SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss.240-14a-11(c) or ss.240-14a-12
Life Cycle Mutual Funds, Inc.
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(Name of Registrant as Specified in its Charter)
Life Cycle Mutual Funds, Inc.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
Life Cycle Mutual Funds, Inc.
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 20, 1998
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September 29, 1998
TO THE SHAREHOLDERS OF
LIFE CYCLE MUTUAL FUNDS, INC.
A Special Meeting of Shareholders of Life Cycle Mutual Funds, Inc. (the
"Company") will be held on October 20, 1998 at 10:00 a.m., at the offices of
BISYS Fund Services, 3435 Stelzer Road, Suite 1000, Columbus, Ohio, 43219, for
the following purposes:
(1) to approve or disapprove the Plan of Liquidation and Dissolution of
the Company, which Plan was approved at a meeting of the Board of Directors of
the Company held on May 29, 1998; and
(2) to transact such other business as may properly come before the
meeting and any adjournments thereof.
The subjects referred to above are discussed in detail in the Proxy
Statement attached to this notice. Each shareholder is invited to attend the
Special Meeting in person. Shareholders of record at the close of business on
August 31, 1998 have the right to vote at the meeting. If you cannot be present
at the meeting, we urge you to fill in, sign, and promptly return the enclosed
proxy in order that the meeting can be held without additional expense and a
maximum number of shares may be voted.
THE BOARD OF DIRECTORS,
LIFE CYCLE MUTUAL FUNDS, INC.
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YOUR VOTE IS IMPORTANT NO MATTER HOW
MANY SHARES YOU OWNED ON THE RECORD DATE.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY BALLOT,
DATE, SIGN AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY. THE PROXY IS REVOCABLE AT ANY TIME
PRIOR TO ITS USE.
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Life Cycle Mutual Funds, Inc.
Life Cycle Equity Fund
Life Cycle Bond Fund
Life Cycle Retirement Income Fund
Life Cycle Harvest Fund
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 20, 1998
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Life Cycle Mutual Funds, Inc. (the "Company") for
use at the Special Meeting of Shareholders of each series of the Company (the
"Special Meeting") to be held at the offices of BISYS Fund Services, 3435
Stelzer Road, Suite 1000, Columbus, Ohio, 43219 on October 20, 1998 at 10:00
a.m. The Company is an open-end investment company consisting of four separate
series of shares, Life Cycle Equity Fund, Life Cycle Bond Fund, Life Cycle
Retirement Income Fund and Life Cycle Harvest Fund (each a "Fund" and
collectively, the "Funds"). Proxies may be solicited by mail, telephone, and
personal interview. The Company has also requested brokers, dealers, banks or
voting trustees, or their nominees to forward proxy material to the beneficial
owners of stock of record. The enclosed proxy is revocable by you at any time
prior to the exercise thereof by submitting a written notice of revocation or
subsequently executed proxy to the Secretary of the meeting. Signing and mailing
the proxy will not affect your right to give a later proxy or to attend the
meeting and vote your shares in person. The cost of soliciting proxies will be
paid by the Company. This statement is expected to be distributed to
shareholders on or about September 29, 1998.
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE NUMBER OF SHARES
REPRESENTED THEREBY AS DIRECTED OR, IN THE ABSENCE OF SUCH DIRECTION, FOR
APPROVAL OF THE COMPANY'S PLAN OF LIQUIDATION AND DISSOLUTION AND TO TRANSACT
SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY
ADJOURNMENT THEREOF.
On August 31, 1998, the date for determination of shareholders entitled to
receive notice of and to vote at the Special Meeting, or any adjournment
thereof, there were issued and outstanding 78,340.25 shares of common stock of
the Company, consisting of 61,562.73 shares of the Life Cycle Equity Fund
series, 4,138.05 shares of the Life Cycle Bond Fund series, 12,639.47 shares of
the Life Cycle Retirement Income Fund series and 0 shares of the Life Cycle
Harvest Fund series. Each outstanding share of the Funds is entitled to one
vote.
Shareholders of the Funds will vote together to approve or disapprove the
Company's Plan of Liquidation and Dissolution (the "Plan"). The affirmative vote
of more than 50% of the outstanding shares of the Company voted at the Special
Meeting, assuming a quorum is present, is required for approval of the Plan.
Abstentions and broker non-votes will not be counted for or
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against the proposal, but will be counted for purposes of determining whether a
quorum is present.
