As filed with the Securities and Exchange Commission on July 28, 1999
Securities Act File No. 333-74407
Investment Company Act File No. 811-9261
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
[X] Registration Statement under the Securities Act of 1933
[X] Pre-Effective Amendment No. 2
[ ] Post-Effective Amendment No. ____ and/or
[X] Registration Statement under the Investment Company Act of 1940
[X] Amendment No. 2
LCM INTERNET GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
810 West Washington Boulevard
Chicago, Illinois 60607
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (312) 705-3028
Barry J. Glasgow
LCM Internet Growth Fund, Inc.
810 West Washington Boulevard
Chicago, Illinois 60607
(Name and Address of Agent for Service)
Copies to:
Scott A. Moehrke, Esq.
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202-3590
Approximate Date of Proposed Public Offering: As soon
as practicable after the effective date of this
Registration Statement.
If any securities being registered on this form will be
offered on a delayed or continuous basis in reliance on
Rule 415 under the Securities Act of 1933, as amended,
other than securities offered in connection with a
dividend reinvestment plan, check the following box. [ ]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities Being Offering Price Aggregate Offering Registration
Being Registered Registered per Share(1) Price(1) Fee(3)
Common Stock, 4,600,000 $10.00 $46,000,000 $12,788.00
$0.01 par shares(2)
value
(1) Estimated solely for the purpose of calculating
the registration fee, pursuant to Rule 457(a) under the
Securities Act of 1933, as amended.
(2) Includes 600,000 shares to be issued in connection
with the exercise of the Underwriters' over-allotment option.
(3) $7,478.20 of the registration fee was paid in
connection with initial filing of the Registration
Statement on March 15, 1999. The remaining $5,309.80
is being paid herewith.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to
delay its effective date until the Registrant shall
file a further amendment which specifically states that
this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to
said Section 8(a), may determine.
<PAGE>
The information in this Prspectus is not complete
and may be changed. The Fund may not sell these
securities until the Registration Statement filed with
the Securities and Exchange Commission is effective. This
Propspectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS
dated ____________, 1999
Subject to Completion, Dated July 28, 1999
4,000,000 SHARES
LCM INTERNET GROWTH FUND, INC.
COMMON STOCK ($.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 4,000,000 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) $40,000,000.00 $2,200,000.00 $37,800,000.00
(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, Inc.,
the representative of the Underwriters (the
"Representative"), in an amount equal to 1% of the
total Price to Public ($400,000). 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
600,000 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 $46,000,000, $2,530,000 and
$43,470,000. See "Underwriting."
LaSalle St. Securities, Inc.
Internet distribution by
E InvestmentBank
Wedbush Morgan Securities
<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. Application will be made to list the Common
Stock on the American Stock Exchange under the symbol
"LCM."
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 35 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.
<PAGE>
TABLE OF CONTENTS OF THE PROSPECTUS
Page
PROSPECTUS SUMMARY 4
FEES AND EXPENSES 7
USE OF PROCEEDS 7
THE FUND 8
INVESTMENT OBJECTIVE AND POLICIES 8
INVESTMENT RESTRICTIONS 10
INVESTMENT PRACTICES AND TECHNIQUES 11
RISK FACTORS AND SPECIAL CONSIDERATIONS 14
YEAR 2000 ISSUE 16
MANAGEMENT OF THE FUND 16
DESCRIPTION OF COMMON STOCK 17
DISTRIBUTIONS; DISTRIBUTION REINVESTMENT PLAN 18
ANTI-TAKEOVER PROVISIONS 19
SHARE PURCHASES AND TENDERS 20
FEDERAL TAXATION OF THE FUND AND ITS DISTRIBUTIONS 20
NET ASSET VALUE 21
UNDERWRITING 21
LEGAL MATTERS 22
EXPERTS 22
ADDITIONAL INFORMATION 22
REPORTS TO SHAREHOLDERS 23
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 24
Until _______________, 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
4,000,000 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, Inc. 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 600,000 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 $37,400,000 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. Application
will be made to list the Common Stock
on the American Stock Exchange (the
"ASE") under the symbol "LCM." See
"Underwriting."
Stock Symbol "LCM."
<PAGE>
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.
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
<PAGE>
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."
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."
<PAGE>
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
$40,000,000.
The Example set forth above assumes payment by an
investor of the sales load, 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
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
$37,400,000 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.
<PAGE>
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 capital
appreciation, a goal it seeks to achieve by investing
primarily in the equity securities of companies that
participate in 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 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).
<PAGE>
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 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 -Transaction/
Entertainment Billing Management
Network Security -General and Fulfillment
Industrial News
-Biometrics -Education Business-to-Business
-Virtual Private Networks Internet Software E-Commerce
("VPNs")
-Virus Detection -JAVA Enablers -Vertical Business-
to-Business Networks
-Security System -E-Commerce -Business-to-
Management Enablers Business Search
-Public Key Interchange -Database Procurement Bots
-Intrusion Detection -Enterprise Interface
-Encryption -Web Interface -Business-to-
and Browsers Business Auctions
-Firewalls -Site Building -EDI Fulfillment
Networks
-Business-to-
Business Out-
Sourcing Management
<PAGE>
Infrastructure Content E-Commerce
Network Connections Portals and Hubs Government-to-Business
-Servers -Mass-Market E-Commerce
Portals
-Routers -Industry -Government-to-
Specific Portals Business
-Data Storage -Search Engine -Vertical Government-
Technologies to-Business Networks
-Satellite -Communities
-Backbones -Transaction -Government Document
Management Distribution
Internet Service Providers Advertising and Marketing
("ISPs")
-Portal -Web Ad Management -Government-to-
Business Contract
-Private Networks -Market Research Search Bots/Guides
-Web Developers -Industry Consultants -Government-to-
Business
-E-Commerce Providers Enabling Technologies Auctions
-Turnkey -Streaming Media -Outsourcing Management
Media Technologies -Traffic Cache Management
-Video Conference -Fax/Telephony
Sites/Tech
-Streaming Video
-Digital Video Discs
-Set-Top TV Boxes
-Multimedia Plug-ins
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).
<PAGE>
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
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
<PAGE>
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.
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
<PAGE>
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 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-
<PAGE>
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 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.
<PAGE>
e) Concentration in the Information Technology Industry
Because the Fund's investments will be concentrated in
the information technology industry, the net asset
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 _________, 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 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;
<PAGE>
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 __________,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 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
<PAGE>
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.
The Fund is not required to hold annual shareholders'
meetings and 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.
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.
<PAGE>
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, 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.
<PAGE>
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
currently 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 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.
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.
<PAGE>
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.
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") (or such
other exchange on which the Fund's shares are traded)
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 ____________,
1999, each Underwriter named below, for whom LaSalle
St. Securities, Inc. 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, Inc.
________
Total 4,000,000
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.
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 600,000 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 $400,000. 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.
<PAGE>
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 fromat
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, Inc.,
one of the proposed 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. Application will be made to list
the Common Stock on the ASE under the symbol "LCM."
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.
LEGAL MATTERS
The validity of the shares of Common Stock offered
hereby will be 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 will be passed upon for the Underwriters
by Sachnoff & Weaver Ltd., Chicago, Illinois.
EXPERTS
The Statement of Assets and Liabilities of the Fund as
of ____________, 1999 will be included in this
Registration Statement in reliance on the report of
PricewaterhouseCoopers, Milwaukee, Wisconsin,
independent accountants, which will appear elsewhere
herein and 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,
<PAGE>
D.C. 20549, at prescribed rates. 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. Application will be
made to list the Fund's Common Stock on the ASE.
Once listed, reports, proxy statements and other
information concerning the Fund, and filed with
the SEC by the Fund, can 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-14
Portfolio Transactions and Brokerage Allocation SAI-15
Taxation of the Fund and its Distributions SAI-16
Financial Statements SAI-18
<PAGE>
The information in this Statement of Additional Information is not complete
and may be changed. The Fund may not sell these securitied until the
Registration Statement filed with the Securities and Exchange Commission
is effective. This Statement of Additional Information is not a Prospectus.
Moreover, this Statement of Additional Information does not constitute an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
Subject to Completion, Dated July 28, 1999
LCM INTERNET GROWTH FUND, INC.
This Statement of Additional Information ("SAI") is
not a prospectus, but should be read in conjunction
with the Prospectus of the LCM Internet Growth Fund,
Inc. (the "Fund"), dated the date hereof. Before
purchasing shares of the Fund, you should obtain and
read the Fund's Prospectus. The Prospectus, which
may be revised from time to time, is available
without charge by writing to the Fund at 810 West
Washington Boulevard, Chicago, Illinois 60607, or by
calling (312) 705-3028.
This Statement of Additional information is dated__________________, 1999.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND POLICIES 3
INVESTMENT PRACTICES AND TECHNIQUES 4
MANAGEMENT 12
PRINCIPAL SHAREHOLDERS 14
INVESTMENT ADVISORY AND OTHER SERVICES 14
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION 15
TAXATION OF THE FUND AND ITS DISTRIBUTIONS 16
FINANCIAL STATEMENTS 18
You should rely only on the information contained in
this SAI and in the 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 SAI or in the Prospectus is accurate
as of any date other than the date hereof.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
a) Investment Objective
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, LCM Capital Management,
Inc. ("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.
For more information, please see "Investment Objective
and Policies" in the Prospectus.
b) Fundamental Investment Policies
The Fund's fundamental investment policies (or
restrictions) are set forth in the Prospectus under the
caption "Investment Restrictions." The Fund's
fundamental investment policies (which include the
Fund's investment objective) may not be changed without
the approval of a majority of the Fund's outstanding
voting securities. Please refer to the Prospectus for
more information.
c) Non-Fundamental Investment Policies
The Fund's non-fundamental investment policies (or
restrictions), which may be changed by the Fund's Board
of Directors without shareholder approval, are set
forth below. Many of these policies are discussed in
the Prospectus under the caption "Investment Practices
and Techniques."
As a matter of non-fundamental policy:
(1)The Fund may not sell securities short, unless the
Fund owns or has the right to obtain securities
equivalent in kind and amount to the securities
sold short, or unless it covers such short sale as
required by the current rules and positions of the
Securities and Exchange Commission (the "SEC") or
its staff, and provided that transactions in
options, futures contracts or other derivative
instruments are not deemed to constitute selling
securities short;
(2)The Fund may not purchase securities on margin,
except that the Fund may obtain such short-term
credits as are necessary for the clearance of
transactions, and provided that margin deposits in
connection with futures contracts or other
derivative instruments shall not constitute
purchasing securities on margin;
(3)The Fund may not invest in illiquid securities if,
as a result of such investment, more than 15% of
its net assets would be invested in illiquid
securities;
(4)The Fund may not purchase securities of other
investment companies, except in compliance with the
Investment Company Act of 1940, as amended (the
"1940 Act");
(5)The Fund may not engage in futures or options on
futures transactions which are impermissible
pursuant to Rule 4.5 under the Commodity Exchange
Act (the "CEA") and, in accordance with Rule 4.5,
will use futures or options on futures transactions
solely for bona fide hedging transactions (within
the meaning of the CEA); provided, however, that
the Fund may, in addition to bona fide hedging
transactions, use futures and options on futures
transactions if the aggregate initial margin and
premiums required to establish such positions, less
the amount by which any such options are "in the
money" (within the meaning of the CEA), do not
exceed 5% of the Fund's net assets;
(6)The Fund may not invest in, purchase or sell
options, except that the Fund may invest up to 10%
of its total assets in options, and may sell
options in an amount not to exceed 10% of its total
assets; and
(7)The Fund may not borrow money in an amount in
excess of 33 1/3% of its total assets (measured by
adding the amount borrowed to the Fund's other
assets).
<PAGE>
With the exception of non-fundamental policy number 7
above, the percentage restrictions set forth above
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.
INVESTMENT PRACTICES AND TECHNIQUES
The following information supplements the discussion of
the Fund's investment practices and portfolio
management techniques described in the Prospectus under
the caption "Investment Practices and Techniques."
a) Short-Term Fixed Income Securities
The Fund may hold a small portion of its assets
(generally not more than 10%) in U.S. government
securities, money market securities and cash to meet
ordinary 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.
(1)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 (i.e., the U.S. Treasury) or its
agencies or instrumentalities. U.S. government
agency/instrumentality securities include
securities issued by (i) the Federal Housing
Administration, Farmers Home Administration, Export-
Import Bank of the United States, Small Business
Administration and GinnieMae, whose securities are
supported by the full faith and credit of the
United States; (ii) the Federal Home Loan Banks,
Federal Intermediate Credit Banks and the Tennessee
Valley Authority, whose securities are supported by
the right of the agency to borrow from the U.S.
Treasury; (iii) the FannieMae, whose securities are
supported by the discretionary authority of the
U.S. government to purchase certain obligations of
the agency or instrumentality; and (iv) the Student
Loan Marketing Association, the Interamerican
Development Bank and the International Bank for
Reconstruction and Development, whose securities
are supported only by the credit of such agencies.
While the U.S. government provides financial
support to such U.S. government-sponsored agencies
or instrumentalities, no assurance can be given
that it always will do so since it is not so
obligated by law. The U.S. government, its
agencies and instrumentalities do not guarantee the
market value of their securities, and consequently,
the value of such securities may fluctuate.
(2)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-1 or higher by Moody's
Investors 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 only with
respect to U.S. government securities. In such a
transaction, at the time the Fund purchases the
security, it simultaneously agrees to resell and
redeliver the security to the seller, who also
simultaneously agrees to buy back the security at a
fixed price and time. This assures a predetermined
yield for the Fund during its holding period since
the resale price is always greater than the
purchase price and reflects an agreed-upon market
rate. Such transactions afford an opportunity for
the Fund to invest temporarily available cash.
Repurchase agreements may be considered loans to
the seller, collateralized by the underlying
securities. The risk to the Fund is limited to the
ability of the seller to pay the agreed-upon sum on
the repurchase date; in the event of default, the
repurchase agreement provides that the Fund is
entitled to sell the underlying collateral. If the
value of the collateral declines after the
agreement is entered into, however, and if the
seller defaults under a repurchase agreement when
the value of the underlying collateral is less than
the repurchase price, the Fund could incur a loss
of both principal and interest. LCMCM monitors the
value of the collateral at the time the transaction
is entered into and at all times during the term of
the repurchase agreement. LCMCM does so in an
effort to determine that the value of the
collateral always equals or exceeds the agreed-upon
repurchase price to be paid to the Fund. If the
seller were to be subject to a federal bankruptcy
proceeding, the ability of the Fund to liquidate
the collateral could be delayed or impaired because
of certain provisions of the bankruptcy laws; (iii)
certificates of deposit issued against funds
deposited in a domestic branch of a U.S. bank or
savings and loan association that are insured by
the Federal Deposit Insurance Corporation ("FDIC")
and have assets in excess of $500 million. Such
certificates are for a definite period of time,
earn a specified rate of return and are normally
negotiable. If such certificates of deposit are
non-negotiable, they will be considered illiquid
securities and be subject to the Fund's 15%
restriction
<PAGE>
on investments in illiquid securities.
Pursuant to a certificate of deposit, the issuer
agrees to pay the amount deposited plus interest to
the bearer of the certificate on the date specified
thereon. Under current FDIC regulations, the
maximum insurance payable as to any one certificate
of deposit is $100,000; therefore, certificates of
deposit purchased by the Fund will not generally be
fully insured; (iv) bankers' acceptances, which are
short-term credit instruments used to finance
commercial transactions. Generally, an acceptance
is a time draft drawn on a bank by an exporter or
an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of
the instrument on its maturity date. The
acceptance may then be held by the accepting bank
as an asset or it may be sold in the secondary
market at the going rate of interest for a specific
maturity; and (v) bank time deposits, which are
monies kept on deposit with U.S. banks or savings
and loan associations for a stated period of time
at a fixed rate of interest. There may be
penalties for the early withdrawal of such time
deposits, in which case the yields of these
investments will be reduced.
b) Illiquid Securities
The Fund may invest up to 15% of its net assets in
illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction,
illiquid securities include, but are not limited to,
restricted securities (securities the disposition of
which is restricted under the federal securities laws),
repurchase agreements with maturities in excess of
seven days and other securities that are not readily
marketable. The Board of Directors of the Fund, or its
delegate, has the ultimate authority to determine, to
the extent permissible under the federal securities
laws, which securities are liquid or illiquid for
purposes of this 15% limitation. Certain securities
exempt from registration or issued in transactions
exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), such as
securities that may be resold to institutional
investors under Rule 144A under the Securities Act, may
be considered liquid under guidelines adopted by the
Board of Directors. However, investing in securities
which may be resold pursuant to Rule 144A under the
Securities Act could have the effect of increasing the
level of the Fund's illiquidity to the extent that
institutional investors become, for a time,
uninterested in purchasing such securities.
The Board of Directors has delegated to LCMCM the day-
to-day determination of the liquidity of any security,
although it has retained oversight and ultimate
responsibility for such determinations. Although no
definitive liquidity criteria are used, the Board of
Directors has directed LCMCM to look to such factors
as (i) the nature of the market for the security
(including the institutional private resale market),
(ii) the terms of certain securities or other
instruments allowing for the disposition to a third
party or the issuer thereof (e.g., certain repurchase
obligations and demand instruments), (iii) the
availability of market quotations (e.g., for securities
quoted in the PORTAL system) and (iv) other permissible
relevant factors.
Restricted securities may be sold only in privately
negotiated transactions or in a public offering with
respect to which a registration statement is in effect
under the Securities Act. Where registration is
required, the Fund may be obligated to pay all or part
of the registration expenses and a considerable period
may elapse between the time of the decision to sell and
the time the Fund may be permitted to sell a security
under an effective registration statement. If, during
such a period, adverse market conditions were to
develop, the Fund might obtain a less favorable price
than that which prevailed when it decided to sell.
Restricted securities will be priced at fair value as
determined in good faith by the Board of Directors.
If, through the appreciation of restricted securities
or the depreciation of unrestricted securities, the
Fund should be in a position where more than 15% of the
value of its net assets are invested in illiquid
securities, including restricted securities which are
not readily marketable (except for Rule 144A securities
deemed to be liquid by LCMCM), the Fund will take such
steps as is deemed advisable, if any, to protect
liquidity.
c) Non-Diversification
While the Fund is "non-diversified," which means that
it is permitted to invest its assets in a more limited
number of companies than other mutual funds, the Fund
intends to diversify its assets to qualify for tax
treatment as a regulated investment company under the
Internal Revenue Code of 1986, as amended ("Code"). To
qualify (i) not more than 25% of the total value of the
Fund's assets may be invested in securities of any one
issuer or of any two or more issuers controlled by the
Fund, which, pursuant to the regulations under the
Code, may be deemed to be engaged in the same, similar
or related trades or businesses, and (ii) with respect
to 50% of the total value of the Fund's assets (a) not
more than 5% of its total assets may be invested in the
securities of any one issuer and (b) the Fund may not
own more than
<PAGE>
10% of the outstanding voting securities
of any one issuer. These percentage limitations do not
apply to investments in U.S. government securities or
the securities of other regulated investment companies.
Accordingly, as a "non-diversified" fund, the Fund may
invest up to 50% of its assets in the securities of as
few as two companies, up to 25% each, so long as the
Fund does not control the two companies and the two
companies are engaged in different businesses. The
Fund may also invest up to 50% of its assets in the
securities of as few as ten companies, up to 5% each,
provided that the Fund does not own in excess of 10% of
any company's outstanding voting stock. Non-
diversification involves an increased risk of loss to
the Fund when the market value of a security declines.
d) Concentration
The Fund has adopted a fundamental investment policy
which prohibits the Fund from investing more than 25%
of its total assets in 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. For this purpose, "information technology
industry" is comprised of those companies providing
infrastructure, content and e-commerce products and/or
services designed for Internet use. This industry,
which is very dynamic and therefore frequently
changing, currently consists of 13 sectors and 65 sub-
sectors as identified by LCMCM. See "Investment
Objective and Policies" in the Prospectus for more
information. Because a relatively high percentage of
the Fund's assets will be invested in the information
technology industry, the Fund's portfolio securities
will be especially influenced by factors specific to
that industry and may be more susceptible to
fluctuation in value than portfolio securities of a
less concentrated investment company.
e) Derivative Transactions
In General. The Fund may invest in derivative
instruments for any lawful purpose consistent with its
investment objective such as hedging or managing risk,
but not for speculation. Derivative instruments are
commonly defined to include securities or contracts
whose value depend on (or "derive" from) the value of
one or more other assets, such as securities or
commodities. These "other assets" are commonly
referred to as "underlying assets."
Options and forward contracts are considered to be the
basic "building blocks" of derivatives. An option is a
contract in which the "holder" (the buyer) pays a
certain amount (the "premium") to the "writer" (the
seller) to obtain the right, but not the obligation, to
buy from the writer (in a "call") or sell to the writer
(in a "put") a specific asset at an agreed upon price
(the "strike price" or "exercise price") at or before a
certain time (the "expiration date"). The holder pays
the premium at inception and has no further financial
obligation. The holder of an option-based derivative
generally will benefit from favorable movements in the
price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the
value of the underlying asset. The writer of an option-
based derivative generally will receive fees or
premiums but generally is exposed to losses due to
changes in the value of the underlying asset.
A forward is a sales contract between a buyer (holding
the "long" position) and a seller (holding the "short"
position) for an asset with delivery deferred until a
future date. The buyer agrees to pay a fixed price at
the agreed future date and the seller agrees to deliver
the asset. The seller hopes that the market price on
the delivery date is less than the agreed upon price,
while the buyer hopes for the contrary. The change in
value of a forward-based derivative generally is
roughly proportional to the change in value of the
underlying asset.
While the Fund may invest in options, it will not
invest in forward contracts. As described below, the
Fund may, however, invest in futures contracts.
Hedging. The Fund may use derivative instruments to
protect against possible adverse changes in the market
value of securities held in, or are anticipated to be
held in, the Fund's portfolio. Derivatives may also be
used by the Fund to "lock-in" its realized but
unrecognized gains in the value of its portfolio
securities. Hedging strategies, if successful, can
reduce the risk of loss by wholly or partially
offsetting the negative effect of unfavorable price
movements in the investments being hedged. However,
hedging strategies can also reduce the opportunity for
gain by offsetting the positive effect of favorable
price movements in the hedged investments.
<PAGE>
Managing Risk. The Fund may also use derivative
instruments to manage the risks of the Fund's
portfolio. Risk management strategies include, but are
not limited to, facilitating the sale of portfolio
securities, establishing a position in the derivatives
markets as a substitute for buying or selling certain
securities or creating or altering exposure to certain
asset classes. The use of derivative instruments may
provide a less expensive, more expedient or more
specifically focused way for the Fund to invest than
"traditional" securities (i.e., stocks or bonds) would.
Exchange or OTC Derivatives. Derivative instruments
may be exchange-traded or traded in over-the-counter
("OTC") transactions between private parties. Exchange-
traded derivatives are standardized options and futures
contracts traded in an auction on the floor of a
regulated exchange. Exchange contracts are generally
liquid. The exchange clearinghouse is the counterparty
of every contract. Thus, each holder of an exchange
contract bears the credit risk of the clearinghouse
(and has the benefit of its financial strength) rather
than that of a particular counterparty. OTC
transactions are subject to additional risks, such as
the credit risk of the counterparty to the instrument,
and are less liquid than exchange-traded derivatives
since they often can only be closed out with the other
party to the transaction. For purposes of the Fund's
15% limitation on investments in illiquid securities,
OTC transactions (as well as any assets used to cover
such transactions) will be considered illiquid.
Risks and Special Considerations. The use of
derivative instruments involves risks and special
considerations as described below. Risks pertaining to
particular derivative instruments are described in the
sections that follow.
(1)Market Risk. The primary risk of derivatives is
the same as the risk of the underlying assets;
namely, that the value of the underlying asset may
go up or down. Adverse movements in the value of
an underlying asset can expose the Fund to losses.
Derivative instruments may include elements of
leverage and, accordingly, the fluctuation of the
value of the derivative instrument in relation to
the underlying asset may be magnified. The
successful use of derivative instruments depends
upon a variety of factors, particularly LCMCM's
ability to predict movements of the securities,
currencies and commodities markets, which requires
different skills than predicting changes in the
prices of individual securities. There can be no
assurance that any particular strategy adopted will
succeed. A decision to engage in a derivative
transaction will reflect LCMCM's judgment that the
derivative transaction will provide value to the
Fund and its shareholders and is consistent with
the Fund's objectives, investment limitations and
operating policies. In making such a judgment,
LCMCM will analyze the benefits and risks of the
derivative transaction and weigh them in the
context of the Fund's entire portfolio and
investment objective.
(2)Credit Risk. The Fund will be subject to the risk
that a loss may be sustained by the Fund as a
result of the failure of a counterparty to comply
with the terms of a derivative instrument. The
counterparty risk for exchange-traded derivative
instruments is generally less than for privately-
negotiated or OTC derivative instruments, since
generally a clearing agency, which is the issuer or
counterparty to each exchange-traded instrument,
provides a guarantee of performance. For privately-
negotiated instruments, there is no similar
clearing agency guarantee. In all transactions,
the Fund will bear the risk that the counterparty
will default, and this could result in a loss of
the expected benefit of the derivative transaction
and possibly other losses to the Fund. The Fund
will enter into transactions in derivative
instruments only with counterparties that LCMCM
reasonably believes are capable of performing under
the contract.
(3)Correlation Risk. When a derivative transaction is
used to completely hedge another position, changes
in the market value of the combined position (the
derivative instrument plus the position being
hedged) result from an imperfect correlation
between the price movements of the two instruments.
With a perfect hedge, the value of the combined
position remains unchanged for any change in the
price of the underlying asset being hedged. With
an imperfect hedge, the value of the derivative
instrument and its hedge are not perfectly
correlated. Correlation risk is the risk that
there might be imperfect correlation, or even no
correlation, between price movements of an
instrument and price movements of investments being
hedged. For example, if the value of a derivative
instrument used in a short hedge (such as writing a
call option, buying a put option or selling a
futures contract) increased by less than the
decline in value of the hedged investments, the
hedge would not be perfectly correlated. Such a
lack of correlation might occur due to factors
unrelated to the value of the investments being
hedged, such as speculative or other pressures on
the markets in which these instruments are traded.
The effectiveness of
<PAGE>
hedges using instruments on
indices will depend, in part, on the degree of
correlation between price movements in the index
and price movements in the investments being
hedged.
(4)Liquidity Risk. Derivatives are also subject to
liquidity risk. Liquidity risk is the risk that a
derivative instrument cannot be sold, closed out or
replaced quickly at or very close to its
fundamental value. Generally, exchange contracts
are very liquid because the exchange clearinghouse
is the counterparty of every contract. OTC
transactions are less liquid than exchange-traded
derivatives since they often can only be closed out
with the other party to the transaction. The Fund
might be required by applicable regulatory
requirements to maintain assets as "cover,"
maintain segregated accounts and/or make margin
payments when it takes positions in derivative
instruments involving obligations to third parties
(i.e., instruments other than purchased options).
If the Fund is unable to close out its positions in
such instruments, it might be required to continue
to maintain such assets or accounts or make such
payments until the position expires, matures or is
closed out. The requirements might impair the
Fund's ability to sell a portfolio security or make
an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The
Fund's ability to sell or close out a position in
an instrument prior to expiration or maturity
depends on the existence of a liquid secondary
market or, in the absence of such a market, the
ability and willingness of the counterparty to
enter into a transaction closing out the position.
Therefore, there is no assurance that any
derivatives position can be sold or closed out at a
time and price that is favorable to the Fund.
(5)Legal Risk. Legal risk is the risk of loss caused
by the legal unenforceability of a party's
obligations under the derivative. While a party
seeking price certainty agrees to surrender the
potential upside in exchange for downside
protection, the party taking the risk is looking
for a positive payoff. Despite this voluntary
assumption of risk, a counterparty that has lost
money in a derivative transaction may try to avoid
payment by exploiting various legal uncertainties
about certain derivative products.
(6)Systemic or "Interconnection" Risk.
Interconnection risk is the risk that a disruption
in the financial markets will cause difficulties
for all market participants. In other words, a
disruption in one market will spill over into other
markets, perhaps creating a chain reaction. Much
of the OTC derivatives market takes place among the
OTC dealers themselves, thus creating a large
interconnected web of financial obligations. This
interconnectedness raises the possibility that a
default by one large dealer could create losses for
other dealers and destabilize the entire market for
OTC derivative instruments.
General Limitations. The use of derivative instruments
is subject to applicable regulations of the SEC, the
several options and futures exchanges upon which they
may be traded and the Commodity Futures Trading
Commission ("CFTC").
The Fund has filed a notice of eligibility for
exclusion from the definition of the term "commodity
pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures
markets. In accordance with Rule 4.5 of the
regulations under the CEA, the notice of eligibility
for the Fund includes representations that the Fund
will use futures contracts and related options solely
for bona fide hedging purposes within the meaning of
CFTC regulations, provided that the Fund may hold other
positions in futures contracts and related options that
do not qualify as a bona fide hedging position if the
aggregate initial margin deposits and premiums required
to establish these positions, less the amount by which
any such futures contracts and related options
positions are "in the money," do not exceed 5% of the
Fund's net assets.
