VESTAUR SECURITIES, INC.
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934 (Amendment No. )
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Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss240.14a-11(c) or ss240.14a-12
Vestaur Securities, Inc.
File No. 811-2320; 2-47081
(Name of Registrant as Specified In Its Charter)
__________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
__________________________________________________________________
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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):
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[ ] 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.
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4) Date Filed:
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Centre Square West - UM Floor
15th and Market Streets
Philadelphia, Pennsylvania 19101
_____________
Dear Stockholder:
I am writing to you to inform you of recent events that resulted in the
scheduling of the Vestaur Securities, Inc. (the "Fund") Annual Meeting of
Stockholders (the "Meeting") on April 28, 1998. Before the Meeting I would
like your vote on the important issues affecting the Fund as described in
the attached Proxy Statement. The Meeting is necessitated by the events
described below.
On November 18, 1998, CoreStates Financial Corp ("CoreStates") agreed
to merge with and into First Union Corporation ("First Union") (the
"Merger"). CoreStates Bank, N.A., a subsidiary of CoreStates and parent
company of CoreStates Investment Advisers, the adviser to the Fund, will
merge with and into First Union National Bank ("FUNB"), a subsidiary of
First Union. The Capital Management Group of FUNB and its investment
adviser affiliates manage or otherwise oversee the investment of over $75
billion in assets belonging to a wide-range of clients, including the Evergreen
family of mutual funds, which funds had assets of approximately $40 billion
as of December 31, 1997.
As a consequence of the Merger and in order to facilitate the investment
management of assets and the delivery of shareholder services to the Fund,
and to integrate the Fund into the Evergreen family of mutual funds, the
Board of Directors of the Fund has proposed for your approval an investment
advisory agreement with FUNB.
Whether or not you plan to be present, we need your vote. We urge you
to complete, sign and return the enclosed proxy card promptly.
A postage-paid envelope is enclosed for this purpose.
If you return your proxy promptly you can help the Fund avoid follow-up
mailings to achieve a quorum. If your shares in the Fund are held in street
name, your bank or broker can vote your shares, but may do so only upon
receipt of your specific instructions. Please contact the person responsible
for your account and instruct him or her to execute a proxy card today.
If you decide between now and the meeting that you can attend the meeting
in person, you can revoke your proxy at that time and vote your shares at
the meeting.
THE BOARD OF DIRECTORS OF THE FUND HAS UNANIMOUSLY APPROVED THE PROPOSALS
AND RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS DESCRIBED IN THIS
PROXY STATEMENT.
If we do not receive your completed proxy card after several weeks, you
may be contacted by our proxy solicitor, Corporate Investor Communications,
Inc. They will remind you to vote your shares.
Thank you for taking these matters seriously and participating in this
important process.
Sincerely,
Mark E. Stalnecker
Philadelphia, Pennsylvania
Chairman of the Board
March 30, 1998
Vestaur Securities, Inc.
DRAFT
VESTAUR SECURITIES, INC.
Centre Square West - UM Floor
15th and Market Streets
Philadelphia, Pennsylvania 19101
_____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 1998
_____________
TO THE STOCKHOLDERS
OF VESTAUR SECURITIES, INC.
Notice is hereby given that the annual meeting of stockholders of Vestaur
Securities, Inc. will be held on Tuesday, April 28, 1998, at 11:00 a.m. local
time, in Conference Room #3, at ARAMARK, 1500 Market Street, 41st Floor,
Centre Square West Tower, Philadelphia, PA 19102, for the following purposes.
1. To elect a Board of eight Directors to serve until the next annual
meeting and until their successors shall have been elected and qualified.
2. To ratify the action of the Board of Directors in selecting Deloitte
& Touche, LLP as auditors to examine the books and financial statements
of Vestaur Securities, Inc., for the period commencing December 1, 1997
and ending November 30, 1998.
3. To consider and vote upon a proposal to approve a new advisory
agreement between Vestaur Securities, Inc. and First Union National
Bank ("FUNB"), pursuant to which FUNB will act as investment adviser
with respect to the assets of the Fund, effective upon the date of
the annual meeting.
4. The transaction of such other business as may properly be brought
before the meeting.
Stockholders of record at the close of business on March 20, 1998 will
be entitled to vote at the meeting. A complete list of the Stockholders
entitled to vote at the meeting shall be available for examination by any
stockholder at the principal office of the Fund during normal business hours
from April 14, until the commencement of the meeting, at which time the list
will be available at the place of the meeting.
It is hoped that you will attend the meeting, but if you cannot do so, please
fill in and sign the enclosed proxy, and return it in the accompanying
envelope as promptly as possible. Any stockholder attending can vote in
person even though a proxy has already been returned.
By Order of the Board of Directors
JOSEPH PHILLIPS
Secretary
Philadelphia, Pennsylvania
March 30, 1998
VESTAUR SECURITIES, INC.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by and
on behalf of the Board of Directors of Vestaur Securities, Inc. ("Vestaur" or
the "Fund") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held in Conference Room #3, at ARAMARK, 1500 Market Street,
Centre Square West Tower, 41st Floor, Philadelphia, Pennsylvania 19102, on
Tuesday, April 28, 1998 at 11:00 a.m., local time. The address of the
principal office of the Fund is Centre Square West - UM Floor,
Philadelphia, Pennsylvania 19101.
Proxy Solicitation
All proxies in the enclosed form which are properly executed and returned to
the Fund will be voted as provided therein at the Annual Meeting or at any
adjournments thereof. A stockholder executing and returning a proxy has the
power to revoke it at any time before it is exercised by giving written notice
of such revocation to the Secretary of the Fund. Signing and mailing the proxy
will not affect your right to give a later proxy or to attend the Annual
Meeting and vote your shares in person.
The Board of Directors intends to bring before the meeting the matters set
forth in items 1, 2 and 3 in the foregoing notice. The persons named in
the enclosed proxy and acting thereunder will vote with respect to items
1, 2 and 3 in accordance with the directions of the stockholders as specified
on the proxy card; if no choice is specified, the shares will be voted IN
FAVOR of the election of the eight directors named under item 1, IN FAVOR
of ratification of Deloitte & Touche, LLP as auditors and IN FAVOR of approval
of the investment advisory agreement described in item 3. If any other matters
are properly presented to the meeting for action, it is intended that the
persons named in the enclosed proxy and acting thereunder will vote in
accordance with the views of management thereon. Abstentions and broker
non-votes are counted for quorum purposes. With regard to the election
of directors, votes may be cast in favor or withheld; votes that are
withheld will be excluded entirely from the vote and will have no
effect. Abstentions will be excluded from the proposal to ratify
approval of accountants and the proposal to approve the investment
advisory agreement. For this reason, abstentions and broker non-votes
will have the effect of a negative vote on the proposal to ratify
approval of accountants because it requires the affirmative vote of a
majority of shares present in person or by proxy and entitled to vote
and similarly, will have the effect of a negative vote on the proposal
to approve the investment advisory agreement because it requires the
vote of a majority of the outstanding voting securities, as defined in
the Investment Company Act of 1940 (the "1940 Act") and described below.
Under the rules of the New York Stock Exchange, Inc. brokers who hold shares
in street name for customers have the authority to vote on certain items
when they have not received instructions from beneficial owners. Brokers
that do not receive instructions are entitled to vote on the election of
directors.
The affirmative vote of a plurality of the shares present in person or
represented by proxy at the meeting is required for the election of Directors
(Item 1); the affirmative vote of a majority of the shares cast at the meeting
is required for ratification of the selection of independent public
accountants (item 2); and the affirmative vote of more than 50% of the Fund's
outstanding shares entitled to vote at the meeting, or a two-thirds majority
of the shares present at the meeting if the holders of more than 50% of the
outstanding shares entitled to vote at the meeting are present in person or
by proxy, is required for approval of the investment advisory agreement.
