INVESTORS RESEARCH FUND, INC.
3757 STATE STEET, SUITE 204
SANTA BARBARA, CALIFORNIA 93105
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 29, 1999
Notice is hereby given that a Special Meeting of Shareholders of INVESTORS
RESEARCH FUND, INC. will be held on Thursday, July 29, 1999 at 9:00 A.M.
(Pacific Daylight Time) at the Pepper Tree Inn, (Board Room), 3850 State
Street, Santa Barbara, California, for the following purposes:
To approve the proposed advisory agreement between Investors Research
Fund and Westcap Investors, LLC.
To transact such other business as may properly come before the Special
Meeting, or any adjournment or adjournments thereof.
Shareholders of record as of the close of business on June 18, 1999 are
entitled to notice of, and to vote at, the Special Meeting or any adjourn-
ments thereof.
June 18, 1999 BY ORDER OF THE BOARD OF DIRECTORS
Hugh J. Haferkamp
President
IMPORTANT: THE MANAGEMENT HOPES THAT YOU CAN ATTEND THE SPECIAL 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 AVOID-
ING THE EXTRA EXPENSE OF FOLLOW-UP LETTERS OR TELEPHONE CALLS.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
INVESTORS RESEARCH FUND, INC.
3757 STATE STREET, SUITE 204, SANTA BARBARA, CALIFORNIA 93105
TO BE HELD JULY 29, 1999
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"), 3757 State Street, Suite 204, Santa Barbara, California 93105, and
its Board of Directors, to be used at the Special Meeting of Shareholders of
the Fund, to be held on Thursday, July 29, 1999, at 9:00 A.M. (Pacific Day-
light Time) at the PEPPER TREE INN, (Board Room), 3850 STATE STREET, SANTA
BARBARA, CALIFORNIA, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders. Such solicitation is made primarily by the
mailing of this Statement with its enclosures. The approximate date of
first mailing is July 3, 1999.
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. It is not expected that any
person will be paid specially by the Fund for the specific purpose of solicit-
ing proxies, although management reserves the right to employ a proxy solicitor
if it appears reasonably necessary to secure a quorum. In some instances, sup-
plementary solicitation may be made by securities dealers by whom shares of
the Fund have been sold and it would then 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 Special Meeting of Shareholders, or
by execution of a subsequent proxy which is presented at the Special Meeting
of Shareholders, or by personal vote at the Special Meeting of the Share-
holders. All proxies solicited by the Board of Directors which are properly
executed and received in time will be voted at the meeting. Such proxies will
be voted in accordance with the instruction thereon, if any, and if no specifi-
cation is made, the proxy will be voted in favor of proposal Number 1 thereon
and, as to any other matter, 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 of the Fund is not aware that any other matters are to be presented
for action.
As of June 18, 1999 there were issued and outstanding 5,610,326 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 June 18, 1999. 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. The favorable vote by a majority of the Fund shares as determined
under Section 2(a)(42) of the Investment Company Act of 1940 (the "1940 Act")
is required for approval of the proposed advisory agreement with Westcap
Investors, LLC.
Abstentions and broker non-votes will be counted as present or represented
at the Special 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 Special Meeting will
be treated as shares not voted for purposes of determining whether the requi-
site vote has been obtained. In view of the requirement that there be a
certain number of affirmative votes, an abstention or a broker non-vote has
a negative impact as to a matter brought to a vote. See section below
entitled "Vote Required."
None of the officers of the Fund has received any compensation directly from
the Fund for serving in such capacity since the date of inception of the Fund,
with the exception that the president of the Fund has been compensated since
January 1, 1994. The compensation has been at the rate of $2,000 per month
since January 1, 1998. The Fund has no pension or retirement benefits for
any officers or employees. The attendance fee payable to Directors and members
of the executive committee is $500 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.
No expense reimbursement is made to the directors except for the president.
His expenses are reimbursed. The total compensation paid by the Fund to all
Directors during the fiscal year 1997-98 was $25,750.
