<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
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 Rule 14a-11(c) or Rule 14a-12
WILLIAM BLAIR MUTUAL FUNDS, INC. (FILE Nos. 33-17463 AND 811-5344)
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS OF REGISTRANT
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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> 2
REVISED PRELIMINARY FILING
November 12, 1996
Dear Stockholders,
A Special Meeting of the stockholders of the International Growth Fund (the
"Portfolio") of William Blair Mutual Funds, Inc. (the "Fund") will be held on
Tuesday, December 17, 1996 at 10:00 a.m. CST at the offices of the Fund, 32nd
Floor, 222 West Adams Street, Chicago, Illinois, 60606.
This meeting has been called to consider and vote upon amendments to reform the
prior and current management agreements between the Fund and William Blair &
Company, L.L.C. (the "Adviser"). Since the Portfolio began operations, both
the Adviser and the Fund have operated based upon an understanding that certain
fee reimbursement language in the Management Agreements does not apply to the
Portfolio. The purpose of a reforming amendment is to change a contract so
that it reflects the actual intentions of the parties. The proposed reforming
amendments will enable the Adviser and the Fund to continue their relationship
in the same manner and on the same basis as they have to date. By approving
the reforming amendments to the management agreements, you will, in essence, be
ratifying a retroactive change in the agreements as written to conform it to
the understanding under which the parties have operated.
What is the effect on your investment? By approving the proposal, the net
asset value of your investment in the Portfolio will not be affected; and
neither you nor the Fund will pay any more in fees and expenses.
Please note that your Board of Directors has unanimously approved the proposal
that you are being asked to vote upon and that neither you nor the Fund will
incur any expenses in relation to this proxy solicitation.
Some stockholders may receive multiple proxies because of their ownership of
more than one account. Your vote is important. To ensure that your vote is
counted it is necessary that you:
* Review the attached proposal;
* Complete and sign the enclosed proxy card; and
* Return the proxy card(s) in an enclosed postage-paid
envelope as soon as possible. Multiple proxies may
be returned in one envelope.
Your prompt response will save the expense of additional solicitations, and you
are encouraged to vote favorably.
Sincerely,
Rocky Barber
President
<PAGE> 3
REVISED PRELIMINARY FILING
WILLIAM BLAIR MUTUAL FUNDS, INC.
222 WEST ADAMS STREET, CHICAGO, ILLINOIS 60606
TELEPHONE (312) 364-8000
Notice of International Growth Fund
Special Meeting of Stockholders
December 17, 1996
November 12, 1996
TO THE STOCKHOLDERS OF THE INTERNATIONAL GROWTH FUND OF
WILLIAM BLAIR MUTUAL FUNDS, INC.:
Notice is hereby given that a Special Meeting of Stockholders of the
International Growth Fund of William Blair Mutual Funds, Inc. will be held in
the 32nd floor conference room of William Blair & Company, L.L.C., 222 West
Adams Street, Chicago, Illinois, on Tuesday, December 17, 1996, at 10:00 a.m.,
Chicago time, for the following purposes:
1. To approve or disapprove amendments to reform the prior and
current management agreements, which will ratify payments made under the
agreements as reformed.
2. To transact such other business as may properly come before
the Special Meeting.
Stockholders of record of the International Growth Fund at the close
of business on October 28, 1996 are entitled to notice of and to vote at the
Special Meeting.
IN ORDER TO AVOID DELAY AND ADDITIONAL EXPENSE, AND TO ASSURE THAT
YOUR SHARES ARE REPRESENTED, IF YOU DO NOT EXPECT TO BE PRESENT IN PERSON AT
THE SPECIAL MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND MAIL THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
Rocky Barber
President
<PAGE> 4
WILLIAM BLAIR MUTUAL FUNDS, INC.
222 WEST ADAMS STREET, CHICAGO, ILLINOIS 60606
TELEPHONE (312) 364-8000
Proxy Statement
for a meeting of the
International Growth Fund Stockholders
November 12, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of the William Blair Mutual Funds, Inc., (the "Fund")
of proxies to be voted at the Special Meeting of Stockholders of the
International Growth Fund (the "Portfolio") to be held on December 17, 1996,
and at any and all adjournments thereof. None of the costs of preparing,
printing and mailing the enclosed proxy, accompanying notice and proxy
statement, or any other costs in connection with the solicitation of proxies,
will be paid by the Fund. Additional solicitation may be made by letter,
telephone or facsimile by officers of the Fund, by officers or employees of
William Blair & Company, L.L.C., or by dealers and their representatives. THE
FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS DECEMBER 31, 1995 ANNUAL
REPORT AND ITS JUNE 30, 1996 SEMI-ANNUAL REPORT UPON REQUEST. WRITE TO THE
FUND AT 222 WEST ADAMS STREET, CHICAGO, ILLINOIS 60606, OR CALL
1-800-742-7272.
