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SIGNATURE PAUL E. SPEARS
TITLE PRESIDENT
<PAGE>
Signature Page
This report is signed on behalf of registrant in the City of Hanover and
Commonwealth of Pennsylvania on the 14th day of August, 1996.
SHEPMYERS INVESTMENT COMPANY
Witness: s/W. Bruce McConnel, III By: s/Paul E. Spears
---------------------------- -------------------------------
W. Bruce McConnel, III Paul E. Spears
Secretary President
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the 6/30/96
N-SAR and is qualified in its entirety by reference to such N-SAR.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 14,766,235
<INVESTMENTS-AT-VALUE> 15,215,072
<RECEIVABLES> 246,367
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,415
<TOTAL-ASSETS> 15,464,854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 265,763
<TOTAL-LIABILITIES> 265,763
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,723,326
<SHARES-COMMON-STOCK> 768,238
<SHARES-COMMON-PRIOR> 768,238
<ACCUMULATED-NII-CURRENT> 39,821
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,893)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 448,837
<NET-ASSETS> 15,199,091
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 445,345
<OTHER-INCOME> 0
<EXPENSES-NET> 58,326
<NET-INVESTMENT-INCOME> 387,019
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (264,073)
<NET-CHANGE-FROM-OPS> 122,946
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 668,367
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 545,421
<ACCUMULATED-NII-PRIOR> 321,168
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,500
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 58,326
<AVERAGE-NET-ASSETS> 15,400,329
<PER-SHARE-NAV-BEGIN> 20.49
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> (.34)
<PER-SHARE-DIVIDEND> .87
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.78
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
For period ending 6/30/96
File number 811-2798
SUB-ITEM 77C: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The matters described below were submitted to a vote of security
holders of Shepmyers Investment Company (the "Company") at an annual meeting of
shareholders on April 26, 1996 (the "Meeting").
(b) The following directors, constituting the entire Board of Directors,
were elected at the Meeting: Paul E. Spears, Gordon P. King, Lawrence S. DeVan,
John M. Fuss, Ralph E. Lemmon, Jr., Robert P. Myers, Paul Frey Spears, John F.
Thompson, III and C. Daniel Weber.
(c) Matter 1 - Election of Directors: At the Meeting, Paul E. Spears,
Gordon P. King, Lawrence S. DeVan, John M. Fuss, Ralph E. Lemmon, Jr., Robert P.
Myers, Paul Frey Spears, John F. Thompson, III and C. Daniel Weber, constituting
the entire Board of Directors, were elected to hold office until the next Annual
Meeting of Shareholders and until his successor is elected and qualified.
The following shares were voted for, against or abstained in the
election of directors:
For Against Abstain
--- ------- -------
Paul E. Spears 699,972 0 0
Gordon P. King 699,972 0 0
Lawrence S. DeVan 637,856 62,116 0
John M. Fuss 699,972 0 0
Ralph E. Lemmon, Jr. 699,972 0 0
Robert P. Myers 699,972 0 0
Paul Frey Spears 699,972 0 0
John F. Thompson, III 699,972 0 0
C. Daniel Weber 699,972 0 0
Matter 2 - Approval of Proposed Advisory Agreement between the Company
and Rittenhouse Financial Services, Inc. until April 30, 1997: Rittenhouse
Financial Services, Inc. ("RFS") served as the Company's investment advisor
under an investment advisory agreement dated April 30, 1985 (the "Advisory
Agreement").
<PAGE>
At a meeting of the Company's Board of Directors held on January 29,
1996, the Company's directors, including a majority of the Company's
disinterested directors, voted to approve a proposed advisory agreement between
RFS and the Company until April 30, 1997 and to recommend its approval by the
shareholders of the Company at the Meeting.
