<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Amendment No. 1
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE ROCKIES FUND, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Neuman, Drennen & Stone, LLC, 1507 Pine Street, Boulder, Colorado 80302
------------------------------------------------------------------------
(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:____
2) Aggregate number of securities to which transaction applies:_______
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):_____
4) Proposed maximum aggregate value of transaction:___________________
5) Total fee paid:____________________________________________________
[ ] Fee Paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:____________________________________________
2) Form, Schedule or Registration Statement No.: ____________________
3) Filing Party:______________________________________________________
4) Date Filed:________________________________________________________
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 26, 1998
The Annual Meeting of Shareholders of The Rockies Fund, Inc. ("the Fund" or
the "Company") will be held at 4465 Northpark Drive, Colorado Springs,
Colorado 80907 on June 26, 1998 at 10:00 o'clock a.m. Mountain Daylight Time
for the purpose of considering and voting upon the following:
1. To elect three (3) Directors to serve until the next Annual Meeting of
Shareholders or until their successors have been duly elected and
qualified.
2. To ratify and approve the selection by the Board of Directors of the
firm of GELFOND HOCHSTADT PANGBURN & CO., a Professional Corporation,
as the independent certified public accountant for the Fund for the
fiscal year ending December 31, 1998.
3. Any other matters properly brought before said meeting or any
adjournment thereof.
Information relating to the above matters is set forth in the accompanying
Proxy Statement. Only holders of outstanding shares of the Company's common
stock of record at the close of business on May 6, 1998 will be entitled to
vote at the meeting or any adjournment thereof.
A copy of the Company's Annual Report to Shareholders, including financial
statements for the year ended December 31, 1997, will be mailed to
shareholders concurrently with the mailing of the Proxy Statement.
Shareholders are cordially invited to attend the meeting in person.
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, IT WOULD BE
APPRECIATED IF YOU WOULD PROMPTLY FILL IN, SIGN AND DATE THE ENCLOSED PROXY
STATEMENT AND RETURN IT IN THE ENCLOSED STAMPED ENVELOPE. Any proxy may be
revoked at any time before it is voted by written notice mailed or delivered
to the Secretary, by receipt or a proxy properly signed and dated subsequent
to an earlier proxy, and by revocation of a written proxy by request in person
at the Annual Meeting of Shareholders. If not so revoked, the shares
represented by the proxy will be voted in accordance with your instruction on
the proxy form.
THE ROCKIES FUND, INC.
-----------------------------------------------
Windy D. Haddad, Secretary<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
PROXY SOLICITED ON BEHALF OF THE COMPANY
The undersigned hereby constitutes and appoints Stephen G. Calandrella or
Clifford C. Thygesen (SEE NOTE BELOW) or either of them acting in the absence
of the other, with full power of substitution the true and lawful attorneys or
attorney and proxies of the undersigned to attend the Annual Meeting of the
Shareholders of The Rockies Fund, Inc. (the "Fund") to be held at the
principal offices of the Fund, 4465 Northpark Drive, Colorado Springs,
Colorado, 80907, on June 26, 1998 at 10:00 o'clock a.m. Mountain Daylight
Time, or any adjournment or adjournments thereof, and vote all the shares of
the Fund standing in the name of the undersigned with all the powers the
undersigned would possess if present at said meeting.
(1) FOR __________ WITHHOLD AUTHORITY __________
To elect all of the nominees listed below:
Stephen G. Calandrella, Charles Powell and Clifford C. Thygesen
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name below)
-------------------------------------------------------------
(2) FOR __________ AGAINST __________ ABSTAIN __________
The ratification and approval of the selection by the Board of Directors
of the firm of GELFOND HOCHSTADT PANGBURN & CO., a Professional
Corporation, as the independent accountants for the Fund for the fiscal
year ending December 31, 1998.
(3) Upon such other matters as may properly come before the meeting.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEM 1 AND ITEM 2 AND
IN THE DISCRETION OF THE PERSON HOLDING THE PROXY FOR ANY OTHER BUSINESS.
(NOTE: Should you desire to appoint a proxy other than the management
designees named above, strike out the names of the management designees and
insert the name of your proxy in the space provided above. Should you do
this, give this proxy card to the person you appoint instead of returning the
proxy card to the Company.)
(PLEASE DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.)
Receipt is acknowledged of Notice of Annual Meeting and Proxy Statement for
the meeting.