If a choice has been specified by the stockholders on the proxy, the
shares of the Portfolio will be voted accordingly. If no choice is so
specified, the shares will be voted FOR approval of amendments to reform the
prior and current management agreements, which will ratify payments made under
the agreements as reformed. Stockholders who give proxies, whether in writing
or by telephone, may revoke them at any time before they are voted by filing
with the Fund a written notice of revocation, by delivering a duly executed
proxy bearing a later date, or by attending the Special Meeting and voting in
person.
A quorum of stockholders is required to take action at the Portfolio's
Special Meeting. A majority of the shares issued and outstanding and entitled
to vote at the Special Meeting, represented in person or by proxy, will
constitute a quorum. Votes cast by proxy or in person will be tabulated by the
inspector of election, who will determine whether a quorum is present at the
Special Meeting. The inspector of election will treat abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees, typically in "street
name," as to which (i) instructions have not been received from the beneficial
owners or persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on a particular matter) as present for the purpose
of determining a quorum.
Approval of the proposed amendments to reform the management
agreements as to the Portfolio requires the affirmative vote of a "majority of
the outstanding voting securities" of the
-1-
<PAGE> 5
Portfolio. The term "majority of the outstanding voting securities"
(as defined in the Investment Company Act of 1940) means the affirmative vote
of the lesser of (1) 67% of the voting securities of the portfolio present at
the meeting if more than 50% of the outstanding shares of the portfolio are
present in person or by proxy; or (2) more than 50% of the outstanding voting
securities of the portfolio.
For purposes of determining the approval of the matters submitted for
a vote, abstentions and broker non-votes will be treated as shares voted
against the approval of such matters. The details of the proposal to be voted
upon by the stockholders of the Portfolio are set forth under the description
of the proposal below.
Shareholder Communications Corporation ("SCC") may be retained to
assist in the solicitation of proxies. If retained, SCC will be paid by
William Blair & Co. L.L.C., including reimbursement for SCC's related expenses.
As the meeting date approaches, some stockholders of the Portfolio may receive
a call from a representative of SCC if the Portfolio has not yet received their
vote. Authorization to permit SCC to execute proxies may be obtained by
telephone or electronically transmitted instructions from stockholders of the
Portfolio. Proxies that are obtained telephonically will be recorded in
accordance with the procedures set forth below. Management of the Fund
believes that these procedures are reasonably designed to ensure that the
identity of the stockholder casting the vote is accurately determined and that
the voting instructions of the stockholder are accurately determined.
SCC has received an opinion of Maryland counsel that addresses the
validity, under the applicable law of the State of Maryland, of authorization
to execute a proxy given orally. The opinion given by Maryland counsel
concludes that a Maryland court would find that there is no Maryland law or
public policy against the acceptance of proxies signed by an orally-authorized
agent, provided it adheres to the procedures set forth below.
In all cases where a telephonic proxy is solicited, the SCC
representative is required to ask the stockholder for such stockholder's full
name, address, social security or employer identification number, title (if the
person giving the proxy is authorized to act on behalf of an entity, such as a
corporation), the number of shares owned and to confirm that the stockholder
has received the Proxy Statement in the mail. If the information solicited
agrees with the information provided to SCC by the Fund, then the SCC
representative has the responsibility to explain the process, read the
proposals listed on the proxy card, and ask the stockholder's instructions on
each proposal. The SCC representative, although he or she is permitted to
answer questions about the process, is not permitted to recommend to the
stockholder how to vote, other than to read any recommendation set forth in the
proxy statement. SCC will record the stockholder's instructions on the card.
Within 72 hours, SCC will send the stockholder a letter or mailgram to confirm
the shareholder's vote and asking the stockholder to call SCC immediately if
the stockholder's instructions are not correctly reflected in the confirmation.
-2-
<PAGE> 6
As of October 28, 1996, there were issued and outstanding 7,288,625
shares of common stock of the Portfolio. Those persons who were stockholders
of record at the close of business on October 28, 1996 will be entitled to one
vote for each share held.
This Proxy Statement is first being mailed to stockholders of the
Portfolio on or about November 12, 1996.
The following table sets forth information as of October 28, 1996 with
respect to each executive officer of the Fund and each director of the Fund who
is an "interested person" of William Blair & Company, L.L.C., the Fund's
investment adviser. These persons receive no compensation from the Fund. The
officers of the Fund hold office until their successors are chosen and
qualified. The Fund's officers are elected, generally on an annual basis, by
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES WITH FUND PRINCIPAL OCCUPATIONS
<S> <C> <C> <C>
Conrad Fischer 62 Chairman of the Board and Director Principal, William Blair
(since 1987) & Company, L.L.C.
James M. McMullan 62 Director (since 1987) Principal, William Blair
& Company, L.L.C.
W. James Truettner 65 Director (since 1991) Principal, William Blair
& Company, L.L.C.
James L. Barber, Jr. 45 President (since 1987) Principal, William Blair
& Company, L.L.C.
Mark A. Fuller, III 39 Senior Vice President Principal, William Blair
(since 1993) & Company, L.L.C.
W. George Greig 44 Senior Vice President Portfolio Manager, William Blair
(since 1996) & Company, L.L.C.
Bentley M. Myer 50 Senior Vice President Principal, William Blair
(since 1992) & Company, L.L.C.