The aggregate dollar amount of portfolio brokerage commissions paid during
Fiscal 1997-98 was $196,818. Of that amount, $14,514 was paid to Diversified
Securities, Inc., the Fund's then Principal Underwriter. That latter figure
represents 7.40% of the aggregate dollar amount of the commissions paid by the
Fund. Diversified Securities, Inc. handled 11.28% of the brokerage transac-
tions effected during the year.
PROPOSAL TO APPROVE THE PROPOSED ADVISORY AGREEMENT WITH WESTCAP INVESTORS, LLC
1. BACKGROUND.
Fox Asset Management, Inc. had been appointed as the Fund's investment
adviser effective June 22, 1998. On or about September 8, 1998, a substantial
reorganization of Fox's portfolio management personnel took place as a result
of differences among the Fox employees concerning the operational structure of
that company. Although Fox's management immediately undertook a reorganiza-
tion, the reorganized company was not the same as the company that Investors
Research Fund had approved in early 1998. The Fund's Board of Directors was
not satisfied with the investment performance of Fox and in March, 1999,
decided to engage a new investment adviser.
2. THE NEW ADVISER.
After interviewing several candidates, the Board selected Westcap Investors,
LLC, of 11111 Santa Monica Boulevard, Suite 820, Los Angeles, CA 90025 as the
Fund's investment adviser. By virtue of the provisions of Rule 15a-4 under the
Investment Company Act of 1940 and with Fox's agreement, the temporary appoint-
ment of Westcap Investors as investment adviser became effective as of April 1,
1999. Under Rule 15a-4, the advisory contract with Westcap must be approved by
2000. the Fund's shareholders in order to continue in effect. Therefore, the
2001. Board has noticed the special meeting of the shareholders to approve
2002. the continuation of Westcap's contract.
3. THE PREVIOUS ADVISORY CONTRACT.
The advisory contract with Fox Asset Management, Inc., dated February 10,
1998, was submitted to the shareholders on April 22, 1998, was approved, and,
as noted previously, Fox began operations as the Fund's adviser on June 22,
1998. That contract provided that Fox would, subject to overall control by
1999. the Fund's Board of Directors, act as the manager of the Fund's port-
2000. folio with the duty
2
to handle all investments of Fund assets. Those duties included determining
the brokers who would carry out the purchases and sales involved in the port-
folio management. For those services, the Fund was to pay Fox a quarterly fee
equal to 0.125% of the net assets of the Fund calculated at the close of each
month, not to exceed 0.5% annually of the average net assets of the Fund
calculated as at the close of each month. The agreement also provided that
the Fund would nominate to Fund shareholders for election as directors of the
Fund two qualified persons to be identified and recommended by Fox.
On March 22, 1999, the Fund's Executive Committee elected to terminate the
advisory agreement with Fox and employ Westcap as the Fund's adviser as
authorized under Rule 15a-4. Notice of termination was immediately served
on Fox to become effective on May 22, 1999. On April 1, 1999, an agreement
was reached among the Fund, Fox and Westcap under which portfolio management
was assumed by Westcap effective on that day. Westcap has been managing the
portfolio since April 1, 1999.
During the Fund's fiscal year '97-'98, the Fund paid to Fox $34,505 for
advisory services and paid to Lakeview Securities Corporation, Fox's predeces-
sor, $113,452 for advisory services.
ADVISER CHANGE
4. WESTCAP INVESTORS, LLC - ORGANIZATION AND PERSONNEL
Westcap Investors, LLC ("Westcap") is a Delaware limited liability company
which was organized in 1995 and is the successor to Westcap Investors, Inc, a
California corporation organized in 1991. Functionally, the two companies are
identical. Westcap is an investment adviser registered as such with the
Securities and Exchange Commission under the Investment Advisers Act of 1940.
The owners of all interests in the company are Glenn C. Weirick, Geoffrey I.
Edelstein, Bradley G. Slocum, and Gregory S. Weirick. Each owns more than a
10% interest in the company. The address of Westcap Investors and each of the
owners is 11111 Santa Monica Boulevard, Suite 820, Los Angeles, CA 90025.