The SEC has identified certain trading practices
involving derivative instruments that involve the
potential for leveraging a fund's assets in a manner
that raises issues under the 1940 Act. In order to
limit the potential for the leveraging of a fund's
assets, as defined under the 1940 Act, the SEC has
stated that a fund may use coverage or the segregation
of a fund's assets. The Fund will set aside cash or
other permissible liquid assets in a segregated
custodial account if required to do so by SEC and CFTC
regulations and/or SEC and CFTC interpretations
thereof. Assets used as cover or held in a segregated
account cannot be sold while the derivative position is
open, unless they are replaced with similar assets. As
a result, the commitment of a large portion of the
Fund's assets to segregated accounts could impede
portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
<PAGE>
In some cases, the Fund may be required to allocate or
limit a percentage of its assets to a particular asset
class. In such cases, the Fund may use a derivative
instrument to increase or decrease exposure to an asset
class. When the Fund uses derivatives in this way, it
is required by applicable SEC guidelines to set aside
liquid assets in a segregated account to secure its
obligations under the derivative instruments. Under
these circumstances, LCMCM may, where reasonable,
measure compliance with the applicable percentage by
reference to the nature of the economic exposure
created through the use of the derivative instrument
and not by reference to the nature of the exposure
arising from the assets set aside in the segregated
account (unless another interpretation is specified by
applicable regulatory requirements, in which case such
other interpretation will be complied with). For
example, if U.S. government securities are set aside to
secure the Fund's obligations under an equity position
involving a derivative instrument, the combined
position (i.e., the derivative instrument and the U.S.
government securities) will be treated as an equity
position (if allowed under applicable regulatory
requirements), not as a U.S. government securities
position.
Options. The Fund may use options for any lawful
purpose consistent with its investment objective such
as hedging or managing risk, but not for speculation.
The Fund may purchase (buy) or write (sell) put and
call options on securities and securities indices
("underlying assets") and enter into closing
transactions with respect to such options to terminate
an existing position. Options used by the Fund may
include European, American and Bermuda style options.
If an option is exercisable only at maturity, it is a
"European" option; if it is also exercisable prior to
maturity, it is an "American" option. If it is
exercisable only at certain times, it is a "Bermuda"
option.
The Fund may purchase (buy) and write (sell) put and
call options and enter into closing transactions with
respect to such options to terminate an existing
position. The purchase of call options serves as a
long hedge, and the purchase of put options serves as a
short hedge. Writing put or call options can enable
the Fund to enhance income by reason of the premiums
paid by the purchaser of such options. Writing call
options serves as a limited short hedge because
declines in the value of the hedged investment would be
offset to the extent of the premium received for
writing the option. However, if the security
appreciates to a price higher than the exercise price
of the call option, it can be expected that the option
will be exercised and the Fund will be obligated to
sell the security at less than its market value or will
be obligated to purchase the security at a price
greater than that at which the security must be sold
under the option. Writing put options serves as a
limited long hedge because increases in the value of
the hedged investment would be offset to the extent of
the premium received for writing the option. However,
if the security depreciates to a price lower than the
exercise price of the put option, it can be expected
that the put option will be exercised and the Fund will
be obligated to purchase the security at more than its
market value.
The value of an option position will reflect, among
other things, the historical price volatility of the
underlying investment, the current market value of the
underlying investment, the time remaining until
expiration, the relationship of the exercise price to
the market price of the underlying investment and
general market conditions.
The Fund may effectively terminate its right or
obligation under an option by entering into a closing
transaction. For example, the Fund may terminate its
obligation under a call or put option that it had
written by purchasing an identical call or put option;
this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put
or call option it had purchased by writing an identical
put or call option; this is known as a closing sale
transaction. Closing transactions permit the Fund to
realize the profit or limit the loss on an option
position prior to its exercise or expiration.
The Fund may purchase or write both exchange-traded and
OTC options. Exchange-traded options are issued by a
clearing organization affiliated with the exchange on
which the option is listed that, in effect, guarantees
completion of every exchange-traded option transaction.
In contrast, OTC options are contracts between the Fund
and the other party to the transaction ("counterparty")
(usually a securities dealer or a bank) with no
clearing organization guarantee. Thus, when the Fund
purchases or writes an OTC option, it relies on the
counterparty to make or take delivery of the underlying
investment upon exercise of the option. Failure by the
counterparty to do so would result in the loss of any
premium paid by the Fund as well as the loss of any
expected benefit of the transaction.
The Fund's ability to establish and close out positions
in exchange-listed options depends on the existence of
a liquid market. The Fund intends to purchase or write
only those exchange-traded options for which there
appears to be a liquid secondary market. However,
there can be no assurance that such a market will exist
at any particular time. Closing transactions can be
made for OTC options only by negotiating directly with
the counterparty, or by a
<PAGE>
transaction in the secondary
market if any such market exists. Although the Fund
will enter into OTC options only with counterparties
that are expected to be capable of entering into
closing transactions with the Funds, there is no
assurance that the Fund will in fact be able to close
out an OTC option at a favorable price prior to
expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an
OTC option position at any time prior to its
expiration. If the Fund were unable to effect a
closing transaction for an option it had purchased, it
would have to exercise the option to realize any
profit.
The Fund may engage in options transactions on
securities indices in much the same manner as the
options on securities discussed above, except the index
options may serve as a hedge against overall
fluctuations in the securities market in general.
The writing and purchasing of options is a highly
specialized activity that involves investment
techniques and risks different from those associated
with ordinary portfolio securities transactions.
Imperfect correlation between the options and
securities markets may detract from the effectiveness
of attempted hedging. The Fund will not invest more
than 10% of its total assets in options, nor will it
sell options in an amount exceeding 10% of its total
assets.
Futures Contracts. The Fund may use futures contracts
for any lawful purpose consistent with its investment
objective such as hedging and managing risk, but not
for speculation. The Fund may enter into interest rate
and index futures. The Fund may also purchase put and
call options, and write covered put and call options,
on futures in which it is allowed to invest. The
purchase of futures or call options thereon can serve
as a long hedge, and the sale of futures or the
purchase of put options thereon can serve as a short
hedge. Writing covered call options on futures
contracts can serve as a limited short hedge, and
writing covered put options on futures contracts can
serve as a limited long hedge, using a strategy similar
to that used for writing covered options in securities.
The Fund's hedging may include purchases of futures as
an offset against the effect of expected increases in
securities prices and sales of futures as an offset
against the effect of expected declines in securities
prices.
To the extent required by regulatory authorities, the
Fund may enter into futures contracts that are traded
on national futures exchanges and are standardized as
to maturity date and underlying financial instrument.
Futures exchanges and trading are regulated under the
CEA by the CFTC. Although techniques other than sales
and purchases of futures contracts could be used to
reduce a Fund's exposure to market or interest rate
fluctuations, the Fund may be able to hedge its
exposure more effectively and perhaps at a lower cost
through using futures contracts.
An interest rate futures contract provides for the
future sale by one party and purchase by another party
of a specified amount of a specific financial
instrument (e.g., debt security) for a specified price
at a designated date, time and place. An index futures
contract is an agreement pursuant to which the parties
agree to take or make delivery of an amount of cash
equal to the difference between the value of the index
at the close of the last trading day of the contract
and the price at which the index futures contract was
originally written. Transaction costs are incurred
when a futures contract is bought or sold and margin
deposits must be maintained. A futures contract may be
satisfied by delivery or purchase, as the case may be,
of the instrument or by payment of the change in the
cash value of the index. More commonly, futures
contracts are closed out prior to delivery by entering
into an offsetting transaction in a matching futures
contract. Although the value of an index might be a
function of the value of certain specified securities,
no physical delivery of those securities is made. If
the offsetting purchase price is less than the original
sale price, the Fund realizes a gain; if it is more,
the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if it is
less, the Fund realizes a loss. The transaction costs
must also be included in these calculations. There can
be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a
particular futures contract at a particular time. If
the Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to
maintain the margin deposits on the futures contract.
No price is paid by the Fund upon entering into a
futures contract. Instead, at the inception of a
futures contract, the Fund is required to deposit in a
segregated account with its custodian, in the name of
the futures broker through whom the transaction was
effected, "initial margin," consisting of cash or other
liquid assets, in an amount generally equal to 10% or
less of the contract value. Margin must also be
deposited when writing a call or put option on a
futures contract, in accordance with applicable
exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does
not represent a borrowing, but rather is in the nature
of a performance bond or good-faith deposit that is
returned to the Fund at the termination of the
transaction if all contractual obligations have been
satisfied. Under
<PAGE>
certain circumstances, such as
periods of high volatility, the Fund may be required by
an exchange to increase the level of its initial margin
payment, and initial margin requirements might be
increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and
from the futures broker daily as the value of the
futures position varies, a process known as "marking to
market." Variation margin does not involve borrowing,
but rather represents a daily settlement of the Fund's
obligations to or from a futures broker. When the Fund
purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast,
when the Fund purchases or sells a futures contract or
writes a call or put option thereon, it is subject to
daily variation margin calls that could be substantial
in the event of adverse price movements. If the Fund
has insufficient cash to meet daily variation margin
requirements, it might need to sell securities at a
time when such sales are disadvantageous. Purchasers
and sellers of futures positions and options on futures
can enter into offsetting closing transactions by
selling or purchasing, respectively, an instrument
identical to the instrument held or written. Positions
in futures and options on futures may be closed only on
an exchange or board of trade that provides a secondary
market. The Fund intends to enter into futures
transactions only on exchanges or boards of trade where
there appears to be a liquid secondary market.
However, there can be no assurance that such a market
will exist for a particular contract at a particular
time.
Under certain circumstances, futures exchanges may
establish daily limits on the amount that the price of
a future or option on a futures contract can vary from
the previous day's settlement price; once that limit is
reached, no trades may be made that day at a price
beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily
limit for several consecutive days with little or no
trading, thereby preventing liquidation of unfavorable
positions.
If the Fund were unable to liquidate a futures or
option on a futures contract position due to the
absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses.
The Fund would continue to be subject to market risk
with respect to the position. In addition, except in
the case of purchased options, the Fund would continue
to be required to make daily variation margin payments
and might be required to maintain the position being
hedged by the future or option or to maintain certain
liquid securities in a segregated account.
Certain characteristics of the futures market might
increase the risk that movements in the prices of
futures contracts or options on futures contracts might
not correlate perfectly with movements in the prices of
the investments being hedged. For example, all
participants in the futures and options on futures
contracts markets are subject to daily variation margin
calls and might be compelled to liquidate futures or
options on futures contracts positions whose prices are
moving unfavorably to avoid being subject to further
calls. These liquidations could increase the price
volatility of the instruments and distort the normal
price relationship between the futures or options and
the investments being hedged. Also, because initial
margin deposit requirements in the futures markets are
less onerous than margin requirements in the securities
markets, there might be increased participation by
speculators in the future markets. This participation
also might cause temporary price distortions. In
addition, activities of large traders in both the
futures and securities markets involving arbitrage,
"program trading," and other investment strategies
might result in temporary price distortions. The Fund
will limit its futures transactions to those permitted
under Rule 4.5 of the CEA.
f) Foreign Securities
The Fund may invest up to 5% of its net assets directly
in foreign securities. Investments in securities of
foreign issuers involve risks which are in addition to
the usual risks inherent in domestic investments. In
many countries, there is less publicly available
information about issuers than is available in the
reports and ratings published about companies in the
U.S. Additionally, foreign companies are not subject
to uniform accounting, auditing and financial reporting
standards. Other risks inherent in foreign investment
include expropriation; confiscatory taxation;
withholding taxes on dividends and interest; less
extensive regulation of foreign brokers, securities
markets and issuers; costs incurred in conversions
between currencies; the illiquidity and volatility of
foreign securities markets; the possibility of delays
in settlement in foreign securities markets;
limitations on the use or transfer of assets (including
suspension of the ability to transfer currency from a
given country); the difficulty of enforcing obligations
in other countries; diplomatic developments; and
political or social instability. Foreign economies may
differ favorably or unfavorably from the U.S. economy
in various respects, and many foreign securities are
less liquid and their prices are more volatile than
comparable U.S. securities. From time to time, foreign
securities may be difficult to liquidate rapidly
without adverse price effects.
<PAGE>
Certain costs attributable to foreign investing, such as custody
charges and brokerage costs, are higher than those attributable
to domestic investing.
MANAGEMENT
The directors and officers of the Fund, together with
information as to their principal business occupations
during the last five years, and other information, are
shown below. Each director who is deemed an
"interested person" of the Fund, as defined in the 1940
Act, is indicated by an asterisk. The directors and
officers listed below have served as such since
inception of the Fund in August 1998, except as
otherwise noted.
*Michael R. Grady, Jr., President, Treasurer and
Director of the Fund (DOB 8/19/62; Age 36).
Mr. Grady co-founded the Fund's investment adviser,
LCMCM, with Mr. Barry Glasgow in June 1998 and has
served as its President and a Director since then.
Since January 1997, Mr. Grady has also served as
President of LaSalle St. Capital Markets, Inc., an
investment banking, research and consulting firm which
is an affiliate of LCMCM, and since December 1996, Mr.
Grady has served as a registered representative of
LaSalle St. Securities, Inc., a registered broker-
dealer, an affiliate of LCMCM and the Fund's principal
underwriter (the "Underwriter"). Prior to joining the
LaSalle group of companies, both of which are located
in Chicago, Illinois, Mr. Grady spent 18 months with
Madison Securities, Inc., a registered broker-dealer in
Chicago, Illinois (from June 1995 until December 1996),
and 14 months with Lexington Securities, Inc., a
registered broker-dealer in Chicago, Illinois (from
April 1994 until June 1995). At both companies, Mr.
Grady served as a registered representative and an
Executive Vice President. From August 1990 until April
1994, Mr. Grady served as a registered representative
of A.G. Edwards & Sons, Inc., a registered broker-
dealer in Bartlett, Illinois. Since October 1994, Mr.
Grady has served as the President of Madison Investment
Partners L.P., a private investment partnership that
Mr. Grady helped to form. Mr. Grady received his B.S.
in Finance from Northern Illinois University in 1985.
*Barry J. Glasgow, Vice President, Secretary and
Director of the Fund (DOB 4/14/43; Age 56).
Mr. Glasgow co-founded the Fund's investment adviser,
LCMCM, with Mr. Grady in June 1998 and has served as
its Chief Investment Officer, Secretary, Portfolio
Manager and a Director since then. From May 1991 until
June 1998, Mr. Glasgow served as the Managing Partner
and Portfolio Manager of Gonski & Glasgow Investments,
a registered investment adviser in Elgin, Illinois.
From January 1991 until May 1996, Mr. Glasgow served as
a registered representative of Rocky Mountain
Securities, Inc., a registered broker-dealer, in its
Elgin, Illinois branch office. From May 1996 until May
1998, Mr. Glasgow served as a registered representative
of Berry-Shino Securities, Inc., a registered broker-
dealer, in its Elgin, Illinois branch office. From May
1998 until the date hereof, Mr. Glasgow has served as a
registered representative of the Underwriter, and from
November 1998 until the date hereof, Mr. Glasgow has
served as a Research Analyst of LaSalle St. Capital
Markets, Inc.
David A. Schwering, Ph.D., Director of the Fund (DOB 1/8/50; Age 49).
Dr. Schwering has served as the President and a
Director of American Communication & Computation, Inc.,
a corporation engaged in the communications
infrastructure business, since January 1980, and as a
Director of International Digital Maintenance, Ltd., a
digital equipment repair firm, since May 1972. Both
companies are located in Silver Springs, Maryland. Dr.
Schwering holds several patents in the fields of
electronic and security devices. As a pioneer in
modern computing, Dr. Schwering developed several early
computer technologies. In the 1970s, he developed the
downlink and computation algorithms for NASA's ABS
satellites, the domestic money transfer system for
Bankers Trust in New York, the off-track betting system
for the State of New York and an encrypted
telecommunications system for the U.S. government. Dr.
Schwering received his B.S. in Physics from the
Massachusetts Institute of Technology (M.I.T.), his
M.S.C.S. from the University of Maryland and a
Doctorate in Economics from Harvard University. Dr.
Schwering is listed in "Who's Who" in the computer
industry.
Michael Radnor, Ph.D., Director of the Fund (DOB 2/1/33; Age 66).
Dr. Radnor has served as a Professor at the J.L.
Kellogg Graduate School of Management at Northwestern
University in Evanston, Illinois since 1964. In 1983,
Dr. Radnor launched the International Business
Development program through
<PAGE>
which his staff at
Northwestern assisted numerous U.S. and foreign
companies to strengthen their international operations,
technology and trade strategies and programs.
Privatized as IBD, Inc. in late 1994, the program works
with firms in several countries worldwide. Dr. Radnor
is the President of IBD, Inc. In 1989, Dr. Radnor,
with support from the State of Illinois, established
the Small Business Development Center/Incubator
("SBDC"). SBDC provides counseling, training, referral
services and direct assistance to small businesses in
the Midwest.
George D. Kraft, Ph.D., Director of the Fund (DOB 9/10/37; Age 61).
Dr. Kraft has served as a Professor at the I.I.T.
Stuart School of Business in Chicago, Illinois since
1994. Previously, he was an Associate Professor of
Electrical and Computer Engineering in the Armour
College of Engineering at I.I.T. In 1993, Dr. Kraft
helped form the Telecommuting Advisory Council of
Illinois, and in 1991, he was a member of a statewide
telecommunications committee that developed a strategic
plan for wiring Illinois with a broadband multimedia
network. He has consulted extensively for the U.S.
government through work for the Defense Information
Systems Agency, the Department of Housing and Urban
Development and the General Services Administration.
Each of these agencies has used him as a national
expert on telecommunication capabilities and products.
Dr. Kraft has also been involved with the National
Institute of Standards and Technology, as manager of
the Integrated Services Digital Network ("ISDN")
Standardization Effort and the Alternate Chairman of
the Executive Steering Committee of the North American
ISDN User's Forum. Dr. Kraft has served as a Director
of the Fund since March 1999.
Lawrence E. Harb, Director of the Fund (DOB 7/28/53; Age 45).
Mr. Harb has served as the Managing Director of Sales
and Marketing for J.S. Wurzler Underwriting Managers,
LLC ("Wurzler"), an underwriter of internet and e-
commerce insurance for certain syndicates of Lloyds of
London which is located in Okemos, Michigan, since
January 1999. Prior to joining Wurzler, he was
affiliated with Aon Corp. for approximately three
years. Aon Corp., which is located in Chicago,
Illinois, is a holding company that owns mutual fund,
investment advisory and brokerage businesses. While at
Aon Corp., Mr. Harb served as Chairman of Financial
Solutions Insurance Services, an insurance brokerage
firm; President of Aon Securities Corp., a registered
broker-dealer; and Senior Vice President/Director of
Marketing of Aon Advisors, a registered investment
adviser. Before his involvement with Aon Corp., Mr.
Harb was President and founder of LaSalle Consultants,
Ltd., a financial consulting firm located in Melrose
Park, Illinois, and President of LCL Investments, Inc.,
a registered broker-dealer located in Melrose Park,
Illinois. Mr. Harb has over 23 years experience in
the financial services industry, co-authored a book on
banking and has taught at the I.I.T. Stuart School of
Business in Chicago, Illinois. Mr. Harb received his
B.S. in Management from Northern Illinois University in
1975 and his Masters of Management degree from
Northwestern University's Kellogg School of Management
in 1993. Mr. Harb has served as a Director of the Fund
since March 1999.
The address of Messrs. Grady and Glasgow is 810 West
Washington Boulevard, Chicago, Illinois 60607; the
address of Dr. Schwering is 223 University Boulevard
East, Silver Spring, Maryland 20901; the address of Dr.
Radnor is Northwestern University, 2001 Sheridan Road,
Evanston, Illinois 60208; the address of Dr. Kraft is
I.I.T. Stuart School of Business, Room 424, 565 West
Adams Street, Chicago, Illinois 60631; and the address
of Mr. Harb is 3520 Okemos Road, Suite 120, Okemos,
Michigan 48864-5943.
In exchange for an equity interest in the Fund,
certain officers of LCMCM will provide the
initial seed capital required to register the Fund with
the SEC. Accordingly, before the public offering of
Fund shares, these persons will own 100% of the Fund's
outstanding shares of common stock.
Directors and officers of the Fund who are also
officers, directors or employees of LCMCM will not
receive any remuneration from the Fund for serving as
directors or officers. Accordingly, neither Mr. Grady
nor Mr. Glasgow will receive any remuneration from the
Fund for their services as directors and officers.
However, the remaining directors will receive the
following fees for their services as directors of the
Fund:(1)
<PAGE>
Name Cash Other Total
Compensation(2) Compensation
David A. Schwering $8,000 $0 $8,000
Michael Radnor $8,000 $0 $8,000
George D. Kraft $8,000 $0 $8,000
Lawrence E. Harb $8,000 $0 $8,000
Total $32,000 $0 $32,000
__________
(1)The amounts indicated are estimates of amounts to
be paid by the Fund during its first fiscal year.
(2)Each director who is not deemed an "interested
person" of the Fund, as defined in the 1940 Act,
will receive $2,000 for each Board of Directors
meeting attended by such person, plus reimbursement
of reasonable expenses incurred in connection
therewith. The Board anticipates holding four
meetings during its first fiscal year. Thus, each
disinterested director is entitled to up to $8,000
during such time period from the Fund, plus
reasonable expenses.
PRINCIPAL SHAREHOLDERS
As of the date hereof, the following persons own of
record or are known by the Fund to own beneficially 5%
or more of the outstanding shares of common stock of
the Fund:
[insert data when available]
Name and Address No. Shares Percentage
[_________________] [________] [_____]
__________
Based on the foregoing, as of the date hereof,
_________________ owned a controlling interest
in the Fund. Shareholders with a controlling interest
could effect the outcome of proxy voting or the
direction of management of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
LCM Capital Management, Inc. ("LCMCM") is the
investment adviser to the Fund. Jack McDermott, the
Chairman of the Board of LCMCM, owns a controlling
interest in LCMCM. Messrs. Grady and Glasgow serve as
officers and directors of LCMCM and the Fund. See
"Management" for more information.
The investment advisory agreement between the Fund and
LCMCM dated as of ___________________ ____, 1999 (the
"Advisory Agreement") has an initial term of two years
and thereafter is required to be approved annually by
the Board of Directors of the Fund or by vote of a
majority of the Fund's outstanding voting securities
(as defined in the 1940 Act). Each annual renewal must
also be approved by the vote of a majority of the
Fund's directors who are not parties to the Advisory
Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting
on such approval. The Advisory Agreement was approved
by the full Board of Directors of the Fund on
__________________ ____, 1999 and by the initial
shareholder of the Fund on ________________ ____, 1999.
The Advisory Agreement is terminable without penalty on
60 days' written notice by the Board of Directors, by
vote of
<PAGE>
a majority of the Fund's outstanding voting
securities or by LCMCM, and will terminate
automatically in the event of its assignment.
Under the terms of the Advisory Agreement, LCMCM will
manage the Fund's investments and business affairs,
subject to the supervision of the Board of Directors.
At its expense, LCMCM will provide office space and all
necessary office facilities, equipment and personnel
for managing the investments of the Fund. As
compensation for its services, the Fund will pay LCMCM
a fee, computed daily and payable monthly, equal to, on
an annual basis, 1.0% of the Fund's average daily net
assets. The organizational and offering expenses of
the Fund will be paid by LCMCM from its own assets.
Custodian, Transfer Agent, Dividend Paying Agent,
Registrar, Fund Accountant and Administrator
As custodian of the Fund's assets, Firstar Bank
Milwaukee, N.A. ("Firstar Bank"), 615 East Michigan
Street, Milwaukee, Wisconsin 53202, has custody of all
securities and cash of the Fund, delivers and receives
payment for portfolio securities sold, receives and
pays for portfolio securities purchased, collects
income from investments, if any, and performs other
duties, all as directed by the officers of the Fund.
Firstar Bank also acts as transfer agent, dividend
paying agent and registrar for the Fund, and Firstar
Mutual Fund Services, L.L.C., which is an affiliate of
Firstar Bank and which is located at the same address,
acts as fund accountant and administrator for the Fund.
Independent Accountants
PricewaterhouseCoopers, ________________, Milwaukee,
Wisconsin, independent accountants for the Fund, audit
and report on the Fund's financial statements.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Under the Advisory Agreement, LCMCM is responsible for
decisions to buy and sell securities for the Fund and
for the placement of the Fund's securities business,
the negotiation of the commissions to be paid on such
transactions and the allocation of portfolio brokerage
and principal business. Purchases may be made from
brokers, dealers and, on occasion, issuers. The
purchase price of securities purchased from a broker or
dealer may include commissions and dealer spreads.
The Fund may also pay mark-ups on principal
transactions.
In executing transactions on behalf of the Fund, LCMCM
has no obligation to deal with any particular broker or
dealer. Rather, LCMCM seeks to obtain the best
execution at the best security price available with
respect to each transaction. The best price to the
Fund means the best net price without regard to the mix
between purchase or sale price and commission, if any.
While LCMCM seeks reasonably competitive commission
rates, the Fund does not necessarily pay the lowest
available commission. As noted in the Prospectus under
the captions "Management of the Fund - Investment
Advisory Agreement" and "Underwriting," pursuant to
guidelines adopted by the Fund's Board of Directors and
in accordance with the rules of the SEC, the
Underwriter, which is an affiliate of LCMCM, as well as
certain broker-dealers involved in the Fund's initial
public offering, may serve as brokers to the Fund;
however, in order for the Underwriter or such broker-
dealers to effect portfolio transactions for the Fund
on an exchange, the commissions, fees or other
remuneration received by such persons must be
reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in
connection with comparable transactions involving
similar securities being purchased or sold on any
exchange during a comparable period of time. This
standard allows the Underwriter and such broker-dealers
to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction.
Section 28(e) of the Securities Exchange Act of 1934,
as amended ("Section 28(e)"), permits an investment
adviser, under certain circumstances, to cause an
account to pay a broker or dealer who supplies
brokerage and research services a commission for
effecting a transaction in excess of the amount of
commission another broker or dealer would have charged
for effecting the transaction. Brokerage and research
services include (i) furnishing advice as to the value
of securities, the advisability of investing,
purchasing or selling securities and the availability
of securities or purchasers or sellers of securities;
(ii) furnishing analyses and reports concerning
issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of
accounts; and (iii) effecting securities transactions
and performing functions incidental thereto (such as
clearance, settlement and custody).
<PAGE>
In selecting brokers or dealers, LCMCM considers
investment and market information and other research,
such as economic, securities and performance
measurement research provided by such brokers or
dealers and the quality and reliability of brokerage
services, including execution capability, performance
and financial responsibility. Accordingly, the
commissions charged by any such broker or dealer may be
greater than the amount another firm might charge if
LCMCM determines in good faith that the amount of such
commissions is reasonable in relation to the value of
the research information and brokerage services
provided by such broker or dealer to the Fund. LCMCM
believes that the research information received in this
manner provides the Fund with benefits by supplementing
the research otherwise available to the Fund. Such
higher commissions will not, however, be paid by the
Fund unless (i) LCMCM determines in good faith that the
amount is reasonable in relation to the services in
terms of the particular transaction or in terms of
LCMCM's overall responsibilities with respect to the
accounts, including the Fund, as to which it exercises
investment discretion; (ii) such payment is made in
compliance with the provisions of Section 28(e) and
other applicable state and federal laws; and (iii) in
the opinion of LCMCM, the total commissions paid by the
Fund will be reasonable in relation to the benefits to
the Fund over the long term. In addition, such higher
commissions will not be paid by the Fund with respect
to portfolio transactions in which the Underwriter is
serving as broker to the Fund. The investment advisory
fees paid by the Fund under the Advisory Agreement are
not reduced as a result of LCMCM's receipt of research
services.
Although LCMCM is a newly organized investment adviser
and does not currently have any advisory accounts in
addition to the Fund, LCMCM may take on other advisory
accounts in the future. In the event that LCMCM serves
as investment adviser to clients, in addition to the
Fund, in the future, LCMCM would also place portfolio
transactions for such other advisory accounts. Under
these circumstances, research services furnished by
firms through which the Fund effects its securities
transactions could be used by LCMCM in servicing all of
its accounts; that is, not all of such services may be
used by LCMCM in connection with the Fund. LCMCM
believes it would not be possible to measure separately
the benefits from research services to each of the
accounts (including the Fund) managed by it. Because
the volume and nature of the trading activities of the
accounts would not likely be uniform, the amount of
commissions in excess of those charged by another
broker or dealer paid by each account for brokerage and
research services would vary. However, LCMCM believes
such costs to the Fund would not be disproportionate to
the benefits received by the Fund on a continuing
basis. LCMCM would seek to allocate portfolio
transactions equitably whenever concurrent decisions
were made to purchase or sell securities by the Fund
and another advisory account. In some cases, this
procedure could have an adverse effect on the price or
the amount of securities available to the Fund. There
can be no assurance that a particular purchase or sale
opportunity would be allocated to the Fund. In making
such allocations between the Fund and other advisory
accounts, certain factors considered by LCMCM would be
the respective investment objectives, the relative size
of portfolio holdings of the same or comparable
securities, the availability of cash for investment and
the size of investment commitments generally held.
