Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 67)
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 Material
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INVESTORS RESEARCH FUND, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
<PAGE>
Hugh J. HAFERKAMP
ATTORNEY AND COUNSELOR AT LAW
11800 BACCARAT LANE, N.E.
ALBUQUERQUE, NEW MEXICO 87111-7600.
TELEPHONE (505) 296-5122
FAX (509) 292-8982
February 12, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Investors Research Fund, Inc.
Your File Nos. 2-14675 and 811-861
Preliminary Copy of Proxy Statement
Gentlemen:
Pursuant to Rule 14a-6(a) under the 1934 Act, Investors Research Fund, Inc.
hereby files under the EDGAR system a preliminary copy of the Proxy statement
for the 1996 annual meeting of the shareholders of the Fund. We anticipate
mailing the definitive copies of the material to the shareholders on or soon
after February 22, 1997.
The reason for the filing is by virtue of Proposal 3 on the ballot. The advisor
has proposed to contract with a sub-advisor for the Fund. That requires a
shareholder vote. There does not seem to be any exception to our filing of this
preliminary copy.
If you should have any questions or comments, please contact me at the above
address and telephone number at your earliest opportunity. Thank you very much
for your attention to this filing.
Very truly yours,
/s/
HUGH J. HAFERKAMP
HJH/rv
Enclosure
cc: Dr. Francis S. Johnson
President
<PAGE>
INVESTORS RESEARCH FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 25, 1997
Notice is hereby given that the annual meeting of the shareholders of INVESTORS
RESEARCH FUND, INC. will be held on Tuesday, March 25, 1997, 10:30 A.M. at the
Pepper Tree Inn, (Tree Top Room), 3850 State Street, Santa Barbara, California,
for the following purposes:
1. To elect a Board of Directors to serve until the next annual meeting
of shareholders and until their successors are elected and qualified.
2. To ratify the selection of Timpson Garcia as the independent Certified
Public Accountants to be employed by the corporation to sign or
certify financial statements which may be filed by the corporation
with the Securities and Exchange Commission.
3. To approve the proposed Sub-Advisory Agreement between Lakeview
Securities Corporation and Merrimac Advisors Company.
4. The transaction of such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
This meeting is being held pursuant to the By-Laws of the corporation.
February 3, 1997
Michael A. Marshall
Secretary-Treasurer
IMPORTANT: THE MANAGEMENT HOPES THAT YOU CAN ATTEND THE ANNUAL MEETING. HOWEVER,
IF YOU ARE UNABLE TO BE PRESENT IN PERSON, YOU ARE EARNESTLY REQUESTED TO SIGN
AND RETURN THE ENCLOSED PROXY IN ORDER THAT THE NECESSARY QUORUM MAY BE
REPRESENTED AT THE MEETING. IF THE ENCLOSED PROXY IS EXECUTED AND RETURNED, IT
MAY NEVERTHELESS BE REVOKED AT THE MEETING OR AT ANY TIME BEFORE THE POLLS
CLOSE. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE.
PLEASE PROMPTLY RETURN THE ENCLOSED PROXY. YOU WILL ASSIST YOUR FUND IN AVOIDING
THE EXTRA EXPENSE OF FOLLOW-UP LETTERS.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS OF
INVESTORS RESEARCH FUND, INC.
(3916 State Street, Suite 3C, Santa Barbara, California 93105)
This Statement is furnished in connection with a solicitation of proxies made by
and on behalf of INVESTORS RESEARCH FUND, INC. (hereafter called the "Fund"),
3916 State Street, Suite 3C, Santa Barbara, California 93105, and its present
management, to be used at the annual meeting of shareholders of the Fund, to be
held on Tuesday, March 25, 1997, 10:30 A.M. at the PEPPER TREE INN, (Tree Top
Room), 3850 STATE STREET, SANTA BARBARA, CALIFORNIA, for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders. Such solicitation
is made primarily by the mailing of this Statement with its enclosures. The
approximate date of first mailing is February 21, 1997.
Supplementary solicitation may be made by mail, telephone, telegraph, and by
personal contact by employees of the Fund and others. The expenses in connection
with preparing and mailing this Statement and its enclosures and of such
solicitations will be paid by the Fund. In some instances, said supplementary
solicitation may be made by securities dealers by whom shares of the Fund have
been sold and would be made at their own expense.
If the enclosed form of proxy is executed and returned, it may nevertheless be
revoked prior to the closing of the polls. A proxy may be revoked by written
notice to the Fund prior to the Annual Meeting of Shareholders, or by execution
of a subsequent proxy which is presented at the Annual Meeting of Shareholders,
or by personal vote at the Annual Shareholders Meeting. All proxies solicited by
the management which are properly executed and received in time will be voted in
the meeting. Such proxies will be voted in accordance with the instruction
thereon, if any, and if no specification is made, the proxy will be voted in
accordance with the judgment of the proxy holder. Discretionary authority is
conferred by the proxy as to all matters not specifically listed which may
properly come before the meeting. The management is not aware that any other
matters are to be presented for action.
As of February 3, 1997 there were issued and outstanding 7,712,493 shares of
capital stock of the Fund. Shareholders are entitled to one (1) vote for each
share of record held at the close of business on February 3, 1997. Fund
shareholders have cumulative voting rights and every shareholder entitled to
vote in the election for directors has the right in person or by written proxy
to multiply the number of votes to which he is entitled by the number of
directors to be elected, and he may cast the whole number of such votes for one
candidate, or he may distribute them among two or more candidates. A shareholder
may use his right to cumulative voting by indicating on the face of the Proxy
enclosed with this Proxy Statement the candidate or candidates of his choice and
the number of votes cast for each such candidate. The candidates receiving the
highest number of votes up to the number to be elected, shall be elected. The
presence in person or by proxy of persons entitled to vote a majority of the
outstanding voting shares at any meeting shall constitute a quorum for the
transaction of business.