The telephone number is (310) 996-3200. Westcap has been acting as an invest-
ment manager for the last seven years, although the Westcap personnel them-
selves have been managing investment portfolios for many years.
Glenn C. Weirick, CFA, CIC, is President and Co-Founder of Westcap
Investors. Mr. Weirick serves as Chairman of both the firm's Investment
Policy Committee and its Equity Policy Committee. Prior to Westcap, Mr.
Weirick was Co-Founder of Trust Company of the West, where he remained for
over 20 years and served there as Chairman of the Equity Policy Committee,
as the Director of Investment Research, and as Managing Director of Equities
and Convertible Securities. He also was the Manager of the TCW Convertible
Securities Fund from 1987 to 1992, when he resigned to devote full time to
Westcap. Mr. Weirick formerly served as Executive Vice President and Chief
Investment Officer of Shareholders Management Company and as President of
the Harbor Fund. He holds the Bachelor of Arts degree from Occidental College
and the Master of Science degree in Finance from the Columbia University
Graduate School of Business. He has 40 years of investment management
experience.
The managing directors of Westcap are: Geoffrey I. Edelstein, CFA, CIC;
Peter Harvie CFA, CIC; Donald L. Keene, CFA, CIC; Terence D. Lynch; Michael
T. Papworth; Bradley G. Slocum and Gregory S. Weirick. They are employees
of Westcap and serve as portfolio managers in the firm's investment process.
Mr. Edelstein, Mr. Slocum and Mr. Gregory S. Weirick are also co-founders of
the
3
firm. These directors have investment experience ranging from 8 years to a
high of 44 years, with an average experience of almost 26 years.
Mr. Edelstein has a Bachelor of Arts degree from the University of Michigan
and a Juris Doctor degree from Northwestern University School of Law. Mr.
Harvie has a Bachelor of Arts degree from Brown University. Mr. Keene has a
Bachelor of Science degree from the University of California at Berkeley. Mr.
Lynch and Mr. Papworth have Bachelor of Arts degrees from the University of
Southern California. Mr. Slocum has a Bachelor of Arts degree from East
Carolina University. Mr. Gregory S. Weirick has a Bachelor of Arts degree
from the University of Arizona.
"CFA" stands for "Chartered Financial Analyst" and "CIC" stands for
"Chartered Investment Counselor." The CFA designation is awarded by the
Institute of Chartered Financial Analysts (Charlottesville, Virginia) after
the applicant has met the required testing and experience requirements. The
CIC designation is awarded by the Investment Council Association of America
(Washington, D.C.) after its testing and experience requirements have been
met.
5. WESTCAP PERFORMANCE BACKGROUND
In the past, Westcap has served primarily institutional and high net worth
private clients. It currently has approximately $1.2 billion under management.
Westcap is interested in managing the investment functions of mutual funds and
has agreed to serve Investors Research Fund, Inc. in that capacity. Prior to
April 1, 1999, Westcap itself had not advised an equity mutual fund, although
several of its members have previously had mutual fund management experience.
Since April 1, 1999, Westcap has also been appointed as one of three invest-
ment managers for ESC Strategic Appreciation Fund, which is based in
Nashville, Tennessee. Westcap manages the domestic large cap portion of
that fund, which currently comprises approximately $7,500,000 out of a total
fund of approximately $23,000,000. Westcap's fee for those services is the
same as the fee under the Fund's proposed advisory agreement.
Westcap has had an excellent performance record since it began operations
on April 1, 1992. A table of gross and net returns of Westcap's composite
equity accounts (Westcap net returns presented below are net of management
fees and all transaction costs in accordance with SEC guidelines) in comparison
with the Standard & Poors 500 Index from April 1, 1992, when Westcap commenced
operations, through March 31, 1999 follows. In evaluating comparisons with the
S & P 500 Index, it must be recognized that the S&P 500 Index has no brokerage
charges, no expenses, and no operational costs subtracted from its performance
results. Also, one cannot make a single direct investment into the S & P 500
Index.
