PRELIMINARY PROXY STATEMENT
DRACENA FUNDS, INC.
400 Haber Road
Cary, Illinois 60013
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
May 3, 1996
Notice is hereby given that a Special Meeting of the Shareholders
of Dracena Funds, Inc. (the "Fund"), a Maryland corporation, will
be held on May 3, 1996 at 10:00 a.m. Chicago time at [address],
Chicago, Illinois _____, for the following purposes:
I. To approve or disapprove the liquidation of the assets and
dissolution of the Fund pursuant to the provisions of the
Plan of Liquidation and Dissolution as approved by the
Fund's Board of Directors on March 12, 1996; and
II. The transaction of such other business as may be properly
brought before the meeting.
Shareholders of record at the close of business on March 29,
1996, are entitled to notice of, and to vote at, this meeting or
any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING,
PLEASE FILL IN, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY
CARD IN THE POSTAGE PAID RETURN ENVELOPE ENCLOSED, SO THAT A
QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER OF SHARES MAY BE
VOTED. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN
YOUR PROXY CARD AND RETURN IT. THE PROXY IS REVOCABLE AT ANY
TIME PRIOR TO ITS USE.
By Order of the Board of Directors,
Alfred R. Gerebizza, Secretary
April _, 1996
<PAGE>
DRACENA FUNDS, INC.
400 Haber Road
Cary, IL 60013
PROXY STATEMENT
Dated April _, 1996
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Dracena
Funds, Inc. (the "Fund"), a Maryland corporation, for use at a
Special Meeting of Shareholders (the "Meeting") to be held on May
3, 1996 at 10:00 a.m. Chicago time at [address], Chicago,
Illinois _____, and at any adjournment thereof, and was first
mailed to shareholders on or about April 3, 1996. Even if you
sign and return the accompanying proxy, you may revoke it by
giving written notice of such revocation to the Secretary of the
Fund prior to the Meeting or by delivering a subsequently dated
proxy or by attending and voting at the Meeting in person.
Management expects to solicit proxies principally by mail, but
Management or agents appointed by Management may also solicit
proxies by telephone, telegraph or personal interview. The costs
of solicitation will be borne by the Fund.
The following are the Proposals for the Meeting:
I. Shareholders will be asked to approve the liquidation of the
assets and dissolution of the Fund pursuant to the
provisions of the Plan of Liquidation and Dissolution as
approved by the Fund's Board of Directors on March 12, 1996;
and
II. Shareholders will be asked to transact such other business
as may be properly brought before the meeting.
The Board of Directors has fixed the close of business on
March 29, 1996 as the record date for the determination of the
shareholders entitled to notice of and to vote at the Meeting or
any adjournment thereof. As of that date, there were
approximately 30,777 outstanding shares of the Dracena Funds,
Inc., each share being entitled to one vote on each matter to
come before the Meeting. As of March 29, 1996, Ronald G. Herdman
owned beneficially and of record 27% of the Fund's shares and
Donaldson, Lufkin & Jenrette Securities Corporation, Inc. owned
of record 72% of the Fund's shares on behalf of its clients.
<PAGE>
The Fund's Annual Report for the year ended October 31,
1995, including financial statements, has been sent to all
shareholders of record on January 2, 1996 and has been further
sent to all stockholders of record on March 29, 1996. Said
report does not, however, form any part of the proxy soliciting
material.
The vote of shareholders holding a majority of the shares of
the Fund entitled to vote is required for approval of the
liquidation of the assets and dissolution of the Fund pursuant to
the provisions of the Plan of Liquidation and Dissolution
(Proposal I).
In the event that a quorum of shareholders is not
represented at the Meeting or at any adjournment thereof, or,
even if a quorum is so represented, in the event that sufficient
votes in favor of any of the proposals set forth in the Notice of
the Meeting are not received, the persons named as proxies may
propose and vote for one or more adjournments of the Meeting to
be held within a reasonable time after the date originally set
for the Meeting (but not more than 120 days after the original
record date for the Meeting), and further solicitation of proxies
may be made without the necessity of further notice. The persons
named as proxies will vote in favor of any such adjournment if
such proxies instruct them to vote in favor of any of the
proposals to be considered at the adjourned meeting, and will
vote against any such adjournment if such proxies instruct them
to vote against or to abstain from voting on all of the proposals
to be considered at the adjournment meetings.