A change in the investments held by the Fund is known
as "portfolio turnover." For instance, a portfolio
turnover rate of 100% would result if all the
securities in a portfolio (excluding securities whose
maturities at acquisition were one year or less) at the
beginning of an annual period had been replaced by the
end of the period. Portfolio turnover generally
involves some expense to the Fund, including brokerage
commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in
other securities. Such sales may result in realization
of taxable capital gains. The portfolio turnover rate
may vary from year to year, as well as within a year.
Under normal market conditions, the portfolio turnover
rate for the Fund is expected to be approximately
80% to 130% and generally will not exceed
175%.
TAXATION OF THE FUND AND ITS DISTRIBUTIONS
As indicated under "Federal Taxation of the Fund and
its Distributions" in the Prospectus, the Fund intends
to qualify annually and be treated as a "regulated
investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and, if
so qualified, will not be liable for federal income
taxes to the extent earnings are distributed on a
timely basis. This qualification does not require
government supervision of the Fund's management
practices or policies. However, in order to so
qualify, the Fund must, among other things: (i) derive
at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to
securities loans, gains from the sale or other
disposition of stock or other income derived with
respect to its business of investing in such stock
(including, but not limited to, gains from options,
futures or forward contracts), and (ii) diversify its
holdings such that,
<PAGE>
at the end of each quarter of each
taxable year, (a) at least 50% of the market value of
the Fund's assets is represented by cash, cash items,
U.S. government securities, securities of other
regulated investment companies and other securities
which, with respect to any one issuer, do not represent
more than 5% of the value of the Fund's assets nor more
than 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the market value
of the Fund's assets is invested in the securities of
any one issuer (other than U.S. government securities
or the securities of other regulated investment
companies).
If the Fund qualifies as a regulated investment
company, the Fund will not be subject to federal income
tax on the portion of its investment company taxable
income (i.e., its investment company taxable income as
defined in the Code without regard to the deduction for
dividends paid) and its net capital gain (i.e., the
excess of its net realized long-term capital gain over
its net realized short-term capital loss) which it
distributes to the Fund's shareholders in each taxable
year, provided that it distributes to its shareholders
at least 90% of its net investment income for such
taxable year. If the Fund should fail to qualify as a
regulated investment company in any year, the Fund
would be subject to tax in such year on all of its
taxable income, whether or not the Fund made any
distributions. In addition, amounts not distributed by
a regulated investment company on a timely basis in
accordance with a calendar year distribution
requirement are subject to a 4% excise tax. To avoid
this tax, the Fund must distribute during each calendar
year an amount equal to, at a minimum, the sum of (i)
98% of its net investment income for the calendar year,
(ii) 98% of its capital gain income for the one year
period ending on October 31 of such year (unless, as in
the case of the Fund, an election is made by a fund
with a November or December year-end to use the fund's
fiscal year) and (iii) all ordinary income and capital
gain net income for previous years that were not
previously distributed.
Dividends paid by the Fund from its net investment
income are taxable as ordinary income to shareholders
of the Fund who are subject to tax. Distributions made
from net capital gains and properly designated by the
Fund as such are taxable to shareholders as long-term
capital gains, regardless of the length of time the
shareholder has owned Fund shares. Any loss upon the
sale or exchange of Fund shares held for six months or
less, however, is treated as long-term capital loss to
the extent of any capital gain dividends received by
the shareholder. Distributions in excess of the Fund's
earnings and profits are treated first as a non-taxable
reduction in the adjusted tax basis of a shareholder's
Fund shares (up to the amount of the shareholder's tax
basis in his or her shares) and, thereafter, constitute
capital gain to such shareholder (provided that Fund
shares are held as a capital asset).
Capital gain dividends may be taxed at a lower rate
than dividends from ordinary income for certain non-
corporate taxpayers. For securities held longer than
one year, the maximum long-term capital gains rate is
20%.
Dividends and distributions by the Fund are generally
taxable to shareholders at the time the dividend or
distribution is made (even if paid or reinvested in
additional Fund shares). However, any dividend
declared by the Fund in October, November or December
of any calendar year, which is payable to Fund
shareholders of record on a specified date in such a
month and which is not paid on or before December 31 of
such year will be treated as being paid by the Fund and
received by Fund shareholders as of December 31 of such
year, provided that the dividend is paid during January
of the following year. After the end of each taxable
year, the Fund will notify shareholders of the federal
income tax status of any dividends and distributions,
or deemed distributions, made by the Fund during such
year.
Gain or loss, if any, recognized on the sale or other
disposition of Fund shares, including repurchases by
the Fund, will be taxed as a capital gain or loss if
the shares are capital assets in the shareholder's
hands and will be taxed as long-term or short-term gain
or loss, as the case may be. A loss realized on a sale
or exchange of Fund shares will be disallowed if other
Fund shares are acquired within a 61-day period
beginning 30 days before and ending 30 days after the
date that the shares are disposed of. The basis of the
shares acquired will be adjusted to reflect the
disallowed loss.
This section is not intended to be a full discussion of
federal income tax laws and the effect of such laws on
Fund shareholders. There may be other federal, state
or local tax considerations applicable to a particular
shareholder. Shareholders are urged to consult their
own tax advisers.
<PAGE>
FINANCIAL STATEMENTS
The following audited financial statements of the Fund
are contained herein:
(a) Report of Independent Accountants.*
(b) Statement of Assets and Liabilities.*
(c) Notes to Statement of Assets and Liabilities.*
*To be filed by amendment.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
Included in Parts A and B.
(2) Exhibits
See "Exhibit Index."
ITEM 25. MARKETING ARRANGEMENTS
See Exhibits h.1 and h.2 to this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses
expected to be incurred in connection with the offering
described in this Registration Statement, assuming the
underwriters' over-allotment option is not exercised
(all of which expenses, except the expense allowance of
LaSalle St. Securities, Inc. (the "Representative"),
will be paid by LCMCM):
SEC registration fees $ 12,788.00
American Stock Exchange listing fee 25,000.00
Printing and engraving expenses; postage *
Audit fees and expenses 1,000.00
Legal fees and expenses *
NASD fees 5,250.00
Representative's expense allowance 400,000.00
Miscellaneous *
Total $660,000.00
____________________
* To be completed by amendment.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Prior to the initial public offering of the
Registrant's Common Stock, certain officers of LCMCM
will control the Registrant.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
Title of Class Number of Record Holders as of________, 1999
Common Stock $0.01 par value [ ]
<PAGE>
ITEM 29. INDEMNIFICATION
Under the Registrant's Articles of Incorporation and By-
Laws, the directors and officers of the Registrant will
be indemnified to the fullest extent permitted by the
Maryland General Corporate Law, subject to the
applicable provisions of the Investment Company Act of
1940, as amended, including advancing of expenses
incurred in connection therewith. In addition, the
Registrant is required to indemnify other employees and
agents of the Registrant to such extent as shall be
authorized by the Board of Directors and permitted by
law. Such indemnification shall be in addition to any
other right or claim to which any director, officer,
employee or agent may otherwise be entitled. The
Registrant may purchase and maintain insurance on
behalf of any person who is or was a director, officer,
employee or agent of the Registrant against any
liability asserted against and incurred by such person
in any such capacity or arising out of such person's
position, whether or not the Registrant would have the
power to indemnify against such liability.
The Registrant and LCMCM, its investment adviser, have
also agreed to indemnify the Representative and other
underwriters involved with the Registrant's initial
public offering against certain liabilities, including
liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
Insofar as indemnification for liabilities under the
Securities Act may be permitted to the directors,
officers, employees and agents of the Registrant, and
the Representative and other underwriters, pursuant to
the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is
against public policy as expressed in the Securities
Act and is therefore unenforceable. In the event that
a claim for indemnification against such liabilities
under the Securities Act (other than the payment by the
Registrant of expenses incurred by a director, officer,
employee or agent of the Registrant, or by the
Representative or any other underwriter, in connection
with the successful defense of any action, suit or
proceeding) is asserted by such directors, officers,
employees, agents or Representative or any other
underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such
indemnification by it is against public policy as
expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Besides serving as investment adviser to the
Registrant, LCMCM is not currently and has not during
the past two fiscal years engaged in any other
business, profession, vocation or employment of a
substantial nature.
Set forth below is a list of each executive officer and
director of LCMCM indicating each business, profession,
vocation or employment of a substantial nature in which
each such person has been engaged during the past two
fiscal years for his or her own account or in the
capacity of director, officer, employee, partner or
trustee:
Position with Other Substantial Business,
Name LCMCM Profession, Vocation or Employment
Michael R. Grady, Jr. President, Treasurer President, LaSalle St. Capital
and Director Markets, Inc.; Registered
Representative, LaSalle St.
Securities, Inc.
Barry J. Glasgow Chief Investment Research Analyst, LaSalle St.
Officer, Secretary, Capital Markets, Inc.;
Portfolio Manager Registered Representative,
and Director LaSalle St. Securities, Inc.;
From May 1991 until June 1998,
Managing Partner and Portfolio
Manager of Gonski & Glasgow
Investments.
Daniel Schlesser Director Senior Vice President and CFO,
LaSalle St. Securities, Inc.
Jack McDermott Chairman of the Board President, LaSalle St. Securities,
Inc.; President, McDermott-
LaSalle, Inc.
Byron Crowe Director Executive Vice President,
LaSalle St. Capital Markets, Inc.;
Registered Representative,
LaSalle St. Securities, Inc.
<PAGE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books or other documents of the
Registrant required to be maintained by Section 31(a)
of the Investment Company Act of 1940, as amended, and
the rules promulgated thereunder, are in the possession
of LCMCM, the Registrant's investment adviser, at the
Registrant's corporate offices, except records held and
maintained by (i) Firstar Bank Milwaukee, N.A., 615
East Michigan Street, Milwaukee, Wisconsin 53202,
relating to its function as custodian and as transfer
agent and (ii) Firstar Mutual Fund Services, L.L.C.,
615 East Michigan Street, Milwaukee, Wisconsin 53202,
relating to its function as administrator and fund
accountant.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(1) Registrant undertakes to suspend the
offering of shares of Common Stock covered hereby until
the Prospectus contained herein is amended, if (i)
subsequent to the effective date of this Registration
Statement, its net asset value per share of Common
Stock declines more than 10% from its net asset value
per share of Common Stock as of the effective date of
the Registration Statement or (ii) its net asset value
per share of Common Stock increases to an amount
greater than its net proceeds as stated in the
Prospectus contained herein.
(2) Not applicable.
(3) Not applicable.
(4) Not applicable.
(5)(a) For the purpose of determining any
liability under the Securities Act, the information
omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A
and contained in a form of prospectus filed under Rule
497(h) under the Securities Act shall be deemed to be a
part of this Registration Statement as of the time it
was declared effective; and
(b) For the purpose of determining any
liability under the Securities Act, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of the
securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) Registrant undertakes to send by first
class mail, within two business days of receipt of a
written or oral request, a copy of the Statement of
Additional Information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, as amended, and the Investment Company Act of
1940, as amended, the Registrant has duly caused this
Pre-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of
Chicago, State of Illinois on the 23rd day of July, 1999.
LCM INTERNET GROWTH FUND, INC.
(Registrant)
By: /s/ Michael R. Grady, Jr.
-----------------------------
Michael R. Grady, Jr.
President and Treasurer
Pursuant to the requirements of the Securities Act
of 1933, as amended, this Pre-Effective Amendment No. 2
to the Registration Statement has been signed below by
the following persons in the capacities and on the
dates indicated.
Name Title Date
/s/ Michael R. Grady, Jr. President, Treasurer and Director July 23, 1999
- -------------------------
Michael R. Grady, Jr.
* Vice President, Secretary and Director July 23, 1999
- ------------------------
Barry J. Glasgow
* Director July 23, 1999
- ------------------------
Michael Radnor
* Director July 23, 1999
- ------------------------
David A. Schwering
* Director July 23, 1999
- -----------------------
George D. Kraft
* Director July 23, 1999
- ----------------------
Lawrence E. Harb
*By: /s/ Michael R. Grady, Jr.
-------------------------------
Michael R. Grady, Jr. (as attorney-in-fact pursuant
to authority granted by power of attorney included
on this signature page in initial filing of this
Registration Statement)
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a) Articles of Incorporation(1)
(b) By-Laws(1)
(c) Not Applicable
(d) Form of Specimen Stock Certificate*
(e) Form of Distribution Reinvestment Plan
(f) Not Applicable
(g) Form of Investment Advisory Contract
(h.1) Form of Underwriting Agreement
(h.2) Form of Master Selected Dealer Agreement
(i) Not Applicable
(j) Form of Custodian Servicing Agreement
(k.1) Form of Stock Transfer Agency Agreement
(k.2) Form of Fund Administration Servicing Agreement
(k.3) Form of Fund Accounting Servicing Agreement
(k.4) Form of Fulfillment Servicing Agreement
(l) Form of Opinion and Consent of Godfrey & Kahn, S.C.
(m) Not Applicable
(n) Consent of PricewaterhouseCoopers*
(o) Not Applicable
(p) Form of Subscription Agreement for Initial Capital
(q) Not Applicable
(r) Financial Data Schedule*
_______________
* To be filed by amendment.
(1) Incorporated by reference to Registrant's initial
filing of the Registration Statement on Form N-2
filed with the SEC on March 15, 1999 (Registration
Nos. 333-74407; 811-9261).
Exhibit (e)
FORM OF
TERMS AND CONDITIONS OF
LCM INTERNET GROWTH FUND, INC.
DISTRIBUTION REINVESTMENT PLAN
Holders of shares of common stock of LCM Internet
Growth Fund, Inc. (the "Fund) are advised as follows
with respect to the Fund's Distribution Reinvestment
Plan (the "Plan"):
1. Participation. Each holder of shares of common
stock of the Fund will automatically be deemed to have
elected to be a participant in the Plan, unless Firstar
Bank Milwaukee, N.A. (the "Plan Agent") is otherwise
instructed by such shareholder, in writing, to have all
distributions, net of any applicable withholding tax,
paid in cash. A shareholder who does not wish to
participate in the Plan will receive all distributions,
the record date for which follows the receipt by the
Plan Agent of such shareholder's instructions, in cash
and will be paid by check mailed directly to such
shareholder by the Plan Agent, as dividend-disbursing
agent. The Plan Agent will act as agent for
participants in administering the Plan and will open an
account for each participant under the Plan in the same
name as his or her outstanding shares of common stock
are registered.
2. Distributions.
(a) General. Whenever the directors of the Fund
declare an income dividend or capital gains
distribution payable, at the option of the shareholder,
in shares of common stock or cash, non-participants in
the Plan will receive such distribution in cash and
participants in the Plan will receive such distribution
in shares of common stock to be issued by the Fund or
purchased on the open market by the Plan Agent. Any
such shares so distributed will be held by the Plan
Agent for each participant's account.
(b) Market Premium Issuances. If, on the distribution
payment date or, if that date is not an American Stock
Exchange trading day, the next preceding trading day
(the "Valuation Date"), the market price per share of
common stock equals or exceeds the net asset value per
share on that date, the Fund will issue shares of
common stock to participants valued at net asset value;
provided, however, if the net asset value is less than
95% of the market price on the Valuation Date, then
participants will be issued shares valued at 95% of the
market price.
(c) Market Discount Purchases. If, on the Valuation
Date, the net asset value per share of common stock
exceeds the market price per share on that date, the
Plan Agent, as agent for the participants, will, for a
period of 30 days, buy shares of the Fund's common
stock in the open market, on the American Stock
Exchange or elsewhere, for each participant's account.
If, at the close of business on any day during the
purchase period, the market
<PAGE>
price exceeds the net asset
value per share, the Plan Agent will cease open market
purchases and the Fund will issue the remaining shares
at a price equal to the greater of net asset value or
95% of the then current market price. In a case where
the Plan Agent has terminated open market purchases and
the Fund has issued the remaining shares, the number of
shares received by each participant in respect of the
distribution will be based on the weighted average of
prices paid for shares purchased in the open market and
the price at which the Fund issues the remaining
shares.
3. Valuation. For purposes of the Plan, the market
price of shares of common stock of the Fund on a
particular date shall be the last sales price on the
American Stock Exchange at the close of the previous
trading day or, if there is no sale on the American
Stock Exchange on that date, then the mean between the
closing bid and asked quotations for such stock on the
American Stock Exchange on such date. The net asset
value per share of common stock on a particular date
shall be as determined by or on behalf of the Fund.
4. Liability of Plan Agent. The Plan Agent shall at
all times act in good faith and agree to use its best
efforts within reasonable limits to ensure the accuracy
of all services performed under this Plan and to comply
with applicable law, but assumes no responsibility and
shall not be liable for loss or damage due to errors
unless such error is caused by the Plan Agent's
negligence, bad faith or willful misconduct or that of
its employees. Each participant's uninvested funds
held by the Plan Agent will not bear interest. The
Plan Agent shall have no liability in connection with
any inability to purchase Fund shares, within the time
provided, or with the timing of any purchases effected.
The Plan Agent shall have no responsibility as to the
value of the shares of common stock acquired for any
participant's account. For the purpose of cash
investments, the Plan Agent may commingle participants'
funds.
5. Recordkeeping.
(a) Stock Certificates. The Plan Agent will hold
shares of common stock acquired pursuant to the Plan in
non-certificated form in the name of each participant
for whom such shares are being held. Upon a
participant's written request, the Plan Agent will
deliver to the participant, without charge, a
certificate or certificates representing all full
shares of common stock held by the Plan Agent pursuant
to the Plan for the benefit of such participant.
Although a participant may from to time have an
undivided fractional interest in a share of common
stock of the Fund, no certificates for fractional
shares will be issued. However, distributions on
fractional shares will be credited to each
participant's account. In the event of termination of
a participant's account under the Plan, the Plan Agent
will adjust for any such undivided fractional interest
in cash at the market value of the shares of common
stock at the time of termination.
(b) Confirmations. The Plan Agent will confirm, in
writing, each acquisition made for the account of a
participant as soon as practicable, but in any event
not later than 60 days after the date thereof.
<PAGE>
(c) Stock Dividends or Splits. Any stock dividends or
split shares distributed by the Fund on shares of
common stock held by the Plan Agent for a participant
will be credited to the participant's account.
6. Proxy Materials. The Plan Agent will forward to
each participant any proxy solicitation material
received by it and will vote any shares so held for
each participant first in accordance with the
instructions set forth on the proxies returned by the
participant to the Fund and then with respect to any
proxies not returned by the participant to the Fund in
the same proportion as the Plan Agent votes proxies
returned by participants to the Fund.
7. Fees. The Plan Agent's service fee for handling
the reinvestment of distributions will be paid by the
Fund. Each participant, however, will be charged a pro
rata share of brokerage commissions incurred with
respect to the Plan Agent'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 because the Plan Agent will be purchasing
shares for all participants in blocks and prorating the
lower commission thus attainable. The Plan Agent may
use its affiliates and/or affiliates of the Fund's
investment adviser for all trading activity relative to
the Plan.
8. Termination.
(a) By Participant. A participant may terminate his
or her account under the Plan by notifying the Plan
Agent, in writing, at Firstar Bank Milwaukee, N.A., c/o
LCM Internet Growth Fund, Inc., P. O. Box 2077,
Milwaukee, Wisconsin 53201-2077. Such termination will
be effective immediately if notice is received by the
Plan Agent prior to the distribution record date;
otherwise, such termination will be effective, with
respect to any subsequent distribution, on the first
trading day after the distribution paid for such record
date shall have been credited to such participant's
account.
(b) By Plan Agent or Fund. The Plan may be terminated
by the Plan Agent or the Fund with respect to any
distributions paid subsequent to written notice of the
termination mailed to participants at least 30 days
before the record date for the payment of any
distribution.
(c) Effect of Termination. Upon any termination, the
Plan Agent will cause a certificate or certificates to
be issued for the full shares held for each participant
under the Plan and cash adjustment for any fractional
shares to be delivered to him or her without charge.
9. Amendment. The terms and conditions of the Plan
may be amended by the Plan Agent or the Fund at any
time or times but, except when necessary or appropriate
to comply with applicable law or the rules or policies
of the Securities and Exchange Commission or any other
regulatory authority, only by mailing to each
participant appropriate written notice at least 30 days
prior to the effective date thereof. The amendment
shall be deemed to be accepted by each participant
<PAGE>
unless, prior to the effective date thereof, the Plan
Agent receives written notice of the termination of the
participant's account under the Plan. Any such
amendment may include an appointment by the Plan Agent,
in its place and stead, of a successor Plan Agent under
these terms and conditions, with full power and
authority to perform all or any acts to be performed by
the Plan Agent under these terms and conditions.
10. Applicable Law. These terms and conditions shall
be governed by the laws of the State of Maryland.
Exhibit (g)
FORM OF
LCM INTERNET GROWTH FUND, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is entered into as of the _____ day
of _________, 1999, between LCM Internet Growth Fund,
Inc., a Maryland corporation (the "Corporation") and
LCM Capital Management, Inc., an Illinois corporation
(the "Adviser").
W I T N E S S E T H
WHEREAS, the Corporation is a closed-end
investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
WHEREAS, the Adviser is a registered investment
adviser, formed to render investment advisory services.
WHEREAS, in managing the Corporation's assets, as
well as in the conduct of certain of its affairs, the
Corporation seeks the benefit of the Adviser's services
and its assistance in performing certain managerial
functions. The Adviser desires to furnish such
services and to perform the functions assigned to it
under this Agreement for the consideration provided for
herein.
NOW THEREFORE, the parties mutually agree as follows:
1. Appointment of the Adviser. The Corporation
hereby appoints the Adviser as its investment adviser,
and the Adviser accepts the appointment. Subject to
the direction of the Board of Directors (the
"Directors") of the Corporation, the Adviser shall
manage the investment and reinvestment of the
Corporation's assets in accordance with the
Corporation's investment objective and policies and
limitations, for the period and upon the terms herein
set forth. The investment of funds shall also be
subject to all applicable restrictions of the Articles
of Incorporation and By-Laws of the Corporation as may
from time to time be in force.
2. Expenses Paid by the Adviser. In addition to the
expenses which the Adviser may incur in the performance
of its responsibilities under this Agreement, and the
expenses which it may expressly undertake to incur and
pay, the Adviser shall incur and pay the following
expenses:
(a) All reasonable compensation, fees and related
expenses of the Corporation's officers and its
Directors, except for such Directors who are not
interested persons (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Adviser (except as
provided in subsection (c), below);
<PAGE>
(b) All expenses related to the rental and
maintenance of the principal offices of the
Corporation; and
(c) All organizational expenses of the
Corporation (including all reasonable compensation,
fees and related expenses of the Corporation's
interested and disinterested Directors incurred in
connection with the Corporation's organizational
meeting) and all expenses incurred in connection with
the Corporation's initial public offering of common
stock.
3. Investment Advisory Functions. In its capacity as
investment adviser, the Adviser shall have the
following responsibilities:
(a) To furnish continuous advice and recommendations
to the Corporation, as to the acquisition, holding or
disposition of any or all of the securities or other
assets which the Corporation may own or contemplate
acquiring from time to time;
(b) To cause its officers to attend meetings and
furnish oral or written reports, as the Corporation may
reasonably require, in order to keep the Directors and
appropriate officers of the Corporation fully informed
as to the condition of the investments of the
Corporation, the investment recommendations of the
Adviser and the investment considerations which have
given rise to those recommendations; and
(c) To supervise the purchase and sale of securities
or other assets as directed by the appropriate officers
of the Corporation.
The services of the Adviser are not to be deemed
exclusive and the Adviser shall be free to render
similar services to others as long as its services for
others does not in any way hinder, preclude or prevent
the Adviser from performing its duties and obligations
under this Agreement. In the absence of willful
misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the
part of the Adviser, the Adviser shall not be subject
to liability to the Corporation or to any shareholder
for any act or omission in the course of, or in
connection with, rendering services hereunder or for
any losses that may be sustained in the purchase,
holding or sale of any security.
4. Obligations of the Corporation. The Corporation
shall have the following obligations under this
Agreement:
(a) To keep the Adviser continuously and fully
informed as to the composition of the Corporation's
investments and the nature of all of its assets and
liabilities;
(b) To furnish the Adviser with a copy of any
financial statement or report prepared for it by
certified or independent public accountants, and with
copies of any financial statements or reports made to
the Corporation's shareholders or to any governmental
body or securities exchange;
<PAGE>
(c) To furnish the Adviser with any further materials
or information which the Adviser may reasonably request
to enable it to perform its functions under this
Agreement; and
(d) To compensate the Adviser for its services in
accordance with the provisions of paragraph 5 hereof.
5. Compensation. The Corporation will pay the
Adviser a fee for its services (the "Advisory Fee") at
the annual rate of 1.00% of the Corporation's average
daily net assets. The Advisory Fee shall be accrued
each calendar day during the term of this Agreement and
the sum of the daily fee accruals shall be paid monthly
as soon as practicable following the last day of each
month. The daily fee accruals will be computed by
multiplying 1/365 by the annual rate and multiplying
the product by the net asset value of the Corporation
as determined in accordance with the Corporation's
registration statement as of the close of business on
the previous day on which the American Stock Exchange
(or such other exchange on which the Corporation's
shares are principally traded) was open for business,
or in such other manner as the parties agree. The
Adviser may from time to time and for such periods as
it deems appropriate reduce its compensation and/or
assume expenses of the Corporation.
6. Expenses Paid by Corporation.
(a) Except as provided in this paragraph, nothing in
this Agreement shall be construed to impose upon the
Adviser the obligation to incur, pay or reimburse the
Corporation for any expenses not specifically assumed
by the Adviser under paragraph 2 above. Except as
noted in paragraph 2 above, the Corporation shall pay
or cause to be paid all of its expenses, including, but
not limited to, investment adviser fees; 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 any other expenses
(including clerical expenses) of issuance, sale or
repurchase of the Corporation's shares of common stock;
expenses in connection with the Corporation's
Distribution Reinvestment Plan; membership fees in
trade associations; expenses of maintaining any stock
exchange listings of the Corporation's shares of 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 Corporation's administrator, fund
accountant, transfer agent and custodian; expenses of
disbursing dividends and distributions; fees, expenses
and out-of-pocket costs of Directors who are not
interested persons (as that phrase is defined in
Section 2(a)(19) of the 1940 Act) of the Adviser;
insurance premiums and litigation costs; and
indemnification.
(b) If expenses borne by the Corporation in any fiscal
year (including the Adviser's fee, but excluding taxes,
interest, brokerage commissions and similar fees)
exceed those set forth in any statutory or regulatory
formula applicable to the Corporation, the Adviser will
reimburse the Corporation for any excess.
<PAGE>
7. Brokerage Commissions. For purposes of this
Agreement, brokerage commissions paid by the
Corporation upon the purchase or sale of securities
shall be considered a cost of the securities of the
Corporation and shall be paid by the Corporation. The
Adviser is authorized and directed to place such
transactions only with brokers and dealers who render
satisfactory service in the execution of orders at the
most favorable prices and at reasonable commission
rates; provided, however, that the Adviser may pay a
broker or dealer an amount of commission for effecting
a securities transaction in excess of the amount of
commission another broker or dealer would have charged
for effecting that transaction, if the Adviser
determines in good faith that such amount of commission
was reasonable in relation to the value of the
brokerage and research services provided by such broker
or dealer viewed in terms of either that particular
transaction or the overall responsibilities of the
Adviser. In placing portfolio business with such
broker or dealers, the Adviser shall seek the best
execution of each transaction, and all such brokerage
placement shall be made in compliance with Section
28(e) of the Securities Exchange Act of 1934, as
amended, and other applicable state and federal laws.
Notwithstanding the foregoing, the Corporation shall
retain the right to direct the placement of all such
transactions, and the Directors may establish policies
or guidelines to be followed by the Adviser in placing
such transactions pursuant to the foregoing provisions.
8. Proprietary Rights. The Adviser has proprietary
rights in the Corporation's name. The Corporation
acknowledges and agrees that the Adviser may withdraw
the use of such name should it cease to act as the
investment adviser to the Corporation.
9. Termination. This Agreement may be terminated at
any time, without penalty, by the Directors or the
shareholders of the Corporation acting by the vote of
at least a majority of its outstanding voting
securities (as that phrase is defined in Section
2(a)(42) of the 1940 Act), provided in either case that
60 days' written notice of termination be given to the
Adviser at its principal place of business. This
Agreement may also be terminated by the Adviser at any
time by giving 60 days' written notice of termination
to the Corporation, addressed to its principal place of
business.
