SCHEDULE 14A
SCHEDULE 14A INFORMATION
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:
[ ] 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 240.14a-11(c) or 240.14a-12
(Name of Registrant as Specified In Its Charter)
The Daruma Funds, Inc.
(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:
June 5, 2000
Dear Shareholder:
This document announces the date, time and location of a
Special Meeting of Shareholders of the Daruma Mid-Cap
Value Fund, the sole series of The Daruma Funds, Inc. (together
the "Fund") It identifies the proposal to be voted on
at the meeting, and contains your proxy statement and
proxy card. A proxy card is, in essence, a ballot.
When you vote your proxy, it tells us how you wish
to vote on important issues relating to your fund.
PLEASE TAKE A MOMENT TO FILL OUT, SIGN AND
RETURN THE ENCLOSED PROXY CARD!
This meeting is critically important. You are being asked to
consider and approve a Plan of Liquidation and Dissolution
which would result in the Fund being liquidated and dissolved
and the proceeds from your shares of the Fund being distributed
to you. The transaction is being proposed because the projected
growth in assets of the Fund was not sufficient to continue to
offer competitive performance and high quality service to
shareholders over the long term. Consequently, after
reviewing several options, the Fund's Board of Directors
has recommended that it would be in the best interest of
the shareholders to terminate the Fund.
Thank you for the confidence you have demonstrated in the
Daruma Mid-Cap Value Fund. It has been our constant endeavor
to reward your confidence by serving your best interest at all
times. We believe that our proposed action is consistent with
that objective. We hope that you will read the attached Proxy
Statement and vote in favor of the liquidation and dissolution
of the Fund.
Sincerely,
/s/
Mariko O. Gordon
President
PROXY STATEMENT
TABLE OF CONTENTS
Page
Notice of Special Meeting of Shareholders (i)
Information about Voting 1
Liquidation and Dissolution of the Fund 2
Other Information about the Fund 4
Exhibit A - Plan of Liquidation and Dissolution
Daruma Mid-Cap Value Fund
(the sole series of The Daruma Funds, Inc.)
60 East 42nd Street, Suite 1111
New York, NY 10165
(800) 435-5076
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the Daruma Mid-Cap
Value Fund a series of The Daruma Funds, Inc. will be
held at 60 East 42nd Street, Suite 1111, New York, New
York on June 23 , 2000 at 10:00 a.m., Eastern time.
During the Meeting, shareholders of the Daruma Mid-Cap Value Fund
will vote on the following proposals:
1. To approve the liquidation of the Daruma Mid-Cap Value
Fund and the dissolution of The Daruma Funds, Inc. pursuant
to the proposed Plan of Liquidation and Dissolution; and
2. To vote in accordance with the views of management
upon any other matters which may legally come before the
Meeting or any adjournment thereof.
By Order of the Board of Directors
/s/
Mary B. O'Byrne
Secretary
June 5, 2000
PLEASE SIGN AND RETURN YOUR PROXY CARD PROMPTLY.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.
(i)
PROXY STATEMENT
The Daruma Funds, Inc.
Special Meeting of Shareholders - June 23, 2000
INFORMATION ABOUT VOTING
On what issue am I being asked to vote?
You are being asked to consider and approve a Plan of Liquidation
and Dissolution ("Liquidation Plan") under which the Daruma Mid-Cap
Value Fund would be liquidated and the proceeds distributed to all
shareholders in proportion to the value of their shares. The
Liquidation Plan also calls for the dissolution of The Daruma
Funds, Inc. For purposes of this Proxy Statement, the Daruma
Mid-Cap Value Fund and The Daruma Funds, Inc. are referred to
together as the "Fund".
The Board of Directors of the Fund is asking you to vote on
the proposal to liquidate the Fund. It is expected that this
proxy statement and proxy card will be mailed to shareholders
on or about June 5, 2000. In addition to solicitations by mail,
some of the Fund's officers and employees, without extra
compensation, may conduct additional solicitations by telephone,
personal interviews and other means. The Fund's investment
manager, Daruma Asset Management, Inc., is paying the cost
of soliciting your vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO APPROVE THE
LIQUIDATION PLAN.