Date , 1998
----------------------------------------------------
---------------------------------------------------------------
Name (please type or print)
---------------------------------------------------------------
Signature
---------------------------------------------------------------
Signature, if held jointly
Please sign exactly as name appears to the left. When shares are held by
joint tenants, both should sign. When signing as executor, administrator,
attorney, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporation name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
4465 Northpark Drive
Colorado Springs, Colorado 80907
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to the Shareholders of THE ROCKIES
FUND, INC. (respectively the "Shareholders" and the "Fund") in connection with
the solicitation by the Fund of proxies to be used at the Annual Meeting of
Shareholders and at any adjournments thereof (the "Meeting"), at the time,
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders and at any adjournment thereof. When the accompanying
proxy is properly executed and returned, the shares of common stock it
represents will be voted at the Meeting and, where a choice has been specified
on a proxy, will be voted in accordance with such specification. If no choice
is specified on a proxy, the shares it represents will be voted FOR the
election of three (3) Directors of the Fund, FOR the ratification of GELFOND
HOCHSTADT PANGBURN & CO., a Professional Corporation, as the Fund's
independent certified public accountant for the fiscal year ending December
31, 1998, and according to the judgment of the persons named in the enclosed
proxies as to any other action which may properly come before the Meeting or
any adjournment thereof.
In the event the Meeting is, for any reason, adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the Meeting. At the adjourned meeting, any business
may be transacted which might have been transacted at the original Meeting.
ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY WRITTEN NOTICE
MAILED OR DELIVERED TO THE SECRETARY, BY RECEIPT OF A PROXY PROPERLY SIGNED
AND DATED SUBSEQUENT TO AN EARLIER PROXY, AND BY REVOCATION OF A WRITTEN PROXY
BY REQUEST IN PERSON AT THE ANNUAL MEETING OF SHAREHOLDERS. IF NOT SO
REVOKED, THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS ON THE PROXY FORM.
This Statement is being mailed on or about May 23, 1998, to Shareholders
eligible to vote at the Meeting. Concurrently with the mailing of this
Statement, the Fund is furnishing to Shareholders its Annual Report for the
fiscal year ended December 31, 1997.
The Fund is bearing all costs of soliciting proxies, and expressly
reserves the right to solicit proxies otherwise than by mail. The
solicitation of proxies by mail may be followed by telephone, telegraph or
other personal solicitations of certain Shareholders and brokers by one or
more of the Directors or by Officers or employees of the Fund. The Fund may
request banks and brokers or other similar agents or fiduciaries for the
voting instructions of beneficial owners and reimburse the expenses incurred
by such agents or fiduciaries in obtaining such instructions. As of the date
of this mailing, however, the Fund has not made any contracts or arrangements
for such solicitations, hence it cannot identify any parties or estimate the
cost of such solicitation.
Only Shareholders of record as of the close of business on May 6, 1998
(the "Record Date"), will be entitled to vote at the Meeting. Representation
of a majority of the Fund's shares of common stock outstanding on such date,
either in person or by proxy, constitutes a quorum for the Meeting. When a
quorum is present, the vote by the holders of a majority of the shares
represented at the Meeting shall decide the proposals to be voted upon at the
Meeting. As of the Record Date, the Fund had outstanding 640,256 shares of
common stock ("Shares"), with each Share being entitled to one vote.
1. SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
-----------------------------------------------------------
The following table sets forth as of March 31, 1998, certain information
with respect to the ownership of the Fund's common stock by (i) each of the
Fund's directors individually, (ii) shareholders known by the Fund to own
beneficially more than five percent (5%) of the outstanding common stock of
the Fund, and (iii) all officers and directors as a group. Each beneficial
owner of the Fund's common stock listed below has sole investment and voting
power of the shares that he beneficially owns, except as noted.
<TABLE>
<CAPTION>
Name and Amount and Nature
Title of Address of of Beneficial Percent
Class Beneficial Owner Ownership of Class (1)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Common D.A Davidson & Co. (2) 236,475 36.9%
Stock 8 Third Street, North
Great Falls, Montana 59401
" Stephen G. Calandrella (3) 234,000 36.5%
4465 Northpark Drive
Colorado Springs,
Colorado 80907
" Charles C. Powell -0- 0%
4475 Walnut, Suite 2-D
Boulder, Colorado 80301
" Clifford C. Thygesen 2,000 0.3%
4893 Idylwild Trail
Boulder, Colorado 80301
" Barbara A. Hamstad 1,500 0.2%
4465 Northpark Drive
Colorado Springs,
Colorado 80907
" Windy D. Haddad 1,500 0.2%
4465 Northpark Drive
Colorado Springs,
Colorado 80907
" All Officers and
Directors as a
Group (5 Persons) 239,000 37.3%
- ------------------------
</TABLE>
1. Beneficial Owners listed have sole voting and investment power with
respect to the shares unless otherwise indicated.
2. Voting and investment power with respect to securities held by D.A.
Davidson & Company is exercised by its Board of Directors.
3. Includes 12,500 shares of common stock held by Aztec Capital Corp. of
which Mr. Calandrella is officer, director and majority shareholder.
2. ELECTION OF DIRECTORS
---------------------
The Directors voted to nominate three (3) Directors for election to hold
office until the next Annual Meeting of Shareholders and until their
successors are elected and qualified. Each of the following nominees has
consented to be nominated to serve as a Director of the Fund. All of the
nominees are currently Directors of the Fund.
The Fund's Articles of Incorporation expressly prohibit cumulative
voting. Therefore, the holders of a majority of the Fund's shares could elect
all of the Directors. It is expected that the proxies received by the
Directors' nominees will be voted, except to the extent that authority is
withheld on any proxy as to all or one or more individuals, to elect as
Directors the following nominees, whose principal occupations during the past
five (5) years, directorships and certain other affiliations and information
are set forth below:
A. Information Concerning Nominees
-------------------------------
The following table sets forth certain information about the
nominees for election as directors:
<TABLE>
<CAPTION>
Shares
Beneficially Principal Occupation During Name,
Age and Office Owned as of Past Five Years and Current
with Fund March 31, 1998 Affiliations
- ---------------------------------------------------------------------------
<S> <C> <C>
Stephen G. 234,000 Mr. Calandrella has been President
Calandrella, 37 and a Director of The Rockies
President and Director Fund, Inc. since February, 1991,
since February, and Chief Executive Officer since
1991, and CEO since January 30, 1994. Mr. Calandrella
January, 1994 has previously served as a
- ---------------- Director of several public
*Mr. Calandrella is companies. Mr. Calandrella
considered by the Fund currently serves as President and
to be a person who is member of the Board of Directors
an "interested person" of Global Casinos, Inc., a
(as defined in the 1940 publicly-held company engaged in
Act) of the Fund the ownership and operation of
because he is an domestic and international casinos
officer of the Fund. and limited stakes gaming
properties; American Educational
Products, a NASDAQ listed
manufacturer of secondary
educational materials; and
Guardian Technologies, a NASDAQ
listed manufacturer of ballistic
protective equipment. Mr.
Calandrella has also engaged in
financing and consulting
activities for development stage
companies, which consist of
advising public and private
companies on capital formation
methods, enhancing shareholder
valuations, mergers, acquisitions
and corporate restructurings, as
well as arranging for bridge loans
and equity purchases.
Charles Powell, 44 -0- shares Mr. Powell is currently Senior
Director since 0% Vice President of Sales of Aurum
February, 1991 Software, a wholly owned
subsidiary of Baan Company. From
1992 to 1996, Mr. Powell was Vice-
President of Finance for KaPre
Software. From March 1992 to June
1993, Mr. Powell was CEO of
Generation 5 Technologies, Inc.
From January 1989 to March 1992,
he was Director of International
Operations at J.D. Edwards &
Company, a software company that
develops and distributes general
business application financial
software. Mr. Powell graduated
from the University of Colorado
with a Bachelor of Science degree
in accounting and finance in 1976
and he received his license as a
Certified Public Accountant in
1976. Mr. Powell currently serves
as a Director for The Rockies
Fund, and International Nursing.
Clifford C.
Thygesen, 62 2,000 shares Mr. Thygesen has been a director
Director since 0.3% of the Fund since February, 1991.
February 1991 Mr. Thygesen has also been a
Director of American Educational
Products, Inc. since 1986, and
President since January, 1996.
American Education Products is a
publicly traded company involved
in the manufacture and
distribution of educational
products, with principal offices
in Boulder, Colorado. Mr.
Thygesen is also a current
Director of Wall Street Racing
Stables, a publicly-traded company
involved in the ownership, racing
and breeding of thoroughbred
horses. Mr. Thygesen is also a
partner in two land development
firms located on Colorado Springs
and Fleming, Colorado. He
received his B.S. degree in
Industrial Administration from the
University of Illinois in 1961.
</TABLE>
B. Meetings and Committees of the Board of Directors
-------------------------------------------------
i. Meetings of the Board of Directors
----------------------------------
During the fiscal year ended December 31, 1997, the Company's
Board of Directors held four (4) meetings which were attended, either in
person or by telephone, by 100% of the Board members. Each incumbent director
participated in each action of the Board of Directors. Each director of the
Fund who is not also an officer is paid the sum of $1,000 for each Board
meeting attended in person by such director. All directors are reimbursed for
expenses associated with attendance at Board of Directors meetings of the
Fund. Other than the foregoing, no director receives any additional
compensation or remuneration as a member of the Fund's Board of Directors.
ii. Appraisal and Review
--------------------
While no formal Appraisal or Review Committee exists, the Board
has established Appraisal and Review procedures to facilitate the Board's
review of all transactions with respect to execution price and brokerage
commissions, to determine if the Fund is receiving "the best execution." The
Board is also responsible for developing and implementing appropriate methods
of evaluation for securities that are not publicly-traded or are otherwise
subject to restrictions upon transfer. Evaluations for such securities are
determined in good faith by the Board of Directors. Finally, the Board has
established and implemented procedures to evaluate and make recommendations
with respect to all investment opportunities presented to the Fund.
iii. Committees
----------
There are no standing audit, compensation or nominating
committees of the Board. The foregoing notwithstanding, Barbara A. Hamstad,
the Fund's Chief Accounting Officer, has been charged with the responsibility
of maintaining all journals and ledgers which the Investment Company Act of
1940, as amended, and the rules and regulations promulgated thereunder,
require the Fund to maintain.
C. Other Executive Officers
------------------------
BARBARA A. HAMSTAD, Mrs. Hamstad has served as Internal Accountant
for The Rockies Fund, Inc. since September of 1993 and as Chief Accounting
Officer and Treasurer since September, 1996. Mrs. Hamstad also serves as
Secretary and Director for Marco Foods, Inc., a small public shell actively
trading in the stock market. Prior to Mrs. Hamstad's accounting positions she
worked as a Vendor Cost Analyst for Raytheon in Santa Barbara, California.
From January, 1989, through June, 1992, she analyzed vendor cost proposals for
subcontracted components, conducted on-site evaluations of subcontractors, and
developed price recommendations based on detailed analyses of cost structure.
From June 1987 through August 1988, she worked as a Financial Assistant at IDS
Financial Services in San Luis Opisbo, California. Mrs. Hamstad graduated
from California Polytechnic State University, San Luis Obispo, CA, with a
bachelor's degree in Business Administration, concentrating in Financial
Management.
WINDY D. HADDAD, has worked for The Rockies Fund since August 9,
1993, and has served as Chief Administrative Officer since October 1, 1995,
and as Corporate Secretary since September 1, 1996. Ms. Haddad currently
serves as Corporate Secretary of Global Casinos, Inc., a NASDAQ listed gaming
company, and as Director of Lone Oak Vineyards, Inc., a 40-acre vineyard
property in Napa Valley, California. Ms. Haddad has also served as Vice
President, Secretary and a Director of Land Resources, Inc., a real estate
development company with operations in Flemming, Colorado. Ms. Haddad
graduated from Colorado College in 1993, earning her Bachelor of Arts degree
in Economics.
D. Legal Proceedings
-----------------
During the beginning of 1996, the Fund received requests for
information from the United States Securities and Exchange Commission ("SEC")
related to an investigation begun by the SEC during 1994 into various matters,
including the administrative and record keeping practices of the Fund, its
securities trading activities and those of its officers and directors. In
September 1996, the Company was notified by the Commission's Staff that it
intends to request that the Commission commence an administrative proceeding
against the Company and its directors based upon certain transactions in
securities formerly included in the Company's securities portfolio. The
Company has responded to the Commission with a written submission which sets
forth why there exists no basis in fact or law for such a proceeding. It is
impossible to predict whether the Staff will recommend a proceeding against
the Company or any of its directors, and if such a recommendation is made,
whether the Commission will authorize the institution of a proceeding. There
can be no assurance of the outcome of this matter or the ultimate effect on
the Fund's financial position.
Other than the foregoing, during the last five (5) years no director
or officer of the Company has:
(1) had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer
either at the time of the bankruptcy or within two (2) years
prior to that time;
(2) been convicted in a criminal proceeding or subject to a pending
criminal proceeding;
(3) been subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily, enjoining,
barring, suspending, or otherwise limiting his involvement in
any type of business, securities or banking activities; or
(4) been found by a Court of competent jurisdiction in a civil
action, the Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgement has not been reversed,
suspended, or vacated.
Mr. Calandrella serves as President of Global Casinos, Inc., a
portfolio and affiliated company. During 1995, Global Casinos, Inc. caused
one of its wholly-owned subsidiaries, Casinos USA, Inc. to file a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code. In December 1996, the United States Bankruptcy Court for the District
of Colorado entered an order confirming a Plan of Reorganization for Casinos
USA, Inc.
E. Transactions With Management and Others
---------------------------------------
Notes payable to related parties at December 31, 1997 include
$6,500 payable to a related party of the Fund's President, which note is
unsecured, carries interest at the rate of twelve percent (12%) per annum, and
is due upon demand.
As a result of the Fund's investment during 1997 and/or position on
the entity's Board of Directors, the Fund would, at various times during
fiscal 1997, be considered to have been an affiliate of American Educational
Products, Inc., Guardian Technologies, Inc., Global Casinos, Inc., Optimax
Industries, Inc., Cova Technologies, Kinetiks.com, Neco Land Resources, LLC,
Bear Star, LLC, Lone Oak Vineyards, and Marco Foods, Inc.
On October 1, 1995, Mr. Calandrella, the Fund's President and
Director, was elected to serve as President of Global Casinos, Inc., a
portfolio company and affiliate of the Fund. In consideration of his services
as Interim President of Global Casinos, Inc., Mr. Calandrella received 9,000
shares in 1996 and has also been granted Incentive Stock Options under the
Global Casinos, Inc. Stock Incentive Plan, exercisable to purchase, in the
aggregate, 15,000 shares of common stock at an exercise price of $5.00 per
share, all of which are fully vested.
Mr. Calandrella also serves as a member of the Board of Directors of
Global Casinos, Inc. In consideration of his services as a director of Global
Casinos, Inc., Mr. Calandrella has been granted Non-Qualified Stock Options
exercisable to purchase, in the aggregate, an additional 15,000 shares of
common stock at an exercise price of $5.00 per share, of which 5,000 Non-
Qualified Stock Options are fully vested.
There exists no arrangement or agreement whereby the Fund has any
direct or indirect beneficial interest or pecuniary interest in any of the
securities or other compensation issued to Mr. Calandrella in consideration of
his services as an executive officer or director of Global Casinos, Inc.
F. Compliance With Section 16(a) of the Exchange Act
-------------------------------------------------
Under the Securities Laws of the United States, the Fund's
Directors, its Executive (and certain other) officers, and any persons holding
more than ten percent (10%) of the Fund's common stock are required to report
their ownership of the Fund's common stock and any changes in that ownership
to the Securities and Exchange Commission and the NASDAQ stock market.
Specific due dates for these reports have been established and the Fund is
required to report in this Report any failure to file. Based upon information
provided to the Company, all of these filing requirements were satisfied by
its Officers and Directors and ten percent holders as of December 31, 1997.
G. Director and Executive Compensation
-----------------------------------
The following tables and discussion set forth information with
respect to all plan and non-plan compensation awarded to, earned by or paid to
all directors of the Fund, and for each of the three (3) highest-paid
executive officers that have aggregate compensation from the Fund for the most
recently completed fiscal year in excess of $60,000.00.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
COMPENSATION TABLE
- ---------------------------------------------------------------------------
Pension or Total
Retirement Compensation
Benefits Estimated From Fund
Accrued Annual and Fund
Name of Aggregate As Part Benefits Complex
Person, Compen- of Fund Upon Paid to
Position sation Expenses Retirement Director
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen G. $48,000 -0- -0- $48,000
Calandrella,
President and
Director
Charles C. $3,000 -0- -0- $3,000
Powell,
Director
Clifford C. $3,000 -0- -0- $3,000
Thygesen,
Director
- ---------------------------------------------------------------------------
</TABLE>
No other executive officer of the Fund received compensation during
the fiscal year ended December 31, 1997 in excess of $60,000.
All officers and employees of the Company are eligible to
participate in the Company's group health and dental insurance plan. The
Company has a Salary Deferred Simplified Employee Pension Plan (SAR-SEP)
adopted in September, 1994. There has been no employer contribution made to
the Plan since inception, nor does the Company incur any administrative fees
associated with this Plan. The Company currently has no written employment
agreements with any of its executive officers. The Company has not
implemented any stock option, stock bonus, incentive stock option or other
similar plans; although the Company may consider the implementation of such
plans in the future. Effective October 1, 1995, the Fund executed and entered
into a three (3) year employment agreement with Ms. Windy Haddad pursuant to
which Ms. Haddad serves as the Fund's Chief Administrative Officer and was
paid an annual salary of $35,000 for fiscal 1997.
H. Voting Requirement
------------------
Election of the nominees as directors requires the affirmative vote
of a majority of the Fund's outstanding voting securities as defined in the
1940 Act (the lesser of (i) 67% of the shares represented at a meeting at
which more than 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE NOMINEES AS DIRECTORS
3. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR
1997
---------------------------------------------------------------------
On July 1, 1996, the client-auditor relationship between the Company and
its principal accountants, KPMG Peat Marwick LLP, ceased. The cessation of
the relationship was the result of the resignation by KPMG Peat Marwick LLP
and was effective July 1, 1996. The cessation of the relationship was
approved by the Company's Board of Directors. The reports of KPMG Peat
Marwick LLP related to the consolidated financial statements of the Company
for the fiscal years ended December 31, 1994 and 1995, did not contain any
adverse opinion or disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope, or accounting principles. In connection with the
audits of the Company's financial statements for each of the fiscal years
ended December 31, 1994 and 1995, and for the period from January 1, 1996
through July 1, 1996, there were no disagreements with KPMG Peat Marwick LLP
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of KPMG Peat Marwick LLP, would have caused KPMG Peat Marwick LLP
to make reference to the matter in their report.
A majority of the members of the Board of Directors who were not
interested persons of the Fund appointed GELFOND HOCHSTADT PANGBURN & CO., a
Professional Corporation, to replace KPMG Peat Marwick LLP, and to serve as
the Fund's independent certified public accountants. This engagement was
effective July 30, 1996. Prior to its engagement as the Company's principal
independent accountant, GELFOND HOCHSTADT PANGBURN & CO., a Professional
Corporation, had not been consulted by the Company either with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements or on any matter which was the subject of
any prior disagreement between the Company and its previous certifying
accountant.
A majority of the members of the Board of Directors who are not
interested persons of the Fund have appointed GELFOND HOCHSTADT PANGBURN &
CO., a Professional Corporation, to serve as the Fund's independent certified
public accountants for fiscal year 1998. The affirmative vote of the holders
of at least a majority of the shares of the Fund's common stock present and
voting, in person or by proxy, at the Meeting, is required to ratify and
confirm this appointment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE IN FAVOR OF THE APPOINTMENT.
If such appointment is not approved by the shareholders, it would be
unlawful for the Fund to file with the United States Securities and Exchange
Commission any financial statement signed or certified by GELFOND HOCHSTADT
PANGBURN & CO., a Professional Corporation, and new independent certified
public accountants would have to be appointed and the appointment submitted to
shareholders for approval. A representative of GELFOND HOCHSTADT PANGBURN &
CO., a Professional Corporation, is not expected to be present at the Meeting.
However, should a representative of the accounting firm attend the Meeting, he
will be given the opportunity to make a statement if he so desires, and would
be available to respond to appropriate questions.
4. STATEMENT OF RISKS OF INVESTMENTS IN BUSINESS DEVELOPMENT COMPANIES
-------------------------------------------------------------------
A. Regulation.
-----------
The Fund has elected to be treated as a Business Development Company
("BDC") under the Small Business Investment Incentive Act of 1980 (the "1980
provisions"), which modifies the Investment Company Act of 1940 (the "1940
Act"). Although the 1980 provisions exempt BDC's from registration under the
1940 Act and relieve such companies from compliance with many of the
provisions of the 1940 Act, the 1980 provisions impose on BDC's greater
restrictions on permitted types of investments. Moreover, the applicable
provisions of the 1940 Act continue to impose numerous restrictions on the
activities of the Fund, including restrictions on the nature of its
investments. There can be no assurance that the 1980 provisions will be
interpreted or administratively implemented in a manner consistent with the
Fund's investment objectives and manner of operation. In the event that the
Fund determines that it can not operate effectively as a BDC, the Fund may at
some future date decide to withdraw its election to be treated as a BDC.
Should the Fund seek to withdraw such election, it must obtain the approval of
stockholders who represent a majority of the Fund's outstanding stock (as
defined in the 1940 Act).
B. Transactions with affiliates; potential conflict of interest.
-------------------------------------------------------------
The 1940 Act restricts transactions between the Fund and "affiliated
persons" (as defined in the 1940 Act) including, among others, the Fund's
officers, directors, principals, stockholders and employees, and any
affiliates of such affiliated persons. In many cases, the 1940 Act prohibits
transactions between the Fund and such persons unless the Fund first applies
for and obtains an exemptive order from the Commission. Delays and costs
involved in obtaining necessary approvals may decrease the profitability of
such transactions or make it impracticable or impossible to consummate such
transactions. The Fund's Board of Directors has implemented procedures
designed to regulate investment activity by affiliates in conflict with or in
conjunction with the Fund's activities, including adopting a Code of Ethics
containing provisions designed to prevent employees from engaging in acts
prohibited by Rule 17j-i under the 1940 Act. However, circumstances could
develop which would require Commission approval in advance of proposed
transactions by the Fund or its affiliates with Eligible Portfolio Companies
("Portfolio Company(ies)") or their affiliates. Depending upon the extent of
management's influence and control with respect to such Portfolio Companies
the selection of the affiliates of management to perform various services for
Portfolio Companies may not be a disinterested decision, and the terms and
conditions for the performance of such services and the amount in terms of
compensation to be received therefor may not be determined in arm's length
negotiations. In addition, officers or directors of the Fund or its
affiliates may serve as directors of or act as underwriter or placement agent
or as a consultant to certain Portfolio Companies and, in connection
therewith, earn consulting fees, finder's fees and underwriter's or placement
agent's commissions and other fees and commissions, which may be paid in the
form of cash, securities or other forms of consideration. Moreover, while
members of management are obligated to use their best efforts to provide the
Fund with a continuing and suitable investment program consistent with its
investment objectives and policies, subject to any applicable legal
restrictions, members of management are not required to present to the Fund
any particular investment opportunity which has come to their attention, even
if such opportunity is within the investment objectives and policies of the
Fund. As a result, certain conflicts of interest may exist between the Fund
and its officers and directors (as in the area of corporate opportunities)
which can only be properly resolved through exercise by the officers and
directors of such judgment as is consistent with their fiduciary duties to the
Fund. The Fund's Portfolio Companies may also enter into certain financial
arrangements with the Fund and or its affiliates subject to the appropriate
regulatory guidelines or approvals as required. Additionally, the Fund may
from time to time co-invest in Portfolio Companies with an officer and/or
director of the Fund or with an affiliate of such an officer or director,
subject to the appropriate regulatory guidelines or approvals as required.
Because of their potentially varying investment objectives or other factors,
conflicts could arise between the Fund and its affiliates relating to such co-
investments, which can only be resolved through the exercise by the Fund's
officers and directors of such judgment as is consistent with their fiduciary
duties to the Fund. Even with the proper exercise of such judgment, however,
there can be no assurance that potential conflicts will be resolved in a
manner favorable to the Fund.
C. High risk investments.
----------------------
The Fund currently makes investments in small public and private
companies, some of which are in the early stages of development with little or
no operating history, or more seasoned companies that operate at losses or
which experience substantial fluctuations in operating results. These
companies may also need substantial capital to support expansion or to achieve
or maintain a competitive position. Such companies may face intense
competition, including competition from companies with greater financial
resources, more extensive research and development, manufacturing, marketing
and service capabilities, and a larger number of qualified managerial and
technical personnel. Such companies may have insufficient cash flow to
service their debt obligations, including bridge loans made by the Fund and
may not have the resources to pay principal and/or interest on such loans in
the event of failure to consummate a proposed public offering or inability to
obtain subsequent financing. Additionally, such investments will generally be
unsecured. Moreover, the Fund may take significant positions in companies in
rapidly changing high-technology fields or intensely regulated industries.
Such companies may face additional risks of product and technological
obsolescence or rapidly changing regulatory environments which could adversely
affect such company's prospects, over which the Fund will have no control. As
a result, no assurance can be given that the Fund's investments will not
result in substantial or complete losses.
D. Bridge financing.
-----------------
Although, with respect to its bridge financing activities the Fund
has, and intends to continue, to invest primarily in Portfolio Companies which
have entered into a letter of intent relating to a public offering, there is
substantial risk that such offerings will not be consummated. Portfolio
Companies may be unable to repay bridge loans made by the Fund in the event
that a contemplated public offering of securities by any such Portfolio
Company or other transaction involving such company is not consummated.
Additionally, the Fund may invest in companies that have not entered into
letters of intent relating to future public offerings and such transactions
may not be pursued.
E. Limited liquidity of portfolio investments.
-------------------------------------------
Currently, a significant portion of the equity participations
obtained in bridge financings and securities purchased in other types of
private placements in which the Fund invests consist of securities that are
subject to restrictions on sale. Restricted securities can not be sold
publicly without prior agreement with the issuer to register these securities
under the Securities Act of 1933, as amended, (the "1933 Act"), or by selling
such securities under Rule 144 or other rules under the 1933 Act which permit
only limited sales under specified conditions. Since it is anticipated that
the Fund will continue to invest in emerging growth companies underwritten by
relatively small underwriters and which may have a limited number of market
makers, the Fund's ability to sell its equity participations and other
securities purchased in private placements may be limited by, and subject to,
the lack or limited nature of a trading market for the securities of Portfolio
Companies and the volatility of the stock market as a whole. Such limitations
could prevent or delay any sale of the Fund's securities or reduce the amount
of proceeds that might otherwise by realized therefrom. Accordingly, the Fund
is substantially dependent upon the ability of the Portfolio Company to
implement a plan which, within a reasonable period of time, would facilitate a
trading market for its securities. Restricted securities generally sell at a
price lower than similar securities that are not subject to restrictions on
sale. When restricted securities are sold to the public, the Fund, under
certain circumstances, may be deemed an "underwriter" or a controlling person
with respect thereto for the purposes of the 1933 Act, and be subject to
liabilities as such under that Act.
F. Possible need for additional investments in Portfolio Companies.
----------------------------------------------------------------
Following its initial investment, the Fund may make additional debt
and equity investments in Portfolio Companies ("Additional Investment(s)") in
order to increase its investment in a successful Portfolio Fund, to exercise
warrants, options, or convertible securities that were acquired in the
original financing, to preserve the Fund's proportionate ownership when a
subsequent financing is planned or to protect the Fund's initial investment
when such Portfolio Companies' performance does not meet expectations. The
Fund will have the discretion to make any Additional Investments as it
determines subject to the availability of capital resources. The failure to
make such Additional Investments may, in certain circumstances, jeopardize the
continued viability of a Portfolio Company and the Fund's initial investment.
The necessity of making Additional Investments may limit the number of
companies in which the Fund has the ability to invest. There can be no
assurance that the Fund will have sufficient funds to make necessary
Additional Investments or that, following an Additional Investment, the Fund
will not lose the entire amount of its initial and Additional Investment. The
Fund has no established criteria in deciding whether to make an Additional
Investment except that management will exercise its business judgment and
apply similar criteria as it does with initial investments. In addition, it
is possible that there may be circumstances under which an Additional
Investment would be considered an affiliated transaction requiring prior
Commission approval. The approval process could be time consuming and costly
and there can be no assurance that such approval would be obtained.
G. Dependence on public offering market.
-------------------------------------
The investment strategy of the Fund is based in large part upon the
state of the securities markets in general and the market for public financing
in particular. Changes in these securities markets and general economic
conditions, including economic downturns, fluctuations in interest rates, the
availability of credit, inflation and other factors, may affect the value of
investments of the Fund. The market for public offerings is cyclical in
nature and, accordingly, there can be no assurance that the securities markets
will, at any point in time, be receptive to public offerings, particularly
those of emerging growth companies. Any adverse change in the market for
public offerings could have a material adverse effect on the Fund and could
severely limit the Fund's ability to realize its investment objective.
H. Competition for investments.
----------------------------
The Fund has and expects to continue to encounter competition in its
efforts to locate attractive opportunities for the investment of its capital
from other entities and individuals having similar investment objectives. The
primary competition for desirable investments comes from investment companies,
investment partnerships and wealthy individuals. Some of the competing
entities and individuals have investment managers or advisors with
significantly greater experience, resources and managerial capabilities then
the Fund and are therefore in a better position than the Fund to obtain access
to attractive investments. To the extent that the Fund can compete for such
investments it may only be able to do so on less favorable terms than those
obtained by larger more established investors.
I. Developing companies.
---------------------
Although the Fund believes that developing companies may have
significant potential for price appreciation, higher market and credit risks
are often associated with these companies. Developing companies generally
have limited product lines, markets, market share and financial resources, or
generally are dependent on a smaller inexperienced management team. In
addition, stocks of developing companies may trade less frequently and in more
limited volume and be subject to greater and more abrupt price swings than
stocks of larger companies. There can be no assurance that any of the
developing companies in which the Fund may invest will realize any anticipated
price appreciation.
J. Turnaround and restructuring companies.
---------------------------------------
The Fund has, and may continue, to invest a portion of its assets in
companies involved in "turnaround" or other "restructuring" situations that
management believes, with the infusion of additional working capital and/or
strengthening of the management team, will realize significant price
appreciation and rapid growth in profits. To the extent that these companies
are unable to successfully turnaround or restructure, the Fund's investment is
likely not to appreciate in value and may be lost in its entirety.
K. Dependence on management.
-------------------------
The Fund will be substantially dependent upon the services of Mr.
Calandrella, the Fund's President and Portfolio Manager, who has assumed
principal responsibility for the Fund's investments. The Fund is, therefore,
dependent upon the ability of Mr. Calandrella to select what he believes are
appropriate investments for the Fund and upon the personal contacts and
relationships of Mr. Calandrella and other members of the Fund's management in
order for such investment opportunities to be offered to the Fund. The Fund
has not entered into employment, consulting or non-competition agreements with
Mr. Calandrella or any of its other officers. Therefore, there can be no
assurance that such officers will remain associated with the Fund in any
particular capacity or that they will not, in the future, compete, directly or
indirectly, with the Fund. In the event that any officers of the Fund cease
to be associated with the Fund, the Fund will seek to find a qualified person
or persons to fill their positions. There can, however, be no assurance that
such individuals can be engaged by the Fund. The loss of services of any of
the Fund's officers could have an adverse effect on the Fund.
L. Reduced Access to, and Limited Participation in, Management.
------------------------------------------------------------
As a result of the decision by the Board of Directors to amend the
Fund's Investment Objective, increasing the geographic region within which it
conducts its investment activities from the Rocky Mountain region of the
United States to the entire geographic region of the United States, the Fund's
ability to actively participate in the management of those Portfolio Companies
located outside the Rocky Mountain region is greatly reduced. As a
consequence, the Fund must rely upon the expertise and abilities of existing
management teams, which, in many instances, are smaller and lack hands on
management experience.
OTHER MATTERS
The Board of Directors knows of no business to be brought before the
Meeting other than as set forth above. If, however, any other matters
properly come before the Meeting, it is the intention of the person's named in
the enclosed proxy form to vote such proxies on such matters in accordance
with their best judgment.
Whether or not you expect to be present at the meeting, please sign and
return the enclosed proxy promptly. Your vote is important. If you wish to
attend the Meeting and wish to vote in person, you may withdraw your proxy.
THE ROCKIES FUND, INC.
-----------------------------------------------
Windy D. Haddad, Secretary
Shareholder Proposals For The 1999 Annual Meeting
--------------------------------------------------
If any shareholder wishes to present a proposal for inclusion in the
proxy materials to be mailed by the Fund with respect to the 1999 Annual
Meeting of Shareholders, the proposal must be presented to the Fund's
management prior to January 31, 1999, along with proof of common stock
ownership in the Fund.
