PROSPECTUS
dated October 26, 1999
2,500,000 SHARES
LCM INTERNET GROWTH FUND, INC.
COMMON STOCK ($.01 PAR VALUE)
The LCM Internet Growth Fund, Inc. (the "Fund"), which
is a newly organized, non-diversified, closed-end
management investment company, is offering an aggregate
of 2,500,000 shares of common stock, $.01 par value per
share (the "Common Stock"). The Fund's investment
objective is to seek capital appreciation by investing
in a portfolio consisting primarily of equity
securities issued by companies that the Fund's
investment adviser believes will benefit from growth of
the Internet. Current dividend income is not an
investment consideration. Under normal market
conditions, the Fund will invest at least 65% of its
total assets in the equity securities of companies that
engage in Internet and Internet-related activities.
There can be no assurance that the Fund's investment
objective will be achieved. LCM Capital Management,
Inc. ("LCMCM") will serve as the investment adviser to
the Fund. The address of the Fund is 810 West
Washington Boulevard, Chicago, Illinois 60607, and the
Fund's telephone number is (312) 705-3028.
These securities involve a high degree of risk. Prior
to this offering, there has been no public market for
the Fund's shares. Equity securities of closed-end
funds have frequently traded at discounts from their
net asset values and initial offering prices. This
risk may be greater for investors expecting to sell
shares of a closed-end fund soon after completion of an
initial public offering of such shares. For a
discussion of other significant risks that should be
considered by potential investors, see "Risk Factors
and Special Considerations."
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved
these securities or determined if this Prospectus is
truthful or complete. Any representation to the
contrary is a criminal offense.
Price to Public(1) Underwriting Discount(2) Proceeds to Fund(3)
Per Share $10.00 $0.55 $9.45
Total (4) $25,000,000.00 $1,375,000.00 $23,625,000.00
(1) The Common Stock is being offered to investors
at an initial public offering price of $10.00 per
share. See "Underwriting."
(2) The Fund and LCMCM have agreed to indemnify the
Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as
amended ("Securities Act"). See "Underwriting."
(3) Before deducting a non-accountable expense
allowance payable to LaSalle St. Securities, LLC,
the representative of the Underwriters (the
"Representative"), in an amount equal to 1% of the
total Price to Public ($250,000). Organizational
expenses of the Fund and offering expenses
associated with this offering, estimated to be
$260,000, will be paid by LCMCM from its own assets.
See "Underwriting."
(4) The Fund has granted to the Underwriters a
30-day over-allotment option to purchase up to
375,000 additional shares of Common Stock on the
same terms and conditions set forth above. If all
of such shares are purchased by the Underwriters,
the total Price to Public, Underwriting Discount and
Proceeds to Fund will be $28,750,000, $1,581,250 and
$27,168,750. See "Underwriting."
Internet Distribution by
LaSalle St. Securities, LLC Einvestmentbank
Wedbush Morgan Securities
Joseph Charles & Associates, Inc. Southwest Securities, Inc.
<TABLE>
<S> <C> <C>
Advanced Equities, Inc. Bluestone Capital Partners, L.P. EBI Securities Corp.
Hagerty Stewart J.P. Turner & Co., LLC L.H. Friend, Weinress, Frankson & Presson, L.P.
Nutmeg Securities, Ltd. Paradise Valley Securities, Inc. Redwine & Co., Inc.
</TABLE>
<PAGE>
The Common Stock is being offered, subject to prior
sale, when, as and if accepted by the Underwriters and
subject to approval of certain legal matters by counsel
for the Underwriters. It is expected that delivery of
the shares of Common Stock will be made on or before
the third business day following the effective date of
this Prospectus at the offices of the Fund's transfer
agent, Firstar Bank Milwaukee, N.A., Milwaukee,
Wisconsin. The Common Stock has been approved for
listing on the American Stock Exchange under the symbol
"FND."
You are advised to read this Prospectus, which sets
forth concisely the information about the Fund that you
should know before investing. It should be retained
for future reference. Additional information regarding
the Fund is included in the Statement of Additional
Information (the "SAI"), dated the date hereof, which
has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated herein by
reference. The table of contents of the SAI is located
on page 24 of this Prospectus. A copy of the SAI is
available without charge by writing the Fund at 810
West Washington Boulevard, Chicago, Illinois 60607, or
by calling (312) 705-3028.
TABLE OF CONTENTS OF THE PROSPECTUS
Page
PROSPECTUS SUMMARY 3
FEES AND EXPENSES 5
USE OF PROCEEDS 6
THE FUND 6
INVESTMENT OBJECTIVE AND POLICIES 6
INVESTMENT RESTRICTIONS 9
INVESTMENT PRACTICES AND TECHNIQUES 9
RISK FACTORS AND SPECIAL CONSIDERATIONS 13
YEAR 2000 ISSUE 15
MANAGEMENT OF THE FUND 15
DESCRIPTION OF COMMON STOCK 16
DISTRIBUTIONS; DISTRIBUTION REINVESTMENT PLAN 17
ANTI-TAKEOVER PROVISIONS 18
SHARE PURCHASES AND TENDERS 19
FEDERAL TAXATION OF THE FUND AND ITS DISTRIBUTIONS 20
NET ASSET VALUE 20
UNDERWRITING 21
LEGAL MATTERS 22
EXPERTS 22
ADDITIONAL INFORMATION 23
REPORTS TO SHAREHOLDERS 23
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 24
Until November 22, 1999, all dealers that effect
transactions in these securities, whether or not
participating in this offering, may be required to
deliver a Prospectus. This is in addition to the
dealers' obligation to deliver a Prospectus when acting
as underwriters and with respect to their unsold
allotments or subscriptions.
You should rely only on the information contained in
this Prospectus. The Fund has not authorized anyone to
provide you with different information. The Fund is
not making an offer of these securities in any state
where the offer is not permitted. You should not
assume that the information contained in this
Prospectus is accurate as of any date other than the
date on the front of this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by
reference to the more detailed information included
elsewhere in this Prospectus.
The Fund The Fund is a newly organized, non-
diversified, closed-end management
investment company, which is
registered as such under the
Investment Company Act of 1940, as
amended (the "1940 Act"). The
investment objective of the Fund is to
seek capital appreciation by investing
in a portfolio consisting primarily of
equity securities issued by companies
that LCMCM believes will benefit from
growth of the Internet. Current
dividend income is not an investment
consideration. Under normal market
conditions, the Fund will invest at
least 65% of its total assets in the
equity securities of companies that
engage in Internet and Internet-
related activities. See "The Fund."
Investment Objective and The Fund's investment objective is
Policies capital appreciation. Under normal
market conditions, the Fund will
invest at least 65% of its total
assets in the equity securities of
companies that participate in the
Internet. See "Investment Objective
and Policies," "Investment Restrictions"
and "Investment Practices and Techniques."
The Offering The Fund is offering an aggregate of
2,500,000 shares of Common Stock to
investors at an initial public
offering price of $10.00 per share.
The offering is being made on behalf
of the Fund through a group of
Underwriters, for which LaSalle St.
Securities, LLC is acting as lead
Representative. The Underwriters have
been granted an option, exercisable
for 30 days from the date of this
Prospectus, to purchase up to an
additional 375,000 shares of Common
Stock to cover over-allotments. The
minimum permitted investment by an
investor in this offering is 200
shares. See "Underwriting."
Use of Proceeds The net proceeds of this offering
(estimated to be $23,375,000 if the
Underwriters' over-allotment option is
not exercised), after deducting the
underwriting discount and the non-
accountable expense allowance, will be
invested by LCMCM on behalf of the
Fund in accordance with the Fund's
investment objective and policies.
Organizational and offering expenses
of the Fund will be paid by LCMCM from
its own assets. See "Use of
Proceeds."
Listing Prior to this offering, there has been
no public market for the shares of
Common Stock of the Fund. The Common
Stock has been approved for listing on
the American Stock Exchange (the
"ASE") under the symbol "FND." See
"Underwriting."
Stock Symbol "FND."
Investment Adviser LCM Capital Management, Inc.
("LCMCM"), a newly organized,
registered investment adviser under
the Investment Advisers Act of 1940,
as amended (the "Advisers Act"), and
an affiliate of the Representative, is
the Fund's investment adviser. LCMCM
will manage the Fund's investment
portfolio in accordance with the
Fund's investment objective and
policies. Prior to the organization
of the Fund, LCMCM had not served as
an investment adviser to any other
investment company.
<PAGE>
Prior to joining LCMCM in June 1998,
the portfolio manager of the Fund,
Barry J. Glasgow, spent seven years
with Gonski & Glasgow Investments, a
registered investment manager, in the
positions of managing partner and
portfolio manager. Prior to the
organization of the Fund, Mr. Glasgow
had not served as a portfolio manager
to any other investment company. See
"Management of the Fund" and "Risk
Factors and Special Considerations."