How do I ensure that my vote is accurately recorded?
You may attend the Meeting and vote in person or you may
complete and return the attached proxy card. A Proxy Card
is, in essence, a ballot.All proxy cards that are properly
signed, dated and received prior to the meeting will be voted as
specified. If you specify a vote, your proxy will be voted as
you indicated. If you return a signed proxy card but do
not specify a choice on the proxy card, your shares will
be voted: (1) FOR the liquidation and dissolution of the
Fund, pursuant to the proposed Liquidation Plan; and (2)
in accordance with the views of management upon any
other matters not now known which may legally come
before the Meeting or any adjournment thereof.
Can I revoke my proxy?
You may revoke your proxy at any time before it is voted
either by sending a written revocation addressed to the
Fund, by submitting a later signed proxy or by attending
the Meeting and voting in person.
How many votes are needed to approve the Liquidation Plan?
According to the Fund's Articles of Incorporation , an
affirmative vote of a majority of the shares
of the Fund entitled to vote on the Liquidation
Plan is necessary for approval the Liquidation
Plan. Abstentions will be treated as votes not
cast for purposes of determining whether the
Liquidation Plan was approved, and, therefore,
have the same effect as a vote against the
Liquidation Plan. However, they will be
counted for purposes of determining whether
a quorum is present at the Meeting.
Who is eligible to vote?
Shareholders of record at the close of business on
June 1, 2000 , will be entitled to vote at this
Meeting. Each shareholder is entitled to one
vote for each full share and a partial vote for
each partial share that they own as of the record date.
On June 1, 2000, the outstanding number of shares
of the Fund were 198,106 each of which had a par value
of $0.001. The Fund's net assets totaled $2,281,332
and were held by 262 shareholders. As of that date,
the Fund's officers and Directors as a group, owned
of record and beneficially approximately 24,448 shares
or approximately less than 13% of the Fund's total
outstanding shares. The following companies and
individuals owned more than 5% (9,905 shares) of
the outstanding shares of the Fund:
Name and Address of Owner Amount and Nature of Ownership % of Class
William F. & Donald Gratz TTEEs 27,117.284 shares - Record 13.69%
Treitel-Gratz Co. Inc. Pft. Shs. Tr
U/a/ dtd 1/1/83
13-01 Queens Plaza South
Long Island City, NY 11101
Anthony D'Ottavio 16,218.271 shares - Record 8.19%
47 East Maple Street
Dallastown, PA 17313
John W. Baackes 13,989.706 shares - Record 7.06%
Capital Area Community Health Plan 403(B)
15 Pateman Circle
Menands, NY 07481
Brian J. Heidtke 11,292.503 shares - Record 5.70%
585 Sparrowbush Road
Wyckoff, NJ 07481
LIQUIDATION AND DISSOLUTION OF THE FUND
Why is the liquidation being recommended?
On May 15, 2000, management of the Fund and Daruma Asset Management,
Inc. (the "Investment Manager"), its investment manager, presented
to the Board of Directors a proposal for the liquidation and
dissolution of the Fund. In management's view, the Fund's
current expense ratio is not competitive without waiver of
fees and expense reimbursements by the Investment Manager.
For example, in the Fund's 1998 and 1999 fiscal years,
total expenses represented 2.50% and 2.00%, respectively,
of the Fund's average net assets, before waiver of all
management fees and payment of expense reimbursements by
the Fund's Investment Manager. In each of those years,
the Investment Manager's fee waiver and expense reimbursement
payments reduced the Fund's total operating expenses to
1.50% of average net assets. Further, the Fund's sales
and redemption experience over its forty-five months of
operation lead management to believe that the potential
for significant cash inflows in the future is not great.
Without a significant increase in net assets, it is
unlikely that the Fund will be able to operate at an
efficient expense level without a significant commitment
of capital by the Investment Manager. In light of the
above, management recommended that the Board vote to
liquidate and dissolve the Fund.In light of management's
recommendation, the Board on May 15, 2000 unanimously
determined that liquidation and dissolution of the Fund
was in the best interests of the shareholders and
unanimously approved the Liquidation Plan.
