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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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HERCULES FUNDS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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:
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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:
------------------------------------------------------------------------
/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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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- -
[LOGO]
HERCULES FUNDS INC.
HERCULES WORLD BOND FUND
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
May 17, 1996
Dear Shareholder:
A special meeting of shareholders of Hercules World Bond Fund (the "Fund") will
be held at the offices of Hercules Funds Inc. on June 18, 1996 at 10:00 a.m.
central time at 222 South Ninth Street, 3rd floor, Minneapolis, Minnesota.
This meeting has been called to seek shareholder approval to liquidate the Fund.
If approved, the assets of the fund will be liquidated and net assets will be
distributed to shareholders as soon as possible after the liquidation is
approved by shareholders.
This liquidation is part of a larger proposal to eliminate Hercules as a
separate family of funds, as we believe the funds are unlikely to grow to a size
which is economically viable. If you are a shareholder in more than one Hercules
fund, you will receive separate mailings of proxy materials for each fund.
PLEASE RETURN A COMPLETED PROXY CARD FOR EACH FUND IN WHICH YOU ARE INVESTED.
We urge you to read all of the enclosed materials carefully but direct your
attention to the following important points:
- The Board of Directors of the Company has unanimously approved the
liquidation and recommends that you vote FOR the liquidation.
- Shareholders will not incur any commissions, sales loads or other charges
in connection with the liquidation and Piper Capital, the investment
manager for the Fund, has agreed to pay for all direct expenses including
the proxy solicitation.
- Shareholders will be eligible to reinvest in any of 16 open-end Piper
Funds at net asset value within 30 days of the Fund's liquidation. Please
refer to the attached QUESTION AND ANSWER sheet and the attached proxy
material for more information.
PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE,
AS YOUR PROMPT RESPONSE WILL ELIMINATE THE NEED FOR ADDITIONAL MAILINGS. A
postage-paid envelope is enclosed with each proxy mailing for your convenience.
As the meeting date approaches, if you haven't voted you may receive a telephone
call reminding you to vote.
The enclosed QUESTION AND ANSWER sheet provides more detailed information about
the proposal. Also enclosed are the formal Notice of Special Meeting and Proxy
Statement. If you have additional questions, please contact your investment
professional or call Piper Capital at 1 800 866-7778 and press 2.
Sincerely,
[SIG]
William H. Ellis
President
<PAGE>
SHAREHOLDER Q&A
MAY 17, 1996
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ON FEBRUARY 6, 1996, PIPER CAPITAL MANAGEMENT RECOMMENDED TO THE BOARD OF
DIRECTORS OF HERCULES FUNDS INC. THAT IT ELIMINATE HERCULES AS A SEPARATE FUND
FAMILY BECAUSE THE FUNDS ARE TOO SMALL TO BE ECONOMICALLY VIABLE. THE BOARD
UNANIMOUSLY AGREED THAT IT WOULD BE IN THE BEST INTEREST OF SHAREHOLDERS TO
REORGANIZE THE HERCULES EQUITY FUNDS INTO APPROPRIATE PIPER FUNDS AND TO
LIQUIDATE THE WORLD BOND FUND. THESE PROPOSALS ARE SUBJECT TO SHAREHOLDER
APPROVAL.
WHAT WILL HAPPEN TO THE VARIOUS HERCULES FUNDS?
Piper Capital is proposing the following changes:
- Hercules North American Growth and Income Fund will be reorganized into
Growth and Income Fund, a series of Piper Funds Inc.
- Hercules European Value Fund and Hercules Pacific Basin Value Fund will be
reorganized into Pacific-European Growth Fund, a series of Piper Global
Funds Inc.
- Hercules Latin American Value Fund will be reorganized into Emerging
Markets Growth Fund, a newly-created series of Piper Global Funds Inc.
- Hercules World Bond Fund be liquidated and net assets distributed to
shareholders.
WHAT ABOUT HERCULES MONEY MARKET FUND?
We expect that shareholders will redeem out of Hercules Money Market Fund as a
result of Piper Capital's decision to discontinue the fund's 1% expense
limitation effective July 1, 1996.
WHY LIQUIDATE THE HERCULES WORLD BOND FUND?
Piper Capital's recommendation to liquidate and distribute the net assets to
shareholders is based on several factors:
- Assets in the fund have declined to just $6.5 million as of March 29,
1996. At this low asset level, it is not economically feasible to continue
capping expenses and prospects for future growth appear remote.
