SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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(Name of Registrant as Specified in Its Charter)
DECLARATION FUND
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
NOT APPLICABLE
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IMPORTANT NEWS FOR MICHIGAN HERITAGE FUND SHAREHOLDERS
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
HERE'S A BRIEF OVERVIEW OF MAJOR MATTERS TO BE VOTED UPON.
Q & A ABOUT THE ENCLOSED PROXY MATERIALS
Q. WHAT IS HAPPENING?
A. Dickinson Asset Management, Inc. ("DAMCO"), Investment Advisor to the
Michigan Heritage Fund (the "Fund") has resigned, effective February 15,
1999. As a result, the Board of Trustees of the Fund has undertaken a
search for a new Advisor. Unfortunately, due to the small size of the Fund
and the restrictive nature of its investment policies, the Board was unable
to find a suitable replacement adviser. As a result, after fully
considering all options available to the Fund, the Board concluded that it
would be in the best interests of the shareholders to close the Fund, wind
up the Fund's affairs, and distribute the net assets of the Fund to its
shareholders.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED CLOSURE OF THE FUND?
A. The Fund is a series of the Declaration Fund (the "Trust"). The Trust is an
open-end management investment company organized under the laws of the
state of Pennsylvania. The Trust is governed by a Declaration of Trust and
by-laws. Under the Trust's Declaration of Trust, whenever the Board votes
to close a fund series when that fund has outstanding shareholders, the
Board must seek and obtain the approval of a majority of the outstanding
shares of the fund to be closed.
Q. HOW WILL THESE CHANGES AFFECT ME AS A FUND SHAREHOLDER?
A. If you vote to close the Fund, all assets of the Fund will be liquidated
and converted to cash. The Board will set a date for closure, and all
outstanding debts and expenses of the Fund through that date will be paid.
The Fund will then calculate net asset value per share by dividing the
total cash remaining in the Fund by the number of outstanding shares. Your
shares will be redeemed at the calculated net asset value and the proceeds
sent to you. You will also receive a statement from the Fund informing you
of the details of your distribution; specifically interest, capital gains,
return of capital etc. Once the assets of the Fund have been distributed,
the Trust will file the necessary documents with the Securities and
Exchange Commission and the State of Pennsylvania terminating the existence
of the Fund.
Q. ARE THEIR ANY OUTSTANDING CLAIMS IN FAVOR OF THE FUND WHICH WILL NOT BE
RESOLVED PRIOR TO THE FUND'S CLOSING?
A. Yes. Currently, the Board has made a claim on behalf of the Fund against
DAMCO for approximately $63,000 in unreimbursed expenses voluntarily
incurred by DAMCO. DAMCO is disputing the validity of the claim.
Q. WHAT IS THE STATUS OF THE CLAIM AGAINST DAMCO?
A The Board has not yet filed suit against DAMCO. Attorneys for both parties
are currently negotiating in an attempt to reach a settlement of the claim.
If the Fund successfully recovers some or all of its claim against DAMCO,
that amount will be distributed to all shareholders of the Fund on a pro
rata basis. There can be no assurance that the Fund will be successful in
its attempts to recover the disputed amounts.
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Q. HOW DO THE BOARD MEMBERS OF MY FUND SUGGEST THAT I VOTE?
A. After careful consideration, the Board members of the Fund, including the
independent members, recommend that you vote "Yes" to close the Fund and
distribute all the net assets of the Fund to the shareholders.
Q. WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY
SOLICITATION?
A. The Trust is paying the costs of the Fund's shareholder meeting and proxy
solicitation.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Services at 1-800-353-3553
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ABOUT THE BALLOT
Shown below is the ballot that you will use to vote on the matters described
above and hereafter in these proxy materials.
1. Approve the Board's decision to close the Fund, wind up its affairs, and
distribute all of the Fund's net assets to the Fund's shareholders. To
approve closing the Fund, choose "Yes". To keep the Fund open, choose "No".
To refrain from voting, choose "Abstain".
Yes No Abstain
/ / / / / /
Signature(s) (All registered owners of accounts shown to the left must sign. If
signing for a corporation, estate or trust, please indicate your capacity or
title.)
X
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Signature Date
X
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Signature Date
PLEASE VOTE TODAY!
Please vote all issues shown on your ballot.
Please vote on each issue using blue or black ink to mark an X in one of the
three boxes provided on each ballot. Mark the Item - Yes, No or Abstain. Then
sign, date and return your ballot in the accompanying postage-paid envelope. All
registered owners of an account, as shown in the address on the ballot, must
sign the ballot. If you are signing for a corporation, trust or estate, please
indicate your title or position.