10. Assignment. This Agreement shall terminate
automatically in the event of any assignment (within
the meaning of Section 2(a)(4) of the 1940 Act) of this
Agreement.
11. Term. This Agreement shall begin as of the date
hereof and shall continue in effect for two years from
the date hereof and thereafter for successive periods
of one year, subject to the provisions for termination
and all of the other terms and conditions hereof if
such continuation shall be specifically approved at
least annually (i) by the vote of a majority of the
Directors of the Corporation, including a majority of
the Directors who are not parties to this Agreement or
"interested persons" of any such party (as defined in
the 1940 Act), cast in person at a meeting called for
that purpose or (ii) by the vote of a majority of the
outstanding voting securities (as that phrase is
defined in Section 2(a)(42) of the 1940 Act) of the
Corporation.
<PAGE>
12. Amendments. This Agreement may be amended by the
mutual consent of the parties, provided that the terms
of each such amendment shall be approved by the
Directors or by the affirmative vote of a majority of
the outstanding voting securities (as that phrase is
defined in Section 2(a)(42) of the 1940 Act) of the
Corporation.
13. Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws
of the State of Illinois, provided, however that
nothing herein shall be construed in a manner that is
inconsistent with the 1940 Act, the Investment Advisers
Act of 1940, as amended, or the rules and regulations
promulgated with respect to such respective Acts.
The Adviser:
LCM CAPITAL MANAGEMENT, INC.
By: __________________________________________
Barry J. Glasgow, Chief Investment Officer
The Corporation:
LCM INTERNET GROWTH FUND, INC.
By: __________________________________________
Michael R. Grady, Jr., President
1
Exhibit (h.1)
LCM Internet Growth Fund, Inc.
4,000,000 Shares*
of Common Stock
UNDERWRITING AGREEMENT
August __, 1999
LASALLE ST. SECURITIES, INC.
As Representative of the several Underwriters
810 West Washington Boulevard
Chicago, Illinois 60607
Dear Sirs:
LCM Internet Growth Fund, Inc., a Maryland
corporation (the "Company"), and LCM Capital
Management, Inc., an Illinois corporation and the
Company's investment manager (the "Manager"), hereby
confirm their agreement with the several underwriters
named in Schedule 1 hereto (the "Underwriters"), for
whom you have been duly authorized to act as
representative (in such capacity, the
"Representative"), as set forth below. If you are the
only Underwriter, all references herein to the
Representative shall be deemed to be to the
Underwriter.
1. Securities. Subject to the terms and conditions
herein contained, the Company proposes to issue and
sell to the several Underwriters an aggregate of
4,000,000 (the "Firm Securities") of shares of common
stock in the Company, par value, $.01 per share (the
"Shares"). The Company also proposes to issue and sell
to the several Underwriters not more than 600,000
additional Shares if requested by the Representative as
provided in Section 3 of this Agreement. Any and all
Shares to be purchased by the Underwriters pursuant to
such option are referred to herein as the "Option
Securities", and the Firm Securities and any Option
Securities are collectively referred to herein as the
"Securities".
2. Representations and Warranties of the Company and
the Manager.
(a) The Company and the Manager jointly and severally
represent and warrant to, and agree with, each of the
several Underwriters that:
(i) A registration statement on Form N-2 (File Nos.
333-74407 and 811-9261) with respect to the Securities,
including a prospectus subject to completion, has been
filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), and one or more
amendments to such
________________________
* Plus an option to purchase from LCM Internet Growth Fund, Inc. up
to 600,000 additional shares to cover over-allotments.
<PAGE>
registration statement may have been
so filed. A notification of registration on Form N-8A
(the "Notification of Registration") has also been
filed with the Commission pursuant to Section 8(a) of
the Investment Company Act of 1940, as amended (the
"Investment Company Act"). After the execution of this
Agreement, the Company will file with the Commission
either (A) if such registration statement, as it may
have been amended, has been declared by the Commission
to be effective under the Act, a prospectus in the form
most recently included in an amendment to such
registration statement (or, if no such amendment shall
have been filed, in such registration statement), with
such changes or insertions as are required by Rule 430A
under the Act or permitted by Rule 497(h) under the Act
and as have been provided to and approved by the
Representative prior to the execution of this
Agreement, or (B) if such registration statement, as it
may have been amended, has not been declared by the
Commission to be effective under the Act, an amendment
to such registration statement, including a form of
prospectus, a copy of which amendment has been
furnished to and approved by the Representative prior
to the execution of this Agreement. As used in this
Agreement, the term "Registration Statement" means such
registration statement, as amended at the time when it
was or is declared effective, including all financial
schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A
under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus"
means each prospectus subject to completion filed with
such registration statement or any amendment thereto
(including the prospectus subject to completion, if
any, included in the Registration Statement or any
amendment thereto at the time it was or is declared
effective); and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to
Rule 497(b) or (h), as the case may be, under the Act
or, if applicable, as subsequently filed pursuant to
Rule 497(d) under the Act.
(ii) The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus.
When any Preliminary Prospectus was filed with the
Commission it (A) contained all statements required to
be stated therein in accordance with, and complied in
all material respects with the requirements of, the
Act, the Investment Company Act and the respective
rules and regulations of the Commission thereunder and
(B) did not include any untrue statement of a material
fact or omit to state any material fact necessary in
order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (A)
contained or will contain all statements
<PAGE>
required to be
stated therein in accordance with, and complied or will
comply in all material respects with the requirements
of, the Act, the Investment Company Act and the
respective rules and regulations of the Commission
thereunder and (B) did not or will not include any
untrue statement of a material fact or omit to state
any material fact necessary to make the statements
therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the
Commission pursuant to Rule 497(b) or (h) under the
Act, as the case may be, and, if applicable, when
subsequently filed with the Commission pursuant to Rule
497(d) under the Act (or, if the Prospectus or such
amendment or supplement is not required to be so filed,
when the Registration Statement or the amendment
thereto containing such amendment or supplement to the
Prospectus was or is declared effective), and on the
Firm Closing Date and any Option Closing Date (both as
hereinafter defined), the Prospectus, as amended or
supplemented at any such time, (A) contained or will
contain all statements required to be stated therein in
accordance with, and complied or will comply in all
material respects with the requirements of, the Act,
the Investment Company Act and the respective rules and
regulations of the Commission thereunder and (B) did
not or will not include any untrue statement of a
material fact or omit to state any material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading. The foregoing provisions of this
paragraph (ii) do not apply to statements or omissions
made in any Preliminary Prospectus, the Registration
Statement or any amendment thereto or the Prospectus or
any amendment or supplement thereto in reliance upon
and in conformity with written information furnished to
the Company by any Underwriter through the
Representative specifically for use therein.
(iii) When the Notification of Registration was
filed with the Commission, it (A) contained all
statements required to be stated therein in accordance
with, and complied in all material respects with the
requirements of, the Investment Company Act and the
rules and regulations of the Commission thereunder and
(B) did not include any untrue statement of a material
fact or omit to state a material fact necessary to make
the statements therein not misleading.
(iv) The Company has been duly organized and is validly
existing as a corporation in good standing under the
laws of the State of Maryland and is duly qualified to
transact business and is in good standing under the
laws of all other jurisdictions where the ownership or
leasing of its properties or the conduct of its
business requires such qualification, except where the
failure to be so qualified does not amount to a
material liability or disability to the Company; and
the Company holds all licenses, certificates and
permits from all governmental authorities necessary for
the conduct of its business as described in the
Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) (other than, if
the Registration Statement is not effective under the
Act, the order of the Commission declaring the
Registration Statement effective under the Act and
similar orders as may be required under state
securities or blue sky laws). The Company has no
subsidiaries.
(v) The Company has full power (corporate and other)
(A) to own or lease its properties and conduct its
business as described in the Registration Statement and
the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus; (B)
to enter into this Agreement, the Investment Advisory
Agreement, dated as of _____, 1999 (the "Advisory
Agreement"), between the Company and the Manager, the
Custodian Contract dated as of _____, 1999, (the
"Custody Agreement"), between the Company and Firstar
Bank Milwaukee, N.A., the Transfer Agency Agreement,
dated as of _____, 1999 (the "Transfer Agency
Agreement"), between the Company and Firstar Bank
Milwaukee, N.A., the Fund Administration Servicing
Agreement, dated as of _____, 1999, (the "Fund
Administration Agreement"), between the Company and
Firstar Mutual Fund Services, LLC ("FMFS"), the
Fulfillment Servicing Agreement, dated as of _____,
1999 (the "Fulfillment Agreement"), between the Company
and FMFS and the Fund Accounting Servicing Agreement,
dated as of _____, 1999 (the "Fund Accounting
Agreement"), between the Company and FMFS; (C) to adopt
the distribution reinvestment plan (the "Distribution
Reinvestment Plan") described in the Prospectus, or, if
the prospectus is not in existence, the
<PAGE>
most recent Preliminary Prospectus; and (D) to carry out all the
terms and provisions hereof and of any of the foregoing
agreements and plans to be carried out by it.
(vi) The Company is duly registered with the Commission
pursuant to Section 8 of the Investment Company Act as
a non-diversified, closed-end management investment
company; and the Company's articles of incorporation
and by-laws comply in all material respects with the
Investment Company Act and the rules and regulations of
the Commission thereunder.
(vii) The Company has authorized, issued and
outstanding capitalization as set forth in the
Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus. All of the
issued Shares have been duly authorized and validly
issued and are fully paid and nonassessable. The Firm
Securities and the Option Securities have been duly
authorized and at the Firm Closing Date or the related
Option Closing Date (as the case may be), after payment
therefor in accordance herewith, will be validly
issued, fully paid and nonassessable. [The Securities
have been duly authorized for listing, subject to
official notice of issuance, on the American Stock
Exchange, and the Company's Registration Statement on
Form 8-A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), has become effective.] No
holders of outstanding shares of beneficial interest of
the Company are entitled as such to any preemptive or
other rights to subscribe for any of the Securities,
and no holder of securities of the Company has any
right which has not been fully exercised or waived to
require the Company to register the offer or sale of
any securities owned by such holder under the Act in
the public offering contemplated by this Agreement.
(viii) The Shares conform to the description thereof
contained in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary
Prospectus.
(ix) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no outstanding (A)
securities or obligations of the Company convertible
into or exchangeable for any capital stock of the
Company, (B) warrants, rights or options to subscribe
for or purchase from the Company any such capital stock
or any such convertible or exchangeable securities or
obligations, or obligations of the Company to issue any
shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such
warrants, rights or options.
(x) The Statement of Assets and Liabilities of the
Company included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) fairly presents
the financial position of the Company as of the date
therein specified. Such Statement of Assets and
Liabilities has been prepared in accordance with
generally accepted accounting principles.
(xi) Pricewaterhouse Coopers, LLP, who have certified
certain financial statements of the Company and
delivered their report with respect to the Statement of
Assets and Liabilities of the Company included in the
Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent
Preliminary Prospectus), are
<PAGE>
independent public accountants as required by the Act, the
Investment Company Act and the respective rules and regulations
thereunder.
(xii) The execution and delivery of this Agreement,
the Advisory Agreement, the Custody Agreement, the
Transfer and Dividend Disbursing Agreement, and the
Fund Administration Agreement have been duly authorized
by the Company; this Agreement, the Advisory Agreement,
the Custody Agreement, the Transfer Agency Agreement,
the Fund Administration Agreement, the Fulfillment
Agreement and the Fund Accounting Agreement have been
duly executed and delivered by the Company; and
assuming due authorization, execution and delivery by
the other parties thereto, the Advisory Agreement, the
Custody Agreement, the Transfer Agency Agreement, the
Fund Administration Agreement, the Fulfillment
Agreement and the Fund Accounting Agreement are the
legal, valid, binding and enforceable instruments of
the Company and all such agreements and the
Distribution Reinvestment Plan comply in all material
respects with the requirements of the Investment
Advisers Act of 1940, as amended (the "Advisers Act"),
and the Investment Company Act and the respective rules
and regulations of the Commission thereunder; and the
Distribution Reinvestment Plan has been duly adopted by
the Company.
(xiii) No legal or governmental proceedings are
pending to which the Company is a party or to which the
property of the Company is subject that are required to
be described in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and are not
described therein and, to the knowledge of the Company
and the Manager, no such proceedings have been
threatened against the Company or with respect to any
of its properties; and no contract or other document is
required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein
(or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) or filed as required by
the Act, the Investment Company Act or the respective
rules and regulations of the Commission thereunder.
(xiv) The issuance, offering and sale of the
Securities to the Underwriters by the Company pursuant
to this Agreement, the compliance by the Company with
the other provisions of this Agreement, the Advisory
Agreement, the Custody Agreement, the Transfer Agency
Agreement, the Fund Administration Agreement, the
Fulfillment Agreement and the Fund Accounting Agreement
and the consummation of the other transactions herein
contemplated do not (A) require the consent, approval,
authorization, registration or qualification of or with
any governmental authority, stock exchange or
securities association except such as have been
obtained, such as may be required under state
securities or blue sky laws or the rules of the
National Association of Securities Dealers, Inc. (the
"NASD Rules") and, if the registration statement filed
with respect to the Securities (as amended) is not
effective under the Act as of the time of execution
hereof, such as may be required (and shall be obtained
as provided in this Agreement) under the Act or the
Investment Company Act, or (B) conflict with or result
in a breach or violation of any of the terms and
provisions of, or constitute a default under, any
agreement or instrument to which the Company is a party
or by which the Company or any of its properties are
bound, or the articles of incorporation or
<PAGE>
by-laws of the Company or any statute or any judgment,
decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to
the Company.
(xv) Subsequent to the date of the audited Statement of
Assets and Liabilities included in the Prospectus (or,
if the Prospectus is not in existence, the most recent
Preliminary Prospectus), the Company has not incurred
any material liabilities or obligations, direct or
contingent, or entered into any material transactions
not in the ordinary course of business, and there has
not been any material adverse change, or any
development involving a prospective material adverse
change (including without limitation a change in
management or control of the Company), in the condition
(financial or otherwise), business prospects, financial
position or net worth of the Company, except in each
case as described in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(xvi) The Company has not distributed and, prior to
the later of the expiration of the option period
described in Section 3(b) hereof and the completion of
the distribution of the Securities, will not distribute
any offering material in connection with the offering
and sale of the Securities other than the Registration
Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or
supplement thereto, or other materials, if any,
permitted by the Act.
(xvii) Neither the Company nor the Manager has
directly or indirectly, (A) taken any action designed
to cause or to result in, or that constituted or which
might reasonably be expected to constitute, the
stabilization or manipulation of the price of any
security of the Company to facilitate the sale or
resale of the Securities or (B) since the filing of the
Registration Statement (X) sold, bid for, purchased, or
paid anyone any compensation for soliciting purchases
of, the Securities or (Y) paid or agreed to pay to any
person any compensation for soliciting another to
purchase any other securities of the Company.
(xviii) Each certificate signed by any officer of the
Company in his or her capacity as such and delivered to
the Representative or counsel for the Underwriters
shall be deemed to be a representation and warranty by
the Company to each Underwriter as to the matters
covered thereby.
(xix) The Company maintains a system of internal
accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in
accordance with management's general or specific
authorization and with the investment policies and
restrictions of the Company and the applicable
requirements of the Investment Company Act, the rules
and regulations thereunder and the Internal Revenue
Code of 1986, as amended; (B) transactions are recorded
as necessary to permit preparation of financial
statements in conformity with generally accepted
accounting principles, to calculate net asset value, to
maintain accountability for assets and to maintain
material compliance with the books and records
requirements under the Investment Company Act and the
rules and regulations thereunder; (C) access to assets
is permitted only in accordance with management's
general or specific authorization; and (D) the recorded
account for assets is
<PAGE>
compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xx) The conduct by the Company of its business (as
described in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary
Prospectus) does not require it to be the owner,
possessor or licensee of any patents, patent licenses,
trademarks, service marks or trade names which it does
not own, possess or license.
(b) The Manager represents and warrants to, and agrees
with each of the Underwriters that:
(i) The Manager has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of Illinois and is duly
qualified to transact business as a foreign corporation
and is in good standing under the laws of all other
jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such
qualification, except where the failure to be so
qualified does not amount to a material liability or
disability to the Manager.
(ii) The Manager has full power (corporate and other)
to own or lease its properties and conduct its business
as described in the Registration Statement and the
Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus; and the Manager
has full power (corporate and other) to enter into this
Agreement and the Advisory Agreement and to carry out
all the terms and provisions hereof and thereof to be
carried out by it.
(iii) The Manager is duly registered with the
Commission as an investment adviser under the Advisers
Act; and the Manager is not prohibited by any provision
of the Advisers Act or the Investment Company Act, or
the respective rules and regulations of the Commission
thereunder, from performing its obligations under the
Advisory Agreement.
(iv) The execution and delivery of this Agreement and
the Advisory Agreement have been duly authorized by the
Manager; this Agreement and the Advisory Agreement have
been duly executed and delivered by the Manager; and,
assuming due authorization, execution and delivery by
the Company, the Advisory Agreement is the legal,
valid, binding and enforceable instrument of the
Manager and complies in all material respects with the
Advisers Act and the Investment Company Act and the
respective rules and regulations of the Commission
thereunder.
(v) The compliance by the Manager with the provisions
of this Agreement and the Advisory Agreement and the
consummation of the other transactions herein
contemplated do not (A) require the consent, approval,
authorization, registration or qualification of or with
any governmental authority, stock exchange or
securities association except such as have been
obtained, such as may be required under state
securities or blue sky laws or the NASD Rules and, if
the registration statement filed with respect to the
Securities (as amended) is not effective under the Act
as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this
Agreement) under the Act or the
<PAGE>
Investment Company Act,
(B) result in a material breach or violation of any of
the terms and provisions of, or constitute a material
default under, any agreement or instrument to which the
Manager is a party or by which the Manager or any of
its properties are bound, or (C) conflict with the
charter documents or by-laws of the Manager or any
statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority
or any arbitrator, stock exchange or securities
association applicable to the Manager.
(vi) The description of the Manager and its business
contained in the Prospectus (or, if the Prospectus is
not yet in existence, the most recent Preliminary
Prospectus) complies in all material respects with the
requirements of the Act, the Investment Company Act and
the respective rules and regulations of the Commission
thereunder and does not include any untrue statement of
a material fact or omit to state any material fact
necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading.
(vii) Subsequent to the date of the Prospectus (or,
if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there has not been any
material adverse change, or any development involving a
prospective material adverse change (including without
limitation a change in management or control of the
Manager), in the condition (financial or otherwise),
business prospects, net worth or results of operations
of the Manager or in the ability of the Manager to
fulfill its respective obligations under this Agreement
or the Advisory Agreement.
(viii) No legal or governmental proceedings are
pending to which the Manager is a party or to which the
property of the Manager is subject that are required to
be described in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and are not
described therein and, to the knowledge of the Manager,
no such proceedings have been threatened against the
Manager or with respect to any of its properties.
(ix) Neither the Company nor the Manager has, directly
or indirectly, (A) taken any action designed to cause
or to result in, or that constituted or which might
reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the
Company to facilitate the sale or resale of the
Securities or (B) since the filing of the Registration
Statement (X) sold, bid for, purchased, or paid anyone
any compensation for soliciting purchases of, the
Securities or (Y) paid or agreed to pay to any person
any compensation for soliciting another to purchase any
other securities of the Company.
(x) The Manager has the financial resources available
to it necessary for the performance of its services and
obligations as contemplated in the Registration
Statement and the Prospectus.
3. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties,
agreements and covenants herein contained and subject
to the terms and conditions herein set forth, the
Company agrees to issue and
<PAGE>
sell to each of the
Underwriters, and each of the Underwriters, severally
and not jointly, agrees to purchase from the Company,
at a purchase price of $9.45 per share, the number of
Firm Securities set forth opposite the name of such
Underwriter in Schedule 1 hereto. One or more
certificates in definitive form for the Firm Securities
that the several Underwriters have agreed to purchase
hereunder, and in such denomination or denominations
and registered in such name or names as the
Representative requests upon notice to the Company at
least 48 hours prior to the Firm Closing Date, shall be
delivered by or on behalf of the Company to the
Representative for the respective accounts of the
Underwriters, against payment by or on behalf of the
Underwriters of the purchase price therefor by wire
transfer of immediately available funds to an account
designated by the Company at least 48 hours prior to
the Firm Closing Date. Such delivery of and payment
for the Firm Securities shall be made at the offices of
Godfrey & Kahn, S.C., 780 North Water Street,
Milwaukee, Wisconsin at 9:30 A.M., Milwaukee time, on
_____, 1999, or at such other place, time or date as
the Representative and the Company may agree upon or as
the Representative may determine pursuant to Section 9
hereof, such time and date of delivery against payment
being herein referred to as the "Firm Closing Date".
The Company will make such certificate or certificates
for the Firm Securities available for checking and
packaging by the Representative at the offices in
Milwaukee, Wisconsin of the Company's transfer agent or
registrar or at the offices in Chicago, Illinois of
LaSalle St. Securities, Inc. at least 24 hours prior to
the Firm Closing Date.
(b) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm
Securities as contemplated by the Prospectus, the
Company hereby grants to the several Underwriters an
option to purchase, severally and not jointly, the
Option Securities. The purchase price to be paid for
any Option Securities shall be the same price per share
as the price per share for the Firm Securities set
forth above in paragraph (a) of this Section 3, plus,
if the purchase and sale of any Option Securities takes
place after the Firm Closing Date and after the Firm
Securities are trading "ex- dividend", an amount equal
to the dividends payable on such Option Securities. The
option granted hereby may be exercised as to all or any
part of the Option Securities within thirty days after
the date of the Prospectus (or, if such 30th day shall
be a Saturday or Sunday or holiday, on the next
business day thereafter when the American Stock
Exchange is open for trading). The Underwriters shall
not be under any obligation to purchase any of the
Option Securities prior to the exercise of such option.
The Representative may exercise the option granted
hereby by giving notice in writing or by telephone
(confirmed in writing) to the Company setting forth the
aggregate number of Option Securities as to which the
several Underwriters are then exercising the option and
the date and time for delivery of and payment for such
Option Securities. Any such date of delivery shall be
determined by the Representative but shall not be
earlier than two business days or later than seven
business days after such exercise of the option and, in
any event, shall not be earlier than the Firm Closing
Date. The time and date set forth in such notice, or
such other time on such other date as the
Representative and the Company may agree upon or as the
Representative may determine pursuant to Section 9
hereof, is herein called the "Option Closing Date" with
respect to such Option Securities. Upon exercise of the
option as provided herein, the Company shall become
obligated to sell to each of the several Underwriters,
and, subject to the terms and conditions herein set
forth, each of the Underwriters (severally and not
jointly) shall become obligated to purchase from the
Company, the same percentage of the total number of the
Option Securities as to which the several Underwriters
are then exercising the option as such Underwriter is
obligated to purchase of the aggregate number of Firm
Securities, as adjusted by the Representative in such
manner as it deems advisable to avoid fractional
shares. If the option is exercised as to all or any
<PAGE>
portion of the Option Securities, one or more
certificates in definitive form for such Option
Securities, and payment therefor, shall be delivered on
the Option Closing Date in the manner, and upon the
terms and conditions, set forth in paragraph (a) of
this Section 3, except that reference therein to the
Firm Securities and the Firm Closing Date shall be
deemed, for purposes of this paragraph (b), to refer to
such Option Securities and Option Closing Date,
respectively.
(c) It is understood that any of you may (but shall
not be obligated to) make payment on behalf of any
Underwriter or Underwriters for any of the Securities
to be purchased by such Underwriter or Underwriters. No
such payment shall relieve such Underwriter or
Underwriters from any of its or their obligations
hereunder.
4. Offering by the Underwriters. Upon your
authorization of the release of the Firm Securities,
the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set
forth in the Prospectus.
5. Covenants of the Company. The Company covenants
and agrees with each of the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of
execution of this Agreement, and any amendments thereto
to become effective as promptly as possible. If
required, the Company will file the Prospectus and any
amendment or supplement thereto with the Commission in
the manner and within the time period required by Rule
497(b), (d) or (h), as the case may be, under the Act.
During any time when a prospectus relating to the
Securities is required to be delivered under the Act,
the Company (A) will comply with all requirements
imposed upon it by the Act, the Investment Company Act
and the respective rules and regulations of the
Commission thereunder to the extent necessary to permit
the continuance of sales of or dealings in the
Securities in accordance with the provisions hereof and
of the Prospectus, as then amended or supplemented, and
(B) will not file with the Commission the prospectus or
the amendment referred to in the third sentence of
Section 2(a)(i) hereof, any amendment or supplement to
such prospectus or any amendment to the Registration
Statement of which the Representative shall not
previously have been advised and furnished with a copy
for a reasonable period of time prior to the proposed
filing and as to which filing the Representative shall
not have given its consent. The Company will prepare
and file with the Commission, in accordance with the
rules and regulations of the Commission, promptly upon
request by the Representative or counsel for the
Underwriters, any amendments to the Registration
Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in
connection with the distribution of the Securities by
the several Underwriters, and will use its best efforts
to cause any such amendment to the Registration
Statement to be declared effective by the Commission as
promptly as possible. The Company will advise the
Representative, promptly after receiving notice
thereof, of the time when the Registration Statement or
any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or
supplement thereto has been filed and will provide
evidence satisfactory to the Representative of each
such filing or effectiveness.
(b) The Company will advise the Representative,
promptly after receiving notice or obtaining knowledge
thereof, of (A) the issuance by the Commission of any
stop order suspending the effectiveness of the
Registration Statement or any amendment thereto or any
order preventing or
<PAGE>
suspending the use of any
Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, (B) the suspension of
the qualification of the Securities for offering or
sale in any jurisdiction, (C) the institution,
threatening or contemplation of any proceeding for any
such purpose or (D) any request made by the Commission
for amending the Registration Statement, for amending
or supplementing the Prospectus or for additional
information. The Company will use its best efforts to
prevent the issuance of any such stop order and, if any
such stop order is issued, to obtain the withdrawal
thereof as promptly as possible.
(c) The Company will arrange for the qualification of
the Securities for offering and sale under the
securities or blue sky laws of such jurisdictions as
the Representative may designate and will continue such
qualifications in effect for as long as may be
necessary to complete the distribution of the
Securities; provided, however, that in connection
therewith the Company shall not be required to qualify
as a foreign corporation or to execute a general
consent to service of process in any jurisdiction.
(d) If, at any time prior to the later of (A) the
final date when a prospectus relating to the Securities
is required to be delivered under the Act or (B) the
Option Closing Date, any event occurs as a result of
which the Prospectus, as then amended or supplemented,
would include an untrue statement of a material fact or
omit to state a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading, or if for any other reason it is necessary
at any time to amend or supplement the Prospectus to
comply with the Act, the Investment Company Act or the
respective rules or regulations of the Commission
thereunder, the Company will promptly notify the
Representative thereof and, subject to Section 5(a)(i)
hereof, will prepare and file with the Commission, at
the Company's expense, an amendment to the Registration
Statement or an amendment or supplement to the
Prospectus that corrects such statement or omission or
effects such compliance.
(e) The Company will, without charge, provide (A) to
the Representative and to counsel for the Underwriters
(X) a signed copy of the Notification of Registration
and (Y) a signed copy of the registration statement
originally filed with respect to the Securities and
each amendment thereto (in each case including exhibits
thereto), a conformed copy of the registration
statement originally filed with respect to the
Securities and each amendment thereto (in each case
including exhibits thereto), certified by the Secretary
or an Assistant Secretary of the Company to be true and
complete copies thereof as filed with the Commission by
electronic transmission, (B) to each other Underwriter,
a conformed copy of such Notification of Registration
and such registration statement and each amendment
thereto (in each case without exhibits thereto) and (C)
so long as a prospectus relating to the Securities is
required to be delivered under the Act, as many copies
of each Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto as the Representative
may reasonably request.
(f) The Company, as soon as practicable but in no
event later than 60 days after the period covered
thereby, will make generally available to its security
holders and to the Representative a consolidated
earnings statement of the Company that satisfies the
provisions of Section 11(a) of the Act and Rule 158
thereunder.
<PAGE>
(g) The Company will apply the net proceeds from the
sale of the Securities as set forth under "Use of
Proceeds" in the Prospectus.
(h) The Company will use its best efforts to list,
subject to notice of issuance, the Securities to be
sold by it on the American Stock Exchange
simultaneously with the effectiveness of the
Registration Statement.
(i) During a period of five years from the effective
date of the Registration Statement, the Company will
furnish to the Representative copies of all reports and
other communications (financial or other) furnished by
the Company to its shareholders and, as soon as
available, copies of any reports or financial
statements furnished or filed by the Company to or with
the Commission or any national securities exchange on
which any class of securities of the Company may be
listed.