4
ANNUALIZED RETURNS ANNUALIZED RETURNS ANNUALIZED RETURNS
WESTCAP EQUITY S&P 500 WESTCAP EQUITY
COMPOSITE ------- COMPOSITE
(GROSS) ---------
-------
1 year 25.13% 18.45% 24.41%
3 years 30.11% 28.07% 29.36%
5 years 25.80% 26.25% 25.08%
Since 4/92 20.47% 20.78% 19.74%
TOTAL RETURN TOTAL RETURN TOTAL RETURN
WESTCAP EQUITY S&P 500 WESTCAP EQUITY
COMPOSITE ------- COMPOSITE
(GROSS) (NET OF FEES)
------- -------------
1 year 25.13% 18.45% 24.41%
3 years 120.23% 110.06% 116.47%
5 years 215.08% 220.74% 206.15%
Since 4/92 268.19% 274.78% 252.92%
Westcap's table above presents its composite performance results from April
1, 1992 through March 31, 1999, in accordance with the Performance Presentation
Standards of the Association for Investment Management and Research ("AIMR").
The accounts in the composite had the same general investment objective as the
Fund and were all similarly managed by Westcap for the entire quarter reported.
All results are calculated on a time weighted basis as prescribed by the AIMR
Performance Presentation Standards. Performance figures for the period April
1, 1992 through December 31, 1992 present the equal weighted results (computed
quarterly). For the 2nd and 3rd quarters of 1992, the dollar weighted results
would be identical to the equal weighted results. For the 4th quarter of 1992,
the dollar weighted return (gross) was 9.9% while the equal weighted return
(gross) was 10.3%. From January 1, 1993 through March 31, 1999, the results
are presented on a dollar weighted basis (computed quarterly). All information
set forth above concerning Westcap's performance has been provided to the Fund
by Westcap and has not been independently verified or audited.
Westcap has informed the Fund that the results include all accounts with
investment objectives, policies, strategies, and risks substantially similar to
those of the Fund except that (1) accounts less than $1 million in market
value, (2) accounts subject to material restrictions imposed by the client,
and (3) accounts whose results have been materially affected by significant
cash contributions or withdrawals have been excluded. The equity portion of
balanced accounts (including cash results) are included in Westcap's Equity
results from the 3rd Quarter 1992 to the present. One fully discretionary
non-fee paying account is also included in Westcap's results beginning with
the 2nd Quarter of 1992 through the 4th Quarter of 1993. Net results are after
the deduction of management fees, but gross results are not. Westcap has in-
formed the Fund that elimination of the accounts of less than $1 million has
no significant effect on the stated performance results because such accounts
total less than 2% of the relevant assets under management. Also, no provision
has been made for federal and state income taxes, if any.
5
In evaluating the foregoing statistics, it is to be recognized that the past
performance of Westcap's equity accounts does not indicate that the Fund's
future performance will necessarily be the same. Also, it is to be recognized
that private accounts are not subject to certain investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code. Had such requirements been
applicable, they might have adversely affected the performance results of the
private account composite. Additionally, the performance results set forth
above do not represent the historical performance of any particular client of
Westcap or of Investors Research Fund.
6. WESTCAP'S INVESTMENT APPROACH
Westcap's intention is to outperform the S&P 500 Index on a consistent basis
while minimizing risk.
Westcap's investment style utilizes a top down approach with a growth style
bias. Its portfolio holdings are generally concentrated in large capitaliza-
tion, high quality, publicly traded equity securities that combine growth
potential with superior financial strength. It invests in companies whose
market capitalization exceeds $1 billion, but also occasionally in other
equity-like instruments such as convertible securities. Convertible securities
are used to produce income and to reduce volatility. A money market account is
used occasionally for holding funds on a temporary basis, but Westcap's policy
is to remain fully invested.
A "top down" analytical approach starts with an overall study of the
relevant investment environment and the current economic situation. This
responsibility is that of the Investment Policy Committee. Westcap does
much of its own research on those subjects, but also accumulates information
and recommendations from outside consultants, brokerage analysts, and similar
experts specializing in demographic and domestic and foreign investment and
economic information.