- Given the investment objective of World Bond Fund, there is not another
fund managed by Piper Capital that would be appropriate for a
reorganization.
WILL THE HERCULES CONTINGENT DEFERRED SALES CHARGE (CDSC) BE WAIVED?
Yes. Shareholders subject to a CDSC (those who purchased shares after June 19,
1995) will not be charged a CDSC upon the Fund's liquidation.
WHAT IF SHAREHOLDERS REDEEM BEFORE THE LIQUIDATION?
Shareholders who purchased shares after June 19, 1995 will be charged a CDSC if
they redeem before the liquidation. Shares purchased on or before June 19, 1995
are not subject to the CDSC.
CAN SHAREHOLDERS REINVEST IN THE PIPER FUNDS AT NET ASSET VALUE?
Yes. Shareholders may reinvest in any of 16 open-end Piper Funds at net asset
value within 30 days of redemption or the Fund's liquidation.
WHAT PERCENTAGE OF SHAREHOLDERS MUST VOTE "YES" IN ORDER FOR THE PROPOSAL TO
PASS?
For each fund, shareholders representing a majority of the outstanding shares
must vote yes in order for the proposed merger or liquidation of that fund to
occur.
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IF APPROVED BY SHAREHOLDERS OF THE FUND, HOW WILL THE LIQUIDATION BE
ACCOMPLISHED?
Assets of the fund will be liquidated as of a date to be determined, and net
assets will be distributed based on the number of shares held by each
shareholder. Shareholders who are already clients of Piper Jaffray will be
credited with the proceeds on their Piper Jaffray statements. Other shareholders
will receive a check either directly or through their brokerage firm, depending
upon whether the shares are held in street name or shareholder name.
WHO WILL PAY FOR THE REORGANIZATION?
Piper Capital has agreed to pay all direct costs associated with the proposed
mergers and liquidation including the costs of proxy solicitation. No
commission, sales loads or other charges will be incurred by shareholders. For
tax purposes, the liquidation will be treated as a redemption of Fund shares
which may be a taxable event. Please refer to the proxy statement for more
information.
<PAGE>
HERCULES FUNDS INC.
HERCULES WORLD BOND FUND
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------
TO BE HELD ON JUNE 18, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders of Hercules
World Bond Fund (the "Fund"), a series of Hercules Funds Inc. (the "Company"),
will be held at 10:00 a.m., Central Time, on June 18, 1996, on the third floor
of the Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota. The
purposes of the meeting are as follow:
1. To consider and vote upon the liquidation and termination of the Fund
pursuant to the provisions of the Plan of Liquidation and Termination
(the "Plan") approved by the Company's Board of Directors on March 29,
1996. A vote in favor of the Plan will be considered a vote in favor of
an amendment to the articles of incorporation of the Company required to
effect the Plan.
2. To transact such other business as may properly come before the meeting.
Shareholders of record on April 25, 1996, are the only persons entitled to
notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE UPCOMING MEETING, PLEASE FILL IN, SIGN, DATE,
AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A stamped return envelope
is enclosed for your convenience.
Susan Sharp Miley
SECRETARY
Dated: May 17, 1996
<PAGE>
PROXY STATEMENT
HERCULES FUNDS INC.
LIQUIDATION OF HERCULES WORLD BOND FUND
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
(800) 584-1317
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SPECIAL MEETING OF SHAREHOLDERS
------------------------
JUNE 18, 1996
This Proxy Statement is furnished to shareholders of Hercules World Bond
Fund (the "Fund"), one of six series of Hercules Funds Inc. (the "Company"), in
connection with the solicitation by the Board of Directors of the Company of
proxies to be voted at a special meeting of shareholders (the "Meeting") of the
Company, to be held on June 18, 1996, and any adjournments thereof. The costs of
solicitation, including the cost of preparing and mailing the Notice of Meeting
and this Proxy Statement, will be paid by Piper Capital Management Incorporated,
the Company's investment adviser and manager (the "Manager" or "Piper Capital"),
and such mailing will take place on or about May 17, 1996. Additional
solicitation may be made by letter, telephone or telegraph by officers or
employees of the Manager or Piper Jaffray Inc. (the "Distributor"), an
"affiliated person" of the Manager (as that term is defined in the Investment
Company Act of 1940, as amended), who serves as Distributor of the Company's
shares, or by dealers and their representatives, in each case without special
compensation therefor. In addition, the Company has engaged Shareholder
Communications Corporation to assist in the solicitation of proxies, the cost of
which will be borne by the Manager. The address of the Manager and the
Distributor is the same as that of the Fund as provided above.
