its officers, directors, or employees, or to its manager, or general
distributor, or officers or directors thereof; (5) make any loan (the purchase
of a security subject to a repurchase agreement or the purchase of a portion of
an issue of publicly distributed debt securities is not considered the making of
a loan); (6) invest in companies for the purpose of exercising control of
management; (7) purchase securities on margin or sell securities short; (8)
purchase shares of other investment companies except in the open market at
ordinary broker's commission, pursuant to a plan of merger or consolidation; (9)
invest in the aggregate more than 5% of the value of its gross assets in the
securities of issuers (other than federal, state, territorial, or local
governments, or corporations, or authorities established thereby), which
including predecessors, have not had at least three years' continuous
operations; (10) enter into dealings with its officers or directors, its manager
or underwriter, or their officers or directors or any organization in which such
persons have a financial interest except for transactions in the Fund's own
shares or other securities through brokerage practices which are considered
normal and generally accepted under circumstances existing at the time; (11)
purchase or retain securities of any company in which any Fund officers or
H-1
directors, or Fund manager, its partner, officer, or director beneficially owns
more than 1/2 of 1% of said company's securities, if all such persons owning
more than 1/2 of 1% of such company's securities own in the aggregate more than
5% of the outstanding securities of such company; (12) borrow or pledge its
credit under normal circumstances except up to 10% of its gross assets (computed
at the lower of fair market value or cost) for temporary or emergency purposes,
and not for the purpose of leveraging its investments, and provided further that
any borrowing in excess of 5% of the total assets of the Fund shall have asset
coverage of at least 3 to 1; (13) make itself or its assets liable for the
indebtedness of others; or (14) invest in securities which are assessable or
involve unlimited liability.
D.L. BABSON TAX-FREE INCOME FUND, INC.
D.L. Babson Tax-Free Income Fund will not: (1) invest in equity securities or
securities convertible into equities; (2) purchase more than 10% of the
outstanding publicly issued debt obligations of any issuer; (3) borrow money
except for temporary emergency purposes, and then only in an amount not
exceeding 10% of the value of the total assets of the Fund; (4) mortgage, pledge
or hypothecate the assets of the Fund to an extent greater than 10% of the value
of the net assets of the Fund; (5) issue senior securities, as defined in the
Investment Company Act of 1940, as amended; (6) underwrite any issue of
securities; (7) purchase or sell real estate, but this shall not prevent
investment in municipal bonds secured by real estate; (8) make loans to other
persons, except by the purchase of bonds, debentures or similar obligations
which are publicly distributed; (9) purchase securities on margin or sell short;
(10) purchase or retain securities of an issuer if to the knowledge of the
Fund's management those directors of the Fund, each of whom owns more than 1/2
of 1% of such securities, together own more than 5% of the securities of such
issuer; (11) purchase or sell commodities or commodity contracts; (12) invest in
put, call, straddle or special options; (13) purchase securities of any issuer
(except the U.S. government, its agencies and instrumentalities, and any
municipal bond guaranteed by the U.S. government) in the Fund if, as a result,
more than 5% of the total assets of the Fund would be invested in the securities
of such issuer; for purposes of this limitation, "issuer" will be based on a
determination of the source of assets and revenues committed to meeting interest
and principal payments of each security, and a government entity which
guarantees the securities issued by another entity is also considered an issuer
of that security; (14) invest in companies for the purpose of exercising
control; (15) invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets;
(16) invest more than 5% of the value of its total assets at the time of
investment in the securities of any issuer or issuers which have records of less
than three years continuous operation, including the operation of any
predecessor, but this limitation does not apply to securities issued or
guaranteed as to interest and principal by the U.S. government or its agencies
or instrumentalities.
H-2
EXHIBIT I
PRINCIPAL INVESTMENT OBJECTIVE FOR EACH FUND
- -------------------------------------------- -------------------------------------------------------------------------
FUND OBJECTIVE
- -------------------------------------------- -------------------------------------------------------------------------
- -------------------------------------------- -------------------------------------------------------------------------
BABSON ENTERPRISE FUND Long-term growth of capital.
