THE ROCKWOOD GROWTH FUND, INC.
P.O. BOX 9043
SMITHTOWN, NEW YORK 11787
TOLL-FREE 1-888-ROCKWOOD
January 30, 1997
Fellow Shareholder:
Enclosed is the proxy statement and proxy card for a special meeting of
shareholders of The Rockwood Growth Fund, Inc. ("Rockwood Fund"). Please take
this opportunity to review the proxy statement and sign and return the proxy
card. Your vote is important and must be counted, no matter how many or how few
shares you own.
About the Proposal
The Board of Directors is asking shareholders to approve a
reorganization of Rockwood Fund, which is an Idaho corporation, into a newly
formed Maryland corporation called Rockwood Fund, Inc. ("New Fund").
Reorganizing Rockwood Fund as a Maryland corporation is being proposed because
Maryland corporate law has been tailored to address issues unique to mutual
funds. As a result, Maryland law offers mutual funds certain advantages not
found in the corporate statutes of other states. New Fund will have the same
fundamental investment objective and policies as Rockwood Fund. In addition, New
Fund will have the same investment manager and subadviser as Rockwood Fund. The
attached materials provide important information about the proposed
reorganization and New Fund. The Board of Directors recommends that you vote in
favor of the proposal.
Your Vote is Important - Please Return the Proxy Card Promptly
Your vote is extremely important and I urge you to complete and return
promptly the proxy card in the enclosed envelope. If you have any questions,
please call toll-free at 1-888-ROCKWOOD.
Sincerely,
Thomas B. Winmill
Co-President
PLEASE VOTE NOW BY SIGNING AND RETURNING THE ENCLOSED
PROXY CARD. Otherwise, your Fund may incur needless delay to solicit
sufficient votes for the meeting.
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
P.O. BOX 9043
SMITHTOWN, NEW YORK 11787
TOLL-FREE 1-888-ROCKWOOD
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 21, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders
("Meeting") of THE ROCKWOOD GROWTH FUND, INC. ("Rockwood Fund") will be held at
the offices of Rockwood Fund at 11 Hanover Square, New York, New York 10005, on
February 21, 1997 at 10:30 a.m., to consider and vote upon the following
proposal:
Approval of an Agreement and Plan of Conversion and
Liquidation providing for Rockwood Fund to reorganize into
Rockwood Fund, Inc., a newly formed Maryland corporation.
No other business may come before said Meeting or any adjournment
thereof. You are entitled to vote at the Meeting and any adjournment thereof if
you owned Rockwood Fund shares at the close of business on January 8, 1997. If
you attend the Meeting, you may vote your shares in person. If you do not expect
to attend the Meeting, please complete, date, sign and return the enclosed proxy
card in the enclosed postage paid envelope.
By order of the Board of Directors,
William J. Maynard
Secretary
January 30, 1997
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
IN ORDER TO AVOID THE DELAY OF FURTHER SOLICITATIONS, WE ASK YOUR COOPERATION IN
MAILING IN YOUR PROXY CARD PROMPTLY IF YOU DO NOT EXPECT TO ATTEND THE MEETING.
NO POSTAGE IS NECESSARY.
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
--------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 21, 1997
--------------------------------------------
PROXY STATEMENT
This proxy statement is being furnished to the shareholders of The
Rockwood Growth Fund, Inc. ("Rockwood Fund") in connection with the Board of
Directors' solicitation of proxies to be used at the special meeting of the
shareholders of Rockwood Fund to be held on February 21, 1997, or any
adjournment or adjournments thereof ("Meeting"). This proxy statement will first
be mailed to shareholders on or about January 31, 1997.
A majority of the shares entitled to vote on January 8, 1997 ("Record
Date"), represented in person or by proxy, shall constitute a quorum at the
Meeting. In the event that a quorum is present at the Meeting but sufficient
votes to approve the proposal described in this proxy statement ("Proposal") are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares represented at
the Meeting in person or by proxy. If a quorum is present, the persons named as
proxies will vote those proxies that they are entitled to vote for the Proposal
in favor of such an adjournment, and will vote those proxies required to be
voted against the Proposal against such adjournment. A shareholder vote may be
taken on the Proposal prior to any such adjournment if sufficient votes have
been received and it is otherwise appropriate.
The individuals named as proxies on the enclosed proxy card will vote
in accordance with your direction as indicated thereon if your proxy card is
received properly executed. If you give no voting instructions, your shares will
be voted in favor of the Proposal. The proxy card may be revoked by giving
another proxy, by letter or telegram received by Rockwood Fund prior to the
Meeting revoking your proxy, or by appearing and voting at the Meeting.
Abstentions and broker non-votes will be counted as shares present for
purposes of determining whether a quorum is present but will not be voted for or
against any adjournment or the Proposal. Accordingly, abstentions and broker
non-votes effectively will be a vote against adjournment or against the
Proposal. Abstentions and broker non-votes will not be counted, however, as
votes cast for purposes of determining whether sufficient votes have been
received to approve the Proposal. Broker non-votes are shares held in street
name for which the broker indicates that instructions have not been received
from the beneficial owners or other person entitled to vote and for which the
broker does not have discretionary voting authority.
As of the Record Date, Rockwood Fund had 62,425.34 shares of common
stock outstanding. As of this same date, the following persons owned of record
and beneficially, in amounts stated after their names, 5% or more of Rockwood
Fund's outstanding shares: Pfendler Family Revocable Living Trust, 2507 Harsh
Avenue SE, Massilon, OH 44646; 4,232.644 shares, representing 6.78% of Rockwood
Fund's outstanding shares. To the knowledge of Rockwood Fund, no other
shareholder then owned, beneficially or of record, more than 5% of its
outstanding shares. On the Record Date, the directors and officers of Rockwood
Fund owned, as a group, 523.466 shares of Rockwood Fund, representing
approximately 0.83% of the outstanding voting securities of Rockwood Fund.
Shareholders on the Record Date will be entitled to one vote for each share held
on that date.
ROCKWOOD FUND WILL FURNISH TO SHAREHOLDERS, WITHOUT CHARGE, A COPY OF
ITS ANNUAL REPORT AND ITS MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL
REPORT UPON WRITTEN REQUEST TO ROCKWOOD FUND OR BY CALLING TOLL-FREE AT 1-888-
ROCKWOOD.
REQUIRED VOTE
Approval of the Agreement and Plan of Conversion and Liquidation
("Plan") requires the affirmative vote of a majority of the outstanding shares
of Rockwood Fund entitled to vote at the Meeting.
PROPOSAL: APPROVAL OF AN AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION
PROVIDING FOR ROCKWOOD FUND TO REORGANIZE INTO ROCKWOOD FUND, INC., A
NEWLY FORMED MARYLAND CORPORATION.
The Board of Directors has approved the Plan, subject to shareholder
approval. A copy of the Plan is attached hereto as Exhibit A. The Plan provides
in substance for Rockwood Fund, an Idaho corporation, to reorganize into a newly
formed Maryland corporation called Rockwood Fund, Inc. ("New Fund"). The
fundamental investment objective, policies and limitations of New Fund will be
identical to those of Rockwood Fund. New Fund would then enter into an
investment management agreement with Rockwood Advisers, Inc. ("Investment
Manager") identical to the existing investment management agreement between the
Investment Manager and Rockwood Fund except that New Fund would be a Maryland
corporation. The
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Investment Manager will in turn enter into a subadvisory agreement with Aspen
Securities and Advisory, Inc. ("Subadviser") identical to the existing
subadvisory agreement with the Subadviser except that it will be in connection
with New Fund. New Fund also will enter into a Distribution Agreement and
Shareholder Administrative Services Agreement with Investor Service Center, Inc.
("Distributor"), an affiliate of the Investment Manager, a Transfer Agency
Agreement and Agency Agreement with DST Systems, Inc., and a Custodian Agreement
and a Service and Agency Agreement with Investors Bank & Trust Company. New Fund
also will adopt a plan of distribution pursuant to Rule 12b-1 ("Rule 12b-1
Plan") under the Investment Company Act of 1940, as amended ("1940 Act"), which
is identical to Rockwood Fund's existing Rule 12b-1 Plan, except that New Fund
would be a Maryland corporation.