Norbert W. Truderung 44 Senior Vice President Principal, William Blair
(since 1992) & Company, L.L.C.
James S. Kaplan 36 Vice President (since 1995) Associate, William Blair
& Company, L.L.C.
John P. Kayser 47 Vice President (since 1994) Principal, William Blair
& Company, L.L.C.
Terence M. Sullivan 52 Vice President (since 1987) Associate, William Blair
& Company, L.L.C.
Walter Rucinski 52 Treasurer (since 1987) Controller, William Blair
& Company, L.L.C.
Janet V. Gassmann 29 Secretary (since 1996) Administrative Assistant, William
Blair & Company, L.L.C.
</TABLE>
On October 28, 1996, directors and executive officers of the Fund as a
group beneficially owned 387,887 shares of International Growth Fund. As of
that date, no person is known to the Fund to have owned beneficially more than
five percent of the shares of the Portfolio.
-3-
<PAGE> 7
AMENDMENTS TO REFORM PRIOR AND CURRENT MANAGEMENT AGREEMENTS
William Blair & Company, L.L.C., 222 West Adams Street, Chicago,
Illinois 60606 (the "Adviser"), has served as the Fund's investment manager
and principal underwriter since the Fund's inception in 1987. The current
management agreement between the Fund and the Adviser dated May 1, 1996, was
approved by the stockholders of each of the four current Fund portfolios at a
special meeting of stockholders on April 23, 1996. Previously, at a meeting
held on February 13, 1996, the Board of Directors of the Fund, including all
the directors who are not "interested persons" of the Fund or the Adviser, had
unanimously approved the current management agreement subject to approval by
the stockholders of each portfolio. For the most recent fiscal year ended
December 31, 1995, the International Growth Fund paid management fees totalling
$886,557.
The International Growth Fund commenced operations October 1, 1992.
At that time, the Fund's existing management agreement with the Adviser was
amended, by a separate document, to include the Portfolio. The amendment
provided for an annual management fee rate of 1.1% of the Portfolio's first
$100 million and .95% thereafter. The amendment did not include any obligation
on the Adviser's part to reimburse the Portfolio for excess operating expenses.
However, the existing management agreement contained the following sentence
(the "Reimbursement Clause"): The Adviser has agreed to reimburse the Fund for
any of a Portfolio's operating expenses (including the management fee but
excluding brokerage commissions or transaction costs, interests, taxes and
extraordinary expenses) that on an annual basis exceed 1.5% of such Portfolio's
average net assets up to $30,000,000 and 1% of such assets above $30,000,000.
The Board of Directors of the Fund and the Adviser did not intend for this
Reimbursement Clause, which applied to the other Fund portfolios, to apply to
the International Growth Fund. There is abundant evidence of this intention,
as discussed below.
Since its inception, the Portfolio has operated based upon the
understanding by both the Adviser and the Fund that it was not subject to this
expense limitation. During the entire life of the Portfolio, the Portfolio has
paid the Adviser its management fee without regard to the Reimbursement Clause.
The fee has been paid on a monthly basis since the Portfolio's inception in
October of 1992. The fees were reported to the Fund's Board of Directors at
their quarterly meetings and were viewed in greater detail by the Board at
their meetings held annually for the express purpose of renewing the Fund's
management agreement. In addition, the fees were reported in the Fund's annual
and semi-annual reports and every year in the updated prospectuses. The fees
reported in the annual reports were audited by the Fund's independent auditors.
The footnotes to the annual reports setting forth the advisory fee do not
mention the Reimbursement Clause, further indicating the independent auditor's
belief that there was no contractual expense reimbursement. Neither the
Adviser nor the Fund's Board of Directors indicated an intention to pay the
fees in any manner or in any amount other than what was actually paid. This
course of dealing supports the conclusion that neither party considered the
Reimbursement Clause to be applicable to the Portfolio.
-4-
<PAGE> 8
Further, evidence that the parties did not intend to be bound by the
Reimbursement Clause was the fact that, for the first year of operations, the
Adviser and the Fund agreed to, disclosed in the Fund's prospectus, and
followed a different, voluntary reimbursement. When the Portfolio commenced
operations in October of 1992, the Adviser agreed to reimburse the Portfolio to
the extent required so that the Portfolio's total operating expenses would not
exceed 2.00% of the Portfolio's average daily net assets during the Portfolio's
first year of operations. There would have been no reason to voluntarily agree
to waive expenses that exceeded 2.00% of assets if the Adviser were already
subject to a contractual requirement to waive fees in excess of 1.50%.
In addition, a special meeting of stockholders of the Fund was held on
April 23, 1996 to consider, among other things, a new management agreement (the
"New Agreement") which was applicable to all portfolios. The New Agreement
continued the Reimbursement Clause as to all portfolios, including the
International Growth Fund. However, this Reimbursement Clause was inconsistent
with specific action that the International Growth Fund stockholders were asked
to approve, and did approve, regarding the fees for that portfolio. The proxy
statement proposed that the existing fee structure, (which was 1.10% of the
first $100 million of average daily net assets and .95% of average daily net
assets above $100 million), be changed to 1.10% of the first $250 million of
average daily net assets, and 1.00% of the average daily net assets above $250
million. There would have been nothing gained from raising the effective fee
if the Reimbursement Clause applied because the Reimbursement Clause would have
limited the fee actually paid to less than the fee the Stockholders approved.
