SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [ ]
Filed by a Party other than the Registrant [X]
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 Sec. 240.14a-11(c) or Sec. 240.14a-12
THE SMALLCAP FUND, INC.
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(Name of Registrant as Specified in its Charter)
Ralph W. Bradshaw
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Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies: _____________________________________________
(2) Aggregate number of securities to which transaction
applies: _____________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
______________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________
(5) Total fee paid:_______________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
_______________________________________
(2) Form, Schedule or Registration Statement No.:
_______________________________________
(3) Filing Party:
_______________________________________
(4) Date Filed:
_______________________________________
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PROXY STATEMENT IN OPPOSITION
TO SOLICITATION BY THE BOARD OF DIRECTORS OF THE
SMALLCAP FUND, INC.
ANNUAL MEETING OF STOCKHOLDERS
To be held on ___________, 2002
This proxy statement and the enclosed [GREEN] proxy card are being furnished to
holders of record on _________, 2002 (the "Record Date") of shares of common
stock ("Common Stock")of The Smallcap Fund, Inc. (the "Fund") by Ralph W.
Bradshaw (the "Soliciting Stockholder"), a stockholder and Director of the Fund,
in connection with the solicitation of proxies by the Soliciting Stockholder for
use at the 2002 Annual Meeting of the Fund to be held at the Grand Hyatt, Park
Avenue at Grand Central Station, East 42nd Street, New York, NY 10017
_____________ on ___________, 2002 at ________ _.m. (eastern time) and any
adjournment or adjournments hereof. The Soliciting Stockholder is soliciting a
proxy to vote your shares at the 2002 Annual Meeting of Stockholders of the Fund
and at any and all adjournments or postponements of the meeting.
INTRODUCTION
This proxy statement and the enclosed [GREEN] proxy card are first being sent to
stockholders of the Fund on or about ________, 2002 for the following purposes:
(1) To vote on the reorganization of the Fund (the "reorganization
proposal")into the Deutsche Small Cap Fund, an open-end investment company
(the "Deutsche Fund"), pursuant to an Agreement and Plan of Reorganization
between the Fund and BT Investment Funds on behalf of Deutsche Fund. Under
this Agreement, the Fund would transfer all of its assets to Deutsche Fund,
an open-end investment company, in exchange for Merger shares of Deutsche
Fund. These shares would be distributed proportionately to you and the other
stockholders of the Fund. Deutsche Fund would also assume the Fund's stated
liabilities, and the Fund would then be liquidated and dissolved;
(2) To elect two directors of the Fund for a term of three years and
until their successors are duly elected and qualified; and
The Soliciting Stockholder is also soliciting your proxy to vote your shares on
the following Shareholder Value Proposal, that he intends to introduce at the
meeting:
(a) If a majority supports the reorganization proposal, the stockholders
recommend that the Board use its best efforts to eliminate the
redemption fee and the in-kind redemption option, and to permanently
cap the expense ratio at 1.25%.
(b) If a majority does not support the reorganization proposal, the
stockholders recommend that the Board of Directors conduct a tender
offer for all shares at Net Asset Value ("NAV") within 60 days.
With respect to these matters, the Soliciting Stockholder is soliciting a proxy
to vote your shares:
- IN FAVOR of the election of the individuals whom the Soliciting
Stockholder intends to nominate for election as director of the Fund.
- IN FAVOR of the Shareholder Value Proposal that the Soliciting Stockholder
intends to introduce at the meeting.
How Proxies Will Be Voted
All of the proposals scheduled by the Fund to be voted on at the meeting are
included in the enclosed [GREEN] proxy card. If you wish to vote on any of
these items, you may do so by completing and returning a [GREEN] proxy card.
If you return a [GREEN] proxy card to the Soliciting Stockholder or its agent,
your shares will be voted on each matter as you indicate. If you do not
indicate how your shares are to be voted on a matter, they will be voted ABSTAIN
on the reorganization proposal, FOR the election of the nominees named in this
proxy, and FOR both parts of the Shareholder Value Proposal. If any other
proposals are introduced at the meeting, proxies will be voted by the Soliciting
Stockholder in accordance with the best interests of the stockholders, in the
sole judgment and opinion of the Soliciting Stockholder. The proxies may also
temporarily decline to attend the Meeting, thereby possibly preventing a quorum,
in order to solicit additional proxies or, if they deem it to be in the interest
of the stockholders, for any other legal reason. If you return a [GREEN] proxy
card, you will be granting the persons named as proxies discretionary authority
to vote on any other matters of which they are not now aware that may come
before the meeting. These may include, among other things, matters relating to
the conduct of the meeting and proposals of other stockholders.