REASONS FOR THE REORGANIZATION
For the reasons set forth below, the Board of Directors, including
those Directors who are not "interested persons" (as that term is defined in the
1940 Act) of Rockwood Fund ("Independent Directors"), has determined that the
Reorganization is in the best interests of Rockwood Fund and that the interests
of the existing shareholders of Rockwood Fund will not be diluted as a result of
the Reorganization.
Reorganizing Rockwood Fund as a Maryland corporation is being proposed
because Maryland corporate law has been tailored to address issues unique to
mutual funds. As a result, Maryland law offers mutual funds certain advantages
not found in the corporate statutes of other states. See "Certain Comparative
Information about Rockwood Fund and New Fund" below for a comparative analysis
of a Maryland corporation and an Idaho corporation.
The Board of Directors recommends that shareholders vote for approval
of the Plan. Such approval encompasses approval of the Reorganization and
authorization of Rockwood Fund as sole shareholder of New Fund to (1) elect the
directors of New Fund; (2) approve investment management and subadvisory
agreements between New Fund and the Investment Manager and between the
Investment Manager and the Subadviser, respectively; (3) approve the Rule 12b-1
Plan for New Fund; and (4) ratify the selection of Tait, Weller & Baker as New
Fund's independent certified public accountants for the fiscal year ending
October 31, 1997.
THE REORGANIZATION
In order to accomplish the Reorganization, New Fund has been formed as
a Maryland corporation pursuant to Articles of Incorporation dated December 11,
1996. The Reorganization will be accomplished by (1) Rockwood Fund transferring
all of its portfolio securities and other assets to New Fund; (2) New Fund, in
exchange for Rockwood Fund's assets, issuing to Rockwood Fund the number of full
and fractional shares equal to the number of full and fractional shares of
Rockwood Fund then outstanding and assuming all the liabilities of Rockwood
Fund; and (3) Rockwood Fund distributing to each Rockwood Fund shareholder the
number of full and fractional shares (rounded to the third decimal place) equal
to the number of full and fractional Rockwood Fund shares held by that
shareholder on the Closing Date (as defined below). As soon as practicable after
the foregoing transactions, Rockwood Fund will take all steps necessary to
liquidate and terminate its legal existence.
If the Plan is approved by Rockwood Fund's shareholders, it is expected
that the Reorganization will be effective on or about March 1, 1997, or on such
date as the parties may mutually agree ("Closing Date").
After approval of the Reorganization, but prior to the issuance of the
shares referred to in (2) above, one share of New Fund will be issued to
Rockwood Fund. Pursuant to the Plan and as the sole shareholder of New Fund,
Rockwood Fund will approve the investment management agreement of New Fund with
the Investment Manager and the subadvisory agreement between the Investment
Manager and the Subadviser, approve the Rule 12b-1 Plan for New Fund, elect
directors of New Fund, and ratify the selection of Tait, Weller & Baker as New
Fund's independent certified public accountants, all as described below.
Upon consummation of the Reorganization, an open account will be
established on New Fund's records in the name of each Rockwood Fund shareholder
representing the number of shares distributed to such shareholder pursuant to
(3) above at the Closing Date. Certificates, if any, for shares of Rockwood Fund
issued prior to the Reorganization will represent the same number of outstanding
shares of New Fund following the Reorganization. Shareholders with certificates
should safely discard them, as they will be canceled on the Closing Date in
exchange for book shares on the records of the transfer agent.
FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the Reorganization will be tax-free for federal
tax purposes. It is a condition of the Plan that Rockwood Fund and New Fund
receive an opinion of Kirkpatrick & Lockhart LLP substantially to the effect
that, based upon the facts and assumptions stated therein, for federal income
tax purposes: (1) the Reorganization will constitute a reorganization within the
meaning of section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
("Code"), and each Fund will be "a party to a reorganization" within the meaning
of section 368(b) of the Code; (2) no gain or loss will be recognized to
Rockwood Fund on the transfer of its assets to New Fund in exchange solely for
New Fund shares and the assumption by New Fund of Rockwood Fund's liabilities or
on the distribution of those shares to its shareholders in constructive exchange
for their Rockwood Fund shares; (3) no gain or loss will be recognized to New
Fund on its receipt of such assets in exchange for the New
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<PAGE>
Fund shares and its assumption of such liabilities; (4) New Fund's basis for
such assets will be the same as the basis of such assets in the hands of
Rockwood Fund immediately before the Reorganization; (5) New Fund's holding
period for such assets will include the period during which such assets were
held by Rockwood Fund; (6) a Rockwood Fund shareholder will recognize no gain or
loss on the constructive exchange of all its Rockwood Fund shares solely for New
Fund shares pursuant to the Reorganization; (7) a Rockwood Fund shareholder's
basis for the New Fund shares received by it in the Reorganization will be the
same as the adjusted basis of that shareholder's Rockwood Fund shares to be
constructively surrendered in exchange for those New Fund shares; (8) the
holding period for New Fund shares received by a shareholder of Rockwood Fund
will include that shareholder's holding period for the Rockwood Fund shares
constructively surrendered in exchange therefor, provided such Rockwood Fund
shares are held as capital assets on the date of the Reorganization; and (9) for
purposes of section 381 of the Code, New Fund will be treated as if there had
been no Reorganization (accordingly, the Reorganization will not result in the
termination of Rockwood Fund's taxable year, Rockwood Fund's tax attributes
enumerated in section 381(c) of the Code will be taken into account by New Fund
as if there had been no Reorganization, and the part of Rockwood Fund's taxable
year before the Reorganization will be included in New Fund's taxable year after
the Reorganization).
CERTAIN COMPARATIVE INFORMATION ABOUT ROCKWOOD FUND AND NEW FUND
Structure of New Fund. New Fund has been established pursuant to
Articles of Incorporation under the laws of the State of Maryland. The
fundamental investment objective, policies and limitations of New Fund will be
the same as those of Rockwood Fund. New Fund's fiscal year will be the same as
that of Rockwood Fund. Prior to the Reorganization, New Fund will have nominal
assets and no liabilities. Initially, Rockwood Fund will be the sole shareholder
of New Fund.
Operations of New Fund will be governed by New Fund's Articles of
Incorporation and Maryland law rather than by Rockwood Fund's Articles of
Incorporation and Idaho law. Certain differences between the two forms of
organization are summarized below. As is the case with Rockwood Fund, the
operations of New Fund will be subject to the provisions of the 1940 Act and the
rules and regulations of the Securities and Exchange Commission ("SEC")
thereunder.
Shares of New Fund and Rockwood Fund. New Fund is authorized to issue
up to 1,000,000,000 shares of common stock ($.01 par value). Shares of New Fund
will be freely assignable by way of pledge (as, for example, for collateral
purposes), gift, settlement of an estate and also by an investor to another
investor. Each share will have equal dividend, voting, liquidation and
redemption rights with every other share. Shares will have no preemptive,
conversion or cumulative voting rights and will not be subject to further call
or assessment. Share certificates will not be issued. The Directors of New Fund
have the power under the Articles of Incorporation to establish a new series or
class of shares. The Directors of New Fund have no present intention of
establishing any such new series or classes.
Rockwood Fund is authorized to issue up to 100,000,000 shares of common
stock ($.10 par value). Shares of Rockwood Fund may be freely transferred. Each
such share has equal voting rights. Rockwood Fund shares have no preemptive or
cumulative voting rights and are not subject to further call or assessment.
Rockwood Fund may have certificated or uncertificated shares, or both, as
designated by resolution of the Board of Directors.