After accumulating and evaluating the research information, the Investment
Policy Committee meets to formulate and update Westcap's investment analyses
to forecast both the investment environment and the economic environment. The
objective is to assess the prospects and probabilities for the next two to five
years. That includes both domestic U.S. and foreign economies. That committee
meets every Tuesday and at other times when it appears desirable to meet. When
the Investment Policy Committee has formulated its analyses and forecasts, it
turns them over to the Equity Policy Committee for action.
The Equity Policy Committee then utilizes the research findings to formulate
a list of industries and companies that are promising for investments. The
committee meets every Monday or more often, as needed. That Westcap committee
gives extensive and intensive attention to the selection of both industries
and companies in which to commit client funds. Westcap utilizes outside
consultants, Wall Street analysts, financial statement analysis techniques,
and information from company managements, customers and suppliers to assist
in the identification of the industries and companies for attention. The
committee then makes the selections of specific companies. However, each
customer's account is assigned to one of Westcap's managing directors as an
individual portfolio manager and the manager is the person who controls the
final investments in the event there should be specific desires and instruc-
tions of the particular account holder. Glenn Weirick is the assigned
portfolio manager for the Investors Research Fund portfolio. At the present
time, no specific instructions have been given by the
6
Fund to Westcap concerning the investment of its funds, so the Fund's general
objectives and policies apply.
In doing its work, the Investment Policy Committee divides the economy into
sectors that will contribute to growth, sectors that will restrain growth, and
those sectors that will be neutral. A further subdivision is made and matrixes
are developed on the basis of the industry groups that are expected to out-
perform the S & P 500 (on a total return basis) over the coming 12-18 months
and those expected to underperform. The committee continually reviews these
groupings and classifications and makes any reclassifications needed as
changes occur in the national or world economies.
Individual equity investment selections are made by the Equity Investment
Committee starting with the "outperform" classifications of the Investment
Policy Committee. Industry sources, various publications, company managements,
company customers, Wall Street sources, and other contacts are utilized to
identify specific investment candidates within the favorable classifications.
Each candidate stock is then evaluated for decision purposes. Such evaluation
frequently involves visits to a company's headquarters and interviews with its
management personnel. The final result is a matrix identifying companies that
are appropriate for investment of the client's funds. At any given time,
Westcap will have a list of some 75 approved stocks, from which 40 to 60 issues
will be selected as the investment portfolio.
Westcap Investors occasionally invests in Level 2 sponsored American
Depository Receipts ("ADRs"). That would cause the Fund to make investments
in foreign companies. An ADR is an unguaranteed negotiable security that
represents interests in the shares of the foreign company, which shares are
on deposit in a United States commercial bank. They are priced in dollars and
pay dividends in dollars, although adjustments are made because of foreign
currency exchange rates. Of course, such investments are subject to the risks
of foreign investments in general, such as currency fluctuations, unsettled
economic and political conditions, differences in accounting, and lower
liquidity.
Westcap's policy is to invest only in ADRs of foreign companies that satisfy
U.S. disclosure requirements and reconcile their home market accounting to the
generally accepted accounting principles observed by U.S. companies and that
provide audited financial statements based on such principles on at least an
annual basis. The sponsoring banks require that the foreign companies provide
direct disclosure to the bank and make monetary deposits of dividends directly
to the sponsoring bank.
7. TERMS OF THE INVESTMENT ADVISORY AGREEMENT
Under the proposed investment advisory agreement, Westcap's duties with
respect to the Fund will include the following:
(i) Supervising and performing all aspects of the portfolio management of
the Fund;
(ii) Determining which issuers and securities shall be represented in the
Fund's investment portfolio and regularly reporting thereon to the Board of
Directors; and
(iii) Formulating and implementing continuing programs for the purchase and
sale of the securities of such issuers and regularly reporting thereon to the
Board of Directors.
7
The basic terms of the proposed agreement are essentially the same as the
existing investment adviser's agreement. Under the proposed agreement with
Westcap, Westcap will receive a quarterly fee for the services it renders.
Payment will be made quarterly on the basis of 0.125% of the net assets of the
Fund calculated as an average of the net assets of the Fund as of the last
business day of each month of the quarter. The fee and payment schedule are
the same in the proposed advisory agreement as those in the current advisory
agreement.