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE
NUMBER OF SHARES REPRESENTED THEREBY AS DIRECTED BY THE PROXY OR,
IN THE ABSENCE OF SUCH DIRECTION, FOR APPROVAL OF EACH OF THE
ABOVE PROPOSALS.
PROPOSAL I
PROPOSAL TO LIQUIDATE THE ASSETS AND DISSOLVE
THE FUND PURSUANT TO THE PROVISIONS OF THE PLAN
OF LIQUIDATION AND DISSOLUTION
THE LIQUIDATION IN GENERAL
The Fund proposes to liquidate the assets and dissolve the
Fund pursuant to the provisions of the Plan of Liquidation and
Dissolution (the "Plan") as approved by the Fund's Board of
Directors on March 12, 1996. The Plan provides for the complete
liquidation of all of the assets of the Fund. If the Plan is
approved, Dracena Fund Group, Inc. (the "Manager") will undertake
to liquidate the Fund's assets at market prices and on such terms
and conditions as the Manager shall determine to be reasonable
and in the best interests of the Fund and its shareholders. In
no event will any of the securities owned by the Fund be sold at
a price which is less than the best price available in the public
market on the date of sale.
<PAGE>
At the meeting of the Directors held on March 12, 1996, the
Directors determined that an orderly liquidation of the Fund's
assets was in the best interest of the shareholders. The
Directors had formally suspended sales at a meeting held on
February 27, 1996, pending discussion of the formal Plan. In the
event the Plan is not adopted, the Directors will consider what
action, if any, should be taken.
REASONS FOR THE LIQUIDATION
The FX Currency Value Fund (the "Portfolio") is the only
series of the Fund, and commenced operations on July 27, 1995.
The Portfolio is a foreign government bond fund. As of March 29,
1996, the Fund's net assets were approximately $_________. The
Directors determined at a meeting held on March 12, 1996 that the
liquidation and termination of the Fund was the appropriate
course of action. After a discussion of all available options,
the Directors, including all of the Directors who are not
"interested persons" of the Fund (as that term is defined in the
Investment Company Act of 1940, as amended), unanimously adopted
a resolution declaring the proposed liquidation and dissolution
advisable and directed that it be submitted to the shareholders
for consideration. Several factors, including those described
below, influenced the Directors' determination that the Fund (and
hence the Portfolio) be liquidated and terminated.
A draft of the Fund's audited financial statements for the
year ended October 31, 1995, as prepared by Rodney Square
Management Corp., the Fund's Administrator ("Rodney Square"), and
reviewed by the Fund's independent auditors, Deloitte & Touche
LLP ("Deloitte & Touche"), was circulated among the members of
the Fund's Board of Directors, in late December, 1995. There
followed telephone conversations among the directors, Deloitte &
Touche, Rodney Square and the law firm of Day Campbell & McGill,
the Fund's legal counsel, relating to the filing of a post-
effective amendment to the Fund's registration statement to
incorporate the audited financial statements. During the course
of these discussions and the review of the financial statements
the directors of the Fund and the Fund's professional advisers
discussed the fact that the level of assets invested in the Fund
did not appear to be supporting the level of the Fund's expenses.
Included among these various conversations was a telephone
conference call on January 4, 1996, in which all the directors
participated.
A formal meeting of the Board of Directors was held on
January 19, 1996. At the meeting, counsel to the Fund discussed
the pending filing of the amendment to the Fund's registration
statement. Counsel advised the Board that the filing was due by
the end of the following week. While it had originally been
contemplated that the filing would take the form of a routine
amendment intended principally to incorporate the Fund's audited
financial statements, Counsel advised the Board that it now
appeared that additional changes needed to be made in the
registration statement, including the Fund's prospectus, to
reflect, among other items, the level of the Fund's expenses as a
percentage of assets.
<PAGE>
The Directors then discussed the fact that the Fund's net
asset value was declining at a rate of three cents per day. The
Fund's manager and co-advisers had agreed to waive their fees for
an indefinite period, and the manager had also agreed to absorb
the organizational expenses of the Fund and had volunteered to
reimburse certain other expenses, with the result that the daily
decline in net assets would drop to approximately 2.1 cents per
day. The Fund's manager indicated at that point that they would
review the extent to which they could assume some or all of the
daily expenses so as to eliminate the daily decline in net asset
value, at least for a period of time.