In the event a quorum is not present at the meeting or in the event that a
quorum is present but sufficient votes to approve the proposed item are not
received, the persons named as proxies may propose one or more adjournments
of the meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
represented at such meeting in person or by proxy. The persons named as
proxies will vote those proxies that they are entitled to vote FOR any such
proposal, IN FAVOR of such an adjournment, and will vote those proxies
required to be voted AGAINST any such proposal, AGAINST any such adjournment.
The Fund will bear the costs of preparing, printing and mailing this proxy
statement, the proxies and any additional materials which may be furnished
to stockholders. Solicitation may be undertaken by mail, telephone,
telegraph and personal contact. The Fund has engaged Corporate Investor
Communications, Inc. to solicit proxies from brokers, banks, other
institutional holders and individual stockholders for a fee of approximately
$5,000. The Annual Report of the Fund has been mailed to all stockholders
entitled to vote at the Annual Meeting. The Fund will furnish, without
charge, a copy of the Annual Report to a stockholder upon request.
Stockholder requests should be directed to Joseph Phillips, Centre
Square West - UM Floor, 15th and Market Streets, Philadelphia, PA 19101;
telephone by collect call to (215) 567-3969. This proxy statement and Form
of proxy were first sent to stockholders on or about March 30, 1998.
Voting Securities and Principal Holders Thereof
Holders of Common Stock of the Fund of record at the close of business
March 20, 1998 will be entitled to vote at the Annual meeting or any
adjournment thereof. As of March 20, 1998, the Fund has outstanding
6,681,019 shares of Common Stock. The stockholders are entitled to one vote
per share on all business of the meeting. To the knowledge of the Fund,
there is no beneficial owner of more than 5% of the outstanding Common
Stock of the Fund.
The officers and directors of the Fund as a group beneficially own in
the aggregate ____________ shares (0.___%) of the outstanding Common
Stock of the Fund and less than 1% of the outstanding securities of
CoreStates Financial Corp ("CoreStates"), ultimate parent of CoreStates Bank,
N.A. ("CoreStates Bank") and CoreStates Investment Advisers, Inc.
(the "Adviser") and First Union Corporation ("First Union"), parent of
First Union Bank ("FUNB"), respectively.
I. ELECTION OF DIRECTORS
At the Annual Meeting eight Directors, constituting the entire Board of
Directors of the Fund, are to be elected to hold office until the next annual
meeting and until their successors are elected and shall have qualified.
If any nominee for any reason becomes unable to serve, the persons named
as proxies will vote for the election of such other persons as they believe
will carry on the present policies of the Fund and as they deem to be
qualified. The Board of Directors has no reason to believe that any of the
eight nominees will be unable to serve. Mr. Jansing was previously a
Director of the Fund from its inception in 1972 until his resignation in
July, 1974. The ages, principal occupations and certain other affiliations
of the nominees, the amount of stock owned beneficially, directly or
indirectly, in the Fund and the years they first became Directors of the
Fund are as follows:
<TABLE>
CAPTION>
Name and Address Age () Principal First Shares Owned Percent of
Occupation and other Became beneficially, Class
affiliations Director directly or 3-20-98
indirectly
3-20-98
<S> <C> <C> <C> <C>
Paul B. Fay, Jr (79) President, The Fay Improvement 1972 1,463 0.020
3766 Clay Street Company; Trustee of Odell Charitable
San Francisco, CA 94118 Foundation and Naval War College
Foundation (Emeritus); Director of
First American Financial Corporation,
and Compensation Resource Group
Incorporated.
#Robert F. Gurnee (70) Chairman, Financial Integrity 1991 200
3801 Kennett Pike Group, Inc., Director, Japan Equity
Building B, Suite 201 Fund, Inc., The Thai Capital Fund.
Greenville, DE 19807 Formerly, Chairman, Sears Roebuck
Acceptance Corporation, and Sears
Receivables Financing Group; and Vice
President and Corporate Treasurer,
Sears, Roebuck and Co.
*
**Glen T. Insley (51) Senior Vice President, Managing 1998 -0- -0-
Two First Union Center Director of Fixed Income, First Union,
NC-1157 First Capital Group.
Charlotte, NC 28288
#John C. Jansing (72) Director, Lord Abbett & Co. 1976 1,000 0.015
162 S. Beach Road managed group of mutual funds and
Hobe Sound, FL 33455 Alpine Group Inc. Formerly, Chairman,
Independent Election Corporation
of America.
*James S. Morgan (81) Private Investor; Vice President, 1978 1,000(1) 0.015
Woodside-282 Rittenhouse Financial Services, Inc.;
1515 The Fairway Vice President and Director, The
Rydal, PA 19046 Rittenhouse Trust Co. Formerly, Senior
Vice President of First Pennsylvania
Bank N.A. Chairman of the Fund
until 1982.
Charles P. Pizzi (47) President, Greater Philadelphia 1997 -0- -0-
200 S. Broad Street Chamber of Commerce.
Suite 700
Philadelphia, PA 19102
**Philip R. Reynolds (70) Treasurer and Trustee of J. 1972 1,041 0.015
43 Montclair Drive Walton Bissell Foundation since 1989.
West Hartford, CT 06107 Formerly, Executive Vice President,
Investments, Phoenix Mutual Life
Insurance Co.
**Marciarose Shestack (64) Freelance television broadcaster, 1972
Parkway House journalist and public relations
2201 Pennsylvania Ave. consultant since 1990. Formerly,
Phila., PA 19130 Consultant to Philadelphia Developers
Alliance, and President, Philadelphia
Developers' Alliance.
</TABLE>
____________________________
# Member of Audit Committee
* Interested Person
** Member of Executive Committee
(1) Does not include 1,000 shares held by a family member of Mr. Morgan as
to which he disclaims beneficial ownership.
Under the 1940 Act, Mr. Insley is an "interested person" of the Fund because
he is an officer of First Union. Mr. Morgan is an "interested person"
because he owns beneficially 5,445 shares of Common Stock of CoreStates.
Mr. Pizzi is not considered an "interested person" of the Fund; however,
the Greater Philadelphia Chamber of Commerce is a party to an investment
advisory agreement with the Adviser and maintains certain banking and trust
relationships with CoreStates Bank. The Fund does not believe that the
relationships are material business relationships. If these circumstances
change, the Board of Directors will determine whether any action is required
to change the composition of the Board.
The officers of the Fund, the period during which each has served, their
ages, principal occupations during the last five years including offices
held with the Adviser, CoreStates and its affiliated companies and
beneficial ownership of shares of the Common Stock of CoreStates are as follows:
<TABLE>
<CAPTION>
Name, Age () and Office Principal Occupation CoreStates** Common
Shares Owned Stock***
Beneficially Options to Purchase
3-20-98 3-20-98
<S> <C> <C> <C>
Mark E. Stalnecker (46) Executive Vice President, 7,853 63,353
Chairman of the Board since 1993. CoreStates Bank, N.A. and
CoreStates Financial Corp.
since 1988. Chief Trust and
Investment Services Officer,
CoreStates Financial Corp.
1990-1995. Chairman and
President, CoreStates Investment
Advisers, Inc., Director,
CoreStates Bank of Delaware,
N.A. and Philadelphia
International Investment Corp.
Dung Vukhac (54) Director, Senior Vice President, 7,903 19,912
President since 1995. Fixed Income Services, CoreStates
Investment Advisers, Inc. since
1987; Previously, Securities
Analyst, Economist, Vice President
and Fixed Income Manager, Trust
Department, Philadelphia
National Bank.