A proxy may be revoked before the meeting by giving written notice of
revocation in person or by mail to the Secretary of the Fund, by timely delivery
of a duly executed proxy bearing a later date or by attending and voting at the
Meeting. Attendance at the Meeting will not in and of itself revoke a proxy. A
quorum of shareholders is required to take action at the Meeting. The holders of
ten percent of the shares outstanding and entitled to vote at the Meeting,
represented in person or by proxy, will constitute a quorum of shareholders at
the Meeting.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the shareholder's instructions.
Unmarked proxy forms will be voted for approval of the liquidation and
termination of the Fund. Abstentions will be counted as present for purposes of
determining whether a quorum of shares is present at the Meeting, but will have
the same effect as a vote "against" the proposal to liquidate and terminate the
Fund. If a broker returns a "non-vote" proxy, indicating a lack of authority to
vote on the proposal, then the shares covered by such non-vote shall be deemed
present at the Meeting for purposes of determining a quorum, but shall not be
deemed to be represented at the Meeting for purposes of calculating the vote
with respect to the proposal. Accordingly, broker non-votes will have the same
effect as a negative vote.
So far as the Company's Board of Directors (the "Board of Directors") is
aware, no matters other than those described in this Proxy Statement will be
acted upon at the Meeting. Should any other matters properly come before the
Meeting, the proxies named in the enclosed proxy form shall act
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upon them according to their best judgment. In the event that sufficient proxy
votes in favor of the proposal to liquidate and terminate the Fund are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Such adjournments will require the affirmative vote of the holders of a
majority of the shares present in person or by proxy at the Meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are entitled to vote in favor of the proposal and will vote against such
adjournment those proxies required to be voted against the proposal.
Only shareholders of record on April 25, 1996, may vote at the Meeting or
any adjournments thereof. As of that date, there were issued and outstanding
627,574 common shares of the Fund. Each shareholder of the Fund is entitled to
one vote for each share held. No person, to the knowledge of Fund management,
was the beneficial owner of more than 5% of the voting shares of the Fund as of
April 25, 1996. As of such date, the officers and directors of the Fund, as a
group, beneficially owned less than 1% of the Fund's outstanding shares.
Under Minnesota law, none of the shareholders of the Fund will be entitled
to exercise any dissenter's rights or appraisal rights with respect to the
liquidation and termination of the Fund.
THE COMPANY'S ANNUAL AND SEMI-ANNUAL REPORTS FOR THE FISCAL YEAR ENDED JUNE
30, 1995 AND THE SIX MONTHS ENDED DECEMBER 31, 1995, RESPECTIVELY, INCLUDING
FINANCIAL STATEMENTS RESPECTING THE FUND, WERE PREVIOUSLY MAILED TO
SHAREHOLDERS. IF YOU HAVE NOT RECEIVED THESE REPORTS OR WOULD LIKE TO RECEIVE
ANOTHER COPY OF ONE OR BOTH REPORTS, PLEASE CONTACT THE COMPANY AT 222 SOUTH
NINTH STREET, MINNEAPOLIS, MINNESOTA 55402-3804, OR CALL 800-584-1317, AND
COPIES WILL BE SENT, WITHOUT CHARGE, BY FIRST-CLASS MAIL WITHIN THREE BUSINESS
DAYS OF YOUR REQUEST.
APPROVAL OF A PLAN OF LIQUIDATION AND TERMINATION
INTRODUCTION
On February 6, 1996, the Board of Directors considered and approved the
recommendation of the Manager that the Fund be liquidated and terminated. A Plan
of Liquidation and Termination of the Fund (the "Plan") was subsequently adopted
by the Board of Directors on March 29, 1996, subject to shareholder approval. A
copy of the Plan is attached as Exhibit A to this Proxy Statement. If the Plan
is approved by the Fund's shareholders, the portfolio securities and other
assets of the Fund will be sold, creditors will be paid or reserves for such
payments established, and the net proceeds of such sales distributed to the
Fund's shareholders in cash, pro rata in accordance with their shareholdings.
Approval of the Plan will be considered approval of an amendment to the articles
of incorporation of the Company required to effect the Plan. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PLAN.
The affirmative vote of a majority of the Fund shares entitled to vote is
required for approval of the Plan.