Meetings of Shareholders. New Fund's By-Laws provide that there will be
no annual meeting of shareholders in any year except as required by law. In
practical effect, this means that New Fund will not hold an annual meeting of
shareholders in years in which the only matters which would be submitted to
shareholders for their approval are the selection of Directors and ratification
of the Directors' selection of accountants, although holders of twenty five
percent of New Fund's shares may call a meeting at any time. There will normally
be no meetings of shareholders for the purpose of electing Directors unless
fewer than a majority of the Directors holding office have been elected by
shareholders. Shareholder meetings will be held in years in which a shareholder
vote on New Fund's investment management agreement, plan of distribution, or
fundamental investment objective, investment policies or investment restrictions
is required by the 1940 Act. New Fund's By-Laws permit removal of a director by
the affirmative vote of a majority of all votes represented at any stockholders'
meeting duly called, provided a quorum is present.
Idaho law and the By-Laws of Rockwood Fund require an annual meeting of
shareholders. Idaho law provides that if the annual meeting is not held within
any eighteen-month period, the district court with jurisdiction for the location
of the corporation's registered office or principal place of business may order
a meeting to be held on the application of any shareholder. A special meeting of
shareholders may be called by the board of directors, the holders of at least
one-fifth of all the shares entitled to vote at the meeting or such smaller
proportion as may be prescribed by the Articles of Incorporation, or such other
persons as may be authorized in the Articles of Incorporation or the By-Laws.
The By-Laws of Rockwood Fund provide for the president to call a special
meeting, although holders of twenty five percent of Rockwood Fund's shares may
call a meeting at any time. Idaho law provides that any director or the entire
board of directors may be removed by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
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Amendments of Articles of Incorporation. New Fund's Articles of
Incorporation generally may only be amended upon adoption of a resolution to
that effect by the Directors and approval of such resolution by the holders of a
majority of New Fund's outstanding shares. Maryland law, however, permits the
Directors to amend the Articles of Incorporation without shareholder approval to
change New Fund's name or the name or other designation of any class or series
of New Fund.
According to Idaho law, the Articles of Incorporation of Rockwood Fund
may be amended upon (1) adoption of a resolution setting forth the proposed
amendment by the Directors; (2) submission of an amendment directly to a vote at
a meeting of shareholders by the holders of not less than one-tenth of all the
shares entitled to vote at the meeting; or (3) upon the written consent of all
the shareholders entitled to vote on the amendment. Idaho law and Rockwood
Fund's Articles of Incorporation provide that an amendment must be approved by
the affirmative vote of a majority of the outstanding shares of the corporation
entitled to vote thereon. Idaho law does not provide the Directors with
authority to amend the Articles of Incorporation without shareholder approval to
change Rockwood Fund's name or the name or other designation of any class or
series of Rockwood Fund.
Shareholders' Rights of Inspection. Maryland law provides that any
shareholder may, during normal business hours, inspect and copy New Fund's
By-Laws, minutes of the proceedings of the shareholders, annual statements of
affairs and voting trust agreements on file at New Fund's principal office.
Maryland law further provides that persons who have been shareholders of record
for six months or more and who own at least five percent of New Fund's shares
may inspect New Fund's books of account and stock ledger.
Idaho law provides that any person who shall have been a holder of
record of shares for at least six months immediately preceding or shall be the
holder of record of at least five percent of all the outstanding shares of the
corporation, upon written demand stating the purpose thereof, shall have the
right to examine in person, or by agent or attorney, at any reasonable time or
times and for any proper purpose its relevant books and records of accounts,
minutes and records of shareholders and to make extracts therefrom. Upon the
written request of any shareholder, the corporation shall mail to such
shareholder its most recent financial statement showing in reasonable detail its
assets and liabilities and the results of its operations.
Shareholder Liability. Maryland law provides that a shareholder or
subscriber for stock of a corporation is not obligated to the corporation or its
creditors with respect to the stock, except to the extent that the subscription
price or other agreed consideration for the stock has not been paid, or
liability is imposed under any other provision of Maryland law.
Idaho law provides that a holder of or subscriber for shares of a
corporation shall be under no obligation to the corporation or its creditors
with respect to such shares other than the obligation to pay to the corporation
the full consideration for which such shares were issued or are to be issued.
Further, any person becoming an assignee or transferee of shares or of a
subscription for shares in good faith and without knowledge or notice that the
full consideration therefor has not been paid shall not be personally liable to
the corporation or its creditors for any unpaid portion of such consideration.
Liability of Directors. New Fund's Articles of Incorporation provide
that to the maximum extent permitted by law, no Director shall be liable to New
Fund or its stockholders for monetary damages. New Fund's Articles of
Incorporation further provide for the indemnification of New Fund's Directors to
the full extent permitted by law and New Fund's By-Laws. New Fund's By-Laws
generally provide that in accordance with applicable law, New Fund shall
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative ("Proceeding"), by reason of
the fact that he or she is or was a director of New Fund, against all reasonable
expenses (including attorneys' fees) actually incurred, and judgments, fines,
penalties and amounts paid in settlement in connection with such Proceeding to
the maximum extent permitted by law, now existing or hereafter adopted. Maryland
law permits a corporation to indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established that
(1) the act or omission of the director was material to the matter giving rise
to the Proceeding and (a) was committed in bad faith or (b) was the result of
active and deliberate dishonesty; (2) the director actually received an improper
personal benefit; or (3) in the case of any criminal proceeding, the director
had reasonable cause to believe that the act or omission was unlawful. Maryland
law further provides that under certain conditions, reasonable expenses may be
paid or reimbursed by New Fund in advance of the final disposition of the
Proceeding.
Section 30-1-5 of the Idaho Business Corporation Act allows Rockwood
Fund to indemnify a director in several situations, including when a director
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason that he or she is or was a director against expenses,
judgments, fines and amounts paid in settlement incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The By-Laws of Rockwood Fund require that Rockwood Fund shall indemnify each
director and officer to the full extent permitted by Section 30-1-5 of the Idaho
Business Corporation Act and by the Articles of Incorporation, and
indemnification shall be provided to officers and directors with respect to an
action, suit or proceeding arising from an act or
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omission or alleged act or omission involved in the conduct of his office. The
Articles of Incorporation of Rockwood Fund prohibit the protection or
indemnification of any director or officer of the corporation against any
liability to the corporation or to its shareholders to which he or she would be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The foregoing is only a summary of certain differences between the
Articles of Incorporation and By-Laws of Rockwood Fund and Idaho law, and of the
Articles of Incorporation and By-Laws of New Fund and Maryland law. It is not a
complete list of differences. Shareholders should refer to the provisions of
these documents and state law directly for a more thorough comparison. A copy of
New Fund's Articles of Incorporation is attached hereto as Exhibit B. Copies of
Rockwood Fund's Articles of Incorporation and By-Laws, and New Fund's By-Laws
are available to shareholders without charge upon written request to Rockwood
Fund at 11 Hanover Square, New York, New York 10005.
INVESTMENT MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT FOR NEW FUND
By voting in favor of the Plan, Rockwood Fund shareholders will be
authorizing Rockwood Fund, as sole shareholder of New Fund prior to its
Reorganization, to vote such shares of New Fund in favor of approval of New
Fund's investment management agreement with the Investment Manager. The terms of
the investment management agreement between New Fund and the Investment Manager
will be identical to the existing investment management agreement between
Rockwood Fund and the Investment Manager, except that New Fund is a Maryland
corporation. By voting in favor of the Plan, shareholders of Rockwood Fund also
will be authorizing Rockwood Fund, as sole shareholder of New Fund prior to its
Reorganization, to vote its shares of New Fund in favor of approval of New
Fund's subadvisory agreement with the Subadviser. The terms of the subadvisory
agreement will be identical to terms of the existing subadvisory agreement.
Under New Fund's investment management agreement, the Investment
Manager would act as general manager of New Fund, being responsible for the
various functions assumed by it, including regularly furnishing advice with
respect to portfolio transactions. The Investment Manager would manage the
investment and reinvestment of New Fund's assets, subject to the control and
oversight of New Fund's Board of Directors.