BABSON ENTERPRISE FUND II
SHADOW STOCK FUND
- -------------------------------------------- -------------------------------------------------------------------------
- -------------------------------------------- -------------------------------------------------------------------------
BABSON VALUE FUND Long-term growth of capital and income.
- -------------------------------------------- -------------------------------------------------------------------------
- -------------------------------------------- -------------------------------------------------------------------------
BABSON TAX-FREE INCOME FUND Providing the highest level of regular income exempt from federal income
tax consistent with stated quality and maturity standards.
- -------------------------------------------- -------------------------------------------------------------------------
GENERAL INVESTMENT POLICIES
- -------------------------------------------- -------------------------------------------------------------------------
FUND GENERAL INVESTMENT POLICY(1)
- -------------------------------------------- -------------------------------------------------------------------------
- -------------------------------------------- -------------------------------------------------------------------------
BABSON ENTERPRISE FUND This Fund invests at least 80% of its net assets, plus any borrowings
for investment purposes, in common stocks of small, faster-growing
companies (referred to as micro-cap). The small companies primarily
selected for the Fund will have market capitalization (share price
multiplied by outstanding shares) at time of purchase that is below the
dollar-weighted median market capitalization of companies in the
Russell 2000 index. The Advisor presently expects to limit this amount
to between $15 million and $500 million in market capitalization at
time of purchase.
The fund selects companies whose stocks are selling at prices it believes
are reasonable in relation to the company's fundamental financial
characteristics and business prospects. The primary valuation ratios used
are:
o price relative to earnings
o price relative to sales
o price relative to assets as measured by book value
o price relative to cash flow
- -------------------------------------------- -------------------------------------------------------------------------
BABSON ENTERPRISE FUND II This Fund invests in substantially the same manner as Babson Enterprise
Fund with the exception that it targets slightly larger companies. The
Fund invests at least 80% of its net assets, plus any borrowings for
investment purposes, in common stocks of small, faster growing companies
worth between $250 million and $1 billion in market capitalization at the
time of initial purchase. The Fund generally invests in stocks listed on
national or regional
- -------------------------------------------- -------------------------------------------------------------------------
- --------
(1) In the current prospectus for each Fund, the General Investment Policy
described above is referred to as the Fund's Principal Investment Strategy.
I-1
- -------------------------------------------- -------------------------------------------------------------------------
exchanges or listed over-the-counter (on NASDAQ) with prices quoted daily
in the financial press.
- -------------------------------------------- -------------------------------------------------------------------------
- -------------------------------------------- -------------------------------------------------------------------------
SHADOW STOCK FUND This Fund invests, under normal circumstances, at least 80% of its net
assets, plus any borrowings for investment purposes, in small company
stocks called "Shadow Stocks." These stocks combine the characteristics
of "small stocks" and "neglected stocks." The Fund defines "small stocks"
as those stocks of companies that have market capitalization at the time
of initial purchase of between $20 million and the capitalization that
marks the point between the 8th and 9th deciles of the New York Stock
Exchange (the "upper limit") and that have annual net profits of at least
$1 million for the three most recent fiscal years. The Fund defines
"neglected stocks" as those that are least held by institutional
investors (on average) and are subject to below average coverage by
analysts and newsletters. It is estimated that the Shadow Stock Fund will
generally contain between 200 and 300 shadow stocks at any one time in
proportions approximating the market capitalizations of the various
companies when compared to each other. Rather than constantly purchasing
and selling stocks for short-term re-balancing, the Fund performs a
detailed re-balancing twice per year.