Abstentions and broker non-votes will be counted as present or represented at
the Annual Meeting for purposes of determining whether a quorum exists. However,
abstentions and broker non- votes with respect to any matter brought to a vote
at the Annual Meeting will be treated as shares not voted for purposes of
determining whether the requisite vote has been obtained. Also, if a broker
indicates on the proxy that it does not, as to certain shares, have
discretionary authority to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter. In view
of the requirement that there be a certain number of affirmative votes, an
abstention or a broker no-vote has a negative impact as to a matter brought to a
vote. See section below entitled "Vote Required."
The aggregate dollar amount of portfolio brokerage commissions paid during
Fiscal 1995-96 was $424,531. Of that amount, $46,392 was paid to Diversified
Securities, Inc., 3701 Long Beach Boulevard, Long Beach, CA 90801 (P. O. Box
357, Long Beach, CA 90807), the Fund's Principal Underwriter. That latter figure
represents 11% of the aggregate dollar amount of the commissions paid by the
Fund. Diversified Securities, Inc. handled 11.28% of the brokerage transactions
effected during the year.
The matters to be acted upon pursuant to the proxy are:
Proposal 1. ELECTION OF DIRECTORS: It is the present intention that the enclosed
proxy will, in the absence of special designation by the shareholders signing
it, be used for the purpose of voting for election or re-election of the
following 12 persons as Directors of the Fund to hold office until the next
annual meeting of shareholders and until their successors are elected and
qualified. The shareholder may nominate and vote for other persons as directors
of the Fund by indicating their names and the number of votes cast for each
candidate on the enclosed proxy.
<PAGE>
<TABLE>
<CAPTION>
Capital Stock
Owned
Beneficially
Served Directly and
Name, Position with Fund Continuously Indirectly
and Principal Occupation as a Director as of
During the Past 5 Years Since Sept.30,1996
<S> <C> <C>
GERTRUDE B. CALDEN, Director and Member of the July 12, 1983 15,155 shares
Executive Committee, is Emeritus Director, Foundation
for Santa Barbara City College and has served under
three Presidents on the National Advisory Council on
Adult Education. 819 East Pedregosa Street,
Santa Barbara, CA 93103 (Age 87)
RICHARD CHERNICK, Director (elected January 22, January 22, 1997 None
1997) is a retired partner of the Los Angeles Law Firm
of Gibson, Dunn & Crutcher. He is currently active
in arbitration and mediation of disputes in the
Los Angeles area. 3055 Wilshire Boulevard,
Seventh Floor, Los Angeles, CA 90010-1108 (Age 51)
JAMES A. CORRADI, Director, Retired business December 2, 1994 501 shares
executive, former General Manager of Hope Ranch
Park Homes Association, and former Board
President of Cook College at Rutgers University.
17 Via Alicia, Santa Barbara, CA 93108 (Age 67)
FREDRIC J. FRENCH,* Director, is President of January 19, 1996 532 shares
The Arms Companies, the Investment Portfolio Management
Division of Lakeview Securities Corporation, investment
adviser to the Fund; formerly Vice-President and
Senior Portfolio Strategist of The Arms Companies
since November, 1992. 6201 Uptown Boulevard, N.E.,
Albuquerque, NM 87110 (Age 50)
HARRY P. GELLES, Director, (elected January 22, January 22, 1997 None
1997, is Senior Vice-President of Chelsea Management
Company, an investment management company in Los Angeles,
California. Previously was Senior Adviser to the
Trust Company of the West, which is also an investment
management firm in Los Angeles. 444 South Flower
Street, Suite 2340, Los Angeles, CA 90071 (Age 62)
HUGH J. HAFERKAMP,** Director, (elected January 22, 1997 None
January 22, 1997) is an attorney-at-law in private
practice in the Santa Barbara area. Has been legal
counsel to Investors Research Fund, Inc. for
approximately 17 years. 11800 Baccarat Lane, N.E.,
Albuquerque, NM 87111 (Age 69)
LEONARD S. JARROTT, Director, is a Real Estate January 24, 1996 None
Investment Adviser and independent Real Estate Broker
in Santa Barbara, California. 2725 Vernon Road,
Santa Barbara, CA 93105 (Age 52)
MICHAEL A. MARSHALL,* Secretary-Treasurer, February 10, 1994 2,948 shares
Director and Member of the Executive Committee, is a
former Senior Vice-President of Prudential California
Realty and is engaged in real estate investment and property
management, M-P Marshall & Co., 23 Princeton Trail,
Coto De Caza, CA 92679 (Age 61)
ROBERT P. MOSESON,* Director, is President and December 7, 1993 9,187 shares
Director of Lakeview Securities Corporation, investment
adviser to the Fund. He is also President and Director
of Performance Analytics, Inc., an investment consulting
firm which is affiliated with Lakeview Securities.
333 West Wacker Drive, Chicago, IL 60606 (Age 53)
WILLIAM J. NASIF, Director, is a certified public February 14, 1996 None
accountant and partner of Nasif, Hicks, Harris & Co.,
Certified Public Accountants of Santa Barbara, CA.
1111 Garden Street, Santa Barbara, CA 93101 (Age 54)
MARK SCHNIEPP, Director, is an economist and Director August 12, 1994 None
of the Economics Forecast Project at the University
of California, Santa Barbara, California.
944 Randolph Road, Santa Barbara, CA 93111 (Age 43)
DAN B. SECORD, Director, is a physician in private December 12, 1995 None
practice of obstetrics and gynecology in Santa Barbara.