Michael F. Melloy (60) Vice President and Portfolio 442 1,153
Vice President since 1990. Manager, CoreStates Investment
Advisers, Inc. since 1990.
Previously, Executive Vice President,
Centre Square Investment Group and
Vice President, First Pennsylvania
Bank N.A.
Karen G. Bater (39) Vice President and Senior Portfolio 885.03 750.000
Assistant Vice President since 1992. Manager, CoreStates Investment
Advisers, Inc. since 1986.
Joseph Phillips (29) Investment Officer, CoreStates -0- -0-
Secretary and Treasurer since 1995. Bank; Previously Investment
Specialist, CoreStates Investment
Advisers, Inc. Collateral Analyst
and Customer Service Specialist,
Mellon Bank and Customer Service,
CoreStates Bank.
</TABLE>
_______________________________
*** CoreStates Financial Corp has 138,714,797 shares of Common Stock
outstanding. First Union has _________ shares of Common Stock outstanding.
Assuming consummation of the Merger, First Union will have ______ shares
of common stock on the closing date of the Merger. Upon consummation of
the Merger, each outstanding share of CoreStates Common Stock will be
converted into 1.62 shares of First Union Common Stock.
Effective April 28, 1998, Mr. Stalnecker will no longer be an officer of
the Fund. His term as a member of the Board of Directors will also expire.
It is anticipated that Glen T. Insley (see above) will assume the duties of
and office previously held by Mr. Stalnecker, with respect to the
management of the Fund.
All officers are elected to one-year terms. All officers and directors may
be reached through the principal offices of the Fund at Centre Square
West - UM Floor, Philadelphia, Pennsylvania 19101. The Fund had no
Nominating or Compensation Committees during fiscal year 1997. The
Board of Directors held four regular meetings in fiscal year 1997.
Unless instructed by the stockholders to refrain from so voting, it is the
intention of the persons named as proxies to vote for election of the eight
nominees listed above as Directors. Provided that a quorum is present, a
plurality of the votes validly cast at the meeting is required to elect
each of the Directors
OTHER REMUNERATION AND AFFILIATIONS OF OFFICERS AND DIRECTORS
Each of the seven directors of the Fund who are not affiliated persons
(as defined in the Investment Company Act of 1940, as amended) of the
Adviser, or of CoreStates, its parent, receives an annual fee of $7,000,
and $200 for each Board meeting attended, as compensation for services.
The Fund also pays such Board members $100 for each Executive Committee
Meeting attended and $150 for each Audit Committee Meeting attended.
The Fund also reimburses all Directors who are not affiliated persons
for expenses incurred in connection with attending meetings of the Board
of Directors. For the year ended November 30, 1997 aggregate Directors
fees paid were $53,050 and expenses paid were $12,020 (see table below).
Fees, salaries or other remuneration of officers of the Fund who also
serve as directors, officers, employees or special consultants to the
Adviser, CoreStates or any of their affiliated companies are borne by
the appropriate CoreStates affiliate. All present officers are covered
by this provision, and did not receive any compensation or expense
reimbursement from the Fund.
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement Estimated from Registrant
Aggregate Benefits Annual and Fund Complex
Compensation from Accrued as Benefits Paid to Directors
Name of Person Registrant for fiscal Part of Fund Upon for the fiscal year
and Position Year Ended 11-30-97 Expenses Retirement ended 11-30-97
<S> <C> <C> <C> <C>
Paul B. Fay, Jr. $7,800.00 -0- -0- $7,800.00
Director
Robert F. Gurnee $7,750.00 -0- -0- $7,750.00
Director
John C. Jansing, Sr. $8,100.00 -0- -0- $8,100.00
Director
Charles P. Pizzi $5,850.00 -0- -0- $5,850.00
Director
James S. Morgan $7,800.00 -0- -0- $7,800.00
Director
Philip R. Reynolds $7,950.00 -0- -0- $7,950.00
Director
Marciarose Shestack $7,800.00 -0- -0- $7,800.00
Director
Mark E. Stalnecker -0- -0- -0- -0-
Director
</TABLE>
II. RATIFICATION OF APPOINTMENT OF AUDITORS
At a meeting held on December 10, 1997, the Board of Directors,
including a majority of those Directors who are not interested persons
of the Fund, selected Deloitte & Touche, LLP as auditors to examine the
Fund's books and securities and to certify from time to time the Fund's
financial statements for the period December 1, 1997 to November 30, 1998,
subject to ratification by the stockholders of the Fund. The firm has no
direct or indirect material interest in the Fund. Representatives of
Deloitte & Touche, LLP are expected to be present at the Annual Meeting
with the opportunity to make a statement if they desire to do so, and they
will be available to respond to appropriate questions. A majority vote of
the shares represented in person and by proxy at the meeting is necessary
to ratify the selection of the auditors.
The Board of Directors has appointed an Audit Committee consisting of
John C. Jansing and Robert F. Gurnee. The purpose of this Committee is to
evaluate financial management, meet with the auditors, and deal with other
matters of a financial nature that they deem appropriate. The Committee
met twice during fiscal year 1997.
III. APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT FOR THE FUND
Background
One of the purposes of the meeting is to consider a new investment advisory
agreement for Vestaur as a result of the merger whereby CoreStates will merge
into First Union (the "Merger") on or about April 30, 1998. The Merger
represents a change in ownership of the parent corporation of the Adviser
and, as such, has the effect under the 1940 Act of terminating the existing
advisory agreement between Vestaur and the Adviser (the "Existing Advisory
Agreement"). Accordingly, shareholders are being asked to approve a new
advisory agreement embodying exactly the same terms and fees with the Adviser
under its new ownership (the "New Advisory Agreement") and to approve the
payment of advisory fees to the Adviser for the period from the consummation
of the Merger through the date of the Annual Meeting. The Fund's Board of
Directors, including a majority of the non-interested Directors (those
Directors who are not parties to the New Advisory Agreement, or interested
persons of such parties) approved the New Advisory Agreement, subject to
approval by the shareholders of the Fund, to become effective upon the date
of the Annual Meeting.
First Union is a North Carolina-based, multi-bank holding company subject
to the Bank Holding Company Act of 1956, as amended, and the rules and
regulations promulgated thereunder (the "BHCA"). Through its full-service
banking subsidiaries, First Union provides a wide range of commercial and
retail banking services and trust services in North Carolina, Florida, South
Carolina, Georgia, Tennessee, Virginia, Maryland, Delaware, Pennsylvania,
New Jersey, New York, Connecticut and Washington, D.C. First Union also
provides various other financial services, including mortgage banking, home
equity lending, credit cards, leasing, investment banking, insurance and
securities brokerage services, through other subsidiaries. As of
September 30, 1997, and for the nine months then ended, First Union reported
assets of $144 billion, net loans of $95 billion, deposits of $92 billion,
stockholders' equity of $11 billion and net income applicable to common
stockholders of $1.5 billion, and as of such date First Union operated
in 38 states, Washington, D.C. and six foreign countries. First Union is the
sixth largest bank holding company in the United States, based on assets at
September 30, 1997. The principal executive offices of First Union are
located at One First Union Center, Charlotte, North Carolina 28288-0013,
and its telephone number is (704) 374-6365.
Under the terms of the Merger Agreement, CoreStates will merge with and into
First Union. Upon consummation of the Merger, each outstanding share of
CoreStates Common Stock will be converted into 1.62 shares of First Union
Common Stock, subject to possible increase under certain circumstances.
It is anticipated that approximately 340,000,000 shares of First Union
Common Stock will be issued in the Merger.
In addition, the Merger Agreement provides that CoreStates Bank and FUNB,
based in Avondale, Pennsylvania, will merge following the Effective Date.