What happens if the liquidation is approved?
The Board of Directors has approved the Liquidation Plan
set forth in Exhibit A to this proxy statement. If the
Shareholders vote to liquidate the Fund, the liquidation
will be carried out according to the terms of the
Liquidation Plan. The terms of the Liquidation Plan
are summarized here.
1. Effective Date of the Liquidation Plan and
Cessation of the Fund's Business as an Investment Company.
The Liquidation Plan will become effective on the date that
it is adopted and approved by an affirmative vote of a majority
of the votes of all shares of the Fund entitled to be cast (the
"Effective Date"). Following this approval, the Fund will cease
making new investments of its assets in accordance with its
investment objective and begin the process of disposing of
its portfolio securities in order to convert its assets to
cash. The Fund will not engage in any business activities
except to dispose of its portfolio securities and to
distribute its assets to its shareholders (after it pays
in full its creditors) and to wind up its affairs. (See
the Plan at Sections 1-3 and 5)
2. Closing of Books and Restriction of Transfer and
Redemption of Shares. On the Effective Date, the books
of the Fund will be closed and the shareholders'
proportionate interests in the Fund will be fixed.
(See the Plan at Section 4)
3. Liquidating Distribution. As soon as possible after
the Fund has disposed of its portfolio securities, the Fund
will mail to each shareholder: (1) a distribution amount
equal to the shareholder's proportionate interest in the net
assets of the Fund; and (2) information concerning the
sources of the liquidating distribution. (See the Plan
at Section 7)
4. Expenses. Daruma Asset Management, Inc., the Fund's
Investment Manager, will pay the expenses incurred in carrying
out the Liquidation Plan. Before the liquidating distribution
is mailed to shareholders, the Fund will pay other expenses
and liabilities incurred (or expected to be incurred) by the
Fund before the distribution. (See the Plan at Sections 6
and 8)
5. Continued Operation of The Daruma Funds, Inc. After
the liquidating distribution is mailed to shareholders, the
Board will continue in office until The Daruma Funds, Inc.
is dissolved in accordance with the laws of the State of
Maryland and deregistered as an investment company with
the U.S. Securities and Exchange Commission. The Board
will have the authority to authorize variations from, or
changes to, the Liquidation Plan if appropriate to
accomplish the liquidation and dissolution. (See the
Plan at Sections 9 and 10.)
What will I receive when the Fund is liquidated?
If the Liquidation Plan is approved, you will receive a
distribution in an amount equal to your interest in the
net assets of the Fund as determined on the Effective Date.
What are the general tax consequences of the liquidation?
You will recognize a capital gain or loss on the liquidating
distribution
equal to the difference between your basis in the Fund shares
and the proceeds received. For each individual shareholder,
such gain or loss will be short-term if the Fund shares
were held one year or less on the date of the liquidating
distribution; or long-term if held more than one year
on the date of the liquidating distribution.
Net short-term gains of individuals are taxed at the same
rate as ordinary income; and, net long-term gains are
taxed at the maximum tax rate of 20%.
What if the liquidation is not approved?
If the shareholders do not approve the Liquidation Plan,
the Fund will temporarily continue to operate as an
open-end registered management investment company and
will again offer its shares and invest its assets in
accordance with its stated objectives and policies.
The Board will then consider other alternatives for the
future of the Fund.
Will any other matters be presented at the Meeting?
The Board is not aware of any other matters to be
presented at this Meeting. If any other matters
are properly presented at the Meeting, the proxy holders
will vote in accordance with the views of management.
OTHER INFORMATION ABOUT THE FUND
The Daruma Funds, Inc. was organized as a business
corporation under the laws of Maryland on
May 13, 1996, and consists of a single series,
the Daruma Mid-Cap Value Fund, which commenced
operations on August 16, 1996. The Fund's
investment objective is long-term capital
appreciation by investing primarily in the
common stocks of medium capitalization companies.
