<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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE ROCKIES FUND, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Neuman & Drennen, 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.
5373 North Union Boulevard, Suite 100
Colorado Springs, Colorado 80918
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" or the
"Company") 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 as follows:
- FOR the election of three (3) Directors of the Fund,
- FOR the ratification of Gerald R. Hendricks & Co., P.C., a
Professional Corporation, as the Fund's independent certified
public accountant for the fiscal year ending December 31, 1999,
- FOR the ratification and approval of the proposal of the Board of
Directors to withdraw the Company's election to be regulated as a
Business Development Company under the Investment Company Act of
1940 (the "1940 Act"),
- FOR the proposal of the Board of Directors that, subject to the
Company withdrawing its election to be regulated as a Business
Development Company under the 1940 Act, the Fund elect to cease
to be a reporting company under Section 13 of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"),
- FOR the proposal and recommendation of the Board of Directors
that subject to the Company ceasing to be subject to regulation
under the 1940 Act and ceasing to be a reporting company under
the Exchange Act, the Company adopt and implement a program to
repurchase its outstanding securities from time to time at prices
not more than the net asset value per share of such securities at
the time of such repurchase, subject to the discretion and
determination of the Company's Board of Directors, 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 October 27, 1999, 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, 1998.
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 October 25,
1999 (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. As of the Record Date, the Fund had outstanding
640,580 shares of common stock ("Shares"), with each Share being entitled
to one vote. Election of the nominees as directors and the approval of
each proposal which will be presented at the Meeting 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 the Meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares). Abstentions
and broker non-votes will have the legal effect of a vote against the
election of each director nominee and against each proposal to which the
abstention or broker non-vote applies. Mr. Stephen Calandrella and D.A.
Davidson & Co., the Fund's two largest shareholders, exercise voting power
with respect to 74.3% of the Fund's outstanding shares of common stock and
have indicated that they intend to vote all of their shares in favor of
each director nominee and in favor of each proposal. As a result, the
presence of a quorum at the Meeting, the election of each director nominee
and the approval of each proposal is assured.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 30, 1999, 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>
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership(1) of Class
- -------- ------------------- ----------------------- --------
<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) 239,666 37.43%
5373 North Union Boulevard,
Suite 100
Colorado Springs, Colorado 80918
" 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%
5373 North Union Boulevard,
Suite 100
Colorado Springs, Colorado 80918
" Gina Garcia-Shaw -0- 0%
5373 North Union Boulevard,
Suite 100
Colorado Springs, Colorado 80918
" All Officers and
Directors as a
Group (5 Persons) 244,666 37.93%
</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.
PROPOSAL 1: 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 Principal Occupation
Name, Age and Office Beneficially Past Five Years
with Fund Owned and Current Affiliations
- -------------------- ----------- ------------------------
<S> <C> <C>
Stephen G. Calandrella 239,666 Mr. Calandrella has been President and
38, President and Director 37.43% a Director of The Rockies Fund, Inc.
since February 1991 and since February, 1991, and Chief
CEO since January 1994 Executive Officer since January 30,
1994. Mr. Calandrella has previously
served as a Director of several public
companies. Mr. Calandrella currently
serves as President and a member of
the Board of Directors of Global
Casinos, Inc., a publicly-held company
engaged in the ownership and operation
of domestic and international casinos
and limited stakes gaming properties;
and American Educational Products, a
NASDAQ listed manufacturer of
secondary educational materials. 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.
* Mr. Calandrella is considered by the Fund to be a person who is an
"interested person" (as defined in the 1940 Act) of the Fund because he is
an officer of the Fund.
Charles Powell, 45, -0- Mr. Powell is currently Senior Vice
Director since 0% President of Sales of Aurum Software,
February, 1991 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, 63 2,000 Mr. Thygesen has been a director of
Director since February 0.3% the Fund since February, 1991. Mr.
1991 Thygesen has also been a Director of
American Educational Products, Inc.
since 1986, and President since
January, 1996. American Educational
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, 1998, 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, age 33. 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 seeking investments. 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
Obispo, 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.
