SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
of the Commission only
(as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
THE MICROCAP FUND, INC.
(Name of Registrant as Specified in its Charter)
(Name of Persons(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 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 Ex-
change 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:
Common Shares, par value $0.01 per share
Series A Convertible Preferred Shares,
par value $0.01 per share
(2) Aggregate number of securities to which trans-
action applies:
2,110,573 Common Shares
253,367 Series A Convertible Pre-
ferred Shares
(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):
$6.375 Common Shares
$7.96875 Series A Convertible Pre-
ferred Shares
(4) Proposed maximum aggregate value of transac-
tion:
$15,473,922
(5) Total fee paid:
$ 3,095
[X] 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:
THE MICROCAP FUND, INC
575 FIFTH AVENUE
37TH FLOOR
NEW YORK, NEW YORK 10017
June 26, 1996
Dear Shareholder,
The enclosed proxy statement outlines the plan of liquidation
for The MicroCap Fund, Inc. (the "Fund") which has been
endorsed by the Fund's management and Board of Directors. I
urge you to carefully read the enclosed material and to vote
in favor of the plan by marking the box "FOR" on the enclosed
white proxy card, signing, dating and promptly mailing it in
the return envelope provided.
The Fund's Board of Directors and I believe this plan of
liquidation to be the fastest, easiest and least expensive way
to liquidate the Fund and distribute the proceeds of the
liquidation to its shareholders.
The plan we are proposing calls for an initial distribution of
approximately 80% of the Fund's available cash shortly after
approval of the plan by the Fund's shareholders. The amount
of the initial distribution will be determined after appropri-
ate valuations and reserves are established based on reviews
by the Fund's accountants, counsel or other consultants. In
addition, upon approval of the plan, the Fund's current
management team will tender their resignations. An independent
Trustee will be appointed by the Board of Directors to carry
out the liquidation of the Fund. The Trustee's function will
be to liquidate the Fund's remaining assets which are primarily
comprised of investment securities with varying degrees of
liquidity. The Trustee will seek to maximize shareholder
value while expeditiously selling the securities for cash.
The only opposition to this plan that we are aware of has come
from a group of minority shareholders led by Michael Falk.
Mr. Falk and his firm, Commonwealth Associates, have been
named in a lawsuit filed on behalf of the shareholders of the
Fund which seeks damages for fraud, breach of fiduciary duty,
and violations of various securities laws. We believe that
this lawsuit has substantial value and we plan to distribute
the proceeds of any award or settlement to the Fund's share-
holders. We further believe that Mr. Falk's group is attempt-
ing to gain control of the liquidation process and thus be in
a position to have the lawsuit dismissed.
Mr. Falk's group has attempted to shift the focus away from
the plan of liquidation in an effort to discredit the current
management team and Board of Directors, claiming that they
have done a poor job of managing the Fund. What Mr. Falk's
group has failed to mention however, is that every single
failed investment made by the Fund was made by a management
team controlled by Mr. Falk, before the current management
team was installed in May 1994. In liquidating these failed
investments, the current management kept Mr. Falk informed
and he endorsed each liquidation decision made by current
management. The current management team has not made any
substandard investments and stands by its decisions to liqui-
date failed investments. These are facts that no level of bad
publicity from Mr. Falk's group can change.
We feel that it is truly unfortunate that the Fund's share-
holders are being barraged with so much negative propaganda
designed to divert attention from the matter at hand. The
Fund's Board of Directors and I urge you to look past the
distractions and to focus on the most important issues:
Whether liquidation of the Fund is in your best interest, and
if so, how to maximize the value to you.
The Fund's Board of Directors is firmly focused on making sure
these issues are concluded properly. Please be assured of our
continued commitment to the process of maximizing the value of
your investment in the Fund. Thank you for your support.
Sincerely,
/s/ Kamal Mustafa
President, Chief Executive
Officer and Portfolio
Manager
YOUR VOTE IS IMPORTANT
REGARDLESS OF THE NUMBER OF SHARES YOU MAY OWN
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD TODAY
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN VOTING
PLEASE CALL OUR PROXY SOLICITOR
D. F. KING & CO., INC
TOLL-FREE (800) 290-6432