The Board then discussed its responsibilities in allowing
the Fund to continue to sell shares in the Fund. Rodney Square
advised the Directors that Rodney Square Distributors, Inc., the
Fund's distributor, was also monitoring the situation. The Board
determined that, at the very least, on a going forward basis
there should be an extensive discussion in the prospectus of the
risks to investors of the continuing decline in net asset value.
The Board then resolved that drafts of the proposed amendment to
the registration statement, including a proposed sticker that
could be attached to the existing prospectus, be drafted by
Rodney Square and reviewed by Counsel to the Fund. The Fund's
President undertook to report to the Board at the next meeting as
to the realistic prospects of the Fund, through its selected
dealer arrangements, being in a position to attract additional
funds for investment so as to spread the per share impact of the
Fund's expenses, and the prospects of controlling expenses so as
to eliminate the decline in net asset value.
Subsequent to the meeting, Rodney Square prepared drafts of
the amendment and the sticker. The Fund's professional advisers,
in conjunction with the Fund manager, had several telephone
conversations over the course of the following week, during which
time the language of the amendment and the sticker was
extensively revised. After extensive discussions among the
Fund's professional advisers, however, it was determined that the
proposed amendment should not be filed before the due date,
insofar as the Board and the professional advisers were still
actively reviewing the Fund's situation and the possible
consequences of that situation. Once the due date had passed,
discussions nonetheless continued as to the language, form and
proper handling of the filing.
On or about February 19, 1996, the Fund's President
received a telephone call from the staff of the Securities and
Exchange Commission (the "Commission") in the Commission's
Chicago regional office requesting a conference call with the
Fund's President and with Counsel to the Fund. A conference call
was arranged for the following day, February 20, 1996, at which
time the staff requested additional information following a
recent examination that they had conducted into the Fund's
operations. The staff also suggested to the Fund's President,
however, that, in their view, and in light of the Fund's current
levels of net assets and expenses, the Board should consider
whether it would be in the best interests of the shareholders to
liquidate the Fund.
<PAGE>
The tasks set at the meeting of January 19, 1996, having
been completed and further information having been gathered by
the Fund's professional advisers and by the Fund's President,
another Board meeting was then convened on February 27, 1996, at
which all directors attended in person. The Board at that
meeting discussed the options that they believed were open to the
Fund. The Board first discussed whether it would be possible to
further reduce expenses. After discussing the steps that had
been taken following the previous Board meeting, the Directors
were satisfied that the daily decline in net asset value had been
arrested, but that there could be no assurance that the decline
could be arrested indefinitely. The Board then discussed at
length all past efforts to increase Fund sales. The Fund's
President reported to the Board that at the time of commencing
operations he had received several promises from broker-dealers
who had either signed or were negotiating to sign selected dealer
agreements with the Fund to the effect that they would be able to
attract investors to the Fund, but that these promises had not
been fully realized. The Fund's President reported that one
reason for that had been that a large amount of money had been
invested in stock funds during the period of the Fund's
operation, and there was reason to believe that that trend would
continue, thereby limiting prospects for non-equity funds. The
Fund's President therefore advised that while he had received
further assurances from these and other such broker-dealers, that
on the basis of past performance he believed the Board could no
longer confidently rely on such promises.
The Directors then discussed the option of liquidating the
Fund, and agreed that in the absence of firm commitments that it
was then in the shareholders' best interests to shut down the
Fund as quickly and as efficiently as possible and distribute
remaining net assets to the shareholders before net asset value
declined any further. The Board recognized in particular that
there were no assurances that there could be substantial future
sales, and that while the assets that had been invested in the
Fund had been substantially less that had been reasonably
anticipated at the time that the Fund commenced operations, the
assets nonetheless did not adequately support the level of the
Fund's expenses, despite the best efforts of Fund management to
control such expenses. The Board concluded that there was no
alternative to a liquidation, in light of the fact that Fund
expenses could not be abated indefinitely, and the fact that
there seemed limited prospects of immediately attracting
additional capital into the Fund. The meeting was reconvened on
the following day, when the Board discussed the procedures that
would be involved in winding up the Fund.