(j) The Company and the Manager will not, directly or
indirectly, (A) take any action designed to cause or to
result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the
Company to facilitate the sale or resale of the
Securities or (B) (X) sell, bid for, purchase, or pay
anyone any compensation for soliciting purchases of,
the Securities or (Y) pay or agreed to pay to any
person any compensation for soliciting another to
purchase any other securities of the Company.
(k) If at any time during the 25-day period after the
Registration Statement becomes effective or the period
prior to the Option Closing Date, any rumor,
publication or event relating to or affecting the
Company shall occur as a result of which in your
opinion the market price of the Common Stock has been
or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising
the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of,
and disseminate a press release or other public
statement, reasonably satisfactory to you, responding
to or commenting on such rumor, publication or event.
6. Expenses.
(a) The Manager agrees to pay all costs and expenses
incident to the performance of the Company's
obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or
this Agreement is terminated pursuant to Section 11
hereof, including all costs and expenses incident to
(i) the printing or other production of documents with
respect to the transactions, including any costs of
printing the registration statement originally filed
with respect to the Securities and any amendment
thereto, the Notification of Registration, any
Preliminary Prospectus (including without limitation,
the expenses of printing the mailing folder for the
Preliminary Prospectus and the expenses of attaching
the mailing folder to each Preliminary Prospectus and
of packaging each Preliminary Prospectus for
distribution) and the Prospectus and any amendment or
supplement thereto, this Agreement, the Advisory
Agreement, the Custody Agreement, the Transfer Agency
Agreement, the Fund Administration Agreement, the
Fulfillment Agreement and the Fund Accounting Agreement
and any blue sky memoranda, (ii) all arrangements
relating to the delivery to the Underwriters of copies
of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any
other experts or advisors retained by the
<PAGE>
Company or the Manager, (iv) the preparation, issuance and
delivery to the Underwriters of any certificates
evidencing the Securities, including transfer agent's
and registrar's fees, (v) the qualification of the
Securities under state securities and blue sky laws,
including filing fees and fees and disbursements of
counsel for the Underwriters relating thereto, (vi) the
filing fees of the Commission and the National
Association of Securities Dealers, Inc. relating to the
Securities, (vii) any listing fees of the Securities
[on the American Stock Exchange,] (viii) any meetings
with prospective investors in the Securities (other
than as shall have been specifically approved by the
Representative to be paid for by the Underwriters) and
(ix) advertising relating to the offering of the
Securities (other than as shall have been specifically
approved by the Representative to be paid for by the
Underwriters). If the sale of the Securities provided
for herein is not consummated because any condition to
the obligations of the Underwriters set forth in
Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 11 hereof
or because of any failure, refusal or inability on the
part of the Company or the Manager to perform all
obligations and satisfy all conditions on its
respective part to be performed or satisfied hereunder
other than by reason of a default by any of the
Underwriters, the Manager agrees to reimburse the
Underwriters severally upon demand for all out-of-
pocket expenses (including counsel fees and
disbursements) that shall have been incurred by them in
connection with the proposed purchase and sale of the
Securities. Neither the Company nor the Manager shall
in any event be liable to any of the Underwriters for
the loss of anticipated profits from the transactions
covered by this Agreement.
(b) If the Underwriters purchase the Firm Securities,
the Company will pay a non-accountable expense
allowance up to $400,000 ($460,000 if the Option
Securities are also purchased) to the Representative
for out-of-pocket expenses incurred in connection with
the offering (including, but not limited to,
advertising relating to the offering of the Securities
and travel expenses and the fees and disbursements of
counsel for the Underwriters). The Company will pay
such amount by permitting the Underwriters to deduct
such amount from the proceeds payable to the Company on
the Firm Closing Date pursuant to Section 3(a) hereof.
7. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and
pay for the Firm Securities shall be subject, in the
Representative's sole discretion, to the accuracy of
the representations and warranties of the Company and
the Manager contained herein as of the date hereof and
as of the Firm Closing Date, as if made on and as of
the Firm Closing Date, to the accuracy of the
statements of the Company's and the Manager's officers
made pursuant to the provisions hereof, to the
performance by the Company and the Manager of its
covenants and agreements hereunder and to the following
additional conditions:
(a) If the Registration Statement or any amendment
thereto filed prior to the Firm Closing Date has not
been declared effective as of the time of execution
hereof, the Registration Statement or such amendment
shall have been declared effective not later than 10
A.M., Milwaukee time, on the date on which the
amendment to the registration statement originally
filed with respect to the Securities or to the
Registration Statement, as the case may be, containing
information regarding the initial public offering price
of the Securities has been filed with the Commission,
or such later time and date as shall have been
consented to by the Representative; the Prospectus and
any amendment or supplement thereto shall have been
filed with the Commission in the manner and within the
time period required by Rule 497(b), (d) or (h), as the
case may be, under the Act; no stop order suspending
the effectiveness of the Registration Statement or any
amendment thereto shall
<PAGE>
have been issued, and no
proceedings for that purpose shall have been instituted
or threatened or, to the knowledge of the Company or
the Representative, shall be contemplated by the
Commission; and the Company shall have complied with
any request of the Commission for additional
information (to be included in the Registration
Statement or the Prospectus or otherwise).
(b) The Representative shall have received an opinion,
dated the Firm Closing Date, of Godfrey & Kahn, S.C.,
counsel for the Company, to the effect that:
(i) the Company has been duly organized and is validly
existing as a corporation in good standing under the
laws of the State of Maryland;
(ii) the Company has corporate power to own or lease
its properties and conduct its business as described in
the Registration Statement and the Prospectus, and the
Company has corporate power to enter into this
Agreement, the Advisory Agreement, the Custody
Agreement, the Transfer Agency Agreement, the Fund
Administration Agreement, the Fulfillment Agreement and
the Fund Accounting Agreement and to carry out all the
terms and provisions hereof and thereof to be carried
out by it;
(iii) the Company is duly registered with the
Commission pursuant to Section 8 of the Investment
Company Act as a non-diversified, closed-end management
investment company; and the Company's articles of
incorporation and by-laws comply in all material
respects with the Investment Company Act and the rules
and regulations of the Commission thereunder;
(iv) the Company has an authorized, issued and
outstanding capitalization as set forth in the
Prospectus; all of the issued Shares have been duly
authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all
applicable federal securities laws and were not issued
in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities;
the Firm Securities have been duly authorized by all
necessary corporate action of the Company and, when
issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be
validly issued, fully paid and nonassessable; no
holders of outstanding Shares are entitled as such to
any preemptive or other rights to subscribe for any of
the Securities; and no holders of securities of the
Company are entitled to have such securities registered
under the Registration Statement;
(v) the execution and delivery of this Agreement have
been duly authorized by all necessary corporate action
of the Company, and this Agreement has been duly
executed and delivered by the Company;
(vi) the execution and delivery of each of the Advisory
Agreement, the Custody Agreement, the Transfer Agency
Agreement, the Fund Administration Agreement, the
Fulfillment Agreement and the Fund Accounting Agreement
have been duly authorized by all necessary corporate
action of the Company and the Advisory Agreement, the
Custody Agreement, the Transfer Agency Agreement, the
Fund Administration Agreement, the Fulfillment
Agreement and the Fund Accounting Agreement and the
Distribution
<PAGE>
Reinvestment Plan comply in all material
respects with all applicable provisions of the
Investment Company Act and the Advisers Act, and,
assuming due authorization, execution and delivery by
the other parties thereto, the Advisory Agreement, the
Custody Agreement, the Transfer Agency Agreement, the
Fund Administration Agreement, the Fulfillment
Agreement and the Fund Accounting Agreement are the
legal, valid, binding, and enforceable instruments of
the Company and comply in all material respects with
the requirements of the Advisers Act and the Investment
Company Act and the respective rules and regulations of
the Commission thereunder;
(vii) To the knowledge of such counsel, (A) no
legal or governmental proceedings are pending to which
the Company is a party or to which the property of the
Company is subject that are required to be described in
the Registration Statement or the Prospectus and are
not described therein, and, to the knowledge of such
counsel, no such proceedings have been threatened
against the Company or with respect to any of its
properties and (B) no contract or other document is
required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein or
filed as required;
(viii) the issuance, offering and sale of the
Securities to the Underwriters by the Company pursuant
to this Agreement, the compliance by the Company with
the other provisions of this Agreement, the Advisory
Agreement, the Custody Agreement, the Transfer Agency
Agreement, the Fund Administration Agreement, the
Fulfillment Agreement and the Fund Accounting Agreement
and the consummation of the other transactions herein
contemplated do not (A) require the consent, approval,
authorization, registration or qualification of or with
any governmental authority, except such as have been
obtained and such as may be required under state
securities or blue sky laws, or (B) conflict with or
result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any
agreement known to such counsel, to which the Company
is a party or by which the Company or any of its
properties are bound, or the articles of incorporation
or by-laws of the Company, or any statute or any
judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator
known to such counsel and applicable to the Company;
(ix) the Registration Statement is effective under the
Act; the filing of the Prospectus pursuant to Rule
497(b), (d) or (h), as the case may be, has been made
in the manner and within the time period required by
Rule 497(b), (d) or (h), as the case may be; and, to
the knowledge of such counsel after reasonable inquiry,
no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has
been issued, and no proceedings for that purpose have
been instituted or threatened or, to the knowledge of
such counsel, are contemplated by the Commission;
(x) the Registration Statement originally filed with
respect to the Securities and each amendment thereto
and the Prospectus (in each case, other than the
financial statements and other financial information
contained therein, as to which such counsel need
express no opinion) comply as to form in all material
respects with the applicable requirements of the
<PAGE>
Act, the Investment Company Act and the respective rules and
regulations of the Commission thereunder;
(xi) To the knowledge of such counsel, the Company is
not currently in breach of, or in default under, any
written agreement or instrument to which the Company is
a party or by which it or its property is bound or
affected; and
(xii) The Company's Registration Statement on Form
8-A under the Exchange Act is effective.
In rendering any such opinion, such counsel may rely,
as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the
Company, the Manager and public officials.
References to the Registration Statement and the
Prospectus in this paragraph (b) shall include any
amendment or supplement thereto at the date of such
opinion.
(c) The Representative shall have received an opinion,
dated the Firm Closing Date, of _________________,
counsel of the Manager, to the effect that:
(i) the Manager is duly incorporated and validly
existing as a corporation in good standing under the
laws of the State of Illinois and is duly qualified to
transact business as a foreign corporation and is in
good standing under the laws of all other jurisdictions
where the ownership or leasing of its properties or the
conduct of its business requires such qualification,
except where the failure to be so qualified does not
amount to a material liability or disability to the
Manager;
(ii) the Manager has corporate power to own or lease
its properties and conduct its business as described in
the Registration Statement and the Prospectus, and the
Manager has corporate power to enter into this
Agreement and the Advisory Agreement and to carry out
all the terms and provisions hereof and thereof to be
carried out by it;
(iii) the Manager is duly registered with the
Commission as an investment adviser under the Advisers
Act; and the Manager is not prohibited by any provision
of the Advisers Act or the Investment Company Act, or
the respective rules and regulations of the Commission
thereunder, from performing its obligations under the
Advisory Agreement;
(iv) the execution and delivery of this Agreement and
the Advisory Agreement have been duly authorized by all
necessary corporate action of the Manager; this
Agreement and the Advisory Agreement have been duly
executed and delivered by the Manager; and, assuming
due authorization, execution and delivery by the
Company, the Advisory Agreement is the legal, valid,
binding and enforceable instrument of the Manager and
complies in all material respects with the Advisers Act
and the Investment Company Act and the respective rules
and regulations of the Commission thereunder;
<PAGE>
(v) the compliance by the Manager with the provisions
of this Agreement and the Advisory Agreement and the
consummation of the other transactions herein
contemplated do not (i) require the consent, approval,
authorization, registration or qualification of or with
any governmental authority, except such as have been
obtained, result in a material breach or violation of
any of the terms and provisions of, or constitute a
material default under, any indenture, mortgage, deed
of trust, lease or other agreement or instrument to
which the Manager is a party or by which the Manager or
any of its properties are bound, or (iii) conflict with
the charter documents or by-laws of the Manager or any
statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority
or any arbitrator, stock exchange or securities
association known to such counsel and applicable to the
Manager;
(vi) the description of the Manager and its business
contained in the Prospectus complies in all material
respects with the requirements of the Act and the
Investment Company Act and the respective rules and
regulations of the Commission thereunder and, to the
best knowledge of such counsel after due inquiry, does
not include an untrue statement of a material fact or
omit to state any material fact necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading; and
(vii) no legal or governmental proceedings are
pending to which the Manager is a party or to which the
property of the Manager is subject that are required to
be described in the Registration Statement or the
Prospectus and are not described therein and, to the
best knowledge of such counsel, no such proceedings
have been threatened against the Manager or with
respect to any of its properties.
In rendering any such opinion, such counsel may
rely, as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers
of the Manager and public officials.
References to the Registration Statement and the
Prospectus in this paragraph (c) shall include any
amendment or supplement thereto at the date of such
opinion.
(d) The Representative shall have received an opinion,
dated the Firm Closing Date, of Sachnoff & Weaver,
Ltd., counsel for the Underwriters, with respect to the
issuance and sale of the Firm Securities, the
Registration Statement and the Prospectus, and such
other related matters as the Representative may
reasonably require, and the Company shall have
furnished to such counsel such documents as they may
reasonably request for the purpose of enabling them to
pass upon such matters.
(e) The Representative shall have received from
Pricewaterhouse Coopers LLP a letter or letters dated,
respectively, the date hereof and the Firm Closing
Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) they are independent accountants with respect to
the Company within the meaning of the Act, the
Investment Company Act and the respective rules and
regulations thereunder;
<PAGE>
(ii) in their opinion, the Statement of Assets and
Liabilities examined by them and included in the
Registration Statement and the Prospectus complies in
form in all material respects with the applicable
accounting requirements of the Act, the Investment
Company Act and the respective rules and regulations of
the Commission thereunder;
(iii) on the basis of carrying out certain
specified procedures (which do not constitute an
examination made in accordance with generally accepted
auditing standards) that would not necessarily reveal
matters of significance with respect to the comments
set forth in this paragraph (iii), a reading of the
minute books of the shareholders, the board of
directors and any committees thereof of the Company,
and inquiries of certain officials of the Company who
have responsibility for financial and accounting
matters, nothing came to their attention that caused
them to believe that at a specific date not more than
five business days prior to the date of such letter,
there were any changes in the shares of beneficial
interest or long-term debt of the Company or any
decreases in stockholders' equity of the Company, in
each case compared with amounts shown on the Statement
of Assets and Liabilities included in the Registration
Statement and the Prospectus; and
(iv) they have recalculated certain data of a
statistical or financial nature identified by the
Representative and appearing in the Prospectus,
including without limitation, under the caption "Fees
and Expenses" and agree with the Company's calculation
of such data as set forth in the Prospectus.
In the event that the letters referred to above set
forth any such changes or decreases, it shall be a
further condition to the obligations of the
Underwriters that (A) such letters shall be accompanied
by a written explanation of the Company as to the
significance thereof, unless the Representative deems
such explanation unnecessary, and (B) such changes or
decreases do not, in the sole judgment of the
Representative, make it impractical or inadvisable to
proceed with the purchase and delivery of the
Securities as contemplated by the Registration
Statement, as amended as of the date hereof.
References to the Registration Statement and the
Prospectus in this paragraph (d) with respect to either
letter referred to above shall include any amendment or
supplement thereto at the date of such letter.
(f) The Representative shall have received a
certificate, dated the Firm Closing Date, of the
principal executive officer and the principal financial
or accounting officer of the Company to the effect
that:
(i) the representations and warranties of the Company
in this Agreement are true and correct as if made on
and as of the Firm Closing Date; the Registration
Statement, as amended as of the Firm Closing Date, does
not include any untrue statement of a material fact or
omit to state any material fact necessary to make the
statements therein not misleading, and the Prospectus,
as amended or supplemented as of the Firm Closing Date,
does not include any untrue statement of a material
fact or omit to state any material fact necessary in
order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading; and the Company has performed all covenants and
<PAGE>
agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Firm
Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has
been issued, and no proceedings for that purpose have
been instituted or threatened or, to the best of the
Company's knowledge, are contemplated by the
Commission; and
(iii) subsequent to the respective dates as of
which information is given in the Registration
Statement and the Prospectus, the Company has not
sustained any material loss or interference with its
business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any
material adverse change, or any development involving a
prospective material adverse change, in the condition
(financial or otherwise), management, business
prospects, net worth or results of operations of the
Company, except in each case as described in or
contemplated by the Prospectus (exclusive of any
amendment or supplement thereto).
(g) The Representative shall have received a
certificate, dated the Firm Closing Date, of the
principal executive officer and the principal financial
or accounting officer of the Manager to the effect
that:
(i) the representations and warranties of the Manager
in this Agreement are true and correct as if made on
and as of the Firm Closing Date; the description of the
Manager and its businesss contained in the Prospectus,
as amended or supplemented as of the Firm Closing Date,
does not include any untrue statement of a material
fact or omit to state any material fact necessary in
order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading; and
(ii) subsequent to the respective dates as of which
information is given in the Registration Statement and
the Prospectus, the Manager has not sustained any
material loss or interference with its business or
properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental
proceeding, and there has not been any material adverse
change, or any development involving a prospective
material adverse change, in the condition (financial or
otherwise), business prospects, net worth or results of
operations of the Manager, except in each case as
described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto).
(h) On or before the Firm Closing Date, the
Representatives and counsel for the Underwriters shall
have received such further certificates, documents or
other information as they may have reasonably requested
from the Company.
(i) Prior to the commencement of the offering of the
Securities, the Securities shall have been approved for
listing on the American Stock Exchange, subject to
official notice of issuance.
<PAGE>
All opinions, certificates, letters and documents
delivered pursuant to this Agreement will comply with
the provisions hereof only if they are reasonably
satisfactory in all material respects to the
Representative and counsel for the Underwriters. The
Company and the Manager shall furnish to the
Representative such conformed copies of such opinions,
certificates, letters and documents in such quantities
as the Representative and counsel for the Underwriters
shall reasonably request.
The respective obligations of the several Underwriters
to purchase and pay for any Option Securities shall be
subject, in their discretion, to each of the foregoing
conditions to purchase the Firm Securities, except that
all references to the Firm Securities and the Firm
Closing Date shall be deemed to refer to such Option
Securities and the Option Closing Date, respectively.
8. Indemnification and Contribution.
(a) The Company and the Manager jointly and severally
(subject to clause (i) below and to Section 17(i) of
the Investment Company Act) agree to indemnify and hold
harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such
controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement
made by the Company or the Manager in Section 2 of this
Agreement; provided, however, that under this clause
(i) the Company shall be liable solely for untrue
statements or alleged untrue statements made by the
Company in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration
Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or
supplement thereto or (B) any application or other
document, including the Notification of Registration,
or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction
in order to qualify the Securities under the securities
or blue sky laws thereof or filed with the Commission
or any securities association or securities exchange
(each an "Application"),
(iii) the omission or alleged omission to state in
the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application a
material fact required to be stated therein or
necessary to make the statements therein not misleading
or any untrue statement or alleged untrue statement of
any material fact contained in any audio or visual
materials used in connection with the marketing of the
Securities that have been approved in writing or
provided, prepared or authorized by the Company ("Sales
Material"), including without limitation, slides,
videos, films, tape recordings, and will reimburse, as
incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person
in connection with investigating, defending against or
appearing as a third-party witness in connection with
any such loss,
<PAGE>
claim, damage, liability or action;
provided, however, that neither the Company nor the
Manager will be liable in any such case to the extent
that any such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made
in such registration statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, any Application or
any Sales Materials in reliance upon and in conformity
with written information furnished to the Company by
such Underwriter through the Representative
specifically for use therein; and provided, further,
that neither the Company nor the Manager will be liable
to any Underwriter or any person controlling such
Underwriter with respect to any such untrue statement
or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such
loss, claim, damage or liability purchased Securities
from such Underwriter but was not sent or given a copy
of the Prospectus (as amended or supplemented) at or
prior to the written confirmation of the sale of such
Securities to such person in any case where such
delivery of the Prospectus (as amended or supplemented)
is required by the Act, unless such failure to deliver
the Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with any
provisions of this Agreement. This indemnity agreement
will be in addition to any liability which the Company
or the Manager may otherwise have. Neither the Company
or the Manager will, without the prior written consent
of the Underwriter or Underwriters purchasing, in the
aggregate more than fifty percent (50%) of the
Securities, settle or compromise or consent to the
entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not
any such Underwriter or any person who controls any
such Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act is a party to
such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an
unconditional release of all of the Underwriters and
such controlling persons from all liability arising out
of such claim, action, suit or proceeding.
(b) Each Underwriter, severally and not jointly, will
indemnify and hold harmless the Company and the
Manager, each of the Company's directors, each of the
Company's officers who signed the Registration
Statement and each person, if any, who controls the
Company or the Manager within the meaning of Section 15
of the Act or Section 20 of the Exchange Act against
any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling
person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the
Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, any Application or any
Sales Material or (ii) the omission or the alleged
omission to state therein a material fact required to
be stated in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, any
Application or any Sales Material or necessary to make
the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in
conformity with written information furnished to the
Company by such Underwriter through the Representative
specifically for use therein; and, subject to the
limitation set forth immediately preceding this clause,
will reimburse, as incurred, any legal or other
expenses reasonably incurred by the Company or the
<PAGE>
Manager or any such director, officer or controlling
person in connection with investigating or defending
any such loss, claim, damage, liability or any action
in respect thereof. This indemnity agreement will be in
addition to any liability which such Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of
any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying
party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified
party otherwise than under this Section 8. In case any
such action is brought against any indemnified party,
and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that
it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party;
provided, however, that if the defendants in any such
action include both the indemnified party and the
indemnifying party and the indemnified party shall have
reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified
parties which are different from or additional to those
available to the indemnifying party, the indemnifying
party shall not have the right to direct the defense of
such action on behalf of such indemnified party or
parties and such indemnified party or parties shall
have the right to select separate counsel to defend
such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the
indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or
other expenses, other than reasonable costs of
investigation, subsequently incurred by such
indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the
proviso to the next preceding sentence (it being
understood, however, that in connection with such
action the indemnifying party shall not be liable for
the expenses of more than one separate counsel (in
addition to local counsel) in any one action or
separate but substantially similar actions in the same
jurisdiction arising out of the same general
allegations or circumstances, designated by the
Representative in the case of paragraph (a) of this
Section 8, representing the indemnified parties under
such paragraph (a) who are parties to such action or
actions) or (ii) the indemnifying party does not
promptly retain counsel satisfactory to the indemnified
party or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at
the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified
party, the indemnifying party will not be liable for
the costs and expenses of any settlement of such action
effected by such indemnified party without the consent
of the indemnifying party.
(d) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this
Section 8 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities
(or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or
payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate
to reflect (i) the relative benefits received by the
indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the
Securities or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also
<PAGE>
the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in
connection with the statements or omissions or alleged
statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect
thereof) as well as any other relevant equitable
considerations. The relative benefits received by the
Company and the Manager on the one hand (it being
understood that for such purpose, the Company and the
Manager shall be treated as one entity) and the
Underwriters on the other shall be deemed to be in the
same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company
bear to the total underwriting discounts and
commissions received by the Underwriters. The relative
fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to
information supplied by the Company, the Manager or the
Underwriters, the parties' relative intent, knowledge,
access to information and opportunity to correct or
prevent such statement or omission, and any other
equitable considerations appropriate in the
circumstances. The Company, the Manager and the
Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro
rata or per capita allocation (even if the Underwriters
were treated as one entity for such purpose) or by any
other method of allocation that does not take into
account the equitable considerations referred to above
in this paragraph (d). Notwithstanding any other
provision of this paragraph (d), no Underwriter shall
be obligated to make contributions hereunder that in
the aggregate exceed the total public offering price of
the Securities purchased by such Underwriter under this
Agreement, less the aggregate amount of any damages
that such Underwriter has otherwise been required to
pay in respect of the same or any substantially similar
claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to
contribute hereunder are several in proportion to their
respective underwriting obligations and not joint, and
contributions among Underwriters shall be governed by
the provisions of the LaSalle St. Securities, Inc.
Master Agreement Among Underwriters. For purposes of
this paragraph (d), each person, if any, who controls
an Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act shall have the
same rights to contribution as such Underwriter, and
each director of the Company, each officer of the
Company who signed the Registration Statement and each
person, if any, who controls the Company or the Manager
within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, shall have the same rights to
contribution as the Company or the Manager, as the case
may be.
9. Default of Underwriters. If one or more
Underwriters default in their obligations to purchase
Firm Securities or Option Securities hereunder and the
aggregate number of such Securities that such
defaulting Underwriter or Underwriters agreed but
failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option
Securities to be purchased by all of the Underwriters
at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representative for the
purchase of such Securities by other persons (who may
include one or more of the non-defaulting Underwriters,
including the Representative), but if no such
arrangements are made by the Firm Closing Date or the
related Option Closing Date, as the case may be, the
other Underwriters shall be obligated severally in
proportion to their respective commitments hereunder to
purchase the Firm Securities or Option Securities that
such defaulting Underwriter or Underwriters agreed but
failed to purchase. If one or more Underwriters so
default with respect to an aggregate number of
Securities that is more than ten percent of the
aggregate number of Firm Securities or Option
Securities, as the case may be, to be purchased by all
of the Underwriters at such time
<PAGE>
hereunder, and if
arrangements satisfactory to the Representative are not
made within 36 hours after such default for the
purchase by other persons (who may include one or more
of the non-defaulting Underwriters, including the
Representative) of the Securities with respect to which
such default occurs, this Agreement will terminate
without liability on the part of any non-defaulting
Underwriter, the Company or the Manager other than as
provided in Section 10 hereof. In the event of any
default by one or more Underwriters as described in
this Section 9, the Representative shall have the right
to postpone the Firm Closing Date or the Option Closing
Date, as the case may be, established as provided in
Section 3 hereof for not more than seven business days
in order that any necessary changes may be made in the
arrangements or documents for the purchase and delivery
of the Firm Securities or Option Securities, as the
case may be. In the event of any such default, the
Company shall have the right to postpone the Firm
Closing Date or the Option Closing Date, as the case
may be, in order to enable the Company to call and hold
an in-person meeting of the directors to approve of any
substitute underwriters as required by Section 15 of
the Investment Company Act. As used in this Agreement,
the term "Underwriter" includes any person substituted
for an Underwriter under this Section 9. Nothing herein
shall relieve any defaulting Underwriter from liability
for its default.
10. Survival. The respective representations,
warranties, agreements, covenants, indemnities and
other statements of the Company, the Manager, the
officers of the Company and the Manager and the several
Underwriters set forth in this Agreement or made by or
on behalf of them pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, the
Manager, any of their officers or directors, any
Underwriter or any controlling person referred to in
Section 8 hereof and (ii) delivery of and payment for
the Securities. The respective agreements, covenants,
indemnities and other statements set forth in Sections
6 and 8 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this
Agreement.
11. Termination.
(a) This Agreement may be terminated with respect to
the Firm Securities or any Option Securities in the
sole discretion of the Representative by notice to the
Company given prior to the Firm Closing Date or the
Option Closing Date, respectively, in the event that
the Company or the Manager shall have failed, refused
or been unable to perform all obligations and satisfy
all conditions on its part to be performed or satisfied
hereunder at or prior thereto or, if at or prior to the
Firm Closing Date or such Option Closing Date,
respectively,
(i) the Company or the Manager shall have, in the sole
judgment of the Representative, sustained any material
loss or interference with its business or properties
from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental
proceeding or there shall have been any material
adverse change, or any development involving a
prospective material adverse change (including without
limitation a change in management or control of the
Company or the Manager, as the case may be), in the
condition (financial or otherwise), business prospects,
net worth or results of operations of the Company or
the Manager, except in each case as described in or
contemplated by the Prospectus (exclusive of any
amendment or supplement thereto);
<PAGE>
(ii) trading in the Shares shall have been suspended by
the Commission or the American Stock Exchange or
trading in securities generally on the American Stock
Exchange shall have been suspended or minimum or
maximum prices shall have been established;
(iii) a banking moratorium shall have been declared
by New York or United States authorities; or
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and
any foreign power, (B) an outbreak or escalation of any
other insurrection or armed conflict involving the
United States or (C) any other calamity or crisis or
material adverse change in general economic, political
of financial conditions having an effect on the U. S.
financial markets that, in the sole judgment of the
Representative, makes it impractical or inadvisable to
proceed with the public offering or the delivery of the
Securities as contemplated by the Registration
Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to
any other party except as provided in Section 10
hereof.
12. Information Supplied by Underwriters. The
statements set forth under the heading "Underwriting"
in any Preliminary Prospectus or the Prospectus or in
any other sections of any Preliminary Prospectus or the
Prospectus (to the extent such statements relate to the
Underwriters) constitute the only information furnished
by any Underwriter through the Representative to the
Company for the purposes of Sections 2(a)(ii) and 8
hereof. The Underwriters confirm that such statements
(to such extent) are correct.