The Fund's most recent Annual Report and
Semi-Annual Report to shareholders were previously
mailed to shareholders. Copies of these reports are
available upon request, without charge, by writing
or calling the Fund at the address and telephone number
shown on the Notice.
Any shareholder who wishes to submit a proposal
for consideration by shareholders at any future meeting
may do so by submitting the proposal in writing to the
Fund at the address shown in the Notice. The Daruma
Funds, Inc. is organized as a Maryland corporation, and
ordinarily does not hold annual shareholders meetings.
Any proposal meeting guidelines of the Securities and
Exchange Commission that is received a reasonable time
in advance of the preparation of material relating to
a future shareholder meeting will be included in
the proxy material.
The Fund's investment manager is Daruma Asset
Management, Inc., located at 60 East 42nd Street,
Suite 1111, New York, New York. The Fund's administrator
is American Data Services, Inc., is located at 150
Motor Parkway, Suite 109, Hauppauge, New York.
By Order of the Board of Directors
/s/
Mary B. O'Byrne
Secretary
Dated: June 5, 2000
Exhibit A
The Daruma Funds, Inc.
Plan of Liquidation and Dissolution
The following Plan of Liquidation and Dissolution ("Plan") of
The Daruma Funds, Inc. (the "Company"), a business corporation
incorporated and existing under the laws of the State of
Maryland and an open-end management investment company
registered under the Investment Company Act of 1940, as amended
("1940 Act"), is intended to accomplish the complete liquidation
and dissolution of the Company in conformity with the laws of
the State of Maryland. The Company consists of a single
series, the Daruma Mid-Cap Value Fund (the "Fund"). The
outstanding voting shares of the Fund constitute all of
the outstanding voting shares of the Company.WHEREAS, on
May 15, 2000, the Company's Board of Directors
unanimously determined that it is in the best interest
of the Company and its shareholders to liquidate and
dissolve the Company and has considered and adopted
this Plan as the method of liquidating and dissolving
the Company and has directed that this Plan be submitted
to shareholders of the Company for approval;
NOW, THEREFORE, the liquidation and dissolution of the
Company shall be carried out in the manner hereinafter
set forth: Effective Date of Plan. The Plan shall be
and become effective only upon the approval, by the
affirmative vote of a majority of the votes of shares
of the Company entitled to be cast. The day of such
approval by shareholders is hereinafter called the
"Effective Date."
1. Dissolution. As promptly as practicable,
the Company shall be dissolved in accordance with the laws
of the State of Maryland.
2. Cessation of Business. After the Effective Date
of the Plan, the Company shall cease its business as an
investment company and shall not engage in any business
activities except for the purposes of winding up its
business and affairs, preserving the value of its assets
and distributing its remaining assets of each class
ratably among the shareholders of the outstanding
shares of that class, in accordance with the provisions
of the Plan, after discharging or making reasonable
provision for the Company's liabilities.
3. Restriction of Transfer and Redemption of Shares.
The proportionate interests of shareholders in the assets
of the Fund shall be fixed on the basis of their respective
holdings at the close of business on the Effective Date of
the Plan. On the Effective Date, the books of the Company
shall be closed. Thereafter, unless the books are reopened
because the Plan cannot be carried into effect, the
shareholders' respective interests in the Company's
assets shall not be transferable by the negotiation
of share certificates or otherwise.
4. Liquidation of Assets and Payment of Debts.
As soon as is reasonable and practicable after the
Effective Date, all portfolio securities of the
Company shall be converted to cash or cash equivalents.
As soon as practicable after the Effective Date, the
Company shall pay, or make reasonable provision to pay,
in full all claims and obligations, including all
contingent, conditional or unmatured claims and
obligations, known to the Company and all claims
and obligations which are known to the Company
but for which the identity of the claimant is unknown.