For its services, New Fund would pay the Investment Manager a fee at
the annual rate of:
1.00% of the first $200 million of New Fund's average
daily net assets .95% of average daily net assets
over $200 million up to $400 million .90% of
average daily net assets over $400 million up to
$600 million .85% of average daily net assets over
$600 million up to $800 million .80% of average
daily net assets over $800 million up to $1 billion
.75% of average daily net assets over $ 1 billion.
The Investment Manager, whose principal business address is 11 Hanover
Square, New York, New York 10005, is a wholly-owned subsidiary of Bull & Bear
Group, Inc. ("Group"). Group is a publicly-owned company whose securities are
listed on the Nasdaq Stock Market and traded in the over-the-counter market.
Bassett S. Winmill may be deemed a controlling person of Group on the basis of
his ownership of 100% of Group's voting stock and, therefore, of the Investment
Manager. The principal executive officer of the Investment Manager is Thomas B.
Winmill. The Directors of the Investment Manager are Robert D. Anderson, Mark C.
Winmill and Thomas B. Winmill. Their respective principal occupations are as
officers of Group and its subsidiaries. The address of each Director is 11
Hanover Square, New York, New York 10005.
Under the terms of New Fund's subadvisory agreement, the Subadviser
would advise and consult with the Investment Manager regarding the selection,
clearing and safekeeping of the Fund's portfolio investments and assist in
pricing and generally monitoring such investments. In consideration of the
Subadviser's services, the Investment Manager, and not New Fund, would pay to
the Subadviser a percentage of the Investment Manager's Net Fees. "Net Fees" are
defined as the actual amounts received by the Investment Manager as compensation
less reimbursements, if any, and waivers of such compensation by the Investment
Manager. The amount of the percentage is determined by the grid and accompanying
definitions set forth on the following page.
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SUBADVISER'S FEE AS A PERCENTAGE OF INVESTMENT MANAGER'S NET FEES
<TABLE>
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 basis points Within 50 basis points More than 50 basis
better than ATR of ATR points below ATR
<S> <C> <C> <C> <C>
Less than or equal to $15,000,000 30% 20% 10%
Greater than $15,000,000 and Less
than or equal to $50,000,000 40% 30% 20%
Greater than $50,000,000 50% 40% 30%
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</TABLE>
A. "Relative Performance" shall be determined from comparing New
Fund's total return with the average total return ("ATR") of funds with the
investment objective of "growth" as compiled by Morningstar, Inc., or, if
unavailable, another similar service acceptable to the parties and New Fund. The
Relative Performance shall be determined as of the last calendar day of each
month ("Performance Determination Date") and shall measure the Relative
Performance for the most recent three year period ("Measurement Period"), except
that (A) for the first twelve months of the subadvisory agreement, Relative
Performance shall be based upon annualized returns, the first three Performance
Determination Dates shall be the next three calendar quarter ends after the
effective date of the subadvisory agreement, and the Measurement Periods shall
be the most recent three months and the fourth Performance Determination Date
shall be the next calendar quarter end and the Measurement Period shall be the
most recent one year period, and (B) for the thirteenth through the
twenty-fourth month of the subadvisory agreement, Relative Performance shall be
determined as of the last calendar day of each month and shall measure the
Relative Performance for the most recent one year period.
B. "Total Net Assets" shall be the total net assets of New Fund as of the
Performance Determination Date.
The Subadviser, whose principal business address is 545 Shoup Avenue,
Suite 303, Idaho Falls, Idaho 83405, is controlled by Ross Farmer, by virtue of
his ownership of 51% of the Subadviser's outstanding voting stock. The address
of Mr. Farmer is 545 Shoup Avenue, Suite 303, Idaho Falls, Idaho 83405. In
addition to Mr. Farmer's ownership interest in the Subadviser, Glad Partnership,
the partners of which are Mr. Farmer's children, owns 23% of the Subadviser's
outstanding voting stock. The address of Glad Partnership is P.O. Box 50313,
Idaho Falls, Idaho 83405.
The principal executive officer and directors of the Subadviser,
their respective offices and principal occupations are set forth below.
Ross H. Farmer--Director and President. Mr. Farmer's principal occupation is as
an investment adviser.
Ronald W. Kiehn--Director. Mr. Kiehn's principal occupation is as President and
controlling shareholder of Rimrock, Inc., a consulting and investment firm.
NEW FUND'S DIRECTORS AND OFFICERS
Subject to the provisions of the Articles of Incorporation, the
business of New Fund is managed by its Directors, who serve indefinite terms and
who have all powers necessary or convenient to carry out that responsibility.
The Directors and officers of New Fund will be identical to the Directors and
officers of Rockwood Fund. The names of the Directors and officers of New Fund,
their respective offices, and principal occupations during the last five years
are set forth below. By voting in favor of the Plan shareholders will be
authorizing Rockwood Fund, as sole shareholder of New Fund prior to its
Reorganization, to vote in favor of the following persons as Directors of New
Fund.
BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the Board of
seven of the other investment companies advised by the Investment Manager and
its affiliates (collectively, the "Complex") and of Group, the parent of the
Investment Manager. He was born February 10, 1930. He is a member of the New
York Society of Security Analysts, the Association for Investment Management and
Research and the International Society of Financial Analysts. He is the father
of Mark C. Winmill and Thomas B. Winmill.
ROBERT D. ANDERSON* -- Vice Chairman and Director. He is Vice Chairman and a
Director of the other investment companies in the Complex and of the Investment
Manager and its affiliates. He was born December 7, 1929. He is a member
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of the Board of Governors of the Mutual Fund Education Alliance, and of its
predecessor, the No-Load Mutual Fund Association. He has also been a member of
the District #12, District Business Conduct and Investment Companies Committees
of the National Association of Securities Dealers, Inc.
RUSSELL E. BURKE III -- Director. 900 Park Avenue, New York, NY 10021. He was
born August 23, 1946. He is President of Russell E. Burke III, Inc. Fine Art,
New York, New York. From 1988 to 1991, he was President of Altman Burke Fine
Arts, Inc. From 1983 to 1988, he was Senior Vice President of Kennedy Galleries.
He is also a Director of six other investment companies in the Complex.
BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune, NJ 07753.
He is Senior Consultant with The Berger Financial Group, LLC specializing in
financial, estate and insurance matters. From March 1995 to December 31, 1995,
he was President of Huber Hogan Knotts Consulting, Inc. From 1990 to March 1995,
he was President of Huber-Hogan Associates. From 1988 to 1990, he was Chairman
of Bruce Huber Associates. He was born February 7, 1930. He is also a Director
of eight other investment companies in the Complex.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Kenny, Kindler, Hunt & Howe, Inc., executive recruiting
consultants. He was born December 14, 1930. From 1976 until 1983 he was Vice
President of Russell Reynolds Associates, Inc., also executive recruiting
consultants. He is also a Director of eight other investment companies in the
Complex.
FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York, NY 10021.
He is President and Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. He was born November 14, 1926. He
is also a Director of eight other investment companies in the Complex.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He was Executive Vice President and a Director of Dan River, Inc., a diversified
textile company, from 1969 until he retired in 1981. He was born February 9,
1923. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry. He is also a Director of eight other investment companies in the
Complex.
MARK C. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
Chief Financial Officer. He is Chief Financial Officer of the Investment Manager
and certain of its affiliates. He is also a Director of five other investment
companies in the Complex. He received his M.B.A. from the Fuqua School of
Business at Duke University in 1987. From 1983 to 1985 he was Assistant Vice
President and Director of Marketing of E.P. Wilbur & Co., Inc., a real estate
development and syndication firm and Vice President of E.P.W. Securities, its
broker/dealer subsidiary. He is the brother of Thomas B. Winmill. He was born
November 26, 1957.
THOMAS B. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
General Counsel. He is President of the Investment Manager and the Distributor,
and of their affiliates. He is also a Director of six other investment companies
in the Complex. He was associated with the law firm of Harris, Mericle & Orr
from 1984 to 1987. He is a member of the New York State Bar and the SEC Rules
Committee of the Investment Company Institute. He is a brother of Mark C.
Winmill. He was born June 25, 1959.