13. Notices. All communications hereunder shall be in
writing and, if sent to any of the Underwriters, shall
be delivered or sent by mail, telex or facsimile
transmission and confirmed in writing to LaSalle St.
Securities, Inc., 810 West Washington Blvd., Chicago,
Illinois 60607, Attention: Equity Transactions Group;
if sent to the Company, shall be delivered or sent by
mail, telex or facsimile transmission and confirmed in
writing to the Company at 810 West Washington Blvd.,
Chicago, Illinois 60607, Attention: Will Thimes; and if
sent to the Manager, shall be mailed, delivered or
telegraphed and confirmed in writing to the Manager at
810 West Washington Blvd., Chicago, Illinois 60607,
Attention: Barry Glasgow.
14. Successors. This Agreement shall inure to the
benefit of and shall be binding upon the several
Underwriters, the Company and the Manager and their
respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person
any legal or equitable right, remedy or claim under or
in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and
provisions hereof being intended to be and being for
the sole and exclusive benefit of such persons and for
the benefit of no other person except that (i) the
indemnities of the Company and the Manager contained in
Section 8 of this
<PAGE>
Agreement shall also be for the
benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the
indemnities of the Underwriters contained in Section 8
of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company
who have signed the Registration Statement and any
person or persons who control the Company or the
Manager within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of
Securities from any Underwriter shall be deemed a
successor because of such purchase.
15. Applicable Law. The validity and interpretation
of this Agreement, and the terms and conditions set
forth herein, shall be governed by and construed in
accordance with the law of the State of Illinois,
without giving effect to any provisions relating to
conflicts of laws.
16. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute
one and the same instrument. If signed in
counterparts, the Agreement shall not become effective
unless at least one counterpart hereof shall have been
executed and delivered on behalf of each party hereto.
If the foregoing correctly sets forth our
understanding, please indicate your acceptance thereof
in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the
Company, the Manager and each of the several
Underwriters.
Very truly yours,
LCM INTERNET GROWTH FUND, INC.
By:_________________________________
Name:
Title:
LCM CAPITAL MANAGEMENT, INC.
By:_________________________________
Name:
Title:
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
LASALLE ST. SECURITIES, INC.
By:________________________________
Name:
Title: Managing Director
As Representative of the several Underwriters.
<PAGE>
SCHEDULE 1
UNDERWRITERS
Number of Firm
Securities to be Purchased
_______________
Underwriter
LaSalle St. Securities, Inc.
[Insert names of other Underwriters]
____________
Total: 4,000,000
Exhibit (h.2)
Form of Master Selected Dealer Agreement
_______, 1999
Dear Sirs:
On or after the date hereof we may invite you to participate
as a selected dealer in connection with one or more public
offerings of securities in which we are serving as sole or lead
representative of the underwriting syndicates or are otherwise
responsible for the distribution of securities to the public by
means of offerings of securities for sale to selected dealers.
This Agreement will confirm our mutual agreement to the following
general terms and conditions applicable to your participation in
any such selected dealer group.
1. Applicability of this Agreement. From time to time on or
after the date hereof we may be responsible (acting for our own
account or for the account of an underwriting or similar group or
syndicate) for managing or otherwise implementing the sale to
selected dealers ("Selected Dealer") of securities offered
publicly pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the "Securities Act"), or
offered pursuant to an exemption from registration thereunder.
The terms and conditions of this Agreement shall be applicable to
any such offering in which we have invited you to participate as
a Selected Dealer and have expressly informed you that the terms
and conditions of this Agreement apply. This Agreement shall not
apply to any offering of securities effected wholly outside the
United States of America. Any offering to which the terms and
conditions of this Agreement apply is herein referred to as an
"Offering", and the securities offered in an Offering are herein
referred to as the "Securities" with respect to such Offering.
In the case of any Offering in which we are acting for the
account of an underwriting or similar group or syndicate
("Underwriters"), the terms and conditions of this Agreement
shall be for the benefit of, and binding upon, such Underwriters,
including, in the case of any Offering in which we are acting
with others as representatives of Underwriters, such other
representatives. Some or all of the Underwriters in any Offering
may be included among the Selected Dealers. The following
provisions of this Agreement shall apply separately to each
Offering.
2. Conditions of Offering; Acceptance and Purchase. Any
Offering will be subject to delivery of the Securities and their
acceptance by us and any other Underwriters, will be subject to
prior sale, to the approval of all legal matters by counsel and
the satisfaction of other conditions, and may be made on the
basis of a reservation of Securities or an allotment against
subscription. We reserve the right to reject any acceptance in
whole or in part, to make allotments and to close the
subscription books at any time without notice. You agree to act
as principal in purchasing any Securities.
We shall invite you to participate in an Offering and in
connection therewith shall advise you of the particular method
and supplementary terms and conditions of the Offering (including
the amount of Securities to be allotted to you, the amount of
Securities reserved for purchase by the Selected Dealers, the
period of such reservation and the information as to prices and
offering date referred to in Section 3(c) hereof). Such
invitation and additional information, to the extent applicable
and then determined, shall be conveyed to you in a telegram,
telex, facsimile transmission or other written form (electronic
or otherwise) of communication (any communication in any such
form being herein referred to as a "written communication").
Such written communication will include instructions for advising
us of your acceptance of such invitation. Any such additional
information, to the extent applicable but not determined at the
time such invitation is conveyed to you, will be conveyed to you
in a subsequent written communication. To the extent such
supplementary terms and conditions are inconsistent with any
provision herein, such terms and conditions shall supersede any
such provision, and you, by your acceptance, shall be bound
thereby. If we have received your acceptance, a subsequent
written
<PAGE>
communication from us shall state that you may reject
your allotment of Securities by notifying us prior to the time
and in the manner specified in such written communication.
Unless otherwise indicated in any such written communication,
acceptances and other communications by you with respect to an
Offering should be sent to LaSalle St. Securities, Inc., 810 West
Washington Boulevard, Chicago, Illinois 60607, Attention:
__________.
Unless you are notified otherwise by us, Securities purchased by
you shall be paid for on such date as we shall determine, on one
day's prior notice to you, by certified or official bank check or
checks drawn on a New York Clearing House bank and payable in
next day funds, in an amount equal to the Public Offering Price
as (hereinafter defined) or, if we shall so advise you, at such
Public Offering Price less the Concession (as hereinafter
defined), and payable to or upon the order of LaSalle St.
Securities, Inc., 810 West Washington Boulevard, Chicago,
Illinois 60607, against delivery of the Securities. If
Securities are purchased and paid for at such Public Offering
Price, such Concession will be paid after the termination of the
provisions of Section 3(c) hereof with respect to such
Securities.
Unless you are notified otherwise by us, payment for and delivery
of Securities purchased by you shall be made through the
facilities of The Depository Trust Company, if you are a member,
unless you have otherwise notified us within two days after the
date the Securities are first released for public offering or, if
you are not a member, settlement may be made through a
correspondent who is a member pursuant to instructions you may
send to us on or before the third business day preceding the
closing for the sale of the Securities.
3. Offering Documents.
(a) Registered Offerings. In the case of an Offering of
Securities registered under the Securities Act (a "Registered
Offering"), we shall provide you with such number of copies of
any prospectus subject to completion (a "preliminary
prospectus"), the prospectus and any amendment or supplement to
any of the foregoing as you may reasonably request for the
purposes contemplated by the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the
applicable rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder. You shall familiarize
yourself with the terms of the Securities and the other terms of
the Offering reflected in any such preliminary prospectus,
prospectus, amendment or supplement. You agree that in
purchasing Securities in a Registered Offering you will rely upon
no statements whatsoever, written or oral, other than the
statements in the prospectus delivered to you by us. You
understand that you will not be authorized by the issuer or any
seller other than the issuer, any guarantor or any insurer of
Securities to give any information or to make any representation
not contained in a preliminary prospectus or the prospectus, as
amended or supplemented, in connection with the Offering of such
Securities. You represent and warrant that you are familiar with
Securities Act Release No. 4968 and Rule 15c2-8 (or any successor
release or provision) under the Exchange Act and any applicable
foreign laws (and any applicable rules and regulations
thereunder) and agree that you will deliver all preliminary
prospectuses and prospectuses required for compliance therewith.
You agree to make a record of your distribution of each
preliminary prospectus and prospectus (including dates, numbers
of copies and persons to whom sent) and you shall, if requested
by us, furnish a copy of an amended or supplemented preliminary
prospectus or prospectus to each person to whom you have
furnished a previous preliminary prospectus or prospectus and, if
also requested by us, indicate to each such person the changes
reflected in such amended or supplemented preliminary prospectus
or prospectus.
(b) Non-Registered Offerings. In the case of an Offering other
than a Registered Offering, we shall provide you with such number
of copies of any preliminary offering circular or other document
comparable to a preliminary prospectus in a Registered Offering
(a "preliminary offering circular") relating to such Offering, a
proof of an offering circular or other document comparable to a
prospectus in
<PAGE>
a Registered Offering (an "offering circular")
relating to such Offering or such offering circular, as you may
reasonably request. You shall familiarize yourself with the
terms of the Securities and the other terms of the Offering
reflected in any such preliminary offering circular, proof of an
offering circular, offering circular or any amendment or
supplement to any of the foregoing. You agree that in purchasing
Securities pursuant to an offering circular you will rely upon no
statements whatsoever, written or oral, other than the statements
in the offering circular delivered to you by us. You understand
that you will not be authorized by the issuer or any seller other
than the issuer, any guarantor or any insurer of the Securities
offered pursuant to the offering circular to give any information
or to make any representation not contained in a preliminary
offering circular, a proof of an offering circular or the
offering circular, as amended or supplemented, in connection with
the sale of such Securities. You agree that you will comply with
the applicable federal, state and foreign laws, and the
applicable rules and regulations of any regulatory body
promulgated under such laws, governing the use and distribution
of offering circulars by brokers or dealers and, to the extent
consistent with such laws, rules and regulations, you agree that
you will deliver all preliminary offering circulars and offering
circulars that would be required if the provisions of Rule 15c2-8
(or any successor provision) under the Exchange Act applied to
such Offering. You agree to make a record of your distribution of
each preliminary offering circular, proof of an offering circular
and offering circular (including dates, numbers of copies and
persons to whom sent) and you shall, if requested by us, furnish
a copy of an amended or supplemented preliminary offering
circular, proof of an offering circular or offering circular to
each person to whom you have furnished a previous preliminary
offering circular, proof of an offering circular or offering
circular and, if also requested by us, indicate to each such
person the changes reflected in such amended or supplemented
preliminary offering circular, proof of an offering circular or
offering circular.
(c) Offer and Sale to the Public. With respect to any offering
of Securities, we shall inform you by a written communication of
the initial public offering price, if any, the selling concession
to Selected Dealers, the reallowance (if any) to other dealers
and the time when you may commence selling Securities to the
public. After such public offering has commenced, we may change
the public offering price, the selling concession and the
reallowance. The offering price, selling concession and
reallowance (if any) at any time in effect with respect to an
Offering are hereinafter referred to, respectively, as the
"Public Offering Price", the "Concession" and the "Reallowance".
With respect to each Offering of Securities, until the provisions
of this Section 3(c) shall be terminated pursuant to Section 4
hereof, you agree to offer Securities to the public only at the
Public Offering Price, except that if a Reallowance is in effect,
a reallowance from the Public Offering Price not in excess of
such Reallowance may be allowed. If such Offering is subject to
the By-Laws, rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD"), such Reallowance may be
allowed only as consideration for services rendered in
distribution to dealers who are actually engaged in the
investment banking or securities business, who execute the
written agreement prescribed by Section 24(c) of Article III of
the Rules of Fair Practice of the NASD and who are either members
in good standing of the NASD or are foreign banks, dealers or
institutions not eligible for membership in the NASD who
represent to you that they will promptly reoffer such Securities
at the Public Offering Price and will abide by the conditions
with respect to foreign banks, dealers and institutions set forth
in Section 3(e) hereof. Upon our request, you will advise us of
the identity of any dealer to whom you allowed a Reallowance and
any Underwriter or dealer from whom you received a Reallowance.
In connection with any Offering involving the public distribution
of the Securities through two or more underwriting syndicates,
you agree to be bound by, and all offers to sell and sales by you
of Securities shall be subject to, such limitations on offers to
sell and sales of Securities as we may advise you in a written
communication, and you agree that any sales made by you to other
dealers shall be made only to such dealers as agree, in their
offers to sell and sales, to be bound by the same limitations.
<PAGE>
(d) Over-allotment; Stabilization; Unsold Allotments. We may,
with respect to any Offering, be authorized (i) to over-allot in
arranging for sales of Securities to Selected Dealers and to
institutions and other retail purchasers and, if necessary, to
purchase Securities or other securities of the issuer at such
prices as we may determine for the purpose of covering such over-
allotments and (ii) for the purpose of stabilizing the market in
the Securities, to make purchases and sales of Securities or of
any other securities of the issuer or any guarantor or insurer of
the Securities as we may advise you by written communication or
otherwise, in the open market or otherwise, for long or short
account, on a when-issued basis or otherwise, at such prices, in
such amounts and in such manner as we may determine. You agree
that upon our request at any time and from time to time prior to
the termination of the provisions of Section 3(c) hereof with
respect to any Offering, you will report to us the amount of
Securities purchased by you pursuant to such Offering which then
remain unsold by you and will, upon our request at any such time,
sell to us for our account or the account of one or more
Underwriters such amount of such unsold Securities as we may
designate at the Public Offering Price less an amount to be
determined by us not in excess of the Concession. If, prior to
the later of (i) the termination of the provisions of Section
3(c) hereof with respect to any Offering or (ii) the covering by
us of any short position created by us in connection with such
Offering for our account or the account of one or more
Underwriters, we purchase or contract to purchase for our account
or the account of one or more Underwriters in the open market or
otherwise any Securities purchased by you under this Agreement as
part of such Offering, you agree to pay us on demand an amount
equal to the Concession with respect to such Securities (unless
you shall have purchased such Securities pursuant to Section 2
hereof at the Public Offering Price, in which case we shall not
be obligated to pay such Concession to you pursuant to Section
2), plus, in each case, transfer taxes, broker's commissions or
dealer's mark-ups, if any, and accrued interest, amortization of
original issue discount or accumulated dividends, if any, paid in
connection with such purchase or contract to purchase.
(e) NASD. The provisions of this Section 3(e) shall apply to
any Offering subject to the By-Laws, rules and regulations of the
NASD.
You represent and warrant that you are a dealer actually engaged
in the investment banking or securities business and you are
either a member in good standing of the NASD or, if you are not
such a member, you are a foreign bank, dealer or institution not
eligible for membership in the NASD which agrees to make no sales
within the United States of America, its territories or
possessions or to persons who are citizens thereof or residents
therein (other than through us) and to comply with all applicable
rules of the NASD, including the NASD's Interpretation with
Respect to Free-Riding and Withholding, in making sales outside
the United States of America. You agree that, in connection with
any purchase or sale of any of the Securities wherein a selling
concession, discount or other allowance is received or granted,
(i) you will comply with the provisions of Section 24 of Article
III of the NASD's Rules of Fair Practice and (ii) if you are a
non-NASD member broker or dealer in a foreign country, you will
also comply, (A) as though you were an NASD member, with the
provisions of Sections 8 and 36 thereof and (B) with Section 25
thereof as that section applies to a non-NASD member broker or
dealer in a foreign country. You represent that you are fully
familiar with the above provisions of the Rules of Fair Practice
of the NASD.
You represent, by your participation in an Offering, that neither
you nor any of your directors, officers, partners or "persons
associated with" you (as defined in the By-Laws of the NASD,
which definition includes counsel, financial consultants and
advisors, finders, members of the selling or distribution group,
and any other persons associated with or related to any of the
foregoing) or any broker-dealer (i) within the last eighteen
months has purchased in private transactions, or intends before,
at or within six months after the commencement of the public
offering of the Securities, to purchase in private transactions,
any securities (including warrants or options) of the issuer, its
parent (if any), any guarantor or insurer of the Securities or
any subsidiary of any of the foregoing or (ii) within the last
twelve months
<PAGE>
had any dealings with the issuer, any guarantor or
insurer of the Securities, any seller other than the foregoing or
any subsidiary or controlling person of any of the foregoing
(other than in connection with the syndicate agreements relating
to such Offering) as to which documents or information are
required to be filed with the NASD pursuant to its interpretation
with Respect to Review of Corporate Financing.
If we inform you that the NASD views the Offering as subject to
Schedule E to the By-Laws of the NASD, you agree that you shall,
to the extent required, offer the Securities in compliance with
such Schedule and the NASD's interpretation thereof.
If we inform you that the NASD views the Securities as interests
in a direct participation program, you agree that you shall, to
the extent required, offer the Securities in compliance with the
NASD's interpretation of Appendix F of its Rules of Fair
Practice.
(f) Relationship among Underwriters and Selected Dealers. We
shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to an Offering.
We may buy Securities from or sell Securities to any Underwriter
or Selected Dealer and, with our consent, the Underwriters (if
any) and the Selected Dealers may purchase Securities from and
sell Securities to each other at the Public Offering Price less
all or any part of the Concession. You are not authorized to act
as agent for us or any Underwriter or the issuer, any seller
other than the issuer, or any guarantor or insurer of any
Securities in offering Securities to the public or otherwise.
Neither we nor any Underwriter shall be under any obligation to
you except for obligations assumed hereby or in any written
communication for us to you in connection with any Offering.
Furthermore, neither we nor any Underwriter shall be under any
liability for or in respect of the validity, value or delivery of
or title to, any Securities or any securities issuable upon
exercise, conversion or exchange of any Securities; the form of,
or the statements contained in, or the validity of, in the case
of a Registered Offering, the registration statement, any
preliminary prospectus, the prospectus, any amendment or
supplement to any of the foregoing or any materials incorporated
by reference in any of the foregoing or, in the case of an
Offering other than a Registered Offering, any preliminary
offering circular, any proof of an offering circular, any
offering circular, any amendment or supplement to any of the
foregoing or any materials incorporated by reference in any of
the foregoing or, in either case, any letters or instruments
executed by or on behalf of the issuer, any seller other than the
issuer, any guarantor or insurer of the Securities or any other
party; the form or validity of any contract or agreement under
which any Securities may be issued or which governs the rights of
holders of any securities; the form or validity of any agreement
for the purchase of the Securities, any agreement among
underwriters or any agreements between or among underwriting
syndicates; the performance by the issuer, any seller other than
the issuer, any guarantor or insurer of the Securities and any
other parties of any agreement on its or their parts; the
qualification for sale in any jurisdiction of any Securities or
securities issuable upon exercise, conversion or exchange of any
Securities or the legality for investment of the Securities or
such securities under the laws of any jurisdiction; or any matter
in connection will any of the foregoing; provided, however, that
nothing in this paragraph shall be deemed to relieve us or any
Underwriter from any liability imposed by the Securities Act.
Nothing contained here or in any written communication from us
shall constitute the Selected Dealers an association or partners
with us or any Underwriter or with one another or, in the case of
an Offering involving the public distribution of the Securities
through two or more underwriting syndicates, with any underwriter
or manager participating in any such syndicate. If the Selected
Dealers, among themselves or with the Underwriters and/or such
other underwriters or managers, should be deemed to constitute a
partnership for federal income tax purposes, then you elect to be
excluded from the application of Subchapter K, Chapter 1,
Subtitle A of the Internal Revenue Code of 1986 and agree not to
take any position inconsistent with that election. You authorize
us, in our discretion, to execute and file on your
<PAGE>
behalf such evidence of that election as may be required by the Internal
Revenue Service. In connection with any Offering you shall be
liable for your proportionate amount of any tax, claim, demand or
liability that may be asserted against you alone or against one
or more Selected Dealers participating in such Offering, or
against us or the Underwriters and/or such other underwriters or
managers, if any, based upon the claim that the Selected Dealers,
or any of them, constitute an association, an unincorporated
business or other entity, including, in each case, your
proportionate share of any expense incurred in defending against
any such tax, claim, demand or liability.
(g) Legal Qualifications. It is understood that neither we nor
any Underwriter assumes any responsibility with respect to the
right of any Selected Dealer to offer or to sell Securities in
any jurisdiction, notwithstanding any "Blue Sky" memorandum or
survey or any other information that we or any other Underwriter
may furnish as to the jurisdictions under the securities laws of
which it is believed the Securities may be sold.
If you propose to offer Securities outside of the United States
of America, its territories or its possessions, you will take, at
your own expense and risk, such action, if any, as may be
necessary to comply with the laws of each foreign jurisdiction in
which you propose to offer Securities.
(h) Compliance with Law. You agree that in selling Securities
pursuant to any Offering (which agreement shall also be for the
benefit of the issuer, any seller other than the issuer and any
guarantor or insurer of such Securities) you will comply with the
applicable provisions of the Securities Act and the Exchange Act,
the applicable rules and regulations of the Commission
thereunder, the applicable rules and regulations of the NASD, the
applicable rules and regulations of any securities exchange or
other self-regulatory organization having jurisdiction over the
Offering and the applicable federal, state or foreign laws, rules
and regulations specified in Section 3 hereof.
4. Termination. This Agreement may be terminated by either
party hereto upon five business days' written notice to the other
party; provided, however, that with respect to any Offering, if
we receive any such notice from you after you have agreed to
participate as a Selected Dealer in any Offering, this Agreement
shall remain in full force and effect as to such Offering and
shall terminate with respect to such Offering in accordance with
the provisions of the following paragraph.
Unless this Agreement or any provision hereof is earlier
terminated by us, and except as we may advise you in a written
communication, the terms and conditions of this Agreement will
cease to be applicable to your participation in an Offering at
the close of business of the forty-fifth day after the date the
Securities are first released for public offering, but in our
discretion may be extended by us by written communication for a
further period or periods not exceeding an aggregate of forty-
five days; provided, however, that the provisions of this
Agreement that contemplate obligations surviving the termination
of its effectiveness shall survive such termination with respect
to any Offering.
5. Amendments. This Agreement may be amended or supplemented
by us by written notice to you and without need for further
action on your part and, except for amendments or supplements set
forth in a written communication to you relating solely to a
particular Offering, any such amendment or supplement to this
Agreement shall be effective with respect to any Offering
effected after this Agreement is so amended or supplemented.
Each reference herein to "this Agreement" shall, as appropriate,
be to this Master Selected Dealer Agreement as so amended or
supplemented.
6. Successors and Assigns. This Agreement shall be binding on,
and inure to the benefit of, the parties hereto and the other
persons specified in Sections 1 and 3 hereof, and the respective
successors and assigns of each of them.
<PAGE>
7. APPLICABLE LAW. THIS AGREEMENT AND THE TERMS AND CONDITIONS
SET FORTH HEREIN WITH RESPECT TO ANY OFFERING, TOGETHER WITH SUCH
SUPPLEMENTARY TERMS AND CONDITIONS WITH RESPECT TO SUCH OFFERING
AS MAY BE CONTAINED IN ANY WRITTEN COMMUNICATION TO YOU IN
CONNECTION THEREWITH, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
8. Notices. Any notice from us to you shall be deemed to have
been duly given if conveyed to you by written communication or
telephone at the address set forth at the end of this Agreement,
or at such other address as you shall have advised us in writing.
Any notice from you to us shall be deemed to have been duly given
if conveyed to us by written communication or telephone at
LaSalle St. Securities, Inc., 810 West Washington Boulevard,
Chicago, Illinois 60607, Attention: __________.
Please confirm, by signing and returning this Agreement to
us, your acceptance of any agreement to the terms and conditions
of this Agreement (as amended and supplemented from time to time
pursuant to Section 5 hereof), together with and subject to any
supplementary or alternative terms and conditions contained in
any written communication from us in connection with any
Offering, all of which shall constitute a binding agreement
between you and us, individually or as representative of any
Underwriters. Your subscription to, or your acceptance of any
reservation of, any Securities pursuant to an Offering shall
constitute (i) confirmation that your representations and
warranties set forth in this Agreement are true and correct as of
the times or for the periods specified herein, (ii) confirmation
that your agreements set forth in this Agreement have been and
will be performed by you to the extent and at the times required
hereby and (iii) acknowledgment that you have requested and
received from us sufficient copies of the prospectus or offering
circular, as the case may be, with respect to such Offering in
order to comply with your undertakings in Section 3(a) or 3(b)
hereof.
Very truly yours,
LASALLE ST. SECURITIES, INC.
By:____________________________
CONFIRMED as of the date first written above:
__________________________________
(Name of Dealer)
By:_______________________________
Title*:___________________________
Address:__________________________
__________________________
__________________
*If signer is not an officer or partner, please attach evidence
of authorization.
Exhibit (j)
FORM OF
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of
this ___ day of ____, 1999, by and between LCM Internet
Growth Fund, Inc., a Maryland corporation (hereinafter
referred to as the "Company"), and Firstar Bank
Milwaukee, N.A., a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as
the "Custodian").
WHEREAS, the Company is a closed-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Company desires that its
securities and cash shall be hereafter held and
administered by Custodian pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Custodian agree
as follows:
1. Definitions
The word "securities" as used herein includes
stocks, shares, bonds, debentures, notes, mortgages or
other obligations, and any certificates, receipts,
warrants or other instruments representing rights to
receive, purchase or subscribe for the same, or
evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a
request or direction or certification in writing signed
in the name of the Company by any two of the President,
a Vice President, the Secretary and the Treasurer of
the Company, or any other persons duly authorized to
sign by the Board of Directors.
The word "Board" shall mean Board of Directors
of the LCM Internet Growth Fund, Inc.
2. Names, Titles, and Signatures of the Company's
Officers
An officer of the Company will certify to
Custodian the names and signatures of those persons
authorized to sign the officers' certificates described
in Section 1 hereof, and the names of the members of
the Board of Directors, together with any changes which
may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a
separate account or accounts in the name of the
Company, subject only to draft or order by Custodian
acting pursuant to the terms of this Agreement.
Custodian shall hold in such account or accounts,
subject to the provisions hereof,
<PAGE>
all cash received by it from or for the account of the Company.
Custodian shall make payments of cash to, or for the account of,
the Company from such cash only:
(a) for the purchase of securities for the portfolio of
the Company upon the delivery of such
securities to Custodian, registered in the
name of the Company or of the nominee of
Custodian referred to in Section 7 or in
proper form for transfer;
(b) for the purchase or redemption of shares of the
common stock of the Company upon delivery
thereof to Custodian, or upon proper
instructions from the Company;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating
expenses (including, without limitation
thereto, fees for legal, accounting,
auditing and custodian services and
expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned
or subscribed to by the Company held by or
to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of
the Company.
Before making any such payment, Custodian shall
receive (and may rely upon) an officers' certificate
requesting such payment and stating that it is for a
purpose permitted under the terms of items (a), (b),
(c), or (d) of this Section 3, Subsection A, and also,
in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to
be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to
whom such payment is to be made, provided, however,
that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a
money market instrument, or any other security with
same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the
Company issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two
business days thereafter.
B. Custodian is hereby authorized to endorse
and collect all checks, drafts or other orders for the
payment of money received by Custodian for the account
of the Company.
C. Custodian shall, upon receipt of proper
instructions, make federal funds available to the
Company as of specified times agreed upon from time to
time by the Company and the Custodian in the amount of
checks received in payment for shares of the Company
which are deposited into the Company's account.
<PAGE>
D. If so directed by the Company, Custodian
will invest any and all available cash in overnight
cash-equivalent investments as specified by the
investment adviser to the FundCompany.
4. Segregated Accounts
Upon receipt of proper instructions, the
Custodian shall establish and maintain a segregated
account(s) for and on behalf of the Company, into which
account(s) may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or
deliver any securities of the Company held by it
pursuant to this Agreement. Custodian agrees to
transfer, exchange or deliver securities held by it
hereunder only:
(a) for sales of such securities for the account of the
Company upon receipt by Custodian of
payment therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street
delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and
cash whether pursuant to any plan of
merger, consolidation, reorganization,
recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such
securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive
securities; or
(h) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant
to items (a), (b), (d), (e), (f), and (g), securities
or cash receivable in exchange therefor shall be
deliverable to Custodian.