The Fund screens "small and neglected stocks" and will not buy a stock or
will sell a part or all of a stock it owns, if the Advisor believes:
o that the financial condition of the company is in jeopardy
o that liquidity is insufficient
o that total acquisition costs are unreasonably high
o that the stock is selling for less than $5 per share (stock
will not be sold for this reason alone but additional stock
will not be bought below $4 per share and will be sold at
the semi-annual re-balancing if the stock is selling below $4
per share)
The Fund will also sell stocks based on:
o potential negative earnings
o tenders or potential mergers
o not meeting criteria for "neglected stocks" for three
semi-annual evaluations
o not meeting criteria for "small stocks" by having market
capitalization below $10 million or above twice the "upper
limit"
- -------------------------------------------- -------------------------------------------------------------------------
- -------------------------------------------- -------------------------------------------------------------------------
BABSON VALUE FUND This Fund invests at least 90% of its net assets, plus any borrowings for
investment purposes, in common stocks that are considered to be
undervalued in relation to earnings, dividends and/or assets. The Fund
invests, at time of initial purchase, in stocks that meet each of the
following criteria:
- -------------------------------------------- -------------------------------------------------------------------------
I-2
- -------------------------------------------- -------------------------------------------------------------------------
o stocks that the Fund considers to be undervalued based on
their earnings, dividends and/or assets or other widely
recognized stock valuation measurements
o stocks of companies the Fund believes are sound businesses
with good future potential based on their fundamental
characteristics
o stocks of companies with an investment quality rating (growth
and stability of earnings and dividends) of "B-" or better by
Standard & Poor's Rating Group ("S&P(R)") or financial
strength rating of "B" or better by ValueLine
o stocks of any price range that may or may not be paying
current dividends
- -------------------------------------------- -------------------------------------------------------------------------
BABSON TAX-FREE INCOME FUND This Fund intends to offer shares substantially exempt from federal
income tax. The Fund will have an expected weighted average maturity
between ten and twenty-five years with maturities being longer than five
years at time of purchase. The Fund may invest at time of purchase:
o at least 80% of its net assets, plus any borrowings for
investment purposes, in municipal securities, such as bonds
and other debt instruments issued by or on behalf of states,
territories and possessions of the United States, including
their subdivisions, authorities, agencies and instrumentalities
and the interest they pay is expected to be exempt from
federal income tax and any alternative minimum tax;
o at least 90% of the municipal bonds bought will be rated
within the three top rating categories of Moody's (Aaa, Aa or
A) or Standard & Poor's(R) (AAA, AA or A);
o investments in short-term municipal obligations and notes will
be (1) backed by the full faith and credit of the United
States; or (2) rated MIG-1, MIG-2 or MIG-3 by Moody's; or
(3) A-1 or A-2 by Standard & Poor's(R); or (4) if unrated
short-term then the issuer's long-term bond rating must be at
least A as determined by Moody's or Standard & Poor's(R); and,
o in cash or short-term money market obligations (including
taxable money market obligations on a temporary basis) that
are rated at the top two categories (A-1/Prime-1 or
A-2/Prime-2).
- -------------------------------------------- -------------------------------------------------------------------------
I-3
EXHIBIT J
PRINCIPAL SHAREHOLDERS OF THE FUNDS
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. As of [DATE] the following
person(s) owned of record or were known by the Funds to own beneficially 5% or
more of any class of the Funds' shares.
AMOUNT AND NATURE PERCENTAGE OF
NAME OF FUND AND CLASS OF BENEFICIAL CLASS
NAME AND ADDRESS OWNERSHIP OUTSTANDING
(%)
================================================ ======================== ========================== ====================
Babson Enterprise Fund, Inc.
Babson Enterprise Fund II, Inc.
Babson Value Fund, Inc.
D.L. Babson Tax-Free Income Fund, Inc.
Shadow Stock Fund, Inc.
J-1
[FORM OF PROXY CARD FOR D.L. BABSON TAX-FREE INCOME FUND, INC.]
The shares represented by a properly executed proxy card
will be voted as specified on the proxy card.
D.L. BABSON TAX-FREE INCOME THIS PROXY IS SOLICITED ON BEHALF OF
FUND, INC. (THE "FUND") THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS
MARCH 15, 2004 - 9:00 A.M. CENTRAL
TIME (THE "MEETING")
The undersigned appoints Jennifer Lammers, Laura Moret, Christopher J. Tomas and
Martin A. Cramer, and each of them individually with power to act without the
other and with the right of substitution in each, the proxies of the undersigned
to vote all shares of the Fund held by the undersigned on January 15, 2004, at
the Meeting, to be held at the offices of RBC Dain Rauscher Corporation, 60
South Sixth Street, Minneapolis, Minnesota, on March 15, 2004 at 9 a.m. Central
Time and at any adjournment thereof, with all powers the undersigned would
possess if present in person. All previous proxies given with respect to the
Meeting are revoked. The undersigned acknowledges receipt of the Notice of
Special Meeting and Proxy Statement dated [EFFECTIVE DATE].