THANK YOU FOR MAILING YOUR BALLOT PROMPTLY!
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Declaration Fund
555 North Lane, Suite 6160
Conshohocken, PA 19428
TELEPHONE 1-800-353-3553
March 1, 1999
Dear Shareholder:
As you read in the Questions and Answers (Q & A) on page 1, the Adviser to
your Fund has resigned and the Board has voted to close the Fund due to an
inability to find a suitable replacement adviser.
We're sending this proxy statement to you because your vote is required in
order to close the Fund. Because the Fund will have no Adviser, it will be
extremely difficult, if not impossible, for the Fund to continue to operate
according to its prospectus. It will also be highly impractical, as well as
irresponsible, for the Fund to attract new investors. As a result, the
continuing expenses of the Fund will be borne by you, which may erode the value
of your investment over time. There is no assurance that the Trust will ever be
successful in finding a suitable replacement adviser.
As you review these materials, please keep in mind that your Board has made
every effort to protect your interests in the Fund. The Board recently
instructed DAMCO to liquidate all securities in the Fund and convert the Fund's
assets to cash. This action has been completed. Accordingly, there is no danger
of loss to your investment resulting from a sudden decline in the market. The
Board is pressing its claim against DAMCO, and if successful , will distribute
any recovery to all shareholders of the Fund.
In an effort to continue the Fund to the benefit of the shareholders, the
Board actively solicited proposals from a number of potential advisers to the
Fund. None of those proposals satisfied the Board that the Fund would be
adequately represented. If the Fund continues without an Adviser, the Board
fears that the value of the Fund's holding will deteriorate over time to the
detriment of the shareholders. The Board concluded that the best way to protect
and preserve shareholder assets was to close the Fund.
Your Board of Trustees has approved the closure of the Fund and recommends
that you vote "Yes" on the enclosed ballot. I encourage you to vote in favor of
the proposal. Please read the enclosed materials carefully before you vote on
these proposal. The materials explain in detail the reasons for the change being
proposed to you by this proxy.
PLEASE VOTE NOW TO HELP SAVE THE COST OF ADDITIONAL SOLICITATIONS.
As always, we thank you for your confidence and support.
Sincerely,
/s/ Stephen B. Tily
Chairman, Board of Trustees
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<PAGE>
DECLARATION FUND
555 North Lane, Suite 6160
Conshohocken, PA 19428
TELEPHONE 1-800-353-3553
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
MARCH 15, 1999 AND PROXY STATEMENT
March 1, 1999
To the Shareholders:
You are invited to attend a special meeting of shareholders of the Michigan
Heritage Fund (the "Fund"), a series of the Declaration Fund (the "Trust"):
The meeting will be held at 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania 19428 on Monday, March 15, 1999 at 10:00 a.m., Eastern time, for
the following purposes and to transact such other business as may properly come
before the meeting or any adjournment of the meeting:
1. To approve the closure of the Fund, the winding up of its affairs, and the
distribution of the Fund's net assets to all shareholders of record
entitled to receive such proceeds.
The Board of Trustees of your Fund has selected the close of business on
February 15, 1999 as the record date for the determination of shareholders of
the Fund entitled to notice of and to vote at the meeting. Shareholders are
entitled to one vote for each share held.
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD. SIGN, DATE
AND RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
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The accompanying proxy is solicited by the Board of Trustees (the "Board") of
the Declaration Fund for voting at the special meeting of shareholders to be
held on Monday, March 15, 1999, and at any and all adjournments thereof (the
"Meeting"). This proxy statement was first mailed to shareholders on or about
March 1, 1998.
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THE SERIES FUNDS. Declaration Fund ("Declaration" or the "Trust") is a "series
company" that issues various series of shares. (Each series also is sometimes
described herein as a "Fund.") Each series has its own investment objective and
policies and operates independently for purposes of investments, dividends and
redemptions.
The series of Declaration include:
Declaration Money Market Fund
Declaration Cash
The VanderPal Protected Income and Growth Fund
The Michigan Heritage Fund
Shares of each Fund represent a proportionate interest in that Fund.
The item to be approved pursuant to this proxy only affects the shareholders of
the Michigan Heritage Fund (the "Fund"). The Fund has two classes of shares;
No-load and Class B shares. This proxy contains only one Item for shareholder
approval, and all shareholders from both share classes are entitled to vote. The
Board of Trustees of your Fund recommends that you vote "Yes" to close the
Fund.. The vote required to approve the Fund's closure is described under the
section of this proxy statement entitled "Miscellaneous."