The terms and conditions of the Advisory Agreement and the proposed
advisory agreement are the same, except that the proposed advisory agreement
does not contain the provision in the Advisory Agreement requiring RFS to
furnish the Company's Board of Directors within 60 days after the end of each of
RFS's fiscal years copies of its financial statements (including a statement of
operations and a balance sheet) for the prior fiscal year audited by independent
certified public accountants.
The number of shares cast for the resolution approving the proposed
advisory agreement was 699,316. The number of votes cast against such resolution
was zero. The number of votes abstaining was 656.
Matter 3 - Ratification of Selection of Ernst & Young, LLP ("Ernst &
Young") as the Company's Independent Certified Public Accountants for the Year
Ending December 31, 1996: Ernst & Young, the Company's auditors beginning in
1978, were selected as independent certified public accounts for the Company for
the year ending December 31, 1996 by a majority of the members of the Company's
Board of Directors who are not "interested persons" of the Company (as defined
in the Investment Company Act of 1940). The ratification of the selection of
independent certified public accountants was submitted to the Company's
shareholders at the Meeting.
The number of shares cast for the resolution ratifying the Board's
selection of Ernst & Young as the Company's independent certified public
accountants was 699,972. The number of shares cast against such resolution was
zero. The number of shares abstaining was zero.
(d) Inapplicable.
ADVISORY AGREEMENT EXHIBIT 77 Q1
April 30, 1996
Rittenhouse Financial Services, Inc.
Two Radnor Corporate Center
Suite 400
100 Matsonford Road
Radnor, Pennsylvania 19087
Gentlemen:
Shepmyers Investment Company, a Pennsylvania corporation (the "Fund"),
is an investment company registered under the Investment Company Act of 1940
which invests and reinvests its assets in a portfolio of securities and
investments. The Fund hereby engages you to act as its Investment Manager to
render investment advisory and administrative services subject to the terms and
conditions herein set forth.
SECTION 1. Investment Management Services.
You shall use your staff and other facilities to conduct and maintain
a continuous review of the Fund's portfolio of securities and investments, and
shall from time to time determine what securities should be purchased or sold by
the Fund, what portion of the assets of the Fund should remain uninvested, and
the extent to which the Fund should otherwise use its investment powers. In
conducting such review and making such determinations, you shall follow the
Fund's investment policies as delineated and limited by the statements contained
in documents filed with the Securities and Exchange Commission, as amended from
time to time, the policies and restrictions set forth in this Agreement or
otherwise adopted by the Board of Directors, and the provisions of the
Investment Company Act of 1940 and the rules promulgated thereunder, so that at
all times the Fund shall be in compliance with its policies and restrictions and
the Investment Company Act of 1940. The Fund agrees to supply you with copies of
all such documents and to notify you of any changes in its investment policies
and restrictions on a timely basis.
In rendering such investment management services to the Fund pursuant
to this Agreement, you may at your own expense employ, retain or otherwise avail
yourself of the services or facilities of other persons or organizations for the
purpose of providing you or the Fund with such statistical and other factual
information, such advice regarding economic factors and trends,
<PAGE>
such advice as to occasional transactions in specific securities or such other
information, advice or assistance as you may deem necessary, appropriate or
convenient for the discharge of your obligations hereunder or otherwise helpful
to the Fund.
You and any person performing executive, administrative or trading
functions for the Fund whose services were made available to the Fund by you are
authorized to recommend that the Fund pay, or cause the Fund to pay, brokerage
commissions to any member of a securities exchange or securities broker or
dealer which may be in excess of the amount which another member of such an
exchange or broker or dealer would have charged for effecting such transaction,
if you or such officer or employee determine in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services (as such term is defined in Section 28(e)(3) of the Securities Exchange
Act of 1934 and the rules, regulations and releases of the Securities and
Exchange Commission thereunder) provided by such member or broker or dealer with
respect to your investment management services hereunder, viewed in terms of
either that particular transaction or your overall responsibilities with respect
to the Fund.
SECTION 2. Resumes and Reports.