BACKGROUND
The Company was managed initially through a joint venture ("Hercules")
between Piper Jaffray Companies, Inc. ("Piper Jaffray") and Midland Walwyn
Capital Corporation ("Midland") pursuant to which the parties agreed to jointly
promote, distribute and manage a family of international funds in the U.S. and
Canada. Shares of the Company were first offered to the public in the U.S. on
November 9, 1993.
The Company's shares, including shares of the Fund, were originally offered
for sale with no front-end or back-end sales charge. In lieu of a sales charge
paid by investors, Hercules and each sub-adviser retained by Hercules to manage
the portfolio of each series of the Company, advanced to broker-dealers a sales
commission (except with respect to the Money Market Fund) in the aggregate of
2.00% of the net asset value of shares purchased. If a shareholder redeemed in
less than two years, all or a portion of the advanced commission was charged
back to the broker-dealer. If a shareholder
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exchanged among the series within the same two year period, the sub-advisers
paid, or were paid, as the case may be, a portion of the commission advance that
had not yet been recovered. While initially the Company, including the Fund,
experienced positive growth, a trend of net redemptions commenced in November of
1994 which has yet to be reversed.
In April 1995, Piper Jaffray and Midland announced their mutual agreement to
terminate the joint venture arrangement and to dissolve Hercules. After
requisite shareholder approval was obtained in July 1995, Piper Capital assumed
the role of manager and investment adviser for the Company.
After becoming manager to the Company, Piper Capital focused on the
structure, pricing and marketing of the various Hercules funds in the U.S. in an
attempt to promote asset growth in the funds and reverse the trend of net
redemptions. In particular, it invested considerable time and financial
resources to develop a distribution network with broker dealers in addition to
Piper Jaffray because Piper Capital believed that the development of an external
distribution system was critical to the successful distribution of the Hercules
funds.
As part of this effort, a change in the pricing structure was implemented in
June 1995 incorporating a contingent deferred sale charge ("CDSC").
Implementation of the CDSC was intended to eliminate the need to recoup from the
broker-dealer through whom the shares were sold the commissions advanced to it
by Piper Capital and the applicable sub-adviser in the event of a redemption
within two years of purchase. In lieu thereof, shareholders would be required to
pay a declining CDSC if shares were redeemed within two years of purchase. It
was believed that this pricing structure would prove attractive to
broker-dealers as well as to future investors. The implementation of the CDSC
did not, however, have the desired effect on growth. Rather, the trend of net
redemptions continued. Latin American Value Fund and Money Market Fund are the
only Hercules funds which have had even one month since October 1994 where
shareholder purchases exceeded redemptions. Moreover, sales through
broker-dealers other than Piper Jaffray remained minimal.
The continuing inability to achieve asset growth in the Hercules funds
prompted a further review by Piper Capital of the future prospects of the funds.
Ultimately, Piper Capital concluded that it is unlikely that the Hercules funds
will, in the foreseeable future, grow to a sufficient size to be economically
viable. Accordingly, Piper Capital recommended to the Board of Directors of the
Company that the Hercules funds be eliminated as a free standing family of
funds, that the Fund and Money Market Fund be liquidated and that each other
Hercules fund be combined with an appropriate fund within the Piper family of
funds (collectively, the "Proposed Actions"). With respect to the liquidation of
the Fund, Piper Capital based its recommendation on, among other things, the
absence of another investment company advised by the Manager that would be
appropriate for a possible business combination.
THE BOARD'S CONSIDERATION
At a meeting of the Board of Directors held on February 6, 1996, Piper
Capital reviewed for the Board the basis for the Proposed Actions. It detailed
the efforts that have been made since inception of the Hercules funds to promote
and market the funds, the continuing inability to reverse the trend of net
redemptions that has continued since November of 1994 despite these efforts, and
the basis for its pessimistic view respecting the Company's future prospects.
On February 6, 1996, the Board of Directors, including all of the
independent directors, unanimously approved the proposed liquidation and on
March 29, 1996 approved the Plan and determined to recommend that shareholders
of the Fund approve the Plan.
In determining whether to recommend that shareholders of the Fund approve
the Plan, the Board, with the advice and assistance of independent legal
counsel, inquired into a number of matters. In particular, the Board considered
the Company's prospects for future growth and the effect upon shareholders
should assets remain at current levels or continue to be reduced further. The
Board
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considered in this regard that since the commencement of operations, Piper
Capital has voluntarily assumed certain administrative, transfer agent and
custodian expenses of the Fund and the Distributor has voluntarily limited its
12b-1 fees payable by the Fund, but that subsequent to June 30, 1996 they will
no longer do so. The Board noted that absent such assumption of expenses and
waiver of fees, the expense ratio of the Fund for the most current fiscal year
would have been considerably higher and total return lower.