Subsequently, several of the Fund's professional advisors
have accepted reductions of their outstanding fees, and the
manager and co-advisors will not receive payment of any of their
fees otherwise owing to them since inception of the Fund. Given
the conclusion of the Board, however, that the continued
operation of the Fund at its size was not economically feasible
for the shareholders, and given the lack of confidence that
further marketing efforts could in the near term increase the
Fund's size sufficiently to remedy these problems, the Board
determined that a prompt liquidation of the Fund was the only
viable alternative.
<PAGE>
At the March 12, 1996 meeting of the Board of Directors, the
Board of Directors considered the liquidation of the Fund
pursuant to the Plan of Liquidation and Dissolution (the "Plan")
attached to this Proxy Statement as Exhibit A. In connection
with the proposal, the Fund will bear the costs associated with
the liquidation of the Fund. After extensive discussions, the
Board of Directors concluded that a liquidation of the Fund was
in the best interests of the Fund and its shareholders.
In the event that the shareholders do not approve the Plan,
the Directors will continue to search for other alternatives for
the Fund.
PLAN OF LIQUIDATION AND DISSOLUTION OF THE FUND
The Plan provides for the complete liquidation of all of the
assets of the Fund. If the Plan is approved, the Manager will
undertake to liquidate the Fund's assets at market prices and on
such terms and conditions as the Manager shall determine to be
reasonable and in the best interests of the Fund and its
shareholders. In no event will any of the portfolio securities
owned by the Fund be sold at a price which is less than the best
price available in the public market on the date of sale.
The interests of stockholders in the assets of the Fund
shall be fixed on the basis of their holdings on the Effective
Date. On such date, the books of the Fund will be closed.
The distribution of the Fund's assets will be made in one or
two cash payments. The first distribution of the Fund's assets
(the "First Distribution") is expected to consist of cash
representing substantially all of the assets of the Fund, less
the amount reserved to pay expenses of the Fund. A second
distribution (the "Second Distribution") (the First Distribution
and the Second Distribution are sometimes collectively referred
to as the "Liquidation Distribution"), if necessary, is
anticipated to be made within 90 days after the First
Distribution and will consist of cash from any assets remaining
after payment of expenses, the proceeds of any sale of assets of
the Fund under the Plan not sold prior to the First Distribution
and any other miscellaneous income to the Fund. The liquidating
distributions will be made prior to the last day of the Fund's
final taxable year ending on liquidation.
All of the expenses incurred by the Fund in carrying out the
Plan will be borne by the Fund.
The Plan provides that the Directors shall have the
authority to authorize such variations from or amendments of the
provisions of the Plan as may be necessary or appropriate to
effect the dissolution, complete liquidation and termination of
the existence of the Fund in accordance with the purposes to be
accomplished by the Plan.
None of the shareholders of the Portfolio will be entitled
to exercise any dissenter's rights or appraisal rights with
respect to the liquidation or dissolution of the Portfolio.
<PAGE>
ANTICIPATED DISTRIBUTION AMOUNTS
The Fund's net asset value on March 29, 1996 was
approximately $_______. At such date, the Fund had _____ shares
outstanding. Accordingly, on March 29, 1996, the net asset value
per share of the Fund was $________. The amounts to be
distributed to shareholders of the Fund upon liquidation will be
reduced by the expenses of the Fund in connection with the
liquidation and portfolio transaction costs. Liquidation
expenses are estimated to be approximately $33,000 (or $____ per
share outstanding on March 29, 1996), consisting of $20,000 for
legal fees and expenses, $5,000 for accounting costs and $3,000
for miscellaneous expenses. Portfolio transaction costs are
estimated to be minimal, although actual portfolio transaction
costs will depend upon the composition of the portfolio and the
timing of the sale of portfolio securities. Actual liquidation
expenses and portfolio transaction costs may vary.
FEDERAL INCOME TAX CONSEQUENCES
The following summary provides general information with
regard to the federal income tax consequences to shareholders on
receipt of the Liquidation Distribution from the Fund pursuant to
the provisions of the Plan. This summary also discusses the
effect of federal income tax provisions on the Fund resulting
from its liquidation and dissolution; however, the Fund has not
sought a ruling from the Internal Revenue Service (the "Service")
with respect to the liquidation of the Fund. This summary is
based on the tax laws and regulations in effect on the date of
this proxy, and is subject to change by legislative or
administrative action.