You shall at your own expense maintain a continuous record of all the
investments and securities which comprise the Fund's portfolio and shall furnish
to the Board of Directors of the Fund (the "Board"), at any time it so requests
reports with respect to its portfolio in the form prescribed by the Board. You
shall also render to the Board, at its regularly scheduled meetings, and at such
other times as the Board may request, a report on all matters pertaining to your
services as Investment Manager hereunder, in the form prescribed by the Board.
In addition, at your own expense you shall furnish the Fund with such reports
and other data as the Board shall request, including, without limitation,
industry surveys, news of recent developments, statistical data, and such other
information as may keep the Board properly informed on developments relating to
the Fund's portfolio, or similar data relating to securities which you include
in the portfolio of the Fund.
SECTION 3. Other Duties and Services.
You shall at your own expense keep the books and records of the Fund,
and on behalf of the Fund shall compute the net asset value, net investment
income and tax-exempt interest income of the Fund (in accordance with any
instructions of the Board of Directors) at such times as the Board may direct.
You may obtain, at your expense, pricing information from brokers, dealers or
others to assist you in computing such net asset value. You shall perform such
other services as are reasonably incidental to the foregoing duties. You shall
furnish to the Fund and to such other
-2-
<PAGE>
persons as the Fund may direct any statements with respect to the net asset
value, net investment income and tax-exempt interest income of the Fund, at such
times, and in such forms, as the Fund may prescribe.
When and if the Board so requests, you shall furnish the Fund at its
expense the services of a person or persons satisfactory to the Fund whose
duties shall include supervising the preparation of (except for the legal and
auditing aspects thereof) the Fund's public financial statements and reports,
its reports to shareholders and others, and any statements or reports to
regulatory authorities of the United States, or states thereof in which the Fund
has qualified its shares for sale.
In addition, you shall furnish to the Fund at its expense
stenographic, telephone, telegraphic, mailing, and other facilities as the Board
may request in connection with the operations of the Fund. It is the intent of
this Agreement that through your staff you shall supply at the Fund's expense
such services as are deemed by the Board to be necessary or desirable and proper
for the continuous operation of the Fund. However, you shall not be required to
perform (a) those services customarily performed by the members of the Board;
(b) those services customarily performed by the officers; or (c) those services
customarily performed by the custodian, transfer agent, registrar, dividend
disbursing agent, independent accountants, broker, dealer or legal counsel.
SECTION 4. Multiple Capacities.
Nothing contained in this Agreement shall be deemed to prohibit you
from acting, and being separately compensated for acting, in one or more
capacities on behalf of the Fund. Whenever you shall be required to act in
multiple capacities on behalf of the Fund, either under this Agreement or by
virtue of this and any other agreement between you and the Fund, you shall
maintain the appropriate separate accounts and records for each such capacity.
The Fund understands that you may act in one or more capacities on behalf of
other investment companies and customers. While information and recommendations
supplied to the Fund shall, in your judgment, be appropriate under the
circumstances and in light of the investment objective of the Fund, they may be
different from the information and recommendations supplied by you to other
investment companies and customers. You shall give the Fund equitable treatment
under the circumstances in receiving information, recommendations and any other
services requested of you, but you shall not be required to give preferential
treatment to the Fund as compared with the treatment given to any other
investment company or customer. It is agreed that all advice and recommendations
will be held in confidence and will be used only with respect to the Fund.
-3-
<PAGE>
SECTION 5. Payment of Expenses.
Unless otherwise provided herein, you shall assume and pay all of your
own costs and expenses incurred in rendering the advisory and other services
required to be furnished by you under this Agreement. The Fund agrees to assume
and pay, or reimburse you for, its operating expenses, including, without
limitation, taxes, interest charges, custodians, transfer agents and registrars
and costs incurred in preparing shareholder reports and proxy materials. The
Fund will also pay any brokerage commissions on its portfolio transactions.
SECTION 6. Compensation for Services.