The Board also considered (i) the likelihood that additional sales of the
Fund's shares could increase the assets to a more viable level; (ii) the absence
of another investment company advised by the Manager that would be appropriate
for a possible business combination; (iii) the Manager's agreement under the
Plan to bear all expenses associated with the Plan as well as any unamortized
organizational expenses on the books of the Fund; and (iv) that shareholders
will have the ability to reinvest liquidation proceeds into another fund managed
by the Manager at net asset value, without paying applicable front-end sales
charges of up to 4.00%. Based on consideration of the foregoing and all other
factors deemed relevant by it, the Board of Directors determined that adoption
of the Plan was in the best interests of the Fund and its shareholders.
If the Plan is not approved by shareholders, the Fund will continue in
existence and the Board will consider alternative actions.
SUMMARY OF THE PLAN AND RELATED TRANSACTIONS
The Plan will become effective on the date of its approval by the Fund's
shareholders (the "Effective Date"). As soon as practicable after the Effective
Date, the Company, on behalf of the Fund, will complete the sale of the Fund's
portfolio securities in order to convert its assets to cash. After the Effective
Date, the Company will not engage in any business activity on behalf of the Fund
except for the purpose of winding up its business and affairs, preserving the
value of its assets and distributing such assets to shareholders after the
payment to (or reservation of assets for payment to) all creditors of the Fund.
All contracts entered into by or on behalf of the Fund will terminate upon
consummation of the transactions contemplated by the Plan. After the Effective
Date, the Fund will not issue any new shares except in connection with the
reinvestment of dividends or distributions by existing shareholders. As soon as
practicable after the Effective Date, and in any event within 60 days
thereafter, the Company will mail to each Fund shareholder of record who has not
redeemed its shares a liquidating distribution equal to the shareholder's
proportionate interest in the remaining assets of the Fund and information
concerning the sources of the liquidating distribution. Shareholders who are
already clients of the Distributor will be credited with the proceeds on their
brokerage account statements. Other shareholders will receive a check either
directly or through their brokerage firm, depending upon whether the shares are
held in street name or shareholder name. Shareholders of the Fund may reinvest
the proceeds of the distribution in any of 16 open-end funds managed by the
Manager at net asset value within 30 days of the payment of the liquidating
distribution.
After the distribution of assets to shareholders, the Fund will be
terminated in accordance with the Plan and applicable provisions under Minnesota
law. In addition, as soon as practicable after the consummation of the Fund's
liquidation and the other Proposed Actions, the Company will be dissolved
pursuant to applicable provisions of Minnesota law and an application will be
filed with the Securities and Exchange Commission for an order declaring that
the Company has ceased to be an investment company. The Plan provides that the
Board of Directors may authorize such variations from, or amendments to, the
provisions of the Plan as may be necessary or appropriate to effect the complete
liquidation and termination of the Fund and the dissolution of the Company in
accordance with the purposes to be accomplished by the Plan.
The adoption of the Plan will not affect the right of shareholders to redeem
shares of the Fund at their then current net asset value per share any day prior
to the day the liquidating distribution is made. All officers of the Company, as
well as all entities serving the Company, will continue in their present
positions and capacities until such time as the Company is dissolved.
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FEDERAL INCOME TAX CONSEQUENCES
PAYMENT BY THE FUND OF LIQUIDATION DISTRIBUTIONS TO SHAREHOLDERS WILL BE A
TAXABLE EVENT. BECAUSE THE INCOME TAX CONSEQUENCES FOR A PARTICULAR SHAREHOLDER
MAY VARY DEPENDING ON INDIVIDUAL CIRCUMSTANCES, EACH SHAREHOLDER IS URGED TO
CONSULT HIS OR HER OWN TAX MANAGER CONCERNING THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES OF RECEIPT OF A LIQUIDATING DISTRIBUTION.