Management Fees The Fund will pay LCMCM for its
investment management services a
monthly fee at an annual rate of 1.0%
of the Fund's average daily net
assets. See "Management of the Fund."
Dividends and It is the Fund's present policy, which
Distributions may be changed by the Board of
Directors, to make regular annual cash
distributions to its shareholders of
substantially all of the Fund's net
investment income, and to distribute,
at least annually, any net realized
capital gains. See "Distributions;
Distribution Reinvestment Plan."
Distribution Under the Fund's Distribution
Reinvestment Plan Reinvestment Plan (the "Plan"),
shareholders will have all dividends
and distributions automatically
reinvested in additional whole and
fractional shares of Common Stock of
the Fund, unless they notify the Fund
of their desire to receive cash
distributions instead. Shareholders
whose shares are held in the name of a
broker or nominee should contact such
broker or nominee to confirm that they
may participate in the Plan. See
"Distributions; Distribution Reinvestment
Plan."
Taxation The Fund intends to qualify and elect
to be treated as a regulated
investment company for U.S. federal
income tax purposes. As such, it will
generally not be subject to U.S.
federal income tax on income and gains
that are distributed to shareholders.
See "Federal Taxation of the Fund and
its Distributions" below and in the
SAI.
Custodian, Transfer Firstar Bank Milwaukee, N.A. ("Firstar
Agent, Dividend Paying Bank"), 615 East Michigan Street,
Agent, Registrar, Milwaukee, Wisconsin, 63202, will act
Administrator and Fund as custodian of the Fund's assets and
Accountant as the Fund's transfer agent, dividend
paying agent and registrar. Firstar
Mutual Fund Services, L.L.C., which is
an affiliate of Firstar Bank and which
is located at the same address, will
act as the Fund's administrator and
fund accountant. See "Management of
the Fund."
Trading Discount As a newly organized entity, the Fund
has no operating history. Shares of
closed-end investment companies
frequently trade in the market at a
discount from net asset value. This
characteristic is a risk separate and
distinct from the risk that the Fund's
net asset value will decrease as a
result of the Fund's investment
activities, and may be greater if you
expect to sell your shares in a
relatively short period of time
following this offering. It should be
noted, however, that shares of some
closed-end funds have traded at
premiums to net asset value. The Fund
cannot predict whether its shares will
trade at, above or below net asset
value. The Fund is intended primarily
for long-term investors, and should
not be considered as a vehicle for
short-term trading purposes. See "The
Fund" and "Risk Factors and Special
Considerations."
<PAGE>
Anti-Takeover Provisions The Fund's Articles of Incorporation
contain certain anti-takeover
provisions that may have the effect of
inhibiting the Fund's possible
conversion to open-end status and
limiting the ability of other persons
to acquire control of the Fund. In
certain circumstances, these
provisions might also inhibit the
ability of shareholders to sell their
shares at a premium over prevailing
market prices. The Fund's Board of
Directors has determined that these
provisions are in the best interests
of shareholders generally. See "Anti-
Takeover Provisions."
Risk Factors The shares of Common Stock offered
hereby involve a high degree of risk,
including the Fund's lack of prior
operating history, LCMCM's lack of
investment management experience, the
non-diversified status of the Fund
under the 1940 Act, the volatility and
concentration of the Fund's
investments, the illiquid nature of
some of the Fund's portfolio
securities and the risks relating to a
limited public market for the Fund's
Common Stock. You should carefully
consider your ability to assume the
foregoing risks before making an
investment in the Fund. Given these
investment risks, investment in the
Fund should not be considered a
complete investment program. See
"Risk Factors and Special
Considerations."
FEES AND EXPENSES
The purpose of the following Fee Table and Example is
to assist you in understanding the fees and expenses
that you will bear directly (shareholder transaction
expenses) and indirectly (annual operating expenses) as
a shareholder of the Fund.
Fee Table:
Shareholder Transaction Expenses
Sales Load (as a percentage of offering price) 5.50%
Non-Accountable Expense Allowance 1.00%
-----
Total Shareholder Transaction Expenses 6.50%
=====
Annual Operating Expenses (as a percentage of net assets)
Management Fees 1.00%
Other Expenses (1) 1.50%
-----
Total Annual Operating Expenses 2.50%
=====
Example: 1 year 3 years 5 years 10 years
You would pay the following
expenses on a $1,000 investment,
assuming a 5% annual return: $89 $138 $189 $330
(1) Based upon estimated amounts of expenses for the Fund's first fiscal
year, assuming Fund assets of $25,000,000.
The Example set forth above assumes payment of the
sales load and non-accountable expense allowance,
reinvestment of all dividends and distributions at net
asset value and an expense ratio equal to the Total
Annual Operating Expense as set forth above. The
assumption in the example of a 5% annual rate of return
is mandated by
<PAGE>
the SEC regulations, and is applicable
to all investment companies. This Example should not
be considered a representation of future expenses or
annual rates of return. Actual expenses and annual
rates of return may be more or less than those assumed
for purposes of the above Example. In addition, while
the above Example assumes reinvestment of all dividends
and distributions at net asset value, participants in
the Fund's Distribution Reinvestment Plan may receive
shares purchased or issued at a price or value
different from net asset value. See "Distributions;
Distribution Reinvestment Plan."
USE OF PROCEEDS
The net proceeds of this offering (estimated to be
$23,375,000 assuming the Underwriters' over-allotment
option is not exercised), after deducting the
underwriting discount and the non-accountable expense
allowance, will be invested in accordance with the
Fund's investment objective and policies set forth
under "Investment Objective and Policies" within three
months from the date of this Prospectus. Pending such
investment, the proceeds will be invested in U.S.
government securities and/or money market securities as
described under "Investment Practices and Techniques"
herein. LCMCM will begin to receive its 1% management
fee as soon as the Fund has assets to invest. The
organizational expenses of the Fund and the expenses
associated with the offering, which are estimated to be
$260,000, will be paid by LCMCM from its own assets.
THE FUND
The Fund was organized on August 24, 1998 as a
corporation under the laws of the State of Maryland.
The Fund is a non-diversified, closed-end management
investment company registered under the 1940 Act. The
Fund's address is 810 West Washington Boulevard,
Chicago, Illinois 60607, and its telephone number is
(312) 705-3028.
The Fund's investment objective is to seek capital
appreciation by investing in a portfolio consisting
primarily of equity securities issued by companies that
LCMCM believes will benefit from growth of the
Internet. Current dividend income is not an investment
consideration. Under normal market conditions, the
Fund will invest at least 65% of its total assets in
the equity securities of companies that engage in
Internet and Internet-related activities. There can be
no assurance that the Fund's investment objective will
be achieved. Due to the risks inherent in the
securities in which the Fund plans to invest, the Fund
should not be considered a complete investment program.
See "Risk Factors and Special Considerations."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital
appreciation by investing in a portfolio consisting primarily
of equity securities issued by companies that LCMCM believes
will benefit from growth of the Internet. Equity securities
are defined to include common stocks, securities
convertible into common stocks, such as convertible
preferred stocks, bonds, notes and debentures, and
American Depositary Receipts ("ADRs"). Current income
is not an investment consideration. No assurance can be
given that the Fund will realize its investment
objective.
The Fund's investment objective is a fundamental policy
that may not be changed without the approval of a
majority of the Fund's outstanding voting securities.
A "majority of the Fund's outstanding voting
securities" means the lesser of (i) 67% of the shares
of Common Stock represented at a meeting at which more
than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares of Common
Stock.
Under normal market conditions, at least 65% of the
Fund's total assets will be invested in the equity
securities of companies that engage in Internet and
Internet-related activities. Under favorable market
conditions, the Fund would expect to be substantially
fully invested in such securities. The Fund may hold a
small portion of
<PAGE>
its assets (generally not more than
10%) in U.S. government securities, money market
securities and cash to meet ordinary daily cash needs.
Under unusual circumstances, as a defensive technique,
the Fund may retain a larger portion of cash and/or
invest more assets in U.S. government securities and/or
money market securities deemed by LCMCM to be
consistent with a temporary defensive posture. To the
extent the Fund engages in temporary investment
strategies, the Fund may not achieve its investment
objective.
The Internet is a global collection of connected
computers that allows commercial and professional
organizations, educational institutions, government
agencies and consumers to communicate electronically,
access and share information and conduct business.
LCMCM believes that because of the dramatic growth of
Internet activity in recent years, favorable investment
opportunities are offered by companies that provide
products and/or services designed for Internet use.
In evaluating investment opportunities for the Fund,
LCMCM will focus primarily on companies with
significant research and development efforts. In this
regard, an important yardstick LCMCM employs in making
portfolio selections, in addition to evaluating trends
in corporate revenues, earnings and dividends, is the
amount of capital currently being expended on research
and development, and the purpose of the technology.