The Board of Trustees has fixed the close of business on February 15, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting. As of February 15, 1999, the Fund had ____________
Shares issued and outstanding.
ITEM 1. CLOSURE OF THE MICHIGAN HERITAGE FUND.
BACKGROUND
The Michigan Heritage Fund was established as a series of the Trust and declared
effective by the Securities and Exchange Commission on July 8, 1997. The Board
of Trustees entered into an investment advisory agreement with Dickinson Asset
Management, Inc. ("DAMCO") to provide investment advisory services to the Fund
prior to the Fund becoming effective. DAMCO has been the adviser to the Fund
since the Fund's inception.
Pursuant to the terms of the Investment Advisory Agreement between the Trust and
DAMCO, DAMCO agreed to waive receipt of some or all of its advisory fees if the
Fund's ordinary operating expense ratios exceeded 1.75% Since the Fund's
inception on July 8, 1997, DAMCO has waived receipt of its fees under the
Investment Advisory Agreement.
Although under no obligation to do so, since the Fund's inception on July 8,
1997, DAMCO has also been reimbursing the Fund for all other Fund expenses in
excess of 1.75% of the Fund's average net assets. Such a practice is common for
new funds. Until a new fund grows to a certain size and becomes self-sustaining,
normal expenses incurred by the Fund in the course of its operations will often
have a very detrimental effect on the Fund's total return performance. Advisers
to new funds will absorb these "excess" expenses in order to hold down a fund's
expense ratio and enhance the Fund's investment performance.
On or about December 15, 1998, DAMCO tendered its resignation as investment
adviser to the Fund. At the time of DAMCO's resignation, there was approximately
$63,000 in accrued expenses to be reimbursed by DAMCO. As part of its
resignation, DAMCO disavowed any responsibility for the outstanding amount.
The Board of Trustees of the Fund met on December 16, 1998 to consider DAMCO's
resignation, the amounts due from DAMCO, and their effect on the Fund. At the
meeting , the Board considered its options with respect to the Fund and its
obligations to the Fund's shareholders. After fully considering its options with
respect to the Fund, the Board issued the following directives to Fund
management:
1. Until further notice, there were to be no new subscriptions accepted for
Fund shares.
2. Management was directed to immediately begin a search for a new adviser to
the Fund to replace DAMCO.
3. Counsel to the Fund was directed to contact counsel for DAMCO to press the
Fund's claim for reimbursement of all outstanding expenses owed by DAMCO.
4. Declaration Service Company ("DSC"), the Fund's transfer agent and fund
accountant, was directed to adjust the net asset value of the Fund's shares
to reflect the uncollected amounts upon the occurrence of the first of the
following events: (1) Any Fund shareholder requested a redemption of
shares, (2) Fund Management reported to the Board that a search for a new
adviser was unsuccessful, (3) Close of business on December 31, 1998, the
Fund's fiscal year-end.
1
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On December 24, 1998, DSC received a redemption request from one of the Fund's
shareholders. Pursuant to Board orders, DSC adjusted the Fund's net asset value
downward to reflect the uncollected expenses, and paid the redemption request.
On or about December 29, 1998, management reported to the Board that all
attempts to find a replacement adviser had failed.
On January 13, 1999, the Board held a special meeting to discuss its options
with respect to the Fund. At that meeting, the Board was informed that the
Fund's net asset value had been adjusted as a result of a redemption request.
Management reported that it had been unsuccessful in finding a new adviser.
Counsel to the Fund reported that there had been no progress in recovering
payment from DAMCO.
BOARD OF TRUSTEES RECOMMENDATION
After fully discussing its options with respect to the Fund, at its special
meeting on January 13, 1999 the Board of Trustees unanimously voted to close the
Fund and to recommend closure to the Fund's shareholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Trustees Evaluation" near the end of this
Item 1.
The Board recommends that shareholders vote "Yes" to close the Fund and
distribute the net assets of the Fund to all shareholders of record.
BOARD OF TRUSTEES EVALUATION
At a regular meeting of the Board on January 13, 1999, the Board discussed its
options with respect to the resignation of DAMCO, previously communicated to the
Board. Having previously directed management of the Trust to search for a new
Advisor, the Board received a report from management that a search for a new
adviser had been unsuccessful. Management informed the Board that management had
approached several established investment advisory firms, but because of the
Fund's lack of asset strength, its very narrow investment objectives, and the
existence of a large expense balance which would negatively affect the Fund's
performance, each adviser had declined to go forward. Management recommended
that the Board close the Fund.