PROPOSED PLAN OF LIQUIDATION AND DISSOLUTION
The Liquidation in General
The Company proposes to liquidate the assets of the Funds and dissolve
pursuant to the provisions of the Plan of Liquidation and Dissolution as
approved by the Board of Directors on May 29, 1998, when the Board determined
that an orderly liquidation of the Funds' assets was in the best interests of
the Company and its shareholders. The Plan provides for the complete liquidation
of the Funds and distribution of their net assets to shareholders. If the Plan
is approved by the requisite shareholder vote, the Company will undertake to
liquidate each Fund's assets at market prices and on such terms and conditions
as the Fund's investment adviser shall determine to be reasonable and in the
best interests of the Funds and their shareholders.
In the event the Plan is not approved by the requisite shareholder vote,
the Board will seek court appointment of a receiver for the Funds.
Reasons for the Liquidation
The Funds are series of shares of the Company, which is an open-end,
diversified management investment company organized as a Maryland corporation on
June 27, 1995 and registered under the Investment Company Act of 1940 (the
"Investment Company Act").
The liquidation of the Funds has been proposed because Benson White &
Company ("Benson White"), the Funds' investment adviser until May 29, 1998, is
unable to pay its expense reimbursement commitments to the Funds. This resulted
in the termination of the Funds' investment advisory contract with Benson White
and the appointment of Wilmington Trust Company as the Funds' interim adviser.
The Board has determined that the Funds are not economically viable, and that it
would be in the best interests of shareholders to liquidate and dissolve the
Funds. The costs of this liquidation are anticipated to be $65,000.00, which may
be subject to further revision depending on the ultimate timing of the
liquidation and final calculations of actual costs associated with this action.
A more detailed explanation of these developments is set forth below.
At a meeting of the Company's Board of Directors held on May 29, 1998,
after discussions with the Funds' investment adviser, independent accountant,
counsel and administrator, the Board determined that the continued operation of
the Funds was not economically feasible or in the best interests of the Funds or
their shareholders. This determination was based on certain factors, including,
without limitation: the relatively small size of the Funds' assets, the
resulting high expense ratios of the Funds, and the inability of Benson White to
reimburse the Fund for certain expenses because of Benson White's insolvency.
Consequently, the Board recognized
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that it was improbable that sales of the Funds' shares could be increased to
raise assets to a more economically viable level. Benson White had waived all of
its advisory fees since inception of the Funds and had undertaken to reimburse
Fund expenses to cap each Fund's expense ratio at 1.95%. However, since July
1996, Benson White has not made any reimbursement payments to the Funds.
Therefore, at the May 29th meeting, the Board recommended the liquidation of the
Funds pursuant to the Plan attached to this Proxy Statement as Exhibit A. At the
same meeting, the Directors accepted the resignation of Benson White as the
Funds' investment adviser and appointed Wilmington Trust Company as the interim
adviser for a period not exceeding 120 days. See "ADDITIONAL INFORMATION."
Background Information
During the third quarter of 1997, in connection with its annual audit, the
Funds' independent accountants notified the Directors and the Audit Committee of
the Board that Benson White owed the Funds non-reimbursed expenses and accruals
for the fiscal year ended July 31, 1997. The auditors were unable to determine
the exact amount of the receivables due from Benson White. However, the auditors
insisted that any amounts outstanding needed to be paid in full in order for
them to certify the financial statements. As a result of this situation, the
auditors were unable to certify the Fund's financial statements for the 1997
fiscal year, and subsequently the Directors instructed the Funds' Distributor to
suspend sales of the Funds' shares. The Board's Audit Committee inquired as to
what actions Benson White was taking to satisfy its outstanding obligations to
the Fund. Benson White informed the Directors that it was continuing to pursue
options to recapitalize itself and that certain shareholders of Benson White
were negotiating the sale of its operations to a subsidiary of a large life
insurance company. Based on these representations, the Board decided that the
best course of action was to await the outcome of these negotiations. The
Directors monitored these activities on a regular basis, and Benson White
continued to report that a sale was imminent and that the proposed buyer would
reimburse the Funds for all obligations due from Benson White. Benson White also
informed the Directors that it was working with BISYS Fund Services,
Inc.("BISYS"), the Funds' administrator, transfer agent and shareholder
servicing agent, to determine if all past, current and future expense amounts
due to the Funds were accurate. Because of these circumstances and the fact that
Benson White was not paying these amounts currently, the Directors instructed
Benson White and BISYS on October 10, 1997 and May 6, 1998 to charge a reserve
against the Funds' assets for the amount of the receivable due from Benson
White.