Staff Santa Barbara Cottage Hospital. Vice Chairman,
Santa Barbara Planning Commission. 2329 Oak Park Lane,
Santa Barbara, CA 93105 (Age 60)
MARK L. SILLS,* Vice-President, Director and Member December 12, 1995 15,346 shares
of the Executive Committee, is Director of Consumer
Services, and Director of Information Services,
Aleene's - Division of ARTIS, Inc., 85 Industrial Way,
Buellton, CA 93427 (Age 52)
<FN>
* An "interested person" as defined in Section 2(a)(19) of the Investment
Company Act of 1940 as amended.
** Is deemed an "interested person" by virtue of having acted as counsel to
the Fund during the last two years.
</FN>
</TABLE>
<PAGE>
It is not expected that any of the nominees will decline or become unavailable
for election; but in case this should happen, the discretionary power given in
the proxy may be used to vote for a substitute nominee or nominees.
During the fiscal year, there were four regular meetings of the Board of
Directors, two special meetings of the Board, and three meetings of the
Executive Committee. All of the incumbent directors attended at least 75% of the
Board meetings during the term of their incumbency, except Mr. Jarrott, who was
absent from one regular and one special Board meeting. All of the above- listed
Directors who were members of the committee attended the Executive Committee
meetings. In addition to the meetings of the full Board of Directors, there were
several meetings of the Independent Directors. All of those meetings were called
for the purpose of selecting and nominating persons to serve as independent
directors, which procedure is required by law in view of the fact that the Fund
has a 12b-1 plan. No compensation was paid for those latter meetings.
To and including December 31, 1993, none of the officers of the Fund had
received any compensation directly from the Fund for serving in any capacity
since the date of inception of the Fund. The Fund has no pension or retirement
benefits for any officers or employees. Effective January 1, 1994, the Fund
began compensating Dr. Johnson at the rate of $1,200 per month for his services
as President of the Fund. The attendance fee payable to Directors and members of
the Executive Committee is $250 for each meeting actually attended. These
payments have been made by the Fund. However, no such attendance fees are
payable to those Directors who are associated with the Investment Adviser. The
Fund does not provide expense reimbursement to the Directors. The total
compensation paid by the Fund to all Directors during the fiscal year 1995-96
was $13,750.
The Board of Directors does not have any standing nominating or compensation
committee and has no committee performing similar functions. However, because of
the 12b-1 Plan, the independent directors are required to select and nominate
those directors who are not interested persons of the Fund and, consequently,
they serve as a de facto nominating committee as to the independent director
positions. The current independent directors are Gertrude B. Calden, James A.
Corradi, Harry P. Gelles, Leonard S. Jarrott, William J. Nasif, Mark Schniepp,
and Dan B. Secord. Additionally, at its December, 1994 meeting, the Board
established an audit committee. The members are Messrs. Corradi, Nasif and
Schniepp.
The following directors received the sums set opposite their names as
compensation for services as directors, including attendance at the meeting of
the Executive Committee, during fiscal 1996:
Gertrude B. Calden ....................... $2,250
James A. Corradi ......................... $1,250
Fredric J. French ........................ $0
Leonard S. Jarrott ....................... $750
Michael A. Marshall ...................... $2,250
Robert P. Moseson ........................ $0
William J. Nasif ......................... $1,000
Mark Schniepp ............................ $1,500
Dan B. Secord ............................ $1,250
Mark L. Sills ............................ $1,250
By virtue of his salary as President and his fees for director's meetings, Dr.
Johnson received total compensation from the Fund during fiscal 1996 of $16,650.
The directors set forth below also serve as members of the Board of Directors of
other companies in addition to that of the Fund.
1. Robert P. Moseson - Lakeview Securities Corporation Performance
Analytics, Inc., Spectrum Advisory Corporation, and Dyametrics
Management Corporation
2. Mark L. Sills - Accu-Dent, Research and Development, Inc.
Proposal 2. SELECTION OF ACCOUNTANTS: A majority of the members of the Board of
Directors who are not interested persons of the Fund (as defined in the
Investment Company Act of 1940) have selected the public accounting firm of
Timpson Garcia, 1610 Harrison Street, Oakland, California 94612, as the
independent certified public accountants to sign or certify any financial
statement which may be filed by the corporation with the Securities and Exchange
Commission. The employment of such accountants is expressly conditioned upon the
right of the corporation, by vote of a majority of the outstanding stock at any
meeting called for the purpose, to terminate such employment forthwith without
any penalty. Such selection is made pursuant to provisions of Section 32(a) of
the Investment Company Act of 1940, and is subject to ratification or rejection
by the stockholders at this meeting. No member of Timpson Garcia, or any
associate thereof, has any other relationship with the Fund or any affiliate
thereof. No representative of the auditors is expected to be present at this
meeting.
It is the present intention that the enclosed proxy will, in the absence of
special designation by the shareholders signing, be used for the purpose of
voting to ratify the selection of Timpson Garcia as the Fund's independent
auditors for Fiscal 1996-97.
Proposal 3. TO APPROVE A NEW SUB-ADVISORY AGREEMENT. Lakeview Securities
Corporation ("Lakeview") serves as the Fund's investment adviser and is
responsible for providing the Fund with a continuous investment program pursuant
to an Investment Advisory Agreement which became effective January 1, 1994 (the
"Advisory Agreement"). The Advisory Agreement was most recently approved by the
shareholders of the Fund at a special meeting held on November 29, 1993.
At a special meeting of the Fund's Board of Directors held on January 22, 1997,
the Directors, including all of the independent directors present, unanimously
approved and voted to recommend to the shareholders of the Fund that they
approve a sub-advisory agreement (the "Proposed Sub-Advisory Agreement") by and
between Lakeview and Merrimac Advisors Company ("Merrimac"). Under the Proposed
Sub-Advisory Agreement, Merrimac would replace The Arms Companies, a division of
Lakeview, making Merrimac an independent company with the same personnel and
style of advisory service.