Voting Requirements
Only stockholders of record on the Record Date are entitled to vote at the
meeting. According to the Fund's proxy statement, as of ___________, 2002
there were ____________ issued and outstanding shares of common stock of the
Fund. Stockholders will be entitled to one vote for each share held. Only
stockholders of record at the close of business on ___________, 2002 will be
entitled to vote at the Meeting. Directors of the Fund are elected by a
plurality of the votes cast.
In tallying stockholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (a) instructions have not been received
from the beneficial owners or persons entitled to vote and (b) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the meeting, but neither abstentions nor broker non-votes will be
considered votes cast for any purposes at the Meeting. The two nominees
receiving the largest number of votes will be elected to serve as directors of
the Fund.
If a quorum is not present at the meeting, the persons named as proxies may
propose one or more adjournments of the meeting to permit further solicitation
of proxies. The proxies may also propose an adjournment for other reasons. Any
adjournment will require the affirmative vote of a majority of those shares
present at the meeting in person or by proxy. If an adjournment of the meeting
is proposed, the person named as proxy on the [GREEN] proxy card will vote for
or against such adjournment in his discretion.
Revocation of Proxies
You may revoke any proxy you give to management or the Soliciting Stockholder at
any time prior to its exercise in the following ways:
Deliver a written revocation of your proxy to the Secretary of the Fund;
Execute and deliver a later dated proxy to the Soliciting Stockholder or to the
Fund or our respective agents; or
Vote in person at the meeting. (Attendance at the meeting will not in and of
itself revoke a proxy.)
There is no limit on the number of times you may revoke your proxy prior to the
meeting. Only the latest dated, properly signed proxy card will be counted.
INFORMATION CONCERNING THE SOLICITING STOCKHOLDER
The address of the Soliciting Stockholder is One West Pack Square, Suite 1650,
Asheville, NC 28801.
As of the Record Date, the Soliciting Stockholder had the beneficial ownership
of 1134 shares of Common Stock of the Fund.
Exhibit 1 to this proxy statement contains a schedule showing the purchases and
sales of Common Stock of the Fund by the Soliciting Stockholder within the past
two years.
The Soliciting Stockholder has made the decision to give stockholders a choice
regarding both the reorganization of the Fund and the members of the Board of
Directors. The Soliciting Stockholder believes that stockholders should be able
to respond to features of the reorganization, as proposed, to insure that it is
in the best interests of the Fund's stockholders.
There are no contracts, arrangements, or understandings of any kind between the
Soliciting Stockholder and any other person with respect to how shares of the
Fund owned by that person might be voted.
REASONS FOR THE SOLICITATION
Stockholders are being asked to decide whether or not the Fund should, in
effect, be acquired by Deutsche Fund, an open-end fund. Further details of this
proposal from the Fund's proxy, where this reorganization proposal is more fully
described, should be studied. There are both advantages and disadvantages for
stockholders if the Fund remains as it is or becomes a part of the Deutsche
Fund. It is important, therefore, that stockholders carefully determine what
decisions are in their best interest.
At the meeting, I intend to introduce a Shareholder Value Proposal that is
further discussed in this proxy. This is advisory but is intended to provide
direction to the Board of Directors about the will of the stockholders. The two
parts of this proposal allow stockholders to provide their input on what
decisions are in their best interest and could aid in the passage of the
reorganization proposal as a majority of stockholders may also support
eliminating restrictions in the proposal. Additionally, should the
reorganization proposal fail but a majority of stockholders vote to support a
subsequent tender offer at NAV, the Board of Directors can better understand the
will of the owners of the Fund.
The purpose of this proxy is to solicit your vote to support the Shareholder
Value Proposal, which I intend to introduce at the meeting, and to elect Andrew
A. Strauss and Glenn W. Wilcox to the Board of Directors.
I believe that the election of Messrs. Strauss and Wilcox as directors will
provide stockholders with an independent voice on important matters affecting
the Fund. Their election will give the Board new perspective and may help assure
that measures intended to benefit stockholders are more actively considered.
They believe that the closed-end fund structure offers distinct advantages and
are committed, as I am, to following the will of the stockholders.
- If a majority approves the reorganization proposal, they will help execute
the plan as quickly and as effectively as possible;
- If a majority also supports removing the impediments to maximizing
benefits for stockholders under the reorganization proposal, they will attempt
to minimize or eliminate those negative features of the proposal;
- If the reorganization proposal fails, but a majority supports the proposal
to conduct a tender offer at NAV, they will work to provide this option within
60 days; and
- If a majority chooses to retain the closed-end fund structure, they will
work to maximize stockholder value in the Fund.