The Fund currently qualifies, and intends to continue to qualify through the
end of the liquidation period, for treatment as a regulated investment company
under the Internal Revenue Code of 1986, as amended, so that it will be relieved
of federal income tax on any investment company taxable income or net capital
gain (the excess of net long-term capital gain over net short-term capital loss)
from the sale of its assets. The payment of liquidation distributions will be a
taxable event to shareholders (for those shareholders subject to tax). Each
shareholder will be viewed as having sold his or her Fund shares for an amount
equal to the liquidation distribution(s) he or she receives. Each shareholder
will recognize gain or loss in an amount equal to the difference between (a) the
shareholder's adjusted basis in the Fund shares, and (b) such liquidation
distribution(s). The gain or loss will be capital gain or loss to the
shareholder if the Fund shares were capital assets in the shareholder's hands
and generally will be long-term if the Fund shares were held for more than one
year before the liquidation distribution is received.
As of June 30, 1995, the Fund had $338,380 in net capital loss carryforwards
and current capital losses that could be used to offset current or future
capital gains. If the liquidation and termination of the Fund is approved and
any capital gains are realized, the Fund will be able to use a portion of its
net capital loss carryforwards to offset such gains. Any remaining capital loss
carryforwards that are not used to offset capital gains realized upon
liquidation will be lost, and the benefit of such capital loss carryforwards
will not pass through to shareholders. If the Fund did not liquidate, it is
possible that sufficient capital gains could be generated in the future to use
the entire amount of the Fund's capital loss carryforwards. However, the Manager
believes that this is unlikely.
The Fund generally will be required to withhold tax at the rate of 31% with
respect to any liquidation distribution paid to individuals and certain other
non-corporate shareholders who fail to certify to the Company that their social
security number or taxpayer identification number provided to the Company is
correct and that the shareholder is not subject to backup withholding.
The foregoing summary is generally limited to the material federal income
tax consequences to shareholders who are individual United States citizens and
who hold shares as capital assets. It does not address the federal income tax
consequences to shareholders who are corporations, trusts, estates, tax-exempt
organizations, pension plans, Individual Retirement Accounts or non-resident
aliens. This summary does not address state or local tax consequences.
Shareholders are urged to consult their own tax advisers to determine the extent
of the federal income tax liability they would incur as a result of receiving a
liquidation distribution, as well as any tax consequences under any applicable
state, local or foreign laws.
REQUIRED VOTE
The affirmative vote of a majority of the Fund shares entitled to vote is
required to approve the Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE PLAN.
SHAREHOLDER PROPOSALS
In the event that the Fund is not liquidated and terminated, any proposals
of security holders intended to be presented at the next meeting of shareholders
should be presented a reasonable time
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prior to the mailing of the proxy materials sent in connection with the meeting,
for inclusion in the proxy statement for that meeting. Annual meetings, however,
are not required to be held pursuant to the Fund's by-laws.
OTHER BUSINESS
Management of the Company knows of no other matters relating to the Fund
which may be presented at the Meeting. However, if any matters not now known
properly come before the Meeting, it is intended that the persons named in the
attached form of proxy, or their substitutes, will vote such proxy in accordance
with their judgment on such matters.
Susan Sharp Miley
SECRETARY
Dated: May 17, 1996
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EXHIBIT A
HERCULES WORLD BOND FUND, A SERIES OF HERCULES FUNDS INC.
PLAN OF LIQUIDATION AND TERMINATION
The following Plan of Liquidation and Termination (the "Plan") of Hercules
World Bond Fund (the "Fund"), one of six series of Hercules Funds Inc. (the
"Company"), a corporation organized and existing under the laws of the state of
Minnesota, which has operated as an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is intended to accomplish the complete liquidation and
termination of the Fund in conformity with the provisions of the Company's
Articles of Incorporation and ByLaws, and Minnesota law.
WHEREAS, the Company's Board of Directors (the "Board") has deemed that it
is advisable and in the best interests of the Fund and its shareholders to
liquidate and terminate the Fund, and the Board, on February 6, 1996, considered
the matter and determined to recommend the liquidation and termination of the
Fund pursuant to this Plan;
NOW, THEREFORE, the liquidation and termination of the Fund shall be carried
out in the manner hereinafter set forth:
1. EFFECTIVE DATE OF PLAN. This Plan shall be effective only upon the
adoption and approval of the Plan at a meeting of shareholders of the Fund
called for the purpose of voting upon the Plan, by a vote of holders of more
than 50 percent of the outstanding shares of the Fund. The date of such adoption
and approval of the Plan by shareholders is hereinafter called the "Effective
Date".