Shareholder approval of the new fee is evidence of the shareholders'
understanding that the Portfolio would be charged the new fee and that the
Reimbursement Clause was not applicable.
Given all the evidence of the parties' intentions, it would not be
reasonable to require the Adviser to comply with the Reimbursement Clause.
However, putting aside the specific evidence of the intentions of the parties,
the terms of the Reimbursement Clause (1.5% of average net assets up to $30
million, and 1.0% of such assets above $30 million) would not be an expense
limit normally set for an international stock fund, given that the Adviser's
fee starts at 1.1% and that international stock funds generally have higher
expenses than domestic funds. To require the Adviser to comply with the
Reimbursement Clause would constitute a windfall for the Fund and would not
appropriately compensate the Adviser for the work it performed.
Under the proposal, you are being asked to approve amendments to the
current and former management agreements. The prior agreement would be amended
and reformed from the beginning of the Portfolio on October 1, 1992. The
current management agreement would be amended and reformed from the beginning
of its term on May 1, 1996. Approval of the amendments would also constitute
ratification of the fee payments that have been made and are to be made without
regard to the expense limitation that had formerly appeared in the management
agreements.
As previously discussed in this proxy statement, the Adviser
and the Funds' Board of Directors believe that the Adviser is entitled to all
management fees collected.
The current management agreement, and the amendments to it and the
prior management agreement, are annexed to this proxy statement as Exhibits A,
B and C, respectively.
-5-
<PAGE> 9
Effect of Amendments to Reform the Agreements
Set forth below is a chart showing the fees and expenses actually
incurred by the Portfolio compared to what would be required if the management
agreements were not amended and reformed. The "Effect on Net Asset Value" as
set forth means that the net asset value per share was reduced, by not imposing
the expense limitations, by as little as 19.5 one-hundredths of 1% in 1993 to
as much as 30.4 one-hundredths of 1% in 1995.
<TABLE>
<CAPTION>
============================================================================================================
INTERNATIONAL GROWTH FUND EXPENSE LIMITATIONS
------------------------------------------------------------------------------------------------------------
EFFECT PER
EXPENSE SHARE ON
AVERAGE ACTUAL LIMITATIONS NET ASSET
NET ASSETS EXPENSES @ 1.5%/1% DIFFERENCE VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/1 - 12/31/92 $ 5,145,381 $ 40,419 $ 40,419 -- --
- ------------------------------------------------------------------------------------------------------------
1993 21,860,415 370,616 327,906 $ 42,710 $0.001954
- ------------------------------------------------------------------------------------------------------------
1994 59,057,847 895,090 740,578 154,512 0.002616
- ------------------------------------------------------------------------------------------------------------
1995 80,254,687 1,196,527 952,547 243,980 0.003040
- ------------------------------------------------------------------------------------------------------------
1/1 to 9/30/96 (not
annualized) 102,647,277 1,106,025 882,355 223,670 0.002179
-------
- ------------------------------------------------------------------------------------------------------------
Total 1/1/93 to 9/30/96 $664,872
========
============================================================================================================
</TABLE>
Set forth below is a chart showing the difference between actual
expense ratios and what they would have been if the expense limitation in the
written management agreement had been applied.
<TABLE>
<CAPTION>
============================================================================================================
INTERNATIONAL GROWTH FUND COMPARISON OF EXPENSE RATIOS
- ------------------------------------------------------------------------------------------------------------
EXPENSE RATIOS @
ACTUAL EXPENSE RATIOS 1.5%/1% LIMITATION DIFFERENCE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10/1 - 12/31/92 1.88% 1.88% --
- ------------------------------------------------------------------------------------------------------------
1993 1.71 1.50 0.21%
- ------------------------------------------------------------------------------------------------------------
1994 1.51 1.25 0.26
- ------------------------------------------------------------------------------------------------------------
1995 1.48 1.19 0.29
- ------------------------------------------------------------------------------------------------------------
1/1 to 9/30/96 (not
annualized) 1.08 0.86 0.22
- ------------------------------------------------------------------------------------------------------------
Full year 1996
(annualized)* 1.44 1.15 0.29
============================================================================================================
</TABLE>
________________
* Assumes assets for the full year are the same as those on September 30, 1996.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY APPROVED THIS MATTER
AND RECOMMEND THAT STOCKHOLDERS VOTE FOR THE PROPOSAL DESCRIBED ABOVE.
-6-
<PAGE> 10
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENT ADVISER
The Adviser is a limited liability company ("L.L.C."), the affairs of
which are controlled by its principals, none of whom owns more than 25% of the
firm. The Chief Executive Officer of the Adviser is E. David Coolidge, III.
The Adviser's Executive Committee is comprised of Harvey H. Bundy, III, E.