If the proposed agreement is approved, portfolio brokers will be selected to
effect securities transactions by Westcap. Since they are operating in the
area of securities sales transactions on a daily basis, they will be initially
responsible for evaluation of the reasonableness of proposed brokerage commis-
sions. A factor which will be considered in the placement of brokerage, in
addition to the proposed commissions, is whether or not broker-dealers have
sold shares of the Fund. However, the fact that a broker-dealer has sold
shares of the Fund will not be the sole factor in the selection of such broker-
dealer and no one has any agreement or commitment of any kind to place
portfolio transactions through any particular broker-dealer.
The primary basis for selecting brokers is to effect transactions where
prompt execution of orders at the most favorable prices can be secured. In
this respect, the Fund itself compares all executions of portfolio orders with
the spread quoted in the financial press to verify that executions are within
the range quoted for the day of execution. However, the Fund has granted
temporary authorization to Westcap to adjust the commission rates it pays to
brokers to take into consideration the enhanced quality of the research ser-
vices provided by particular brokers and the significantly reduced turnover
rate of Westcap portfolio practices. These rates will be consistent with the
rates paid by all other Westcap clients.
It is to be recognized that research services and information furnished by
brokers through whom the Fund will effect securities transactions may be used
by Westcap in servicing all of their accounts and that not all such services
may be used by the investment adviser in connection with Fund transactions.
The proposed investment advisory agreement provides that any investment
program undertaken by Westcap, as well as any other actions taken by Westcap
on behalf of the Fund, shall at all times be subject to any directive of the
Board of Directors of the Fund. In performing its obligations under the agree-
ment, Westcap is required to comply with all state and federal laws applicable
to its activities, including the Investment Company Act of 1940 and the Invest-
ment Advisor's Act of 1940, and the policies and practices set forth in the
Fund's prospectus and statement of additional information.
Westcap is obligated to provide to the Fund the benefit of its best judgment
and efforts in rendering services to the Fund. In return, neither Westcap nor
its officers, directors, shareholders, employees or agent 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. However, Westcap will be respon-
sible to the Fund or its shareholders for any acts of willful misfeasance, bad
faith or negligence in the performance of its obligations under the agreement,
and for any losses by reason of any reckless disregard of its obligations and
duties under the advisory agreement.
The proposed advisory agreement provides for an initial term commencing upon
termination of the existing interim agreement after approval by the share-
holders. The agreement then continues in effect from
8
year to year provided that such continuance is specifically approved at least
annually by (a) the Board of Directors or the vote of "a majority of the out-
standing voting securities" of the Fund (as defined in the 1940 Act) and
(b) the affirmative vote of a majority of the directors who are not parties
to such agreement or interested persons of any such party by votes cast in
person at a meeting called for such purpose.
A supplement to the proposed advisory agreement provides that the Fund is
expected to nominate two (2) persons recommended by Westcap from its management
for election as directors of the Fund. However, if elected by the share-
holders, those persons will be required to abstain from voting on questions
concerning the selection, tenure and employment of the Fund's investment
adviser.
The proposed advisory agreement may be terminated without penalty by either
party on sixty (60) days written notice. The proposed agreement would termi-
nate automatically in the event of its "assignment," as defined in the 1940
Act.
If approved by the shareholders, the new advisory agreement will become
effective immediately. There will be no disruption in advisory services,
assuming approval of the proposed advisory agreement.
Please refer to Exhibit A to this Proxy Statement for the precise language
of the proposed advisory agreement and the supplement thereto.
EVALUATION BY THE BOARD OF DIRECTORS
In pursuing its objective of enhanced distribution of its shares, the Board
majority has concluded that such distribution requires enhanced performance as
a prerequisite. Accordingly, after pursuing the investigation described previ-
ously, the full Board interviewed representatives of the final candidates and
studied written presentations by them. The majority of the Board concluded
that Westcap was the definite choice to serve as the Fund's adviser.