Subject to the terms and conditions of the merger Agreement (including
receipt of all necessary regulatory and stockholder approvals), the
effective date of the Merger (the "Effective Date") will occur on (i) such
date as shall be mutually agreed upon by CoreStates and First Union, or
(ii) if such parties are not so able to agree, such date as First Union
shall notify CoreStates in writing not less than five days prior thereto,
which date shall not be more than 15 days after the conditions to the
obligations of the parties to effect the Merger have been satisfied or waived
in writing. Subject to the foregoing, it is currently anticipated that the
Effective Date will occur on or about April 30, 1998. The Merger is subject
to the prior approval of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") under the BHCA. In addition, the Merger may
require certain approvals of or notices to state, federal and other regulatory
authorities.
As required by the 1940 Act, the Existing Advisory Agreement provides for its
automatic termination upon "assignment." Consummation of the Merger may be
deemed to be an assignment (as defined in the 1940 Act) of the Existing
Advisory Agreement resulting in the termination of the Existing Advisory
Agreement in accordance with its terms. In anticipation of the Consummation
of the Merger, and to provide continuity in investment advisory services,
Vestaur's Board of Directors, including a majority of the Board members who
are not "interested persons" (as defined in the 1940 Act) at a meeting held
on March 11, 1998, approved and directed that there be submitted to
shareholders for approval a new investment advisory agreement between
Vestaur and the Adviser.
The Fund and the Adviser have received an Order from the Securities and
Exchange Commission, which permits the implementation, without shareholder
approval, of a new investment advisory agreement for a period of up to 120
days following the consummation of the Merger (but in no event later than
July 31, 1998), in the event that the Merger is consummated prior to
shareholder approval of the New Advisory Agreement. The Order permits the
Adviser to receive all fees earned under the new advisory agreement following
shareholder approval (the "Interim Period Advisory Fees"). The fees paid
will be unchanged from the fees paid under the existing advisory agreement.
The fees will be paid into an interest-bearing escrow account maintained by
an independent escrow agent. The escrow agent will release the amounts
held in the escrow account (including any interest earned): (a) to the
Adviser upon approval of the New Advisory Agreement by shareholders at
this meeting; or (b) to the Fund if the 120 day period ends and the new
investment advisory agreement has not received the requisite
shareholder approval.
In connection with the Fund's approval of the New Advisory Agreement,
the Board considered that the terms of the Merger do not require a
material change in the Fund's investment objective or policies, the
Adviser's investment management or operation of the Fund, the investment
personnel managing the Fund, the investment advisory fee or the
shareholder services or other business activities of the Fund. FUNB has
informed the Board of Vestaur that the Merger will not at this time
result in any material changes, although no assurance can be given that
such a change will not occur in the future.
As described in more detail below, the Existing Advisory Agreement provides
that the Adviser will provide certain administrative services to the Fund
and that the Adviser may delegate its responsibilities to affiliated
companies. The Adviser currently provides day-to-day fund administrative
services under those terms. If the New Advisory Agreement is approved
by shareholders, it is contemplated that administrative services will be
provided to the Fund by Evergreen Investment Services, Inc., an affiliate
of FUNB. Fees for administrative services will continue to be paid from
the advisory fee. The Board has also approved an unaffiliated new
custodian for the Fund, State Street Bank and Trust Company, with no
increase in custodian fees paid by the Fund. The Board of the Fund
also modified certain non-fundamental investment policies of the Fund, as
described below. To enable the Fund to more effectively manage its assets,
the Fund is now permitted to invest in the following short-term cash
equivalent instruments in addition to commercial paper:
Variable amount master demand notes. These are promissory notes that
are payable on demand and that bear interest tied to a money market
rate or index. The rate on the note is adjusted upward or downward
each time the base rate changes. The payment obligations may be backed
solely by the unsecured promise of the issuer to make payments when due.
Repurchase Agreements. A repurchase agreement is a means of investing
monies for a short period. In a repurchase agreement, a seller -- a U.S.
commercial bank or recognized U.S. securities dealer -- sells securities
to a fund and agrees to repurchase the securities at the fund's cost plus
interest within a specified period (normally one day). In these
transactions, the securities purchased by the Fund will have a total value
equal to or in excess of the value of the repurchase agreement, and will be
held by the Fund's Custodian Bank until repurchased.
The use of repurchase agreements involves certain risks. For example,
if the other party to the agreement defaults on its obligation to
repurchase the underlying security at a time when the value of the security
has declined, the Fund may incur a loss upon disposition of the security.
If the other party to the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws,
a court may determine that the underlying security is collateral for a
loan by the Fund and not within the control of the Fund. As a result,
the Fund's ability to realize on such collateral may be automatically
stayed. Finally, it is possible that the Fund may not be able to
substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Fund's
management acknowledges these risks, it is expected that they can be
controlled through careful monitoring procedures.
The Board also approved the use of pricing services to value securities
traded in the over-the-counter market when such prices are believed to
reflect the fair market value of such securities.
Section 15(f) of the 1940 Act provides that when a change in the control
of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in connection therewith
as long as two conditions are satisfied. First, no "unfair burden" may be
imposed on the investment company as a result of the transaction relating
to the change of control, or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden," as defined in
the 1940 Act, includes any arrangement during the two-year period after the
change in control whereby the investment adviser (or predecessor or successor
adviser), or any interested person of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with
the purchase or sale of securities or other property to, from, or on behalf
of the investment company (other than fees for bona fide principal
underwriting services). No such compensation arrangements are in effect or
contemplated insofar as the Fund is concerned.
The second condition is that, during the three-year period immediately
following consummation of the transaction, at least 75% of the
investment company's board of directors must not be "interested persons"
of the Adviser within the meaning of the 1940 Act. At present, two of the
Fund's directors, out of eight directors, are interested persons of the
Adviser. The Fund expects to comply with Section 15(f).
If the Merger is not completed, the Existing Advisory Agreement will
remain in effect. In the event the New Advisory Agreement is not
approved by the Fund's shareholders, the Directors will promptly seek to
enter into a new advisory arrangement for the Fund, subject to approval
by the Fund's shareholders.
THE INVESTMENT ADVISER
The Adviser has managed the Fund since June 14, 1990. The address of
the Adviser is Upper Mezzanine, 1500 Market Street, Philadelphia,
Pennsylvania 19102. The Adviser provides investment advisory services to
individuals, investment companies, pension and profit sharing plans and
corporations or other business entities. Mark Stalnecker is Chairman,
President and a Director of the Adviser, and reports to Peter Welber,
President of CoreStates Asset Management. In such capacity, he is
responsible for the investment management activities of the Adviser.
The other Directors of the Adviser are Dung Vukhac, Steve Dalton, Charles T.
Meisse, JoAnne T. Fredericks, also the Treasurer, and Lary Aasheim.
Michael F. Melloy, Stuart N. Hosansky and Karen G. Bater are Vice Presidents
of the Adviser and William T. Lawrence is Vice President and Secretary of
the Adviser. All of the above may be reached at the address of the Adviser
stated above.
As of December 31, 1997, CoreStates Bank, N.A. managed the investments of 29
common trust funds having assets of more than $3.1 billion. The Adviser is
investment manager to CoreFund, Inc., a management investment company
presently consisting of twenty portfolios: CoreFund Cash Reserve, CoreFund
Treasury Reserve, CoreFund Elite Tax Free Reserve, CoreFund Tax-Free Reserve,
CoreFund Special Equity Fund, CoreFund Growth Equity Fund, CoreFund Core
Equity Fund, CoreFund Equity Index Fund, CoreFund International Growth Fund,
CoreFund Balanced Fund, CoreFund Global Bond Fund, CoreFund Government
Income Fund, CoreFund Short-Intermediate Bond Fund, CoreFund Bond Fund,
CoreFund Short-Term Income Fund, CoreFund Intermediate Municipal Fund,
CoreFund New Jersey Municipal Fund and CoreFund Pennsylvania Municipal Fund.