Approval of the Proposed Sub-Advisory Agreement will not result in an increase
in any fees payable by the Fund. Lakeview will be solely responsible for paying
the sub-advisory fee to Merrimac under the Proposed Sub-Advisory Agreement.
Under the Proposed Sub-Advisory Agreement, Merrimac will provide Lakeview with
advice and recommendations regarding the Fund's investments and will assist
Lakeview in handling the Fund's portfolio of investments. Merrimac will also
provide Lakeview with economic and financial information, as well as other
research and assistance, on a continuous basis.
MERRIMAC AND THE PROPOSED SUB-ADVISORY AGREEMENT
Merrimac Advisors Company was organized under the laws of the State of New
Mexico on October 23, 1996. Merrimac registered with the Securities and Exchange
Commission (the "SEC") as an investment adviser under the Investment Advisers
Act of 1940 on December 6, 1996. The address of Merrimac is 6201 Uptown
Boulevard, N.E., Suite 203, Albuquerque, New Mexico 87110. Its telephone number
is (505) 883-8856. Merrimac's sole shareholder is Fredric J. French. Mr. French
and his wife, Judy K. French, are the only directors of Merrimac. Mrs. French is
not otherwise involved in the operation of the corporation. Mr. French also
serves as a Director of Investors Research Fund, Inc., having been elected as a
Director on January 19, 1996.
Merrimac intends to provide investment advice and management to advisory
clients, including the Fund. At the present time, Mr. French is an employee of
Lakeview and, as such, has participated in management of the Fund's investment
portfolio at all times that Lakeview has served as investment adviser to the
Fund, that is, since January 1, 1994. Since September 30, 1995, Mr. French and
Robert P. Moseson (President of Lakeview) have worked closely together in
management of the Fund's portfolio and the Fund has been informed that that
existing practice will be continued if the Proposed Sub-Advisory Agreement is
approved. All decisions and transactions will continue to be the responsibility
of Lakeview and will be under the final control of Lakeview.
The Fund has been informed by Lakeview that establishing Merrimac as an
independent company will permit Lakeview and its related companies to recommend
Merrimac to some of its other clients for advisory services after Mr. French
ceases to act as an employee of Lakeview following approval of this agreement.
Currently, restrictive commitments made by affiliates of Lakeview prevent Mr.
French from expanding his client base while an employee of Lakeview. Some of the
personnel of those clients employing Merrimac in the future may also wish to
utilize Merrimac and Lakeview's investment style and purchase Fund shares for
their own portfolios. That secondary effect, assuming that it occurs, will
increase the Fund's shareholder base.
In addition to the foregoing, Merrimac, having the opportunity for growing its
business base, will have additional resources for service to the Fund and will
assure the continued availability of the services of Mr. French as an adviser to
the Fund.
MATERIAL PROVISIONS OF THE PROPOSED SUB-ADVISORY CONTRACT
A. Compensation
The Proposed Sub-Advisory Agreement provides that Merrimac will receive from
Lakeview during the first year that said agreement is in effect fees in an
amount equal to 80% of the fee paid by the Fund to Lakeview under the Investment
Advisory Agreement. After the Proposed Sub-Advisory Agreement has been in effect
for 12 months, Merrimac will be paid by Lakeview a sum equal to 50% of the
annual fee paid by the Fund to Lakeview, or such other percentage as the parties
shall agree upon.
B. Term
If approved by the shareholders of the Fund, the Proposed Sub-Advisory Agreement
will take effect on March 25, 1997 and will then continue in effect until March
25, 1998. Thereafter, the Proposed Sub-Advisory Agreement will continue in
effect from year to year subject to the annual approval of its continuance as
described below under "Termination, Continuance and Amendment."
C. Termination, Continuance and Amendment
Except as described above, the Proposed Sub-Advisory Agreement will continue
from year to year subject to annual approval of its continuance by a majority of
the Independent Directors, cast in person at a meeting called for the purpose of
voting on such approval, and annual approval by either (a) the Directors of the
Fund, or (b) a majority of the Fund's outstanding voting securities, as defined
in the Investment Company Act of 1940. The Proposed Sub-Advisory Agreement will
be terminable at any time without penalty on 60 days' written notice by the
Directors, by a vote of a majority of the Fund's outstanding voting securities,
or by Lakeview or Merrimac, as the case may be. The Proposed Sub- Advisory
Agreement terminates automatically in the event of its assignment or in the
event that the adviser ceases to act as the Fund's investment adviser.
D. Limitation of Liability
The Proposed Sub-Advisory Agreement provides that Merrimac will not be liable
for any mistake of judgment or mistaken opinion relating to portfolio and
investment matters of the Fund, unless there is an absence of good faith.
However, nothing in the proposed agreement is to be construed as protecting
Merrimac against liability to the Fund or its stockholders (or to Lakeview) by
reason of negligence, willful misfeasance, bad faith or reckless disregard of
duties on the part of Merrimac.
E. Other Services
The Proposed Sub-Advisory Agreement authorizes Merrimac to provide services to
other clients within the scope of investment advisory or investment management
services, or a business ancillary thereto, but Mr. French can engage in any
unrelated business only with the specific consent of Lakeview. Furthermore, no
employment other than services to Lakeview and the Fund is to interfere with the
sub-advisory services to be provided to Lakeview and the Fund. The proposed
agreement obligates Merrimac, upon request, to provide reasonable assistance in
the marketing and promotion of shares of the Fund.