LCMCM believes that dollars invested in research and
development today frequently have significant bearing
on future growth, or lack thereof.
LCMCM will draw upon a myriad of information sources in
evaluating the direction of the Internet and the
opportunities afforded thereby. Through these sources,
LCMCM has come to believe that the Internet as it
exists today will eventually develop into three
separate, yet connected, forms, each serving a
different function. Specifically, in addition to the
current version of the Internet which serves a variety
of commercial, communication and entertainment
functions (i.e., Internet 1), LCMCM foresees the
development of two new "Internets": Internet-2 (for
government and university use), and Internet-3 (for
very secure commercial purposes, like bank
transactions). Given its investment objective and
policies, LCMCM believes that the Fund will be well
positioned to take advantage of any such growth, should
it occur.
In order to assist in the assessment of Internet-
related investment opportunities for the Fund, LCMCM
has divided those companies which participate in the
Internet into three major areas consisting of 13
sectors and 65 sub-sectors. These three major areas
are as follows: infrastructure, content and e-
commerce. Infrastructure is the basic connections,
networks and computer and server hardware necessary to
convey information from point A to point B. Content
includes those sites, services, software and
applications necessary to facilitate user access to
information and/or services on the web. E-commerce is
the structure necessary to conduct business-to-
business, consumer-to- business and government-to-
business transactions. Those companies providing
infrastructure, content and
e- commerce products and/or services designed for
Internet use comprise the "information technology
industry."
Although LCMCM has identified 13 sectors and 65 sub-
sectors for investment, because the Internet is so
dynamic, LCMCM intends to closely monitor the Internet
for emerging and obsolete sectors and sub-sectors. For
each identified sub-sector, LCMCM intends to evaluate
the companies, both public and private, that are vying
for leadership. Generally, such leaders will be added
to the Fund's holdings. However, like the sectors and
sub-sectors themselves, these leaders will not remain
static. The evaluation of changes among the leaders
will be a continual process.
LCMCM expects that approximately 85% of the Fund's
Internet-related equity investments will be divided
among the leaders of the identified sub-sectors. As
the leaders of the identified sub-sectors change, the
Fund's investments will be rebalanced so as to
replicate as nearly as possible the current status of
the indicated sub-sectors and the leaders thereof. Any
such rebalancing will increase the Fund's transactional
expenses and portfolio turnover. The weighting of the
investment in each sub-sector will be determined by a
proprietary quantitative program overlapping the
portfolio. The remaining 15% will be in assets
identified by LCMCM as special
<PAGE>
situations which will generally be in companies that do
not have the historical basis necessary for the Fund's
model or involve emerging technology.
LCMCM will utilize a quantitative model to overlap the
Fund's portfolio holdings because LCMCM expects the
Internet to exhibit a life cycle effect which will
generate benefits for a shifting set of companies.
Certain sectors may become more visible, garner more
public attention and may, in fact, be more vital to one
phase of the Internet's development than other sectors
until the Internet enters a new phase. Periods of over-
visibility and sky-high valuations for one sub-sector
may prove temporary as another gains visibility and
momentum, only to be replaced by another sub-sector,
and so on.
The chart below illustrates the 13 sectors and 65 sub-sectors
LCMCM has currently identified:
Infrastructure Content E-Commerce
Communications Information Providers Retail E-Commerce
-Equipment -Family Oriented -Direct Sales
-Digital Subscriber Line -Financial -Auctions
-Cable -Health/Medical -Shopping Bots/Guides
-Wireless -Multimedia Entertainment -Transaction/Billing
Network Security -General and Management Fulfillment
-Biometrics Industrial News Business-to-Business
-Virtual Private Networks -Education E-Commerce
("VPNs") Internet Software -Vertical Business-
-Virus Detection -JAVA Enablers to-Business Networks
-Security System -E-Commerce Enablers -Business-to-Business
Management -Database Search Procurement Bots
-Public Key Interchange -Enterprise Interface -Business-to-Business
-Intrusion Detection -Web Interface and Auctions
-Encryption Browers -EDI Fulfillment
-Firewalls -Site Building Networks
Network Connections Portals and Hubs -Business-to-Business
-Servers -Mass-Marjet Portals Out-Sourcing
-Routers -Industry Specific Management
-Data Storage Portals Government-to-Business
-Satellite -Search Engine E-Commerce
-Backbones Technologies -Government-to-Business
Internet Service Providers -Communities -Vertical Government-
("ISPs") -Transaction Management to-Business Networks
-Portal Advertising and Marketing -Government Document
-Private Networks -Web Ad Management Distribution
-Web Developers -Market Research -Government-to-Business
-E-Commerce Providers -Industry Consultants Contract Search
-Turnkey Enabling Technologies Bots/Guides
Media Technologies -Streaming Media -Government-to-Business
-Video Conference -Traffic Cache Management Auctions
Sites/Tech -Fax/Telecopy -Outsourcing Management
-Streaming Video
-Digital Video Discs
-Set-Top TV Boxes
-Multimedia Plug-ins
<PAGE>
INVESTMENT RESTRICTIONS
The following restrictions, along with the Fund's
investment objective, are the Fund's only fundamental
policies - that is, policies that cannot be changed
without the approval of a majority of the Fund's
outstanding voting securities. See "Investment
Objective and Policies," above. All other policies and
investment restrictions referred to in this Prospectus
are not fundamental policies of the Fund and may be
changed by the Fund's Board of Directors without
shareholder approval. Except as otherwise noted, the
percentage restrictions set forth below, as well as
those contained elsewhere in this Prospectus, apply at
the time a transaction is effected, and a subsequent
change in a percentage resulting from market
fluctuations or any other cause other than action by
the Fund will not require the Fund to dispose of
portfolio securities or take other action to satisfy
the percentage restriction. As a matter of fundamental
policy:
(1) The Fund may not borrow money or issue senior
securities, except as permitted under the 1940 Act;
(2) The Fund may not purchase or sell commodities,
unless acquired as a result of ownership of securities
or other instruments (but this shall not prevent the
Fund from purchasing or selling options, futures
contracts or other derivative instruments, or from
investing in securities or other instruments backed by
commodities);
(3) The Fund may not make loans, except to the extent
the Fund may be deemed to be making loans by purchasing
debt securities or entering into repurchase agreements,
and the Fund may lend its portfolio securities in an
amount not in excess of 33 1/3% of its total assets
(taken at market value);
(4) The Fund may not act as an underwriter of another
issuer's securities, except to the extent that, in
connection with the purchase and sale of portfolio
securities, it may be deemed to be an underwriter
within the meaning of the Securities Act;
(5) The Fund may not purchase or sell real estate,
unless acquired as a result of ownership of securities
or other instruments (but this shall not prohibit the
Fund from purchasing or selling securities or other
instruments backed by real estate or of issuers engaged
in real estate activities); and
(6) The Fund may not purchase the securities of any
issuer if, as a result, more than 25% of the Fund's
total assets would be invested in the securities of
issuers whose principal business activities are in the
same industry, except that the Fund will invest, under
normal market conditions, more than 25% of its total
assets in the securities of issuers in the "information
technology industry" (as defined by the Fund).
INVESTMENT PRACTICES AND TECHNIQUES
The following provides a more detailed discussion of
certain of the securities that the Fund may purchase
and certain of the investment practices and portfolio
management techniques that the Fund may utilize. Any
investment by the Fund in debt securities or repurchase
agreements will be for cash management purposes only,
and in the event the Fund determines to lend its
portfolio securities, it will be for the purpose of
generating additional income (not capital
appreciation).
a) U.S. Government Securities
The U.S. government securities in which the Fund may
invest are securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities.
Certain of these securities, including U.S. Treasury
bills, notes and bonds, and Federal Housing
Administration debentures, are supported by the full
faith and credit of the United States. Other U.S.
government securities issued or guaranteed by federal
agencies or government-sponsored enterprises that are
not supported by the full faith and credit of the
United States include obligations supported by the
right of the issuer to borrow from the U.S. Treasury,
such as obligations of Federal Home Loan Banks, and
<PAGE>
obligations supported only by the credit of the agency
or instrumentality, such as Student Loan Marketing
Association securities.
b) Money Market Securities
The money market securities in which the Fund may
invest include (i) commercial paper rated A-1 or higher
by Standard & Poor's ("S&P") or Prime-I or higher by
Moody's Investor Service ("Moody's"), or if such
commercial paper is not rated, issued by companies
which have an outstanding debt issue rated AA or higher
by S&P or Aa or higher by Moody's, (ii) repurchase
agreements entered into with respect to U.S. government
securities which are secured by collateral at least
equal to the repurchase price and (iii) certificates of
deposit, bankers' acceptances and other short-term
obligations issued by domestic branches of U.S. banks
and savings and loan associations.
c) Leverage through Borrowing
The Fund has a fundamental investment restriction which
states that the Fund may not borrow money except as
permitted under the 1940 Act. The 1940 Act permits
borrowings in an amount up to 33 1/3% of a fund's total
assets. Accordingly, the Fund is authorized to borrow
money in an amount up to 33 1/3% of its total assets
(measured by adding the amount borrowed to the Fund's
other assets). This percentage restriction must be
satisfied at all times. The Fund's borrowings create
an opportunity for greater return to the Fund and,
ultimately, the Fund's shareholders, but at the same
time increase exposure to losses. Borrowing money (or
leveraging the Fund's assets, as it is sometimes
referred to) will generally exaggerate the effect on
the Fund's net asset value of any increase or decrease
in the market value of the Fund's investment portfolio.