These portfolios have aggregate assets of $3.9 billion.
FUNB will serve as investment adviser to the Fund under the terms of the
New Advisory Agreement. First Union and its subsidiaries provide a broad
range of financial services to individuals and businesses. The Capital
Management Group of FUNB and investment advisory affiliates of FUNB manage
or otherwise oversee the investment of over $75 billion in assets belonging
to a wide range of clients, including the Evergreen family of mutual funds.
FUNB currently serves as investment adviser to the following companies
or series of an investment company with an investment objective similar
to the Fund.
<TABLE>
<CAPTION>
Investment
Net Assets Advisory
Fund at 12-31-97 Fees*
<S> <C> <C>
Evergreen Select Fixed Income Fund $466,563,009 0.50%
Evergreen Select Income Plus Fund $1,162,201,382 0.50%
</TABLE>
____________________________________
* Annually of average net assets
During First Union's fiscal year ended December 31, 1997, there were no
transactions in First Union's securities by any current officer or current
Director of the Fund and or officer or director of First Union or FUNB or
the Adviser in an amount equal to or exceeding 1% of the outstanding
securities of First Union.
The names, addresses and principal occupations of the directors and
principal executive officers of FUNB are set forth below.
<TABLE>
The Directors and principal executive officers of First Union
National Bank are:
<CAPTION>
<S> <C>
Edward E. Crutchfield, Jr. Chairman and Chief Executive Officer, First Union
Corporation; Chief Executive Officer and Chairman,
First Union National Bank
John R. Georgius President, First Union Corporation;
President, First Union National Bank
Marion A. Cowell, Jr. Executive Vice President, Secretary
& General Counsel, First Union Corporation;
Secretary and Executive Vice President,
First Union National Bank
Robert T. Atwood Executive Vice President and Chief Financial Officer,
First Union Corporation; Chief Financial Officer
and Executive Vice President, First Union National Bank
</TABLE>
The Chairman and Chief Executive Officer of CoreStates is Terrence A.
Larsen who also is a Director of CoreStates. The names of all of the other
Directors of CoreStates are as follows: Robert W. Cardy, Chairman, President
and Chief Executive Officer, Carpenter Technology Corp.; Carlton E. Hughes,
Chairman and Director, Stewart-Amos Steel, Inc.; Ernest E. Jones, Executive
Director, Greater Philadelphia Urban Affairs Coalition; Herbert Lotman,
Chairman and Chief Executive Officer, Keystone Foods Corporation; George V.
Lynett, Esq., Publisher, The Scranton Times; Samuel A. McCullough, Special
Consultant to CoreStates; Patricia A. McFate, Senior Scientist and Program
Director, Science Applications International Corporation; Marlin Miller, Jr.,
President, Chief Executive Officer and Director, Arrow International, Inc.;
James M. Seabrook, Chairman and Chief Executive Officer, Seabrook
Brothers & Sons, Inc.; Raymond W. Smith, Chairman, Chief Executive Officer
and Director, Bell Atlantic Corporation; George Strawbridge, Jr. Private
Investor; Peter S. Strawbridge, Retired President, Strawbridge and Clothier;
and Judith M. von Seldeneck, President and Chief Executive Officer, the
Diversified Search Companies. Charles L. Coltman, III is Vice Chairman of
CoreStates and CoreStates Bank. Albert Mandia is Executive Vice President
and Chief Financial Officer of CoreStates. All of the above persons may be
reached in care of CoreStates Financial Corp., 1500 Market Street,
Philadelphia, PA 19101. None of the foregoing persons owns as much as
1% of the outstanding stock of CoreStates and all of them own less than 5%.
CoreStates Bank, serves as custodian of the Fund's assets. For the fiscal
year ended November 30, 1997, the Fund paid custodian fees of $23,543 to
CoreStates Bank. At the meeting of the Board held on March 11, 1998, the
Board approved a new custodian agreement for the Fund with State Street
Bank and Trust Company ("State Street"). Under the terms of the Agreement,
State Street will provide custodian services for the Fund. State Street
will also provide accounting services for the Fund pursuant to an agreement
with Evergreen Investment Services, Inc. on behalf of the Fund, as
described below.
THE EXISTING ADVISORY AGREEMENT AND THE
NEW ADVISORY AGREEMENT
The Existing Advisory Agreement and the proposed New Advisory Agreement
are identical in all substantive respects, differing only in their
effective and termination dates. The description of the New Advisory
Agreement is qualified in its entirety by reference to the form of
Agreement attached as Exhibit A to this proxy statement. Pursuant to the
terms of the Existing Advisory Agreement and the New Advisory Agreement,
the Adviser provides and FUNB will provide, the Fund with an investment
program complying with the investment objectives, policies and restrictions
of the Fund and, in carrying out such program is responsible for the
investment and reinvestment of the Fund's assets. The Adviser performs and
absorbs the cost of research, statistical analysis and continuous complete
supervision of the Fund's investment portfolio. FUNB will assume the same
responsibility under the New Advisory Agreement.
Under the Existing Advisory Agreement, the Adviser causes the Fund to be
furnished office space and all ordinary and necessary office facilities,
equipment and personnel for managing the affairs of the Fund. The Adviser
or its affiliates paid the fees, salaries or other remuneration of directors
and officers of the Fund who also served as directors, officers or employees
of or special consultants to the Adviser, CoreStates, CoreStates Bank, or any
of their affiliated companies. Similarly, following the Merger, FUNB or its
affiliates will pay the fees, salaries or other remuneration of directors and
officers of the Fund who also serve as directors, officers or employees of or
special consultants to First Union, First Union Bank, or any of their
affiliated companies.
The Adviser absorbed the costs and expenses of the Fund's Transfer Agent,
Dividend Disbursing Agent and Agent under the Automatic Dividend
Investment Plan and the Fund's Registrar, and FUNB will continue to do so
pursuant to the New Advisory Agreement. The Existing Advisory Agreement and
the New Advisory Agreement provide that the Adviser and FUNB, respectively,
may delegate its obligations under the Agreement to its affiliated companies.
If the New Advisory Agreement is approved, it is anticipated that
administrative services previously provided by the Adviser under the
Existing Agreement, will be provided by an affiliated company of FUNB.
The Fund will enter into a "New Administrative Services Agreement" with
Evergreen Investment Services, Inc. ("EIS"). EIS will manage the day-to-day
business administration of the Fund and provide services similar to those
currently provided to the Fund by the Adviser. The New Administrative
Services Agreement was approved by the Fund's Board on March 11, 1998 and is
not subject to shareholder approval. EIS is entitled to receive a fee based
on the average daily net assets of the Fund at a rate based on the total
assets of the funds administered by EIS for which FUNB or its affiliates also
serve as investment adviser, calculated in accordance with the following
schedule: .050% of the first $7 billion; .035% on the next $3 billion; .030%
on the next $5 billion; .020% on the next $10 billion; .015% on the next
$5 billion; and .010% on assets in excess of $30 billion. In return for its
advisory and other services and the expenses it assumes, under the terms of
the Existing Advisory Agreement and the New Advisory Agreement, the Adviser
and FUNB, respectively, are entitled to receive a monthly fee at an annual
rate of 0.5% of the average monthly net asset value of the Fund plus 2.5% of
the net amount of interest and dividend income after deducting interest on
borrowed funds. In computing the advisory fee, the Adviser first multiplies
the average monthly net asset value times 0.5%. The Adviser then determines
investment income, net of interest paid on borrowings. In recent years, there
have been no borrowings by the Fund and no interest paid thereon to deduct
from investment income. If there were borrowings, the Adviser would deduct
the interest paid on borrowings from the Fund's investment income and then
multiply that remainder times 2.5%. The product of that computation would
be added to the product of the first computation based on average monthly
net assets. Amortization of debt discount is not considered interest income
for the purpose of calculating such fee. For the fiscal year ended
November 30, 1997, the Adviser received $683,391 (0.70% of average net
assets) from the Fund in fees under the Existing Advisory Agreement.