ANALYSIS OF PROPOSAL AND REVIEW BY DIRECTORS
The directors have determined that the terms of the Proposed Sub-Advisory
Agreement are fair and reasonable. In approving the Proposed Sub-Advisory
Agreement and recommending its approval by the shareholders of the Fund, the
directors, including the independent directors, considering the best interests
of the shareholders of the Fund, took into account all of the factors they
deemed relevant. The primary factors and directors' related analysis are
described below.
The directors considered the fact that, notwithstanding the change in
relationship between Mr. French and Lakeview, the proposed agreement will
provide continuity in the successful investment strategy being pursued by the
Fund. Both Mr. French and Lakeview have represented to the Fund that there will
be no change in the handling of the Fund's portfolio as a result of the
establishment of Merrimac. Lakeview will continue to bear the responsibility as
the Fund's investment manager.
The directors also believe that the agreement of Mr. French and Merrimac to
devote significant time and effort to marketing the Fund will be beneficial to
the Fund and its shareholders. Lakeview has represented to the Fund that it is
undertaking a marketing campaign on behalf of the Fund and that Mr. French has
agreed to participate in that effort. Expansion of the Fund's shareholder base
will be beneficial to all shareholders because Fund expenses can be spread over
more shares and there will be more capital to take advantage of investment
opportunities. The directors believe that Mr. French's participation in
marketing efforts with Lakeview will likely increase sales of Fund shares.
Finally, this new arrangement will, in Lakeview's opinion, allow Lakeview to
utilize its relationships with related companies to make references of clients
to Merrimac. In turn, individuals from those business clients may purchase Fund
shares to obtain the same investment expertise. As noted above, expansion of the
Fund's shareholder base is highly desirable from the shareholders' standpoint
and the ability to refer to a non-employee of Lakeview is expected to be highly
beneficial to the Fund.
There will be no additional cost to the Fund of the new sub- advisory
arrangement and Merrimac will bear its own expenses.
DIRECTORS' EVALUATION AND RECOMMENDATION
The directors, including all of the independent directors present at the meeting
(only one absent), by a vote cast at a meeting held on January 22, 1997,
unanimously approved and voted to recommend to the shareholders of the Fund that
they approve the Proposed Sub-Advisory Agreement. If the shareholders approve
the Proposed Sub-Advisory Agreement, that agreement will take effect as of March
25, 1997.
THE DIRECTORS RECOMMEND THAT THE SHAREHOLDERS OF THE FUND APPROVE
THE PROPOSED SUB-ADVISORY AGREEMENT.
STOCKHOLDER'S PROPOSALS: Any proposal of a shareholder intended to be presented
at the 1998 annual meeting must be received by the Fund at its office no later
than October 15, 1997 for inclusion in the proxy statement and proxy form
relating to that meeting.
INVESTMENT ADVISER: Lakeview Securities Corporation, 333 West Wacker Drive,
Chicago, Illinois 60606 is an investment advisory firm which is neither owned
nor controlled by the Fund. Lakeview Securities has been employed by the Fund as
its Investment Adviser. The existing investment advisory contract, which became
effective January 1, 1994, was solicited by the Adviser, recom- mended by the
Board of Directors, and approved on November 29, 1993 by vote of the holders of
a majority of the outstanding shares of the Fund. Unless sooner terminated in
accordance with its terms, the contract will continue until midnight, December
31, 1997.
During fiscal 1994, the Fund's previous adviser was paid $56,691 for investment
management services rendered during the first quarter of the year. Lakeview
Securities Corporation was paid $141,952 for its investment management services
during the last three quarters of fiscal 1994. Lakeview Securities was paid
$171,087 during fiscal 1995, and $145,654 during fiscal 1996. Lakeview
Securities is paid at the rate of 0.5 of 1 percent of the average monthly
portfolio value per annum.
The Investment Adviser receives no brokerage commissions or any other
compensation from the Fund.
Messrs. Fredric J. French and Robert P. Moseson are associated with Lakeview
Securities, the Investment Adviser, whose business address is 333 West Wacker
Drive, Chicago, Illinois. They are affiliated with the Fund. Mr. Moseson has a
controlling interest in the Investment Adviser.
When the Adviser directs portfolio transactions through Diversified Securities,
Inc., the Principal Underwriter, the Fund is informed that the Underwriter seeks
to effect such transactions where it can get prompt execution of orders at the
most favorable prices.
Figures pertaining to the Fund's brokerage for the last three fiscal years are
presented in the following table:
<TABLE>
<CAPTION>
Annual Portfolio Brokerage Commissions Brokerage Paid to
Turnover Ratio Total Brokerage Paid by the Fund to Broker-Dealer not Affiliated
to Total Assets Commissions Paid the Underwriter* with Adviser or Underwriter for:
Sales Services Other
<S> <C> <C> <C> <C> <C> <C>
1994 234.77% $210,457 $82,392 $128,065 -nil- -nil-
1995 248.44% $284,333 $80,465 $203,868 -nil- -nil-
1996 669.79% $424,531 $46,392 $378,139 -nil- -nil-
<FN>
* The Underwriter is also a registered broker-dealer with a
securities retail brokerage operation.
** Portfolio turnover rate for the year 1993 has been restated to
exclude U.S. Treasury Bills.
</FN>
</TABLE>
<PAGE>
VOTE REQUIRED: The presence in person or by proxy of the holders of a majority
of the outstanding shares is required to constitute a quorum at the Annual
Meeting. The election of directors requires a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. With respect to Proposals 2 and 3, the vote
required is the affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on that subject matter.
Approval of each of the proposals will require the affirmative vote of a
majority of Investors Research Fund, Inc. shares, as determined under Section
2(a)(42) of the Investment Company Act of 1940. That requires the affirmative
vote of the holders of the lesser of either (A) 67% or more of the outstanding
shares as of February 3, 1997 present at the meeting if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (B) more than 50% of the outstanding shares.