As compensation for your services, the Fund will pay to you, on the
last business day in each month a monthly fee of $2,083.33. This fee shall be
reduced in any fiscal year of the Fund by the amount that the expenses of the
Fund, including such fee but excluding taxes, brokerage commissions, interest,
and extraordinary expenses, exceed the applicable expense limitations imposed by
state securities regulations or authorities. Reductions shall be made at the
time of each monthly payment on an estimated basis, if appropriate, and an
adjustment to reflect the reduction on an annual basis shall be made, if
necessary, in the fee payable with respect to the last month in any fiscal year
of the Fund. You shall promptly refund any amount paid in excess of the fee
determined to be due for such year.
Such compensation for your services as is provided for in this Section
shall be the only compensation to which you shall be entitled under this
Agreement.
If this Agreement shall become effective subsequent to the first day
of a month, or shall terminate before the last day of a month, your compensation
shall be pro rated for such fraction of the month during which this Agreement is
in effect.
SECTION 7. Liability of the Investment Adviser.
You shall be liable only for willful misfeasance, bad faith or gross
negligence in the performance of your duties or reckless disregard of your
obligations under this Agreement, and nothing herein shall protect you against
any such liability to the Fund or its shareholders. You shall not be liable for
the acts and omissions of any agent (other than a director, officer or employee
of yours) employed by you, nor for those of any bank, trust company, broker or
other person with whom or into whose hands any moneys, shares of the Fund or
securities and investments may be deposited or come, pursuant to the provisions
of this Agreement. You shall not be liable for any defects in title of any
property acquired, nor for any loss unless it shall occur through your own
willful default. Subject to the foregoing, you shall not be liable
-4-
<PAGE>
for any action taken or omitted in good faith on the written advice of counsel,
provided that such counsel is satisfactory to the Fund.
SECTION 8. Additional Covenants.
You shall promptly notify the Board in writing if at any time a
material decrease in the amount of assets which you manage or other material
adverse change in your business or financial condition occurs or is reasonably
expected to occur.
SECTION 9. Termination of Agreement and Assignment.
This Agreement may be terminated at any time, without the payment of
any penalty, (i) on 30 days' written notice by you or (ii) on 24 hours' notice
by the Fund, acting pursuant to a resolution adopted by the Board or by the vote
of the holders of a majority of the outstanding shares of the Fund. This
Agreement shall automatically terminate in the event of its assignment.
Termination shall not affect the rights of the parties which have accrued prior
thereto.
SECTION 10. Duration of Agreement.
This Agreement shall be effective April 30, 1996 and, unless sooner
terminated, shall continue until April 30, 1997. Thereafter it shall continue
for successive yearly periods, provided that such continuance is specifically
approved annually in the manner required by the Investment Company Act of 1940.
SECTION 11. Definition.
When used in this Agreement, the term "a majority of the outstanding
shares of the Fund" means the lesser of (1) 67% of the Fund's shares present at
a meeting if the holders of more than 50% of the outstanding shares are present
in person or by proxy, or (2) more than 50% of the outstanding shares of the
Fund, and the terms "assignment" and "interested persons" shall have the
meanings given such terms in the Investment Company Act of 1940.
SECTION 12. Concerning Applicable Provisions of Law.
This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the Investment
Company Act of 1940. To the extent that any provision herein contained conflicts
with any such applicable provisions of law, the latter shall control.
This Agreement is executed and delivered in Hanover, Pennsylvania, and
the laws of the Commonwealth of Pennsylvania shall govern its construction,
validity and effect.
-5-
<PAGE>
If the agreement set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this letter and returning the same to
the undersigned, whereupon this letter shall constitute a binding agreement
between the parties hereto.
Yours very truly,
SHEPMYERS INVESTMENT COMPANY
/s/ Paul E. Spears
Paul E. Spears, President
Accepted:
/s/ George Connell
RITTENHOUSE FINANCIAL SERVICES, INC.
-6-