The Staff of the Securities and Exchange Commission conducted an
inspection of the Fund and Benson White subsequent to the suspension of Fund
sales in October 1997 and the establishment of a reserve against the Fund's net
asset value. In January 1998, the Staff raised a number of significant issues
relating to the Funds' operations that have been impacted by Benson White's
inability to reimburse the Funds for expenses in excess of the cap Benson White
had undertaken to provide. Benson White responded to the Staff by representing
that negotiations for the sale of Benson White were continuing and that a deal
was likely to occur. The Board
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continued to monitor Benson White and, in April 1998, concluded that it could no
longer be confident that Benson White would actually consummate a sale or
recapitalization.
Absent the cap on Fund expenses that Benson White had undertaken to
provide, the Funds' average annual total returns for the one year period ended
May 31, 1998 were -15.11% for the Bond Fund, 16.38% for the Equity Fund, -65.53%
for the Harvest Fund and -9.85% for the Retirement Income Fund. The Board
recognized that the Funds' performance suffered because of high expense ratios
and small asset size. The Board determined that this performance record and the
high expense ratios would make the Funds unattractive to new investors or to
other fund groups for purposes of a fund merger. Additionally, BISYS is no
longer contractually obligated to continue servicing the Funds as of March 31,
1998, but has continued to serve in those capacities on an interim, indefinite
basis at the request of the SEC Staff. Based upon these and other relevant
factors, the Board concluded that a liquidation of the Funds would be in the
best interests of their shareholders. In anticipation of the Funds' liquidation,
the Directors authorized the interim adviser, Wilmington Trust Company, to adopt
a non-fundamental investment strategy for the Funds emphasizing principal
preservation rather than income or capital growth.
At the May 29, 1998 Board meeting, the Board considered various
alternatives for the Funds including: (i) increasing the size of the Funds
through special marketing efforts; (ii) merging the Funds with investment
companies with a similar investment focus; and (iii) liquidating the Funds. A
committee of independent directors reported to the full Board that it had
considered each alternative and had concluded that a prompt liquidation of the
Funds was the alternative that was in the best interests of the shareholders of
the Funds. This committee's view was that further marketing efforts would not be
successful in increasing the Funds' size sufficiently to permit the Funds to
assume the payment of all of their expenses. The merger of the Funds with a
similar investment company was not a realistic option because of the relatively
small amount of assets in the Funds, the expense involved in a merger and the
fact that many Fund shareholders could be reasonably expected to redeem any
interest in the merged entity.
The Board, including all of the Directors who are not "interested persons"
(as that term is defined in the Investment Company Act of 1940, as amended) of
the Funds, then unanimously adopted resolutions approving the Plan and directing
that it be submitted to the Funds' shareholders for consideration. The Board has
also considered that the Funds would bear the costs associated with their
liquidation, which are expected to total approximately $65,000 subject to
further revision depending on the timing of and actual costs incurred in the
liquidation.
The Funds' independent Directors continue to monitor the amounts due to or
payable by the Funds associated with their normal operations and the
extraordinary expenses associated with the Funds' proposed liquidation. The
costs of liquidation may further reduce the Funds' final net asset values in the
event there are not existing expense accruals to cover such additional costs.
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The liquidation of the assets and termination of the Funds will have the
effect of permitting the Funds' shareholders to invest the distributions to be
received by them upon liquidation in investment vehicles of their own choice.
Description of the Plan of Dissolution and Liquidation
The Plan provides for the complete liquidation of all of the assets of the
Funds. Under the Plan, on the date on which the Plan is approved by the Funds'
shareholders (the "Effective Date"), the Funds will cease to conduct business
except as is required to carry out the terms of the Plan and to accept
redemption requests. Thereafter, all securities and other assets held by the
Funds not already held in cash or cash equivalents will be converted to cash or
cash equivalents. The Funds' interim investment adviser, Wilmington Trust
Company, will undertake to liquidate the Funds' assets at market prices on such
terms and conditions as the Funds' portfolio managers shall determine to be
reasonable and in the best interests of the Funds and the shareholders. In no
event will any of the portfolio securities owned by the Funds be sold at a price
which is less than the best price available in the public market at the time of
sale.