If you share these goals, I urge you to vote, using the enclosed [GREEN] proxy
card.
CERTAIN CONSIDERATIONS
In deciding whether to give the Soliciting Stockholder your proxy, you should
consider the following information.
Even if these nominees are elected, there can be no assurance that the full
Board of Directors will take any actions that they may advocate or that such
actions, if taken, will achieve their intended goals. These nominees will, if
elected, represent a minority of the Fund's five directors, absent the
resignation of any other directors.
Implementation of certain Board actions may require stockholder approval, and no
assurance can be given that such approval will be obtained. In addition,
various costs, which would be borne indirectly by stockholders, may be
associated with certain actions, including but not limited to those associated
with holding a special meeting of stockholders.
The Soliciting Stockholder believes that all stockholders of the Fund will
benefit if any actions taken to improve stockholder value or to reduce or
eliminate the discount to NAV are successful.
Proposal 1 - THE REORGANIZATION PROPOSAL
Stockholders are asked to determine whether or not the Fund should be
reorganized so that the assets of the Fund would be acquired by the open-end
Deutsche Fund and shares of our Fund be exchanged for an equivalent value of
newly created Merger shares in the Deutsche Fund. As disclosed in the Fund's
proxy, the Advisor's presentation of this proposal to the Board illustrated
three main benefits to the Fund's stockholders. The proposal would address the
discount to NAV at which the Fund's shares have historically traded, since an
open-end fund would continually redeem shares at NAV. The proposal would allow
the Fund to absorb additional trading volume and, without the proposal, it would
not be possible to grow the Fund significantly.
The reorganization proposal contains a number of features that limit the
benefits to the Fund's stockholders and thus may result in its defeat.
Specifically, some of these are:
- - A 2% redemption fee. Since the Fund's discount to Net Asset Value ("NAV")
has often remained under 4% in recent trading, stockholders who choose to redeem
their shares in the first year could lose 50% or more of the benefits from
closing the discount.
- - An option to redeem shares in-kind. The Deutsche Fund has retained the
option to satisfy redemption requests with shares of stock from the portfolio.
In addition to the 2% redemption penalty, stockholders of our Fund who choose to
sell their shares may also be burdened with the receipt and liquidation of a
wide variety of small cap positions, some of which could be illiquid, instead of
cash.
- - The Deutsche Fund has a higher expense ratio than our Fund. While the
proposal includes a temporary reduction in expenses, it is likely that the
higher level of expenses will eventually flow to the Fund's stockholders unless
the Deutsche Fund agrees to a permanent reduction.
As a Director of the Fund, I did not support the reorganization proposal
because, as presented, I did not believe that it went far enough to insure that
it was in the best interest of stockholders. However, the Shareholder Value
Proposal, which follows, addresses my concerns about the reorganization by
allowing stockholders to express their will to the Board concerning
alternatives.
Proposal 2 - ELECTION OF DIRECTORS
There are five members in the current Board of Directors.
At the meeting, stockholders will have the opportunity to elect two people as
directors of the Fund to serve for a three-year term and until their successor
shall have been elected and qualified.
The Soliciting Stockholder intends to nominate Andrew A. Strauss and Glenn W.
Wilcox for election as directors to fulfill these positions. Information about
the nominees is as follows:
Name, Age, Address Principle Occupation During Past 5 Years
Glenn W. Wilcox, Sr. (70) Chairman of the Board and Chief Executive
One West Pack Square Officer of Wilcox Travel Agency. Director
Suite 1700 of Champion Industries, Wachovia Corp.,
Asheville, NC 28801 EIS Fund, Cornerstone Strategic
Value Fund, Progressive Return Fund, and
The Cornerstone Strategic Return Fund;
Board Trustee and Chairman
Of Appalachian State University; Board
Trustee and Director, Mars Hill College;
and Chairman, Tower Associates, Inc. (a
real estate venture)
The Number of Shares Owned Directly or Indirectly as of ______________, 2002
is _____.
Andrew A. Strauss (48) Attorney and senior member of Strauss &
77 Central Avenue Associates, P.A., Attorneys; previous
Suite F President of White Knight Healthcare,
Asheville, NC 28801 and LMV Leasing, a wholly owned
Subsidiary of Xerox Credit Corporation
Director of Progressive Return Fund,
The Cornerstone Strategic Return Fund,
Cornerstone Strategic Value Fund,
EIS Fund, Memorial Mission Hospital
Foundation, and Deerfield Episcopal
Retirement Community
The Number of Shares Owned Directly or Indirectly as of ______________, 2002
is _____.