David Coolidge, III, Conrad Fischer, Edgar D. Jannotta, John P. Kayser,
Richard P. Kiphart, Albert J. Lacher, James D. McKinney and James M. McMullan.
The address of each of the above-named principals is 222 West Adams Street,
Chicago, Illinois 60606.
Messrs. Fischer, McMullan and W. James Truettner, current directors of
the Fund, are "interested persons" of the Adviser. The remaining directors of
the Fund are not "interested persons" of the Adviser. The officers of the Fund
who are principals or employees of the Adviser are named on page ___ of this
proxy statement.
ALLOCATION OF PORTFOLIO TRANSACTIONS
Decisions on the Fund's portfolio transactions (including the decision
to buy or sell, the appropriate price, allocation of brokerage, use of a broker
as agent or dealer as principal, and negotiation of commissions) are made by
the Adviser, subject to the monitoring of the Adviser. In purchasing and
selling portfolio securities, the Fund seeks to obtain the most favorable
overall result, taking into account the net price, the method of execution and
research services provided by the broker. Such research services include
economic forecasts and analytical, narrative and statistical reports on
industries and companies for consideration by the Fund and the Adviser's other
clients.
Selection of a broker for a particular portfolio transaction depends
upon many factors, some of which are subjective and which include the net
price, the confidentiality, reliability, integrity, the size and nature of the
transaction and the market in which it is to occur, and any research or other
services that the broker has provided. The Adviser determines the overall
reasonableness of brokerage commissions, and of premiums and discounts on
principal transactions (which do not involve commissions), by review of
comparable trades for the Adviser's other clients and in the market generally.
If more than one broker is believed to be equally qualified to effect a
portfolio transaction, the Adviser may assign the transaction to a broker that
has furnished research services; but the Adviser has no agreement, formula or
policy as to allocation of brokerage. The Fund does not ordinarily market its
shares through brokers, and any sales of the Fund's shares by a broker would be
neither a qualifying nor disqualifying factor in allocating brokerage.
The Fund may pay to brokers that provide research services to the
Adviser a commission higher than another broker might have charged if it is
determined that the commission is reasonable in relation to the value of the
brokerage and research services that are provided, viewed in terms of either
the particular transaction or the Adviser's overall responsibility to its
advisory accounts. The extent to which such commissions exceed commissions
solely for
-7-
<PAGE> 11
execution cannot be determined; but such research services, which are involved
in portfolio transactions for the Fund and for the Adviser's other advisory
accounts, can be of benefit both to the Fund and such other accounts. The
value of research services that are provided by brokers who handle portfolio
transactions for the Fund cannot be precisely determined, and such services are
supplemental to the Adviser's own efforts, which are undiminished thereby. The
Adviser does not believe that its expenses are reduced by reason of such
services. Transactions in over-the-counter securities are generally executed
as principal trades with primary market makers, except where it is believed
that a better combination of price and execution could otherwise be obtained.
The investment decisions for the Fund are reached independently from
those for other accounts managed by the Adviser. Such other accounts also may
make investments in the same type of instruments or securities as the Fund at
the same time as the Fund. When two or more accounts have funds available for
investment in similar instruments, available investments are allocated as to
amount in a manner considered equitable to each account. In some cases this
procedure may affect the size or price of the position obtainable for the Fund.
However, it is the opinion of the Board of Directors that the benefits
available because of the Adviser's organization outweigh any disadvantages that
may arise from exposure to simultaneous transactions.
No portfolio transactions are executed for the Fund with or through
the Adviser or any affiliated broker-dealer of the Adviser. The Fund may
purchase securities from other members of an underwriting syndicate of which
the Adviser or an affiliated broker-dealer is a participant, but only under
conditions set forth in applicable rules of the Securities and Exchange
Commission and in accordance with procedures adopted and reviewed periodically
by the Board of Directors.
STOCKHOLDER PROPOSALS
Since the Fund is not required to, nor does it intend to, hold regular
meetings of its stockholders, the anticipated date of the next special
stockholder meeting cannot be provided. Any stockholder who wishes to submit a
proposal for consideration at the next meeting of stockholders, when and if
such a meeting is called, should submit such proposal promptly to the Fund.
GENERAL
Management does not intend to present and does not have reason to
believe that any other items of business will be presented at the Special
Meeting. However, if other matters are properly presented to the Special
Meeting for a vote, the proxies will be voted upon such matters in accordance
with the judgment of the person acting under the proxies.
Failure of a quorum to be present at the Special Meeting will
necessitate adjournment. The persons named in the enclosed proxy may also move
for an adjournment of the Special
-8-
<PAGE> 12
Meeting to permit further solicitation of proxies with respect to the proposal
if they determine that adjournment and further solicitation is reasonable and
in the best interests of the stockholders.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN
AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
Rocky Barber
President
-9-
<PAGE> 13
EXHIBIT A
MANAGEMENT AGREEMENT
AGREEMENT made as of this first day of May, 1996, by and between
WILLIAM BLAIR MUTUAL FUNDS, INC., a Maryland corporation (the "Fund"), and
WILLIAM BLAIR & COMPANY, L.L.C., an Illinois limited liability company (the
"Manager").