The Plan further provides that the ratable distribution of the Funds'
assets to shareholders will be made in one or more cash payments. The first
distribution of the Funds' assets (the "First Distribution") is expected to
consist of cash representing substantially all of the assets of the Funds, less
the amount reserved to pay liabilities and expenses of the Funds. Subsequent
distributions, if necessary, are anticipated to be made as soon as practicable
after the First Distribution and will consist of cash from any assets remaining
after payment of liabilities and expenses, the proceeds of any sale or assets
under the Plan not sold prior to the First Distribution and any other
miscellaneous income to the Funds. Upon distribution of the Funds' assets, the
Company will attempt to collect and distribute to shareholders of record any
outstanding amounts that are or may be owed to the Company by third parties.
At present, the date or dates on which the Company will pay the
liquidation distributions to shareholders and on which the Funds will be
liquidated are not known to the Company, but it is anticipated that if
shareholders adopt the Plan, the liquidation would occur on or prior to October
31, 1998.
Following liquidation of the Funds, the Company intends to file an
application with the Commission to de-register as an investment company under
the Investment Company Act. The Company will file Articles of Dissolution in
accordance with applicable provisions of Maryland law. As stated above, all
outstanding claims will continue to be pursued while the Company is in
dissolution. In accordance with the provisions of Maryland law, the remaining
Directors charged with winding up the affairs of the Company shall make a final
determination with regard to prosecuting, settling or otherwise compromising any
claims retained by the Company. Once a final determination has been made that
all claims are either properly discharged or abandoned, the Company shall take
steps to cease its corporate existence.
5
THE RIGHT OF A SHAREHOLDER TO REDEEM HIS OR HER FUND SHARES AT ANY TIME HAS NOT
BEEN IMPAIRED AND WILL NOT BE IMPAIRED BY THE ADOPTION OF THE PLAN. THEREFORE, A
SHAREHOLDER MAY REDEEM SHARES CONSISTENT WITH THE PROVISIONS OF THE INVESTMENT
COMPANY ACT WITHOUT THE NECESSITY OF WAITING FOR THE FUNDS TO EFFECT A COMPLETE
LIQUIDATION.
Federal Income Tax Consequences
The following summary provides general information with regard to the
federal income tax consequences to the shareholders on receipt of the First
Distribution from the Company pursuant to the provisions of the Plan and
subsequent distributions from the Company, if any (the "Liquidating
Distributions"). This summary also discusses the federal income tax consequences
from the liquidation of the Funds and the dissolution of the Company. The Funds
have not sought a ruling from the Internal Revenue Service (the "Service") with
respect to the liquidation of the Funds and the tax consequences thereof to the
Funds, the Company or the shareholders. The tax consequences discussed herein
may affect shareholders differently depending on their particular tax situations
unrelated to the Liquidating Distribution, and accordingly, this summary is not
a substitute for careful tax planning on an individual basis. The receipt of the
Liquidating Distributions may result in tax consequences that are unanticipated
by shareholders. THUS, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING THE TAX CONSEQUENCES TO THE SHAREHOLDER OF THE RECEIPT OF THE
LIQUIDATING DISTRIBUTIONS, LIQUIDATION OF THE FUNDS AND THE DISSOLUTION OF THE
COMPANY.
This summary is based on the tax laws and regulations in effect on the
date of this proxy statement, all of which are subject to change by legislative
or administrative action, possibly with retroactive effect. The discussion
herein does not address the particular federal income tax consequences that may
apply to certain shareholders such as trusts, estates, tax exempt organizations,
qualified plans, individual retirement accounts, nonresident aliens, or other
foreign investors. This summary does not address the state or local tax
consequences of a shareholder's receipt of the Liquidating Distributions or the
liquidation of the Funds and the Company.
As discussed above, pursuant to the Plan, the Funds will sell their
assets, distribute the proceeds to their shareholders and dissolve the Company.
The Company anticipates that it will retain its qualification as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), during the liquidation period, and therefore, will not be taxed on any
of its net income from the sale of its assets.
For federal income tax purposes, each shareholder's receipt of the First
Distribution will be a taxable event in which the shareholder will be viewed as
having sold shares of the Funds in exchange for an amount equal to the First
Distribution received. Each shareholder will recognize gain or loss measured by
the difference between the adjusted tax basis in the shares and the aggregate of
the First Distribution received from the Funds. If the shareholders hold the
shares as
6
a capital asset, the gain or loss will be characterized as a long-term capital
gain or loss provided the shares were held for more than one year. Generally, an
individual shareholder's maximum tax rate for capital gains is 20% for shares
held more than one year.