The Fund pays no compensation to the Fund's officers. According to the Fund's
proxy, none of the Fund's directors or officers has engaged in any financial
transactions with the Fund or the Advisor.
Other than fees that may be payable by the Fund to its directors, the nominees
named above have no arrangement or understanding with any person with respect to
any future employment by the Fund or by any affiliate of the Fund.
The persons named as proxies in the enclosed [GREEN] proxy card intend, in the
absence of contrary instructions, to vote all proxies they are entitled to vote
IN FAVOR of the election of the nominees named above. The nominees have
consented to stand for election and to serve if elected. If either is unable to
serve, an event not now anticipated, the proxies will be voted for such other
person, if any, designated by the persons named as proxies.
Information regarding the persons now serving as directors and officers of the
Fund, and additional information regarding the Fund, are contained in the Fund's
proxy statement.
Proposal 3a and 3b - Shareholder Value Proposal
Both parts of this proposal serve to convey the wishes of stockholders to the
Board. This proposal is not included in the Fund's proxy but is intended to be
proposed at the 2002 Annual Meeting of Shareholders. It is possible that those
conducting the meeting may attempt to use procedural grounds to effectively
block the introduction of this proposal at the meeting. Since this is an
advisory proposal, the Board is under no obligation to respond to its passage.
However, a vote of approval by the majority of shares should influence the
actions of the Board of Directors, who are bound by a fiduciary obligation to
the stockholding owners.
The reorganization proposal addresses the historic problem of the Fund's shares
trading at a discount to NAV. However, features of the proposal, including a 2%
redemption fee, an option to redeem shares with in-kind portfolio securities,
and a higher expense ratio, together substantially reduce its benefit to
stockholders. Passage by a majority of stockholders of both the reorganization
proposal and the first part of the Shareholder Value Proposal and their
subsequent implementation by the Board would allow those stockholders of the
Fund who so desired to exchange their shares at NAV. Implementation of this
proposal may result in higher level of asset withdrawal, the effects of which on
remaining stockholders is unknown. The Soliciting Stockholder recommends that
you vote FOR the first part of the Shareholder Value Proposal.
The second part of the Shareholder Value Proposal would only be effective if the
reorganization proposal were to fail. This part recommends that, if a majority
favors this proposal, the Board conduct a tender offer for all shares at NAV
within 60 days. It is likely that the expense ratio would be negatively
affected by substantial reduction in asset level. Tax consequences from partial
portfolio liquidation are unknown. Implementation of this part of the
Shareholder Value Proposal would address the discount situation by allowing
those who so choose to exchange their shares for full NAV. Since the majority
of the Board determined that the discount problem would be best addressed by
open-ending, it would provide a benefit to existing stockholders similar to that
which would result from choosing to open-end the Fund. As a result, the
Soliciting Stockholder recommends that you vote FOR the second part of the
Shareholder Value Proposal.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The Fund's proxy shows Deep Discount Advisors, Inc. and Ron Olin Investment
Management Company as beneficial owners of ______% and ______% respectively of
the Fund's outstanding shares. Ralph Bradshaw is a former employee of Deep
Discount Advisors. He has also been a consultant to Ron Olin Investment
Management Company. Neither company is a party to this solicitation and, as
passive investors in the Fund's shares, they are not endorsing this proxy
solicitation. The Soliciting Stockholder knows of no other person who owned of
record or beneficially more than 5% of the outstanding Common Stock of the Fund
that is not disclosed in the Fund's proxy statement.
According to the Fund's proxy statement, the directors and officers of the Fund,
as a group owned less than 1% of the outstanding shares of the Fund.
THE SOLICITATION
Ralph W. Bradshaw, the Soliciting Stockholder, is making this solicitation.
Banks, brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward this proxy statement and the enclosed [GREEN] proxy card to
the beneficial owners of shares of Common Stock for whom they hold shares of
record. The Soliciting Stockholder will reimburse these organizations for their
reasonable out-of-pocket expenses.
The Soliciting Stockholder will bear all of the fees and expenses related to
this proxy solicitation.
The Soliciting Stockholder is not and, within the past year, has not been a
Party to any contract, arrangement or understanding with any person with respect
to any securities of the Fund. In addition, there is no arrangement or
understanding involving the Soliciting Stockholder that relates to future
employment by the Fund or any future transaction with the Fund.