2. CESSATION OF BUSINESS. After the Effective Date, the Company shall not
engage in any business activities on behalf of the Fund except for the purpose
of winding up the Fund's business and affairs, preserving the value of its
assets and distributing its assets to shareholders in accordance with the
provisions of this Plan after the payment to (or reservation of assets for
payment to) all creditors of the Fund. After the Effective Date, the Fund shall
not issue any new shares except in connection with the reinvestment of dividends
or distributions by existing shareholders. Notwithstanding the provisions of
this Plan, the Company shall, prior to making the final liquidating distribution
to Fund shareholders, continue to honor requests for the redemption of Fund
shares received up to and including 4:00 P.M. on the day before the Liquidation
Record Date (as defined in Section 5 below).
3. LIQUIDATION OF ASSETS. As soon as practicable after the Effective Date
and consistent with the terms of the Plan, the Company shall cause the
liquidation of the Fund's assets to cash form.
4. PAYMENT OF DEBTS. As soon as practicable after the Effective Date, the
Company shall determine and pay (or reserve sufficient amounts to pay) the
amount of all known or reasonably ascertainable liabilities of the Fund incurred
or expected to be incurred prior to the date of the liquidating distribution
provided in Section 5 below.
5. LIQUIDATING DISTRIBUTION. As soon as practicable after the Effective
Date, and in any event within sixty (60) days thereafter, the Company will mail
the following to each Fund shareholder of record who has not redeemed its
shares: (i) a liquidating distribution equal to the shareholder's proportionate
interest in the remaining assets of the Fund (after the payment and creation of
the reserves contemplated by Section 4 above); and (ii) information concerning
the sources of the liquidating distribution. On or before such mailing date the
Company will compile the list of remaining shareholders of record entitled to
receive a liquidation distribution. The day on which such list is determined
shall be the "Liquidation Record Date". The payment of the liquidating
distribution and the retirement and cancellation of Fund shares will be effected
pursuant to an amendment to the Articles of Incorporation of the Company in the
form attached hereto as Exhibit 1 (the "Amendment").
7
<PAGE>
6. TERMINATION AND DISSOLUTION. As promptly as practicable after the
completion of the liquidating distribution described in the preceding paragraph,
the Fund shall be terminated pursuant to the terms of this Plan and applicable
provisions of Minnesota law. In addition, as soon as practicable after the
effective date of certain reorganizations and other liquidations affecting the
remaining five series of the Company, the Company shall be deregistered as an
investment company under the Investment Company Act and dissolved as a
corporation pursuant to applicable provisions of Minnesota law.
7. EXPENSES OF LIQUIDATION AND TERMINATION. All expenses incurred by the
Company in relation to the carrying out of this Plan, other than brokerage
commissions and taxes, if any, shall be borne by Piper Capital Management
Incorporated, the investment adviser and manager for the Fund.
8. POWER OF THE BOARD. The Board and, subject to the general direction of
the Board, the officers of the Company, shall have authority to do or to
authorize any or all acts and things as provided for in this Plan and any and
all such further acts and things as they may consider necessary or desirable to
carry out the purposes of this Plan, including without limitation, the execution
and filing of all articles, documents, information returns, tax returns, forms
and other papers which may be necessary or appropriate to implement this Plan or
which may be required by the provisions of the Investment Company Act, the
Securities Act of 1933, as amended, and applicable Minnesota law.
9. AMENDMENTS TO THE PLAN. The Board shall have the authority to authorize
such variations from or amendments to the provisions of this Plan (other than
the terms of the liquidating distribution) as may be necessary or appropriate to
effect the complete liquidation and termination of the Fund, the dissolution of
the Company and the distribution of the Fund's assets to Fund shareholders in
accordance with the purposes intended to be accomplished by this Plan.
8
<PAGE>
EXHIBIT 1 TO PLAN OF LIQUIDATION AND TERMINATION
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
HERCULES FUNDS INC.
The undersigned officer of Hercules Funds Inc. (the "Corporation"), a
corporation subject to the provisions of Chapter 302A of the Minnesota Statutes,
hereby certifies that the Corporation's (a) Board of Directors, by written
action dated March 29, 1996, and (b) shareholders, at a meeting held June 18,
1996, adopted the resolutions hereinafter set forth; and such officer further
certifies that the amendments to the Corporation's Articles of Incorporation set
forth in such resolutions were adopted pursuant to Chapter 302A.