Gina Garcia-Shaw age 32. Mrs. Garcia-Shaw joined the Fund on
June 1, 1998, as Chief Administrative Officer and Corporate Secretary.
Prior to her arrival, Mrs. Garcia-Shaw worked for Pikes Peak Regional
Development, a division of the SBA, as Administrative Manager, from April
1996 through April 1998. Her more specific skills included monthly
financial statement preparation and reviewing Business Plans for potential
SBA loans. Mrs. Garcia-Shaw also brings ten years of experience in
banking. October 1988 through April 1996, she was employed by Bank One,
which position began as the Secretary to the Vice President. The last year
of her tenure Mrs. Garcia-Shaw became an Indirect Lender approving car
loans for the local dealership. March 1986 through October 1988, she
worked as a Loan Operations Assistant for Colorado National Bank, formerly
known as Central Bank.
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. On June 1, 1998, in response to a recommendation of the
Commission's staff, the Commission brought an administrative proceeding
against the Company and its individual directors in which it alleges
several violations of federal securities laws, including the failure of the
Fund to comply with certain record-keeping practices required under the
1940 Act and allegations of manipulative practices in connection with
certain trading of the Fund's portfolio securities. The SEC is seeking
relief in the form of civil fines as well as the disqualification of the
Fund's directors from serving as control persons of companies regulated
under the 1940 Act. The Company and its Directors have vigorously defended
the administrative proceeding which was heard before an administrative law
judge in November 1998. As of the date of this Proxy Statement, no
determination has been made on the outcome of this proceeding. There can
be no assurance of the outcome of this matter or its ultimate effect on
either the Fund's financial position or its Directors.
Other than the foregoing, during the last five (5) years no
director or officer of the Company has:
(i) 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;
(ii) been convicted in a criminal proceeding or subject to a
pending criminal proceeding;
(iii) 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
(iv) 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, 1998 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 1998 and/or position
on the entity's Board of Directors, the Fund would, at various times during
fiscal 1998, 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 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, 1998.
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
Retirement Total
Benefits Compensation
Accrued Estimated from Fund
Name of as Part Annual Paid to
Person, Aggregate of Fund Benefits upon Director/
Position Compensation Expenses Retirement Officer
- -------- ------------ -------- ------------- ---------
<S> <C> <C> <C> <C>
Stephen G. $48,000 -0- -0- $48,000
Calandrella,
President and
Director
Charles C. Powell, $3,000 -0- -0- $3,000
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, 1998 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.
The Fund has no written employment agreements with Mr. Calandrella or
any other employee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE NOMINEES AS DIRECTORS
PROPOSAL 2. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR
FISCAL YEAR 1999
On February 4, 1999, the client-auditor relationship between the
Company and its principal accountants, Gelfond Hochstadt Pangburn & Co.,
ceased effective February 4, 1999. The report of Gelfond Hochstadt
Pangburn & Co. related to the consolidated financial statements of the
Company for the fiscal years ended December 31, 1997 and 1996 contains a
reference to the inherent uncertainty of valuation of certain securities
contained in the financial statements. With the exception of the
foregoing, the reports of Gelfond Hochstadt Pangburn & Co. related to the
consolidated financial statements of the Company for the fiscal years ended
December 31, 1997 and 1996 did not contain any adverse opinion or
disclaimer of opinion, or was 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, 1997 and 1996, there were no disagreements with Gelfond
Hochstadt Pangburn & Co. on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of Gelfond Hochstadt Pangburn &
Co., would have caused Gelfond Hochstadt Pangburn & Co. to make reference
to the matter in their report.
The Company has retained the accounting firm of Gerald R. Hendricks &
Co., P.C. to serve as the Company's independent accountant to audit the
Company's financial statements. This engagement was effective February 4,
1999. Prior to its engagement as the Company's independent accountant,
Gerald R. Hendricks & Co., P.C. had not been consulted by the Company
either with respect to the application of accounting principles to a
specific transaction or the type of audit opinion that might be rendered on
the Company's financial statements or on any matter that was the subject of
any prior disagreement between the Company and its previous certifying
accountant.