Before making any such transfer, exchange or
delivery, Custodian shall receive (and may rely upon)
an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a
purpose permitted under the terms of items (a), (b),
(c), (d), (e), (f),or (g), of this Section 5 and also,
in respect of item (h), upon receipt of an officers'
certificate specifying the
<PAGE>
securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made,
provided, however, that an officers' certificate need
not precede any such transfer, exchange or delivery of
a money market instrument, or any other security with
same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the
Company issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two
business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an
officers' certificate to the contrary, Custodian shall:
(a) present for payment all coupons and other income
items held by it for the account of the Company, which
call for payment upon presentation and hold the cash
received by it upon such payment for the account of the
Company; (b) collect interest and cash dividends
received, with notice to the Company, for the account
of the Company; (c) hold for the account of the Company
hereunder all stock dividends, rights and similar
securities issued with respect to any securities held
by it hereunder; and (d) execute, as agent on behalf of
the Company, all necessary ownership certificates
required by the Internal Revenue Code of 1986, as
amended (the "Code") or the Income Tax Regulations (the
"Regulations") of the United States Treasury Department
(the "Treasury Department") or under the laws of any
state now or hereafter in effect, inserting the
Company's name on such certificates as the owner of the
securities covered thereby, to the extent it may
lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers'
certificate, Custodian shall register all securities,
except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Code
and any Regulations of the Treasury Department issued
thereunder or in any provision of any subsequent
federal tax law exempting such transaction from
liability for stock transfer taxes, and shall execute
and deliver all such certificates in connection
therewith as may be required by such laws or
regulations or under the laws of any state. All
securities held by Custodian hereunder shall be at all
times identifiable in its records held in an account or
accounts of Custodian containing only the assets of the
Company.
The Company shall from time to time furnish to
Custodian appropriate instruments to enable Custodian
to hold or deliver in proper form for transfer, or to
register in the name of its
registered nominee, any securities which it may hold
for the account of the Company and which may from time
to time be registered in the name of the Company.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian
shall vote any of the securities held hereunder by or
for the account of the Company, except in accordance
with the instructions contained in an officers'
certificate. Custodian shall deliver, or cause to be
executed and delivered, to the Company all notices,
proxies and proxy soliciting materials with respect to such
<PAGE>
securities, such proxies to be executed by the
registered holder of such securities (if registered
otherwise than in the name of the Company), but without
indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Company shall pay or reimburse Custodian
from time to time for any transfer taxes payable upon
transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses
made or incurred by Custodian in the performance of
this Agreement.
Custodian shall execute and deliver such
certificates in connection with securities delivered to
it or by it under this Agreement as may be required
under the provisions of the Code and any Regulations of
the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exempt
transfers and/or deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its
services pursuant to this Agreement such compensation
as may from time to time be agreed upon in writing
between the two parties. Until modified in writing,
such compensation shall be as set forth in Exhibit A
attached hereto.
Custodian shall not be liable for any action
taken in good faith upon any certificate herein
described or certified copy of any resolution of the
Board, and may rely on the genuineness of any such
document which it may in good faith believe to have
been validly executed.
The Company agrees to indemnify and hold
harmless Custodian and its nominee from all taxes,
charges, expenses, assessments, claims and liabilities
(including reasonable counsel fees) incurred or
assessed against it or by its nominee in connection
with the performance of this Agreement, except such as
may arise from its or its nominee's own bad faith,
negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any
account of the Company for such items. In the event of
any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Company,
or in the event that Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may
arise from its or its nominee's own bad faith,
negligent action, negligent failure to act or willful
misconduct, any property at any time held for the
account of the Company shall be security therefor.
Custodian agrees to indemnify and hold harmless
the Company from all charges, expenses, assessments,
and claims/liabilities (including reasonable counsel
fees) incurred or assessed against it in connection
with the performance of this Agreement, except such as
may arise from the Company's own bad faith, negligent
action, negligent failure to act, or willful
misconduct.
<PAGE>
11. Subcustodians
Custodian is hereby authorized to engage
another bank or trust company as a subcustodian for all
or any part of the Company's assets, so long as any
such bank or trust company is itself qualified under
the 1940 Act and the rules and regulations thereunder
and provided further that, if the Custodian utilizes
the services of a subcustodian, the Custodian shall
remain fully liable and responsible for any losses
caused to the Company by the subcustodian as fully as
if the Custodian was directly responsible for any such
losses under the terms of this Agreement.
Notwithstanding anything contained herein, if
the Company requires the Custodian to engage specific
subcustodians for the safekeeping and/or clearing of
assets, the Company agrees to indemnify and hold
harmless Custodian from all claims, expenses and
liabilities incurred or assessed against it in
connection with the use of such subcustodian in regard
to the Company's assets, except as may arise from
Custodian's own bad faith, negligent action, negligent
failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Company
periodically as agreed upon with a statement
summarizing all transactions and entries for the
account of the Company. Custodian shall furnish to the
Company, at the end of every month, a list of the
portfolio securities for the Company showing the
aggregate cost of each issue. The books and records of
Custodian pertaining to its actions under this
Agreement shall be open to inspection and audit at
reasonable times by officers of, and by auditors
employed by, the Company.
13. Termination or Assignment
This Agreement may be terminated by the
Company, or by Custodian, on ninety (90) days notice,
given in writing and sent by registered mail to:
Mr. James C. Tyler
Attn.: Mutual Fund Services
Firstar Bank Milwaukee, N.A.
615 East Michigan Street
Milwaukee, WI 53202
or to the Company at:
Mr. Barry J. Glasgow
LCM Internet Growth Fund, Inc.
810 W. Washington Blvd.
Chicago, IL 60607
as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to
Custodian or a vote of the shareholders of the Company
(if required) to dissolve or
<PAGE>
to function without a
custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other
property of the Company to the Company, but may deliver
them to a bank or trust company of its own selection
that meets the requirements of the 1940 Act as a
Custodian for the Company to be held under terms
similar to those of this Agreement, provided, however,
that Custodian shall not be required to make any such
delivery or payment until full payment shall have been
made by the Company of all liabilities constituting a
charge on or against the properties then held by
Custodian or on or against Custodian, and until full
payment shall have been made to Custodian of all its
fees, compensation, costs and expenses, subject to the
provisions of Section 10 of this Agreement.
This Agreement may not be assigned by Custodian
without the consent of the Company, authorized or
approved by a resolution of its Board of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed
to prevent the use by Custodian of a central securities
clearing agency or securities depository, provided,
however, that Custodian and the central securities
clearing agency or securities depository meet all
applicable federal and state laws and regulations, and
the Board of Directors of the Company approves by
resolution the use of such central securities clearing
agency or securities depository.
15. Records
Custodian shall keep records relating to its
services to be performed hereunder, in the form and
manner, and for such period, as it may deem advisable
and is agreeable to the Company but not inconsistent
with the rules and regulations of appropriate
government authorities, in particular Section 31 of the
1940 Act and the rules thereunder. Custodian agrees
that all such records prepared or maintained by the
Custodian relating to the services performed by
Custodian hereunder are the property of the Company and
will be preserved, maintained, and made available in
accordance with such section and rules of the 1940 Act
and will be promptly surrendered to the Company on and
in accordance with its request.
16. Governing Law
This Agreement shall be governed by Wisconsin
law. However, nothing herein shall be construed in a
manner inconsistent with the 1940 Act on any rule or
regulation promulgated by the Securities and Exchange
Commission thereunder.
17.Year 2000 Representation
Custodian hereby represents and warrants that
it does not anticipate that the "Year 2000 Problem"
will have a material impact on its ability to perform
its duties under this Agreement. The "Year 2000
Problem" refers to the inability of computer systems to
properly process and calculate date-related information
and data from and after January 1, 2000.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by a duly
authorized officer on one or more counterparts as of
the day and year first written above.
LCM INTERNET GROWTH FUND, INC. FIRSTAR BANK MILWAUKEE, N.A.
By:______________________________ By:________________________________
Attest:__________________________ Attest:____________________________
<PAGE>
Custody Services
Annual Fee Schedule - Domestic Funds
Exhibit A
Annual fee based upon market value
2 basis points per year
Minimum annual fee - $3,000
Investment transactions (purchase, sale, exchange,
tender, redemption, maturity, receipt, delivery):
$12.00 per book entry security (depository or Federal Reserve system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates
$35.00 per option/futures contract
$15.00 per variation margin
$15.00 per Fed wire deposit or withdrawal
Variable Amount Demand Notes: Used as a short-term
investment, variable amount notes offer safety and
prevailing high interest rates. Our charge, which is
1/4 of 1%, is deducted from the variable amount note
income at the time it is credited to your account.
Plus reasonable out-of-pocket expenses. Foreign
securities custody services will be quoted separately.
Fees and out-of-pocket expenses are billed to the
Company monthly, based upon market value at the
beginning of the month.
Exhibit (k.1)
FORM OF
STOCK TRANSFER AGENCY AGREEMENT
THIS AGREEMENT entered into as of this ___ day of
_________, 1999 by and between LCM Internet Growth
Fund, Inc., a Maryland corporation (the "Company") and
Firstar Bank Milwaukee, N.A., a national banking
corporation (the "Agent").
WHEREAS, the Company desires to appoint the Agent
as its registrar, transfer agent, dividend disbursing
agent and agent in connection with certain other
activities; and
WHEREAS, the Agent desires to act in said
capacities.
NOW, THEREFORE, in consideration of the mutual
covenants of the parties made herein and the payments
herein provided for, the parties hereby agree as
follows:
1. Appointment. The Company hereby appoints the
Agent to serve as registrar, transfer agent for the
Company's authorized and issued shares of common stock,
$0.01 par value (the "Shares"), dividend disbursing
agent and agent in connection with the Company's
distribution reinvestment plan (the "Plan") as
described in the Company's prospectus (which is
included in its Registration Statement on Form N-2 as
filed with the Securities and Exchange Commission (the
"SEC")). The Agent hereby accepts said appointment and
agrees to perform its duties in accordance with the
provisions of this Agreement.
2. Term; Amendment. The Agent's appointment shall
take effect as of the date hereof and, unless sooner
terminated as provided herein, shall continue
automatically in effect for successive annual periods.
This Agreement may be terminated by either party upon
90 days written notice to the other. This Agreement
may be amended only by the mutual written consent of
the parties.
3. Duties of the Agent. The Agent hereby agrees to
perform the following services:
(a) In accordance with procedures established from
time to time by agreement between the Company and the
Agent, the Agent shall:
(i) receive for acceptance orders for the purchase of
Shares and promptly deliver payment and appropriate
documentation thereof to the Company's custodian;
(ii) pursuant to purchase orders, issue and record the
appropriate number of Shares and hold such Shares in
the appropriate shareholder account;
(iii) effect transfers of Shares by the registered
owners thereof upon receipt of appropriate documentation;
(iv) prepare and transmit payments for dividends and
distributions declared by the Company;
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(v) act as agent pursuant to the Plan (a copy of which
is attached hereto as Exhibit A);
(vi) issue replacement certificates for those
certificates alleged to have been lost, stolen or
destroyed upon receipt by the Agent of indemnification
satisfactory to the Agent and protecting the Agent and
the Company and, if requested by the Agent, a surety
bond from the effected shareholder, and the Agent may,
at its option, issue replacement certificates in place
of mutilated certificates upon presentation thereof and
without such indemnity;
(vii) maintain records of account for and advise
the Company and its shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Company
and maintain, pursuant to Rule 17ad-10(e) under the
Securities Exchange Act of 1934, as amended, (the
"Exchange Act"), a record of the total number of Shares
of the Company which are authorized, based upon data
provided to it by the Company, and issued and
outstanding.
(b) In addition to and not in lieu of the services set
forth in the above paragraph (a), the Agent shall:
(i) perform the customary services of registrar,
transfer agent, dividend disbursing agent and agent for
the Plan, including, but not limited to: maintaining
all shareholder accounts, preparing shareholder meeting
lists, mailing shareholder reports and prospectuses to
current shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and
filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends
and distributions by federal authorities for all
shareholders, preparing and mailing confirmation forms
and statements of account to shareholders for all
purchases of Shares and other confirmable transactions
in shareholder accounts, preparing and mailing activity
statements for shareholders and providing shareholder
account information; and
(ii) provide reports which will enable the Company to
monitor the states in which registered shareholders are
located.
(c) In effecting transfers of Shares by the registered
owners thereof, the Agent may rely upon the Uniform
Commercial Code, the provisions of Chapter 112 of the
Wisconsin Statutes and any other statutes which, in the
opinion of counsel, protect the Agent and the Company
in not requiring complete documentation, in registering
transfers without inquiry into adverse claims, in
delaying registration for the purpose of such inquiry
or in refusing registration where, in its judgment, an
adverse claim necessitates such refusal.
4. Fees and Expenses. The Company agrees to pay the
Agent for the performance of the duties set forth in
this Agreement, the amounts set forth in Exhibit B
attached hereto. Such fees and out-of-pocket expense
identified in Exhibit B may be changed from time to
time subject to mutual agreement between the parties.
The Company agrees to pay all fees and reimburseable
expenses within ten (10) business days following
receipt of the billing notice.
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5. Representations and Warranties of the Agent. The
Agent represents and warrants to the Company that:
(a) It is a national bank duly organized and in good
standing under the laws of the State of Wisconsin;
(b) It is duly qualified to carry on its business in
the State of Wisconsin;
(c) It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and
perform this Agreement;
(d) All requisite corporate proceedings have been
taken to authorize it to enter into and perform this Agreement;
(e) It has and will continue to have access to the
necessary facilities, equipment and personnel to
perform its duties and obligations under this Agreement;
(f) It is a registered transfer agent under the Exchange Act;
(g) It will comply with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities
Act"), the Exchange Act, the Investment Company Act of
1940, as amended (the "Investment Company Act"), and
any laws, rules and regulations of governmental
authorities having jurisdiction; and
(h) It does not anticipate that the "Year 200 Problem"
will have a material impact on its ability to perform
its duties under this Agreement. The "Year 2000
Problem" refers to the inability of computer systems to
properly process and calculate date-related information
and data from and after January 1, 2000.
6. Representations and Warranties of the Company.
The Company represents and warrants to the Agent that:
(a) It is a corporation duly organized and in good
standing under the laws of the State of Maryland;
(b) It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and
perform this Agreement;
(c) All requisite corporate proceedings have been
taken to authorize it to enter into and perform this
Agreement;
(d) It is a closed-end non-diversified investment
company registered under the Investment Company Act;
(e) A registration statement under the Securities Act
will be made effective and appropriate state securities
law filings will be made with respect to all Shares of
the Fund being offered for sale; and
(f) It shall make all required filings under federal
and state securities laws.
7. Covenants of the Company and the Agent.
(a) The Company shall promptly furnish to the Agent the following:
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(i) a certified copy of the resolution of the Board of
Directors of the Company authorizing the appointment of
the Agent and the execution and delivery of this
Agreement;
(ii) a copy of the Company's Articles of Incorporation
and By-Laws, and all amendments thereto;
(iii) specimen signatures of all officers of the
Company authorized to sign stock certificates;
(iv) a certificate of the Company's Secretary as to the
number of Shares authorized, issued and outstanding; and
(v) specimens of all forms of certificates for Shares,
certified by the Company's Secretary.
(b) The Agent agrees to establish and maintain
facilities and procedures reasonably acceptable to the
Company for the safekeeping of stock certificates,
check forms and facsimile imprinting devices, if any;
and for the preparation or use, and for keeping account
of, such certificates, forms and devices.
(c) The Agent shall keep records relating to the
services to be performed hereunder, in the form and
manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act,
and the rules thereunder, the Agent agrees that all
such records prepared or maintained by the Agent
relating to the services to be performed by the Agent
hereunder are the property of the Company and will be
preserved, maintained and made available in accordance
with such section and rules, and will be surrendered
promptly to the Company on and in accordance with its
request.
(d) The Agent and the Company agree that all books,
records, information and data pertaining to the
business of the other party which are exchanged or
received pursuant to the negotiation or the carrying
out of this Agreement shall remain confidential, and
shall not be voluntarily disclosed to any other person,
except as may be required by law.
(e) In case of any requests or demands for the
inspection of the shareholder records of the Company,
the Agent will endeavor to notify the Company and to
secure instructions from an authorized officer of the
Company as to such inspection. The Agent reserves the
right, however, to exhibit the shareholder records to
any person whenever it is advised by its counsel that
it may be held liable for the failure to exhibit the
shareholder records to such person.
8. Performance of Services; Limitation of Liability.
(a) The Agent shall exercise reasonable care
in the performance of its duties under this
Agreement. The Agent shall not be liable for any
error of judgment or mistake of law or for any
loss suffered by the Company in connection with
matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the
failure of communication or power supplies beyond
the Agent's control, except a loss resulting from
the Agent's refusal or failure to comply with the
terms of this Agreement or from
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bad faith,
negligence or willful misconduct on its part in
the performance of its duties under this
Agreement. Notwithstanding any other provision of
this Agreement, the Company shall indemnify and
hold harmless the Agent from and against any and
all claims, demands, losses, expenses and
liabilities (whether with or without basis in fact
or law) of any and every nature (including
reasonable attorneys' fees) which the Agent may
sustain or incur or which may be asserted against
the Agent by any person arising out of any action
taken or omitted to be taken by it in performing
the services hereunder (i) in accordance with the
foregoing standards, or (ii) in reliance upon any
written or oral instruction provided to the Agent
by any duly authorized officer of the Company,
such duly authorized officer to be included in a
list of authorized officers furnished to the Agent
and as amended from time to time in writing by
resolution of the Board of Directors of the
Company.
(b) The Agent shall indemnify and hold the
Company harmless from and against any and all
claims, demands, losses, expenses and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which the Company may sustain or
incur or which may be asserted against the Company
by any person arising out of any action taken or
omitted to be taken by the Agent as a result of
the Agent's refusal or failure to comply with the
terms of this Agreement, its bad faith, negligence
or willful misconduct.
(c) In the event of a mechanical breakdown
or failure of communication or power supplies
beyond its control, the Agent shall take all
reasonable steps to minimize service interruptions
for any period that such interruption continues
beyond the Agent's control. The Agent will make
every reasonable effort to restore any lost or
damaged data and correct any errors resulting from
such a breakdown at the expense of the Agent. The
Agent agrees that it shall, at all times, have
reasonable contingency plans with appropriate
parties, making reasonable provision for emergency
use of electrical data processing equipment to the
extent appropriate equipment is available.
Representatives of the Company shall be entitled
to inspect the Agent's premises and operating
capabilities at any time during regular business
hours of the Agent, upon reasonable notice to the
Agent.
(d) Regardless of the above, the Agent
reserves the right to reprocess and correct
administrative errors at its own expense.
(e) In order that the indemnification
provisions contained in this section shall apply,
it is understood that if in any case the
indemnitor may be asked to indemnify or hold the
indemnitee harmless, the indemnitor shall be fully
and promptly advised of all pertinent facts
concerning the situation in question, and it is
further understood that the indemnitee will use
all reasonable care to notify the indemnitor
promptly concerning any situation which presents
or appears likely to present the probability of a
claim for indemnification. The indemnitor shall
have the option to defend the indemnitee against
any claim which may be the subject of this
indemnification. In the event that the indemnitor
so elects, it will so notify the indemnitee and
thereupon the indemnitor shall take over complete
defense of the claim, and the indemnitee shall in
such situation initiate no further legal or other
expenses for which it shall seek indemnification
under this section. The indemnitee shall in no
case confess any claim or make any compromise
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in any case in which the indemnitor will be asked to
indemnify the indemnitee except with the
indemnitor's prior written consent.
9. Notices. Notices of any kind to be given by
either party to the other party shall be in writing and
shall be duly given if mailed or otherwise delivered as
follows:
Notice to the Agent, to:
Ms. Suzanne Barnes
Firstar Bank Milwaukee, N.A.
Corporate Trust Department
1555 North RiverCenter Drive, Suite 301
Milwaukee, Wisconsin 53212
Tele: 414-905-5001
Fax: 414-905-5049
Notice to the Company, to:
Mr. Barry J. Glasgow
LCM Internet Growth Fund, Inc.
810 West Washington Blvd.
Chicago, Illinois 60607
Tele: 312-705-3028
Fax: 312-705-3000
10. Duties in the Event of Termination. In the event
that, in connection with termination, a successor to
any of the Agent's duties or responsibilities hereunder
is designated by the Company by written notice to the
Agent, the Agent will promptly, upon such termination
and at the expense of the Company, transfer to such
successor all relevant books, records, correspondence
and other data established or maintained by the Agent
under this Agreement in a form reasonably acceptable to
the Company (if such form differs from the form in
which the Agent has maintained, the Company shall pay
any expenses associated with transferring the data to
such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for
assistance from the Agent's personnel in the
establishment of books, records and other data by such
successor.
11. Governing Law. This Agreement shall be construed
and the provisions hereof interpreted under and in
accordance with the laws of the State of Wisconsin.
However, nothing herein shall be construed in a manner
inconsistent with the Investment Company Act or any
rule or regulation promulgated by the SEC thereunder.
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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer on one or more counterparts as of the day and
year first written above.
LCM INTERNET GROWTH FUND, INC. FIRSTAR BANK MILWAUKEE, N.A.
By:___________________________ By:__________________________
Its:__________________________ Its:_________________________
Attest Attest
By:___________________________ By:__________________________
<PAGE>
Exhibit A
TERMS AND CONDITIONS OF
LCM INTERNET GROWTH FUND, INC.
DISTRIBUTION REINVESTMENT PLAN
Holders of shares of common stock of LCM Internet
Growth Fund, Inc. (the "Fund) are advised as follows
with respect to the Fund's Distribution Reinvestment
Plan (the "Plan"):
1. Participation. Each holder of shares of common
stock of the Fund will automatically be deemed to have
elected to be a participant in the Plan, unless Firstar
Bank Milwaukee, N.A. (the "Plan Agent") is otherwise
instructed by such shareholder, in writing, to have all
distributions, net of any applicable withholding tax,
paid in cash. A shareholder who does not wish to
participate in the Plan will receive all distributions,
the record date for which follows the receipt by the
Plan Agent of such shareholder's instructions, in cash
and will be paid by check mailed directly to such
shareholder by the Plan Agent, as dividend-disbursing
agent. The Plan Agent will act as agent for
participants in administering the Plan and will open an
account for each participant under the Plan in the same
name as his or her outstanding shares of common stock
are registered.
2. Distributions.
(a) General. Whenever the directors of the Fund
declare an income dividend or capital gains
distribution payable, at the option of the shareholder,
in shares of common stock or cash, non-participants in
the Plan will receive such distribution in cash and
participants in the Plan will receive such distribution
in shares of common stock to be issued by the Fund or
purchased on the open market by the Plan Agent. Any
such shares so distributed will be held by the Plan
Agent for each participant's account.
(b) Market Premium Issuances. If, on the distribution
payment date or, if that date is not an American Stock
Exchange trading day, the next preceding trading day
(the "Valuation Date"), the market price per share of
common stock equals or exceeds the net asset value per
share on that date, the Fund will issue shares of
common stock to participants valued at net asset value;
provided, however, if the net asset value is less than
95% of the market price on the Valuation Date, then
participants will be issued shares valued at 95% of the
market price.
(c) Market Discount Purchases. If, on the Valuation
Date, the net asset value per share of common stock
exceeds the market price per share on that date, the
Plan Agent, as agent for the participants, will, for a
period of 30 days, buy shares of the Fund's common
stock in the open market, on the
<PAGE>
American Stock
Exchange or elsewhere, for each participant's account.
If, at the close of business on any day during the
purchase period, the market price exceeds the net asset
value per share, the Plan Agent will cease open market
purchases and the Fund will issue the remaining shares
at a price equal to the greater of net asset value or
95% of the then current market price. In a case where
the Plan Agent has terminated open market purchases and
the Fund has issued the remaining shares, the number of
shares received by each participant in respect of the
distribution will be based on the weighted average of
prices paid for shares purchased in the open market and
the price at which the Fund issues the remaining
shares.
3. Valuation. For purposes of the Plan, the market
price of shares of common stock of the Fund on a
particular date shall be the last sales price on the
American Stock Exchange at the close of the previous
trading day or, if there is no sale on the American
Stock Exchange on that date, then the mean between the
closing bid and asked quotations for such stock on the
American Stock Exchange on such date. The net asset
value per share of common stock on a particular date
shall be as determined by or on behalf of the Fund.
4. Liability of Plan Agent. The Plan Agent shall at
all times act in good faith and agree to use its best
efforts within reasonable limits to ensure the accuracy
of all services performed under this Plan and to comply
with applicable law, but assumes no responsibility and
shall not be liable for loss or damage due to errors
unless such error is caused by the Plan Agent's
negligence, bad faith or willful misconduct or that of
its employees. Each participant's uninvested funds
held by the Plan Agent will not bear interest. The
Plan Agent shall have no liability in connection with
any inability to purchase Fund shares, within the time
provided, or with the timing of any purchases effected.
The Plan Agent shall have no responsibility as to the
value of the shares of common stock acquired for any
participant's account. For the purpose of cash
investments, the Plan Agent may commingle participants'
funds.
5. Recordkeeping.
(a) Stock Certificates. The Plan Agent will hold
shares of common stock acquired pursuant to the Plan in
non-certificated form in the name of each participant
for whom such shares are being held. Upon a
participant's written request, the Plan Agent will
deliver to the participant, without charge, a
certificate or certificates representing all full
shares of common stock held by the Plan Agent pursuant
to the Plan for the benefit of such participant.
Although a participant may from to time have an
undivided fractional interest in a share of common
stock of the Fund, no certificates for fractional
shares will be issued. However, distributions on
fractional shares will be credited to each
participant's account. In the event of termination of
a participant's account under the Plan, the Plan Agent
will adjust for any such undivided fractional interest
in cash at the market value of the shares of common
stock at the time of termination.
<PAGE>
(b) Confirmations. The Plan Agent will confirm, in
writing, each acquisition made for the account of a
participant as soon as practicable, but in any event
not later than 60 days after the date thereof.
(c) Stock Dividends or Splits. Any stock dividends or
split shares distributed by the Fund on shares of
common stock held by the Plan Agent for a participant
will be credited to the participant's account.
6. Proxy Materials. The Plan Agent will forward to
each participant any proxy solicitation material
received by it and will vote any shares so held for
each participant first in accordance with the
instructions set forth on the proxies returned by the
participant to the Fund and then with respect to any
proxies not returned by the participant to the Fund in
the same proportion as the Plan Agent votes proxies
returned by participants to the Fund.
7. Fees. The Plan Agent's service fee for handling
the reinvestment of distributions will be paid by the
Fund. Each participant, however, will be charged a pro
rata share of brokerage commissions incurred with
respect to the Plan Agent'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 because the Plan Agent will be purchasing
shares for all participants in blocks and prorating the
lower commission thus attainable. The Plan Agent may
use its affiliates and/or affiliates of the Fund's
investment adviser for all trading activity relative to
the Plan.
8. Termination.
(a) By Participant. A participant may terminate his
or her account under the Plan by notifying the Plan
Agent, in writing, at Firstar Bank Milwaukee, N.A., c/o
LCM Internet Growth Fund, Inc., P. O. Box 2077,
Milwaukee, Wisconsin 53201-2077. Such termination will
be effective immediately if notice is received by the
Plan Agent prior to the distribution record date;
otherwise, such termination will be effective, with
respect to any subsequent distribution, on the first
trading day after the distribution paid for such record
date shall have been credited to such participant's
account.
(b) By Plan Agent or Fund. The Plan may be terminated
by the Plan Agent or the Fund with respect to any
distributions paid subsequent to written notice of the
termination mailed to participants at least 30 days
before the record date for the payment of any
distribution.
(c) Effect of Termination. Upon any termination, the
Plan Agent will cause a certificate or certificates to
be issued for the full shares held for each participant
under the Plan and cash adjustment for any fractional
shares to be delivered to him or her without charge.
<PAGE>
9. Amendment. The terms and conditions of the Plan
may be amended by the Plan Agent or the Fund at any
time or times but, except when necessary or appropriate
to comply with applicable law or the rules or policies
of the Securities and Exchange Commission or any other
regulatory authority, only by mailing to each
participant appropriate written notice at least 30 days
prior to the effective date thereof. The amendment
shall be deemed to be accepted by each participant
unless, prior to the effective date thereof, the Plan
Agent receives written notice of the termination of the
participant's account under the Plan. Any such
amendment may include an appointment by the Plan Agent,
in its place and stead, of a successor Plan Agent under
these terms and conditions, with full power and
authority to perform all or any acts to be performed by
the Plan Agent under these terms and conditions.
10. Applicable Law. These terms and conditions shall
be governed by the laws of the State of Maryland.
<PAGE>
Exhibit B
Annual Fee $16.00 per shareholder account
Minimum annual fees of $25,500
Plus reasonable Out-of-Pocket Expenses, including but not limited to:
Telephone - toll-free lines Proxies
Postage Retention of records (with prior approval)
Insurance Microfilm/fiche of records
Programming (with prior approval) Special reports
Stationery/envelopes ACH fees
Mailing
ACH Shareholder Services
$125.00 per month per fund group
$ .50 per account setup and/or change
$ .35 per item for EFT payments and purchases
$3.50 per correction, reversal, return item
Additional Shareholder Fees (Billed to Investors)
Any outgoing wire transfer $12.00 / wire
Return check fee $25.00 / item
Stop payment $20.00 / stop
(liquidation, dividend, draft check)
Research fee $ 5.00 / item
(for requested items of the second calendar
year [or previous] to the request)
(cap at $25.00)
Exhibit (k.2)
FORM OF
FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
___ day of ____, 1999, by and between LCM Internet
Growth Fund, Inc., a Maryland corporation (hereinafter
referred to as the "Company") and Firstar Mutual Fund
Services, LLC, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as
"FMFS").