If the accompanying form of proxy is executed properly and returned, shares
represented by it will be voted at the Annual Meeting in accordance with the
instructions on the proxy. However, if no instructions are specified, shares
will be voted in favor of each of the nominees and each of the proposals set
forth in the Notice of the Meeting.
COPIES OF THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS TO ITS
SHAREHOLDERS ARE AVAILABLE UPON REQUEST TO THE FUND'S OFFICE LOCATED AT 3916
STATE STREET, SUITE 3C, SANTA BARBARA, CA 93105 OR CALL 1-800-473-8631.
No other business is currently expected to come before the Meeting. As to any
matter which has not been brought to the attention of the proxies prior to the
date of this proxy statement, which is presented at the meeting, the proxies
will deal with such matter in accordance with their best judgment and the
discretionary authority granted by the proxy.
<PAGE>
COMPENSATION TABLE *
Position or Estimated
Retirement Annual Total
Benefits Benefits Compensation
Aggregate Accrues as Upon Paid to
Name, Position Compensation Expenses Retirement Directors
Francis S. Johnson $16,650 $ 0 $ 0 $2,250
President
Gertrude B. Calden $ 2,250 $ 0 $ 0 $2,250
Director
James A. Corradi $ 1,250 $ 0 $ 0 $1,250
Director
Fredric J. French $ 0 $ 0 $ 0 $ 0
Director
Leonard S. Jarrott $ 750 $ 0 $ 0 $ 750
Director
Michael A. Marshall $ 2,250 $ 0 $ 0 $2,250
Secretary-Treasurer
Robert P. Moseson $ 0 $ 0 $ 0 $ 0
Director
William J. Nasif $ 1,000 $ 0 $ 0 $1,000
Director
Mark Schniepp $ 1,500 $ 0 $ 0 $1,500
Director
Dan B. Secord $ 1,250 $ 0 $ 0 $1,250
Director
Mark L. Sills $ 1,250 $ 0 $ 0 $1,250
* For Fiscal 1995-1996
<PAGE>
SUB-ADVISORY AGREEMENT
Merrimac Advisors Company
One Coronado Place
6201 Uptown Boulevard N.E.
Albuquerque, New Mexico 87100
Gentlemen:
Lakeview Securities Corporation ("LSC") is a registered investment advisor under
the Investment Advisers Act of 1940, as amended ("Advisers Act"). LSC serves as
investment adviser to Investors Research Fund, Inc. (the "Fund"), an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "Act") pursuant to an Investment Advisory
Agreement dated December 27, 1993 (the "Fund Agreement"). The Fund is engaged in
the business of investing and reinvesting its assets in securities of the type,
and in accordance with the limitations specified in the Prospectus, Application
and Statement of Additional Information dated January 30, 1996, which is part of
its effective Registration Statement filed with the U.S. Securities and Exchange
Commission (collectively, the "Fund Prospectus"). Merrimac Advisors Company
("Merrimac" or "you") is a registered investment advisor under the Advisers Act.
Fredric J. French, President, director and sole shareholder of Merrimac and a
director of the Fund, is familiar with the investment strategies employed by LSC
in managing the investment and reinvestment of Fund assets and may be of
assistance to LSC in carrying out its duties and responsibilities under the Fund
Agreement. LSC hereby retains Merrimac as its sub-adviser for the consideration
and upon the terms and conditions hereinafter set forth:
1. Merrimac has received copies of, and is familiar with, each of the following:
(a) The Articles of Incorporation of the Fund;
(b) The By-Laws of the Fund;
(c) The Fund Agreement;
(d) The Fund's Portfolio Compliance Checklist;
(e) The Fund Prospectus;
(f) The Fund's Code of Ethics;
(g) LSC's Code of Ethics.
LSC will furnish to Merrimac from time to time copies of all amendments of or
supplements to the foregoing, if any.
In carrying out its duties and responsibilities as sub- advisor to LSC, Merrimac
shall at all times act in a manner that is consistent with the investment
policies, objectives and restrictions as set forth in the Fund Prospectus.
Furthermore, in the performance of Merrimac's duties hereunder, it shall at all
times act in a manner consistent with the provisions contained in the documents
delivered to Merrimac pursuant to this Section 1, as each of the same may, from
time to time be amended or supplemented.
2. LSC employs Merrimac to assist LSC in managing the investment and
reinvestment of Fund assets and, without limiting the generality of the
foregoing, to review Fund investments and to recommend and, when directed by
LSC, effect investment changes whenever such changes appear to LSC to be
desirable. In addition, you are to perform all statistical, research, economic,
and analysis services necessary or convenient to the performance of your duties
as investment adviser. You will submit to LSC and the Fund such reports relating
to the valuation of the Fund's securities as LSC may reasonably request. Such
services shall be rendered directly to LSC. In addition, upon the request of LSC
or the Fund, you will provide reasonable assistance to LSC, the Fund, and to the
underwriter of the Fund shares and other persons duly authorized to market Fund
shares, in the marketing and promotion of Fund shares. You will promptly deliver
to LSC and the Fund, for their review, not less than three (3) business days
prior to any other use, any marketing and promotional materials prepared by you
for or making reference to the Fund. You agree not to use any marketing,
advertising or promotional material regarding or making reference to LSC or the
Fund that have been objected to in writing by LSC or the Fund. All advice and
recommendations provided by you to LSC will be consistent with the investment
policies, objectives and restrictions of the Fund.