If you have any questions concerning this proxy solicitation or the procedures
to be followed to execute and deliver a proxy, please contact the Soliciting
Stockholder at 828-210-8184.
ADDITIONAL PROPOSALS
The Soliciting Stockholder knows of no business that will be presented for
consideration at the meeting other than that set forth in this proxy statement
and in the Fund's proxy statement. If any other matters are properly presented
for consideration at the meeting, it is the intention of each of the persons
named as proxies on the enclosed [GREEN] proxy card to vote in accordance with
his own best judgement on such matters.
The date by which a stockholder must submit a proposal to be presented at the
2003 Annual Meeting of Stockholders is set forth in the Fund's proxy statement.
Dated: ___________, 2002
EXHIBIT 1 Purchases and Sales of Smallcap Fund Shares
SECURITIES OF THE FUND PURCHASED OR SOLD WITHIN THE PAST TWO YEARS BY THE
SOLICITING STOCKHOLDER
Date Number of Shares Purchased
[PROXY CARD]
PROXY CARD
PROXY SOLICITED IN OPPOSITION
TO THE BOARD OF DIRECTORS OF THE
SMALLCAP FUND, INC.
BY RALPH W. BRADSHAW,
A STOCKHOLDER AND DIRECTOR OF
THE SMALLCAP FUND, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON __________, 2002
The undersigned hereby appoints Thomas R. Westle, Barry Breen, and Ralph W.
Bradshaw, and each of them, as the undersigned's proxies, with full power of
substitution, to attend the Annual Meeting of Stockholders of The Smallcap Fund,
Inc. (the "Fund") and to vote all shares of Common Stock of the Fund which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on June __ 2002 at _____ a.m. at the Grand Hyatt, Park Avenue at Grand Central
Station, East 42nd Street, New York, NY 10017, and any adjournment or
adjournments thereof. Properly executed proxies will be voted (or the vote on
such matters may be withheld on specific matters) in accordance with
instructions appearing on the proxy. Please refer to the Proxy Statement for
a discussion of the proposals.
(INSTRUCTIONS: Mark votes by placing an "x" in the appropriate [ ].)
(1) To approve the reorganization of the Fund into the Deutsche Small Cap
Fund, an open-end investment company (the "Deutsche Fund"), pursuant to an
Agreement and Plan of Reorganization between the Fund and BT Investment Funds
on behalf of the Deutsche Fund and as more fully described in the Fund's Proxy
Statement;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To elect Andrew A. Strauss and Glenn W. Wilcox as Directors to the Fund's
Board of Directors to serve for a term of three years and until their successors
are duly elected and qualified; and
Andrew A. Strauss FOR THE NOMINEE [ ] WITHHOLD [ ]
Glenn W. Wilcox FOR THE NOMINEE [ ] WITHHOLD [ ]
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE FOR THE ELECTION OF THESE NOMINEES
3. To approve the following Shareholder Value Proposal:
(a) If a majority supports the reorganization proposal, the stockholders
recommend that the Board use its best efforts to eliminate the redemption fee
and the in-kind redemption option, and to permanently cap the expense ratio at
1.25%.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(b) If a majority does not support the reorganization proposal, the
stockholders recommend that the Board of Directors conduct a tender offer for
all shares at Net Asset Value within 60 days.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SOLICITING STOCKHOLDER URGES YOU TO VOTE FOR THE ABOVE PROPOSAL
ANY AND ALL OTHER PROPOSALS WILL BE VOTED BY THE PROXYHOLDERS IN THE BEST
INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGMENT OF THE
PROXYHOLDERS AT THE TIME OF THE MEETING. THE UNDERSIGNED HEREBY ACKNOWLEDGES
RECEIPT OF THE PROXY STATEMENT DATED __________, 2002, OF RALPH W. BRADSHAW AND
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE EXECUTED BY THE UNDERSIGNED
RELATING TO THE SUBJECT MATTER HEREOF AND CONFIRMS ALL THAT THE PROXIES MAY
LAWFULLY DO BY VIRTUE HEREOF.
(IMPORTANT - PLEASE FILL IN DATE)
This proxy card is provided by Ralph W. Bradshaw, a stockholder and director of
the Fund. Please sign exactly as your name appears hereon or on proxy cards
previously sent to you. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by the President or other duly authorized officer. If a
partnership, please sign in partnership name by authorized person.
SIGNATURE(S)_____________________________________________Dated:____________
Please sign as registered and return promptly in the enclosed envelope.
Executors, trustees and other signing in a representative capacity should
include their names and the capacity in which they sign.