WHEREAS, the Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, the shares of
common stock, $.001 per value per share ("Shares"), of which are registered or
are to be registered under the Securities Act of 1933; and
WHEREAS, the Fund is authorized to issue Shares in separate series
with each such series representing the interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently offers Shares in four portfolios,
designated the Growth Fund, the International Growth Fund, the Income Fund and
the Ready Reserves Fund, herein referred to as the "Existing Portfolios",
together with any other Fund portfolios which may be established later and
served by the Manager hereunder, being herein referred to collectively as the
"Portfolios" and individually referred to as a "Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Manager to render
investment advisory and management services to the Existing Portfolios, and the
Manager is willing to render such services;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. Employment; Services. The Fund hereby employs the Manager to
act as the adviser for the Existing Portfolios and other Portfolios hereunder
and to manage the investment and reinvestment of the assets of such Portfolios
in accordance with applicable investment objectives, policies and restrictions,
and to administer its affairs to the extent requested by and subject to the
supervision of the Board of Directors of the Fund for the period and upon the
terms herein set forth. The investment of funds shall be subject to all
applicable restrictions of the Articles of Incorporation and By-Laws of the
Fund as may from time to time be in force.
The Manager accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit any of its
principals or employees to serve without compensation as directors or officers
of the Fund if elected to such positions, and to assume the obligations
-10-
<PAGE> 14
herein set forth for the compensation herein provided. The Manager shall for
all purposes herein provided be deemed to be an independent contractor and,
unless otherwise expressly provided or authorized, shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund. It is understood and agreed that the Manager, by separate agreements
with the Fund, may also serve the Fund in other capacities.
2. Additional Portfolios. In the event that the Fund establishes
one or more portfolios other than the Existing Portfolios with respect to which
it desires to engage the Manager to render investment advisory and management
services hereunder, it shall notify the Manager in writing. If the Manager is
willing to render such services and the Fund and the Manager agree upon the
management fee rates (including breakpoints) to be payable by such portfolio or
portfolios, the Manager shall notify the Fund in writing, whereupon such
portfolio or portfolios shall become a Portfolio or Portfolios hereunder.
3. Management Fee. For the services and facilities described in
Section 1, the Fund will pay to the Manager a management fee based upon an
annual percentage of the average daily net assets of each Portfolio, as
follows:
a. For the Growth Fund:
.75% of average daily net assets.
b. For the International Growth Fund:
1.10% of the first $250 million of average daily net
assets; plus
1.00% of average daily net assets over $250 million.
c. For the Income Fund:
.25% of the first $250 million of average daily net
assets; plus
.20% of average daily net assets over $250 million;
plus
5.0% of the gross income earned by the Portfolio.
d. For the Ready Reserves Fund:
.625% of the first $250 million of average daily net
assets; plus
.600% of the next $250 million of average daily net
assets; plus
-11-
<PAGE> 15
.575% of the next $2,000 million of average daily net assets; plus
.550% of average daily net assets over $2,500 million.
The fee payable under this Agreement shall be calculated and accrued for each
business day by applying the appropriate annual rates to the net assets of the
Portfolio as of the close of the preceding business day, and dividing the sum
so computed by the number of business days in the fiscal year. The fee for a
given month shall be paid on the first business day of the following month.
For the month and year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year, respectively. The
services of the Manager to the Fund under this Agreement are not to be deemed
exclusive, and the Manager shall be free to render similar services or other
services to others so long as its services hereunder are not impaired thereby.
4. Expenses. In addition to the fee of the Manager, the Fund
shall assume and pay expenses for services rendered by a custodian for the
safekeeping of the Fund's securities or other property, for keeping its books
for account, for any other charges of the custodian, and for calculating the
net asset value of the Fund as provided in the prospectus of the Fund. The
Manager shall not be required to pay and the Fund shall assume and pay the
charges and expenses of its operations, including but not limited to
compensation of the directors (other than those affiliated with the Manager),
charges and expenses of independent auditors, of legal counsel, of any transfer
or dividend disbursement agent, any registrar of the Fund, costs of acquiring
and disposing of portfolio securities, interest, if any, on obligations
incurred by the Fund, costs of share certificates and of reports, membership
dues in the Investment Company Institute or any similar organization, reports
and notices to shareholders, stationery, printing, postage, other like
miscellaneous expenses and all taxes and fees payable to federal, state or
other government agencies on account of the registration of securities issued
by the Fund, filing of corporate documents or otherwise. The Fund shall not
pay or incur any obligation for any expenses for which the Fund intends to seek
reimbursement from the Manager as herein provided without first obtaining the
written approval of the Manager. The Manager shall arrange, if desired by the
Fund, for principals or employees of the Manager to serve, without compensation
from the Fund, as directors, officers or agents of the Fund if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by law.