As of February 28, 1998, the Fund had net assets of $98.6 million.
FUNB would have received the same fees if the New Advisory Agreement had
been in effect during the fiscal year ended November 30, 1997.
The Fund is responsible under the Existing Advisory Agreement and the New
Advisory Agreement for all other costs and expenses of its operations,
including fees of the Directors who were not "affiliated persons" (as defined
in the 1940 Act) of the Adviser, CoreStates, CoreStates Bank or any of their
affiliated companies, (and with respect to the New Advisory Agreement First
Union, First Union Bank or any of their affiliated companies), custodian
expenses, legal fees, expenses of independent accountants, costs of acquiring
and disposing of portfolio securities, brokerage fees, taxes, stock exchange
listing expenses, reports to shareholders, proxy materials, and the cost of
printing share certificates and other expenses. The Existing Advisory
Agreement and the New Advisory Agreement provide that the Adviser and FUNB,
respectively, will not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the Adviser's part in the performance of
its duties under this Agreement.
Annual Fund Operating Expenses. If the proposed New Advisory Agreement
had been in effect during the most recent fiscal year, total Fund operating
expenses would have been the same as the expenses at the end of the most
recent fiscal year.
The Existing Advisory Agreement was approved by the Shareholders of the
Fund on April 22, 1996 for an initial two year term in connection with the
merger of Meridian Bancorp, Inc. into CoreStates. The proposed New
Advisory Agreement will become effective on the date of shareholder
approval and continue in force for an initial two year period. The Existing
Advisory Agreement and the New Advisory Agreement provide that the
respective Agreement will continue from year to year so long as such
continuance is specifically approved at least annually by (1) the Board of
Directors of the Fund or (2) the vote of a majority of the outstanding
voting securities of the Fund; provided, however, that in either event the
continuance also is required to be approved by the vote of a majority of the
Directors of the Fund who are not "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund or the Adviser cast in person at
a meeting called for the purpose of voting upon such approval. The Existing
Advisory Agreement and the New Advisory Agreement provide for automatic
termination of the respective Agreement in the event of its assignment.
In addition, each Agreement is terminable at any time, without penalty, by
the Board of Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund on 60 days' written notice to
the Adviser or by the Adviser on 60 days' written notice to the Fund.
If the Board's approval of the New Advisory Agreement is ratified by
either more than 50% of the Fund's outstanding shares entitled to vote at
the meeting or by a two-thirds majority of the shares present at such
meeting if the holders of more than 50% of the outstanding shares entitled
to vote at the meeting are present in person or by proxy, the New Advisory
Agreement will be approved. No arrangements, other than the nomination of
Mr. Insley described above, have been made in connection with the New
Advisory Agreement with respect to the composition of the Board of
Directors of the Fund or FUNB.
The proposed New Advisory Agreement between the Fund and FUNB is
Exhibit A of this proxy statement.
The Board of Directors recommends that shareholders vote to
approve the New Advisory Agreement.
ADDITIONAL INFORMATION
The Adviser has informed the Fund that the services provided under
the Existing Advisory Agreement and the New Advisory Agreement may be
performed by the Adviser or FUNB and its bank and non-bank affiliates
without violation of applicable statutes and regulations, including the
federal statute commonly known as the Glass-Steagall Act. The
Glass-Steagall Act, among other things, relates to the activities of bank
holding companies and banks and their subsidiaries and affiliates in
connection with investment companies. Future changes in either Federal
or state statutes and regulations relating to the permissible activities
of banks or bank holding companies and the subsidiaries or affiliates of
those entities, as well as further judicial or administrative decisions
or interpretations of present and future statutes and regulations could
prevent or restrict the ability of FUNB or any other affiliates or
subsidiaries of First Union to continue to perform such services for the
Fund. Depending upon the nature of any changes in the services which could
be provided by FUNB or First Union's other affiliates, the Board of Directors
of the Fund would review the relationships with First Union's affiliates and
subsidiaries and consider taking all actions necessary in the circumstances.
STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for consideration at the 1998
Annual Meeting of Stockholders of the Fund should submit such proposal in
writing so that it is received by the Fund at Centre Square West - UM Floor,
15th and Market Streets, Philadelphia, Pennsylvania 19101, by not later than
December 2, 1998. Mere submission of a stockholder proposal does not
guarantee inclusion of the proposal in the proxy statement or presentation of
the proposal at the Annual Meeting since such inclusion and presentation are
subject to compliance with certain federal regulations.
Joseph Phillips, Secretary
March 30, 1998
INVESTMENT ADVISORY AND SERVICES AGREEMENT
VESTAUR SECURITIES, INC.
THIS AGREEMENT, made as of the 28th day of April, 1998 by and
between VESTAUR SECURITIES, INC., a Delaware corporation (the "Company"),
and FIRST UNION NATIONAL BANK, a national bank (the "Adviser").
In consideration of the premises and of the mutual agreements hereinafter
set forth, the Company and the Adviser agree as follows:
PART ONE
Definitions
A. "The period of this Agreement" means the term of this Agreement and any
renewal or extension thereof, or until any prior termination thereof.
B. The "1940 Act" means the Investment Company Act of 1940, as amended.
C. The "vote of the majority of the outstanding voting securities" of the
Company has the meaning contained in the 1940 Act.
D. The terms "interested person", "affiliated person" and "assignment"
have the meanings contained in the 1940 Act.
E. The terms "affiliated company" and "affiliated companies" means with
respect, to the Adviser, First Union Corporation and any corporation
controlling, controlled by or under common control with First Union
Corporation.
F. The term "interim period" means the period commencing on the date of the
consummation of the merger of CoreStates Financial Corp and First Union
Corporation and ending on the date that this agreement shall have been
approved by the vote of the majority of the outstanding voting securities
of the Company.
PART TWO
Investment Advice and Other Services
G. The Company hereby retains the Adviser, and the Adviser hereby agrees,
for the period of this Agreement and under the terms and conditions
hereinafter set forth, to provide or to cause to be provided
administration of the day-to-day investment operations of the Company,
to furnish the Company continuously with investment planning to provide
investment advice with regard to the Company's portfolio, to prepare and
make available to the Company all necessary research and statistical data
in connection therewith and to supervise the purchase and sale and the
acquisition and disposition of specific securities by the Company. The
Adviser shall keep or cause its affiliated companies to keep the books
and financial records of the Company, and on behalf of the Company shall
compute the net asset value of the Company's shares (in accordance with
any instructions of the Board of Directors of the Company (the "Board")
at such times as the Board may direct. The Adviser shall furnish, to the
Company and to such other persons as the Company may direct, any
statements with respect to the net asset value per share, at such times,
and in such forms, as the Company may reasonably prescribe. The Adviser
shall maintain a continuous record of all the investments and securities
which comprise the Company's portfolio and shall furnish to the Board a
resume of such portfolio, at such times, and in such forms, as the Board
may reasonably prescribe. The Adviser shall also render to the Board a
report on all matters pertaining to the services provided by the Adviser
hereunder, at such times, and in such forms, as the Board may reasonably
prescribe. The Adviser shall perform such other services as are
reasonably incidental to the foregoing duties.