WHEREAS, the Corporation is registered as an open-end management investment
company (I.E., a mutual fund) under the Investment Company Act of 1940 and
offers its shares to the public in several series, each of which represents a
separate and distinct portfolio of assets; and
WHEREAS, it is desirable and in the best interest of the holders of the
Hercules World Bond Fund ("Hercules Fund"), a series of the Corporation, to
liquidate and terminate the Hercules Fund pursuant to the Plan of Liquidation
and Termination (the "Plan") approved by Fund shareholders on June 18, 1996;
WHEREAS, the Corporation wishes to provide for the distribution of the
assets of Hercules Fund to its shareholders and the simultaneous cancellation
and retirement of the outstanding shares of Hercules Fund; and
WHEREAS, the Plan requires that, in order to bind all shareholders of
Hercules Fund to the foregoing and, in particular, to bind such shareholders to
the cancellation and retirement of the outstanding shares of Hercules Fund, it
is necessary to adopt an amendment to the Corporation's Articles of
Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation's Articles of
Incorporation be, and the same hereby are, amended to add the following Article
5E immediately following Article 5 thereof:
5E. (a) For purposes of this Article 5E, the following terms shall have the
following meanings:
"EFFECTIVE DATE" means the date on which Hercules Fund shareholders
adopt and approve the Plan of Liquidation and Termination (the "Plan")
approved by Hercules Fund shareholders on June 18, 1996.
"HERCULES FUND" means the Series E Common Shares of the Corporation,
which have been designated Hercules World Bond Fund in the bylaws of the
Corporation.
"LIQUIDATING DISTRIBUTION DATE" means the date, as soon as
practicable after the Effective Date, for the consummation of the
liquidation.
(b) At the Liquidating Distribution Date, the assets belonging to
Hercules Fund shall be distributed, as described in the Plan, among Hercules
Fund's shareholders in proportion to each shareholder's interest in the
remaining assets of Hercules Fund. For purposes of the foregoing, the term
"assets belonging to" has the meaning assigned to it in Article 7(b) of the
Corporation's Articles of Incorporation.
(c) All issued and outstanding shares of the Hercules Fund shall
simultaneously be canceled on the books of the Hercules Fund and retired.
(d) From and after the Liquidating Distribution Date, the Hercules Fund
Shares canceled and retired pursuant to paragraph (c) above shall have the
status of authorized and unissued Shares of the Corporation without
designation as to series.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed
these Articles of Amendment on behalf of the Corporation on , 1996.
HERCULES FUNDS INC.
By ___________________________________
Its __________________________________
<PAGE>
-
<PAGE>
HERCULES FUNDS INC.
HERCULES WORLD BOND FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996
The undersigned shareholder of Hercules World Bond Fund ("Bond Fund"), a
series of Hercules Funds Inc. (the "Company"), does hereby appoint WILLIAM H.
ELLIS, ROBERT H. NELSON and SUSAN SHARP-MILEY each of them, as attorneys-in-fact
and proxies of the undersigned, each with the full power of substitution, to
attend the Special Meeting of Shareholders of Bond Fund to be held on June 18,
1996, at Piper Jaffray Tower, 222 South Ninth Street, Third Floor, Minneapolis,
Minnesota 55402 at 10:00 a.m., Central time, and at all adjournments thereof and
to vote the shares held in the name of the undersigned on the record date for
said meeting for the Proposal specified on the reverse side hereof. Said
attorneys-in-fact shall vote in accordance with their best judgment as to any
other matter.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE PROPOSAL LISTED ON THE REVERSE SIDE HEREOF. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO
CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return it
promptly in the accompanying envelope, which requires no postage if mailed in
the United States.
<PAGE>
PLEASE MARK BOXES / / or /X/ in blue or black ink.
The Proposal:
Approval of the liquidation and termination of Bond Fund pursuant to the
provisions of the Plan of Liquidation and Termination (the "Plan") approved by
the Company's Board of Directors on March 29, 1996. A vote in favor of the Plan
will be considered a vote in favor of an amendment to the articles of
incorporation of the Company required to effect the Plan.
/ / FOR / / AGAINST / / ABSTAIN
Dated: ____________________ , 1996
(Month) (Day)
___________________________________
Signature(s)
___________________________________
Signature(s)
Please read both sides of this
ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME(S) APPEAR HEREON.
When signing as custodian,
attorney, executor, administrator,
trustee, etc., please give your
full title as such. All joint
owners should sign this proxy. If
the account is registered in the
name of a corporation, partnership
or other entity, a duly authorized
individual must sign on its behalf
and give his or her title.