Although Westcap does not presently have an established retail distribution
organization, it does have numerous contacts with financial planners, sales
people, and financial and investment consultants. It believes that substantial
distribution increments can be achieved by its contacts in the industry and by
investments in the Fund by people and institutions who cannot meet the minimum
investment amount set by Westcap for its private accounts. Furthermore, the
Board believes that the considerably enhanced performance expected from Westcap
will be attractive to the Fund's retail organizations. The Fund has been
informed that Westcap intends to establish an affiliated distribution agency
within the next few months that is to concentrate on distribution of Fund
shares. The agency is scheduled to be headed by an experienced mutual fund
marketer.
The Board believes that the considerably reduced turnover assured by Westcap
will lead to considerably reduced brokerage expenses. In turn, it should also
lead to more favorable tax results for those shareholders who are not in tax-
deferred plans. Additionally, if enhanced distribution of shares is achieved,
it will reduce per share expenses.
Some of the material factors considered by the Board, generally in order of
importance, in selecting Westcap were:
9
1. An excellent performance record sustained over a relatively long period,
with an excellent reputation in the investment management industry;
2. Westcap utilizes the growth style of investment management, which is the
investment style currently utilized by the Fund;
3. Westcap employs a risk averse approach to investing, aiming first to pre-
serve capital;
4. Westcap utilizes a team approach to stock selection with frequent
personal visits to companies of interest;
5. Westcap utilizes a disciplined investment approach and invests primarily
in large capitalization stocks with higher dividend yield, which the Board
considers favorable from both risk and marketability standpoints;
6. Westcap does not attempt to time the market and remains essentially fully
invested except at times of relatively severe economic dislocation or of asset
over-valuation;
7. Westcap has a low turnover ratio, which is favorable from both an expense
standpoint and a tax standpoint, but operates with recognition that investment
performance is the primary consideration; and
8. Westcap has a very strong recommendation by Canterbury Consulting, the
Fund's consulting firm.
As indicated previously, the really material factors in selection of Westcap
were their high performance record, their conservative risk averse investment
style, and their excellent reputation in the investment community. All of
these factors are expected to enhance the Fund's distribution of its shares.
Figures pertaining to the Fund's brokerage for the last three fiscal years are
presented in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Brokerage Paid to
Annual Portfolio Brokerage Commissions Broker-Dealers Not
Turnover Ratio Total Brokerage Paid by the Fund to Affiliated with
to Total Assets Commissions Paid the Underwriter* Adviser or Underwriter for:
- ----------------------------------------------------------------------------------------------
Sales Services Other
1996 669.79% $424,531 $ 46,392 $378,139 -nil- -nil-
1997 294.81% $257,905 $ 82,151 $175,754 -nil- -nil-
1998 260.95% $196,818 $ 14,514 $182,304 -nil- -nil-
</TABLE>
* The Underwriter, ND Capital Inc., is also a registered broker-dealer with a
securities retail brokerage operation.
With respect to the question of "soft dollars" in brokerage transactions,
the Fund is informed that Westcap does give preference to brokerage houses
which make significant research available to it. However, Westcap neverthe-
less seeks best execution regardless of the research aspect and does not make
separate payments for research provided. Additionally, because of the low
turnover rate, the size of the
10
funds under management, and the practice of making similar purchases and sales
in all accounts, any amounts which could be considered "soft dollars" would,
as to any specific account, be negligible.
SHAREHOLDER'S PROPOSALS FOR NEXT MEETING
The next scheduled annual meeting of shareholders of the Fund is to be held
on March 28, 2000. Any proposal by a shareholder to be presented at that meet-
ing has to be received by the Fund no later than November 1, 1999.
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 Proposal 1, 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 the proposal 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 June 18, 1999 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 Special Meeting in accordance with the
instructions on the proxy. However, if no instructions are specified, shares
will be voted in favor of the proposal set forth in the Notice of Special
Meeting of Shareholders.
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 3757
STATE STREET, SUITE 204, 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 THAT 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF
THE PROPOSED INVESTMENT ADVISORY AGREEMENT WITH WESTCAP INVESTORS, LLC.
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