The Adviser shall furnish the Company or cause its affiliated companies
to furnish the Company with the services of a person or persons
satisfactory to the Company whose duties shall include (except for the
legal and auditing aspects thereof) the supervision of the Company's
financial statements and reports, the preparation of reports to
shareholders and others, and any statements or reports required by
regulatory authorities of the United States, or states thereof in
which the Company has qualified its shares for sale.
In addition, the Adviser shall furnish or cause its affiliated
companies to furnish to the Company such office space and facilities,
including, without limitation, stenographic, telephone, telegraphic,
mailing, and other facilities as may be required for the management of
the affairs and business of the Company. It is the intent of this
Agreement that the Adviser shall supply or, in the case of noninvestment
advisory services, cause its affiliated companies to supply, such
services as are necessary or desirable and proper for the continuous
operation of the Company. However, the Adviser shall not be required
to perform or to cause the performance of (a) those services customarily
performed by the members of the Board; (b) those services customarily
performed by the officers of the Company (except to the extent requested,
those of the Secretary of the Company); or (c) those services customarily
performed by the independent accountant, broker, dealer or independent
legal counsel.
H. The Adviser shall arrange, if requested by the Company, for officers and
directors of the Adviser or its affiliated companies to serve without
compensation from the Company as directors or officers of the Company,
if duly elected to such positions by the shareholders or directors of the
Company, or as employees of the Company. In addition, the Adviser will
bear the cost of fees, salaries or other remuneration of directors and
officers of the Company who also serve as directors, officers, employees
or special consultants to the Adviser or any of its affiliated companies.
I. The Adviser covenants and agrees that in making purchases, sales,
acquisitions and dispositions of specific securities on behalf of the
Company, it shall at all times be governed by the Company's investment
objectives and policies as delineated and limited by the statements
contained in the various documents filed with the Securities and Exchange
Commission (the "Commission") as such documents may from time to time be
amended (whether or not such amendments are filed with the Commission).
The Company agrees to supply the Adviser with copies of all documents
filed with the Commission, together with any amendments thereto (whether
or not such are filed with the Commission).
J. The Adviser hereby covenants and agrees that it will make no separate
charge to any shareholders of his individual account for any service
rendered to said shareholder or the Company by the Adviser or its
affiliated companies hereunder unless such charges for special services
are specifically approved by the Board, including a majority of the
directors who are not "interested persons" of the Adviser. No special
charge will be levied retroactively or without appropriate notice to
affected shareholders.
K. The Adviser hereby acknowledges that all records necessary in the
operation of the Company, including records pertaining to its
shareholders and investments, are the sole and exclusive property of the
Company, and in the event that a transfer of management or investment
advisory services to someone other than the Adviser should even occur,
the Adviser will promptly, and at its own cost, take all steps necessary
to segregate such records and deliver them to the Company.
L. Subject to approval of this Agreement by the vote of a majority of
the outstanding voting securities of the Company, the Adviser hereby
covenants and agrees to cause payment or reimbursement to the Company
of all fees and expenses of the Company's Transfer Agent, Dividend
Disbursing Agent, Registrar and the Agent or Agents under the Company's
Automatic Dividend Investment Plan.
PART THREE
Compensation to Investment Adviser
M. The Company covenants and agrees to pay to the Adviser, and the Adviser
covenants and agrees to accept from the Company in full compensation, and
as the only compensation to which the Adviser shall be entitled to
receive under this Agreement, for all investment advice, material and
other services furnished, and for all facilities and equipment and for
all expenses paid or reimbursed by the Adviser hereunder, a monthly fee
at an annual rate of 0.5% of the average monthly net asset value of the
Company, plus 2.5% of the net amount on interest and dividend income
after deducting interest on borrowed funds (the "Advisory Fee"). The
Advisory Fee shall be computed as of the close of business on the last
business day of each month. The Advisory Fee shall be prorated for any
fraction of a month at the commencement or termination of this Agreement.
N. Net asset value of the Company for purposes of computing the Advisory
Fee will be determined as of the close of trading on the last business
day in each month on which the New York Stock Exchange is open, and will
be computed pursuant to the provisions of the Company's Bylaws and any
currently effective Prospectus of the Company.
O. The Advisory Fee provided for hereunder shall be paid in cash by the
Company to the Adviser within ten (10) business days after the last day
of each month and such Advisory Fee shall be adjusted, if necessary, at
the time of the payment due in the last month in the fiscal year of the
Company. Any overpayment of the Advisory Fee shall promptly be refunded
to the Company. Notwithstanding the foregoing provisions of Part Three
of this Agreement, the Advisory Fee during the interim period shall be
accrued on the books of the Company and paid into an interest-bearing
escrow account maintained by a financial institution that is not
affiliated with the Adviser. The amounts in the escrow account will
be paid to the Adviser upon shareholder approval of this Agreement. The
escrow agent will pay the escrow amounts to the Fund in the absence of
shareholder approval by the end of the interim period.
PART FOUR
Allocation of Expenses
P. Subject to approval of this Agreement by a majority of the outstanding
voting securities of the Company, the Adviser agrees to cause payment
or reimbursement to the Company for all its expenses during the period of
this Agreement except:
1. fees payable to the Adviser for its services under this Agreement;
2. all taxes of any kind paid by the Company;
3. all custodian or trustee fees, costs and expenses;
4. costs and expenses in connection with the auditing and
certification of the records and accounts of the Company by the Company's
Independent certified public accountants;
5. brokerage commissions and charges including transfer taxes and similar
taxes, incurred in acquiring and disposing of portfolio securities;
6. costs of obtaining and printing stock certificates, reports to
shareholders, notices, proxies, proxy statements, and also the cost of
envelopes in which such are to be mailed; provided, however, that the
Adviser shall receive no compensation for the use of its facilities or
personnel in connection with the preparation and distribution of reports
to shareholders or the preparation and distribution of proxy material for
the Company, and the Adviser shall pay the fees of its counsel for
services rendered in such connection;
7. postage on all communications, notices and statements to brokers,
dealers, and the Company's shareholders;
8. fees paid to directors who are not "affiliated persons" of the Adviser;
9. all fees and expenses of independent legal counsel for the Company;
10. all stock exchange listing expenses;
11. the cost of insurance authorized by the Board or required of
the Company by law; and
12. expenses which from time to time may be designated as extraordinary"
by a resolution adopted by a majority of the directors of the
Company who are not "interested persons" of the Adviser.
Q. Notwithstanding any other provisions of this Agreement, including
the provisions of paragraph 6 of Part Two and paragraph I of Part
Four hereof, the Adviser shall not be responsible for payment or
reimbursement of any expenses incurred by the Company during the
interim period unless and until Advisory Fees for such period shall
have been paid to the Adviser.
PART FIVE
Multiple Capacities
Nothing contained in this Agreement shall be deemed to prohibit the Adviser
from acting, and being separately compensated for acting, in one or more
capacities on behalf of the Company. Whenever the Adviser shall be required
to act in multiple capacities on behalf of the Company, either under this
Agreement or by virtue of this and any other Agreement between the Adviser
and the Company, the Adviser shall maintain the appropriate separate accounts
and records for each such capacity. The Company understands that the Adviser
or its parent, First Union Corporation including any of its subsidiaries or
affiliates, may act in one or more capacities on behalf of other investment
companies and customers and the Company consents thereto. While information
and recommendations supplied to the Company shall, in the Adviser's judgment,
be appropriate under the circumstances and in light of the investment
objectives and policies of the Company, they may be different from the
information and recommendations supplied to other investment companies and
customers. The Company shall be entitled to equitable treatment under the
circumstances in receiving information, recommendations and any other
services, but the Company recognizes that it is not entitled to receive
preferential treatment as compared with the treatment given to any other
investment company or customer.