The executive officers of New Fund, each of whom serves at the
pleasure of the Board of Directors, are as follows:
MARK C. WINMILL -- Co-President, Co-Chief Executive Officer and Chief Financial
Officer. (see biographical information above).
THOMAS B. WINMILL -- Co-President, Co-Chief Executive Officer and General
Counsel (see biographical information above).
ROBERT D. ANDERSON -- Vice Chairman (see biographical information above).
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. From 1993 to 1995, he was
Associate Director - Proprietary Trading at Barclays De Zoete Wedd Securities
Inc., from 1992 to 1993, he was Director, Bond Arbitrage at WG Trading Company
and from 1989 to 1992, he was Vice President of Wilkinson Boyd Capital Markets.
He was born March 1, 1955.
BRETT B. SNEED, CFA -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. He is a Chartered Financial
Analyst, a member of the Association for Investment Management and Research and
a member of the New York Society of Security Analysts. From 1986 to 1988, he
managed private accounts, from 1981 to 1986, he was Vice President of Morgan
Stanley Asset Management, Inc. and prior thereto was a portfolio manager and
member of the Finance and Investment Committees of American International Group,
Inc., an insurance holding company. He was born June 11, 1941.
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<PAGE>
JOSEPH LEUNG, CPA -- Treasurer and Chief Accounting Officer. He is Treasurer and
Chief Accounting Officer of the Investment Manager and its affiliates. From 1992
to 1995 he held various positions with Coopers & Lybrand LLP, a public
accounting firm. From 1991 to 1995, he was the accounting supervisor at
Retirement Systems Group, a mutual fund company. From 1987 to 1991, he held
various positions with Ernst & Young, a public accounting firm. He is a member
of the American Institute of Certified Public Accountants. He was born September
15, 1965.
WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice President and
Secretary of the Investment Manager and its affiliates. From 1991 to 1994, he
was associated with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. He
is a member of the New York State Bar. He was born September 13, 1964.
* Bassett S. Winmill, Robert D. Anderson, Mark C. Winmill and Thomas B. Winmill
are "interested persons" of New Fund as defined by the 1940 Act, because of
their positions with the Investment Manager.
PLAN OF DISTRIBUTION
New Fund's Board of Directors has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan"). By voting in favor of
the Plan, shareholders of Rockwood Fund will be authorizing Rockwood Fund, as
sole shareholder of New Fund prior to its Reorganization, to vote such shares of
New Fund in favor of the approval of the 12b-1 Plan. The 12b-1 Plan will be
identical to the plan of distribution adopted by Rockwood Fund pursuant to Rule
12b-1 under the 1940 Act except that New Fund is a Maryland corporation. Under
the 12b-1 Plan, New Fund would be authorized to pay the Distributor, as
compensation for the Distributor's distribution and service activities, a fee at
an annual rate of 0.25% of New Fund's average daily net assets. The 12b-1 Plan,
if approved, will remain in effect for one year from the date of such approval,
and thereafter from year to year so long as it is approved by a majority of New
Fund's entire Board of Directors, including a majority of those Directors who
are not "interested persons" of New Fund as defined in the 1940 Act, and who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related to the Plan unless sooner terminated according to its
terms.
NEW FUND'S AUDITORS
Tait, Weller & Baker has been selected by the Board of Directors in
the manner provided for by the 1940 Act as New Fund's independent public
accountants for New Fund's fiscal year ending October 31, 1997, subject to the
right of New Fund to terminate such employment at any time without penalty by a
vote of a majority of New Fund's outstanding shares. Tait, Weller & Baker also
serve as the independent public accountant for Rockwood Fund and for the
Investment Manager and its affiliates.
By voting in favor of the Plan, shareholders of Rockwood Fund will be
authorizing Rockwood Fund, as sole shareholder of New Fund prior to its
Reorganization, to vote such shares of New Fund in favor of ratifying the
selection of Tait, Weller & Baker as the independent accountants for New Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
SHAREHOLDER PROPOSALS
Rockwood Fund is required to hold an annual meeting of shareholders.
As a Maryland corporation, New Fund is not currently required to hold an annual
meeting in any year in which the election of directors is not required to be
acted upon by the provisions of the 1940 Act. Any shareholder who wishes to
submit proposals to be considered at future meetings of shareholders should send
such proposals to Rockwood Fund at 11 Hanover Square, New York, New York 10005.
Submission of a proposal does not necessarily mean that such proposal will be
included. Inclusion of such proposals is subject to limitations under the
Federal securities laws.
OTHER BUSINESS
No other business may come before this Special Meeting or any
adjournment thereof. In addition to solicitations through the mails, Rockwood
Fund may, if necessary to obtain the requisite representation of shareholders,
solicit proxies by telephone, telefacsimile and personal interview by employees
or through securities dealers. The cost of soliciting proxies, including the
preparation and mailing of the proxy and proxy statement and including
reimbursement to dealers and others who forward proxy material to their clients,
will be borne by the Investment Manager.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED, PROMPT
EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED,
POSTAGE- PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION
This AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION ("Agreement")
is made this 20th day of December, 1996, by and between The Rockwood Growth
Fund, Inc. ("Rockwood Fund"), a corporation organized under the laws of the
State of Idaho, and Rockwood Fund, Inc. ("New Fund"), a corporation organized
under the laws of the State of Maryland (each a "Fund" and collectively
"Funds").
WHEREAS, Rockwood Fund is a non-diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, Rockwood Fund was organized pursuant to Articles of
Incorporation dated March 7, 1985, and presently is authorized to issue
100,000,000 shares of common stock, $.10 par value ("Rockwood Fund Shares"); and
WHEREAS, New Fund was organized pursuant to Articles of Incorporation
dated December 11, 1996, and presently is authorized to issue 1,000,000,000
shares of common stock, $.01 par value ("New Fund Shares"); and
WHEREAS, Rockwood Fund desires to change its place of organization
from Idaho to Maryland (by converting from an Idaho corporation to a Maryland
corporation) through a reorganization within the meaning of section 368(a)(1)(F)
of the Internal Revenue Code of 1986, as amended ("Code"); and
WHEREAS, Rockwood Fund desires to accomplish such change by
transferring all of its assets to New Fund (which was established solely for the
purpose of acquiring such assets and continuing Rockwood Fund's business) in
exchange solely for the assumption by New Fund of all of Rockwood Fund's
liabilities and the issuance to Rockwood Fund of New Fund Shares, which shares
Rockwood Fund will thereupon distribute pro rata to its shareholders in complete
liquidation, all in accordance with the procedures and subject to the terms and
conditions set forth in this Agreement (which is intended to be, and is adopted
as, a "plan of reorganization" for federal income tax purposes) (all such
transactions being herein referred to as the "Reorganization").
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Plan of Conversion and Liquidation
(a) Rockwood Fund will convey, transfer and deliver to New Fund at
the Closing (as defined in Section 2 hereof) all of its then existing assets. In
consideration therefor, New Fund shall at the Closing (i) assume all of Rockwood
Fund's liabilities and obligations, whether absolute, accrued, contingent or
otherwise, and including all fees and expenses in connection with the
transactions contemplated hereby, including, without limitation, costs of legal
advice, accounting, printing, mailing, proxy solicitation and transfer taxes, if
any, and (ii) issue and deliver to Rockwood Fund full and fractional New Fund
Shares, equal in number to the number of full and fractional Rockwood Fund
Shares then outstanding.
(b) Upon consummation of the transaction described in paragraph (a)
of this Section 1, the New Fund Share acquired by Rockwood Fund pursuant to
Section 4(e) hereof shall be redeemed by New Fund for $1.00 and Rockwood Fund
will constructively distribute in complete liquidation, pro rata to its
shareholders of record as of the Closing Date (as defined in Section 2 hereof)
in exchange for their Rockwood Fund Shares, the New Fund Shares received by
Rockwood Fund pursuant to paragraph (a) of this Section 1. Such distribution
will be accomplished by the establishment of an open account on the share
records of New Fund in the name of each such shareholder representing the
respective pro rata number of full and fractional New Fund Shares due such
shareholder. Fractional New Fund Shares will be rounded to the third decimal
place. Certificates representing New Fund Shares may or may not be issued as
determined by the directors of New Fund. Simultaneously with such crediting of
New Fund Shares to such Rockwood Fund shareholders, their Rockwood Fund Shares
shall be canceled.