If expenses borne by the Fund for any Portfolio which the Manager
manages in any fiscal year (including the Manager's fee, but excluding
interest, taxes, fees incurred in acquiring and disposing of portfolio
securities and, to the extent permitted, extraordinary expenses) exceed 1.5% of
the first $30,000,000 of average daily net assets of such Portfolio and 1% of
average daily net assets of the Portfolio over $30,000,000, the Manager will
reduce its fee or reimburse
-12-
<PAGE> 16
the Portfolio for any excess. If for any month the expenses of a Portfolio
properly chargeable to the income account shall exceed 1/12 of the percentage
of average net assets allowable as expenses, the payment to the Manager with
respect to such Portfolio for that month shall be reduced so that the total net
expense will not exceed such percentage. As of the end of the Fund's fiscal
year, however, the foregoing computations and payments shall be readjusted so
that the aggregate compensation payable to the Manager for the year is equal to
the percentage set forth in Section 3 hereof of the average net asset values as
determined as described herein throughout the fiscal year, diminished to the
extent necessary so that the total of the aforementioned expense items shall
not exceed the expense limitation. The aggregate of repayments, if any, by the
Manager to the Portfolio for the year shall be the amount necessary to limit
the said net expense to said percentage. Notwithstanding anything in the
foregoing to the contrary, the Manager shall not be obligated to reimburse the
Portfolio in an amount exceeding its advisory fee for the period received from
such Portfolio.
The net asset value for each Portfolio shall be calculated in
accordance with the provisions of the Fund's prospectus or at such other time
or times as the directors may determine in accordance with the provisions of
the Investment Company Act of 1940. On each day when the net asset value is
not calculated, the net asset value of a share of a Portfolio shall be deemed
to be the net asset value of such a share as of the close of business on the
last day on which such calculation was made for the purpose of the foregoing
computations.
5. Affiliations. Subject to applicable statutes and regulation,
it is understood that directors, officers or agents of the Fund are or may be
interested in the Manager as principals, agents or otherwise, and that the
principals and agents of the Manager may be interested in the Fund otherwise
than as a director, officer or agent.
6. Limitation of Liability of Manager. The Manager shall not be
liable for any error of judgment or of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of the Manager in the performance of its obligations and duties or by reason of
its reckless disregard of its obligations and duties under this Agreement.
7. Term; Termination; Amendment. This Agreement shall become
effective with respect to the Existing Portfolios on the date hereof and shall
remain in full force until April 30, 1997, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter with respect to the Existing Portfolios and each other Portfolio to
which the Agreement shall have become applicable, but only so long as such
continuance is specifically approved for each Portfolio at least annually in
the manner required by the Investment Company Act of 1940 and the rules and
regulations thereunder; provided, however, that if the continuation of this
Agreement is not approved for a Portfolio, the Manager
-13-
<PAGE> 17
may continue to serve in such capacity for such Portfolio in the manner and to
the extent permitted by the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by the Manager on sixty (60) days written notice to the other
party. The Fund may effect termination with respect to any Portfolio by action
of the Board of Directors or by vote of a majority of the outstanding voting
securities of such Portfolio.
This Agreement may also be terminated with respect to any Portfolio at
any time, without the payment of any penalty, by the Board of Directors or by
vote of a majority of the outstanding voting securities of such Portfolio, in
the event that it shall have been established by a court of competent
jurisdiction that the Manager or any officer or principal of the Manager has
taken any action which results in a breach of the covenants of the Manager set
forth herein.
The terms "assignment" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the Investment Company
Act of 1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the
Manager to receive payments on any unpaid balance of the compensation described
in Section 3 earned prior to such termination.
As to each Portfolio of the Fund, this Agreement may be amended only
by an instrument in writing signed by the party against which enforcement of
the amendment is sought. An amendment of this Agreement affecting a Portfolio
hereunder shall not be effective until approved by (i) vote of the holders of a
majority of the outstanding voting securities of the Portfolio; and (ii) a
majority of those Directors of the Fund who are not parties to this Agreement
or "interested persons" (as defined in the Investment Company Act of 1940) of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval.
8. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
9. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
10. Applicable Law. This Agreement shall be construed in
accordance with applicable federal law and the laws of the State of Illinois.
-14-
<PAGE> 18
IN WITNESS WHEREOF, the Fund and the Manager have caused this
Agreement to be executed as of the day and year first above written.
WILLIAM BLAIR MUTUAL FUNDS, INC.
By:
--------------------------------
ATTEST:
- --------------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
By:
--------------------------------
ATTEST:
- --------------------------------
-15-
<PAGE> 19
EXHIBIT B
AMENDMENT TO WRITTEN MANAGEMENT AGREEMENT
THIS AMENDMENT, made as of this 17th day of December, 1996, amends the
written Management Agreement dated May 1, 1996 by and between William Blair
Mutual Funds, Inc., a Maryland corporation (the "Fund"), and William Blair &
Company, L.L.C., an Illinois Limited Liability Company (the "Manager"). Terms
used herein shall have the same meaning as set forth in the Management
Agreement.
At a Special Meeting of Stockholders on December 17, 1996, the
stockholders approved amendments to reform the current and prior management
agreements which ratified payments made under the agreements as reformed.