The Company will attempt to collect any outstanding amounts due to the
shareholders. Any recoveries by the Company in excess of expenses will be income
to the shareholders. Generally, this income will be ordinary income.
If a shareholder has failed to furnish a correct taxpayer identification
number, has failed to report fully dividend or interest income, or has failed to
certify that he or she has provided a correct taxpayer identification number and
that he or she is not subject to "backup withholding," the shareholder may be
subject to a 31% backup withholding tax with respect to taxable proceeds
received as part of the Liquidating Distributions. An individual's taxpayer
identification number is his or her social security number. Certain shareholders
specified in the Code may be exempt from backup withholding. The backup
withholding tax is not an additional tax and may be credited against a
taxpayer's federal income tax liability.
The receipt of Liquidating Distributions by an individual retirement
account or qualified plan is outside the scope of this discussion and such
shareholders should consult with their own tax advisors concerning the
consequences of the Liquidating Distributions in advance of the receipt of the
Liquidating Distributions.
The distribution of liquidation proceeds to a custodian for a minor
holding shares pursuant to the Uniform Gifts to Minors Act (the "UGMA") would
not affect the status of the assets for purposes of UGMA, although the minor
shareholder may realize gain upon the liquidation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
PLAN OF LIQUIDATION AND DISSOLUTION.
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ADDITIONAL INFORMATION
Wilmington Trust Company, located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, serves as the Funds' interim
investment adviser until September 30, 1998, pursuant to temporary investment
advisory contracts approved by the Company's Board of Directors, and separately
by the Directors who are not interested persons, on May 29, 1998. Upon the
conclusion of Wilmington Trust Company's engagement as interim investment
adviser, the Funds' assets will be held entirely as cash or cash equivalents by
the Custodian and monitored by the Board pending final distributions to
shareholders. The Company will not seek shareholder ratification of the Funds'
interim investment advisory contracts with Wilmington Trust Company because the
Board does not anticipate that Wilmington Trust will serve as the Funds'
investment adviser for more than 120 days. Rule 15a-4 under the Investment
Company Act provides that after the termination of a fund's adviser, a temporary
adviser may be appointed without shareholder approval for up to 120 days after
termination.
Benson White & Company, 656 Swedesford Road, Wayne, Pennsylvania, formerly
served as the investment adviser of each Fund pursuant to investment advisory
contracts dated July 31, 1995. The Company's Board of Directors accepted Benson
White's resignation as investment adviser effective May 29, 1998.
BISYS Fund Services, 3435 Stelzer Road, Suite 1000, Columbus, Ohio 43219,
currently serves as the Funds' administrator, transfer agent and shareholder
servicing agent. Since the termination of the Funds' administrative services
agreement with BISYS on March 31, 1998, BISYS has agreed to provide
administrative services only on an interim basis, and BISYS has no contractual
obligation to continue providing such services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of August 31, 1998, the following persons were known by the Company to
own beneficially more than 5% of the outstanding voting shares of the respective
Funds. All directors and officers of the Funds as a group beneficially owned
less than 1% of the outstanding voting shares of the Funds.
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LIFE CYCLE EQUITY FUND
NAME AND ADDRESS OF OWNER TOTAL SHARES PERCENT OWNED
Bear Stearns Securities Corp. 4,739.224 7.698
FBO 574-13172-17
1 Metrotech Ctr. North
Brooklyn, NY 11201-3857
Bear Stearns Securities Corp. 4,739.224 7.698
FBO 574-18496-15
1 Metrotech Ctr. North
Brooklyn, NY 11201-3857
Bear Stearns Securities Corp. 4,739.224 7.698
FBO 574-99134-13
1 Metrotech Ctr. North
Brooklyn, NY 11201-3859
Fifth Third Bank, Custodian 3,425.200 5.563
Shirley B. Cunningham
IRA
P.O. Box 588
Ivy, VA 22945-0588
Fifth Third Bank, Custodian 5,860.407 9.519
John T. Cunningham
IRA
P.O. Box 588
Ivy, VA 22945-0588
Fifth Third Bank, Custodian 217.574 5.257
Virginia B. Dion
IRA
397 S.W. Riverway Blvd
Palm City, FL 34990
Fifth Third Bank, Custodian 441.113 10.659
Catherine L. Sommers
Rollover IRA
200 Cliff Rd
Wellesley, MA 02181-1322
9
NAME AND ADDRESS OF OWNER TOTAL SHARES PERCENT OWNED
Fifth Third Bank, Custodian 303.442 7.332
Gregory M. Hryb
IRA
204 Brookside Rd
Darien, CT 06820-2604
American Eagle Investments Inc. 763.735 18.456
Administration Services Inc.