(c) As soon as practicable after the foregoing transactions, Rockwood
Fund shall file Articles of Dissolution for record with the State of Idaho and
shall take, in accordance with the laws of the State of Idaho, all other steps
as shall be necessary and proper to liquidate and terminate its legal existence.
2. Closing and Closing Date. The Reorganization, together with
related acts necessary to consummate the same ("Closing"), shall take place
beginning at 10:00 a.m., local time, on February 28, 1997 ("Closing Date"), at
the offices of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W. --
2nd Floor, Washington, D.C., or at such other time, date or place as the Funds
may mutually agree.
3. Representations and Warranties.
Rockwood Fund represents and warrants as follows:
(a) Rockwood Fund is a corporation duly organized, validly existing
and in good standing under the laws of the State of Idaho, and its Articles of
Incorporation are on file with the State of Idaho;
(b) Rockwood Fund is duly registered as an open-end management investment
company under the 1940 Act, and such registration is in full force and effect;
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(c) Rockwood Fund qualified for treatment as a regulated investment
company under Subchapter M of the Code ("RIC") for each past taxable year since
it commenced operations and will continue to meet all requirements for such
qualification for its current taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did not
apply to it;
(d) There is no plan or intention of Rockwood Fund shareholders who
own 5% or more of the Rockwood Fund Shares -- and, to the best of Rockwood
Fund's management's knowledge, there is no plan or intention of the remaining
Rockwood Fund shareholders -- to redeem or otherwise dispose of any portion of
the New Fund Shares to be received by them in the Reorganization;
(e) The liabilities of Rockwood Fund to be assumed by New Fund were
incurred by Rockwood Fund in the ordinary course of its business;
(f) Rockwood Fund is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within the
meaning of section 386(a)(3)(A) of the Code;
(g) Not more than 25% of the value of Rockwood Fund's total assets
(excluding cash and cash items (including receivables) and U.S. government
securities) is invested in the stock and securities of any one issuer, and not
more than 50% of the value thereof is invested in the stock and securities of
five or fewer issuers;
(h) New Fund Shares are not being acquired for the purposes of making any
distribution thereof, other than in accordance with the terms of this Agreement;
and
(i) As of the Closing, Rockwood Fund will not have outstanding any
warrants, options, convertible securities or any other type of rights pursuant
to which any purchaser could acquire Rockwood Fund shares.
(j) Rockwood Fund will be liquidated immediately after consummation of the
Reorganization.
New Fund represents and warrants as follows:
(a) New Fund is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland, and its Articles of
Incorporation are on file with the Department of Assessments and Taxation of the
State of Maryland;
(b) New Fund will be duly registered as an open-end management
investment company under the 1940 Act on or before the Closing Date, and such
registration will be in full force and effect on the Closing Date;
(c) New Fund has not commenced operations and will not commence operations until
after the Closing;
(d) New Fund will meet all the requirements to qualify for treatment as a RIC
for its current taxable year;
(e) Prior to the Closing, there will be no issued and outstanding New
Fund Shares or any other securities issued by New Fund, except as provided in
Section 4(e);
(f) No consideration other than New Fund Shares (and New Fund's
assumption of Rockwood Fund's liabilities) will be issued in exchange for
Rockwood Fund's assets.
(g) New Fund does not have a plan or intention to issue additional
New Fund Shares following the Reorganization except for shares issued in the
ordinary course of its business as an open-end investment company; nor does New
Fund have any plan or intention to redeem or otherwise reacquire any New Fund
Shares issued pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of such business;
(h) New Fund (i) will actively continue the business of Rockwood Fund
in substantially the same manner that Rockwood Fund conducted it immediately
before the Reorganization, (ii) has no plan or intention to sell or otherwise
dispose of any of the assets to be acquired by it in the Reorganization, except
for dispositions made in the ordinary course of its business and dispositions
necessary to maintain its status as a RIC and (iii) expects to retain
substantially all such assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances suggest the
desirability of change or it becomes necessary to make dispositions thereof to
maintain such status;
(i) There is no plan or intention for New Fund to be dissolved or
merged into another corporation or business trust or "fund" thereof (within the
meaning of section 851(h)(2) of the Code) following the Reorganization; and
(j) Immediately after the Reorganization, (i) not more than 25% of
the value of New Fund's total assets (excluding cash and cash items (including
receivables) and U.S. government securities) will be invested in the stock and
securities of any one issuer, and (ii) not more than 50% of the value thereof
will be invested in the stock and securities of five or fewer issuers.
Each Fund represents and warrants as follows:
(a) The fair market value of the New Fund Shares, when received by
Rockwood Fund shareholders, will be approximately equal to the fair market value
of their Rockwood Fund Shares constructively surrendered in exchange therefor;
A-2
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(b) Immediately following consummation of the Reorganization,
Rockwood Fund shareholders will own all the New Fund Shares and will own such
shares solely by reason of their ownership of Rockwood Fund Shares immediately
prior to the Reorganization;
(c) Each Rockwood Fund shareholder will pay his or her own expenses, if
any, incurred in connection with the Reorganization;
(d) Immediately following consummation of the Reorganization, New
Fund will hold the same assets -- except for assets distributed to Rockwood Fund
shareholders who receive cash or other property and assets used to pay expenses
incurred in connection with the Reorganization, which excepted assets, together
with the amount of all redemptions and distributions (other than regular, normal
dividends) made by Rockwood Fund immediately preceding the Reorganization, will,
in the aggregate, constitute less than 1% of its net assets --and be subject to
the same liabilities that Rockwood Fund held or was subject to immediately prior
thereto, plus any liabilities and expenses of the parties incurred in connection
with the Reorganization;
(e) The fair market value on a going-concern basis of the assets to
be transferred by Rockwood Fund to New Fund will equal or exceed Rockwood Fund's
liabilities to be assumed by New Fund plus any liabilities to which the
transferred assets are subject; and
(g) There is no intercompany indebtedness between the Funds that was issued
or acquired, or it will be settled, at a discount.
4. Conditions Precedent. The obligations of each Fund to effectuate
the transactions contemplated hereby shall be subject to (i) performance by the
other party of all its obligations to be performed hereunder on or before the
Closing Date, (ii) all representations and warranties of the other party
contained in this Agreement being true and correct in all material respects as
of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date, with the same force and
effect as if made on and as of the Closing Date, and (iii) the further
conditions that on or before the Closing Date:
(a) All necessary filings shall have been made with the Securities
and Exchange Commission ("Commission") and state securities commissions, and no
order or directive shall have been received that any other or further action is
required to permit the parties to carry out the transactions contemplated by
this Agreement.
(b) One or more post-effective amendments to Rockwood Fund's
registration statement on Form N-1A ("Registration Statement") under the
Securities Act of 1933, as amended, and the 1940 Act containing (i) such
amendments to the Registration Statement as are determined by the directors of
each Fund to be necessary and appropriate as a result of this Agreement and (ii)
the adoption by New Fund, as its own, of the Registration Statement, as so
amended, shall have been filed with the Commission, and such post-effective
amendment or amendments to the Registration Statement shall have become
effective.