The Fund and the Manager hereby agree that this amendment reforms the
written Management Agreement dated May 1, 1996 as to the International Growth
Fund (the "Portfolio") to conform said written Management Agreement to the
actual understanding and agreement of the parties.
The written Management Agreement did not properly exclude the
Portfolio from terms therein regarding the reimbursement of fees, contrary to
the actual understanding and agreement of the parties. Accordingly, the
parties agree that the first sentence of the second paragraph of Section 4 of
the written Management Agreement should have read, and is hereby amended and
reformed to read, as follows:
If expenses borne by the Fund for any Portfolio, EXCEPT THE
INTERNATIONAL GROWTH FUND, which the Manager manages in any
fiscal year (including the Manager's fee, but excluding interest,
taxes, fees incurred in acquiring and disposing of portfolio
securities and, to the extent permitted, extraordinary expenses)
exceed 1.5% of the first $30,000,000 of average daily net assets
of such Portfolio and 1% of average daily net assets of the
Portfolio over $30,000,000, the Manager will reduce its fee or
reimburse the Portfolio for any excess.
This amendment is effective as of May 1, 1996.
IN WITNESS WHEREOF, the Fund and the Manager have caused this
Amendment to be executed as of the day and year first above written.
(Signatures)
Note: The new language is bolded.
-16-
<PAGE> 20
EXHIBIT C
AMENDMENT TO WRITTEN THIRD AMENDMENT
TO MANAGEMENT AGREEMENT
THIS AMENDMENT, made as of this 17th day of December, 1996, amends the
Management Agreement dated January 5, 1988, (the "Management Agreement") as
amended July 25, 1990, May 1, 1991, October 1, 1992 and January 24, 1994 by and
between William Blair Mutual Funds, Inc., a Maryland corporation (the "Fund"),
and William Blair & Company, L.L.C., an Illinois Limited Liability Company
(formerly William Blair & Company, an Illinois partnership) (the "Manager").
Terms used herein shall have the same meaning as set forth in the Management
Agreement.
The International Growth Fund (the "Portfolio") became subject to the
Management Agreement by the third amendment thereto as of October 1, 1992 (the
"Third Amendment").
At a Special Meeting of Stockholders on December 17, 1996, the
stockholders approved amendments to reform the current and prior management
agreements which ratified payments made under the agreements as reformed.
The Fund and the Manager hereby agree that this amendment reforms the
written Third Amendment, dated October 1, 1992, of the Management Agreement to
conform said written Third Amendment to the actual understanding and agreement
of the parties.
The Third Amendment did not properly exclude the Portfolio from terms
of the Management Agreement regarding the reimbursement of fees, contrary to
the actual understanding and agreement of the parties. Accordingly, the Third
Amendment is hereby amended and reformed to include the following statement:
The second paragraph of Section 4 of the Management Agreement,
dated January 5, 1988, is not applicable to the International
Growth Fund.
This amendment is effective as of October 1, 1992.
IN WITNESS WHEREOF, the Fund and the Manager have caused this
Amendment to be executed as of the day and year first above written.
(Signatures)
Note: The second paragraph of Section 4 contains the Reimbursement
Clause.
-17-
<PAGE> 21
<TABLE>
<S> <C>
PROXY CARD SIDE 1
____________
Please be sure to sign and date this Proxy. |Date | Mark box at right if comments or [ ]
____________________________________________|____________| address changes have been noted on the
|_________________________________________________________| reverse side of this card.
Shareholder sign here Co-Owner sign here
RECORD DATE SHARES:
[X] PLEASE MARK VOTES AS IN EXAMPLE
1. Approval of Proposed Management
Agreement [ ] [ ] [ ]
The Board of Directors recommends a
vote FOR the proposal.
</TABLE>
PROXY CARD SIDE 2
WILLIAM BLAIR MUTUAL FUNDS, INC.
INTERNATIONAL GROWTH FUND
Proxy Solicited by the Board of Directors For Special Meeting of
Stockholders To be Held on December 17, 1996
The undersigned hereby appoints Conrad Fischer with full power of substitution.
Proxy for the undersigned to represent and vote the shares of common stock of
the undersigned at the Special Meeting of Stockholders of William Blair Mutual
Funds, Inc. International Growth Fund to be held on December 17, 1996 or any
adjournment thereof.
The shares to which this Proxy relates will be voted as specified. If no
specification is made, such shares will be voted for the proposal set forth on
this Proxy.
================================================================================
Please be sure to sign and date this Proxy.
- -------------------------------------------------------------------------------
Note: Please sign exactly as your name appears on this Proxy. If signing for
estates, trusts or corporations, title or capacity should be stated. If
shares are held jointly, each holder should sign.
================================================================================
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________________ ________________________________
____________________________________________ ________________________________
____________________________________________ ________________________________
<PAGE> 22
PLEASE RETURN YOUR PROXY IMMEDIATELY
In order to assure a quorum being represented at the Special Meeting of
Shareholders, you are urged to sign and return the enclosed proxy immediately.
Compliance with this request will help to avoid the expense of a second
mailing.