FBO Allen Rosenberg
Profit Sharing Plan Pensioners
28 Huntington Cir
Medford, NJ 08055-3318
Dorl E. Kline 406.375 9.820
Box 38 20 Caskey Drive
Railroad, PA 17355-0038
Fifth Third Bank, Custodian 513.371 12.406
Regina M. Sauer
IRA
265 Hemlock Hill Rd
Orange, CT 06477-1613
LIFE CYCLE BOND FUND
Fifth Third Bank, Custodian 224.146 5.416
Larry B. Maier
IRA
1390 W. Main St
Ephrata, PA 17522-1312
LIFECYCLE RETIREMENT
INCOME FUND
Fifth Third Bank, Custodian 4,270.479 33.786
Shirley B. Cunningham
IRA
P.O. Box 588
Ivy, VA 22945-0588
10
NAME AND ADDRESS OF OWNER TOTAL SHARES PERCENT OWNED
Fifth Third Bank, Custodian 7,784.919 61.592
John T. Cunningham
IRA
P.O. Box 588
Ivy, VA 22945-0588
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS
The Company has not been in compliance with the shareholder reporting
requirements under the Investment Company Act. The Company's independent
accountants, PricewaterhouseCoopers LLP, would not certify the Company's
financial statements for the fiscal year ended July 31, 1997 because of
uncertainty about the Funds' accrued unreimbursed expenses and concerns about
overstatement of the Funds' net asset values. Therefore, the completion of the
Company's audited annual financial statements for the fiscal year ended July 31,
1997, was delayed until August 1998. Additionally, because of unresolved
questions concerning the exact amount of the Funds' expenses and the receivables
due from the Adviser, completion of the Funds' semi-annual financial statements
for the six months ended January 31, 1998 was also delayed until August 1998.
The Funds' audited annual financial statements and unaudited semi-annual
financial statements have been completed, and copies are being mailed to
shareholders with this proxy statement.
SHAREHOLDER PROPOSALS
In the event that the Funds are not liquidated and dissolved pursuant to
this proxy solicitation, any shareholder who desires to submit a proposal for
consideration at future shareholder meetings may do so by submitting such
proposal in writing to the Board of Directors of Life Cycle Mutual Funds, Inc.,
c/o Joseph V. Del Raso, Esquire, Pepper Hamilton LLP, 3000 Two Logan Square,
Philadelphia, PA 19103-2799. Ordinarily, the Fund does not hold annual
shareholder meetings.
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OTHER MATTERS
Representatives of the Funds' independent accountants,
PriceWaterhouseCoopers LLP, will be available by telephone at the Special
Meeting.
Management does not know of any matters to be presented at the Special
Meeting other than those mentioned in this Proxy Statement. If any other
business should come before the meeting, the proxies will vote thereon in
accordance with their best judgment.
By Order of the Board of Directors
of Life Cycle Mutual Funds, Inc.
Dated: September 25, 1998
IF YOU CANNOT ATTEND THE SPECIAL MEETING, IT IS REQUESTED THAT YOU
COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED SO
THAT THE MEETING MAY BE HELD AND ACTION TAKEN ON THE MATTER DESCRIBED HEREIN
WITH THE GREATEST POSSIBLE NUMBER OF SHARES PARTICIPATING.
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EXHIBIT A
THIS PLAN OF LIQUIDATION AND DISSOLUTION (the "Plan") is adopted by Life
Cycle Mutual Funds, Inc., a Maryland corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
consisting of four separate series of shares ("Series"), Life Cycle Equity Fund,
Life Cycle Bond Fund, Life Cycle Retirement Income Fund and Life Cycle Harvest
Fund; and
WHEREAS, this Plan is intended to be and is adopted as a plan of
liquidation of each Series of the Company, on the terms and conditions set forth
below; and
WHEREAS, the Board of Directors of the Company, including a majority of
the directors who are not interested persons (as defined by the 1940 Act), has
determined that this Plan is in the best interests of the shareholders of each
Series of the Company.