(c) Each party shall have received an opinion from Kirkpatrick &
Lockhart LLP as to the federal income tax consequences mentioned below. In
rendering such opinion, such counsel may rely as to factual matters, exclusively
and without independent verification, on the representations made in this
Agreement (or in separate letters addressed to such counsel). Such opinion shall
be substantially to the effect that, based on the facts and assumptions stated
therein, for federal income tax purposes: (i) the Reorganization will constitute
a reorganization within the meaning of section 368(a)(1)(F) of the Code, and
each Fund will be "a party to a reorganization" within the meaning of section
368(b) of the Code; (ii) no gain or loss will be recognized to Rockwood Fund on
the transfer of its assets to New Fund in exchange solely for New Fund Shares
and the assumption by New Fund of Rockwood Fund's liabilities or on the
distribution of those shares to its shareholders in constructive exchange for
their Rockwood Fund Shares; (iii) no gain or loss will be recognized to New Fund
on its receipt of such assets in exchange for the New Fund Shares and its
assumption of such liabilities; (iv) New Fund's basis for such assets will be
the same as the basis of such assets in the hands of Rockwood Fund immediately
before the Reorganization; (v) New Fund's holding period for such assets will
include the period during which such assets were held by Rockwood Fund; (vi) a
Rockwood Fund shareholder will recognize no gain or loss on the constructive
exchange of all such shareholder's Rockwood Fund Shares solely for New Fund
Shares pursuant to the Reorganization; (vii) a Rockwood Fund shareholder will
recognize no gain or loss on the constructive exchange of all his Rockwood Fund
Shares solely for New Fund Shares pursuant to the Reorganization; (viii) a
Rockwood Fund shareholder's basis for the New Fund Shares to be received by the
shareholder in the Reorganization will be the same as the adjusted basis of that
shareholder's Rockwood Fund Shares to be constructively surrendered in exchange
for those New Fund Shares; (ix) the holding period for the New Fund Shares
received by a shareholder of Rockwood Fund will include that shareholder's
holding period for the Rockwood Fund Shares constructively surrendered in
exchange therefor, provided such Rockwood Fund Shares are held as capital assets
on the date of the Reorganization; and (x) for purposes of section 381 of the
Code, New Fund will be treated as if there had been no Reorganization
(accordingly, the Reorganization will not result in the termination of Rockwood
Fund's taxable year, Rockwood Fund's tax attributes enumerated in section 381(c)
of the Code will be taken into account by New Fund as if there had been no
Reorganization, and the part of Rockwood Fund's taxable year before the
Reorganization will be included in New Fund's taxable year after the
Reorganization).
(d) Rockwood Fund shall have prepared a proxy statement in compliance
with the Securities Exchange Act of 1934 and the 1940 Act in connection with a
meeting of its shareholders for the purpose, inter alia, of voting on the
Reorganization and this Agreement; and the Reorganization and this Agreement
shall have been adopted and approved by the affirmative vote of the holders of
the requisite number of the outstanding Rockwood Fund Shares entitled to vote
thereon as required by law at the time such vote is taken.
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(e) Prior to the Closing, the directors of New Fund shall have
authorized the issuance of, and New Fund shall have issued, one New Fund Share
to Rockwood Fund in consideration of the payment of $1.00 for the purpose of
enabling Rockwood Fund to vote on the matters referred to in paragraphs (f), (g)
and (h) of this Section 4.
(f) New Fund shall have entered into an Investment Management
Agreement with Rockwood Advisers, Inc., a Distribution Agreement with Investor
Service Center, Inc., a Shareholder Administrative Service Agreement with
Investor Service Center, Inc., a Transfer Agency Agreement and an Agency
Agreement with DST Systems, Inc., and a Custodian Agreement and a Service and
Agency Agreement with Investors Bank & Trust Company and shall have approved a
Sub- Advisory Agreement between Rockwood Advisers, Inc. and Aspen Securities and
Advisory, Inc. Each such agreement shall have been approved by the directors of
New Fund and, to the extent required by law, by such of those directors who are
not "interested persons" of New Fund as defined in the 1940 Act, and by Rockwood
Fund as the sole shareholder of New Fund.
(g) The directors of New Fund who are not "interested persons" of New
Fund, as defined in the 1940 Act, shall have selected Tait, Weller & Baker as
independent public accountants for New Fund, and such selection shall have been
ratified by Rockwood Fund as the sole shareholder of New Fund.
(h) Rockwood Fund as the sole shareholder of New Fund shall have elected
the directors of New Fund.
At any time prior to the Closing, any of the foregoing conditions, except that
set forth in paragraph (d) of this Section 4, may be waived by the directors of
either Fund if, in their judgment, such waiver will not have a material adverse
effect on the interests of the shareholders of Rockwood Fund.
5. Amendment. This Agreement may be amended at any time by action of the
directors of either Fund notwithstanding approval thereof by the shareholders of
Rockwood Fund, provided that no amendment shall have a material adverse effect
on the interests of such shareholders.
6. Termination. The directors of either Fund may terminate this
Agreement and abandon the Reorganization notwithstanding approval thereof by the
shareholders of Rockwood Fund, at any time prior to the Closing, if
circumstances should develop that, in their judgment, make proceeding with the
Agreement inadvisable.
7. Governing Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Maryland; provided that, in
the case of any conflict between the 1940 Act and Maryland laws, the 1940 Act
shall govern.
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan
of Conversion and Liquidation to be executed and delivered by their duly
authorized officers as of the day and year first written above.
[signatures omitted]
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EXHIBIT B
ARTICLES OF INCORPORATION
OF
ROCKWOOD FUND, INC.
FIRST: (1) The name and address of the incorporator of the Corporation is
as follows:
-----
R. Darrell Mounts
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(2) Said incorporator is over eighteen years of age.
(3) Said incorporator is forming a corporation under the general laws of
the State of Maryland.
SECOND:The name of the Corporation is:
ROCKWOOD FUND, INC.
THIRD: (1) The Corporation is formed for the following purpose or purposes:
- -----
(a) To conduct, operate and carry on the business of an open-end management
investment company registered as such with the Securities and Exchange
Commission pursuant to the Investment Company Act of 1940, as amended; and
(b) To exercise and enjoy all powers, rights and privileges granted to and
conferred upon corporations by the Maryland General Corporation Law, now or
hereafter in force.
(2) The foregoing clauses shall be construed as powers as well as objects and
purposes.
FOURTH: The address of the principal office of the corporation within the State
of Maryland is 11 East Chase Street, Baltimore, Maryland 21202, and the resident
agent of the Corporation in the State of Maryland at this address is CSC Lawyers
Incorporating Service Company.
FIFTH: (1) The total number of shares of capital stock which the Corporation has
authority to issue is one billion (1,000,000,000) ($.01) par value per share
("Shares"), having an aggregate par value of $10,000,000.
The Board of Directors of the Corporation shall have full power and
authority to create and establish and to classify or to reclassify, as the case
may be, any Shares of the Corporation in separate and district series ("Series")
and classes of Series ("Classes"). The Shares of said Series or Classes of stock
shall have such preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption as shall be
fixed and determined from time to time by the Board of Directors. The
establishment of any Series or Class shall be effective upon the adoption of a
resolution by the Board of Directors setting forth such establishment and
designation and the relative rights and preferences of the Shares of such Series
or Class. At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated, the Directors may abolish
that Series or Class and the establishment and designation thereof.
The Board of Directors is hereby expressly granted authority to
increase or decrease the number of Shares of any Series or Class, but the number
of Shares of any Series or Class shall not be decreased by the Board of
Directors below the number of Shares thereof then outstanding, and, from time to
time to designate or redesignate the name of any Class or Series whether or not
Shares of such Class or Series are outstanding. The Corporation may hold as
treasury shares, reissue for such consideration and on such terms as the Board
of Directors may determine, or cancel, at their discretion from time to time,
any Shares reacquired by the Corporation. No holder of any of the Shares shall
be entitled as of right to subscribe for, purchase, or otherwise acquire any
Shares of the Corporation which the Corporation proposes to issue or reissue.
The Corporation shall have authority to issue any additional Shares
hereafter authorized by resolution of the Board of Directors and any Shares
redeemed or repurchased by the Corporation. All Shares of any Series or Class
when properly issued in accordance with these Articles of Incorporation shall be
fully paid and nonassessable.