PLEASE VOTE, DATE AND SIGN,
AND PROMPTLY RETURN THIS PROXY
CARD IN THE ENCLOSED
ENVELOPE PROVIDED.
Dated: ____________________________
___________________________________
___________________________________
(Signature) (SIGN IN THE BOX)
Please sign exactly as your name or
names appear to the left. When
shares are held by joint tenants,
both should sign. When signing as
attorney, executor, administrator,
trustee, guardian or in any other
representative capacity, please
give full title as such. If signing
for a corporation, please sign in
full corporate name by authorized
person. If a partnership, please
sign in partnership name by
authorized person.
PLEASE FILL IN BOXES AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. [X]
PLEASE DO NOT USE FINE POINT PENS. IF NO SPECIFICATION IS MADE, THE SHARES
WILL BE VOTED "FOR" ALL ITEMS, AS APPLICABLE.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. To approve the election of the following individuals to the board of
directors of the Fund: (01) T. Geron Bell, (02) Lucy Hancock Bode, (03) [ ] [ ] [ ]
Leslie H. Garner, Jr., (04) Ronald James, (05) Michael T. Lee, (06) John
A. MacDonald, (07) H. David Rybolt, (08) James R. Seward, and (09) Jay H.
Wein.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, MARK THE
BOX "FOR ALL EXCEPT" AND WRITE THE NOMINEE'S(S') NAME(S) ON THE LINE
BELOW.)
- ----------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve an Agreement and Plan of Reorganization, pursuant to which [ ] [ ] [ ]
the Fund would be reorganized as a separate portfolio of the Tamarack
Funds Trust, a newly-created Delaware statutory trust.
FOR AGAINST ABSTAIN
3. To approve the modification/reclassification of certain fundamental
investment restrictions
Modification of policies that must remain fundamental:
3.A Diversification [ ] [ ] [ ]
3.B Borrowing [ ] [ ] [ ]
3.C Senior Securities [ ] [ ] [ ]
3.D Underwriting Securities [ ] [ ] [ ]
3.E Real Estate [ ] [ ] [ ]
3.F Making Loans [ ] [ ] [ ]
3.G Concentration of Investments [ ] [ ] [ ]
3.H Commodities [ ] [ ] [ ]
Reclassification of certain fundamental investment restrictions as
non-fundamental:
3.I Investments for Control [ ] [ ] [ ]
3.J Investments in Other Investment Companies [ ] [ ] [ ]
3.K Margin Activities and Short Selling [ ] [ ] [ ]
3.L Unseasoned Companies [ ] [ ] [ ]
3.M Investments in Securities of Related Issuers [ ] [ ] [ ]
3.R Pledging, Mortgaging and Hypothecating Fund Assets [ ] [ ] [ ]
3.S Investments in Options [ ] [ ] [ ]
3.T Investments in Equity Securities [ ] [ ] [ ]
3.U Investments in Publicly Issued Debt Obligations. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. To approve the reclassification of the Fund's general investment [ ] [ ] [ ]
policies as non-fundamental policies.
FOR AGAINST ABSTAIN
5. To ratify the selection of Deloitte & Touche LLP as the independent [ ] [ ] [ ]
auditors of the Fund for the current fiscal year.
THE PERSONS NAMED AS PROXIES WILL VOTE IN THEIR DISCRETION ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF
(PLEASE SIGN AND DATE ON REVERSE)
[FORM OF PROXY CARD FOR
BABSON ENTERPRISE FUND, INC., BABSON ENTERPRISE FUND II, INC.
BABSON VALUE FUND, INC. AND SHADOW STOCK FUND, INC.]
The shares represented by a properly executed proxy card
will be voted as specified on the proxy card.