This summary of the federal income tax consequences is
generally applicable to shareholders who are individual United
States citizens (other than dealers in securities) and does not
address the particular federal income tax consequences which may
apply to shareholders who are corporations, trusts, estates, tax
exempt organizations or non-resident aliens, for example. This
summary does not address state or local tax consequences. The
tax consequences discussed herein may affect shareholders
differently depending upon their particular tax situations
unrelated to the Liquidation Distribution, and accordingly, this
summary is not a substitute for careful tax planning on an
individual basis. SHAREHOLDERS MAY WISH TO CONSULT THEIR
PERSONAL TAX ADVISERS CONCERNING THEIR PARTICULAR TAX SITUATIONS
AND THE IMPACT THEREON OF RECEIVING THE LIQUIDATION DISTRIBUTION
AS DISCUSSED HEREIN.
As discussed above, pursuant to the Plan, the Fund will sell
its assets and distribute the proceeds to its shareholders. The
Fund anticipates that it will retain its qualification as a
regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code") during the liquidation period and
will not be taxed on any of its net income from the sale of its
assets.
<PAGE>
For federal income tax purposes, a shareholder's receipt of
the Liquidation Distribution will be a taxable event in which the
shareholder will be viewed as having sold his or her shares of
the Fund in exchange for an amount equal to the Liquidation
Distribution that he or she receives. Each shareholder will
recognize gain or loss measured by the difference between the
adjusted tax basis in the shares and the aggregate Liquidation
Distribution received from the Fund. Assuming the shares are
held as a capital asset, the gain or loss will be characterized
as a capital gain or loss. A capital gain or loss attributable
to shares held for more than one year will constitute a long-term
capital gain or loss, while a capital gain or loss attributable
to shares held for not more than one year will constitute a short-
term capital gain or loss.
The receipt of a Liquidation Distribution by an Individual
Retirement Account Plan ("IRA") which holds shares would
generally not be viewed as a taxable event to the beneficiary;
however, some IRAs which hold shares may have been established
with custodians who do not possess the power to reinvest the
Liquidation Distribution, but instead must immediately distribute
such amounts to the IRA beneficiary. In this situation, the
amount received by the beneficiary will constitute a taxable
distribution; and if the beneficiary has not attained 59 1/2
years of age, such distribution will generally constitute a
premature distribution subject to a 10% penalty tax. This
penalty tax is in addition to the beneficiary's regular
income tax. Beneficiaries who receive a distribution from
their IRAs on account of the liquidation may be able to avoid the
above-described taxes and characterize the receipt of the
liquidation distribution as a tax-free distribution if, within 60
days of receipt of the Liquidation Distribution, i t is "rolled
over" into a new IRA or into an otherwise eligible retirement
plan and the shareholder has not engaged in a rollover from
this IRA to another IRA or otherwise eligible retirement plan
during the one year period ending on the day of receipt of the
Liquidation Distribution. Such a rollover will not generate a
deduction for the current year; however distributions are subject
to mandatory withholding of 20% on distributions from qualified
retirement plans that are eligible for rollover but are not
directly transferred from the distributing plan to an eligible
transferee plan. IRA shareholders who do not wish to roll over
their Liquidation Distribution, or who have rolled over their
IRAs during the one-year period ending on the day of receipt of
the distribution, may contact the Fund's transfer agent to make
other arrangements for the transfer of their IRAs. Tax results
will vary depending upon the status of each beneficiary, and
therefore beneficiaries who receive distributions from an IRA on
account of the liquidation of the Fund must consult with their
own tax advisers regarding their personal tax results in this
matter.
The foregoing summary sets forth general information
regarding the probable tax consequences to the Fund and to
individual shareholders who are United States citizens which
result from the liquidation of the Fund, as previously discussed.
No tax ruling has been or will be requested from the Service
regarding the payment or receipt of a Liquidation Distribution.