WHEREAS, the Company is a closed-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, FMFS is a trust company and, among other
things, is in the business of providing fund
administration services for the benefit of its
customers; and
WHEREAS, the Company desires to retain FMFS to act
as Administrator for the Company.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and FMFS agree as
follows:
1. Appointment of Administrator
The Company hereby appoints FMFS as Administrator of
the Company on the terms and conditions set forth
in this Agreement, and FMFS hereby accepts such
appointment and agrees to perform the services and
duties set forth in this Agreement in
consideration of the compensation provided for
herein.
2. Duties and Responsibilities of FMFS
A. General Management
1. Act as liaison among all Company service providers
2. Coordinate board communication by:
a. Assisting Company counsel in establishing meeting
agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director
and officer liability coverage, and
making the necessary SEC filings
relating thereto
e. Preparing minutes of meetings of the board and
shareholders
<PAGE>
3. Audits
a. Prepare appropriate schedules and assist independent auditors
b. Provide information to SEC and facilitate audit process
c. Provide office facilities
4. Assist in overall operations of the Company
5. Pay Company expenses upon written authorization from the Company
B. Compliance
1. Regulatory Compliance
a. Monitor compliance with 1940 Act requirements,
including:
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of Ethics for the disinterested directors of the Company
b. Monitor Company's compliance with the policies and
investment limitations of the Company as
set forth in its Prospectus and
Statement of Additional Information
2. SEC Registration and Reporting
a. Assist Company counsel in updating Prospectus and
Statement of Additional Information (if
necessary) and in preparing proxy statements
b. Prepare annual and semiannual reports
c. Coordinate the printing of publicly disseminated
Prospectuses and reports
d. File fidelity bond under Rule 17g-1
e. File shareholder reports under Rule 30b2-1
f. Prepare and file reports and other documents required
by U.S. stock exchanges on which the Company's shares
are listed
3. IRS Compliance
a. Monitor Company's status as a regulated investment
company under Subchapter M through
review of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including excise
tax distributions)
<PAGE>
C. Financial Reporting
1. Provide financial data required by Company's
Prospectus and Statement of Additional
Information
2. Prepare financial reports for shareholders, the
board, the SEC, U.S. stock exchanges on
which the Company's shares are listed and
independent auditors
3. Supervise the Company's custodian and accountants in
the maintenance of the Company's general
ledger and in the preparation of the
Company's financial statements, including
oversight of expense accruals and payments,
of the determination of net asset value of
the Company's net assets and of the
Company's shares, and of the declaration
and payment of dividends and other
distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate
federal and state tax returns including
Forms 1120/8610 with any necessary
schedules
2. Prepare state income breakdowns where relevant
3. File Form 1099 Miscellaneous for payments to
directors and other service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate
shareholders
3. Compensation
The Company, agrees to pay FMFS for the performance of
the duties listed in this Agreement, the fees and
reasonable out-of-pocket expenses as set forth in
the attached Exhibit A.
These fees may be changed from time to time, subject to
mutual written Agreement between the Company and FMFS.
The Company agrees to pay all fees and reimbursable
expenses within ten (10) business days following
the receipt of the billing notice.
4. Performance of Service; Limitation of Liability
A. FMFS shall exercise reasonable care in the
performance of its duties under this Agreement.
FMFS shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Company in connection with matters to which this
Agreement relates, including losses resulting from
mechanical breakdowns or the failure of
<PAGE>
communication or power supplies beyond FMFS's
control, except a loss resulting from FMFS's
refusal or failure to comply with the terms of
this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance
of its duties under this Agreement.
Notwithstanding any other provision of this
Agreement, the Company shall indemnify and hold
harmless FMFS from and against any and all claims,
demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which FMFS may sustain or incur
or which may be asserted against FMFS by any
person arising out of any action taken or omitted
to be taken by it in performing the services
hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or
oral instruction provided to FMFS by any duly
authorized officer of the Company, such duly
authorized officer to be included in a list of
authorized officers furnished to FMFS and as
amended from time to time in writing by resolution
of the Board of Directors of the Company.
FMFS shall indemnify and hold the Company
harmless from and against any and all claims,
demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which the Company may sustain or
incur or which may be asserted against the Company
by any person arising out of any action taken or
omitted to be taken by FMFS as a result of FMFS's
refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or
willful misconduct.
In the event of a mechanical breakdown or failure
of communication or power supplies beyond its
control, FMFS shall take all reasonable steps to
minimize service interruptions for any period that
such interruption continues beyond FMFS's control.
FMFS will make every reasonable effort to restore
any lost or damaged data and correct any errors
resulting from such a breakdown at the expense of
FMFS. FMFS agrees that it shall, at all times,
have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency
use of electrical data processing equipment to the
extent appropriate equipment is available.
Representatives of the Company shall be entitled
to inspect FMFS's premises and operating
capabilities at any time during regular business
hours of FMFS, upon reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right
to reprocess and correct administrative errors at its
own expense.
B. In order that the indemnification provisions
contained in this section shall apply, it is
understood that if in any case the indemnitor may
be asked to indemnify or hold the indemnitee
harmless, the indemnitor shall be fully and
promptly advised of all pertinent facts concerning
the situation in question, and it is further
understood that the indemnitee will use all
reasonable care to notify the indemnitor promptly
concerning any situation which presents or appears
likely to present the probability of a claim for
indemnification. The indemnitor shall have the
option to defend the indemnitee against any claim
which may be the subject of this indemnification.
In the event that the indemnitor so elects, it
will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the
claim, and the indemnitee shall in such situation
initiate
<PAGE>
no further legal or other expenses for
which it shall seek indemnification under this
section. The indemnitee shall in no case confess
any claim or make any compromise in any case in
which the indemnitor will be asked to indemnify
the indemnitee except with the indemnitor's prior
written consent.
5. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors,
officers, and employees to treat confidentially
and as proprietary information of the Company all
records and other information relative to the
Company and prior, present, or potential
shareholders of the Company (and clients of said
shareholders), and not to use such records and
information for any purpose other than the
performance of its responsibilities and duties
hereunder, except after prior notification to and
approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be
withheld where FMFS may be exposed to civil or
criminal contempt proceedings for failure to
comply, when requested to divulge such information
by duly constituted authorities, or when so
requested by the Company.
6. Data Necessary to Perform Services
The Company or its agent, which may be FMFS, shall
furnish to FMFS the data necessary to perform the
services described herein at times and in such
form as mutually agreed upon.
7. Term of Agreement
This Agreement shall become effective as of the date
hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. The Agreement may be
terminated by either party upon giving ninety (90)
days prior written notice to the other party or
such shorter period as is mutually agreed upon by
the parties. However, this Agreement may be
amended by mutual written consent of the parties.
8. Notices
Notices of any kind to be given by either party to the
other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice
to FMFS shall be sent to:
Mr. James C. Tyler
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
<PAGE>
Mr. Barry J. Glasgow
LCM Internet Growth Fund, Inc.
810 W. Washington Blvd.
Chicago, IL 60607
9. Duties in the Event of Termination
In the event that, in connection with termination, a
successor to any of FMFS's duties or
responsibilities hereunder is designated by the
Company by written notice to FMFS, FMFS will
promptly, upon such termination and at the expense
of the Company, transfer to such successor all
relevant books, records, correspondence, and other
data established or maintained by FMFS under this
Agreement in a form reasonably acceptable to the
Company (if such form differs from the form in
which FMFS has maintained, the Company shall pay
any expenses associated with transferring the data
to such form), and will cooperate in the transfer
of such duties and responsibilities, including
provision for assistance from FMFS's personnel in
the establishment of books, records, and other
data by such successor.
10. Governing Law
This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with
the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and
Exchange Commission thereunder.
11. Records
FMFS shall keep records relating to the services to be
performed hereunder, in the form and manner, and
for such period as it may deem advisable and is
agreeable to the Company but not inconsistent with
the rules and regulations of appropriate
government authorities, in particular, Section 31
of the 1940 Act and the rules thereunder. FMFS
agrees that all such records prepared or
maintained by FMFS relating to the services to be
performed by FMFS hereunder are the property of
the Company and will be preserved, maintained, and
made available in accordance with such section and
rules of the 1940 Act and will be promptly
surrendered to the Company on and in accordance
with its request.
12. Year 2000 Representation
FMFS hereby represents and warrants that it does
not anticipate that the "Year 2000 Problem" will
have a material impact on its ability to perform
its duties under this Agreement. The "Year 2000
Problem" refers to the inability of computer
systems to properly process and calculate date-
related information and data from and after
January 1, 2000.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by a duly authorized officer
on one or more counterparts as of the day and year
first written above.
LCM INTERNET GROWTH FUND, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By:______________________________ By:________________________________
Attest:__________________________ Attest:____________________________
<PAGE>
Fund Administration and Compliance
Annual Fee Schedule - Domestic Funds
Exhibit A
Annual fee based upon average net fund assets
6 basis points on the first $200 million
5 basis points on the next $500 million
3 basis points on the balance
Minimum annual fee: $35,000
Plus reasonable out-of-pocket expense reimbursements,including
but not limited to:
Postage
Programming
Stationery
Proxies
Retention of records
Special reports
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of directors meetings
Auditing and legal expenses
Fees and reasonable out-of-pocket expense reimbursements are billed monthly
Exhibit (k.3)
FORM OF
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
___ day of ____, 1999, by and between LCM Internet
Growth Fund, Inc., a Maryland corporation (hereinafter
referred to as the "Company") and Firstar Mutual Fund
Services, LLC, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as
"FMFS").
WHEREAS, the Company is a closed-end management
investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, FMFS is in the business of providing,
among other things, mutual fund accounting services to
investment companies; and
WHEREAS, the Company desires to retain FMFS to
provide accounting services to the Company.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and FMFS agree as
follows:
1. Appointment of Fund Accountant
The Company hereby appoints FMFS as Fund
Accountant of the Company on the terms and conditions
set forth in this Agreement, and FMFS hereby accepts
such appointment and agrees to perform the services and
duties set forth in this Agreement in consideration of
the compensation provided for herein.
2. Duties and Responsibilities of FMFS
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date+1 basis
using security trade information communicated
from the investment manager.
(2) For each valuation date, obtain prices from a
pricing source approved by the Board of
Directors of the Company and apply those
prices to the portfolio positions. For those
securities where market quotations are not
readily available, the Board of Directors of
the Company shall approve, in good faith, the
method for determining the fair value for such
securities.
(3) Identify interest and dividend accrual balances as
of each valuation date and calculate gross
earnings on investments for the accounting
period.
<PAGE>
(4) Determine gain/loss on security sales and identify
them as, short-term or long-term; account for
periodic distributions of gains or losses to
shareholders and maintain undistributed gain
or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense
accrual amounts as directed by the Company as
to methodology, rate or dollar amount.
(2) Record payments for Company expenses upon receipt
of written authorization from the Company.
(3) Account for Company expenditures and maintain
expense accrual balances at the level of
accounting detail, as agreed upon by FMFS and
the Company.
(4) Provide expense accrual and payment reporting.
C. Valuation and Financial Reporting Services:
(1) Account for Company share purchases, sales,
exchanges, transfers, dividend reinvestments,
and other Company share activity as reported
by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the
Company.
(3) Determine net investment income (earnings) for the
Company as of each valuation date. Account
for periodic distributions of earnings to
shareholders and maintain undistributed net
investment income balances as of each
valuation date.
(4) Maintain a general ledger and other accounts,
books, and financial records for the Company
in the form as agreed upon.
(5) Determine the net asset value of the Company
according to the accounting policies and
procedures set forth in the Company's current
Prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts
reflective of Company operations at such time
as required by the nature and characteristics
of the Company.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as
agreed upon from time to time.
(8) Prepare monthly reports which document the
adequacy of accounting detail to support month-
end ledger balances.
<PAGE>
D. Tax Accounting Services:
(1) Maintain accounting records for the investment
portfolio of the Company to support the tax
reporting required for IRS-defined regulated
investment companies.
(2) Maintain tax lot detail for the investment
portfolio.
(3) Calculate taxable gain/loss on security sales
using the tax lot relief method designated by
the Company.
(4) Provide the necessary financial information to
support the taxable components of income and
capital gains distributions to the transfer
agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the
Company's accounting records available to the
Company and its advisers, the Securities and
Exchange Commission, and the outside auditors.
(2) Maintain accounting records according to the 1940
Act and regulations provided thereunder.
3. Pricing of Securities
For each valuation date, obtain prices from a
pricing source selected by FMFS but approved by the
Company's Board of Directors and apply those prices to
the portfolio positions of the Company. For those
securities where market quotations are not readily
available, the Company's Board of Directors shall
approve, in good faith, the method for determining the
fair value for such securities.
If the Company desires to provide a price which
varies from the pricing source, the Company shall
promptly notify and supply FMFS with the valuation of
any such security on each valuation date. All pricing
changes made by the Company will be in writing and must
specifically identify the securities to be changed by
CUSIP, name of security, new price or rate to be
applied, and, if applicable, the time period for which
the new price(s) is/are effective.
4. Changes in Accounting Procedures
Any resolution passed by the Board of Directors of
the Company that affects accounting practices and
procedures under this Agreement shall be effective upon
written receipt and acceptance by the FMFS.
<PAGE>
5. Changes in Equipment, Systems, Service, Etc.
FMFS reserves the right to make changes from time
to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules
and equipment, so long as such changes do not adversely
affect the service provided to the Company under this
Agreement.
6. Compensation
FMFS shall be compensated for providing the
services set forth in this Agreement in accordance with
the Fee Schedule attached hereto as Exhibit A and as
mutually agreed upon and amended from time to time.
The Company agrees to pay all fees and reimbursable
expenses within ten (10) business days following the
receipt of the billing notice.
7. Performance of Service; Limitation of Liability
A. FMFS shall exercise reasonable care in the
performance of its duties under this Agreement.
FMFS shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Company in connection with matters to which this
Agreement relates, including losses resulting from
mechanical breakdowns or the failure of
communication or power supplies beyond FMFS's
control, except a loss resulting from FMFS's
refusal or failure to comply with the terms of
this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance
of its duties under this Agreement.
Notwithstanding any other provision of this
Agreement, the Company shall indemnify and hold
harmless FMFS from and against any and all claims,
demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which FMFS may sustain or incur
or which may be asserted against FMFS by any
person arising out of any action taken or omitted
to be taken by it in performing the services
hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or
oral instruction provided to FMFS by any duly
authorized officer of the Company, such duly
authorized officer to be included in a list of
authorized officers furnished to FMFS and as
amended from time to time in writing by resolution
of the Board of Directors of the Company.
FMFS shall indemnify and hold the Company
harmless from and against any and all claims,
demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which the Company may sustain or
incur or which may be asserted against the Company
by any person arising out of any action taken or
omitted to be taken by FMFS as a result of FMFS's
refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or
willful misconduct.
In the event of a mechanical breakdown or
failure of communication or power supplies beyond
its control, FMFS shall take all reasonable steps
to minimize service interruptions for any period
that such interruption continues beyond FMFS's
control. FMFS will make every reasonable effort
to restore any lost or damaged data and correct
any errors resulting from such a breakdown at the
expense of FMFS. FMFS agrees that it
<PAGE>
shall, at
all times, have reasonable contingency plans with
appropriate parties, making reasonable provision
for emergency use of electrical data processing
equipment to the extent appropriate equipment is
available. Representatives of the Company shall
be entitled to inspect FMFS's premises and
operating capabilities at any time during regular
business hours of FMFS, upon reasonable notice to
FMFS.
Regardless of the above, FMFS reserves the
right to reprocess and correct administrative
errors at its own expense.
B. In order that the indemnification
provisions contained in this section shall apply,
it is understood that if in any case the
indemnitor may be asked to indemnify or hold the
indemnitee harmless, the indemnitor shall be fully
and promptly advised of all pertinent facts
concerning the situation in question, and it is
further understood that the indemnitee will use
all reasonable care to notify the indemnitor
promptly concerning any situation which presents
or appears likely to present the probability of a
claim for indemnification. The indemnitor shall
have the option to defend the indemnitee against
any claim which may be the subject of this
indemnification. In the event that the indemnitor
so elects, it will so notify the indemnitee and
thereupon the indemnitor shall take over complete
defense of the claim, and the indemnitee shall in
such situation initiate no further legal or other
expenses for which it shall seek indemnification
under this section. Indemnitee shall in no case
confess any claim or make any compromise in any
case in which the indemnitor will be asked to
indemnify the indemnitee except with the
indemnitor's prior written consent.
8. No Agency Relationship
Nothing herein contained shall be deemed to
authorize or empower FMFS to act as agent for the other
party to this Agreement, or to conduct business in the
name of, or for the account of the other party to this
Agreement.
9. Records
FMFS shall keep records relating to the services to
be performed hereunder, in the form and manner, and for
such period as it may deem advisable and is agreeable
to the Company but not inconsistent with the rules and
regulations of appropriate government authorities, in
particular, Section 31 of the 1940 Act, and the rules
thereunder. FMFS agrees that all such records prepared
or maintained by FMFS relating to the services to be
performed by FMFS hereunder are the property of the
Company and will be preserved, maintained, and made
available in accordance with such section and rules of
the 1940 Act and will be promptly surrendered to the
Company on and in accordance with its request.
<PAGE>
10. Data Necessary to Perform Services
The Company or its agent, which may be FMFS, shall
furnish to FMFS the data necessary to perform the
services described herein at such times and in such
form as mutually agreed upon. If FMFS is also acting
in another capacity for the Company, nothing herein
shall be deemed to relieve FMFS of any of its
obligations in such capacity.
11. Notification of Error
The Company will notify FMFS of any balancing or
control error caused by FMFS within three (3) business
days after receipt of any reports rendered by FMFS to
the Company, or within three (3) business days after
discovery of any error or omission not covered in the
balancing or control procedure, or within three (3)
business days of receiving notice from any shareholder.
12. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors,
officers, and employees to treat confidentially and as
proprietary information of the Company all records and
other information relative to the Company and prior,
present, or potential shareholders of the Company (and
clients of said shareholders), and not to use such
records and information for any purpose other than the
performance of its responsibilities and duties
hereunder, except after prior notification to and
approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be
withheld where FMFS may be exposed to civil or criminal
contempt proceedings for failure to comply, when
requested to divulge such information by duly
constituted authorities, or when so requested by the
Company.
13. Term of Agreement
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. This Agreement may be
terminated by either party upon giving ninety (90) days
prior written notice to the other party or such shorter
period as is mutually agreed upon by the parties.
However, this Agreement may be replaced or modified by
a subsequent agreement between the parties.
14. Notices
Notices of any kind to be given by either party to
the other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice to
FMFS shall be sent to:
Mr. James C. Tyler
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
<PAGE>
and notice to the Company shall be sent to:
Mr. Barry J. Glasgow
LCM Internet Growth Fund, Inc.
810 W. Washington Blvd.
Chicago, IL 60607
15. Duties in the Event of Termination
In the event that in connection with termination, a
successor to any of FMFS's duties or responsibilities
hereunder is designated by the Company by written
notice to FMFS, FMFS will promptly, upon such
termination and at the expense of the Company transfer
to such successor all relevant books, records,
correspondence and other data established or maintained
by FMFS under this Agreement in a form reasonably
acceptable to the Company (if such form differs from
the form in which FMFS has maintained the same, the
Company shall pay any expenses associated with
transferring the same to such form), and will cooperate
in the transfer of such duties and responsibilities,
including provision for assistance from FMFS's
personnel in the establishment of books, records and
other data by such successor.
16. Governing Law
This Agreement shall be construed in accordance
with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the SEC thereunder.
17. Year 2000 Representation
FMFS hereby represents and warrants that it does
not anticipate that the "Year 2000 Problem" will have a
material impact on its ability to perform its duties
under this Agreement. The "Year 2000 Problem" refers
to the inability of computer systems to properly
process and calculate date-related information and data
from and after January 1, 2000.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer on one or more counterparts as of the day and
year first written above.
LCM INTERNET GROWTH FUND, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By:______________________________ By:________________________________
Attest:__________________________ Attest:____________________________
<PAGE>
Fund Accounting Services
Annual Fee Schedule
Exhibit A
Domestic Equity Funds
$22,000 for the first $40 million
1 basis point on the next $200 million
.5 basis point on average net assets exceeding $240 million
Plus reasonable out-of-pocket expenses, including pricing service:
Domestic and Canadian Equities $.15
Options $.15
Corp/Gov/Agency Bonds $.50
CMO's $.80
International Equities and Bonds $.50
Municipal Bonds $.80
Money Market Instruments $.80
Fees and reasonable out-of-pocket expenses are billed to the Company monthly
Exhibit (k.4)
FORM OF
FULFILLMENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
___ day of _____, 1999, by and between LCM Internet
Growth Fund, Inc., a corporation organized under the
laws of the State of Maryland (hereinafter referred to
as the "Company"), LCM Capital Management, Inc., a
corporation organized under the laws of the State of
Illinois (hereinafter referred to as the "Adviser"),
LaSalle St. Securities, Inc., a corporation organized
under the laws of the State of _______ (hereinafter
referred to as "LaSalle") and Firstar Mutual Fund
Services, LLC, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as
"FMFS").
WHEREAS, the Company is a closed-end management
investment company which is registered under the
Investment Company Act of 1940, as amended;
WHERAS, the Adviser is a registered investment
adviser under the Investment Advisers Act of 1940, as
amended;
WHEREAS, the Adviser serves as investment adviser
to the Company;
WHEREAS, LaSalle is a registered broker-dealer
under the Securities Exchange Act of 1934, as amended,
and serves as principal underwriter of Company shares;
WHEREAS, FMFS provides fulfillment services to
mutual funds, and
WHEREAS, the Company, the Adviser and LaSalle
desire to retain FMFS to provide fulfillment services
to the Company.
NOW, THEREFORE, the parties agree as follows:
1. Duties and Responsibilities of FMFS
1. Answer all prospective shareholder calls concerning the Company.
2. Send all available Company material requested by the
prospect within 24 hours from time of call.
3. Receive and update all Company fulfillment literature so that
the most current information is sent and quoted.
4. Provide 24 hour answering service to record prospect
calls made after hours (7 p.m. to 8 a.m. CT).
5. Maintain and store Company fulfillment inventory.
6. Send periodic fulfillment reports to the Company as
agreed upon between the parties.
<PAGE>
2. Duties and Responsibilities of the Company
1. Provide Company fulfillment literature updates to FMFS as necessary.
2. Coordinate with LaSalle the filing with the NASD,
SEC and State Regulatory Agencies, as
appropriate, all fulfillment literature that
the Company requests FMFS send to prospective shareholders.
3. Supply FMFS with sufficient inventory of
fulfillment materials as requested from time to time by FMFS.
4. Provide FMFS with any sundry information about the
Company in order to answer prospect questions.
3. Indemnification
The Company agrees to indemnify FMFS from any liability
arising out of the distribution of fulfillment
literature, which has not been approved by the
appropriate Federal and State Regulatory Agencies.
FMFS agrees to indemnify the Company from any liability
arising from the improper use of fulfillment literature
during the performance of duties and responsibilities
identified in this agreement. FMFS will be liable for
bad faith, negligence or willful misconduct on its part
in its duties under this Agreement.
4. Compensation
The Adviser agrees to compensate FMFS for the services
performed under this Agreement in accordance with the
attached Exhibit A. All invoices shall be paid within
ten days of receipt.
5. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors,
officers, and employees to treat confidentially and as
proprietary information of the Company all records and
other information relative to the Company and prior,
present, or potential shareholders of the Company (and
clients of said shareholders), and not to use such
records and information for any purpose other than the
performance of its responsibilities and duties
hereunder, except after prior notification to and
approval in writing by the Company which approval shall
not be unreasonably withheld and may not be withheld
where FMFS may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to
divulge such information by duly constituted
authorities, or when so requested by the Company.
6. Termination
This Agreement may be terminated by either party upon
10 days written notice.
7. No Agency Relationship
Nothing herein contained shall be deemed to authorize
or empower FMFS to act as agent for the Company, or to
conduct business in the name of, or for the account of
the Company.
<PAGE>
8. Data Necessary to Perform Services
The Company or its agent, which may be FMFS, shall
furnish to FMFS the data necessary to perform the
services described herein at such times and in such
form as mutually agreed upon. If FMFS is also acting
in another capacity for the Company, nothing herein
shall be deemed to relieve FMFS of any of its
obligations in such capacity.
9. Notification of Error
The Company will notify FMFS of any error caused by
FMFS the later of: within three (3) business days
after receipt of any reports rendered by FMFS to the
Company; within three (3) business days after discovery
of any error or omission not covered in the balancing
or control procedure; or within three (3) business days
of receiving notice from any shareholder.
10.Year 2000 Representation
FMFS hereby represents and warrants that it does not
anticipate that the "Year 2000 Problem" will have a
material impact on its ability to perform its duties
under this Agreement. The "Year 2000 Problem" refers
to the inability of computer systems to properly
process and calculate date-related information and data
from and after January 1, 2000.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer on one or more counterparts as of the day and
year first written above.
LCM INTERNET GROWTH FUND, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By:______________________________ By:________________________________
Attest:__________________________ Attest:____________________________
LCM CAPITAL MANAGEMENT, INC. LA SALLE ST. SECURITIES, INC.
By:______________________________ By:________________________________
Attest:__________________________ Attest:____________________________
<PAGE>
Literature Fulfillment Services
Annual Fee Schedule
Exhibit A
Base Service $100 per month
Customer Service
State registration compliance edits
Literature database
Record prospect request and profile
Prospect servicing 8:00 am to 7:00 pm CT
Recording and transcription of requests
received off-hours
Periodic reporting of leads to client
Service Fee: $.99 / minute
Assembly and Distribution of Literature Requests
Generate customized prospect letters
Assembly and insertion of literature items
Inventory tracking
Inventory storage, reporting
Periodic reporting of leads by state, items
requested, market source
Service Fee: $.45 / lead - insertion of up to 4 items/lead
$.15 / additional inserts
Fees and reasonable out-of-pocket expenses are billed to Company monthly
Exhibit l
GODFREY & KAHN, S.C.
Attorneys at Law
780 North Water Street
Milwaukee, Wisconsin 53202
Telephone: 414-273-3500
Facsimile: 414-273-5198
______ __, 1999
LCM Internet Growth Fund, Inc.
810 West Washington Boulevard
Chicago, Illinois 60607
Ladies and Gentlemen:
We have acted as your counsel in connection with
the preparation of a Registration Statement on Form N-2
(Registration Nos. 333-74407; 811-9261) (the
"Registration Statement") relating to the sale by you
of up to _________ shares of LCM Internet Growth Fund,
Inc. (the "Company") common stock, $0.01 par value (the
"Shares"), in the manner set forth in the Registration
Statement (and the Prospectuses included therein).
We have examined: (a) the Registration Statement
(and the Prospectuses included therein), (b) the
Company's Articles of Incorporation and By-Laws, (c)
certain resolutions of the Company's Board of Directors
and (d) such other proceedings, documents and records
as we have deemed necessary to enable us to render this
opinion.
Based upon the foregoing, we are of the opinion
that the Shares, when sold as contemplated in the
Registration Statement, will be duly authorized and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an
exhibit to the Registration Statement. In giving this
consent, however, we do not admit that we are "experts"
within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
GODFREY & KAHN, S.C.
Exhibit p
______ ___, 1999
LCM Internet Growth Fund, Inc.
810 West Washington Blvd.
Chicago, IL 60607
Ladies and Gentlemen:
The undersigned (the "Purchaser") hereby
subscribes to 10,583 shares of common stock, $0.01 par
value per share (the "Shares"), of LCM Internet Growth
Fund, Inc. (the "Company") at a price of $9.45 per
share payable by delivery of $100,000 in cash to the
Company. The Purchaser is acquiring the shares solely
for its own account and not with a view to their
distribution within the meaning of the Securities Act
of 1933, as amended (the "Securities Act").
The Purchaser represents that its present and
anticipated financial position permits it to purchase
the Shares and to hold such Shares indefinitely for
investment purposes.
The Purchaser acknowledges that:
(a) the Shares are not registered under the Securities
Act or under any applicable state securities law and
must be held indefinitely unless they are subsequently
so registered or unless an exemption from such
registration is available; and
(b) each certificate representing the Shares will bear
the following legend, or one similar thereto, drawing
attention to the restrictions on its transferability:
"The securities evidenced by this certificate
have not been registered under the Securities
Act of 1933 or under any applicable state
securities law, and may not be transferred
except upon delivery to the Company of an
opinion of counsel
<PAGE>
satisfactory in form and substance to it that
such transfer will not violate the Securities
Act of 1933, as amended, or any applicable
state securities law."
PURCHASER:__________________________
By:_________________________________
Name:
Title:
Receipt Acknowledged:
LCM INTERNET GROWTH FUND, INC.
By:_______________________________
Name:
Title:
Date: ______ __, 1999