[NAME OF FUND] (THE "FUND") THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS
MARCH 15, 2004 - 9:00 A.M. CENTRAL TIME
(THE "MEETING")
The undersigned appoints Jennifer Lammers, Laura Moret, Christopher J. Tomas and
Martin A. Cramer, and each of them individually with power to act without the
other and with the right of substitution in each, the proxies of the undersigned
to vote all shares of the Fund held by the undersigned on January 15, 2004, at
the Meeting, to be held at the offices of RBC Dain Rauscher Corporation, 60
South Sixth Street, Minneapolis, Minnesota, on March 15, 2004 at 9 a.m. Central
Time and at any adjournment thereof, with all powers the undersigned would
possess if present in person. All previous proxies given with respect to the
Meeting are revoked. The undersigned acknowledges receipt of the Notice of
Special Meeting and Proxy Statement dated [EFFECTIVE DATE].
PLEASE VOTE, DATE AND SIGN,
AND PROMPTLY RETURN THIS PROXY
CARD IN THE ENCLOSED
ENVELOPE PROVIDED.
Dated: _______________________________
______________________________________
______________________________________
(Signature) (SIGN IN THE BOX)
Please sign exactly as your name or
names appear to the left. When shares
are held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee,
guardian or in any other representative
capacity, please give full title as
such. If signing for a corporation,
please sign in full corporate name by
authorized person. If a partnership,
please sign in partnership name by
authorized person.
PLEASE FILL IN BOXES AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. [X]
PLEASE DO NOT USE FINE POINT PENS. IF NO SPECIFICATION IS MADE, THE SHARES
WILL BE VOTED "FOR" ALL ITEMS, AS APPLICABLE.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. To approve the election of the following individuals to the board of
directors of the Fund: (01) T. Geron Bell, (02) Lucy Hancock Bode, (03) [ ] [ ] [ ]
Leslie H. Garner, Jr., (04) Ronald James, (05) Michael T. Lee, (06) John
A. MacDonald, (07) H. David Rybolt, (08) James R. Seward, and (09) Jay H.
Wein.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, MARK THE
BOX "FOR ALL EXCEPT" AND WRITE THE NOMINEE'S(S') NAME(S) ON THE LINE
BELOW.)
- -----------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve an Agreement and Plan of Reorganization, pursuant to which [ ] [ ] [ ]
the Fund would be reorganized as a separate portfolio of the Tamarack
Funds Trust, a newly-created Delaware statutory trust.
FOR AGAINST ABSTAIN
3. To approve the modification/reclassification of certain fundamental
investment restrictions
Modification of policies that must remain fundamental:
3.A Diversification [ ] [ ] [ ]
3.B Borrowing [ ] [ ] [ ]
3.C Senior Securities [ ] [ ] [ ]
3.D Underwriting Securities [ ] [ ] [ ]
3.E Real Estate [ ] [ ] [ ]
3.F Making Loans [ ] [ ] [ ]
3.G Concentration of Investments [ ] [ ] [ ]
3.H Commodities [ ] [ ] [ ]
Reclassification of certain fundamental investment restrictions as
non-fundamental:
3.I Investments for Control [ ] [ ] [ ]
3.J Investments in Other Investment Companies [ ] [ ] [ ]
3.K Margin Activities and Short Selling [ ] [ ] [ ]
3.L Unseasoned Companies [ ] [ ] [ ]
3.M Investments in Securities of Related Issuers [ ] [ ] [ ]
3.N Making Loans to Related Parties [ ] [ ] [ ]
3.O Entering into Dealings with Related Parties [ ] [ ] [ ]
3.P Liability for Debt of Others [ ] [ ] [ ]
3.Q Investments in Assessable or Unlimited Liability Securities. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. To approve the reclassification of the Fund's general investment [ ] [ ] [ ]
policies as non-fundamental policies.
FOR AGAINST ABSTAIN
5. To ratify the selection of Deloitte & Touche LLP as the independent [ ] [ ] [ ]
auditors of the Fund for the current fiscal year.
THE PERSONS NAMED AS PROXIES WILL VOTE IN THEIR DISCRETION ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
OR POSTPONEMENTS THEREOF
(PLEASE SIGN AND DATE ON REVERSE)