In addition, interest payments and fees paid by the
Fund on any borrowings may offset or exceed the return
earned on borrowed funds. The Fund currently intends
to borrow money only for temporary, extraordinary or
emergency purposes. While the Fund has no current
intention of doing so, the Fund may also borrow for the
purpose of financing additional investments, or
purchasing the Fund's own Common Stock in the open
market in an attempt to increase the market price of
such stock when it is trading at a discount to net
asset value. In the event the Fund determines to
engage in either of these activities, shareholders will
be notified via a supplement to this Prospectus, press
release and/or in some other similar manner.
d) Derivative Transactions
The Fund may purchase and sell "call" and "put" options
on securities and securities indices which are listed
on a national securities exchange or in the over-the-
counter markets as a means of achieving additional
return or hedging the value of the Fund's portfolio.
The Fund will not write (i.e., sell) options in an
amount exceeding 10% of its total assets, or invest
(i.e., purchase) more than 10% of its total assets in
options.
A "call" option is a contract that gives the holder of
the option the right to buy from the writer (i.e., the
seller) of the option, in return for a premium paid,
the security underlying the option at a specified
exercise price at any time during the term of the
option. The writer of the call option has the
obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price
during the option period. A "put" option is a contract
that gives the holder of the option the right to sell
to the writer (i.e., the seller), in return for the
premium, the underlying security at a specified price
during the term of the option. The writer of the put
option, who receives the premium, has the obligation to
buy the underlying security upon exercise, at the
exercise price during the option period.
Options on securities indices work in much the same
manner as options on securities discussed above, except
that delivery of cash rather than the underlying
securities is made. Cash settled index options do not
relate to a particular number of shares. Rather, the
"size" of a cash-settled index option contract is
determined by the index "multiplier." A stock index
fluctuates with changes in the market values of the
stocks included in the index, although due to
differences in trading times and days or other factors,
a stock index option may not reflect actual market
values of the underlying securities in the index at
certain times.
<PAGE>
If the Fund has written an option, it may terminate its
obligation by effecting a closing purchase transaction.
This is accomplished by purchasing an option of the
same series as the option previously written. There
can be no assurance that a closing purchase transaction
can be effected when the Fund so desires. An exchange-
traded option may be closed out only on an exchange
which provides a secondary market for an option of the
same series. Although the Fund will generally purchase
or write those options for which there appears to be a
secondary market, there can be no assurance that a
liquid secondary market will exist for any particular
option.
In addition to purchasing and selling options, the Fund
may invest in futures and options on futures. Please
see the SAI for more information.
e) American Depositary Receipts
The Fund's investment in equity securities may include
investments in ADRs. ADRs, which are typically issued
by a U.S. financial institution (a "depositary"),
evidence ownership interests in a security or pool of
securities issued by a foreign company which have been
deposited with a depositary. ADRs are denominated in
U.S. dollars and trade in the U.S. securities markets.
Investments in ADRs may entail the special risks of
international investment, including currency exchange
fluctuations, government regulations and the potential
for political and economic instability.
f) Illiquid Securities
The Fund may invest up to 15% of its net assets in
illiquid securities, which are securities that are not
readily marketable. When purchasing illiquid
securities, the Fund will endeavor to obtain the right
to registration at the expense of the issuer.
Generally, there will be a lapse of time between the
Fund's decision to sell any such security and the
registration of the security permitting sale.
Investing in such securities may have the effect of
decreasing the level of liquidity in the Fund's
investment portfolio during such period.
g) Closed-End Investment Companies
The Fund may also invest in shares of closed-end
investment companies that are trading at a discount to
net asset value, or at a premium to net asset value if
LCMCM believes that such investments will further the
Fund's investment objective. Closed-end funds in which
the Fund may invest need not have a policy of investing
in the Internet. There can be no assurance that the
market discount on shares of any closed-end fund
purchased by the Fund will ever decrease. In fact, it
is possible that the market discount may increase and
the Fund may suffer realized or unrealized capital
losses due to further decline in the market price of
the securities of such closed-end funds. Similarly,
there can be no assurance that the market price of any
shares of a closed-end fund purchased by the Fund at a
premium will not decrease subsequent to a purchase of
such shares by the Fund. Under the 1940 Act, the Fund
may invest only up to 10% of its total assets in shares
of other investment companies and only up to 5% of its
total assets in any one investment company, provided
the investment does not represent more than 3% of the
voting stock of the acquired investment company at the
time such shares are purchased. Any investment by the
Fund in a closed-end fund will result in increased
transaction costs, since the closed-end fund will have
its own fees and expenses (including its own management
fees) which will be passed along to its investors,
including the Fund. As a result, Fund shareholders
will be subject to duplicative fees.
h) Lending Portfolio Securities
The Fund may lend portfolio securities with a value not
exceeding 33 1/3% of the Fund's total assets to brokers
or dealers, banks or other institutional borrowers of
securities as a means of earning income. Any such
securities lending will be done through Firstar Bank as
agent for the Fund. In the event the Fund engages in
securities lending activities, the Fund will receive
from the borrower collateral in the form of cash or
securities issued or guaranteed by the U.S. government.
Such collateral will be invested on the Fund's behalf
by Firstar Bank and maintained at all times in an
amount equal to at least 100% of the current market
value of the loaned
<PAGE>
securities. The purpose of such
securities lending is to permit the borrower to use
such securities for delivery to purchasers when the
borrower has sold short. The Fund will continue to
receive the equivalent of the interest or dividends
paid by the issuer of the securities lent, and the Fund
will also receive interest on the investment of the
collateral, or a fee from the borrower as compensation
for the loan. However, the Fund will pay reasonable
custodial and administrative fees to Firstar Bank in
connection with any such loan. The Fund will retain
the right to call, upon notice, the lent securities.
While there may be delays in recovery or even loss of
right in collateral should the borrower fail
financially, LCMCM will, together with Firstar Bank,
review the creditworthiness of the entities to which
such loans are made to evaluate those risks. There are
no special protections afforded to the Fund in the
event Firstar Bank fails financially.
i) Repurchase Agreements
The Fund may acquire U.S. government securities and
simultaneously enter into so-called "repurchase
agreements" with the settler, which may be a member
bank of the Federal Reserve System or primary dealers
in U.S. government securities, whereby the settler
agrees to repurchase such securities at the Fund's cost
plus interest within a specified time (usually within
seven days). Repurchase agreements offer the Fund a
means of generating income from excess cash that the
Fund might otherwise hold. The Fund's repurchase
agreements will provide that the collateral underlying
the repurchase agreement will always be at least equal
to the repurchase price. Repurchase agreements are
deemed to be loans under the 1940 Act. In all cases,
LCMCM must be satisfied with the creditworthiness of
the other party to the agreement before entering into a
repurchase agreement on behalf of the Fund. In the
event of the bankruptcy (or other insolvency
proceeding) of the other party to a repurchase
agreement, the Fund might experience delays in securing
its cash. To the extent that, in the meantime, the
value of the securities the Fund purchases may have
declined, the Fund could experience a loss.
j) Reverse Repurchase Agreements
From time to time, the Fund may enter into reverse
repurchase agreements whereby the Fund sells a security
and simultaneously obtains the commitment of the
purchaser, which may be a commercial bank or a broker
or dealer, to sell the security back to the Fund at an
agreed upon price on an agreed upon date. The Fund
generally retains the right to interest and principal
payments on the security. Since the Fund receives cash
upon entering into a reverse repurchase agreement, it
may be considered a borrowing. When required by SEC
guidelines, the Fund will set aside permissible liquid
assets in a segregated account to secure its
obligations to repurchase the security.
k) When-Issued and Delayed-Delivery Securities
The Fund may purchase securities on a "when-issued" or
"delayed-delivery" basis whereby the Fund purchases a
security with delivery of the security and payment
deferred to a future date. Normally, the settlement
date occurs within 45 days of the purchase. During the
period between purchases and settlement, no payment is
made by the Fund to the issuer, and no interest is
accrued on debt securities nor is dividend income
earned on equity securities. Forward commitments
involve a risk of loss if the value of the security to
be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in the
value of the Fund's other assets. While when-issued or
delayed-delivery securities may be sold prior to the
settlement date, the Fund intends to purchase such
securities with the intent of actually acquiring them.