The statements above are, therefore, not binding on the Service,
<PAGE>
and there can be no assurance that the Service will concur with
this summary or that the tax consequences to any shareholder upon
receipt of a Liquidation Distribution will be as set forth above.
EACH SHAREHOLDER SHOULD SEEK INDEPENDENT COUNSEL REGARDING THE
POSSIBLE FEDERAL INCOME TAX CONSEQUENCES OF RECEIVING A
LIQUIDATION DISTRIBUTION WITH RESPECT TO HIS OR HER INDIVIDUAL
CIRCUMSTANCES.
LIQUIDATION DISTRIBUTIONS
At present, the date or dates on which the Fund will pay the
First and Second Distributions to its shareholders and on which
the Fund will be liquidated are not known to the Fund, but it is
anticipated that if the Plan is adopted by the shareholders such
First Distribution would occur on or prior to June 3, 1996 and
their Second Distribution, if any, on or before July 1, 1996.
Shareholders will receive their First and Second Distributions
without any further action on their part.
The right of a shareholder to redeem his or her shares of
the Fund at any time has not been impaired by the adoption of the
Plan. Therefore, a shareholder may redeem in accordance with the
redemption procedure set forth in the Fund's current prospectus
without the necessity of waiting for the Fund to take any action.
The Fund does not impose any redemption charges, but will be
required in calculating net asset value to include an accrual for
anticipated expense of liquidation.
IMPACT OF THE PLAN ON THE FUND'S STATUS UNDER THE
INVESTMENT COMPANY ACT
On the Effective Date, the Fund will cease doing business as
a registered investment company and, as soon as practicable, will
apply for deregistration under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Securities
and Exchange Commission will issue an order approving the
deregistration of the Fund if the Fund is no longer doing
business as an investment company. Accordingly, the Plan
provides for the eventual cessation of the Fund's activities as
an investment company and its deregistration under the Investment
Company Act, and a vote in favor of the Plan will constitute a
vote in favor of such a course of action.
Until the Fund's withdrawal as an investment company becomes
effective, the Fund, as a registered investment company, will
continue to be subject to and will comply with the Investment
Company Act.
PROCEDURE FOR DISSOLUTION UNDER MARYLAND LAW
Pursuant to the Maryland General Corporation Law and the
Articles of Incorporation and By Laws of the Fund, if a majority
of the aggregate outstanding shares are voted for the proposed
liquidation and dissolution of the Fund, articles of dissolution
stating that the dissolution has been authorized will in due
course be executed, acknowledged and filed with the Secretary of
State of the State of Maryland, and will become effective in
accordance with such law. Upon such articles of dissolution
<PAGE>
becoming effective, the Fund will be legally dissolved, but
thereafter the Fund will continue to exist for the purpose of
paying, satisfying, and discharging any existing debts or
obligations, collecting and distributing its assets, and doing
all other acts required to liquidate and wind up its business and
affairs, but not for the purpose of continuing the business for
which the Fund was organized.
CONCLUSION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE PROPOSED LIQUIDATION OF ASSETS AND DISSOLUTION OF THE
FUND PURSUANT TO THE PROVISIONS OF THE PLAN OF LIQUIDATION AND
DISSOLUTION.
<PAGE>
PROPOSAL II
OTHER MATTERS
The Directors are not aware of any matters to be presented
at the Meeting other than those set forth in this proxy
statement. If any other business should come before the meeting,
the persons named in the accompanying proxy will vote thereon in
accordance with their best judgment.
APPRAISAL RIGHTS
Shareholders will not be entitled to appraisal rights under
Maryland law in connection with the Plan.
VOTING INFORMATION
Approval of the Plan requires the affirmative vote of the
holders of at least a majority of the outstanding shares of the
Fund. Unless a contrary specification is made, the accompanying
proxy will be voted in favor of the Plan.
PRINCIPAL STOCKHOLDERS
Set forth below is a list of all stockholders of the Fund
which, to be Fund's knowledge, were the beneficial owners of more
than five percent of the shares of common stock of the Fund
outstanding on March 29, 1996, such common stock being the only
class of securities outstanding. None of the directors or
officers of the Fund own any shares of common stock of the Fund.
To the knowledge of the Fund, the person specified below has sole
voting power and sole investment power as to the shares set forth
opposite his name below.