(2) The Board of Directors is hereby authorized to issue and
sell from time to time Shares of the Corporation for cash or securities or other
property as the Board of Directors may deem advisable in the manner and to the
extent now or hereafter permitted by the laws of the State of Maryland;
provided, however, that the consideration per share (exclusive of any selling
commission) to be received by the Corporation upon the issuance or sale of any
Shares of its capital stock shall not be less than the par value per share and
shall not be less than the net asset value per share of such capital stock
determined as hereinafter provided. No such Shares, whether now or hereafter
authorized, shall be required to be first offered to the then existing
stockholders and no stockholder shall have any preemptive right to purchase or
subscribe to any unissued shares of the Corporation's capital stock or for any
additional shares whether now or hereafter authorized.
(3) At all meetings of stockholders, each holder of Shares
shall be entitled to one vote for each Share standing in the holder's name on
the books of the Corporation on the date fixed in accordance with the By-Laws
for
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determination of stockholders entitled to vote thereat; provided, however, that
when required by the Investment Company Act of 1940 or rules thereunder or when
the Board of Directors has determined that the matter affects only the interest
of one Series or Class, matters may be submitted to a vote of the holders of
Shares of a particular Series or Class, and each holder of Shares thereof shall
be entitled to votes equal to the Shares of the Series or Class standing in the
holder's name on the books of the Corporation. The presence in person or by
proxy of the holders of one-third (1/3) of the Shares outstanding and entitled
to vote shall constitute a quorum at any meeting of the stockholders except
where a matter is to be voted on by a Series or Class, one-third of the Shares
of that Series or Class outstanding and entitled to vote shall constitute a
quorum for the transaction of business by that Series or Class.
(4) Each holder of Shares shall be entitled at such times as
may be permitted by the Corporation to require the Corporation to redeem any or
all of the holder's Shares at a redemption price per share equal to the net
asset value per share less such charges as are determined by the Board of
Directors, at such time as the Board of Directors shall have prescribed by
resolution. The Board of Directors may specify conditions, prices, places and
manner and form of payment of redemption, and may specify requirements for the
proper form or forms of requests for redemption. The Board of Directors may
postpone payment of the redemption price and may suspend the right of the
holders of Shares to require the Corporation to redeem Shares during any period
or at any time when and to the extent permissible under the Investment Company
Act of 1940.
(5) The Board of Directors may cause the Corporation to
redeem at current net asset value all Shares owned or held by any one
stockholder having an aggregate current net asset value of any amount. Such
redemptions shall be effected in accordance with such procedures as the Board of
Directors may adopt. Upon redemption of Shares pursuant to this Section, the
Corporation shall promptly cause payment of the full redemption price to be made
to the holder of Shares to be redeemed.
(6) Dividends and distributions on Shares may be declared,
calculated and paid with such frequency and in such form, manner and amount as
the Board of Directors may from time to time determine.
(7) Net asset value, as used herein, shall be determined on
such days and at such times and by such methods as the Board of Directors shall
determine, subject to the Investment Company Act of 1940 and the applicable
rules and regulations promulgated thereunder. Such determination may be made on
a Series-by-Series basis or made or adjusted on a Class-by-Class basis, as
appropriate.
SIXTH: Notwithstanding any provision of law requiring a greater proportion than
a majority of the votes of all Shares of the Corporation to take or authorize
any action, any action (including amendment of these Articles of Incorporation)
may be taken or authorized by the Corporation upon the affirmative vote of a
majority of the Shares entitled to vote thereon.
SEVENTH: (1) To the maximum extent permitted by applicable law (including
Maryland law and the Investment Company Act of 1940) as currently in effect or
as may hereafter be amended:
(a) No director or officer of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages; and
(b) The Corporation shall indemnify and advance expenses as provided in the
By-Laws to its present and past directors, officers, employees and agents, and
persons who are serving or have served at the request of the Corporation as a
director, officer, employee or agent in similar capacities for other entities.
(2) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity or arising out of his or her
status as such, whether or not the Corporation would have the power to indemnify
him or her against such liability.
(3) Any repeal or modification of this Article SEVENTH, by
the stockholders of the Corporation, or adoption or modification of any other
provision of the Articles of Incorporation or By-Laws inconsistent with this
Section, shall be prospective only, to the extent that such repeal or
modification would, if applied retrospectively, adversely affect any limitation
on the liability of any director or officer of the Corporation or
indemnification available to any person covered by these provisions with respect
to any act or omission which occurred prior to such repeal, modification or
adoption.
EIGHTH: (1) All corporate powers and authority of the Corporation shall be
vested in and exercised by the Board of Directors except as otherwise provided
by statute, these Articles, or the By-Laws of the Corporation. The Corporation
shall have at least three directors; provided that if there is no stock
outstanding, the number of directors may be less than three but not less than
one. The number of directors shall never be less than the number prescribed by
the General Corporation Law of the State of Maryland.
(2) Thomas B. Winmill shall act as sole director of the
Corporation until the first annual meeting or until his successor is duly chosen
and qualified.
(3) Subject to the provisions of these Articles of
Incorporation and the provisions of the Investment Company Act of 1940, any
director, officer or employee, individually, or any partnership of which any
director, officer or employee may be a member, or any corporation or association
of which any director, officer or employee of this Corporation may be an
officer, director, trustee, employee or stockholder may be a party to or may be
pecuniarily interested in any contract
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or transaction of the Corporation, and in the absence of fraud, no contract or
other transaction shall be thereby affected or invalidated, provided that the
facts shall be disclosed or shall have been known to the Board of Directors or a
majority thereof and any director of the Corporation who is so interested or who
is also a director, officer, trustee, employee or stockholder of such
corporation or association or a member of such partnership which is so
interested may be counted in determining the existence of a quorum at any
meeting of the Directors of the Corporation which shall authorize any such
contract or transaction and may vote thereat on any such contract or transaction
with like force and effect as if he were not such director, officer, trustee,
employee or stockholder of such corporation or association so interested or not
a member of a partnership so interested, or so interested individually.
IN WITNESS WHEREOF, the undersigned has adopted and signed these
Articles of Incorporation on this 11th day of December, 1996 and hereby
acknowledges the same to be his act and that to the best of his knowledge,
information and belief, all matters and facts stated herein are true in all
material respects and that he is making this statement under the penalties of
perjury.
[signature omitted]
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THE ROCKWOOD GROWTH FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints Robert D. Anderson and Thomas B.
Winmill, and each of them, attorneys and proxies of the undersigned, with full
powers of substitution and revocation, to represent the undersigned and to vote
on behalf of the undersigned all shares of The Rockwood Growth Fund, Inc. (the
"Fund") which the undersigned is entitled to vote at the Special Meeting of
Shareholders (the "Meeting") of the Fund to be held at the offices of the Fund,
11 Hanover Square, New York, New York 10005 on February 21, 1997 at 10:30 a.m.,
and at any adjournments thereof. The undersigned hereby acknowledges receipt of
the Notice of Special Meeting of Shareholders and Proxy Statement dated January
30, 1997 and hereby instructs said attorneys and proxies to vote said shares as
indicated herein.
A majority of the proxies present and acting at the Meeting in person
or by substitute (or, if only one shall be so present, then that one) shall have
and may exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
Please sign exactly as your name appears hereon. If
shares are registered in more than one name, all
should sign but if one signs, it binds the others.
When signing as attorney, executor, administrator,
agent, trustee, or guardian, please give full title
as such. If a corporation, please sign in full
corporate name by an authorized officer. If a
partnership, please sign in partnership name by an
authorized person.
__________________________________ (L.S.)
Signature
__________________________________ (L.S.)
Signature
Dated ___________________________, 1997
To avoid the delay
of adjourning the
meeting, please
return this proxy
promptly in the
enclosed postage
paid envelope.
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<PAGE>
Please indicate your vote by an "X" in the appropriate box below.
This proxy, if properly executed, will be voted in the manner directed
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the proposal. Please refer to the Proxy Statement for a discussion of
the proposal.
APPROVAL OF AN AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION
PROVIDING FOR ROCKWOOD FUND TO REORGANIZE INTO ROCKWOOD FUND, INC., A
NEWLY FORMED MARYLAND CORPORATION.
|_| FOR |_| AGAINST |_| ABSTAIN
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