The Fund will maintain liquid securities equal in value
to such securities, which will either mature or, if
necessary, be sold on or before the settlement date to
pay for the when-issued or delayed-delivery securities.
There is no restriction on the percentage of the Fund's
assets that may be invested in when-issued or delayed-
delivery securities.
l) Concentration
Under normal market conditions, the Fund intends to
invest more than 25% of its total assets in the securities
<PAGE>
of issuers in the information technology
industry. This practice involves an increased risk of
loss to the Fund should the market value of securities
in this industry decline.
RISK FACTORS AND SPECIAL CONSIDERATIONS
The purchase of shares of Common Stock involves a
number of significant risks. As a result, there can be
no assurance that the Fund will achieve its investment
objective. In addition to the other information
contained in this Prospectus, you should consider the
following risk factors in evaluating an investment in
the Common Stock.
a) No Prior History; Discount from Net Asset Value
The Fund is a newly organized, closed-end management
investment company with no operating history. Prior to
this offering, there has been no public market for the
Fund's shares. Shares of closed-end management
investment companies frequently trade at a discount
from their net asset value. This risk may be greater
for investors expecting to sell their shares in a
relatively short period after completion of the public
offering. Accordingly, the Common Stock is designed
primarily for long-term investors and should not be
considered a vehicle for short-term trading purposes.
The net asset value of the Fund's shares are expected
to also fluctuate with price changes of its portfolio
securities, but may not fluctuate proportionately with
the changes in value of portfolio securities.
b) No Prior Investment Record at LCMCM
Although the portfolio manager of the Fund, Barry J.
Glasgow, has more than seven years of prior investment
management experience as a portfolio manager for
private accounts, he has no prior investment record
with LCMCM and he has no prior experience managing an
investment company. Likewise, LCMCM is a newly
organized investment adviser which, prior to the
organization of the Fund, had not served as an
investment adviser to any other investment company.
c) Non-Diversified Status
The Fund is classified as a "non-diversified"
investment management company under the 1940 Act, which
means that the Fund may invest a greater portion of its
assets in a limited number of issuers than would be the
case were the Fund classified as a "diversified"
investment management company. Relative to a
"diversified" investment management company, changes in
the financial results and/or condition or market
valuation of a single issuer may cause greater
fluctuations in net asset value per share.
d) Volatility of Investments
The market prices of the securities in which the Fund
intends to invest are likely to be highly volatile and
could be subject to wide fluctuations which would
result in similar fluctuations in the net asset value
of the Fund's Common Stock. The reason for this
volatility is that the stock markets, and in particular
the Nasdaq National Market, have experienced extreme
price and volume fluctuations that have particularly
affected the market prices of equity securities of many
technology companies and that have often been unrelated
or disproportionate to the operating performance of
such companies. As a result, the trading prices of
many technology companies' stocks are at or near
historical highs and reflect price-to-earnings ratios
substantially above historical levels. There can be no
assurance that these trading prices and price-to-
earnings ratios will be sustained. In the event of a
decrease in such prices or ratios, the net asset value
of the Fund's Common Stock (and the value of your
investment) is likely to fall and could fall greater
than that of technology shares in general.
e) Concentration in the Information Technology Industry
Because the Fund's investments will be concentrated in
the information technology industry, the net asset
<PAGE>
value of its shares of Common Stock will be especially
influenced by factors specific to that industry and may
fluctuate more widely than the value of shares in a
portfolio investing in a broader range of industries.
For example, many products and services are subject to
risks of rapid obsolescence caused by technological
advances.
In addition, competitive pressures may have a
significant effect on the financial condition of
companies in this industry. If the information
technology continues to advance at an accelerated rate,
and the number of companies and product offerings
continues to expand, these companies could become
increasingly sensitive to short product cycles and
aggressive pricing.
Finally, many of the activities of companies in the
information technology industry are highly capital-
intensive, and it is possible that companies which
invest substantial amounts of capital in new products
and services will be unable to recover their
investments or otherwise meet their obligations.
f) Smaller Companies
The Fund expects to invest a substantial portion of its
assets in securities issued by smaller companies (both
as to revenues and stock market capitalization). Such
companies may offer greater opportunities for capital
appreciation than larger companies, but also involve
certain special risks. Such companies may have limited
product lines, markets and/or financial resources, and
may be dependent on a limited management group.
While the markets in securities of such companies have
grown rapidly in recent years, such securities may
trade less frequently and in smaller volume than more
widely-held securities. The market prices of such
securities may fluctuate more sharply than those of
other securities, and the Fund may experience some
difficulty in establishing and/or closing out positions
in these securities at prevailing market prices.
There may be less publicly-available information about
the issuers of these securities or less market interest
in such securities than those of larger companies, and
it may take a longer time for the market prices of such
securities to reflect the full value of the issuer's
underlying earnings potential.
g) Investments in Equity Securities
Under normal market conditions, the Fund will invest at
least 65% of its total assets in equity securities.
All equity securities are subject to price volatility,
potential bankruptcy of the issuer, general movements
in markets, overall economic conditions and perceptions
of potential growth. The equity securities of small-
capitalization companies are particularly susceptible
to these characteristics.
h) Illiquid Securities
The Fund may invest in securities for which no readily
available market exists, which are restricted as to
resale or otherwise are highly illiquid. The ability
of the Fund to dispose of such securities may be
greatly limited, and the Fund may have to continue to
hold such securities during periods when LCMCM would
otherwise have sold the
securities. This, in turn, could cause the Fund to
sell other investments and/or engage in borrowing
transactions if necessary to raise cash to meet its
obligations.
i) Anti-Takeover Provisions
The Fund's Articles of Incorporation contain certain
anti-takeover provisions that may have the effect of
inhibiting the Fund's possible conversion to open-end
status and limiting the ability of other persons to
acquire control of the Fund. In certain circumstances,
these provisions might also inhibit the ability of
shareholders to sell their shares of Common Stock at a
premium over prevailing market prices. The Fund's
Board of Directors has determined that these provisions
are in the best interests of shareholders generally.
<PAGE>
YEAR 2000 ISSUE
Like other investment companies, financial and business
organizations and individuals around the world, the
Fund could be adversely affected if the computer
systems used by the Fund's service providers do not
properly process and calculate date-related information
and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund
has made compliance with the Year 2000 Problem a high
priority. Accordingly, the Fund is taking steps it
believes are reasonably designed to address the Year
2000 Problem, focusing primarily on the computer
software systems of its major service providers. In
this regard, these service providers have represented
to the Fund that they do not currently anticipate that
the Year 2000 Problem will have a material impact on
their ability to continue to fulfill their duties as
service providers to the Fund. With respect to the
companies in which the Fund invests, the Fund cannot
make any assurances as to their Year 2000 compliance
efforts. In the event one or more of these companies
is not Year 2000 compliant, the Fund may be adversely
affected.
MANAGEMENT OF THE FUND
Directors & Officers
The business and affairs of the Fund are managed under
the direction of the Fund's Board of Directors, and the
day-to-day operations of the Fund are conducted through
or under the direction of the Fund's officers. The SAI
contains information as to the identity and background
of the Fund's directors and officers.
Investment Adviser
The Board of Directors of the Fund has entered into an
Investment Advisory Agreement with LCM Capital
Management, Inc. ("LCMCM") under which LCMCM will
manage the Fund's investments and business affairs,
subject to the supervision of the Board of Directors.
LCMCM was organized on June 4, 1998 as an Illinois
Corporation, and is a registered investment adviser
under the Advisers Act. LCMCM has no prior experience
managing investment companies. The address of LCMCM is
810 West Washington Street, Chicago, Illinois 60607,
and its telephone number is (312) 705-3028.
The Fund's portfolio manager is Barry J. Glasgow, Chief
Investment Officer and Secretary of LCMCM. From March
1991 to June 1998, Mr. Glasgow served as the managing
partner and portfolio manager of Gonski & Glasgow
Investments, a registered investment adviser, with
responsibility for investment direction, portfolio
management, operations, computer software and
compliance (i.e., filings with state and federal
authorities). Mr. Glasgow has no prior experience
managing investment companies.
Investment Advisory Agreement
Pursuant to the Investment Advisory Agreement, dated as
of October 26, 1999, LCMCM will, under the supervision
of the Fund's Board of Directors: (i) provide a
continuous investment program for the Fund's portfolio,
(ii) provide investment research, and from this
research, make and execute recommendations for the
purchase and sale of securities, (iii) provide all
facilities and personnel, including officers, required
for the Fund's administrative management and (iv) pay
the salaries and expenses of all officers and employees
of the Fund, and all directors of the Fund who are
affiliated with LCMCM or its affiliates.
As compensation for its services, and the related
expenses borne by LCMCM, the Fund pays LCMCM a fee,
computed daily and payable monthly, equal to, on an
annual basis, 1.0% of the Fund's average daily net
assets.
In addition to the fees payable to LCMCM, the Fund pays
all other expenses incurred in the operation of the
Fund including, but not limited to, direct charges
relating to the purchase and sale of portfolio
securities; interest charges; fees and expenses of
attorneys and auditors; taxes and governmental fees;
costs of stock certificates and
<PAGE>
any other expenses
(including clerical expenses) of issuance, sale or
repurchase of the Fund's Common Stock; expenses in
connection with the Fund's Distribution Reinvestment
Plan; membership fees in trade associations; expenses
of maintaining any stock exchange listings of the
Fund's Common Stock; expenses of printing and
distributing reports, prospectuses, notices and proxy
materials; expenses of corporate data processing and
related services; shareholder record keeping and
shareholder account services (including salaries of
shareholder relations personnel); expenses of printing
and filing reports and other documents filed with
governmental agencies; expenses of shareholders'
meetings; fees and disbursements of the Fund's
administrator, fund accountant, transfer agent and
custodian; expenses of disbursing dividends and
distributions; fees, expenses and out-of-pocket costs
of directors of the Fund who are not interested persons
of LCMCM; insurance premiums and litigation costs; and
indemnification. The Fund is not, however, responsible
for its organizational fees and expenses or the
expenses of this offering (except for underwriting
discounts and commissions and the Representative's non-
accountable expense allowance); rather, these fees will
be paid by LCMCM from its own assets.
The Investment Advisory Agreement contains provisions
relating to the selection of securities brokers to
effect the portfolio transactions of the Fund. Under
these provisions, LCMCM may (i) direct Fund portfolio
brokerage to the Representative, although LCMCM has no
current intention to do so, and (ii) pay commissions to
brokers other than the Representative which are higher
than might be charged by another qualified broker to
obtain brokerage and/or research services considered by
LCMCM to be useful or desirable for its investment
management of the Fund.
The SAI contains more information about the Investment
Advisory Agreement, including a more complete
description of the brokerage practices of the Fund.
Custodian
The Fund's custodian is Firstar Bank Milwaukee, N.A.,
615 East Michigan Street, Milwaukee, Wisconsin 53202.
Transfer Agent, Dividend Paying Agent, Registrar and Fund Accountant
Firstar Bank also serves as the Fund's transfer agent,
dividend paying agent and registrar. Firstar Mutual
Fund Services, L.L.C. ("Firstar"), which is an
affiliate of Firstar Bank and which is located at the
same address, serves as fund accountant.
Administrator
Firstar also serves as the Fund's administrator
pursuant to a Fund Administration Servicing Agreement
dated October 26, 1999. In this capacity, Firstar
performs certain compliance and tax reporting functions
for the Fund. For these services, the Fund pays
Firstar a monthly fee computed at an annual rate as
follows: (i) for the first $200 million of net assets,
0.06% of the Fund's average daily net assets during the
previous month, (ii) for the next $500 million of net
assets, 0.05% of the Fund's average daily net assets
during the previous month and (iii) for net assets in
excess of $700 million, 0.03% of the Fund's average
daily net assets during the previous month, subject to
a minimum annual fee of $35,000. Firstar is also
entitled to reimbursement for certain out-of-pocket
expenses.
DESCRIPTION OF COMMON STOCK
The Fund, which was incorporated under the laws of the
State of Maryland on August 24, 1998, is authorized to
issue 500,000,000 shares of capital stock, par value
$0.01 per share, all of which shares are initially
classified as Common Stock. The Board of Directors is
authorized, however, to classify or reclassify any
unissued shares of capital stock by setting or changing
the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption.
The shares of Common Stock, when issued, will be fully
paid and non-assessable. All shares of Common Stock are
equal as to dividends, assets
<PAGE>
and voting privileges and
have no conversion, preemptive, subscription or exchange
rights. In the event of liquidation, each share of
Common Stock is entitled to its proportion of the Fund's
assets after payment of debts and expenses.
Shareholders are entitled to one vote per share. All
voting rights for directors are non-cumulative, which
means that holders of more than 50% of the shares of
Common Stock can elect 100% of the directors if they
choose to do so, and in such an event, the holders of
the remaining shares of Common Stock will not be able to
elect any directors.
The Fund has no present intention of offering
additional shares beyond this offering, except that
additional shares may be issued under the Distribution
Reinvestment Plan. See "Distributions; Distribution
Reinvestment Plan." Other offerings of Common Stock,
if made, will require approval of the Fund's Board of
Directors. Any additional offerings will be subject to
the requirements of the 1940 Act that shares may not be
sold at a price below the then current net asset value
(exclusive of underwriting discounts and commissions)
except in certain circumstances, including in
connection with an offering to existing shareholders or
with the consent of a majority of the Fund's
outstanding voting securities.
Under the 1940 Act and Maryland law, the Fund is not
required to hold annual shareholders' meetings and,
unless required to do so by the rules of the ASE, does
not intend to hold such meetings. However, under
Maryland law and the By-Laws of the Fund, the Fund will
call a special meeting of its shareholders upon the
written request of shareholders entitled to cast at
least 25% of all the votes at such meeting. Any
request for such a special meeting must state the
purpose of the meeting and the matters proposed to be
acted on at it. The Secretary of the Fund will (i)
inform the shareholders who made the request of the
reasonably estimated cost of preparing and mailing a
notice of the meeting, and (ii) on payment of these
costs to the Fund, notify each shareholder entitled to
notice of the meeting. Notwithstanding the above,
under Maryland law, unless requested by shareholders
entitled to cast a majority of all the votes entitled
to be cast at a meeting, a special meeting need not be
called to consider any matter which is substantially
the same as a matter voted on at any special meeting of
the shareholders held during the preceding 12 months.
Shareholders' meetings must be held in order to approve
any change in a fundamental investment policy of the
Fund. See "Investment Restrictions."
DISTRIBUTIONS; DISTRIBUTION REINVESTMENT PLAN
The Fund's policy is to distribute to shareholders, on
an annual basis, substantially all of its net
investment income, and to distribute, at least
annually, any net realized capital gains. If, for any
calendar year, the total distributions exceed net
investment income and net realized capital gains, the
excess, distributed from the Fund's assets, will
generally be treated as a tax-free return of capital
(up to the amount of the shareholder's tax basis in his
or her shares). The amount treated as a tax-free
return of capital will reduce a shareholder's adjusted
basis in his or her shares of Common Stock, thereby
increasing his or her potential gain or reducing his or
her potential loss on the sale of such shares. Such
excess, however, will be treated first as ordinary
income up to the amount of the Fund's current and
accumulated earnings and profits, and then as return of
capital and capital gains as set forth above.
In the event the Fund distributes amounts in excess of
its net investment income and net realized capital
gains, such distributions will decrease the Fund's
total assets and, therefore, have the likely effect of
increasing the Fund's expense ratio. In addition, in
order to make such distributions, the Fund may have to
sell a portion of its investment portfolio at a time
when independent investment judgment might not dictate
such action.
Shareholders may elect to receive all distributions in
cash paid by check. Pursuant to the Distribution
Reinvestment Plan (the "Plan"), shareholders not making
such election will have all such amounts automatically
reinvested in whole or fractional shares of Common
Stock of the Fund, as the case may be.
<PAGE>
If the directors of the Fund declare a distribution
payable either in shares of Common Stock or in cash, as
shareholders may have elected, then non-participants in
the Plan will receive cash and participants in the Plan
will receive the equivalent in shares determined as
follows: whenever the market price per share of Common
Stock on the valuation date is equal to or exceeds the
net asset value per share on that date, the Fund will
issue new shares to participants at net asset value;
provided, however, if the net asset value is less than
95% of the market price on the valuation date, then
such shares will be issued at 95% of the market price.
The valuation date will be the distribution payment
date, or, if that date is not an ASE trading day, the
next preceding trading day. If the net asset value
exceeds the market price on the valuation date, Firstar
Bank will purchase shares of Common Stock in the open
market, on the ASE or elsewhere, for the participants'
accounts on, or shortly after, the payment date. If,
before such open market purchases can be made, the
market price exceeds the net asset value of the shares,
open market purchases will cease and the Fund will
issue the remaining shares at a price equal to the
higher of net asset value or 95% of the then market
price.
Firstar Bank maintains all shareholder accounts in the
Plan and furnishes written confirmations of all
transactions in an account, including information
needed by shareholders for personal and tax records.
Shares in the account of each Plan participant will be
held by Firstar Bank in non-certificated form in the
name of the participant.
There is no charge to participants for reinvesting
distributions. Firstar Bank's fees for handling the
reinvestment of distributions will be paid by the Fund.
There will be no brokerage charges with respect to
shares issued directly by the Fund as a result of
distributions payable either in stock or in cash.
However, each participant will pay a pro-rata share of
brokerage commissions incurred with respect to Firstar
Bank's open market purchases in connection with the
reinvestment of distributions. Brokerage charges for
purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions, as
Firstar Bank will be purchasing shares for all
participants in blocks and prorating the lower
commission thus attainable. Firstar Bank may use its
affiliates and/or affiliates of LCMCM, including the
Representative, for all trading activity relative to
the Plan. Such affiliates will receive a commission in
connection with such trading transactions.
If a shareholder desires to discontinue his or her
participation in the Plan, the shareholder will receive
a certificate for the appropriate number of full shares
in the account, along with a check in payment for any
fractional shares.
The automatic reinvestment of distributions will not
relieve participants of any income tax that may be
payable on such distributions. See "Federal Taxation
of the Fund and its Distributions."
Experience under the Plan may indicate that changes in
the Plan are desirable. Accordingly, the Fund reserves
the right to amend the Plan, provided participants are
given written notice at least 30 days prior to the
effective date thereof. The Fund may also terminate
the Plan as applied to any distribution paid subsequent
to written notice of the termination sent to
participants at least 30 days before the record date
for such distribution. For more information about the
Plan, please call Firstar Bank at (877) 526-7528.
ANTI-TAKEOVER PROVISIONS
The Fund currently has provisions in its Articles of
Incorporation which could have the effect of limiting
(i) the ability of other entities or persons to acquire
control of the Fund, (ii) the Fund's freedom to engage
in certain transactions or (iii) the ability of the
Fund's directors or shareholders to amend the Articles
of Incorporation or effectuate changes in the Fund's
management. These provisions, which are described
below, may be regarded as "anti-takeover" provisions.
First, directors of the Fund may be removed from
office, with or without cause, only by the affirmative
vote of the holders of at least 66 2/3% of the shares
of the Fund entitled to be voted for the election of
directors. Second,
<PAGE>
the affirmative vote of the holders
of 66 2/3% of the outstanding shares of the Fund is
required to amend certain provisions of the Articles of
Incorporation. Third, the affirmative vote of the
holders of 66 2/3% of the outstanding shares of the
Fund is required to authorize the conversion of the
Fund from a closed-end to an open-end investment
company, or generally to authorize any of the following
transactions:
(i) a merger or consolidation or statutory share
exchange of the Fund with or into any other
corporation;
(ii) a sale of all or substantially all of the
Fund's assets (other than in the regular course of the
Fund's investment activities); or
(iii) a liquidation or dissolution of the Fund,
unless such action has been approved, adopted or
authorized by the affirmative vote of at least two-
thirds of the total number of directors fixed in
accordance with the By-Laws, in which case the
affirmative vote of a majority of the Fund's
outstanding shares is required.
The 66 2/3% voting requirements described above, which
are greater than the minimum requirements under
Maryland law or the 1940 Act, can only be changed by a
similar 66 2/3% vote. Reference is made to the Articles
of Incorporation of the Fund, on file with the SEC, for
the full text of these provisions.
The provisions of the Articles of Incorporation
described above could have the effect of depriving Fund
shareholders of opportunities to sell their shares at a
premium over prevailing market prices by discouraging a
third party from seeking to obtain control of the Fund
in a tender offer or similar transaction.
SHARE PURCHASES AND TENDERS
Although shares of closed-end investment companies
sometimes trade at premiums over net asset value, they
frequently trade at discounts. The Fund cannot predict
whether the Common Stock will trade above, at or below
net asset value. The Fund believes that if the Common
Stock trades at a discount to net asset value, the
share price will not adequately reflect the value of
the Fund to shareholders and that shareholders'
financial interests would be furthered if the market
price of the Common Stock more closely reflected net
asset value. For these reasons, the Board of Directors
intends to consider from time to time repurchases of
Common Stock on the open market when the shares are
trading at a discount from net asset value, and the
Fund may engage in borrowings to finance or refinance
such repurchase transactions. In addition, the Board
of Directors may consider, from time to time, but not
more frequently than once every two years, making an
offer to each shareholder of record to purchase at net
asset value shares of Common Stock owned by the
shareholder. The Fund does not have a fundamental
policy with respect to the repurchase of Common Stock
and these repurchases are discretionary.
Before authorizing any repurchase of Common Stock or
tender offer to the Common Stock shareholders, the
Fund's Board of Directors would consider all relevant
factors, including the market price of the Common
Stock, its net asset value per share, the liquidity of
the Fund's securities positions, the effect an offer to
repurchase might have on the Fund or its shareholders
and relevant market considerations. Any offer would be
made in accordance with the requirements of the 1940
Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Although the matter will be
subject to the review of the Board of Directors at the
time, a tender offer is not expected to be made if the
anticipated benefit to shareholders and the Fund would
not be commensurate with the anticipated cost to the
Fund, or if the number of shares expected to be
tendered would not be material.
When a tender offer is authorized to be made by the
Fund's Board of Directors, it will be an offer to
purchase at a price equal to the net asset value of all
(but not less than all) of the shares of Common Stock
owned by a shareholder (or attributed to the
shareholder for federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the
"Code")). A shareholder who tenders all Common Stock
shares owned
<PAGE>
or considered owned by him or her, as
required, will realize a taxable gain or loss depending
upon such person's basis in such shares.
The policy of the Fund's Board of Directors with
respect to tender offers and repurchases, which may be
changed by the Board of Directors, is that the Fund
will not accept tenders or effect repurchases if (i)
those transactions, if consummated, would (a) result in
the exclusion of the Common Stock from the ASE, or (b)
impair the Fund's status as a regulated investment
company under the Code; (ii) the Fund would not be able
to liquidate securities to repurchase Common Stock in
an orderly manner that is consistent with the Fund's
investment objective and policies; or (iii) there is,
in the Board's judgment, any material (a) legal action
or proceeding instituted or threatened challenging the
transactions or otherwise materially affecting the
Fund, (b) suspension of or limitation on prices for
trading securities generally on the ASE or any exchange
on which securities held by the Fund are traded, (c)
declaration of a banking moratorium by federal or state
authorities or any suspension of payment by banks in
the United States, (d) limitation affecting the Fund or
issuers of securities held by the Fund imposed by
federal, state or local authorities on the extension of
credit by lending institutions, (e) commencement of
war, armed hostilities or other international or
national calamity directly or indirectly involving the
United States or (f) other event or condition that
would have a material adverse effect on the Fund or its
shareholders if shares of Common Stock were
repurchased. The Board of Directors may modify these
conditions in light of experience.
Subject to the foregoing, the Board of Directors has
decided that if the Fund's shares of Common Stock are
trading at a discount to net asset value at a time
which is at least six months from the effective date of
the Fund's Registration Statement on Form N-2 (i.e., at
least six months from October 15, 1999), the officers
of the Fund may, in their discretion, make open market
purchases in an effort to reduce or eliminate the
discount. Under normal circumstances, such purchases
by the Fund will be made with cash and cash equivalent
reserves, although purchases may also be financed
through Fund borrowings in an amount up to 33 1/3% of
the Fund's total assets (measured by adding the amount
borrowed to the Fund's other assets or uninvested
cash). See "Investment Practices-Leverage Through
Borrowing." No assurance can be given that open market
purchases, if any, will result in the Common Stock's
trading at a price that is close or equal to net asset
value. The market price of the Common Stock will,
among other things, be determined by the relative
demand for, and supply of, the Common Stock in the
market, the Fund's investment performance, the Fund's
dividends and investor perception of the Fund's overall
attractiveness as an investment as compared with other
investment alternatives. In the event the Fund
acquires its Common Stock through open market
purchases, the Fund's total assets may decrease and,
therefore, its expense ratio may increase.
FEDERAL TAXATION OF THE FUND AND ITS DISTRIBUTIONS
The Fund intends to qualify and be treated as a
regulated investment company under the Code. The Fund
currently intends to distribute substantially all of
its net investment income annually, and to distribute,
at least annually, any net realized capital gains,
thereby avoiding the imposition on the Fund of federal
income and excise taxes on such distributed income and
gain. Such distributions from net investment income
will be taxable as ordinary income to shareholders of
the Fund who are subject to tax, and the Fund's capital
gain distributions will be taxable as capital gain to
such shareholders. Notwithstanding the above, the Fund
may decide to retain all or part of any net capital
gains for reinvestment.
After the end of each taxable year, the Fund will
notify shareholders of the federal income tax status of
any distributions, or deemed distributions, made by the
Fund during such year. For a more detailed discussion
of these matters, see "Taxation of the Fund and its
Distributions" in the SAI.
<PAGE>
NET ASSET VALUE
The net asset value of the Fund's shares of Common
Stock will be determined as of the close of regular
trading on the American Stock Exchange ("ASE") on each
day the ASE is open for trading by dividing the Fund's
total assets, less the Fund's total liabilities, by the
total number of shares outstanding. Net asset value
will be published weekly in a financial newspaper of
general circulation. Such data for closed-end funds is
usually published in the Monday editions of The Wall
Street Journal and Barron's. The Fund assumes no
responsibility for the accuracy of such data and does
not represent that The Wall Street Journal and/or
Barron's will continue to publish such data.
UNDERWRITING
Upon the terms and subject to the conditions contained
in the Underwriting Agreement dated as of October 26,
1999, each Underwriter named below, for whom LaSalle
St. Securities, LLC is acting as Representative, has
severally agreed to purchase, and the Fund has agreed
to sell to each such Underwriter, the number of shares
of Common Stock set forth opposite the name of each
such Underwriter:
Number of
Underwriter Shares
LaSalle St. Securities, LLC 1,000,000
Wedbush Morgan Securities 250,000
Joseph Charles & Associates, Inc. 200,000
Southwest Securities, Inc. 200,000
Bluestone Capital Partners, L.P. 100,000
EBI Securities Corp. 100,000
Hagerty Stewart 100,000
J.P. Turner & Company, LLC 100,000
L.H. Friend, Weinress, Frankson & Presson, L.P. 100,000
Nutmeg Securities, Ltd. 100,000
Paradise Valley Securities, Inc. 100,000
Redwine & Company, Inc. 100,000
Advanced Equities, Inc. 50,000
Total 2,500,000
The Underwriting Agreement provides that the
obligations of the Underwriters to pay for and accept
delivery of the shares of Common Stock offered hereby
are subject to the approval of certain legal matters by
counsel and to certain other conditions. The
Underwriters are obligated to take and pay for all
shares of Common Stock offered hereby if any are taken.
The Underwriters propose to offer part of the shares of
Common Stock directly to the public at the public
offering price set forth on the cover page of this
Prospectus and part of the shares to certain dealers at
a price which represents a concession not in excess of
$0.35 per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of
$0.10 per share to certain other dealers. After the
initial offering of the shares of Common Stock to the
public, the public offering price and such concessions
may be changed by the Underwriters. The underwriting
discount of $0.55 per share is equal to 5.5% of the
initial offering price. You must pay for shares of
Common Stock purchased in this offering on or before
the third business day following the effective date of
the Registration Statement of which this Prospectus is
a part. Each investor must purchase a minimum of 200
shares of Common Stock in this offering.
<PAGE>
Of the 2,500,000 shares of Common Stock offered by the
Fund, up to 50,000 of such shares are reserved for sale
at the initial public offering price to disinterested
directors of the Fund and their affiliates. There can
be no assurance that such shares will be purchased by
these persons. Any such reserved shares not so
purchased will be reoffered immediately by the
Underwriters to the public at the initial public
offering price.
The Fund has granted to the Underwriters an option,
exercisable for 30 days from the effective date of the
Registration Statement of which this Prospectus is a
part, to purchase up to an additional 375,000 shares of
Common Stock to cover over-allotments, if any, at the
initial public offering price less the underwriting
discount.
The Representative will receive from the Fund a non-
accountable expense allowance in an amount equal to 1%
of the gross offering amount, or $250,000. LCMCM has
agreed to pay the organizational and offering expenses
of the Fund, which are estimated to be $260,000 and
which include all filing fees, legal costs and other
expenses in connection with qualifying the shares of
Common Stock offered hereby for sale under the laws of
such states as the Representative may designate.
The Fund anticipates that the Underwriters or their
affiliates may, from time to time and subject to the
regulations set forth in the 1940 Act, act as brokers
or dealers in connection with the execution of the
Fund's securities transactions after the Underwriters
cease to act as underwriters of the Fund's Common
Stock.
The Fund and LCMCM have agreed to indemnify the
Underwriters against certain liabilities, including
liabilities under the Securities Act. However, such
indemnification is subject to the provisions of Section
17(i) of the 1940 Act which provides, in part, that no
agreement shall contain a provision which protects or
purports to protect an underwriter of an investment
company against any liability to such company or its
shareholders to which it would otherwise be subject due
to misfeasance, bad faith or gross negligence in the
performance of its duties, or reckless disregard of its
obligations and duties under such agreement.
In connection with this offering, the Underwriters may
purchase and sell the Common Stock in accordance with
Regulation M under the Exchange Act. These
transactions may include over-allotment and stabilizing
transactions. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the
Common Stock. The Underwriters may also impose a
penalty bid, whereby selling commissions otherwise
accruing to an Underwriter or selling group member in
respect of securities sold in the offering for their
account may be reclaimed if such securities are
repurchased by the Underwriters in stabilizing
transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common
Stock, which may be higher than the price that might
otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any
time. These transactions may be effected on the ASE,
in the over-the-counter market or otherwise.
This Prospectus is being made available in electronic
format on the following Internet websites:
www.lcmfunds.com (which is a website maintained by the
Fund) and www.einvestmentbank.com (which is a website
maintained by Wedbush Morgan Securities, one of the
Underwriters in this offering). Except for this
Prospectus, nothing on either of these websites shall be
deemed to be part of this Prospectus.
Prior to this offering, there has been no public market
for the Common Stock. The Common Stock has been
approved for listing on the ASE under the symbol "FND."
The Representative is an affiliate of LCMCM, the Fund's
investment adviser. The Representative's principal
business address is 810 West Washington Boulevard,
Chicago, Illinois 60607.
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered
hereby have been passed on for the Fund by Godfrey &
Kahn, S.C., Milwaukee, Wisconsin. Godfrey & Kahn, S.C.
serves as counsel to the Fund. In addition, certain
legal matters have been passed upon for the
Underwriters by Sachnoff & Weaver Ltd., Chicago,
Illinois.
EXPERTS
The Statement of Assets and Liabilities of the Fund as
of October 6, 1999 has been included in this
Registration Statement in reliance on the report of
PricewaterhouseCoopers LLP, Milwaukee, Wisconsin,
independent accountants, which appears elsewhere herein
and has been given on the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Fund has filed with the SEC a Registration
Statement on Form N-2 under the Securities Act and the
1940 Act with respect to the shares of Common Stock
offered by this Prospectus. This Prospectus, which is
a part of the Registration Statement, does not contain
all the information set forth in the Registration
Statement or the exhibits thereto. For further
information regarding the Fund and the Common Stock,
reference is made to the Registration Statement,
including the exhibits thereto, which may be obtained
from the SEC as specified below. In addition, as of
the effective date of the Registration Statement of
which this Prospectus is a part, the Fund will be
subject to the informational requirements of the
Exchange Act and the 1940 Act, and, in accordance
therewith, will file reports, proxy statements and
other information with the SEC.
The reports, proxy statements and other information
filed by the Fund with the SEC can be inspected and
copied at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at its Regional Offices
located at 7 World Trade Center, Room 1300, New York,
New York 10048 and Northwest Atrium Center, 500 West
Madison Street, Room 1400, Chicago, Illinois 60661-
2511. Copies of such material can also be obtained
from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed
rates. You may obtain information on the operation of
the public reference facilities by calling the SEC at 1-
800-SEC-0330. The SEC maintains a web site at
http://www.sec.gov containing reports, proxy statements
and other information regarding registrants, including
the Fund, that file electronically with the SEC.
Reports, proxy statements and other information
concerning the Fund, and filed with the SEC by the
Fund, can also be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York,
New York 10006-1881.
REPORTS TO SHAREHOLDERS
The Fund will furnish to its shareholders annual
reports containing audited financial statements,
periodic unaudited reports containing financial
statements and such other periodic reports as it may
determine to furnish or as may be required by law.
<PAGE>
THE FOLLOWING IS THE TABLE OF CONTENTS CONTAINED IN THE
STATEMENT OF
ADDITIONAL INFORMATION FILED AS PART OF THE FUND'S
REGISTRATION STATEMENT
TABLE OF CONTENTS
OF THE
STATEMENT OF ADDITIONAL INFORMATION
PAGE
Investment Objective and Policies SAI-3
Investment Practices and Techniques SAI-4
Management SAI-12
Principal Shareholders SAI-14
Investment Advisory and Other Services SAI-15
Portfolio Transactions and Brokerage Allocation SAI-16
Taxation of the Fund and its Distributions SAI-17
Financial Statements SAI-18