Name and Address Amount and Nature of
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE
Ronald G. Herdman 8,334 27%
1455 Broad Green Street
Houston, Texas 77079
ADDITIONAL INFORMATION
The expenses of preparing and mailing the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne
by the Fund. The Fund will reimburse banks, brokers and others
for their reasonable expenses in forwarding proxy solicitation
material to the beneficial owners of the shares of the Fund.
Approval of the proposal to abolish the Fund requires the
vote of a majority of the outstanding voting securities of the
Fund.
In order to obtain the necessary quorum at the Meeting
(i.e., a majority of the shares of the Fund's securities entitled
to vote at the Meeting, present in person or by proxy),
<PAGE>
supplementary solicitation may be made by mail, telephone,
telegraph or personal interview by officers of the Fund. It is
anticipated that the cost of such supplementary solicitation, if
any, will be nominal.
All shares represented by properly executed proxies, unless
such proxies have previously been revoked, will be voted at the
Meeting in accordance with the directions on the proxies; if no
direction is indicated, the shares will be voted "FOR" approval
of the proposal to liquidate and dissolve the Fund.
Broker dealer firms holding Fund shares in "street name" for
the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their
shares on Proposal 1 before the Meeting. The Fund will include
shares held of record by broker dealers as to which such
authority has been granted in its tabulation of the total number
of votes present for purposes of determining whether the
necessary quorum of stockholders exists. Proxies which are
returned but which are marked "abstain" or on which a broker
dealer has declined to vote on any proposal ("broker non votes")
will be counted as present for purposes of a quorum. Abstentions
and broker non votes will not be counted as votes cast and
therefore will have the same effect as a "NO" vote on Proposal 1.
FUND MANAGEMENT
The Fund's Manager is Dracena Funds Group., Inc., whose
principal office is located at 400 Haber Road, Cary, Illinois
60013. The Fund's co-investment advisers, operating under the
supervision and direction of the Fund's Board of Directors and
the Manager, are KAM, Inc., located at 400 Haber Road, Cary,
Illinois, 60013, and Rohden Capital management, Ltd., located at
38 Blaine Avenue, Hinsdale, Illinois 60512. The Fund's
Administrator is Rodney Square Management Corporation ("Rodney
Square"), located at 12100 North Market Street, Wilmington,
Delaware, 19890.
ANNUAL REPORT
A copy of the annual report of the Fund for the fiscal year
ended October 31, 1995 accompanies this proxy statement.
By Order of the Board of Directors
Alfred R. Gerebizza
Secretary
Dated: April _, 1996
<PAGE>
EXHIBIT A
PLAN OF LIQUIDATION AND DISSOLUTION
OF
DRACENA FUNDS, INC.
[TO COME]
<PAGE>
DRACENA FUNDS, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of the Dracena
Funds, Inc. (the "Fund"), for use at a Special Meeting of
Shareholders to be held at [address], Chicago, Illinois _____, on
May 3, 1996 at 10:00 a.m. Chicago time.
The undersigned hereby appoints Daniel K. Spitzer and Alfred R.
Gerebizza, and each of them, with full power of substitution, as
proxies of the undersigned to vote at the above-stated Special
Meeting, and at all adjournments thereof, all shares of common
stock of the Fund that are held of record by the undersigned on
the record date for the Special Meeting, upon the following
matters:
Please mark box in blue or black ink.
ITEM I. Proposal to liquidate the assets and dissolve
the Fund pursuant to the provisions of the
Plan of Liquidation and Dissolution.
FOR--- AGAINST--- ABSTAIN---
ITEM II. The transaction of such other business as may
be properly brought before the meeting.
FOR--- AGAINST--- ABSTAIN---
Every properly signed proxy will be voted in the manner specified
thereon and, in the absence of specification, will be treated as
GRANTING authority to vote FOR all of the above items.
Receipt of Notice of Special Meeting and Proxy Statement is
hereby acknowledged.
PLEASE SIGN, DATE AND RETURN PROMPTLY.
_________________________________________________
Sign here exactly as name(s) appears hereon
__________________________________________________
Dated: _____________________, 1996
IMPORTANT: Joint owners must EACH sign.
When signing as attorney, executor,
administrator, trustee, guardian or
corporate officer, please give your
full title as such.
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