The Board next considered whether to would be advisable to continue the Fund
without an outside adviser. Management and the Fund's independent auditors
presented a report to the Board on the likely consequences of the Fund remaining
open under the current circumstances. The Board learned that, as of December 14,
1998, when DAMCO resigned, Declaration Service Company ("DSC"), the Fund's
transfer agent, and Declaration Distributors, Inc. ("DDI"), the Fund's principal
underwriter, ceased charging servicing fees to the Fund pending a decision by
the Board concerning the Fund's future. The Board learned that, if the Fund
remained open, DDI and DSC would have to begin charging fees again to cover the
costs of services to the Fund. As a result, the Fund's expense ratio would
increase dramatically. At the same time, without an investment adviser, the
Board would have to manage the assets of the Fund. The Board agreed that it did
not have the expertise to manage a portfolio of Michigan-based securities.
Accordingly, if the Board managed the Fund's assets, it would be limited to
investing in money market securities only. The Board learned that, by investing
the Fund's cash assets exclusively in money market securities, the earnings of
the Fund would not equal the ongoing expenses incurred by the Fund. As a result,
the Fund's assets would be negatively impacted and eventually, entirely
depleted. Further, investing exclusively in money market securities would be a
violation of the Fund's fundamental investment policy. After full discussion, it
was decided that such an option would not be in the best interests of the Fund's
shareholders.
2
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The Board then considered the steps necessary to close the Fund. Counsel to the
Fund and the Fund's independent auditor, Sanville and Company, informed the
Board of its responsibilities and requirements for closing the Fund.
In addition, counsel to the Fund and the independent Trustees prepared and
distributed an analysis of the Board's fiduciary obligations. The Trustees
discussed the recommendations of management and reviewed their fiduciary
obligations. There was extended discussion of, and questioning about, the Fund's
future options and the ability of the Trust to continue the Fund without an
outside investment adviser. As a result of their investigation and discussions,
at its meeting on January 13, 1999, the Board voted to close the Fund and to
recommend closure to the shareholders of the Fund for their approval.
During its deliberations, the Board used outside assistance in its analysis of
the Fund's financial status and other aspects of the Fund to help evaluate the
potential effects of various Board actions upon the Fund and the Trust.
Throughout the review process the independent Trustees had the assistance of
legal counsel.
As part of its effort to preserve the assets of the Fund until such time as the
Fund's affairs wee wound up and its assets distributed, the Board sent written
notice to DAMCO, instructing it to liquidate all outstanding assets of the Fund
and convert all Fund assets to cash. DSC was directed to contact the Fund's
custodian and direct the custodian to invest the Fund's cash in overnight,
interest-bearing deposits only until further notice. The Board undertook these
actions in order to preserve the assets of the Fund and to remove from the Fund
any risk of asset loss due to market declines.
As a result of their investigation and consideration of the Fund's status and
the options available to the Fund, at its meeting on January 13, 1999, the Board
voted to close the Fund, wind up its affairs, and distribute the net assets of
the Fund to all shareholders of record, and to recommend its decision to the
shareholders of the Fund for their approval.
The Board of Declaration recommends that shareholders of the Fund vote "Yes" to
approve the Fund's closure.
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OTHER INFORMATION
MISCELLANEOUS
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with solicitation
of proxies will be paid by the Trust, including any additional solicitation made
by letter, telephone or telegraph. In addition to solicitation by mail, certain
officers and representatives of the Trust, and certain financial services firms
and their representatives, who will receive no extra compensation for their
services, may solicit proxies by telephone, telegram or personally. In addition,
the Trust may retain a firm to solicit proxies on behalf of the Board, the fee
for which will be borne by the party incurring the expense.
A COPY OF YOUR FUND'S ANNUAL REPORT AND ANY MORE RECENT SEMI-ANNUAL REPORT ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING TO DECLARATION FUND, P.O. BOX
844, CONSHOHOCKEN, PA 19428-0844, OR BY CALLING 1-800-___-____.
PROPOSALS OF SHAREHOLDERS
As a Pennsylvania Business Trust, Declaration Fund is not required to hold
annual shareholder meetings, but will hold special meetings as required or
deemed desirable. Since the Trust does not hold regular meetings of
shareholders, the anticipated date of the next shareholders meeting cannot be
provided. Any shareholder proposal that may properly be included in the proxy
solicitation material for a special shareholder meeting must be received by the
Trust no later than four months prior to the date when proxy statements are
mailed to shareholders.