NOW THEREFORE, the Board of Directors of the Company hereby adopts the
following:
i. CONDITIONS PRECEDENT. This Plan is approved subject to the following
conditions:
(1) This Plan shall be approved by the affirmative vote of more than
50% of the outstanding shares of the Company's common stock voted
at a special meeting of the shareholders called for the purpose of
approving the Plan, assuming a quorum is present.
1
(2) A Proxy Statement describing the Plan and the proposed liquidation
and dissolution shall be prepared and submitted to the Securities
and Exchange Commission ("SEC") and when authorized by such
regulator, shall be delivered to each shareholder of record of the
Company for the purposes of soliciting proxies for the approval of
the Plan.
(3) All necessary approvals and authorizations from the SEC or any
other regulatory authority having jurisdiction over the
transactions contemplated by the Plan shall be obtained.
(4) At or immediately prior to the Liquidation Date (as defined in
paragraph 6), each Series shall, if necessary, have declared and
paid a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to the
shareholders of a Series all of the Series' investment company
taxable income for taxable years ending at or prior to the
Liquidation Date (computed without regard to any deduction for
dividends paid) and all of its net capital gain, if any, realized
in taxable years ending at or prior to the Liquidation Date (after
reduction for any capital loss carry-forward).
ii. TERMINATION OF BUSINESS OPERATIONS. On the date on which the
shareholders approve the Plan (the "Effective Date"), each Series of
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the Company shall cease to conduct business except as is required to
carry out the terms of the Plan and to accept redemption requests.
iii. NOTICE OF LIQUIDATION. As soon as practicable after the Effective
Date, the Company shall mail notice to all its creditors that the Plan
has been approved by the Board of Directors and the shareholders and
that it will be liquidating its assets. Such notice will comply with
the requirements of any state laws mandating notice of liquidation
such as that contemplated by the Plan.
iv. LIQUIDATION OF ASSETS. As soon as it is reasonable and practicable
after the Effective Date, but in no event later than October 30, 1998
(the "Liquidation Period"), all portfolio securities of each Series of
the Company not already converted to cash or cash equivalents shall be
converted to cash or cash equivalents.
v. LIABILITIES. During the Liquidation Period, the Company shall pay,
discharge, or otherwise provide for the payment or discharge of, any
and all liabilities and obligations of the Company. If it is unable to
pay, discharge or otherwise provide for any of its liabilities during
the Liquidation Period, the Company may, however, retain cash or cash
equivalents in an amount which it estimates is necessary to discharge
any unpaid liabilities of the Company on the Company's books as of the
Liquidation Date (as defined in paragraph 6). Unpaid liabilities may
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include but not be limited to, income dividends and capital gains
distributions, if any, payable for the period prior to the Liquidation
Date.
vi. DISTRIBUTION TO SHAREHOLDERS. Upon termination of the Liquidation
Period (the "Liquidation Date"), the assets of each Series will be
distributed ratably among the Series' shareholders of record in one or
more cash payments. The first distribution of the Series' assets (the
"First Distribution") is expected to consist of cash representing
substantially all the assets of a Series, less the amount reserved to
pay creditors and other expenses of liquidation such as ongoing
trustees fees and professional services. Subsequent distributions, if
any, will be made on a timely basis and would consist of cash from any
assets remaining after payment of creditors, the proceeds of any sale
of assets of the Series under the Plan not sold prior to the First
Distribution and any other miscellaneous income to the Series.
vii. AMENDMENT OR TERMINATION. This Plan and the transactions contemplated
hereby may be terminated and abandoned by resolution of the Board of
Directors of the Company, at any time prior to the Liquidation Date,
if circumstances should develop that, in the opinion of the Board, in
its sole discretion, make proceeding with this Plan inadvisable for
the Company. The Board of Directors may modify or amend this Plan at
any time without shareholder approval if it determines that such
action would be advisable and in the best interests of the
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Company and the shareholders. However, if the Board determines that
any such amendment or modification will materially and adversely
affect the interests of the shareholders, such an amendment or
modification will not be adopted unless approved by the shareholders.
viii. FILINGS. As soon as practicable after the final distribution of the
Company's assets to shareholders, the Company shall file Articles of
Dissolution, Form N-8F under the 1940 Act and any other documents, as
are necessary to effect the dissolution and/or de-registration of the
Company in accordance with the requirements of the Articles of
Incorporation of the Company, the Maryland Business Corporation Law,
the Internal Revenue Code of 1986, as amended, any applicable
securities laws, and any rules and regulations of the Securities and
Exchange Commission or any state securities commission, including,
without limitation, withdrawing any qualification to conduct business
in any state in which the Company is so qualified, as well as the
preparation and filing of any tax returns.