5. Liquidating Distribution. As soon as possible
after the Effective Date, the Company shall mail to each
shareholder of record on the Effective Date: (1) a
liquidating distribution equal to the shareholder's
proportionate interest in the net assets of the Company;
and (2) information concerning the sources of the
liquidating distribution. Any accrued income or
gains will be distributed as part of the liquidation
distribution. Upon the mailing of the liquidating
distribution, all outstanding certificated and
uncertificated shares of the Company will be deemed
canceled. Shareholders in possession of certificated
shares of the Company will not be required to
surrender their certificates to complete the
liquidating distribution.
6. Management and Expenses of the Company
Subsequent to the Liquidating Distribution.
Daruma Asset Management, Inc. (the "Adviser") shall
bear the expenses incurred in carrying out this Plan
including, but not limited to, printing, legal,
accounting, custodian and transfer agency fees,
and the expenses of reports to or meeting of shareholders.
7. Articles of Dissolution. Upon completion of the
Liquidating Distribution, the Directors shall cause Articles
of Dissolution to be filed in accordance with the laws of
the State of Maryland.
8. Deregistration as an Investment Company. Upon
completion of the Liquidating Distribution, the Directors
shall cause to be filed with the SEC an application for
an order declaring that the Company has ceased to be an
investment company.
9. Power of Board of Directors. The Board, the
directors and the officers, shall have authority to do
or authorize any acts and things as provided for in the
Plan and as they may consider necessary or desirable to
carry out the purposes of the Plan, including the
execution and filing of certificates, tax returns and other
papers. The death, resignation or disability of any trustee
or any officer of the Company shall not impair the authority
of the surviving or remaining trustees or officers to
exercise any of the powers provided for in the Plan.
The Board of Directors shall have the authority to
authorize variations from or amendments of the provisions
of the Plan as may be necessary or appropriate to effect
the liquidation and dissolution of the Company, and the
distribution of its net assets to shareholders in
accordance with the laws of the State of Maryland.
Dated: May 15, 2000
SPECIAL MEETING OF SHAREHOLDERS
DARUMA MID-CAP VALUE FUND
(the sole series of The Daruma Funds, Inc.)
June 23, 2000
The undersigned hereby revokes all previous
proxies for his or her shares and appoints __________________ ,
and each of them, proxies of the undersigned with full power
of substitution to vote all shares of the Daruma Mid-Cap
Value Fund (the "Fund") which the undersigned is entitled
to vote at the Fund's Special Meeting to be held at 60
East 42nd Street, Suite 1111, New York, New York at
10:00 a.m., Eastern time on June 23, 2000, including any
adjournment thereof (the "Meeting), upon such business
as may properly be brought before the Meeting.
No. 1 To approve the liquidation of the Daruma Mid-Cap Value Fund
and the dissolution of The Daruma Funds, Inc., pursuant to the
proposed Plan of Liquidation and Dissolution.
FOR AGAINST ABSTAIN
No. 2
To vote in accordance with the views of management upon any
other matters which may legally come before the Meeting or
any adjournment thereof.
GRANT WITHHOLD
Please indicate your proposal selections by placing an "X" in
the appropriate box.
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE REQUIRED IF MAILED IN THE U.S.
This proxy is solicited on behalf of the Board of Directors
of The Daruma Funds, Inc. (the "Company") It will be voted
as specified. If no specification is made, this proxy shall
be voted in favor of Proposal 1, regarding the liquidation
and dissolution of the Company and its sole series, Daruma
Mid-Cap Value Fund pursuant to the Plan of Liquidation and
Dissolution. If any other matters properly come before the
meeting about which the proxyholders were not aware prior
to the time of the solicitation, authorization is given the
proxyholders to vote in accordance with the views of
management on such matters. The management is not aware
of any such matters.
Dated:
Signature Signature
Print Name Print Name
Note: Please sign exactly as your name appears on the proxy.
If signing for estates, trusts or corporations,
title or capacity should be stated. If shares are held
jointly, each holder must sign.
IMPORTANT: PLEASE SIGN AND SEND YOUR PROXY. . . TODAY!
You are urged to date and sign the attached proxy and return
it promptly. This will help save the expense of
follow-up letters to shareholders who have not responded.
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