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OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Trustees of Declaration Fund is not aware of any matters that will
be presented for action at the Meeting other than the matters set forth herein.
Should any other matters requiring a vote of shareholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote the
shares as to any such other matters in accordance with their best judgment in
the interest of the Trust.
VOTING, QUORUM
Each share of the Fund is entitled to one vote on each matter submitted to a
vote of the holders of those shares of the Fund at the Meeting; no shares have
cumulative voting rights.
Each valid proxy will be voted in accordance with the instructions on the proxy
and as the persons named in the proxy determine on such other business as may
come before the Meeting. If no instructions are given, the proxy will be voted
YES on the proxy. Shareholders who execute proxies may revoke them at any time
before they are voted, either by writing to Declaration or in person at the time
of the Meeting. Proxies given by telephone or electronically transmitted
instruments may be counted if obtained pursuant to procedures designed to verify
that such instructions have been authorized.
The only Item to be voted on by this proxy requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. The term "majority
of the outstanding voting securities" as defined in the 1940 Act means: the
affirmative vote of the lesser of (1) 67% of the voting securities of the Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding shares
of the Fund.
The Declaration of Trust and By-Laws of Declaration provide that the presence at
a shareholder meeting in person or by proxy of at least 33.3% of the shares of a
series constitutes a quorum for that series. Thus, the meeting for a particular
series could not take place on its scheduled date if less than 33.3% of the
shares of that series were represented. If, by the time scheduled for the
meeting, a quorum of shareholders of a series is not present or if a quorum is
present but sufficient votes in favor of any of the items are not received, the
persons named as proxies may propose one or more adjournments of the meeting for
that series to permit further soliciting of proxies from its shareholders. Any
such adjournment will require the affirmative vote of a majority of the shares
of the series as to which the meeting is being adjourned present (in person or
by proxy) at the session of the meeting to be adjourned. The persons named as
proxies will vote in favor of any such adjournment if they determine that such
adjournment and additional solicitation are reasonable and in the interest of
the respective series' shareholders.
In tallying shareholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting. Abstentions and broker non-votes will not be counted as
"votes cast" and will have no effect on the result of the vote. The Board of
Trustees of Declaration recommends a YES vote on the Item before the Fund's
shareholders.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
Stephen B. Tily
Chairman, Board of Trustees
4
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EXHIBIT A
HOLDERS OF MORE THAN
5% OF THE FUND'S SHARES
NAME AND ADDRESS % OWNERSHIP # SHARES SHARE CLASS
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Thank you for mailing your ballot promptly!
We appreciate your continuing support and look forward to serving your future
investment needs.
DECLARATION FUND
1. Approve the Board's decision to close the Fund, wind up its affairs, and
distribute all of the Fund's net assets to the Fund's shareholders. To
approve closing the Fund, choose "Yes". To keep the Fund open, choose "No".
To refrain from voting, choose "Abstain".
Yes No Abstain
/ / / / / /
Signature(s) (All registered owners of accounts shown to the left must sign. If
signing for a corporation, estate or trust, please indicate your capacity or
title.)
X
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Signature Date
X
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Signature Date
PLEASE VOTE TODAY!
Please vote all issues shown on your ballot.
Please vote on each issue using blue or black ink to mark an X in one of the
three boxes provided on each ballot. On all Items, mark - Yes, No or Abstain.
Then sign, date and return your ballot in the accompanying postage-paid
envelope. All registered owners of an account, as shown in the address on the
ballot, must sign the ballot. If you are signing for a corporation, trust or
estate, please indicate your title or position.
THANK YOU FOR MAILING YOUR BALLOT PROMPTLY!
Your vote is needed! Please vote on the reverse side of this form and sign in
the space provided. Return your completed proxy in the enclosed envelope today.
You may receive additional proxies for your other accounts with the Fund. These
are not duplicates; you should sign and return each proxy card in order for your
votes to be counted. Please return them as soon as possible to help save the
cost of additional mailings.
The signers of this proxy hereby appoint David F. Ganley and Paul L. Giorgio,
and each of them, attorneys and proxies, with power of substitution in each, to
vote all shares for the signers at the special meeting of shareholders to be
held March 15, 1999, and at any adjournments thereof, as specified herein, and
in accordance with their best judgement, on any other business that may properly
come before this meeting. If no specification is made herein, all shares will be
voted "Yes" in favor of the proposal set forth on this proxy. The proxy is
solicited by the Board of Declaration which recommends that you vote "Yes" on
this single Item.