ix. POWERS OF BOARD AND OFFICERS. The Board of Directors and, subject to
the direction of the Board of Directors, the officers of the Company,
shall have authority to do or authorize any or all acts and things as
provided for in the Plan and any and all such further acts and things
as they may consider necessary or desirable to carry out the purposes
of the Plan, including, without limitation, the execution and filing
of all
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certificates, documents, information returns, tax returns, forms and
other papers which may be necessary to or appropriate to implement the
Plan or which may be required be the provisions of the 1940 Act or any
other applicable laws. The death, resignation or other disability of
any director or any officer of the Company shall not impair the
authority of the surviving or remaining directors or officers to
exercise any of the powers provided for in the Plan.
x. AMENDMENT OF PLAN. The Board shall have the authority to authorize
such variations from or amendments of the provisions of the Plan
(other than the terms of the Liquidation Distribution) as may be
necessary or appropriate to effect the dissolution, complete
liquidation, de-registration and termination of the existence of the
Company, and the distribution of assets to Shareholders in accordance
with the purposes to be accomplished by the Plan.
xi. EXPENSES. The expenses of carrying out the terms of this Plan shall be
borne by the Company, whether or not the liquidation contemplated by
the Plan is effected.
xii. FURTHER ASSURANCES. The Company shall take such. further action,
prior to, at, and after the Liquidation Date, as may be necessary or
desirable and proper to consummate the transactions contemplated by
this Plan.
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xiii. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Plan to be executed by their duly authorized representatives as of this ________
day of October, 1998.
LIFE CYCLE MUTUAL FUNDS, INC.
By:____________________________
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BY SIGNING AND DATING THIS BALLOT, YOU AUTHORIZE THE PROXY TO VOTE THE PROPOSAL
AS MARKED. IF NOT MARKED, THE PROXY WILL VOTE "FOR" THE PROPOSAL, AND AS SHE
SEES FIT ON ANY OTHER MATTER AS MAY PROPERLY COME BEFORE THE MEETING. IF YOU DO
NOT INTEND TO PERSONALLY ATTEND THE MEETING, PLEASE COMPLETE AND MAIL THIS
BALLOT AT ONCE IN THE ENCLOSED ENVELOPE.
LIFE CYCLE MUTUAL FUNDS, INC.
PROXY BALLOT FOR SPECIAL MEETING OF SHAREHOLDERS - OCTOBER 20, 1998
The undersigned hereby constitutes and appoints Ellen F. Stoutamire, with
power of substitution, as proxy to appear and vote all of the shares of
beneficial interest standing in the name of the undersigned on the record date
at the Special Meeting of Shareholders of Life Cycle Mutual Funds, Inc. to be
held at the offices of BISYS Fund Services, 3435 Stelzer Road, Suite 1000,
Columbus, Ohio 43219 at 10:00 a.m. local time, or at any postponement or
adjournment thereof; and the undersigned hereby instructs said proxy to vote as
indicated on this proxy ballot.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED IN THE
FOLLOWING ITEM. IF NO CHOICE IS SPECIFIED, THEY WILL BE VOTED TO APPROVE
THE PROPOSAL. PLEASE REFER TO THE PROXY STATEMENT DISCUSSION OF THESE
MATTERS. THIS PROXY IS SOLICITED ON BEHALF OF THE FUNDS' BOARD OF DIRECTORS.
1. Approval of the Company's Plan of Liquidation and Dissolution:
FOR |_| AGAINST |_| ABSTAIN |_|
To transact such other business as may properly come before the Meeting.
- --------------------------------------------------------------------------------
SIGNATURE SIGNATURE (JOINT OWNER) DATE
PLEASE DATE AND SIGN NAME OR NAMES TO AUTHORIZE THE VOTING OF YOUR SHARES AS
INDICATED ABOVE. WHERE SHARES ARE REGISTERED WITH JOINT OWNERS, ALL JOINT OWNERS
SHOULD SIGN. PERSONS SIGNING AS AN EXECUTOR, TRUSTEE, ADMINISTRATOR, OR OTHER
REPRESENTATIVE SHOULD GIVE FULL TITLE AS SUCH.
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