PART SIX
Inconsistent Position
R. The Adviser agrees that no officer or director of the Adviser will
deal for or on behalf of the Company with himself as principal or
agent, or with any corporation, partnership or other person in which he
may have a financial interest, except that this shall not prohibit:
1. Officers and directors of the Adviser from having a financial
interest in the Company or in the Adviser.
2. The purchase of securities for the Company, or the sale of
securities owned by the Company, through a security broker or
dealer, one or more of whose partners, officers or directors is an
officer or a director of the Adviser, provided such transactions
are handled in the capacity of broker only and provided commissions
charged do not exceed customary brokerage charges for such services.
S. If any occasion should arise in which the Adviser or any of its officers
or directors advises persons concerning the shares of the Company, the
Adviser or such officer or director will act solely on its, hers or his
own behalf and not in any way on behalf of the Company.
T. The Adviser agrees that, except as herein otherwise expressly provided,
neither it nor any of its officers or directors shall at any time
during the period of this Agreement make, accept or receive, directly
or indirectly, any fees, profits or emoluments of any character in
connection with the purchase or sale of securities (except securities
issued by the Company) or other assets by or for the Company.
U. Notwithstanding any other provisions of this Agreement, nothing herein
is to be construed to prevent the Adviser, subject to approval of the
Board of Directors of the Company and compliance with applicable laws and
regulations, to serve as custodian of the Company's assets or as its
transfer or dividend disbursing agent.
PART SEVEN
Name of the Company
The Company may use the name "Vestaur" or any name derived from or similar
thereto only for so long as this Agreement or any extension, renewal or
amendment hereof remains in effect. At such time as such an agreement shall
no longer be in effect, the Company will (to the extent that it lawfully can)
cease to use such a name or any other name indicating that it is advised by
or otherwise connected with the Adviser, or an affiliate of the Adviser.
PART EIGHT
Limitation of Liability of Adviser
The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Company in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Adviser's part in the
performance of its duties under this Agreement. Any person, even though
also employed by the Adviser, who may be or become an employee of and paid
by the Company shall be deemed, when acting within the scope of his
employment by the Company, to be acting in such employment solely for the
Company and not as the Adviser's employee or agent.
PART NINE
Amendment
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought.
PART TEN
Effectiveness, Renewal and Termination
V. This Agreement shall become effective upon the date first written
above and, subject to its approval by a vote of the majority of the
outstanding voting securities of the Company, shall remain in full
force and effect, subject to prior termination as provided herein,
for a period of two years from the date of such approval. This Agreement
shall thereafter continue in full force and effect from year to year,
subject to prior termination as provided herein, but only so long as its
continuance shall be specifically approved at least annually (1) by the
Board or by a vote of the majority of the outstanding voting securities
of the Company, and (2) by the vote of a majority of the directors who
are not parties to this Agreement or "interested persons" of any such
party, cast in person at a meeting called for the purpose of voting on
such approval.
W. This Agreement may be terminated by either the Company or the Adviser at
any time by giving the other party sixty days' written notice of such
intention to terminate; provided that any such termination shall be made
without the payment of any penalty, and provided further that such
termination may be effected either by the Board or by a vote of the
majority of the outstanding voting securities of the Company.
X. This Agreement shall terminate in the event of its "assignment".
PART ELEVEN
Nature of Relationship
The Company and the Adviser are not partners or joint venturers with
each other and nothing herein shall be construed so as to make them such
partners or joint venturers or impose any liability as such on either of
them. The Adviser shall be deemed to be an independent contractor and,
except as expressly provided or authorized in this Agreement, as amended,
shall have no authority to act for or represent the Company.
PART TWELVE
Notice
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the party to this Agreement entitled to
receive such at such address as such other party may designate in writing
mailed for receipt of such notice.
PART THIRTEEN
Miscellaneous
Y. Neither this Agreement nor any transaction made pursuant hereto shall be
invalidated or in any way affected by the fact that directors, officers,
agents and/or shareholders of the Company are or may be interested in the
Adviser, or any successor or assignee thereof, as directors, officers,
shareholders or otherwise; that directors, officers, shareholders or
agents of the Adviser are or may be interested in the Company as
directors, officers shareholders or otherwise or that the Adviser or
any successor or assignee, is or may be interested in the Company as
shareholders or otherwise provided, however, that neither the Adviser
nor any officer or director of the Adviser or of the Company shall sell
to or buy from the Company any property or security other than a security
issued by the Company, except in accordance with an applicable order or
exemptive rule of the Commission.
Z. This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the 1940
Act and the laws and regulations governing national banks. To the
extent that any provisions herein contained conflict with any such
applicable provisions of law and regulations, the latter shall control.
AA. This Agreement is executed and delivered in the Commonwealth
of Pennsylvania and shall be construed in accordance with the
laws and decisions of said Commonwealth.
BB. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
CC. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original but all of which
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Adviser have each caused this
Agreement to be executed in duplicate in its name and on its behalf by
its undersigned duly authorized officers, or on the day and year first
above written.
ATTEST: VESTAUR SECURITIES, INC.
_____________________________________ By:___________________________________
Title: Chairman
ATTEST: FIRST UNION NATIONAL BANK
_____________________________________ By:___________________________________
Title:
PROXY
VESTAUR SECURITIES, INC.
This Proxy is solicited on Behalf of the Board of Directors of the Corporation
for the Annual Meeting of Stockholders, April 28, 1998
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Joseph Phillips and Karen G. Bater or either of them, with full
power of substitution, as attorneys and proxies to appear and vote all of
the shares of stock standing in the name of the undersigned at the annual
meeting of stockholders of Vestaur Securities, Inc. to be held in Conference
Room #3 at ARAMARK, 41st Floor, 1500 Market Street, Centre Square West Tower,
Philadelphia, PA 19102 on the 28th day of April, 1998 at 11:00 o'clock a.m.,
local time, and at any and all adjournments thereof, and the undersigned
hereby instructs said attorneys to vote:
(Continued, and to be signed on other side)
<TABLE>
Please mark your votes as in this example.
<CAPTION>
The shares represented by this proxy will be voted as specified in the
following items 1, 2 and 3 but if no choice is specified, they will be
voted For the election of the 8 persons named in the proxy statement as
Directors, For ratification of the appointment of the auditors named and
For approval of the Investment Advisory Agreement.
<S> <C> <C> <C> <C> <C>
1. ELECTION OF
DIRECTORS
FOR all nominees [ ] WITHHOLD [ ] Nominees: Paul B Fay, Jr. Charles P. Pizzi 2. The ratification of the
(except as marked AUTHORITY to Robert F. Gurnee Philip R. Reynolds selection of Deloitte &
to the contrary vote for all John C. Jansing Marciarose Shestack Touche as auditors for
below*) nominees James S. Morgan Mark E. Stalnecker the period December 1,
1997 through November
30, 1998
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. The approval of the
Investment Advisory
Agreement between Vestaur
Securities, Inc. and
First Union National Bank
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(*INSTRUCTION: To withhold authority 4. Upon any other business
to vote for any individual nominee, which may properly come
write the name of the nominee(s) below.) which may properly come
before the meeting or any
adjournment thereof.
The management knows of no
other such business.
______________________________
</TABLE>
SIGNATURE(S)________________________________________ DATE_____________, 1998.
(Signature of all joint owners is required. Fiduciaries please indicate
your full title.)
If any other matters properly come before the meeting about which the proxy
holders were not aware prior to the time of the solicitation, authorization
is given the proxy holders to vote in accordance with the views of the
management thereto. The management is not aware ofany such matters.
_PLEASE SIGN AND RETURN_
_THIS PROXY CARD IN THE_
_ENCLOSED ENVELOPE._