3. It is understood that you will from time-to-time employ or associate with
yourself such persons as you believe to be particularly fitted to assist you in
the execution of your duties hereunder, the cost of performance of such duties
to be borne and paid by you, and you agree to employ such persons as are
reasonably necessary to carry out your obligations to all of your clients. You
will provide to LSC and the Fund in writing, promptly following request, such
information regarding itself and the Fund's investments as shall be necessary
for the preparation of periodic reports to the Fund's stockholders and such
other documents and papers as may be required to comply with applicable laws and
the rules, regulations and other requirements of the Securities and Exchange
Commission or other federal, state or local governmental agencies including,
without limitation registration statements on Form N-1A, semi-annual reports on
Form N-SAR, proxy statements, periodic statements and reports, other shareholder
communications, and "blue sky" filings. You agree to permit inspection by
officers and directors of LSC and/or the Fund, upon reasonable notice and at
reasonable times, of all records, books, correspondence, stockholder lists, and
other papers and documents maintained or prepared by you in connection with the
Fund's business and affairs. Furthermore, you agree to maintain, preserve and
make available all such records in accordance and compliance with Section 31 of
the Act, Section 204 of the Advisers Act and all governmental regulations and
requirements, as applicable to you in your capacity as sub-adviser to the Fund.
You agree that all records prepared or maintained by you in connection with the
Fund's business and affairs will be the property of the Fund.
4. You will make recommendations with respect to the purchase and sale of
securities for or on account of the Fund. To carry out such decisions, you are
hereby authorized, as LSC's sub- advisor and attorney-in-fact, to place orders
in the Fund's name for the investment and reinvestment of Fund assets when and
as directed by LSC. Notwithstanding the foregoing, all procedures for making
changes in the Fund's portfolio of securities, including procedures for the
placing and confirmation of orders with brokers and dealers, shall at all times
be and remain under the direction and control of the Fund's board of directors
and officers. You will, however, maintain such records and perform such duties
in connection with the Fund's portfolio of securities as may be reasonably
requested by LSC, and as may be required by applicable governmental laws and
regulations.
5. LSC will provide you with all information under its control which may be
reasonably required for the performance of your duties hereunder, and to advise
you promptly of any changes in the Fund's policies which may affect any of your
obligations hereunder. Except as otherwise specifically provided hereinabove,
you shall have no obligation to provide supervisory or administrative services
in connection with the general business and affairs of the Fund.
6. You will assist LSC in its reporting to the board of directors of the Fund at
each regularly scheduled meeting thereof all changes in the Fund's portfolio
since the prior report, and will furnish to LSC from time-to-time such
information as you may believe appropriate concerning the Fund's portfolio,
whether concerning the individual companies whose securities are included in the
Fund's portfolio, the industries in which they are engaged, or the conditions
prevailing in the economy generally. You will also furnish to LSC such
statistical and analytical information with respect to securities in its
portfolio as you may believe appropriate or as LSC or the board of directors of
the Fund may reasonably request. In making purchases and sales of securities,
you will bear in mind the policies set from time-to-time by LSC and the board of
directors of the Fund as well as the limitations imposed in the Fund Prospectus,
the Act, and the Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies. All powers of control over the Fund's
investments shall at all times be and remain in the Fund's directors and
officers, but this section shall not be construed to relieve LSC or Merrimac
from their various obligations to carry out the investment functions delegated
either under the Fund Agreement or this Agreement.
7. In consideration of the services to be rendered by you, LSC agrees to pay to
you a quarterly fee equal to the Applicable Percentage (as defined below) of (a)
the quarterly fee paid to it by the Fund under paragraph 7 of the Fund Agreement
less (b) any portion of the net expenses of the Fund incurred by the Fund during
each of its fiscal years or portions thereof that this Agreement is in effect
which, as to the Fund in any such year, exceeds the limits applicable to the
Fund under the laws or regulations of any state in which Fund shares are
qualified for sale (reduced pro rata for any portion of less than a year). The
Applicable Percentage shall mean (i) for the first 12 months of the term of this
Agreement, eighty percent (80%) and (ii) for each 12- month period thereafter,
fifty percent (50%) or such other percentage as the parties may mutually agree.
An estimated fee shall be paid in advance on or before the tenth day of the
first month of the applicable quarter, subject to reconciliation based on the
actual fee paid to LSC by the Fund and excess net expenses of the Fund for such
quarter. Any overpayment of the quarterly fee shall be repaid by you to LSC upon
demand. Any underpayment of the quarterly fee shall be paid to you within 30
days of the end of such quarter.
8. LSC shall expect of you, and you will give LSC the benefit of your best
judgment and effort in rendering services to LSC and the Fund, and LSC agrees as
an inducement to your undertaking these services that neither you, nor your
officers, directors, shareholders, employees or agents, or any affiliates of the
foregoing shall be liable for any mistake of judgment, or opinion relating to
portfolio and investment matters of the Fund, except for lack of good faith,
provided that nothing herein shall be deemed to protect or purport to protect,
you against any liability to the Fund or its stockholders, or LSC to which you
would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of your obligations and duties hereunder, or by
reason of your reckless disregard of your obligations and duties hereunder.
9. This Agreement shall become effective as of the date of approval of this
Agreement by the Fund, and shall continue in effect until the first anniversary
of such date, and thereafter for successive twelve-month periods (computed from
each anniversary date), provided that such continuance is specifically approved
at least annually by the board of directors of the Fund in accordance with
Section 15(c) of the Act or by vote of a majority of the outstanding voting
securities (as defined in Section 2(a)(42) of the Act) of the Fund, and, by a
majority of the board of directors who are not parties to this Agreement or
interested persons (as defined in Section 2(a)(19) of the Act) of any such
party. This Agreement shall be terminated, without the payment of any penalty,
upon the termination or expiration of the Fund Agreement. This Agreement may be
terminated, without the payment of any penalty, (a) by a vote of a majority of
the board of directors of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to you, (b) by you on
60 days' written notice to LSC, or (c) by LSC on 60 days' written notice to you.