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 Gerald
R. Hendricks & Co., P.C., 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 Gerald R.
Hendricks & Co., P.C. 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.
PROPOSAL 3. WITHDRAWAL OF BUSINESS DEVELOPMENT COMPANY ELECTION
The Board of Directors of the Company has proposed and approved, and
recommends that the Shareholders consider and approve, a withdrawal of the
Company's election to be regulated as a Business Development Company under
the 1940 Act (the "Election Withdrawal"). The purpose of the Election
Withdrawal is to have the Company cease to be subject to regulation under
the 1940 Act altogether, as described below.
By having elected to be treated as a Business Development Company
("BDC"), the Company was exempt from having to register as an investment
company under the 1940 Act and was and is also relieved form compliance
with many of the provisions of the 1940 Act applicable to investment
companies. However, as BDC, the Fund suffers under greater restrictions on
permitted types of investments than registered investment companies.
Subject to the approval of the Fund's Shareholders, if the Fund
withdraws its election to be treated as a BDC but still would be an
"investment company" within the meaning of the 1940 Act, the Fund would
have to register as an investment company unless it could rely upon an
exemption from the registration requirements of the 1940 Act. Inasmuch as
the Fund believes that it can rely upon the exemption contained in Section
3(c)(1) of the 1940 Act by virtue of it having fewer than one hundred
shareholders, the Fund is recommending that the shareholders approve its
withdrawal of its election to be treated as a BDC.
A. Reasons for Election Withdrawal
-------------------------------
Since its inception, the Fund has been a BDC and has pursued a policy
of investing in small business concerns in conformity with the requirements
imposed upon BDC's. If the Company had not made an election to be treated
as a BDC, the Company would qualify as an "investment company" subject to
regulation under the 1940, which establishes a comprehensive regulatory
framework governing numerous aspects of the operation of investment
companies and their affiliates. The Company is also a "closed-end"
investment company in that it does not redeem its shares at the election of
a shareholder and does not continuously offer its shares for sale to the
public.
Management has experienced certain disadvantages operating the Fund in
compliance with the 1940 Act. Among other disadvantages, the Fund's
ability to operate effectively and grow has been hindered by the provisions
of the 1940 Act which restrict the ability of the Fund to enter into
transactions with "affiliates." In the Fund's industry, an advantageous
method of investing in a portfolio company is for the Fund to participate
in the investment with other investors. The Fund is less able to aid the
portfolio company in finding additional equity and debt investors,
participate in larger investments than it would otherwise be able to make
on its own, and diversity its investments by not having to invest as much
as the portfolio company needs. However, absent an exemptive order from
the Commission, which may be difficult and time-consuming to obtain, a
company subject to the 1940 Act may not utilize this method of raising
capital with its affiliates due to the restrictions in the 1940 Act on an
investment company entering into a transaction in which it is a joint
participant with an affiliate. The Fund believes that these restrictions
have adversely affected the Fund's ability to compete in the small business
investment industry by hindering its investments to raise equity capital,
participate in larger investments and diversity its investments. The
restrictions of the 1940 Act on transactions with affiliates also prohibit,
absent an exemptive order from the Commission, transactions between
portfolio companies. Such restrictions prevent portfolio companies
controlled by the Fund from entering into business relationships among
themselves that could be advantageous to one or more of such portfolio
companies.
In addition, the limitations of the 1940 Act restrict the manner in
which the Fund can provide key executives with long-term capital gain
compensation arrangements that are typical in private, unregulated small
business investment firms which account for the majority of the small
business investment industry.
Moreover, the Fund must incur significant general and administrative
costs in order to comply with the regulations imposed by the 1940 Act.
Management devotes considerable time to issues relating to compliance with
the 1940 Act and the Fund incurs substantial legal and accounting fees with
respect to such matters. The Board of Directors believes that resources
now being expended on 1940 Act compliance matters could be utilized more
productively if devoted to the operation of the Fund's business. The Board
of Directors has determined that the costs of compliance with the 19840 Act
are substantial, especially when compared to the Company's net income, and
that it would therefore be in the financial interests of shareholders to
cease to be regulated under the 1940 Act altogether.
The Board of Directors of the Company has determined that the most
efficacious way to reduce these costs and eliminate the competitive
disadvantages the Company experiences due to the requirements of the 1940
Act would be to withdraw its election to be treated as a BDC. As the Fund
otherwise qualifies as a "investment company" within the meaning of the
1940 Act, upon the withdrawal of its BDC election, the Fund would be
required to register as an investment Company under the 1940 Act unless it
is exempt from those registration requirements.
The Fund currently has fewer than one hundred beneficial owners of its
common stock. Section 3(c)(1) of the 1940 Act excludes from the definition
of an investment company:
"Any issuer whose outstanding securities . . . are
beneficially owned by not more than one hundred persons
and which is not making and does not presently propose
to make a public offering of its securities."
In reliance upon the foregoing provision, the Fund believes that upon
withdrawal of its election as a BDC and the implementation of its election
to cease to be a reporting company under Section 13 of the Exchange Act,
the Fund will be excluded from the definition of an "investment company."
As a result, the fund will be able to operate as a private investment fund
without regulation under the 1940 Act.
B. Risks of Election Withdrawal
----------------------------
The 1940 Act regulates the form, content and frequency of financial
reports to shareholders; requires that the Fund file periodic reports with
the SEC, reports which are designed to disclose compliance with the 1940
Act and to present other financial information; prohibits the Fund from
changing the nature of its business or fundamental investment policies
without the prior approval of its shareholders; regulates the composition
of the Board of Directors by preventing investment bankers and securities
brokers from constituting more than a minority of the directors of the
Fund; limits the number of "interested persons" of the Fund who may be
directors of the Fund and prevents officers, directors or employees of any
one bank from constituting more than a minority of the Fund's directors;
requires any investment management contract to be submitted to the
shareholders for their approval; prohibits certain transactions between the
Fund and affiliated persons, including directors and officers of the Fund
and affiliated companies, unless such transactions are exempt by the
Commission; regulates the capital structure of the Fund by restricting
certain issuances of senior equity and debt securities and restricts the
issuance of stock options, rights and warrants; prohibits pyramiding
investment companies and the cross-ownership of securities; provides for
the custody of securities and bonding of certain employees; prohibits
voting trusts; and requires shareholder ratification of the selection of
accountants.
Upon implementation of the Election Withdrawal and the Company ceasing
to be a reporting company under the Exchange Act, the Fund will no longer
be subject to the foregoing regulations, all of which are designed to
protect the interests of shareholders. Rather, as a private investment
fund, the Fund would be managed at the discretion of its Board of Directors
and executive officers, all of whom will be subject to customary principles
of fiduciary duty and duty of loyalty but no longer subject to the
protective regulations of the 1940 Act.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE FUND'S WITHDRAWAL OF ITS ELECTION TO BE TREATED AS A BUSINESS
DEVELOPMENT COMPANY.
PROPOSAL 4. AN ELECTION TO CEASE TO BE A REPORTING COMPANY.
The Fund is currently a reporting company which files reports with the
SEC under Section 13 of the Exchange Act and whose shares are traded in the
over-the-counter market. An integral part of the Fund's efforts to cease
to be regulated under the 1940 Act requires that the Fund cease to be a
reporting company under Section 13 of the Exchange Act and, as a result,
there cease to exist a public trading market for the Fund's common stock.
If the public trading market for the Fund's common stock were to continue,
the Fund could not be assured that it would continue to be excluded from
the registration requirements of the 1940 Act in reliance upon it having
fewer than one hundred shareholders. As a result, it will be necessary for
the Fund to elect to cease to file reports with the Commission and
otherwise cease making publicly available current information regarding the
Fund in order to assure that trading activity in the Fund's securities in
the over-the-counter market is precluded.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
THAT THE FUND CEASE TO BE A REPORTING COMPANY UNDER
SECTION 13 OF THE EXCHANGE ACT.
PROPOSAL 5. REPURCHASE PROGRAM
The Board of Directors has also determined that from time to time in
the future it may become necessary or desirable to engage in a program to
repurchase a portion of its outstanding securities. As a BDC, the Fund has
been precluded from repurchasing any of its securities in buy-back programs
instituted by its Board of Directors as is commonly done by other public
entities. However, once the Fund has withdrawn its election to be treated
as a BDC and is no longer subject to regulation under the 1940 Act, it will
have the ability to implement one or more repurchase programs at such times
and in such amounts as the Board of Directors may determine.
Moreover, the Board of Directors anticipates that in order to be
assured that it maintains fewer than one hundred shareholders, it may from
time to time be required to redeem one or more shareholder positions in the
event the number of shareholders of the Fund increases as a result of
private transactions in the Fund's common stock or distributions resulting
from the death or dissolution of a shareholder.
While authorization of a stock repurchase program is customarily
within the strict purview of a Board of Directors, the Fund has determined
that in the interest of full and fair disclosure to its shareholders it
will present the stock repurchase program to its shareholders for their
approval.
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.
-----------------------------------
Gina Garcia-Shaw, Secretary
Shareholder Proposals For The 2000 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 2000
Annual Meeting of Shareholders, the proposal must be presented to the
Fund's management prior to January 31, 2000, along with proof of common
stock ownership in the Fund.
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 17, 1999
The Annual Meeting of Shareholders of The Rockies Fund, Inc. ("the Fund" or
the "Company") will be held at 5373 North Union Boulevard, Suite 100,
Colorado Springs, Colorado 80918 on November 17, 1999 at 11:00 o'clock a.m.
Mountain Standard 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 Gerald R. Hendricks & Co., P.C., a Professional
Corporation, as the independent certified public accountant for
the Fund for the fiscal year ending December 31, 1999.
3. To ratify and approve the proposal of the Board of Directors to
withdraw the Company's election to be regulated as a Business
Development Company under the Investment Company Act of 1940.
4. To ratify and approve the proposal of the Board of Directors
that, subject to the Company withdrawing its election to be
regulated as a Business Development Company under the 1940 Act,
the Fund elect to cease to be a reporting company under Section
13 of the Securities and Exchange Act of 1934, as amended.
5. To ratify and approve the proposal and recommendation of the
Board of Directors that subject to the Company ceasing to be
subject to regulation under the 1940 Act and ceasing to be a
reporting company under the Exchange Act, the Company adopt and
implement a program to repurchase its outstanding securities from
time to time at prices not more than the net asset value per
share of such securities at the time of such repurchase, subject
to the discretion and determination of the Company's Board of
Directors, 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.
6. 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 October 25, 1999 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, 1998, 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.
------------------------------------
Gina Garcia-Shaw, 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,
5373 North Union Boulevard, Suite 100, Colorado Springs, Colorado, 80918,
on November 17, 1999 at 11:00 o'clock a.m. Mountain Standard 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.
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 Gerald R. Hendricks & Co., P.C., a
Professional Corporation, as the independent accountants for the
Fund for the fiscal year ending December 31, 1999.
(3) FOR _____________ AGAINST ____________ ABSTAIN ____________
The ratification and approval of the proposal of the Board of
Directors to withdraw the Company's election to be regulated as a
Business Development Company under the Investment Company Act of
1940.
(4) FOR _____________ AGAINST ____________ ABSTAIN ____________
The proposal of the Board of Directors that, subject to the Company
withdrawing its election to be regulated as a Business Development
Company under the 1940 Act, the Fund elect to cease to be a
reporting company under Section 13 of the Securities and Exchange
Act of 1934, as amended.
(5) FOR _____________ AGAINST ____________ ABSTAIN ____________
The proposal and recommendation of the Board of Directors that
subject to the Company ceasing to be subject to regulation under the
1940 Act and ceasing to be a reporting company under the Exchange
Act, the Company adopt and implement a program to repurchase its
outstanding securities from time to time at prices not more than the
net asset value per share of such securities at the time of such
repurchase, subject to the discretion and determination of the
Company's Board of Directors, 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.
(6) Upon such other matters as may properly come before the meeting.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEMS 1 THROUGH 5
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 ________________________, 1999
------------------------------------------
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.