If, within 90 days after the date hereof, this Agreement shall not have been
approved by the Fund, you will be entitled to terminate this Agreement upon
notice to LSC and will be entitled to any fees earned by you as provided in
Paragraph 7. Termination of this Agreement shall not be deemed to terminate or
otherwise invalidate any other agreement between Merrimac and LSC, except as
otherwise provided herein. Furthermore, termination of this Agreement shall not
be deemed to terminate or otherwise invalidate the Advisory Agreement between
the Fund and LSC.
10. This Agreement may not be transferred, assigned, sold, or in any manner
hypothecated or pledged by you, and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed to them by governing law and interpretations
thereof contained in rules or regulations promulgated by the Securities and
Exchange Commission thereunder. You may assign this Agreement in a transaction
in which you rely bona fide upon Rule 2a-6 under the Act upon notice to LSC and
the Fund.
11. In the event this Agreement is terminated for any reason and no subsequent
agreement is entered into between you and LSC, all fees due to you hereunder
shall be prorated as of the effective date of termination and paid within five
(5) business days thereafter. Upon such termination or within a reasonable time
thereafter, you shall surrender to LSC all books, records, correspondence,
stockholders' lists and other papers and documents pertaining to the Fund which
are in your possession or control.
12. No provision of this Agreement may be changed or waived orally, but only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought, and no amendment of this Agreement shall be
effective until approved by (a) the Board of Directors of the Fund, including a
majority of the directors who are not interested persons of LSC, Merrimac or the
Fund, cast in person at a meeting called for the purpose for voting on such
approval, and (b) a majority of the outstanding voting securities of the Fund,
as defined in the Act. Nothing in this Agreement shall be construed as a change
in, modification or amendment to the Fund Agreement.
13. Except to the extent necessary to enable you to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict the right of
Merrimac or of Frederic J. French to engage in any other aspects of the
investment advisory or management business or any business ancillary thereto, or
the right of Fredric J. French, upon the consent of LSC, or any of your other
officers, directors, shareholders, or employees, or any affiliates thereof, to
engage in any business, including acting as investment advisor or manager for
any other person or entity or to devote time and attention to the management or
other aspects of any other business, whether of a similar or dissimilar nature,
or to render portfolio management or advisory services of any kind to any other
corporation, firm, individual, trust or association.
14. LSC acknowledges and agrees that you may obtain from broker-dealers approved
by LSC or the board of directors of the Fund, supplemental research, market and
statistical information for use with respect to the Fund. The term "research,
market and statistical information" includes, without limitation, advice as to
the value of securities, the advisability of investing, purchasing and selling
securities, and the availability of securities or purchasers or sellers of
securities, and furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts. LSC understands that such information will be in addition to and not
in lieu of the services required to be performed by you under this Agreement and
that your expenses will not necessarily be reduced as a result of the receipt of
such information. LSC also acknowledges that such information may be useful to
you and your affiliates in providing services to clients other than the Fund,
and that not all such information will at all times be used by you in connection
with the Fund. Finally, LSC acknowledges that information provided to you and
your affiliates by brokers and dealers through whom other clients of yours
effect securities transactions may be useful to you in providing services to the
Fund. Accordingly, LSC understands that investment decisions for the Fund may
not, at all times, be made independently from those of other accounts managed by
you and your affiliates. In furtherance of the foregoing, LSC agrees that, when
the same securities are purchased for or sold by the Fund and any such other
accounts you shall allocate such purchases and sales in a manner deemed by you
to be fair and equitable to all of the accounts, including the Fund and, subject
to your obtaining the best price and execution for your clients (which shall not
necessarily mean the lowest commission available), brokers and dealers providing
research, market and statistical information may be engaged to effect
transactions on behalf of the Fund.
15. All notices and communications to be made hereunder shall be in writing
shall be delivered to LSC or to you, as the case may be, by U.S. certified mail,
return receipt requested, postage prepaid, by commercial courier or by personal
delivery, in each case to the address set forth in this Agreement or to such
other person or address as shall be identified by written notice as provided
herein. Any notice or communication sent by mail as aforesaid, shall be deemed
delivered three (3) business days after deposit in the U.S. mail; any notice
sent personally or by commercial courier shall be deemed delivered upon
confirmation of receipt at such address.
16. This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois and to the extent applicable, the Act and the
Advisor Act. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
17. In connection with the purchase or sale of portfolio securities for the
account of the Fund, neither you nor any of your directors, officers or
employees will act as principal or agent, or receive any commission. You shall,
at the time you place any order to purchase or sell portfolio securities on
behalf of the Fund, inform LSC of any financial interest you have in the issuer
of the securities being purchased or sold. Each Access Person, as defined in
Rule 17(j)-1 in the Act, of Merrimac will provide personal trading reports to a
designated representative of LSC in accordance with the Fund's Code of Ethics.
18. Nothing in this Agreement shall be construed so as to make LSC and Merrimac
partners or joint venturers. Except in the performance of its duties hereunder,
Merrimac is and shall be an independent contractor. Unless otherwise expressly
provided or authorized, Merrimac shall have no authority to act for or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund or of LSC.
19. Merrimac has delivered to LSC and the Fund its Codes of Ethics. Merrimac
agrees that any amendments that it may adopt to its Code of Ethics shall be
submitted to and reasonably satisfactory to LSC.
If the foregoing is satisfactory to you, please indicate your acceptance by
signing below.
Very truly yours,
LAKEVIEW SECURITIES CORPORATION
333 West Wacker Drive
Suite 1010
Chicago, Illinois 60601
By:
Title:
Accepted this ___ day of
______________________, 1997
MERRIMAC ADVISORS COMPANY
By:
Title:
Acknowledged this ___ day of
________________________, 1997
INVESTORS RESEARCH FUND, INC.
By:
Title:
