<PAGE>
As filed with the Securities and Exchange Commission on October 21, 1996
Registration No. 33-6364
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
POST-EFFECTIVE AMENDMENT NO. 11 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT |X|
COMPANY ACT OF 1940
AMENDMENT NO. 13 |X|
_______________________________________
ADDISON CAPITAL SHARES, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Janney Montgomery Scott Inc.
2 Bala Cynwyd Plaza
Bala Cynwyd, PA 19004
(Address of Principal Executive Offices)
Registrant's Telephone Number: (215) 667-7007
JAMES W. JENNINGS, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP
2000 One Logan Square
Philadelphia, PA 19103
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
|X| immediately upon filing pursuant to Paragraph (b)
|_| on __________ pursuant to Paragraph (b)
|_| 60 days after filing pursuant to Paragraph (a)
|_| on __________ pursuant to Paragraph (a) of Rule 485
The Registrant has registered an indefinite number of shares of its common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. On August 22, 1996, the Registrant filed a Rule 24f-2
notice covering the fiscal year ended June 30, 1996.
<PAGE>
ADDISON CAPITAL SHARES, INC.
Cross Reference Sheet
Form N-1A Item Location
- -------------- --------
Part A. Information Required in a Prospectus Caption
- ---------------------------------- ------------------
Prospectus
- ----------
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Summary of Fund Expenses
Item 3. Condensed Financial
Information........................... Financial Highlights
Item 4. General Description of
Registrant............................ The Fund; The Fund's
Investment Objective and
Policies; The Fund's
Investment Limitations
Item 5. Management of the Fund................ Management of the Fund
Item 5A. Managment's Discussions of
Fund Performance...................... Not Applicable -
Disclosure in Annual
Report
Item 6. Capital Stock and Other
Securities............................ Description of Fund
Shares; Dividends and
Capital Gains
Distributions; Tax Status
of Dividends and Capital
Gains Distributions;
Shareholder Inquiries
Item 7. Purchase of Securities
Being Offered......................... How You Can Invest in the
Fund; What Shares Will
Cost; How Net Asset Value
is Determined; The Fund's
Distributor
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<PAGE>
Item 8. Redemption or Repurchase.............. How You Can Sell Your Fund
Shares
Item 9. Legal Proceedings..................... Not applicable
Part B. Information Required in a Statement of Additional
- ---------------------------------------------------------
Information
- -----------
Item 10. Cover Page............................ Cover Page
Item 11. Table of Contents..................... Table of Contents
Item 12. General Information and
History............................... Not applicable
Item 13. Investment Objectives and
Policies.............................. Additional Information
About Investment
Limitations and Policies;
Portfolio Transactions and
Brokerage
Item 14. Management of the
Registrant............................ Management of the Fund
(Prospectus); Additional
Information About the
Fund's Management and
Affiliations
Item 15. Control Persons and
Principal Holders of
Securities............................ The Fund's Directors and
Officers
Item 16. Investment Advisory and
Other Services........................ Investment Advisory and
Other Services; The Fund's
Custodian, Transfer and
Dividend Disbursing Agent;
The Fund's Certified
Public Accountants
Item 17. Brokerage Allocation.................. Portfolio Transactions and
Brokerage
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Item 18. Capital Stock and Other
Services.............................. Additional Information
About Fund Shares
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered............................... Additional Purchase and
Redemption Information;
Valuation of Shares
Item 20. Tax Status............................ Additional Tax Information
Item 21. Underwriters.......................... The Fund's Distributor
Item 22. Calculation on Yield
Quotations of Money Market
Funds................................. Not applicable
Item 23. Financial Statements.................. Financial Statements
Part C. Other Information
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Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of the Registration Statement.
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<PAGE>
[LOGO]
Addison Capital Shares, Inc. (the "Fund") is a mutual fund
seeking long-term capital appreciation. The Fund invests principally in those
equity securities which the Fund's investment adviser, Addison Capital
Management Company, believes are undervalued and therefore offer above-average
potential for capital appreciation. See "The Fund's Investment Objective and
Policies" at page 7.
The Fund's shares are distributed by Janney Montgomery
Scott Inc.
This Prospectus sets forth concisely the information about the
Fund that a prospective investor ought to know before investing. It should be
retained for future reference. A Statement of Additional Information about the
Fund dated the same date as this Prospectus, and which is incorporated herein by
reference, has been filed with the Securities and Exchange Commission and is
available without charge upon request from Janney Montgomery Scott Inc. (address
and telephone numbers listed below).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
DISTRIBUTOR
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
Philadelphia, Pennsylvania 19103
In Philadelphia, Pennsylvania (215) 665-6000
Outside Philadelphia, Pennsylvania (800) 526-6397
The date of this Prospectus is November 1, 1996.
<PAGE>
TABLE OF CONTENTS
Page
----
The Fund................................................................. 3
Advantages to Investors..................................... 3
Summary of Fund Expenses................................................. 5
Financial Highlights..................................................... 7
The Fund's Investment Objective and Policies............................. 9
The Fund's Investment Limitations........................................ 11
How You Can Invest in the Fund........................................... 12
What Shares Will Cost.................................................... 13
How Your Shareholder Account will be Maintained.......................... 14
How You Can Sell Your Fund Shares........................................ 14
Redemption in Kind.......................................... 16
Exchange Privilege.......................................... 17
How Net Asset Value is Determined........................................ 17
Dividends and Capital Gains Distributions................................ 18
Tax Status of Dividends and Capital
Gains Distributions......................................... 18
Shareholder Services..................................................... 20
Confirmations and Reports................................... 20
Systematic Withdrawal Plan.................................. 20
Qualified Retirement Plans............................................... 21
Management of the Fund................................................... 22
The Fund's Distributor................................................... 27
Description of Fund Shares............................................... 29
Transfer Agent........................................................... 30
Shareholder Inquiries.................................................... 30
Application for Pre-Authorized Check Plan................................ __
Account Application...................................................... __
================================================================================
This Prospectus does not constitute an offering by the Fund or by the principal
underwriter in any jurisdiction in which such offering may not lawfully be made.
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<PAGE>
THE FUND
Addison Capital Shares, Inc. (the "Fund") is a corporation
formed under the laws of the state of Maryland on June 4, 1986. The Fund is an
open-end diversified mutual fund and commenced operations on September 15, 1986.
The Fund currently offers one class of common stock designed for investment by
individuals, institutions and fiduciaries whose investment objective is
long-term capital appreciation. See "The Fund's Investment Objective and
Policies" at page 9. The Fund may later offer additional series of shares
designed for investment by persons or entities with different investment
objectives. A minimum initial investment of $1,000. See "How You Can Invest in
the Fund" at page 12.
The Fund currently pays an annual distribution fee to its
distributor, Janney Montgomery Scott Inc. ("Janney"), equal to .40% of the
Fund's average daily net assets, pays an annual service fee to Janney equal to
.25% of the Fund's average daily net assets and pays other fees for management
and investment advisory services. Addison Capital Management Company acts as the
Fund's investment adviser. The total amount of the Fund's investment advisory
services, financial accounting, management and distribution fees should equal
approximately 1.60% of the Fund's average daily net assets, which amount is
higher than that paid by many other equity investment companies. See "Management
of the Fund" at page 22 and "The Fund's Distributor" at page 27.
Advantages to Investors
- Investors will obtain the benefit of professional
management for securities investments and avoid the
cost and burden of selecting, supervising, and
handling an individual securities portfolio.
- Investors will obtain an interest in a diversified
portfolio of many different securities, with the
brokerage costs incurred by the Fund being
significantly less than those which would be borne by
investors individually making a small series of
purchases.
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- By investing in the Fund through an Individual
Retirement Account ("IRA"), Self-Employed
Individual Retirement Plan ("Keogh Plan"), or
corporate retirement plan, investors can obtain
tax-shelter for a portion of their current income
and tax deferral of the earnings on their
investment. See "Qualified Retirement Plans" at
page 21.
- Investors will be free to redeem their shares at any
time at the next determined net asset value. See "How
You Can Sell Your Fund Shares" at page 14 and
"Qualified Retirement Plans" at page 21.
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<PAGE>
SUMMARY OF FUND EXPENSES
The following information concerning shareholder transaction
expenses and annual Fund operating expenses was developed for use by all mutual
funds to aid investors in understanding the various expenses that are borne
directly or indirectly by the Fund. It should be noted that the long term
investor in the Fund may pay more through the distribution fees described below
than the economic equivalent of the maximum front-end sales charges permitted by
the Rules of the National Association of Securities Dealers.
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases/1/
(as a percentage of offering price)..................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)..................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds,as applicable).................... None
Redemption Fees (as a percentage of
amount redeemed, if applicable)......................................... None
Exchange Fees........................................................... None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Asset Based Sales Charges
(12b-1 Fees)/2/......................................................... 0.40%
- --------
1/ Janney has agreed to waive the front-end sales charge of 3% for all new
share purchases.
2/ Janney receives total payments for distribution of Funds shares in an
amount equal to .65% of the Fund's average net assets. Of this amount,
.40% is received from the Fund under the Compensation Plan and .25% is
received from Addison. Janney distributes this fee to brokers for
promoting sales of Fund shares. The NASD imposes a maximum limit on
asset based charges for funds with a 12b-1 fee of 6.25% of new sales,
plus interest.
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Investment Management Fees/3/............................................ 0.75%
Shareholder Servicing Fees/4/............................................ 0.25%
Other Expenses/5/........................................................ 0.56%
Total Fund Operating Expenses........................................... 1.96%
The following example illustrates the expenses that are paid on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted above, the
Fund charges no redemption fees of any kind.
1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following
expenses on a $1000
investment assuming (1) 5%
annual return and (2)
redemption at the end of each
period: $20 $62 $106 $229
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown.
- --------
3/ Addison has agreed to pay Janney an amount equal to .25% of the Fund's
average net assets for Janney's efforts in selling and marketing the
shares of the Fund.
4/ 100% of the Servicing Fees are retained by Janney for continuous
personal service, such as responding to shareholder inquiries, quoting
net asset values, and attending to other shareholder matters, including
shareholder account maintenance.
5/ Includes administrative fees equal to 0.20% of the Fund's average net
assets.
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<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth certain information
concerning the investment results of the Fund. The following information for
each of the five years in the period ended June 30, 1996 has been audited by
Tait, Weller & Baker, independent certified public accountants, whose report
thereon appears with the Fund's financial statements included in the Statement
of Additional Information, which may be obtained by shareholders by contacting
Janney.
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<PAGE>
Financial Highlights (for a Fund Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
6/30/96 6/30/95 6/30/94 6/30/93 6/30/92 6/30/91
<S> <C> <C> <C> <C> <C> <C>
------- ------- ------- ------- ------- -------
Net asset value at
beginning of period...................... $22.92 $20.45 $22.69 $19.64 $18.90 $18.17
------ ------ ------ ------ ------ ------
Income from Investment Operations
Net investment income.................... .17 .22 .21 .24 .26 .22
Net realized and
unrealized gains
(losses) on investments.................. 5.42 3.77 (.76) 3.72 1.57 .74
------ ------ ------ ------ ------ ------
Total from investment
operations............................... 5.59 3.99 (.55) 3.96 1.83 .96
------ ------ ------ ------ ------ ------
Less Distributions
Dividends from net
investment income........................ (.21) (.20) (.23) (.24) (.27) (.23)
Distributions from
capital gains............................ (1.88) (1.32) (1.46) (.67) (.82) ---
------ ------ ------ ------ ------ ------
Total distributions...................... (2.09) (1.52) (1.69) (.91) (1.09) (.23)
------ ------ ------ ------ ------ ------
Net asset value at
end of period............................ $26.42 $22.92 $20.45 $22.69 $19.64 $18.90
====== ====== ====== ====== ====== ======
Total return(1).......................... 25.92% 21.11% (2.73)% 20.98% 9.93% 5.40%
Ratios/Supplemental Data
Net assets at end of
period (in 000's)........................ $50,704 $38,506 $36,171 $37,621 $31,243 $28,744
Ratio of expenses to
average net assets....................... 1.96% 2.06% 2.06% 2.13% 2.12% 2.34%
Ratio of net income
to average net assets.................... 0.69% 1.03% 1.00% 1.14% 1.32% 1.24%
Portfolio turnover
rate..................................... 38.97% 42.82% 43.26% 30.01% 57.34% 57.52%
</TABLE>
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* Initial public offering date
(1) Assumes an initial investment made at the net asset value last calculated
on the business day before the first day of each fiscal year and does
not reflect sales loads or account fees.
(2) Prior to reimbursement of expenses by Janney and the Adviser, the ratio
of expenses to average net assets on an annualized basis was 2.45%, 2.49%
and 3.16% for 1989, 1988 and 1987, respectively, and the ratio of net
investment income to average net assets on an annualized basis was 2.11%,
1.22% and 0.16% for 1989, 1988 and 1987, respectively.
(3) Annualized.
<PAGE>
<TABLE>
<CAPTION>
Year Year Year Year
Ended Ended Ended Ended
6/30/90 6/30/89 6/30/88 6/30/87
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value at
beginning of period...................... $16.45 $14.62 $16.21 $12.75
------ ------ ------ ------
Income from Investment Operations
Net investment income.................... .22 .42 .21 .13
Net realized and
unrealized gains
(losses) on investments.................. 1.71 1.79 (1.62) 3.35
------ ------ ------ ------
Total from investment
operations............................... 1.93 2.21 (1.41) 3.48
------ ------ ------ ------
Less Distributions
Dividends from net
investment income........................ (.21) (.38) (.17) (.02)
Distributions from
capital gains............................ --- --- (.01) ---
------ ------ ------ ------
Total distributions...................... (.21) (.38) (.18) (.02)
------ ------ ------ ------
Net asset value at
end of period............................ $18.17 $16.45 $14.62 $16.21
====== ====== ====== ======
Total return(1).......................... 11.70% 15.37% (8.64%) 34.25%(3)
Ratios/Supplemental Data
Net assets at end of
period (in 000's)........................ $29,037 $26,953 $25,843 $26,318
Ratio of expenses to
average net assets....................... 2.21% 2.30%(2) 2.24%(2) 1.50%(2)(3)
Ratio of net income
to average net assets.................... 1.20% 2.26% (2) 1.47%(2) 1.82%(2)(3)
Portfolio turnover
rate..................................... 68.97% 52.39% 63.12% 25.20%
</TABLE>
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<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
The Fund's objective will be long-term capital appreciation. The
Fund's adviser, Addison Capital Management Company (the "Adviser"), believes
that this objective can best be met through the purchase of equity securities
that appear to be undervalued. A security may be undervalued because of many
factors, including but not limited to investor apathy, market decline within an
industry group, poor industry conditions, tax-loss selling or other factors
that may provide buying opportunities at attractive prices relative to the
long-term prospects for the securities in question. Such securities are usually
characterized by low price to earnings ratios relative to standard indices, such
as the Standard & Poor's 500 index, or low price to earnings ratios relative to
the relevant industry grouping. There can be no assurance that the Fund's
investment objective will be achieved. Fund shares will fluctuate in value as a
result of changes in value of portfolio investments.
The Adviser intends to invest in securities which are undervalued due
to investor apathy, earnings declines, or other adverse developments where the
Adviser believes these developments have abated. It believes that such
securities are likely to provide a greater return than securities with prices
that appear to reflected anticipated favorable developments because the latter
are subject to much greater correction should any unfavorable developments
occur. Although the Fund will invest primarily in dividend-paying companies, the
Fund may from time to time invest in securities that pay no dividends or
interest.
The Fund will invest primarily in common stock, but may also invest in
debt instruments, preferred stock and convertible securities. Investments in
stock may include purchases of securities of closed-end investment companies
provided that, immediately after any such purchase, not more than 10% of the
Fund's total assets will be invested in such securities.
Debt instruments held by the Fund may include money market
instruments, such as securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements secured thereby, bank
certificates of deposit and bankers' acceptances issued by banks having net
assets of at least $1 billion as of the end of their most recent fiscal year,
-9-
<PAGE>
commercial paper which at the date of the investment is rated at the highest
grade by Standard & Poor's Corporation (A-1), by Moody's Investors Service, Inc.
(P-1) or by Fitch's Investor's Service (F-1), or, if not rated, is issued by a
company which at the date of investment has an outstanding issue rated A or
better by Standard & Poor's or Moody's, and other long and short-term debt
instruments which are rated A or higher by Standard & Poor's or Moody's,
including corporate bonds, debentures and notes, and bonds and notes issued by
state and local governments and governmental entities. In periods of market
decline, the Fund expects to continue its policy of seeking investments in
equity securities that appear undervalued rather than building cash reserves.
The Fund may purchase securities traded both on recognized securities
exchanges and in the over-the-counter market. While the Fund may invest in some
foreign securities, investments in foreign securities that are not traded on the
New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market System will constitute less than 10% of the Fund's portfolio. The Fund's
investments in securities of foreign companies may involve greater risks than
are present in domestic investments. There is generally less publicly available
information about foreign companies and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. In addition, such companies may use different accounting and
financial standards. The Fund will consider possible political and financial
instability abroad, as well as the liquidity and volatility of foreign
investments.
When cash is temporarily available, the Fund may invest in repurchase
agreements. A repurchase agreement is an agreement under which either U.S.
government obligations or high quality debt securities are acquired from a
securities dealer or bank subject to resale at an agreed upon price and date.
The securities will be held for the Fund by its Custodian as collateral until
retransferred and will be supplemented by additional collateral (without cost to
the Fund) if necessary to maintain a total value equal to or in excess of the
value of the repurchase agreements. The Fund will not enter into repurchase
agreements of more than seven days' duration if more than 10% of its net assets
-10-
<PAGE>
would be invested in such agreements and other illiquid investments. The Fund
will bear a risk of loss in the event that the other party to a repurchase
agreement defaults on its obligations and the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities. The Adviser, with
the approval of the Fund's Board of Directors, will enter into repurchase
agreements only with financial institutions deemed to present minimal risk of
bankruptcy or insolvency during the term of the agreement.
The timing of purchases and sales of the Fund's portfolio securities
will be made primarily on the investment merits of such securities. Only
secondarily will such timing be influenced by whether any gain from such
transactions would be classified as short-term or long-term for tax purposes.
THE FUND'S INVESTMENT LIMITATIONS
Under the Fund's fundamental policies, which cannot be changed except
by vote of a majority of the Fund's outstanding shares, the Fund may not:
1. Borrow money, except for temporary purposes in an aggregate
amount not to exceed 5% of the value of its total assets at
the time of borrowing. Although not a fundamental policy
subject to shareholder approval, the Fund intends to repay any
money borrowed before any additional portfolio securities are
purchased.
2. Mortgage, pledge or hypothecate any of its assets,
except to secure permitted borrowings up to 5% of the
value of its total assets at the time of borrowing.
3. Invest more than 5% of its total assets (taken at market value
at the time of the purchase) in securities of any one issuer,
other than the U.S. Government or its agencies and
instrumentalities, or buy more than 10% of the voting
securities or more than 10% of all the securities of any
issuer.
4. Invest more than 5% of its total assets (taken at
market value at the time of the purchase) in securities
of companies that, including their predecessors, have
-11-
<PAGE>
been in operation for less than three years or in equity
securities that are not readily marketable.
See the Fund's Statement of Additional Information for a listing of
other investment limitations.
HOW YOU CAN INVEST IN THE FUND
You may purchase Fund shares through any Janney broker. See "What
Shares Will Cost" at page 13. Documents available from your Janney broker should
be completed if you invest in Fund shares through an IRA, Keogh Plan or
corporate retirement plan.
The minimum initial investment in the Fund for each account will be
$1,000. However, the initial investment in an IRA account established on behalf
of a non-working spouse of a shareholder who has an IRA invested in the Fund
requires a minimum amount of only $250. The minimum investment of each purchase
of additional shares, including purchases of shares through the Fund's
Pre-authorized Check Plan, and plans involving transfers from other financial
institutions, will be $50. In addition, once an account is established, the
minimum amount for subsequent investment will be waived if an investment in an
IRA or similar plan is the maximum amount permitted under the Internal Revenue
Code. You should always furnish your shareholder account number when making
additional purchases of Fund shares.
There are three ways you can invest in the Fund:
1. Through Your Janney Broker.
Fund shares may be purchased through any Janney broker. Each will be
pleased to explain to you the shareholder services available from the Fund, and
answer any questions you may have. After you have initially purchased Fund
shares, you can order additional Fund shares from your Janney broker in person,
by telephone or by mail. An order placed with Janney on behalf of an IRA or
Keogh Plan that is sponsored by Janney and that is being opened at the same time
that the order is placed, will not be transmitted to the Fund until Janney
receives a check for the amount of the purchase. Other investors must make
payment within three business days of their order.
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<PAGE>
2. Through the Pre-authorized Check Plan and Other
Transfers of Funds from Financial Institutions.
Once you are a Fund shareholder, you can make additional investments
through the Fund's Pre-authorized Check Plan for convenient automatic monthly
investments. In addition, certain financial institutions may allow you to
request the automatic transfer of $50 or more on a monthly basis to Provident
National Bank, custodian for the Fund (the "Custodian"), for investment in
shares of the Fund.
3. Open Account Program.
If you do not elect otherwise on your application to purchase Fund
shares, you are automatically enrolled in an Open Account Program. You may
schedule your purchases to suit your personal requirements and you are not
obligated in any way. As each payment is received by the Fund's Transfer Agent,
full and fractional shares will be purchased at the next effective offering
price and proper entry is made on the books of the Fund.
The market value of the Fund's shares is subject to fluctuation.
Before undertaking any plan for systematic investment, the investor should keep
in mind that such a program does not assure a profit or protect against a loss
in declining markets.
WHAT SHARES WILL COST
Fund shares will be sold on each day on which the New York Stock
Exchange (the "Exchange") is open. The shares of the Fund will be sold at their
next determined net asset value. See "How Net Asset Value is Determined" at page
17. Prior to July 3, 1995, the Fund imposed a 3% sales charge payable to Janney
on purchases of shares. This sales charge would decrease depending on the amount
of purchase as set forth by the Fund. However, commencing July 3, 1995, Janney
waived the payment of the 3% sales charge on purchases of Fund shares. The Board
of Directors of the Fund determined that such waiver was appropriate to
encourage sales of Fund shares, and has approved Janney's continuation of such
waiver. Janney will not re-introduce this sales charge without the prior consent
of the Board, including a majority of the "non-interested" directors as defined
in the Investment Company Act of 1940.
-13-
<PAGE>
Except with respect to certain orders for Fund shares to be invested
in an IRA (see "Qualified Retirement Plans" at page 21), orders accepted by
Janney before the close of business of the Exchange on any day that the Exchange
is open for business will be executed at the net asset value determined as of
the close of the Exchange on that day. Orders accepted by Janney after the close
of the Exchange will be executed at the offering price determined as of the
close of the Exchange on its next trading day. Fund shares ordered through the
Fund's Pre-authorized Check Plan will be purchased at the offering price
determined on the close of business of the Exchange on the date in each month
the Custodian draws a check on your account. Fund shares purchased through an
automatic monthly transfer of funds from your account to the Custodian will be
purchased at the net asset value determined at the close of the business of the
Exchange on the respective dates such transfers are made. The Fund reserves the
right to reject any order for Fund shares.
HOW YOUR SHAREHOLDER ACCOUNT WILL BE MAINTAINED
When you initially purchase Fund shares, an account will automatically
be established for you. Any shares that you purchase or receive as a
distribution from time to time will be credited directly to your account at the
time of purchase or receipt. No certificates will be issued unless you
specifically request them in writing, and no charge will be made for the
issuance of certificates. Certificates will be issued in full shares only. No
certificates will be issued for shares prior to 15 business days after purchase
of such shares by check unless the Fund can be reasonably assured during that
period that payment for the purchase of such shares has been collected.
HOW YOU CAN SELL YOUR FUND SHARES
There are two ways you can sell and receive cash for your Fund shares.
First, you may give your Janney broker an order for repurchase of your shares.
At its discretion, Janney will transmit your order to the Fund for processing as
a redemption request or repurchase your shares itself. Janney will not impose
any charge or fee for transmitting a redemption request to the
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<PAGE>
Fund or for repurchasing your shares. Second, if you hold your Fund shares in
certificate form, or if you do not hold Fund shares in a Janney account, you may
send a written request for redemption to Addison Capital Shares, Inc., c/o
Provident Financial Processing Corporation, P.O. Box 8950, Wilmington, DE
19899.
Upon receipt by the Transfer Agent or Janney of a request for
redemption or a repurchase order in "good order" as described below, you will be
sent a check equal to the amount of the net asset value of the redeemed shares
next determined after the redemption request or repurchase order has been
received. If the request for redemption is received by the Transfer Agent or
Janney before the close of business of the Exchange, the Shares will be redeemed
or repurchased at the net asset value per share determined at the close of the
Exchange on that day. Requests for redemption received by the Transfer Agent or
Janney after the close of business of the Exchange or on a day when the Exchange
is not open for business will be executed at the net asset value determined at
the close of the Exchange on its next trading day.
Your check normally will be forwarded promptly after redemption.
However the Fund reserves the right to take up to seven days to make payment if,
in the judgment of the Adviser, the Fund could be adversely affected by
immediate payment. The proceeds of your redemption or repurchase may be more or
less than your original cost. If the shares to be redeemed or repurchased were
paid for by check (including certified or cashier's checks) within 15 business
days of the redemption or repurchase request, the proceeds may not be disbursed
unless the Fund can be reasonably assured that the check has been collected.
A redemption or repurchase request will be considered to be received
in "good order" only if:
1. You have indicated in writing the number of shares to
be redeemed and your shareholder account number.
2. The written request is signed by you and by any co-
owner of the account with exactly the same name or
names used in establishing the account.
-15-
<PAGE>
3. The written request is accompanied by any certificates
representing the shares that have been issued to you, and you
have endorsed the certificates for transfer or an accompanying
stock power exactly as the name or names appear on the
certificates.
4. The signatures on the written redemption request and on any
certificates for your shares (or an accompanying stock power)
have been guaranteed by a national bank, a state bank (not
including a savings bank) or a trust company, or by Janney, or
by any other member firm of the New York, American, Boston,
Midwest, Pacific or Philadelphia Stock Exchanges.
Other supporting legal documents may be required from corporations or
other organizations, fiduciaries or persons other than the shareholder of record
making the request for redemption or repurchase. If you have a question
concerning the sale of Fund shares, contact your Janney broker.
The Fund reserves the right to suspend redemption or payment at times
when the Exchange is closed (other than customary weekend or holiday closings)
or during periods of emergency or other periods as permitted by the Securities
and Exchange Commission. In the case of any such suspension, you may either
withdraw your request for redemption or repurchase order or receive payment
based upon the net asset value next determined after the suspension is lifted.
Because of the high cost of maintaining small accounts, the Fund may
elect to close any account with a current value of less than $500 by redeeming
all of the shares in the account and mailing the proceeds to you. However, if
the Fund so elects, you will be notified that your account is below $500 and
will be allowed 60 days in which to make an additional investment in order to
avoid having your account closed.
Redemption in Kind
Although the Fund intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole or in
part by a distribution of securities from the Fund's portfolio.
-16-
<PAGE>
Redemption in kind will be made in conformity with applicable
Securities and Exchange Commission rules, taking such securities at the same
value employed in determining net asset value and selecting the securities in a
manner the Fund determines to be fair and equitable.
The Fund has also elected to be governed by Rule 18f-1 of the
Investment Company Act of 1940 under which the Fund is obligated to redeem
shares for any one shareholder in cash only up to the lesser of $250,000 or 1%
of the Fund's net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who receive securities and sell them
could receive less than the redemption value of their securities and could incur
certain transaction costs, including brokerage fees incurred in disposing of the
securities received.
Exchange Privilege
Shares of the Fund may be exchanged for shares of the Janney
Montgomery Scott ("JMS") Money Market Fund portfolios. Shares of the Fund and
the JMS Money Market Fund portfolios are exchanged at their respective net asset
values. The JMS Money Market portfolios do not presently impose any sales
charges. Further information concerning this privilege is contained in the
Fund's Statement of Additional Information.
HOW NET ASSET VALUE IS DETERMINED
Net asset value per Fund share will be determined by dividing the
value of the total assets of the Fund, less liabilities, by the number of shares
outstanding. Net asset value will be determined daily, as of the close of the
Exchange on its customary business days. Securities owned by the Fund for which
market quotations are readily available will be valued at current market value,
or, in their absence, at fair value as determined by the Fund's Board of
Directors.
-17-
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund intends to declare dividends out of its net investment income
to shareholders twice a year. The Fund also intends to distribute to
shareholders substantially all net long-term and short-term capital gains
realized on portfolio securities after the end of its fiscal year and the
calendar year, in which the gains are realized. Shareholders may elect to:
1. Receive both dividend and capital gains distributions
in shares;
2. Receive dividends in cash and capital gains
distributions in shares; or
3. Receive both dividends and capital gains distributions
in cash.
Such an election may be made by completing the section entitled
"Subsequent Investments/Dividends and Distributions" in the Share Application
located at the back of this Prospectus. If no election is made, both dividends
and capital gains distributions will be credited to your account in additional
shares at the net asset value of the shares determined at the close of the day
following the record date for payment of the dividends and distributions. You
may elect at any time to change your option by notifying in writing the Transfer
Agent, who is also the dividend disbursing agent for the Fund.
TAX STATUS OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The following discussion of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement. New
legislation, administrative changes, and court decisions may significantly
change the conclusions expressed herein and may have a retroactive effect with
respect to the transactions contemplated herein.
No attempt has been made to present a detailed explanation of the
federal, state, or local income tax treatment of the Fund or its shareholders.
Accordingly, investors are urged to consult their tax advisors regarding
specific questions as to federal, state, and local income taxes.
-18-
<PAGE>
The Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As long as the Fund qualifies for this tax treatment, the Fund will be
relieved of Federal income tax on amounts distributed to shareholders. The Code
requires, among other things, that the Fund distribute each year at least 90% of
its investment company taxable income. The Fund also intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for
Federal excise tax. For additional information, please see the Fund's Statement
of Additional Information.
Distributions to shareholders of net investment income of the Fund and
of net short-term capital gains of the Fund will be taxable to shareholders as
ordinary income, whether such distributions are received in cash or in
additional shares. Generally, to the extent attributable to dividends received
by the Fund from domestic corporations, a portion of the Fund's distributions of
net investment income will be eligible for the dividends received deduction for
corporate shareholders.
Distributions to shareholders of net capital gain of the Fund are
taxable to shareholders as long-term capital gains, whether received in cash or
additional shares, and regardless of how long a shareholder has held the shares.
Dividends declared in October, November or December of a year and
payable to shareholders of record on a specified date in such a month are deemed
to be paid by the Fund and received by the shareholder on December 31 of such
year, provided they are paid before February 1 of the following year.
The price paid for a share of the Fund ordinarily includes an amount
equal to any per share undistributed earnings and a proportionate amount of any
undistributed capital gains realized in the Fund's investments. Any distribution
of such earnings or gains after a purchase may in effect be a return of capital,
but would nevertheless be subject to tax.
-19-
<PAGE>
Any gain or loss recognized on a sale or redemption of shares of the
Fund by a shareholder who is not a dealer in securities will generally be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise will be generally treated as a short-term
capital gain or loss. However, if shares on which a net capital gain
distribution has been received are subsequently sold or redeemed and such shares
have been held for six months or less, any loss recognized will be treated as a
long-term capital loss to the extent of the long-term capital gain distribution.
Shareholders will be advised annually as to the Federal income tax
consequences of distributions made during the year. Shareholders are encouraged
to consult with their tax advisors concerning the application of the rules set
forth above to their particular circumstances, and also concerning the
application of state and local taxes to an investment in the Fund. State and
local tax consequences of an investment in the Fund may differ from the Federal
income tax consequences described above.
SHAREHOLDER SERVICES
Confirmations and Reports
You will receive after each purchase or sale a confirmation showing
the particular transaction and the current status of your account. Reports will
be sent to shareholders at least semiannually showing the Fund's portfolio and
other information. An annual report containing financial statements audited by
independent certified public accountants will also be sent to shareholders each
year.
Shareholder inquiries should be addressed to Janney Montgomery Scott
Inc., 1801 Market Street, Philadelphia, PA 19103 (telephone in Philadelphia:
(215) 665-6000; telephone outside Philadelphia: (800) 526-6397).
Systematic Withdrawal Plan
You may elect to make systematic withdrawals from your Fund account of
a minimum of $50 on a monthly basis or $150 on a quarterly basis if you are
purchasing or already own shares with a net asset value of $10,000 or more.
Please contact Janney for further information.
-20-
<PAGE>
QUALIFIED RETIREMENT PLANS
An investment in Fund shares may be appropriate for IRAs, Keogh Plans,
and corporate retirement plans. Investors who are considering establishing such
a plan may wish to consult their attorneys or tax advisers with respect to
individual tax questions. Janney can make available to you forms of self-
directed IRAs, Keogh Plans, and corporate retirement plans.
The Internal Revenue Code requires the custodian of any IRA to furnish
each individual benefitting from an IRA with a copy of the governing instrument
used to establish the IRA and a disclosure statement satisfying the requirements
of regulations under Section 408 of the Internal Revenue Code no later than the
earlier of the date of establishment or purchase of the IRA. If, however, the
governing instrument and disclosure statement are not furnished to such
individual at least seven days preceding the earlier of the date of purchase or
establishment of the IRA, the individual must be permitted to revoke his IRA and
receive a full refund for a period of seven days from the earlier of those
dates. If the revocation period applies, Janney, as custodian of a Janney
self-directed IRA will hold the individual's initial payment to his IRA in a
suspense account until the expiration of the seven-day period. Thereupon, if the
IRA has not been revoked, such payment will be applied to the purchase of Fund
shares at the net asset value next calculated following such expiration date
plus the appropriate sales charge. No interest will be paid on funds held in
such suspense account. An order placed with Janney on behalf of a Janney
self-directed IRA will not be transmitted to the Fund until Janney receives a
check and completed IRA application.
The option of investing in the retirement plans described above
through regular payroll deductions may be arranged with Janney and your
employer. Additional information with respect to these plans is available upon
request from any Janney broker.
-21-
<PAGE>
MANAGEMENT OF THE FUND
The Fund's Board of Directors have overall responsibility for the
operation of the Fund.
The Fund's officers are responsible for the operation of the Fund
under the supervision of the Board of Directors. The directors and officers of
the Fund, their principal occupations during the past five years and other
business affiliations are set forth below. An asterisk (*) indicates directors
who are "interested persons" of the Fund as defined by the Investment Company
Act of 1940.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Fund During Past Five Years
- ---------------- ---------------- ----------------------
<S> <C> <C>
Radcliffe Cheston* President and President and Director of
1608 Walnut Street Chief Executive Addison Capital Management
Philadelphia, PA Officer Company since May 1990;
Vice President, Treasurer
and Secretary of Addison
Capital Management Company
and general partner of its
predecessor since January
1984.
Rudolph C. Sander* Chairman of the Chairman of the Board and
1801 Market Street Board and Director Chairman of the Executive
Philadelphia, PA Committee of Janney
Montgomery Scott Inc.
Margaret M. Healy Director President, Rosemont
Rosemont College College; Lecturer in
Rosemont, PA Philosophy, Bryn Mawr
College, 1978-1995.
William R. Dimeling Director Partner, Dimeling,
1629 Locust Street Schreiber & Park and its
Philadelphia, PA predecessor, Dimeling &
Schreiber, a private
investment partnership
since 1982; Trustee of
Pennsylvania Real Estate
Investment Trust; Director of
Aero Services International Inc.
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Fund During Past Five Years
- ---------------- ---------------- ----------------------
<S> <C> <C>
Charles E. Mather, III Director President and Director of
226 Walnut Street Mather & Co. (insurance
Philadelphia, PA brokers); Director of
American Shipbuilders and
Shipowners Mutual Assurance
Company and Christiana Bank
& Trust (a state chartered
bank not a member of the
Federal Reserve Board);
Director and President of
Finance Company of
Pennsylvania (a registered
investment company).
Charles L. Sullivan Vice President Senior Vice President and
1801 Market Street Director of Janney
Philadelphia, PA Montgomery Scott Inc.
James W. Wolitarsky Treasurer, Chief Senior Vice President,
1801 Market Street Financial Officer Treasurer and Director of
Philadelphia, PA and Chief Janney Montgomery Scott
Accounting Officer Inc.
Fred W. Thomas Vice President Senior Vice President of
1608 Walnut Street Addison Capital Management
Philadelphia, PA Company since May 1990;
Director of Research of
Addison Capital Management
Company from September 1989
through May 1990; Vice
President of Abel/Noser
Corp. From March 1984
through August 1989.
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Fund During Past Five Years
- ---------------- ---------------- ----------------------
<S> <C> <C>
James V. Kelly, CFA Vice President Senior Vice President and
1608 Walnut Street Director of Addison Capital
Philadelphia, PA Management Company since
August 1992; Vice President
of Addison Capital
Management Company since
October 1990; President of
Sysdicon Investment Counsel
January 1989 to October
1990; Vice President and
Chief Equity Investment
Officer of Wilmington Trust
Company January 1986 to
January 1989.
James W. Jennings Secretary Partner, Morgan, Lewis &
2000 One Logan Square Bockius LLP
Philadelphia, PA
</TABLE>
Pursuant to the Board of Directors' responsibility for Fund management,
it has employed the Adviser to serve as the Fund's investment adviser. Subject
to the overall supervision of the Board of Directors, the Adviser manages the
investment affairs of the Fund and directs the investments of the Fund in
accordance with its investment objective, policies and limitations. The Adviser
manages the investment affairs of the Fund pursuant to an Investment Advisory
Agreement between the Fund and the Adviser dated September 8, 1986 and approved
by the Fund's sole shareholder, Janney, on August 13, 1986. The Investment
Advisory Agreement was subsequently approved by the Fund's shareholders at a
meeting on October 29, 1987. The Adviser is a wholly-owned subsidiary of Janney,
which, in turn, is an indirect wholly-owned subsidiary of Penn Mutual Life
Insurance Company. The Adviser's address is 1608 Walnut Street, Thirteenth
Floor, Philadelphia, PA 19103.
The Adviser is entitled to receive for its services a fee, calculated
daily and payable monthly, at an annual rate of 0.75% of the average daily net
assets of the Fund for the first $100 million of average net assets, 0.50% of
-24-
<PAGE>
average daily net assets exceeding $100 million but less than or equal to $250
million, and 0.25% of average net assets exceeding $250 million. The advisory
fee is higher than that paid by most other mutual funds.
For the fiscal year ended June 30, 1996, the Adviser received $340,192
in advisory fees from the Fund.
The advisory fee may be reduced because of regulations in various
states where Fund shares may be qualified for sale which impose limitations on
the annual expense ratio of the Fund. For example, the Fund has qualified its
shares for sale in California. Under California law the Fund's aggregate annual
expenses may not exceed 2.5% of the first $30 million of its average daily net
assets, 2% of the next $70 million of average daily net assets, and 1.5% of
average daily net assets in excess of $100 million. Interest, taxes, capital
items (including brokerage) and the distribution fee to be paid to Janney as
described below will not be included in calculating aggregate annual expenses
for this purpose. The Fund may also seek to qualify its shares in other
jurisdictions which impose limitations on its expenses.
If the purchase or sale of securities consistent with the investment
policies of the Fund and one or more other clients served by the Adviser is
considered at or about the same time, transactions in such securities will be
allocated among the Fund and such other clients in a manner deemed fair and
reasonable by the Adviser. Although there is no specified formula for allocating
such transactions, the various allocation methods used by the Adviser, and the
results of such allocations, will be subject to periodic review by the Fund's
Board of Directors. Simultaneous transactions in the same securities by the Fund
and other clients served by the Adviser may have an adverse effect upon the
price or volume of securities available to the Fund.
Under an Administration and Accounting Services Agreement between the
Fund and Provident Financial Processing Corporation ("PFPC"), PFPC provides
certain administrative and accounting services, including bookkeeping, record
maintenance, and preparation of filings required by the Securities and Exchange
Commission and federal and state tax authorities. PFPC's annual fees, payable
monthly, for these services equal 0.10% of the Fund's average daily assets,
-25-
<PAGE>
with a minimum annual fee of $100,000 (a portion of which has been voluntarily
waived since commencement of the Fund's operations). The Fund also reimburses
PFPC for certain disbursements. These amounts do not include fees payable to the
Transfer Agent and the Fund's Custodian for their services. PFPC is a
wholly-owned subsidiary of the Custodian. For the year ended June 30, 1996, PFPC
received fees of $75,000 for accounting services.
Under a Services Agreement between the Fund and Janney, Janney provides
office space to the Fund, oversees PFPC's performance of its duties under the
Administration and Accounting Services Agreement, oversees the performance by
the Custodian and Transfer Agent of their respective duties to the Fund and
responds to shareholder inquiries, for an annual fee equal to 0.25% of the
Fund's average daily net assets. This fee is in addition to the annual
distribution fee which Janney will also receive from the Fund. See "The Fund's
Distributor" below. Janney has waived payment of this fee since commencement of
the Fund's operations through June 30, 1993. Commencing July 1, 1993, Janney
began collecting this fee from the Fund. For the year ended June 30, 1996,
Janney received services fees of $113,397.
The total amount of the advisory services, financial accounting and
management fees described above and distribution fees described below paid by
the Fund during the fiscal year ended June 30, 1996 was 1.60% of the Fund's
average daily net assets. In addition to such fees, the Fund incurs and pays the
following types of expenses: taxes, expenses for legal and auditing services,
the expense of preparing (including typesetting, printing and mailing) reports,
prospectuses and notices to its shareholders, the cost of printing stock
certificates, fees and disbursements of the Custodian, disbursements of PFPC,
the expense of issuing and redeeming Fund shares, the cost of registering Fund
shares under federal and state laws, shareholder meetings and related proxy
solicitation expenses, the fees and out-of-pocket expenses of Directors who are
not affiliated with Janney or the Adviser, insurance, interest, brokerage costs,
legal, including any litigation, expenses, association membership dues, and
other expenses properly payable by the Fund.
-26-
<PAGE>
The Fund uses a variety of brokers, including Janney, as broker for
agency transactions in listed and over-the-counter securities at commission
rates and under circumstances consistent with the policy of best execution.
Janney received $0 in brokerage commissions from the Fund during the fiscal year
ended June 30, 1996.
THE FUND'S DISTRIBUTOR
Janney is the distributor of the Fund's shares whose principal business
address is shown on the cover of this Prospectus.
The Underwriting Agreement between Janney and the Fund obligates Janney
to pay certain expenses in connection with the offering of Fund shares,
including sales commissions to its brokers. Under the Underwriting Agreement, as
well as a distribution plan adopted by the Fund's Board of Directors (the
"Compensation Plan"), Janney will also pay for the printing and distribution of
prospectuses and periodic reports used in connection with the offering of Fund
shares to prospective investors and for supplementary sales literature and
advertising costs. The Compensation Plan and the Underwriting Agreement provide
that the Fund will compensate Janney for these expenses by paying Janney an
annual distribution fee equivalent to 0.65% of the Fund's average daily net
assets. However, commencing July 1, 1993, Janney waived a portion of this fee
equal to 0.25% of the Fund's average daily net assets. The Board of Directors of
the Fund determined that such a waiver was appropriate in view of Janney's
decision to commence collecting the service fee described above under
"Management of the Fund". The distribution fee is computed daily and paid
monthly, and is in addition to the Adviser's fee and Janney's fee, if any, for
other services described under "Management of the Fund" above. For the year
ended June 30, 1996, Janney received distribution fees of $181,436. As set forth
above under "What Shares Will Cost", Janney commencing on July 3, 1995, has
waived the payment of a 3% sales charge on purchases of Fund shares. At the same
time, the Adviser agreed to pay Janney an amount equal to .25% of the Fund's
average net assets out of said Adviser's own assets. The Board of Directors of
the Fund determined that in order to encourage sales of Fund shares, it is
reasonable to permit the Adviser to use its own assets to pay Janney for its
distribution efforts and to permit Janney to waive sales charges on purchases
of new funds shares, and has approved Janney's continuation of such waiver.
-27-
<PAGE>
At any given time, Janney may incur expenses in distributing shares of
the Fund which are in excess of the total payments made by the Fund pursuant to
the Compensation Plan. For example, Janney may conduct sales promotions and,
from its own resources, pay additional consideration or other incentives in the
form of cash or other compensation (such as merchandise or trips) to its own
representatives. Because there is no requirement under the Plan that Janney be
reimbursed for all its expenses or any requirement that the Plan be continued
from year to year, this excess amount does not constitute a liability of the
Fund. Any cumulative expenses incurred by Janney but not yet recovered through
distribution fees may or may not be recovered through future distribution fees.
Thus, Janney's actual distribution expenditures in a given year may be less than
the Plan payments it receives from the Fund for that year, and no effect will be
given to previously accumulated distribution expenditures in excess of the Plan
payments borne by Janney out of its own resources in other years. The Fund's
Compensation Plan is classified as a "compensation plan" because it will pay the
distribution fee regardless of the actual distribution expenses. To the extent
that the fee under the Plan exceeds the actual distribution expenses of Janney
(which has not occurred to date), any excess should be considered direct
compensation to Janney.
To date the fees under the Plan have not fully reimbursed Janney for
the distribution expenses it incurred. In later years, the distribution fee may
exceed Janney's distribution expenses. The Fund is not obligated under the
Compensation Plan and the Underwriting Agreement to reimburse Janney for the
excess of distribution expenses incurred in any one year over the amount of the
distribution fee actually paid, or to reimburse Janney in a later year for any
part of the amount of the distribution fee owed in a prior year but not paid
because the amount of such expenses exceeded expense ceilings imposed by state
regulations. In the event that the Fund later offers shares in other portfolios
and uses Janney to distribute such shares, the distribution fee herein described
may be used by Janney to finance distribution of such shares.
-28-
<PAGE>
DESCRIPTION OF FUND SHARES
The Fund has authorized capital of two billion shares of common stock,
par value $0.001. Each share will be entitled to one vote for the election of
directors and on any matter submitted to a shareholder vote. Fractional shares
will have fractional voting rights. Voting rights will not be cumulative. In the
opinion of Morgan, Lewis & Bockius LLP, counsel for the Fund, the shares are
exempt from existing personal property taxes in Pennsylvania.
Pursuant to the Maryland General Corporation Law, the Fund is not
required to hold annual meetings of shareholders unless the Investment Company
Act of 1940 requires action by the shareholders to elect members of the Board of
Directors under certain circumstances.
The Fund's Articles of Incorporation authorize the Board of Directors,
without shareholder approval (unless otherwise required by applicable law), to:
(i) sell and convey the Fund's assets to another management investment company
for consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding Fund shares to be redeemed at a
price which is equal to their net asset value and which may be paid in cash or
by distribution of the securities or other consideration received from the sale
and conveyance; (ii) sell and convert the Fund's assets into money and, in
connection therewith, to cause all outstanding Fund shares to be redeemed at
their net asset value; or (iii) combine the Fund's assets with the assets
belonging to another portfolio of the Fund hereafter organized if the Board of
Directors reasonably determines that such combination will not have a material
adverse effect on the shareholders of the Fund and such other portfolio and, in
connection therewith, to cause all outstanding Fund shares to be redeemed or
converted into shares of another class of the Fund's capital stock at net asset
value. The exercise of such authority by the Board will be subject, however, to
the provisions of the Investment Company Act of 1940, including Section 13(a)(4)
of that Act which prohibits an investment company from changing the nature of
its business so as to cease being an investment company without the authorizing
vote of a majority of its outstanding voting securities.
-29-
<PAGE>
TRANSFER AGENT
Provident Financial Processing Corporation, P.O. Box 8950, Wilmington,
DE 19899, serves as transfer agent and dividend disbursing agent for the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by calling Janney at the telephone
number shown on the cover page of this Prospectus.
-30-
<PAGE>
BANK DRAFT AUTHORIZATION
The authorization on the reverse side is subject to the following
provisions:
1. PNCBank shall collect the amount specified from the
investor's personal checking account, as authorized on the reverse side, by
drawing checks on such accounts to its own order.
2. Checks will be drawn once each month. The cancelled
checks will constitute receipts for such amounts.
3. The privilege of making deposits under this service may be revoked by
PNCBank without prior notice if any check is not paid upon presentation.
PNCBank shall be under no obligation to notify the investor as to the
non-payment of any check.
4. This service may be discontinued by the investor by written notice to
PNCBank, which is received at least ten business days prior to the
collection date or at any time by PNCBank upon thirty days' written notice
prior to any collection date.
When this card has been completed, please mail to:
Provident Financial Processing Corporation
c/o Addison Capital Shares, Inc.
P.O. Box 8950
Wilmington, DE 19899
Please enclose a voided blank check.
INDEMNIFICATION AGREEMENT
To: Bank named on the reverse side.
Your depositor executing the authorization on the reverse side is purchasing
shares of Addison Capital Shares, Inc. (the "Fund"), a mutual fund for which
PNCBank is custodian, and has authorized Provident to collect the amounts
indicated for investment from his or her personal checking account by drawing
checks on such account to its order. In consideration of your compliance with
such depositor's request that you pay and charge to his or her account checks
drawn on such account by, and payable to the order of PNCBank, Janney Montgomery
Scott Inc. ("Janney"), distributor for the Fund, hereby agrees:
1. To indemnify and hold you harmless from any loss you may suffer resulting
from or in connection with the execution and issuance of any check, whether or
not genuine, purporting to be drawn by or on behalf of and payable to PNCBank
on the account of your depositor executing the authorization on the reverse
side and received by you in the regular course of business through normal
banking channels for the purpose of payment, including any costs or expenses
reasonably incurred in connection with such loss, but excepting any loss due to
your payment of any check drawn against insufficient funds.
2. In the event that any such check shall be dishonored, whether with or without
cause, and whether intentionally or inadvertently, to indemnify you and hold
you harmless from any loss resulting from such dishonor, including the costs and
reasonable expenses.
Janney Montgomery Scott Inc.
by Norman T. Wilde, Jr., President
Authorized by a resolution adopted by the Board of Directors of Janney
Montgomery Scott Inc.
<PAGE>
See preceding page
for instructions to
start a monthly
investment program.
<PAGE>
IF YOU WANT TO START A MONTHLY
INVESTMENT PROGRAM
_______________________________________________________________________________
o Complete both parts of the bank draft authorization in the
panel to the right
o Complete the Account Application on the next page
o Send
|_| A check made out for the total amount of your initial
investment
and
|_| a blank check marked "void" to:
Provident Financial Processing Corporation
c/o Addison Capital Shares, Inc.
P.O. Box 8950
Wilmington, DE 19899
(The blank check marked "void" is required because the Transfer Agent must
obtain, and retain in its records, an exact replica of the coding at the bottom
of the voided check so that it can arrange through appropriate bank channels
monthly withdrawals from your check account.)
COMPLETE, DETACH AND MAIL WITH
COMPLETE SHARE APPLICATION
<PAGE>
TO BEGIN BANK DRAFT INVESTING
THROUGH YOUR CHECKING ACCOUNT
(Pre-Authorized Check Plan)
I hereby authorize PNCBank to draw $_______________ from my checking account
monthly, beginning with the 20th day of _______________ to be used to purchase
(month)
shares of Addison Capital Shares, Inc. for my account through the
_______________________________________________________________________________
Name of Bank, Branch Name and Number (if any)
_______________________________________________________________________________
Address of Bank or Branch
____________________________________________________ ________________________
(Routing symbol)
This authorization is subject to the provisions on the reverse side.
Name(s)________________________________________________________________________
Street_________________________________________________________________________
City ________________________________________ State___________ Zip_____________
Note: Please enclose a blank check marked "void"
----------------------------------------
AUTHORIZATION TO HONOR BANK DRAFTS
DRAWN BY
PNCBANK
To:____________________________________________________________________________
(Print Bank Name -- and Branch, if any)
_______________________________________________________________________________
(Bank Address)
_______________________________________________________________________________
For my convenience, I hereby request and authorize you to pay and charge to my
account checks drawn on my account by, and payable to the order of, PNCBank. I
agree that while this authorization remains in effect (1) your rights in respect
to each such check shall be the same as if it were signed personally by me, (2)
you shall be fully protected in honoring any such check and (3) if any such
check be dishonored, with or without cause, and whether inadvertently, you shall
be under no liability whatsoever.
This authorization shall remain in effect until you receive written revocation
signed by me.
_______________________________________________________________________________
(Print Name of Depositor(s) As Shown On Bank Records)
_______________________________________________________________________________
(Checking Account No.)
__________ ___________________________________________________________________
(Date) (Signature of Depositor As Shown On Bank Records)
<PAGE>
<TABLE>
<CAPTION>
ADDISON CAPITAL SHARES, INC.
SHARE APPLICATION
Send Completed Application to:
ADDISON CAPITAL SHARES, INC.,
c/o JANNEY MONTGOMERY SCOTT INC.,
2 BALA CYNWYD PLAZA, BALA CYNWYD, PA 19004
===================================================================================================================================
ACCOUNT REGISTRATION
<S> <C> <C>
Owner (print) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |-| | |-| | | | |
------------------------------------------------------------------------- -----------------------
Co-owner (if any) | | | | | | | | | | | | | | | | | | | | | | | | | | | |-| | | | | | | | |
------------------------------------------------------------------------- -----------------------
Street Address | | | | | | | | | | | | | | | | | | | | | | | | | Exempt from Backup Withholding
(For Instructions, see Step 3 on
last page)
| | | | | | | | | | | | | | | | | | | | | | | | |
-------------------------------------------------------------------------
City State Zip Code
*If joint registration is indicated, both must sign and the registration will be as joint tenants with right of survivorship and
not as tenants in common, unless otherwise specifically stated.
===================================================================================================================================
SUBSEQUENT INVESTMENTS/DIVIDENDS AND DISTRIBUTIONS-- Minimum initial investment is $1,000; thereafter $50. I enclose a check in the
amount of $---------------.
|_| I intend without obligation, to make additional investments in the amount of
$____________________.
Dividend and other distributions election: (please check applicable box; if no
box checked, you will be deemed to have checked box 1):
|_| 1. All dividends and distributions of realized securities profits shall be accepted in additional shares at net asset value.
|_| 2. All dividends shall be paid to me in cash and all distributions of realized securities profits will be accepted in
additional shares at net asset value.
|_| 3. All dividends and distributions of realized securities profits shall be paid to me in cash.
- -----------------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN: Minimum required investment is $10,000.
|_| Monthly |_| Quarterly $____________________ Starting the _________ of __________________ Month ____________ Year
- -----------------------------------------------------------------------------------------------------------------------------------
APPLICANT(S) SIGNATURE(S) Sign below exactly as printed in Account Registration:
Under penalties of perjury, I certify (1) that the number shown on this form is my correct taxpayer identification number, and
(2) that I am not subject to backup withholding because (a) I have not been notified that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (b) the Internal Revenue Service has notified me that I am no longer
subject to backup withholding. If you have been notified by the IRS that you are currently subject to backup withholding, strike
out phrase (2).
We hereby certify that each of the persons listed below has been duly elected, is now legally holding the office set opposite his
name and has the authority to make this authorization.
Citizenship: |_| U.S. |_| Other _______________ Telephone No. (_____)___________________. Please print titles below if signing for
(Please provide) a business or trust.
X_______________________________________________________ ____________________________________________________________________
(Signature) (President, Trustee, General Partner or Agent)
X_______________________________________________________ ____________________________________________________________________
(Signature) (Co-owner, Secretary of Corporation, Co-trustee, etc.)
===================================================================================================================================
MUST BE COMPLETED BY DEALER Dealer's Name and Address:
| | | | | | | | | | | | | | | | | | | | | ___________________________________________________
- ------------------- ------------------- -----------------
Invoice Date No. of Shares Trade Date
| | | | | | | | | | | | | | | | | | | | | | |
- -------------------------------------------------------------------
Representative's Last Name and Number
| | | |-| | | |-| | | | |
-----------------------------------
(Area Code) Representative's Phone Number
| | | | | | | | | | | | | | | | | | | | | | |
- -------------------------------------------------------------------
Dealer Branch Branch Number
_______________________________________________________________________ ___________________________________________________
Authorized Signature of Dealer
===================================================================================================================================
</TABLE>
<PAGE>
ADDISON CAPITAL SHARES, INC.
c/o Janney Montgomery Scott Inc.
2 Bala Cynwyd Plaza
Bala Cynwyd, PA 19004
Investment Adviser
ADDISON CAPITAL MANAGEMENT ADDISON
COMPANY ____________________________
1608 Walnut Street
Philadelphia, PA 19103 ____________________________
CAPITAL
Distributor/Shareholder
Servicing ____________________________
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street ____________________________
Philadelphia, PA 19103
SHARES
Custodian
PNCBANK
17th & Chestnut Streets
8th Floor
Philadelphia, PA 19103
Transfer Agent Distributed by:
PROVIDENT FINANCIAL
PROCESSING CORPORATION JANNEY MONTGOMERY SCOTT INC.
P.O. Box 8950
Wilmington, DE 19899
Independent Accountants Prospectus
TAIT, WELLER & BAKER
Two Penn Center Plaza, Suite 700
Philadelphia, PA 19102
Legal Counsel
MORGAN, LEWIS & BOCKIUS LLP November 1, 1996
2000 One Logan Square
Philadelphia, PA 19103
_________________________________ ____________________________
_________________________________ ____________________________
<PAGE>
ADDISON CAPITAL SHARES
Addison Capital Shares, Inc. (the "Fund") is a mutual fund
seeking long-term capital appreciation. The Fund invests
principally in those equity securities which the Fund's
investment adviser, Addison Capital Management Company, believes
are undervalued and therefore offer above-average potential for
capital appreciation.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Fund's Prospectus, dated November 1, 1996, which
has been filed with the Securities and Exchange Commission. A copy of the
Prospectus is available without charge from Janney Montgomery Scott Inc.
(address and telephone number listed below).
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
Philadelphia, Pennsylvania 19103
In Philadelphia, Pennsylvania (215) 665-6000
Outside Philadelphia, Pennsylvania (800) 526-6397
Dated: November 1, 1996
<PAGE>
Statement of Additional Information
November 1, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information About Investment
Limitations and Policies........................................................................... 3
Additional Tax Information........................................................................... 6
Additional Purchase and Redemption Information....................................................... 7
Pre-Authorized Check Plan and Transfer of
Funds from Financial Institutions..................................................... 7
Open Account Program.................................................................... 8
Systematic Withdrawal Plan.............................................................. 8
Redemption by Securities................................................................ 9
Exchange Privilege with JMS Money Market
Fund Portfolios....................................................................... 10
Additional Information About Fund Shares............................................................. 11
Valuation of Shares.................................................................................. 12
Retirement Plans..................................................................................... 13
Individual Retirement Account - IRA..................................................... 13
IRAs, Keogh Plans and Corporate
Retirement Plans Available from Janney................................................ 14
Additional Information About the Fund's
Management and Affiliations............................................................. 14
Investment Advisory and Other Services............................................................... 15
Portfolio Transactions and Brokerage................................................................. 18
The Fund's Distributor............................................................................... 20
The Fund's Custodian, Transfer Agent and Dividend
Disbursing Agent........................................................................ 23
The Fund's Legal Counsel............................................................................. 23
The Fund's Independent Certified Public Accountants.................................................. 24
Financial Statements and Exhibits.................................................................... 25
</TABLE>
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<PAGE>
ADDITIONAL INFORMATION ABOUT
INVESTMENT LIMITATIONS AND POLICIES
In addition to the investment objectives and investment policies
described in the Prospectus, Addison Capital Shares, Inc. (the "Fund") has
adopted certain investment limitations that cannot be changed except by vote of
a majority of the Fund's outstanding voting securities. The Fund may not:
1. Purchase securities on "margin";
2. Invest more than 25% of its total assets (taken at
market value) in any one industry;
3. Invest in securities issued by other investment
companies, except in connection with a merger,
consolidation, acquisition or reorganization, or by
purchase in the open market of securities of closed-end
investment companies where no underwriter or dealer
commission or profit, other than a customary brokerage
commission, is involved and only if immediately
thereafter not more than 10% of the Fund's total assets
(taken at market value) would be invested in such
securities;
4. Purchase or sell commodities and commodity contracts;
5. Underwrite the securities of other issuers, except that the
Fund may invest in securities that are not readily marketable
without registration under the Securities Act of 1933 if
immediately after the making of such investment not more than
5% of the value of the Fund's total assets (taken at cost)
would be so invested;
6. Make loans, except loans of portfolio securities, except to
the extent a repurchase agreement may be considered a loan and
except to the extent the purchase of a portion of an issue of
publicly distributed notes, bonds or other evidences of
indebtedness or deposits with banks and other financial
institutions may be considered loans;
-3-
<PAGE>
7. Write or purchase put, call, straddle or spread
options;
8. Purchase or retain the securities of any issuer if the
officers or directors of the Fund, its investment advisers, or
other managers owning beneficially more than one-half of one
percent of such outstanding securities together own
beneficially more than five percent of such outstanding
securities;
9. Purchase or sell real estate, except that the Fund may invest
in readily marketable securities secured by real estate or
interests therein or in readily marketable securities issued
by companies that invest in real estate or interests therein;
10. Purchase or sell interests in oil and gas or other
mineral exploration or development programs, except
that the Fund may invest in so-called master limited
partnerships which have oil and gas interests so long
as such partnerships are listed on the New York Stock
Exchange or the American Stock Exchange or are included
in the National Association of Securities Dealers, Inc.
national market system; or
11. Make any short sales of securities.
As noted above, the investment policies of the Fund described in the
preceding paragraphs, along with its objectives and certain other policies
described in the Prospectus, are fundamental policies of the Fund and may not be
changed without the vote of a majority of the holders of the Fund's outstanding
voting securities. Under the Investment Company Act of 1940, a "vote of a
majority of the outstanding voting securities" of the Fund means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or
(2) 67% or more of the shares present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy.
The Fund also may invest in foreign securities. It is presently the
Fund's intention that the value of investments in foreign securities which are
not traded on the New York or
-4-
<PAGE>
American Stock Exchange, or the NASDAQ National Market System, will not exceed
10% of the value of its total assets.
Although not a fundamental policy subject to shareholder vote, so long
as the Fund's shares continue to be registered in certain states, the Fund may
not invest more than 5% of the value of its net assets, taken at the lower of
cost or market value, in warrants or invest more than 2% of the value of such
net assets in warrants not listed on the New York or American Stock Exchanges.
The Fund presently has no intention of purchasing any warrants during the
foreseeable future. In addition, although not a fundamental policy subject to
shareholder vote, so long as the Fund's shares continue to be registered in
certain states, the Fund may not make short sales of securities. Although not
prohibited by the Fund's fundamental investment policies, the Fund has no
present intention of loaning its portfolio securities to others.
When cash is expected to be available only temporarily, the Fund may
invest in repurchase agreements. A repurchase agreement is an agreement under
which either U.S. government obligations or high quality debt securities are
acquired from a securities dealer or bank subject to resale at an agreed upon
price and date. The resale price reflects an agreed upon interest rate which is
unrelated to the interest rate provided by the securities which are transferred.
In these transactions, the securities are held for the Fund by its custodian as
collateral until retransferred and will be supplemented by additional collateral
(without cost to the Fund) if necessary to maintain a total value equal to or in
excess of the value of the repurchase agreements. Repurchase agreements are
usually for periods of one week or less, but may be for longer periods. The Fund
will not enter into repurchase agreements of more than seven days' duration if
more than 10% of its net assets would be invested in such agreements and other
illiquid investments. The Fund's Adviser will monitor the credit-worthiness of
any party with whom the Fund has a then-outstanding repurchase agreement.
To the extent that proceeds from any sale upon a default of the
obligation to repurchase were less than the repurchase price, the Fund might
suffer a loss. If bankruptcy proceedings were commenced with respect to the
seller of the security, realization upon the collateral by the Fund could be
delayed or limited.
-5-
<PAGE>
However, the Fund has adopted standards for the parties with whom it will enter
into repurchase agreements which the Fund's Board of Directors believes are
reasonably designed to assure that each party presents no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the repurchase agreement.
The timing of purchases and sales of Fund securities will be made
primarily on the investment merits of the securities. Only secondarily will such
timing be influenced by whether any gain from such transactions would be
classified as short-term or long-term for tax purposes. This factor may be
expected to result from time to time in a higher rate of portfolio turnover than
if both factors were given equal weight. High portfolio activity increases the
Fund's transaction costs, including brokerage commissions. To the extent
short-term trading results in realization of gains on securities held less than
twelve months, shareholders are subject to taxes at ordinary income tax rates.
See "Tax Status of Dividends and Capital Gains Distributions". However, it is
anticipated that the Fund will not realize substantial short-term capital gains.
ADDITIONAL TAX INFORMATION
The Fund intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As a regulated investment company, the Fund will not be subject to
federal income tax to the extent it distributes its net investment income
(including net short-term capital gains) and the excess of its net long-term
capital gains over net short-term capital losses.
In order to qualify for treatment as a regulated investment company,
the Fund will be required, among other things, to distribute annually at least
90% of its net investment income. In addition to this distribution requirement,
the Fund must derive at least 90 % of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, gains from the
disposition of stock or securities, and certain other income. The Fund will also
be required to derive less than 30% of its gross income each year from the sale
or other disposition of stocks or securities held for less than 3 months.
-6-
<PAGE>
Moreover, at the close of each quarter of its taxable year, at least 50% of the
Fund's total assets must be represented by (i) cash items, Government
securities, and securities of other regulated investment companies, and (ii)
other securities, but limited, in respect of any one issuer, to an amount not
greater than 5% of the value of the Fund's total assets and to not more than 10%
of the voting securities of such issuer. Finally, at the close of each quarter
of the Fund's taxable year, no more than 25% of the total assets of the Fund may
be invested in the securities (other than Government securities or securities of
other regulated investment companies) of any one issuer, or of two or more
issuers which the Fund controls and which are engaged in the same, similar, or
related trades or businesses.
While the above requirements are aimed at qualification of the Fund as
a regulated investment company under Subchapter M of the Code, the Fund also
intends to comply with certain requirements of the Code to avoid liability for
federal excise tax. Accordingly, the Fund will distribute, on or before December
31 of each year, at least 98% of its ordinary income for such year and at least
98% of its capital gain net income for the one-year period ended October 31 of
such year, plus certain other amounts.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Pre-authorized Check Plan and Transfer of Funds from Financial
Institutions.
The Prospectus explains that you may buy additional shares of the Fund
through the Fund's Pre-authorized Check Plan. Under this plan you may arrange
for automatic monthly investments in the Fund of $50 or more by authorizing the
Fund's Custodian, PNCBank (the "Custodian") to prepare a check each month drawn
on your checking account at a commercial bank. Each month the Custodian will
send a check to your bank for collection, and the proceeds of the check will be
used to buy shares of the Fund at the per share net asset value determined on
the day the check is sent to your bank. You will receive a confirmation after
each purchase of additional shares through your checking account, and the
cancelled check will be returned to you by your bank with your regular checking
account statement.
-7-
<PAGE>
You may also buy additional shares of the Fund through a plan
permitting transfers of funds from a financial institution. Certain financial
institutions may allow you, on a pre-authorized basis, to have $50 or more
automatically transferred monthly to the Transfer Agent for investment in shares
of the Fund.
If your check is not honored by the institution it is drawn on, you may
be subject to extra charges in order to cover collection costs. These charges
may be deducted from your shareholder account.
Open Account Program
If you do not elect otherwise on your application to purchase Fund
shares, you are automatically enrolled in an Open Account Program. You may
schedule your purchases to suit your personal requirements and you are not
obligated in any way. As each payment is received, full and fractional shares
will be purchased at the next effective offering price and proper entry is made
on the books of the Fund.
The market value of the Fund's shares is subject to fluctuation. Before
undertaking any plan for systematic investment, the investor should keep in mind
that such a program does not assure a profit or protect against a loss in
declining markets.
Systematic Withdrawal Plan
You may also elect to make systematic withdrawals from your Fund
account of a minimum of $50 on a monthly basis or $150 on a quarterly basis if
you are purchasing or already own shares with a net asset value of $10,000 or
more. The amounts paid to you each month or quarter will be obtained by
redeeming sufficient shares from your account to provide the withdrawal amount
that you have specified. The Systematic Withdrawal Plan will also be available
for shares held in an IRA, Keogh Plan, SEPP or corporate retirement plan. You
may change the monthly or quarterly amount to be paid to you without charge not
more than once a year by notifying Janney Montgomery Scott Inc. ("Janney").
Redemptions will be made at net asset value determined as of the close of
business on the New York Stock Exchange (the "Exchange") on the 25th day of each
month or the 25th day of the last month
-8-
<PAGE>
of each quarter, whichever is applicable. If the Exchange is not open for
business on that day, the shares will be redeemed at net asset value determined
as of the close of business of the Exchange on the preceding business day. The
check for the withdrawal payment will usually be mailed to you on the next
business day following redemption. If you elect to participate in the Systematic
Withdrawal Plan, dividends and distributions on all shares in your account must
be automatically reinvested in Fund shares. You may terminate the Systematic
Withdrawal Plan at any time without charge or penalty. The Fund, the Fund's
transfer agent, Provident Financial Processing Corporation (the "Transfer
Agent") and Janney also reserve the right to modify or terminate the Systematic
Withdrawal Plan at any time.
Withdrawal payments will be treated as sales of shares rather than as
dividends or capital gains distributions. These payments will be taxable to the
extent that the total amount of the payments exceeds the tax basis of the shares
sold. If the periodic withdrawals exceed reinvested dividends and distributions,
the amount of your original investment may be correspondingly reduced.
Ordinarily, you should not purchase additional shares of the Fund if
you maintain a Systematic Withdrawal Plan because you may incur tax liabilities
in connection with such purchases and withdrawals. The Fund will not knowingly
accept purchase orders from you for additional shares if you maintain a
Systematic Withdrawal Plan unless your purchase is equal to at least one year's
scheduled withdrawals. In addition, if you maintain a Systematic Withdrawal Plan
you may not make periodic investments under the Pre-authorized Check Plan.
Redemption by Securities
In addition to the Fund's rights to suspend or delay redemptions noted
in the Fund's Prospectus, the Fund further reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for a
redemption or repurchase order by making payment in whole or in part by
securities valued in the same way as they would be valued for purposes of
computing the Fund's per share net asset value. If payment is made in
securities, a shareholder may incur brokerage expenses in converting those
securities into cash, and will be subject to
-9-
<PAGE>
fluctuation in the market price of those securities until they
are sold.
Exchange Privilege with JMS Money Market Fund Portfolios.
Shareholders may redeem shares of the Fund having a value of $1,000 or
more and use the proceeds to acquire shares of the JMS Money Market Fund, the
JMS Tax-Free Money Market Fund and the JMS Government Money Market Fund (the
"JMS Funds") without sales commission. Subsequently, if they wish within not
more than three years after the date of the transfer to the JMS Funds, to redeem
such Fund shares (and any JMS Fund shares acquired through reinvestment of
income dividends and capital gains distributions on such shares) they may use
the proceeds to reinvest in shares of the Fund without sales commission or any
further service charge. Each redemption, investment and reinvestment will be
made at the then currently applicable net asset value per share. If the monies
previously transferred to any of the JMS Funds have not been transferred back
into shares of the Fund within three years time, then the Exchange Privilege
will expire. This Exchange Privilege will not be available if the proceeds from
a redemption of Fund shares or JMS Fund shares are paid directly to the investor
or at his direction to any person other than the Fund. A broker-dealer other
than Janney may charge the investor a fee for handling any exercise of this
Exchange Privilege. For tax purposes, any such redemption of Fund shares or
Independence Fund shares will be regarded as a sale on which a capital gain or
loss may be realized by the shareholder.
The JMS Funds are open-end investment companies, the shares of which
are sold without sales commission, investing exclusively in money market
instruments (Money Market Fund), tax-exempt money market instruments (Tax-Free
Money Market Fund), and U.S. Government issued or guaranteed marketable debt
obligations (Government Money Market Fund). The Fund and the JMS Funds have
materially different investment objectives and policies, investment portfolios
and methods of operations. The Fund and the JMS Funds have separate managements
and investment advisers. Janney acts as distributor for the Fund and the JMS
Funds. The Exchange Privilege does not in any way constitute an offering or
recommendation on the part of the Fund of an investment in shares of any of the
JMS Funds. Any shareholder who considers acquiring
-10-
<PAGE>
JMS Fund shares should first obtain and review a Fund prospectus before
exercising the Exchange Privilege.
The Exchange Privilege may be exercised by a Fund investor only once in
any ninety-day period. The Fund or the JMS Funds may further limit the number of
times the Exchange Privilege may be exercised by any investor within a specified
period of time. This Exchange Privilege may be terminated at any time by the
Fund or the JMS Funds. However, in such event, six months prior written notice
of termination must be given to the former shareholders who hold JMS Fund shares
pursuant to the Exchange Privilege.
ADDITIONAL INFORMATION ABOUT FUND SHARES
The Fund's Articles of Incorporation authorize the Board of Directors
to issue up to two billion full and fractional shares of capital stock. The Fund
presently has one class of shares known as Class A Common Stock. The Fund's
Articles of Incorporation authorize the Board of Directors to classify or
reclassify any unissued shares of the Fund into one or more additional classes
by setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board may grant in its discretion. When
issued for payment as described in the Prospectus and this Statement of
Additional Information, the Fund's shares will be fully paid and non-assessable.
Rule 18f-2 under the Investment Company Act of 1940 provides that, upon
the issuance of an additional class or classes of shares representing interests
in separate portfolios of the Fund ("Portfolios"), any matter required to be
submitted to the holders of the Fund's outstanding voting securities shall not
be deemed to have been effectively acted upon unless approved by the holders of
a majority of the outstanding shares of each Portfolio affected by the matter. A
Portfolio is affected by a matter unless it is clear that the interests of each
Portfolio in the matter are identical or that the matter does not affect any
-11-
<PAGE>
interest of the Portfolio. Under Rule 18f-2 the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Portfolio only if approved by a
majority of the outstanding shares of such Portfolio. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts and the election of directors may be
effectively acted upon by shareholders of the Fund voting without regard to
class. In the event of the liquidation or dissolution of the Fund, shares of a
Portfolio would be entitled to receive the assets available for distribution
belonging to the Portfolio, and a proportionate distribution, based upon the
relative asset values of the respective Portfolios, of any general assets not
belonging to any particular Portfolio which are available for distribution.
The Fund's Articles of Incorporation provide that, in the event any
proposed corporate action requires shareholder approval, the action may be taken
upon the majority vote of all outstanding shares of voting securities of the
Fund, regardless of class. However, this provision will not apply if it is
contrary to federal law, including Rule 18f-2.
VALUATION OF SHARES
The net asset value of a Fund share is determined by dividing the value
of the total assets of the Fund, less liabilities, by the number of shares
outstanding. Net asset value is determined daily, as of the close of the New
York Stock Exchange, on its customary business days. Securities owned by the
Fund for which market quotations are readily available are valued at current
market value, or, in their absence, at fair value as determined by the Fund's
Board of Directors. Securities traded on an exchange or NASD National Market
System securities will be normally valued at last sale prices. Other
over-the-counter securities, and securities traded on exchanges for which there
is no sale on a particular day, are valued at the mean of the latest closing bid
and asked prices. Debt instruments that mature in sixty or fewer days are valued
at amortized cost.
-12-
<PAGE>
RETIREMENT PLANS
As noted in the Fund's Prospectus, an investment in Fund shares may be
appropriate for IRAs, Keogh Plans and corporate retirement plans. Unless the
Fund is otherwise directed, capital gains distributions and dividends received
on Fund shares held by any of these plans will be automatically reinvested in
additional Fund shares and will be exempt from taxation until distributed from
the plans. Investors who are considering establishing such a plan may wish to
consult their attorneys or tax advisers with respect to individual tax
questions. The option of investing in these plans through regular payroll
deductions may be arranged with Janney and your employer. Additional information
with respect to these plans is available upon request from any Janney broker.
Individual Retirement Account - IRA
Under the tax law as currently in effect, the Code imposes substantial
restrictions on your ability to make deductible contributions to an IRA. Under
the Code, deductible IRA contributions are limited if (1) an individual has an
adjusted gross income of more than $25,000 (or a married couple filing a joint
return has an adjusted gross income of more than $40,000), and (2) an individual
is an active participant (or, with respect to a married couple filing a joint
return, either spouse is an active participant) in a tax-qualified employer
sponsored retirement plan or certain other tax-favored or government plans (an
"Employer Plan") for any part of the individual's (or couple's) taxable year.
Under the Code, an individual who is an active participant in an Employer Plan
and who has an adjusted gross income of $25,000 or more, but not exceeding
$35,000, is allowed to deduct a portion of his IRA contribution. That portion
decreases proportionately to the extent the individual's income exceeds $25,000.
A married couple filing a joint return whose adjusted gross income is $40,000 or
more, but does not exceed $50,000, is also allowed to deduct a portion of their
IRA contributions, which portion decreases proportionately to the extent the
couple's adjusted gross income exceeds $40,000. An individual with an adjusted
gross income exceeding $35,000 and who is an active participant in an Employer
Plan is not allowed to deduct any portion of his IRA contributions, and a
married couple filing a joint return whose adjusted gross income exceeds
-13-
<PAGE>
$50,000 is not able to deduct any portion of their IRA contributions if either
spouse is an active participant in an Employer Plan. Under the Code, individuals
may make nondeductible contributions to the extent they are not eligible to make
deductible contributions.
An investment in Fund shares through IRA contributions is advantageous
from a tax standpoint because all income, dividends and capital gains earned on
your Fund shares are not immediately taxable to you or the IRA, but will be
taxable, as are all IRA distributions, as ordinary income when distributed. To
avoid penalties, your interest in an IRA must be distributed, or start to be
distributed, to you not later than April 1 following the taxable year in which
you attain age 70 1/2. Distributions made before age 59 1/2 are subject to a
penalty equal to 10% of the distribution, except in the case of death or
disability or where the distribution is rolled over into another IRA in
accordance with certain rules specified in Section 408(d) of the Code.
IRAs, Keogh Plans and Corporate Retirement Plans Available From
Janney
You may also create, through Janney a self-directed IRA (the "Janney
IRA").
Janney also makes available to self-employed individuals a Plan and
Custodial Agreement for Keogh and Corporate Retirement Plans through which Fund
shares may be purchased. The custodial services pursuant to the Agreement are
performed by Janney. However, you have the right to use a bank of your own
choice to provide these services at your own cost. There are penalties for
premature distributions from a Keogh Plan prior to age 59 1/2, except in the
case of death or disability.
ADDITIONAL INFORMATION CONCERNING THE
FUND'S MANAGEMENT AND AFFILIATIONS
Officers and directors of the Fund who are interested persons of the
Fund receive no salary or fees from the Fund. Directors of the Fund who are not
interested persons of the Fund receive an annual fee of $5,000 and related
expenses for each meeting of the Board of Directors attended by them.
-14-
<PAGE>
The following Compensation Table shows aggregate compensation paid to each of
the Fund's Directors by the Fund and the Fund Complex, respectively in the year
ended June 30, 1996.
<TABLE>
<CAPTION>
COMPENSATION TABLE
===================================================================================================================================
<C> <C> <C> <C> <C>
(1) Name of Person, (2) Aggregate (3) Pension or Retirement (4) Estimated Annual (5) Total Compensation
Position Compensation Benefits Accrued as part of Benefits Upon Retirement From Registrant and Fund
From Fund Expenses Complex Paid to Directors
Registrant for the fiscal year ended
for the fiscal June 30, 1996
year ended
June 30, 1996
===================================================================================================================================
*Rudolph C. Sander $0 $0 $0 $0
Chairman of the Board and
Director
Margaret M. Healy $5,000 $0 $0 $5,000
Director
Charles A. Meyers $5,000 $0 $0 $5,000
Director
Charles E. Mather, III $5,000 $0 $0 $5,000
Director
===================================================================================================================================
* A Trustee who is an "interested person" as defined in the Investment Company Act.
</TABLE>
Janney, a Delaware corporation, wholly owned by Independence Square
Properties, Inc., a Pennsylvania corporation, which is in turn wholly owned by
Penn Mutual Life Insurance Company, a life insurance company formed under the
laws of Pennsylvania. The address of Janney is 1801 Market Street, Philadelphia,
Pennsylvania. The address of each of its parent companies described above is
Independence Square, Philadelphia, Pennsylvania.
-15-
<PAGE>
As of September 1, 1996, the Fund knew of no person who owned of record
or beneficially five percent or more of the Fund's shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Addison Capital Management Company (the "Adviser") serves as the Fund's
investment adviser. The Adviser is a wholly-owned subsidiary of Janney;
therefore, each of the companies listed immediately above may be deemed to
control the Adviser. The Adviser acts as the Fund's investment adviser under an
Investment Advisory Agreement dated September 8, 1986. The Agreement provides
that, subject to overall supervision by the Board of Directors of the Fund, the
Adviser will manage the investment affairs of the Fund. The Adviser will be
responsible for managing the Fund's portfolio and for making purchases and sales
of portfolio securities consistent with the Fund's investment objective and
policies described in the Prospectus and this Statement of Additional
Information.
The Adviser receives for its services a management fee, calculated
daily and payable monthly, at an annual rate of 0.75% of the average daily net
assets of the Fund for the first $100 million of daily average net assets, 0.50%
of average daily net assets exceeding $100 million but less than $250 million,
and 0.25% of average daily net assets exceeding $250 million. For the fiscal
years ended June 30, 1994, June 30, 1995 and June 30, 1996 the Adviser received
$286,680, $269,708 and $340,192, respectively, in advisory fees from the Fund.
The advisory fee, and the annual management and distribution fees paid to
Janney, may be reduced on a pro rata basis under regulations in various states
where Fund shares are qualified for sale which impose limitations on the annual
expense ratio of the Fund.
The Investment Advisory Agreement was approved by the Fund's sole
shareholder on September 4, 1986 and by the Fund's shareholders at a meeting on
October 29, 1987. It will remain in effect from year to year, provided each
annual continuance is approved in the manner required by the Investment Company
Act of 1940 and, in respect to any continuance, if the Adviser does not notify
the Fund at least 60 days prior to each anniversary date of the Agreement that
it does not desire such continuance. Each
-16-
<PAGE>
continuance must be approved by a majority of the Board of Directors or by vote
of the holders of a majority of the outstanding voting securities of the Fund.
Additionally, the Agreement, and each continuance hereof, must be approved by
vote of a majority of the directors of the Fund who are not parties to the
Agreement or "interested" persons of such parties as that term is defined in the
Investment Company Act of 1940. The Fund's Board of Directors, including all the
non-interested Directors approved the continuation of the Agreement on September
2, 1992. The Agreement may be terminated by the Fund, without penalty, on 60
days' written notice to the Adviser and will terminate automatically in the
event of its assignment.
Under the Investment Advisory Agreement, the Fund has the non-exclusive
right to use the name "Addison" until that Agreement is terminated, or until the
right is withdrawn in writing by the Adviser.
Under a Services Agreement between the Fund and Janney, Janney provides
office space to the Fund, supervises performance by Provident Financial
Processing Corporation ("PFPC") and by the Fund's Custodian of their respective
duties, and responds to shareholders inquiries, for an annual fee equal to 0.25%
of the Fund's average daily net assets. This fee is in addition to the annual
distribution fee which Janney will also receive from the Fund. See "The Fund's
Distributor" below. Janney has waived payment of this fee since commencement of
the Fund's operations through June 30, 1993. Commencing July 1, 1993, Janney
began collecting this fee from the Fund. For the years ended June 30, 1995 and
June 30, 1996, Janney received service fees of $89,902 and $113,397,
respectively.
Pursuant to an Administration and Accounting Services Agreement dated
September 8, 1986 between PFPC and the Fund, PFPC performs accounting and
recordkeeping services for the Fund. For example, PFPC keeps all books and
records with respect to the Fund's security transactions, controls disbursements
from the Fund, computes daily the net asset value of the Fund, prepares monthly
financial statements and security transactions listings and quarterly broker
security transactions summaries, and provides various Fund statistical data on
an ongoing basis as requested. PFPC also prepares and files, on the Fund's
behalf, the Fund's annual and quarterly reports to the Securities and
-17-
<PAGE>
Exchange Commission, assists in the preparation of federal and state tax
returns, and assists generally in all aspects of the Fund's operations other
than those duties to be performed by the Custodian, the Transfer Agent, the
Adviser, and Janney. As fees for its services, PFPC receives an annual fee equal
to .10% of the Fund's average daily net assets, with a minimum annual fee of
$100,000 (a portion of which has been voluntarily waived since commencement of
the Fund's operations). For the fiscal years ended June 30, 1994, June 30, 1995
and June 30, 1996, PFPC received fees of $75,000, $75,000 and $75,000,
respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As a general rule, the timing of the Fund's purchases and sales of
securities will be based primarily on the investment merits of the securities
and only secondarily will timing be influenced by whether capital gains will be
long-term or short-term. Thus, the turnover rate may vary greatly from year to
year or during periods within a year. The portfolio turnover rate is computed by
dividing the lesser of purchases or sales of securities for the period by the
average value of portfolio securities for that period. The Fund's portfolio
turnover rate for the fiscal years ended June 30, 1995 and June 30, 1996 was
42.82% and 38.97%, respectively.
Under the Investment Advisory Agreement the Adviser is responsible for
the execution of the Fund's portfolio transactions and must seek best execution
for such transactions. Best execution, however, does not mean that the Fund
necessarily will be paying the lowest commission or spread available. Rather,
the Fund also will take into account such factors as size of the order,
difficulty of execution, efficiency of the executing broker's facilities
(including the services described below), and any risk assumed by the executing
broker.
Consistent with the policy of best execution, the Adviser may give
consideration to research, statistical and other services furnished by brokers
or dealers to the Adviser for its use and may place orders with brokers who
provide supplemental investment and market research and securities and economic
analysis. Accordingly, the Investment Advisory Agreement also incorporates the
concepts of Section 28(e) of the Securities
-18-
<PAGE>
Exchange Act of 1934 by providing that, subject to the approval of the Fund's
Board of Directors, the Adviser may cause the Fund to pay a broker-dealer which
furnishes brokerage and research services a higher commission than that which
might be charged by another broker-dealer for effecting the same transaction;
provided that such commission is deemed reasonable in terms of either the
particular transaction or the overall responsibilities of the Adviser to the
Fund. Such research services may be useful to the Adviser in connection with
services to clients other than the Fund. For the fiscal year ended June 30,
1996, the Adviser directed transactions for the Fund aggregating $28,961,852.52
to broker-dealers for research services, for which the broker-dealers received
$45,433.76 in commissions.
From time to time the Fund may use Janney as broker for agency
transactions in listed and over-the-counter securities at commission rates and
under circumstances consistent with the policy of best execution. Commissions
paid to Janney will not exceed "usual and customary" brokerage commissions. Rule
17e-1 under the Investment Company Act of 1940 defines "usual and customary
commissions" to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." For the fiscal years ended June 30, 1994 and June 30, 1995, Janney
received brokerage commissions of $5,790 and $6,713, respectively, from the
Fund. For the fiscal year ended June 30, 1996, Janney received brokerage
commissions of $0, or 0% of the aggregate brokerage commissions paid by the
Fund. The securities transactions effected through Janney represented 0% of the
aggregate dollar amount of transactions involving the payment of commissions.
The Adviser will also select other brokers to execute portfolio
transactions. In the over-the-counter market, the Fund generally will deal with
responsible primary market-makers unless a more favorable execution can
otherwise be obtained.
The Fund may not buy securities from, or sell to, Janney as
principal. However, the Fund's Board of Directors has adopted
-19-
<PAGE>
procedures in conformity with Rule 10f-3 under the Investment Company Act of
1940 whereby the Fund may purchase securities that are offered in underwritings
in which Janney is a participant. The Board of Directors of the Fund will
consider the possibilities of seeking to recapture for the benefit of the Fund
expenses of certain portfolio transactions, such as underwriting commissions and
tender offer solicitation fees, by conducting such portfolio transactions
through affiliated entities, including Janney, only to the extent such recapture
would be permissible under applicable regulations, including the rules of the
National Association of Securities Dealers, Inc. and other self-regulatory
organizations.
Section 11(a)(1)(H) of the Securities Exchange Act of 1934 (the "1934
Act") repeals the managed account provisions of Section 11(a) to allow members
of national securities exchanges to effect transactions on such exchanges for
managed accounts, i.e. accounts for which members exercise investment
discretion. Pursuant to Section 11(a)(1)(H), Janney is permitted, as a member of
a national securities exchange, to perform functions other than execution in
connection with a securities transactions for the Fund on that exchange only if
the Fund expressly consents by written contract. The Fund has expressly provided
such consent in accordance with Section 11(a)(1)(H).
Investment decisions for the Fund are made independently from those of
other accounts advised by the Adviser. However, the same security may be held in
the portfolios of more than one account.
When two or more accounts simultaneously engage in the purchase or sale
of the same security, the prices and amounts will be equitably allocated among
each account. In some cases, this procedure may adversely affect the price or
quantity of the security available to a particular account. In other cases,
however, an account's ability to participate in large-volume transactions may
produce better executions and prices.
THE FUND'S DISTRIBUTOR
Janney is the distributor of the Fund's shares pursuant to
an Underwriting Agreement with the Fund. Janney's distribution
services are performed on a "best efforts" basis. Offering of
-20-
<PAGE>
the Fund's shares will be continuous. The Underwriting Agreement obligates
Janney to pay for the printing and distribution of prospectuses and periodic
reports used in connection with the offering of Fund shares to prospective
investors, after the prospectuses and reports have been prepared, set in type
and mailed to existing shareholders at the Fund's expenses, and for
supplementary sales literature and advertising costs. Rudolph C. Sander, who is
Chairman of the Board and a Director of the Fund, is also Chairman of the Board,
Chairman of the Executive Committee and a Director of Janney. Charles J.
Sullivan, a Vice President of the Fund, is also a Senior Vice President and
Director of Janney.
As compensation for its services, Janney receives an annual
distribution fee equivalent to 0.65% of the Fund's average daily net assets in
accordance with the Distribution Plan described below. However, commencing July
1, 1993, Janney waived a portion of this fee equal to 0.25% of the Fund's
average daily net assets. The Board of Directors of the Fund determined that
such a waiver was appropriate in view of Janney's decision to commence
collecting the service fee described above under "Investment Advisory and Other
Services". The distribution fee will be computed daily and paid monthly. For the
fiscal years ended June 30, 1994, June 30, 1995 and June 30, 1996, Janney
received fees of $157,896, $143,844 and $181,436, respectively, from the Fund
for distribution services.
Prior to July 3, 1995, Janney also received, upon each sale of Fund
shares, the entire amount of the applicable sales charge. Commencing on July 3,
1995, Janney waived the payment of the 3% sales charge on purchases on Fund
shares. At the same time, the Adviser agreed to pay Janney an amount equal to
.25% of the Fund's average net assets from its own assets. The Board of
Directors of the Fund determined that in order to encourage sales of Fund
shares, it is reasonable to permit the Adviser to use its own assets to pay
Janney for its distribution efforts and to permit Janney to waive sales charges
on purchases of new Fund Shares, and has approved Janney's continuation of such
waiver. Janney will not re-introduce this sales charge without the prior consent
of the Board, including a majority of the "non- interested" directors as defined
in the Investment Company Act of 1940.
-21-
<PAGE>
The Fund has adopted a Distribution Plan ("Plan") which, among other
things, permits it to pay Janney the 0.65% distribution fee out of its net
assets. The Plan was approved by the Fund's sole shareholder on August 13, 1986
and, as required by Rule 12b-1 under the Investment Company Act of 1940, was
also approved by the Board of Directors of the Fund on August 12, 1986,
including a majority of the directors who were not "interested persons" of the
Fund as that term is defined in the Investment Company Act of 1940 and who had
no direct or indirect financial interest in the operation of the Plan or the
Underwriting Agreement. In approving the Plan, in accordance with the
requirements of Rule 12b-1, the directors considered various factors including
the amount of the distribution fee. The directors determined that there is a
reasonable likelihood that the Plan will benefit the Fund and the shareholders.
Although the payment by the Adviser to Janney in the amount of .25% of
the Fund's average net assets is made from the Adviser's own assets, the Board
of Directors has deemed such payment subject to the 12b-1 Distribution Plan.
Accordingly, the Board of Directors determined the payment from the Adviser is
appropriate and consistent with Rule 12b-1 and the Distribution Plan.
The Plan may be terminated by vote of a majority of the independent
directors of the Fund who have no direct or indirect financial interest in the
Plan or in the Underwriting Agreement, or by vote of a majority of the
outstanding voting securities of the Fund. Any change in the Plan that would
materially increase the distribution costs to the Fund requires shareholder
approval; otherwise the Plan may be amended by the directors, including a
majority of the independent directors, as described above.
The Plan continues in effect for successive one-year periods (from each
September 8 anniversary date), provided that each such continuance is
specifically approved by (i) the vote of a majority of the directors who are not
parties to the Underwriting Agreement or interested persons of any such party
and who have no direct or indirect financial interest in the Plan or Agreement
and (2) the vote of a majority of the entire Board of Directors. The Fund's
Board, including all non-interested directors, approved the continuance of the
Plan on September, 1995.
-22-
<PAGE>
Rule 12b-1 requires that any person authorized to direct the
disposition of monies paid or payable by the Fund pursuant to the Plan or any
related agreement shall provide to the Fund's Board of Directors, and the
directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which expenditures were made. Rule 12b-1 also
provides that the Fund may rely on that rule only if the selection and
nomination of the Fund's independent directors are committed to the discretion
of such independent directors.
The Underwriting Agreement will continue in effect for successive
one-year periods subject to the same provisions for renewal as the Plan. In
addition, the Underwriting Agreement will terminate upon assignment or upon 60
days' notice, given prior to the second anniversary of the date of the agreement
and each anniversary thereafter, from Janney. The Fund may terminate the
Underwriting Agreement, without penalty, upon 60 days' notice, by a majority
vote of either its Board of Directors, the independent directors who have no
direct or indirect interest in the Plan or the Underwriting Agreement, or the
outstanding voting securities of the Fund.
THE FUND'S CUSTODIAN, TRANSFER AND DIVIDEND
DISBURSING AGENT
Cash and securities owned by the Fund will be held by PNCBank, 17th and
Chestnut Streets, 8th Floor, Philadelphia, Pennsylvania 19103, as Custodian
pursuant to a Custodian Agreement. Under the Custodian Agreement, the Custodian
will (i) maintain a separate account in the name of the Fund, (ii) disburse
money on behalf of the Fund, and (iii) collect all income and other payments on
account of the Fund's portfolio securities.
Provident Financial Processing Corporation, P.O. Box 8950, Wilmington,
Delaware 19899, will serve as the Fund's transfer agent and dividend disbursing
agent pursuant to a Transfer Agency Agreement. Under the Agreement, PFPC will
(i) issue and redeem shares of the Fund, (ii) process dividend and distribution
payments to shareholders, (iii) mail annual and semi-annual reports, dividend
notices and other shareholder communications, (iv) respond to correspondence by
shareholders and others, and (v) maintain shareholder accounts. Shareholders
-23-
<PAGE>
who request a historical transcript of their account from the Transfer Agent
will be charged a fee based upon the number of years researched. The Fund
reserves the right, upon 60 days' written notice, to make other charges to
investors to cover administrative costs.
THE FUND'S LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia,
Pennsylvania 19103, serves as counsel to the Fund and has passed upon certain
matters in connection with this offering. Mr. Jennings, who is Secretary of the
Fund, is a partner in the firm. The firm also acts as counsel to the Adviser and
to Janney.
THE FUND'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
Tait, Weller & Baker, Two Penn Center Plaza, Suite 700, Philadelphia,
Pennsylvania 19102 have been selected as the independent certified public
accountants for the Fund. The Financial Statements of the Fund which appear in
this Statement of Additional Information have been examined by Tait, Weller &
Baker whose report thereon appears elsewhere herein and has been included herein
in reliance upon the report of said firm of accountants, which is given upon
their authority as experts in accounting and auditing.
-24-
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A and B of the Registration
Statement:
- Financial Highlights (for a Fund Share Outstanding
Throughout the Period) September 15, 1986
(commencement of operations) to June 30, 1987 and
for the fiscal years ended June 30, 1988, June 30,
1989, June 30, 1990, June 31, 1991, June 30, 1992,
June 30, 1993, June 30, 1994, June 30, 1995
and June 30, 1996
- Schedule of Portfolio Investments for the fiscal
year ended June 30, 1996
- Statement of Assets and Liabilities for the fiscal
year ended June 30, 1996
- Statement of Operations for the fiscal year ended
June 30, 1996
- Statement of Changes in Net Assets for the fiscal
year ended June 30, 1996
- Financial Highlights for the fiscal years ended
June 30, 1991 through June 30, 1996
- Notes to the Financial Highlights
- Report of Independent Certified Public Accountants
(2) All required financial statements are included in
Parts A and B hereof. All other financial
statements and schedules are inapplicable.
-1-
<PAGE>
(b) Exhibits:
*(1) Articles of Incorporation dated June 3, 1986 are
incorporated herein by reference to Exhibit 1 of the
Registrant's Registration Statement on Form N- 1A.
*(2) By-Laws as amended on March 7, 1990 are
incorporated herein by reference to Exhibit 2 of
Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A.
(3) None.
(4) Specimen Copy of Share Certificate for the
Registrant's Class A Common Stock is incorporated
herein by reference to Exhibit 4 to the Registrant's
Registration Statement on Form N-1A.
*(5) Investment Advisory Agreement between the Registrant
and Addison Capital Management Company is
incorporated herein by reference to Exhibit 5 to the
Registrant's Registration Statement on Form
N-1A.
(6) *(a) Underwriting Agreement between the Registrant
and Janney Montgomery Scott Inc. is
incorporated herein by reference to Exhibit
6(a) to the Registrant's Registration
Statement on Form N-1A.
*(b) Dealer Agreement between Janney Montgomery
Scott Inc. and Penn Mutual Equity Services,
Inc. is incorporated herein by reference to
Exhibit 6(b) to the Registrant's
Registration Statement on Form N-1A.
(7) None.
*(8) Custodian Agreement between the Registrant and
Provident National Bank is incorporated herein by
-2-
<PAGE>
reference to Exhibit 8 to the Registrant's
Registration Statement on form N-1A.
(9) *(a) Services Agreement between the Registrant and
Janney Montgomery Scott Inc. is incorporated
herein by reference to Exhibit 9(a) to the
Registrant's Registration Statement on Form
N-1A.
*(b) Administration and Accounting Services
Agreement between the Registrant and
Provident Institutional Management
Corporation is incorporated herein by
reference to Exhibit 9(b) to the
Registrant's Registration Statement on Form
N-1A.
*(c) Transfer Agency Agreement between the
Registrant and Provident Financial
Processing Corporation is incorporated
herein by reference to Exhibit 9(c) to the
Registrant's Registration Statement on Form
N-1A.
(10) (a) Opinion re: legality and consent of Morgan,
Lewis & Bockius LLP is incorporated herein
by reference to Exhibit 10(a) to the
Registrant's Registration Statement on Form
N-1A.
*(b) Opinion re: Pennsylvania personal property
taxes and consent of Morgan, Lewis & Bockius
LLP is incorporated herein by reference to
Exhibit 10(b) to the Registrant's
Registration Statement on Form N-1A.
*(11) Consent of Tait, Weller & Baker.
(12) None.
*(13) Agreement with Janney Montgomery Scott Inc. for
providing Initial Capital is incorporated herein by
reference to Exhibit 13A the Registrant's
Registration Statement on Form N-1A.
-3-
<PAGE>
(14) None.
*(15) The Registrant's 12b-1 Plan is incorporated herein by
reference to Exhibit 15 to the Registrant's
Registration Statement on Form N-1A.
(16) None.
(17) None.
*(18) Powers of Attorney.
*(27) Financial Data Schedules
- --------------------
* Filed with this Post-Effective Amendment
-4-
<PAGE>
Item 25. Persons Controlled by or under Common Control with
Registrant
Not Applicable.
Item 26. Number of Holders of Securities
The following information is as of June 30,
1996:
Title of Class Number of Record Holders
Common Stock, par 2,608
value $.001 per share
Item 27. Indemnification
Article VII of the Registrant's Articles of Incorporation provides,
"The Corporation shall indemnify its present and past directors,
officers, employees, and agents, and persons who are serving or
have served at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or enterprise, to the maximum extent permitted
by applicable law, in such manner as may be provided in the
By-Laws; provided, that no director or officer of the Corporation
shall be indemnified against any liability to the Corporation or
its stockholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. The
Corporation may purchase insurance against any liability which may
be asserted against or incurred by any director or officer in such
capacity or arising out of his status as such (whether or not
indemnification with respect to such liability is permitted under
these Articles of Incorporation or any provision of law), as the
Board of Directors may determine."
Article VIII of the Registrant's By-Laws provides,
-5-
<PAGE>
"ARTICLE VIII.1. Indemnification of Officers, Directors,
Employees and Agents. The Corporation shall indemnify its
present and past Directors, officers, employees, and
agents, and persons who are serving or have served at the
request of the Corporation as a director, officer,
employee or agent of another corporation, partnership,
joint venture, trust, or enterprise, to the maximum extent
provided and allowed by Md. Corp. and Assigns. Code ss.2-
418, as amended from time to time.
Article VIII.2. Limitations of Indemnification.
(a) Notwithstanding anything herein to the contrary, no
Director, officer, investment adviser, or principal underwriter of
the Corporation shall be indemnified for any liability, whether or
not there is an adjudication of liability, arising by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office or in
performance of its contract. Subject to the limitation of any
applicable law, the determination of whether or not there has been
such disabling conduct may be determined by (1) a final decision on
the merits by a court or other body before whom the proceeding was
brought that such person to be indemnified was not liable by reason
of such disabling conduct, or (2) in the absence of such a
decision, a reasonable determination, based upon a review of the
facts, that such person to be indemnified was not liable by reason
of such disabling conduct, by (i) the vote of a majority of a
quorum of directors which are neither "interested persons", as
defined in the Investment Company Act of 1940 ("disinterested
directors") nor parties to the proceeding, or (ii) whether or not
such quorum is obtainable, if a majority of a quorum of
disinterested directors so directs, by an independent legal counsel
in a written opinion.
(b) Notwithstanding anything herein to the contrary, no
expenses (including attorneys' fees) incurred by the Corporation's
Directors and officers in any pending proceeding shall be paid by
the Corporation in advance unless such person to be indemnified, or
someone on his behalf, undertakes to repay the advance unless it is
-6-
<PAGE>
ultimately determined that he is entitled to indemnification and
(a) such person provides security for his undertaking, (2) the
Corporation is insured against losses arising by reason of any
lawful advances, or (3) a majority of a quorum of the disinterested
directors who are not parties to the proceeding, or an independent
legal counsel (chosen by a majority of a quorum of disinterested
directors) in a written opinion, shall determine, based upon a
review of readily available facts, that there is reason to believe
that such person will ultimately be entitled to indemnification."
In the Underwriting Agreement between the Fund and Janney
Montgomery Scott Inc., the Fund has agreed to indemnify Janney
against any liability arising out of any alleged untrue statement
of material fact, or failure to state a material fact, in the
Fund's Registration Statement and Prospectus, except liabilities
arising from the Distributor's will misfeasance, bad faith, or
gross negligence, and liabilities arising from written
misstatements furnished by the Distributor for use in the
Registration Statement. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant by
the Registrant pursuant to the Articles of Incorporation or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant
of express incurred or paid by trustees, officers or controlling
persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees,
officers or controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issues.
-7-
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Radcliffe Cheston, President, Treasurer and a director of Addison
Capital Management Company (the "Adviser") was a general partner of
a now dissolved partnership, also known as Addison Capital
Management Company (the "Predecessor"), an investment advisory
business from which the Adviser acquired its assets in April 1986.
Rudolph C. Sander, a director and Chairman of the Board of the
Adviser, is Chairman of the Board and Chairman of the Executive
Committee of Janney Montgomery Scott Inc., a brokerage and
investment banking firm which is the Fund's distributor.
Item 29. Principal Underwriter
(a) Janney does not act as principal underwriter for
any other investment company.
(b) The Directors and executive officers of Janney
Montgomery Scott Inc. as of August 1,
1996 are listed below. Except as otherwise
noted, each person's principal business address
is at Janney Montgomery Scott Inc., 1801 Market
Street, Philadelphia, Pennsylvania 19103.
-8-
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ----------------------
<S> <C> <C>
Andrews, James Christopher 1st Vice President None
Barrett, William Joel(1) Sr. Vice President None
Bennett, Robert John 1st Vice President None
Berardino, Ronald Michael(1) Exec. Vice President and Director None
Betz, Jr., William Raymond 1st Vice President None
Brodie, Nancy S. Director None
Brandreth, Sr., William Rea Sr. Vice President and Director None
Carlin, Jr., William James 1st Vice President None
Castagna, Sr., Anthony John 1st Vice President None
Chappell, Robert E. Director None
Cook, Jr., Charles Beckwith(1) Vice Chair, Bd. of Directors None
Croonquist, George Thomas(2) Sr. Vice President and Director None
Dallas, Paul 1st Vice Pesident None
Day, Steve Woodward 1st Vice President None
DiCicco, Dominic Charles 1st Vice President None
Doyle, Lawrence Patrick 1st Vice President None
Eldredge, Jr., Ashton Goodliff Sr. Vice President and Director None
Fenton, Joseph Patrick 1st Vice President None
Foley, Michael C. Sr. Vice President and Director None
Fortuna, Jr., John 1st Vice President None
Gardner, Herbert M.(1) Sr. Vice President None
Gonzalez, Jay Clark 1st Vice President None
Gray, John Joseph Exec. Vice President and Director None
Grim, Jack 1st Vice President None
Hunter, Jr., James Terrance 1st Vice President None
Howell, Christopher R. 1st Vice President None
Johnson, Lawrence Retlaw 1st Vice President None
Kirkpatrick, Jr., Henry Halsey 1st Vice President None
Lagana, Thomas Frank 1st Vice President None
Langen, Robert Carl 1st Vice President None
Lee, Brian Westcott 1st Vice President None
Lichtenthal, Steven Mark Sr. Vice President None
Lombard, Jr., Jerome F. 1st Vice President None
Losty, Edward 1st Vice President None
Lynch, IV, Thomas 1st Vice President None
Madvedoff, Mark 1st Vice President None
Marks, Katherine A. 1st Vice President None
McAlenney, Jr., Edward Joseph 1st Vice President None
McCrea, James Anthony 1st Vice President and Assistant Secretary None
Meminger, Alan Smith 1st Vice President None
Meyer, James Maurice Sr. Vice President and Director None
Mielziner, Norman Kenneth 1st Vice President None
Mufson, Michael J. Sr. Vice President None
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ----------------------
<S> <C> <C>
O'Malley, III, William Gresham Sr. Vice President, Secretary and Director None
Onori, Paul Nicholas 1st Vice President None
Patitucci, Michael Robert 1st Vice President None
Peroni, Jr., Eugene 1st Vice President None
Purkiss, Richard Allen Sr. Vice President and Director None
Radetzky, William Richard Sr. Vice President None
Richards, II, Robert Kenneth 1st Vice President None
Rosato, Kenneth Vincento 1st Vice President None
Rubel, Steven K. 1st Vice President None
Ruello, John K. 1st Vice President None
Rulon-Miller, William L. Sr. Vice President None
Salera, Frank Theodore 1st Vice President None
Sander, Rudolph Charles Chairman and Chairman Executive Committee Chairman and Director
Sanford, William Joseph 1st Vice President None
Schankel, Alan Miller Sr. Vice President and Director None
Scherer, Howard B. Vice President None
Simon, Gail Roberta 1st Vice President None
Spatacco, Michael Stephan 1st Vice President None
Stark, Jeanette Louise 1st Vice President None
Stiles, Thomas Edward(4) Director None
Sullivan, Charles John Sr. Vice President and Director Vice President
Tait, John Edwin(4) Director None
Thornton, Richard Anson 1st Vice President and Asst. Treasurer None
Thompson, Richard A. 1st Vice President None
Tickner, Will S. 1st Vice President None
Travlos, Darcy 1st Vice President None
Waitneight, Stephen Karl(3) 1st Vice President None
Warren, Frederick R. 1st Vice President None
Weissenborn, Stanton Sr. Vice President None
Whitaker, Jr., Arthur James 1st Vice President None
Wilde, Jr., Norman Taylor President, Chief Executive Office and Director None
Wolitarsky, James William Sr. Vice President, Treasurer and Director None
</TABLE>
(1) Principal Business Address is Janney Montgomery Scott Inc., 26 Broadway,
New York, NY 10004.
(2) Principal Business Address is Janney Montgomery Scott Inc., 505 Main
Street, Hackensack, NJ 07601.
(3) Principal Business Address is Janney Montgomery Scott Inc., 1909 E.
Marlton Pike, Cherry Hill, NJ 08003.
(4) Principal Business Address is The Penn Mutual Life Ins. Co., Independence
Sq., Phila., PA.
Item 30. Location of Accounts and Records
Books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940,
and the rules promulgated thereunder, are maintained
as follows:
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<PAGE>
(a) With the respect to Rule 31a-1(a);
(b)(1); (b)(2)(i); (3); and (7), the
required books and records are
maintained at the offices of the
Registrant's custodian: PNCBank,
17th and Chestnut Streets, 8th
Floor, Philadelphia, Pennsylvania
19103.
(b) With respect to Rule 31a-1(a);
(b)(2)(ii), (iii); (5); (6); and (8)
the required books and records are
maintained at the offices of
Registrant's accounting and
administrative services agent: PFPC,
103 Bellevue Parkway, Wilmington,
Delaware 19809.
(c) With respect to Rule 31a-1(a) and
(b)(2)(iv), the required books and
records are maintained at the offices of
Registrant's transfer agent: Provident
Financial Processing Corporation, 3531
Silverside Road, Wilmington, Delaware
19803.
(d) With respect to Rule 31a-1(d), the
required books and records are
maintained at the offices of the
Fund's distributor, Janney
Montgomery Scott Inc., 1801 Market
Street, Philadelphia, Pennsylvania
19103.
(e) With respect to Rules 31a-1(a);
(b)(9); (10); (f), the required
books and records are maintained at
the offices of Registrant's
Investment Adviser: Addison Capital
Management Company, 1608 Walnut
Street, Philadelphia, Pennsylvania.
(f) With respect to records required by
Rule 31a-1(b)(4), the required books
and records are maintained at the
offices of Registrant's counsel:
Morgan, Lewis & Bockius LLP, 2000
One Logan Square, Philadelphia,
Pennsylvania 19103.
-11-
<PAGE>
Item 31. Management Services
None.
Item 32. Undertakings
None.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to the Registration Statement to be duly signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia and
Commonwealth of Pennsylvania as of the 21st day of October, 1996.
ADDISON CAPITAL SHARES, INC.
Registrant
/s/ Radcliffe Cheston
-------------------------------------
Radcliffe Cheston, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
/s/ Radcliffe Cheston
- ----------------------- President and October 21, 1996
Radcliffe Cheston Chief Executive Officer
/s/ Radcliffe Cheston
- ------------------------- Chairman of the Board October 21, 1996
Rudolph C. Sander* and Director
/s/ Radcliffe Cheston
- ------------------------- Director October 21, 1996
Margaret M. Healey*
/s/ Radcliffe Cheston
- ------------------------- Director October 21, 1996
William R. Dimeling*
/s/ Radcliffe Cheston
- ------------------------- Director October 21, 1996
Charles E. Mather, III*
/s/ Radcliffe Cheston
- ------------------------- Treasurer and Chief October 21, 1996
James W. Wolitarsky* Financial and
Accounting Officer
/s/ Radcliffe Cheston
- -------------------------
*Radcliffe Cheston
Attorney-in-Fact
</TABLE>
-13-
<PAGE>
EXHIBIT INDEX
Page
(1) Articles of Incorporation.
(2) By-Laws.
(5) Investment Advisory Agreement between the
Registrant and Addison Capital Management
Company.
(6) (a) Underwriting Agreement between the
Registrant and Janney Montgomery
Scott Inc.
(b) Dealer's Agreement between Janney
Montgomery Scott Inc. and Penn Mutual
Equity Services, Inc.
(8) Custodian Agreement between the Registrant
and The Provident National Bank.
(9) (a) Services Agreement between the Registrant
and Janney Montgomery Scott Inc.
(b) Administration and Accounting Services;
Agreement between the Registrant and
Provident Institutional Management
Corporation.
(c) Transfer Agency Agreement between the
Registrant and Provident Financial
Processing Corporation.
(10) (b) Opinion re: Pennsylvania personal
property taxes and Consent of Morgan,
Lewis & Bockius LLP.
(11) Consent of Tait, Weller & Baker.
(13) Agreement with Janney Montgomery
Scott Inc. for providing Initial Capital.
(15) Registrant's 12b-1 Plan.
(18) Powers of Attorney.
(27) Financial Data Schedules
-14-
<PAGE>
Exhibit 1
ARTICLES OF INCORPORATION
of
ADDISON CAPITAL SHARES, INC.
FIRST: I, James W. Jennings, whose post office address is 2000 One
Logan Square, Philadelphia, Pennsylvania 19103, being more than eighteen years
of age, do under and by virtue of the General Laws of the State of Maryland
authorizing the formation of corporations, associate myself as incorporator with
the intention of forming a corporation.
SECOND: Name. The name of the corporation (hereinafter called the
"Corporation") is ADDISON CAPITAL SHARES, INC.
THIRD: Corporate Purposes. The purpose for which the Corporation is
formed is to act as an open-end diversified management company under the
Investment Company Act of 1940, and in this connection the Corporation is
expressly empowered as follows:
(1) To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, assign,
negotiate, transfer, lend, trade in, deal in, pledge, exchange or
otherwise dispose of or turn to account or realize upon, Securities
(which term "Securities" shall for the purposes of this Article,
without limitation of the generality thereof, be deemed to include any
stocks, shares, bonds, debentures, notes, bills, or other evidence of
indebtedness, negotiable or non-negotiable instruments, certificates of
deposit, bankers' acceptances, fixed time deposits, letters of credit,
commercial paper, finance paper, repurchase and reverse repurchase
agreements, mortgages or other obligations, and any certificates,
receipts, warrants, options or other instruments representing rights to
receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interest therein or created or issued
by any persons, firms, associations, partnerships, corporations,
syndicates, banks, savings institutions, combinations, organizations,
governments, or subdivisions, agencies, or instrumentalities thereof;
and to exercise, as owner or holder of any Securities, all rights,
powers and privileges in respect thereof; and to do any and all acts
and things for the preservation, protection, improvement and
enhancement in value of any and all Securities;
(2) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise) any
property, real or personal, and any interest therein;
(3) To borrow money and issue notes or other evidences of
indebtedness;
-1-
<PAGE>
(4) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for
such amount or kind of consideration (including, without limitation
thereof, Securities), as its Board of Directors may determine and
without the need for stockholder approval, and as now or hereafter
permitted by the laws of Maryland and by these Articles of
Incorporation determined in a manner consistent with the Investment
Company Act of 1940 and the regulations of the Securities Exchange
issued thereunder;
(5) To purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of
the stockholders of the Corporation) shares of its capital stock, in
any manner and to the extent now or hereafter permitted by the laws of
Maryland and by these Articles of Incorporation;
(6) To conduct its business in all its branches and exercise
any or all of its corporate rights and powers at one or more offices in
Maryland and elsewhere in any part of the world, without restriction or
limit as to extent;
(7) To do any and all such further acts and things and to
exercise any and all such further powers as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of all or any of the
foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, by in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of these Articles of
Incorporation, and shall each be regarded as independent, and construed as
powers as well as objectives and purposes, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or restrict in any
manner the meaning of general terms or the general powers of the Corporation now
or hereafter conferred by the laws of Maryland.
FOURTH: Address and Resident Agent. The post office address of the
place at which the principal office of the Corporation in the State of Maryland
will be located is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
The Corporation's resident agent is The Corporation Trust,
Incorporated, a corporation of this State, and the post office address of the
resident agent is 32 South Street, Baltimore, Maryland 21202.
FIFTH: Capital Stock. (1) The total number of shares of capital stock
which the Corporation shall have authority to issue is Two Billion
(2,000,000,000) shares of Common Stock, of the par value of $2,000,000.00, of
which number of authorized, unissued and unclassified shares of Common Stock
Fifty Million (50,000,000) shares, of the par value of one
-2-
<PAGE>
Mill ($0.001) per share and the aggregate par value of $50,000.00, are
classified and designated Class A Common Stock and the balance of such
authorized shares are unclassified.
(2) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by the Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors, in its discretion, may determine.
(3) The Corporation may issue shares of any class or series in
fractional denominations to the same extent as whole shares. Any fractional
share shall carry proportionately all the rights of a whole share of the same
class or series, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(4) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of the Articles of Incorporation and
By-laws of the Corporation.
(5) The Board of Directors shall have authority by resolution to
classify and reclassify any authorized but unissued shares of capital stock from
time to time by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of the stock
subject to the provisions of Sections 6, 7, 8, 9 and 10 of this Article FIFTH
and not inconsistent with applicable law. The power of the Board of Directors to
classify the shares of capital stock shall include, without limitations,
authority to classify or reclassify any such stock into a class or classes of
capital stock and to divide and classify shares of any class into one or more
series of such class, by determining, fixing or altering one or more of the
following:
(i) The distinctive designation of such class or series;
provided that, unless otherwise prohibited by the terms of such class
or series, the number of shares of any class or series may be decreased
by the Board of Directors in connection with any classification or
reclassification of unissued shares and the number of shares of any
class or series which have been redeemed, purchased or otherwise
acquired by the Corporation shall remain part of the authorized capital
stock and be subject to classification and reclassification as provided
herein.
(ii) Whether or not and, if so, the rates, amounts and times
at which, and the conditions under which, dividends shall be payable on
shares of such class or series.
(iii) Whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided by law and, if
so, the terms of such voting rights.
-3-
<PAGE>
(iv) The rights of the holders of shares of such class or
series upon the liquidation, dissolution or winding up of the affairs
of, or upon any distribution of the assets of, the Corporation.
(v) Any other rights, restrictions, including restrictions on
transferability, and qualification of shares of such class or series,
not inconsistent with law and the Articles of Incorporation of the
Corporation.
(6) All consideration received by the Corporation for the issue or sale
of stock of any class, together with all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, proceeds in whatever form the same may be, shall irrevocably belong to
the class of shares of stock with respect to which such assets, payments, or
funds were received by the Corporation for all purposes, and shall be subject
only to the rights of creditors, and shall be so handled upon the books of
account of the Corporation. Such assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, any assets derived from any reinvestment of such proceeds in whatever
form, and a portion of any general assets of the Corporation not belonging to a
particular class, are herein referred to as "assets belonging to" such class.
(7) Shares of each class shall be entitled to such dividends and
distributions, in stock or in cash or both, as may be declared from time to time
by the Board of Directors, acting in its sole discretion, with respect to such
class; provided, however, that dividends and distributions on shares of a class
shall be paid only out of the lawfully available "assets belonging to such
class" as such phrase is defined in Section 6 of this Article FIFTH.
(8) In the event of the liquidation or dissolution of the Corporation,
stockholders of each class shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to stockholders, but other
than general assets not belonging to any particular class of stock, the assets
belonging to such class, such assets to be distributed among such stockholders
in proportion to the number of shares of such class held by them and recorded on
the books of the Corporation. In the event that there are any general assets not
belonging to any particular class of stock and available for distribution,
distribution of such assets shall be made to the holders of stock of all classes
in proportion to the asset value of the respective classes determined as
hereinafter provided.
(9) The assets belonging to any class of stock shall be charged with
the liabilities in respect of such class, and shall also be charged with such
class's share of the general liabilities of the Corporation, in proportion to
the asset value of the respective classes determined as hereinafter provided.
The determination of the Board of Directors shall be conclusive as to the amount
of such liabilities, including the amount of expenses and reserves; as to any
allocation of the same expenses and reserves; as to any allocation of the same
to a given class; and as to whether the same, or any general assets of the
Corporation, are allocable to one or more classes. The liabilities so allocated
to a class are herein referred to as "liabilities belonging to" such class.
-4-
<PAGE>
(10) Each stockholder of each class shall be entitled to one vote for
each share of stock, irrespective of the class, then standing in his name on the
books of the Corporation, and on any matter submitted to a vote of stockholders,
all shares of stock then issued and outstanding and entitled to vote shall be
voted in the aggregate and not by class except that: (i) when expressly required
by law, shares of stock shall be voted by individual class and (ii) only shares
of stock of the respective class or classes affected by a matter shall be
entitled to vote on such matter.
(11) Notwithstanding any provisions of the General Laws of the State of
Maryland requiring any action to be taken or authorized by the affirmative vote
of the holders of a designated proportion of the votes of all classes or of any
class of stock of the Corporation, such action shall be effective and valid if
taken or authorized by the affirmative vote of the holders of a majority of the
total number of shares outstanding and entitled to vote thereon, except as
otherwise provided herein.
(12) To the extent that the Corporation has funds or other property
legally available therefor, each holder of shares of capital stock of the
Corporation shall be entitled to require the Corporation to redeem all or any
part of the shares of capital stock of the corporation standing in the name of
such holder on the books of the Corporation, and all shares of capital stock
issued by the Corporation shall be subject to redemption by the Corporation, at
the redemption price of such shares as in effect from time to time as may be
determined by the Board of Directors of the Corporation to suspend the right of
redemption of shares of capital stock of the Corporation or postpone the date of
payment of such redemption price in accordance with the provisions of applicable
law, and the Corporation shall have the right at any time to redeem the shares
owned by any holder of capital stock of the Corporation (i) if such redemption
is, in the opinion of the Board of Directors of the Corporation, desirable in
order to prevent the Corporation from being deemed a "personal holding company"
within the meaning of the Internal Revenue Code of 1954, as amended, (ii) if the
value of such shares in the account maintained by the Corporation or its
transfer agent for any class of stock is less than $1,000.00; provided, however,
that each stockholder shall be notified that the value of his account is less
than $1,000.00 and allowed sixty days to make additional purchases of shares
before such redemption is processed by the Corporation, or (iii) if the net
income with respect to any particular class of shares should be negative or it
should otherwise be appropriate to carry out the Corporation's responsibilities
under the Investment Company Act of 1940, as each case subject to such further
terms and conditions as the Board of Directors of the Corporation may from time
to time adopt. The redemption of shares of capital stock of the Corporation
shall, except as otherwise provided in this section, be the net asset value
thereof as determined by the Board of Directors of the Corporation from time to
time in accordance with the provisions of applicable law, less such redemption
fee or other charge, if any, as may be fixed by resolution of the Board of
Directors of the Corporation. Payment of the redemption price shall be made in
cash by the Corporation at such time and in such manner as may be determined
from time to time by the Board of Directors of the Corporation unless, in the
opinion of the Board of Directors, which shall be conclusive, conditions exist
which make payment wholly in cash unwise or undesirable; in such event the
Corporation may make payment wholly or party in securities or other property
included in the
-5-
<PAGE>
assets belonging or allocable to the class of the shares redemption of which is
being sought, the value of which shall be determined as provided herein.
(13) Each holder of any class of stock of the Corporation who
surrenders his certificate in good delivery form to the Corporation or, if the
shares in question are not represented by certificates, who delivers to the
Corporation a written request in good order signed by the stockholder, shall, to
the extent permitted by the By-Laws or by resolution of the Board of Directors,
be entitled to convert the shares in question, on the basis hereinafter set
forth, into shares of stock of any class of the Corporation. The Corporation
shall determine the net asset value, as provided herein, of the shares to be
converted and may deduct therefrom a conversion cost, in an amount determined
within the discretion of the Board of Directors. Within five (5) business days
after such surrender and payment of any conversion cost, the Corporation shall
issue to the stockholder such number of shares of stock as provided herein in
the same manner and at the same time as that of the shares surrendered, shall
equal the net asset value of the shares surrendered, less any conversion cost as
aforesaid. Any amount representing a fraction of a share may be paid in cash at
the option of the Corporation. Any conversion cost may be paid and/or assigned
by the Corporation to the underwriter and/or to any other agency, as it may
elect.
(14) Without the vote of the shares of any class of stock of the
Corporation then outstanding (unless stockholder approval is otherwise required
by applicable law), the Corporation may, if so determined by the Board of
Directors:
(a) Sell and convey the assets belonging to a class of stock
to another trust or corporation that is a management investment company (as
defined in the Investment Company Act of 1940) and is organized under the laws
of any state of the United States for consideration which may include the
assumption of all outstanding obligations, taxes and other liabilities, accrued
or contingent, belonging to such class and which may include securities issued
by such trust or corporation. Following such sale and conveyance, and after
making provision for the payment of any liabilities belonging to such class that
are not assumed by the purchaser of the assets belonging to such class, the
Corporation may, at its option, redeem all outstanding shares of such class at
the net asset value thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less such redemption fee or
other charge, if any, as may be fixed by resolution of the Board of Directors.
Notwithstanding any other provision of these Articles of Incorporation to the
contrary, the redemption price may be paid in cash or by distribution of the
securities or other consideration received by the Corporation for the assets
belonging to such class upon such conditions as the Board of Directors deems, in
its sole discretion, to be appropriate consistent with applicable law and these
Articles of Incorporation;
(b) Sell and convert the assets belonging to a class of stock
into money and, after making provision for the payment of all obligations, taxes
and other liabilities, accrued or contingent, belonging to such class, the
Corporation may, at its option, (i) redeem all outstanding shares of such class
at the net asset value thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less such redemption fee or
other charge, if any,
-6-
<PAGE>
as may be fixed by resolution of the Board of Directors upon such conditions as
the Board of Directors deems, in its sole discretion, to be appropriate
consistent with applicable law and these Articles of Incorporation, or (ii)
combine the assets belonging to such class following such sale and conversion
with the assets belonging to any one or more other classes of stock of the
Corporation pursuant to and in accordance with Section 14(c) of this Article
FIFTH; or
(c) Combine the assets belonging to a class of stock with the
assets belonging to any one or more classes of stock of the Corporation if the
Board of Directors reasonably determines that such combination will not have a
material adverse effect on the stockholders of any class of stock of the
Corporation participating in such combination. In connection with any such
combination of assets the shares of any class of stock of the Corporation then
outstanding may, if so determined by the Board of Directors, be converted into
shares of any other class or classes of stock of the Corporation with respect to
which conversion is permitted by applicable law, or may be redeemed, at the
option of the Corporation, at the net asset value thereof as determined by the
Board of Directors in accordance with the provisions of applicable law, less
such redemption fee or other charge, or conversion cost, if any, as may be fixed
by resolution of the Board of Directors upon such conditions as the Board of
Directors deems, in its sole discretion, to be appropriate consistent with
applicable law and these Articles of Incorporation. Notwithstanding any other
provision of these Articles of Incorporation to the contrary, any redemption
price, or part thereof, paid pursuant to this Section 14(c) may be paid in
shares of any other existing or future class or classes of stock of the
Corporation.
SIXTH: Board of Directors. The number of directors of the Corporation
shall be five. However, the By-Laws of the Corporation may fix the number of
directors at a number greater than that named in these Articles of Incorporation
any may authorize the Board of Directors, by the vote of a majority of the
entire Board of Directors, to increase or decrease the number of directors fixed
by these Articles of Incorporation or by the By-Laws within a limit specified in
the By-Laws, provided that in no case shall the number of directors be less than
three unless the Corporation has no more than one stockholder, in which case the
number of directors of the Corporation may be less than three but shall not be
less than one, and to fill the vacancies created by any such increase in the
number of directors. Unless otherwise provided by the By-Laws of the
Corporation, the directors of the Corporation need not be stockholders therein.
The names of the directors who shall act as such until the first annual
meeting of stockholders or until their successors are duly chosen and qualified
are: Jay R. Massey and Rudolf C. Sander.
SEVENTH: Indemnification. The Corporation shall indemnify its present
and past directors, officers, employees, and agents, and persons who are serving
or have served at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
enterprise, to the maximum extent permitted by applicable law, in such manner as
may be provided in the By-Laws; provided, that no director or officer of the
Corporation shall be indemnified against any liability to the Corporation or its
stockholders to
-7-
<PAGE>
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The Corporation may purchase insurance against any liability which
may be asserted against or incurred by any director or officer in such capacity
or arising out of his status as such (whether or not indemnification with
respect to such liability is permitted under these Articles of Incorporation or
any provision of law), as the Board of Directors may determine.
EIGHTH: Miscellaneous. The following provisions are hereby adopted for
the purpose of defining, limiting and regulating the powers of the Corporation
and of the directors and stockholders.
(1) The By-Laws of the Corporation may divide the directors of
the Corporation into classes and prescribe the tenure of the office of
the several classes, but no class shall be elected for a period shorter
than that from the time of the election following the division into
classes until the next annual meeting and thereafter for a period
shorter than the interval between annual meetings or for a longer
period than five years and the term of office of at least one class
shall expire each year. Notwithstanding the foregoing, no such division
into classes shall be made prior to the first annual meeting of
stockholders of the Corporation.
(2) Any director may be removed at any time, with or without
cause, in such lawful manner as may be provided in the By-Laws of the
Corporation.
(3) Unless the By-Laws otherwise provide, the Board of
Directors of the Corporation shall have power to hold their meeting, to
have an office or offices and, subject to the provisions of the laws of
Maryland, to keep the books of the Corporation outside of said State at
such places as may from time to time be designated by them.
(4) In addition to the powers and authority hereinafter or by
statute expressly conferred upon them, the Board of Directors may
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
express provisions of the laws of Maryland, of these Articles of
Incorporation and of the By-Laws of the Corporation.
(5) Shares of stock in other corporations shall be voted by
the President or a Vice-President, or such officer or officers of the
Corporation as the Board of Directors shall designate for the purpose,
or by a proxy or proxies thereunto duly authorized by the Board of
Directors, except as otherwise ordered by vote of the holders of a
majority of the shares of the capital stock of the Corporation
outstanding and entitled to vote in respect thereto.
(6) (a) The Corporation may enter into an investment advisory
or management or supervisory contract or contracts, an exclusive or
non-exclusive
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underwriting or distributing contract or contracts, and other contracts
with any company or companies, including Janney Montgomery Scott Inc.
and any company which is a subsidiary or affiliate thereof, and may
otherwise do business with such a company, notwithstanding that any one
or more directors, officers, or employees of the Corporation may be a
stockholder, director, officer, trustee, member, or employees of such
company, and in the absence of fraud the Corporation and such company
may deal freely with each other, and no such contract or transaction
between the Corporation and such company shall be invalidated or in any
way affected thereby, nor shall any director, officer, or employee of
the Corporation be liable to the Corporation or to any stockholder or
creditor thereof or to any other person, merely by reason of such
relationship, for any loss incurred by it or him under or by reason of
any such contract or transaction or accountable for any profit realized
directly or indirectly therefrom; provided, that nothing herein shall
protect any director or officer of the Corporation or to its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
(b) The Corporation is adopting its corporate name through
permission of Addison Capital Management Company; and if it shall enter
into an investment advisory or management or supervisory contract with
such company or any of its affiliates, as authorized herein, the
Corporation shall make appropriate covenants that upon the termination
of such contract for any cause it will, at the request of such company
from its corporate name and will not thereafter transact business in a
corporate name using the word "Addison" in any form or combination
whatsoever, or otherwise use the word "Addison" as a part of its name.
Such convenants on the part of the Corporation are hereby made binding
upon it, its directors, officers, stockholders, creditors and all other
persons claiming under or through it.
(7) Unless otherwise required by applicable law, the presence in person
or by proxy of the holders of record of one-third of the shares of the capital
stock of the Corporation issued and outstanding and entitled to vote thereat,
shall constitute a quorum at all meetings of the stockholders.
NINTH: Duration. The duration of the Corporation shall be perpetual.
TENTH: Amendments. From time to time any of the provisions of these
Articles of Incorporation may be amended, altered or repealed, upon the vote of
the majority of the aggregate of the votes entitled to be cast thereon, and
other provisions which might under the statutes of the State of Maryland at the
time in force be lawfully contained in articles of incorporation may be added or
inserted upon the vote of the majority of the aggregate of the votes entitled to
be cast thereon, and all rights at any time conferred upon the stockholders of
the Corporation by these Articles of Incorporation are granted subject to the
provisions of this Article TENTH. The Corporation shall notify the stockholders
in its next subsequent regular report to the stockholders of any amendment of
these Articles of Incorporation.
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The term "these Articles of Incorporation" as used herein and in the
By-Laws of the Corporation shall be deemed to mean these Articles of
Incorporation as from time to time amended and restated.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act on the 3rd day of June, 1986.
/s/ James W. Jennings
------------------------------------
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PHILADELPHIA
PENNSYLVANIA
I HEREBY CERTIFY THAT on the 3rd day of June, 1986, before me a Notary
Public of the County of Philadelphia, Commonwealth of Pennsylvania, personally
appeared James W. Jennings, who acknowledges the foregoing Articles of
Incorporation to be his act.
WITNESS my hand and Notarial Seal.
My Commission Expires: January 24, 1987 /s/ Florine Watson
---------------------------
Notary Public
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As amended September 3, 1987,
October 29, 1987
and March 7, 1990
ADDISON CAPITAL SHARES, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
ARTICLE I.1. Place of Meeting. All meetings of the
stockholders shall be held at the principal office of the corporation in
Baltimore, Maryland, except that the Board of Directors may fix a different
place of meeting within the United States which shall be specified in each
notice of the meeting.
ARTICLE I.2. Annual Meetings. The annual meeting of the
stockholders of the Corporation shall not be required to be held in any year in
which stockholders are not required to elect directors under the Investment
Company Act of 1940 (the "1940 Act"). If the Corporation is required by the 1940
Act to hold a meeting to elect directors, the meeting shall be designated as the
Annual Meeting of stockholders for that year and shall be held within 120 days
after the occurrence of an event requiring the election of directors. The Board
of Directors may, in its discretion, hold a meeting to be designated as the
Annual Meeting of stockholders on a date within the thirty-one day period,
October 16 through November 15, in any year where an election of directors by
stockholders is not required under the 1940 Act. The date of an Annual Meeting
shall be set by appropriate resolution of the Board of Directors, and
stockholders shall vote on the election of directors and transact any other
business as may be properly brought before the Annual Meeting.
ARTICLE I.3. Special or Extraordinary Meetings. Special or
extraordinary meetings of the stockholders for any purpose or purposes may be
called by the Chairman of the Board or the President or a majority of the Board
of Directors. Special meetings of the stockholders shall be called by the
Secretary upon receipt of the request in writing signed by stockholders holding
not less than one quarter in amount of the entire capital stock issued and
outstanding and entitled to vote thereat; provided that such request shall state
the purpose or purposes of the proposed meeting and the matters to be acted
upon, and the stockholders requesting such meeting shall have paid the
Corporation its reasonably estimated cost of preparing and mailing the notice
thereof, which the Secretary shall determine and specify to such stockholders.
Unless requested by stockholders entitled to cast a majority of all the votes
entitled
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to be cast at the meeting, a special meeting need not be called to consider any
matter which is substantially the same as a matter voted on at any special
meeting of the stockholders held during the preceding twelve months.
ARTICLE I.4. Notice of Meeting of Stockholders. Not less
than ten days' and not more than ninety days' written or printed notice of every
meeting of stockholders, stating the time and place thereof (and the general
nature of the business proposed to be transacted at any special or extraordinary
meeting), shall be given to each stockholder entitled to vote thereat by leaving
the same with him or at his residence or usual place of business or by mailing
it, postage prepaid, and addressed to him at his address as it appears upon the
books of the Corporation.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by proxy
or to any stockholder who, in writing executed and filed with the records of the
meeting, either before or after the holding thereof, waives such notice.
ARTICLE I.5. Closing of Transfer Books; Record Dates. The
Board of Directors may fix the time, not exceeding twenty days preceding the
date of any meeting of stockholders, any dividend payment date or any date for
the allotment of rights, during which the books of the Corporation shall be
closed against transfers of stock. If such books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of providing for the closing of the books
against transfers of stock as aforesaid, the Board of Directors may fix, in
advance, a date, not exceeding ninety days and not less than ten days preceding
the date of any meeting of stockholders, and not exceeding ninety days preceding
any dividend payment date or any date for the allotment of rights, as a record
date for the determination of the stockholders entitled to notice of and to vote
at such meeting, or entitled to receive such dividends or rights, as the case
may be; and only stockholders of record on such date shall be entitled to notice
of and to vote at such meeting or to receive such dividends or rights, as the
case may be.
ARTICLE I.6. Quorum; Adjournment of Meetings. The presence
in person or by proxy of the holders of record of one third of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote
thereat, shall constitute a quorum at all meetings of the stockholders. If at
any meeting of the stockholders there shall be less than a quorum present, the
stockholders present at such meeting may, without further notice, adjourn the
same from time to time until a quorum shall attend, but no business shall be
transacted at any such adjourned meeting except such as might have been lawfully
transacted had the meeting not been adjourned. This ARTICLE I.6 may be altered,
amended, or repealed only upon the affirmative vote of the holders of the
majority of the aggregate of the votes entitled to be cast thereon.
ARTICLE I.7. Voting and Inspectors. At all meetings of
stockholders every stockholder of record entitled to vote thereat shall be
entitled to one vote for each share of stock
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standing in his name on the books of the Corporation (and such stockholders of
record holding fractional shares shall have proportionate voting rights as
provided in the Articles of Incorporation) on the date for the determination of
stockholders entitled to vote at such meeting, either in person or by proxy
appointed by instrument in writing subscribed by such stockholder or his duly
authorized attorney. No proxy which is dated more than eleven months before the
meeting at which it is offered shall be accepted, unless such proxy shall, on
its face, name a longer period for which it is to remain in force.
All elections shall be had and all questions decided by a
majority of the votes cast at a duly constituted meeting, except as otherwise
provided in the Articles of Incorporation or in these By-Laws or by specific
statutory provision superseding the restrictions and limitations contained in
the Articles of Incorporation or in these By-Laws.
At any election of Directors, the Board of Directors prior
thereto may, or, if they have not so acted, the chairman of the meeting may, and
upon the request of the holders of ten percent (10%) of the stock entitled to
vote at such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of Director shall be appointed such
Inspector.
The chairman of the meeting may cause a vote by ballot to
be taken upon any election or matter and such vote shall be taken upon the
request of the holders of ten percent (10%) of the stock entitled to vote on
such election or matter.
ARTICLE I.8. Conduct of Stockholders' Meetings. The
meetings of the stockholders shall be presided over by the Chairman of the
Board, or if he shall not be present, by the President or a Vice President, or
if neither of them is present, by a chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as secretary of such
meetings, or if he is not present, an Assistant Secretary shall so act; if
neither the Secretary nor an Assistant Secretary is present, then the meeting
shall elect its secretary.
ARTICLE I.9. Concerning Validity of Proxies, Ballots, Etc.
At every meeting of the stockholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the Secretary of
the meeting, who shall decide all questions touching the qualification of
voters, the validity of the proxies, and the acceptance or rejection of votes,
unless inspectors of election shall have been appointed as provided in ARTICLE
I.7, in which event such inspectors of election shall decide all such questions.
ARTICLE I.10. Action Without Meeting. Any action to be
taken by stockholders may be taken without a meeting if all stockholders
entitled to vote on the matter consent to the action in writing and the consents
are filed with the records of stockholders' meetings.
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ARTICLE II
BOARD OF DIRECTORS
ARTICLE II.1. Number and Tenure of Office. The business
and property of the Corporation shall be conducted and managed under the
direction of a Board of Directors consisting of three Directors, which number
may be increased as provided in ARTICLE II.3. Each Director shall hold office
until the annual meeting of stockholders of the Corporation next succeeding his
election and until his successor is duly elected and qualifies. Directors need
not be stockholders.
ARTICLE II.2. Vacancies. In case of any vacancy in the
Board of Directors through death, resignation, removal, or other cause, a
majority of the remaining Directors, although such majority is less than a
quorum, by an affirmative vote, may elect a successor to hold office until the
next annual meeting of the stockholders of the Corporation and until his
successor is duly elected and qualifies, unless in the case of removal of a
Director the stockholders shall have filled the vacancy caused by such removal,
as provided in ARTICLE II.15 hereof.
ARTICLE II.3. Increase or Decrease in Number of Directors.
The Board of Directors, by the vote of a majority of the entire Board, may
increase the number of Directors to a number not exceeding thirteen, and may
elect Directors to fill the vacancies created by any such increase in the number
of Directors until the next annual meeting and until their successors are duly
elected and qualify. The Board of Directors, by the vote of a majority of the
entire Board, may likewise decrease the number of Directors to a number not less
than three.
ARTICLE II.4. Election of Entire New Board. If at any time
after the first annual meeting of stockholders of the Corporation a majority of
the Directors in office shall consist of Directors elected by the Board of
Directors, a special meeting of the stockholders shall be called forthwith for
the purpose of electing the entire Board of Directors, and the terms of office
of the Directors then in office shall terminate upon the election and
qualification of such Board of Directors. This ARTICLE II.4 may be altered,
amended or repealed only upon the affirmative vote of the holders of a majority
of all the shares of the capital stock of the Corporation at the time
outstanding and entitled to vote.
ARTICLE II.5. Place of Meeting. The Directors may hold
their meetings, have one or more offices, and keep the books of the Corporation
outside the State of Maryland, at any office or offices of the Corporation or at
any other place as they may from time to time by resolution determine, or, in
the case of meetings, as shall be specified or fixed in the respective notices
or waivers of notice thereof.
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ARTICLE II.6. Regular Meetings. Regular meetings of the
Board of Directors shall be held at such time and on such notice, if any, as the
Board of Directors may from time to time determine. No notice of any regular
meeting need be in writing.
The annual meeting of the Board of Directors shall be held
as soon as possible after the annual meeting of the stockholders for the
election of Directors.
ARTICLE II.7. Special Meetings. Special meetings of the
Board of Directors may be held from time to time upon call of the President or
of a majority of the Directors, by oral or telegraphic or written notice duly
served on or sent or mailed to each Director not less than one day before such
meeting. No notice need be given to any Director who attends in person or to any
Director who, in writing executed and filed with the records of such meeting
either before or after the holding thereof, waives such notice. Such notice or
waiver of notice need not state the purpose or purposes of such meeting.
ARTICLE II.8. Telephone Meetings. Members of the Board of
Directors or any committee of the Board may participate in a meeting by means of
a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at the meeting.
ARTICLE II.9. Quorum. One-third of the Directors shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the Directors present at any meeting at which there
is a quorum shall be the act of the Directors, except as may be otherwise
specifically provided by statute, by the Articles of Incorporation, by these
By-Laws or any contract or agreement to which the Corporation is a party.
ARTICLE II.10. Executive Committee. The Board of Directors
may, in each year, by the affirmative vote of a majority of the entire Board,
elect from the Directors an Executive Committee to consist of such number of
Directors (not less than three) as the Board may from time to time determine.
The Board of Directors by such affirmative vote shall have power at any time to
change the members of such Committee and may fill vacancies in the Committee by
election from the Directors. When the Board of Directors is not in session, the
Executive Committee shall have and may exercise any or all of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation (including the power to authorize the seal of the Corporation to be
affixed to all papers which may require it), except as provided by law or by any
contract or agreement to which the Corporation is a party, and except the power
to increase or decrease the size of, or fill vacancies on, the Board, to remove
or appoint executive officers, to dissolve or change the permanent membership of
the Executive Committee, or to make or amend the By-Laws of the Corporation. The
Executive Committee
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may fix its own rules of procedure, and may meet when and as provided by such
rules or by resolution of the Board of Directors, but in every case the presence
of a majority shall be necessary to constitute a quorum. In the absence of any
member of the Executive Committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a member of the Board of
Directors to act in the place of such absent member.
ARTICLE II.11. Other Committees. The Board of Directors,
by the affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members (not less
than two) and shall have and may exercise such powers as the Board may determine
in the resolution appointing them. A majority of all members of any such
committee may determine its action and fix the time and place of its meetings,
unless the Board of Directors shall otherwise provide. The Board of Directors
shall have power at any time to change the members and powers of any such
committee, to fill vacancies, and to discharge any such committee.
ARTICLE II.12. Action Without Meeting. Any action to be
taken by the Board of Directors, the Executive Committee, or any other committee
of the Board may be taken without a meeting if all the members thereof consent
to the action in writing and the consents are filed with the minutes of the
Board, the Executive Committee, or such other committee, as the case may be.
ARTICLE II.13. Compensation of Directors. No Directors
shall receive any stated salary or fees from the Corporation for his services as
a Director if he is, other than by being a Director, affiliated (as such term is
defined by the Investment Company Act of 1940) with the Corporation, its
investment adviser, or its principal underwriter. Except as provided in the
preceding sentence, Directors shall be entitled to receive such compensation
from the Corporation for their services as may from time to time be voted by the
Board of Directors.
ARTICLE II.14. Removal of Directors. At any stockholders'
meeting at which a quorum is present, the stockholders of the Corporation may
remove any Director, with or without cause, by the affirmative vote of a
majority of all the votes entitled to be cast for the election of Directors, and
at the same meeting the stockholders may by like vote elect a qualified person
as Director to replace the Director so removed.
ARTICLE III
OFFICERS
ARTICLE III.1. Executive Officers. The executive officers
of the Corporation shall be chosen by the Board of Directors as soon as may be
practicable after the annual meeting of the stockholders. These may include a
Chairman of the Board, a President, one or more Vice Presidents (the number
thereof to be determined by the Board of Directors), a Secretary and a
Treasurer. The Board of Directors or the Executive Committee may also in its
discretion appoint
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Assistant Secretaries, Assistant Treasurers, and other officers, agents and
employees, who shall have such authority and perform such duties as the Board of
Directors or the Executive Committee may determine. The Board of Directors may
fill any vacancy which may occur in any office. Any two offices, except those of
President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law or these By-Laws to be executed,
acknowledged or verified by two or more officers.
ARTICLE III.2. Term of Office. The term of office of all
officers shall be one year and until their respective successors are chosen and
qualified; provided, however, that any officer may be removed from office at any
time, with or without cause, by vote of a majority of the entire Board of
Directors.
ARTICLE III.3. Powers and Duties. The Chairman of the
Board of Directors shall, if present, preside at all meetings of the Board of
Directors and at all meetings of stockholders. He shall also be a member of and
Chairman of any Executive Committee or Investment Committee. The President shall
be the chief executive officer. Subject to the foregoing, the officers of the
Corporation shall have such powers and duties as generally pertain to their
respective offices, as well as such powers and duties as may from time to time
be conferred by the Board of Directors or the Executive Committee.
ARTICLE III.4. Surety Bonds. The Board of Directors may
require any officer or agent of the Corporation to execute a bond (including,
without limitation, any bond required by the federal Investment Company Act of
1940, as amended, and the rules and regulations of the Securities and Exchange
Commission) to the Corporation in such sum and with such surety or sureties as
the Board of Directors may determine, conditioned upon the faithful performance
of his duties to the Corporation, including responsibility for negligence and
for the accounting of any of the Corporation's property, funds or securities
that may come into his hands.
ARTICLE IV
CAPITAL STOCK
ARTICLE IV.1. Certificates of Stock. Certificates for
shares of stock shall be in such form as the Board of Directors may from time to
time prescribe. No certificates shall be valid unless it is signed by the
President or a Vice-President and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer of the Corporation and
sealed with its seal or unless it bears the facsimile signatures of such
officers and a facsimile of such seal. In case any officer who has signed any
certificate ceases to be an officer of the Corporation before the certificate is
issued, the certificates may nevertheless be issued by the Corporation with the
same effect as if the officer had not ceased to be such officer as of the date
of its issue.
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ARTICLE IV.2. Transfer of Shares. Shares of the
Corporation shall be transferable on the books of the Corporation by the holder
of record thereof in person or by his duly authorized attorney or legal
representative, (i) if a certificate or certificates have been issued for such
shares upon surrender and cancellation of certificates for the same number of
shares of the same class, duly endorsed or accompanied by proper instruments of
assignment and transfer, with such proof of the authenticity of the signature as
the Corporation or its agents may reasonably require, or (ii) as otherwise
prescribed by the Board of Directors.
ARTICLE IV.3. Stock Ledgers. The stock ledgers of the
Corporation, containing the names and addresses of the stockholders and the
number of shares held by them respectively, shall be kept at the principal
office of the Corporation in Baltimore, Maryland, or, if the Corporation employs
a transfer agent, at the offices of the transfer agent of the Corporation.
ARTICLE IV.4. Lost, Stolen or Destroyed Certificates. The
Board of Directors or the Executive Committee may determine the conditions upon
which a new certificate of stock of the Corporation of any class may be issued
in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in their discretion, require the owner of such certificate
or his legal representative to give bond, with sufficient surety, to the
Corporation and the transfer agent, if any, to indemnify it and such transfer
agent against any and all loss or claims which may arise by reason of the issue
of a new certificate in the place of the one so lost, stolen or destroyed.
ARTICLE V
CORPORATE SEAL
The Board of Directors shall provide a suitable corporate
seal, in such form and bearing such inscriptions as it may determine.
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ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the
Board of Directors.
ARTICLE VII
CUSTODY OF SECURITIES
ARTICLE VII.1. Employment of a Custodian. The Corporation
shall place and at all times maintain in the custody of a Custodian (including
any sub-custodian for the Custodian) all funds, securities and similar
investments owned by the Corporation. The Custodian (and any sub-custodian)
shall be a bank having not less than $2,000,000 aggregate capital, surplus and
undivided profits and shall be appointed from time to time by the Board of
Directors, which shall fix its remuneration.
ARTICLE VII.2. Action Upon Termination of Custodian
Agreement. Upon termination of a Custodian Agreement or inability of the
Custodian to continue to serve, the Board of Directors shall promptly appoint a
successor custodian, but in the event that no successor custodian can be found
who has the required qualifications and is willing to serve, the Board of
Directors shall call as promptly as possible a special meeting of the
stockholders to determine whether the Corporation shall function without a
custodian or shall be liquidated. If so directed by vote of the holders of a
majority of the outstanding shares of stock of the Corporation, the Custodian
shall deliver and pay over all property of the Corporation held by it as
specified in such vote.
ARTICLE VII.3. Other Arrangements. The Corporation may
make such other arrangements for the custody of its assets (including deposit
arrangements) as may be required by any applicable law, rule or regulation.
ARTICLE VIII
INDEMNIFICATION
ARTICLE VIII.1. Indemnification of Officers, Directors,
Employees and Agents. The Corporation shall indemnify its present and past
Directors, officers, employees, and agents, and persons who are serving or have
served at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or enterprise,
to the maximum extent provided and allowed by Md. Corp. and Assigns.
Code 2-418, as amended from time to time.
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ARTICLE VIII.2. Limitations of Indemnification.
(a) Notwithstanding anything herein to the contrary, no
Director, officer, investment adviser, or principal underwriter of the
Corporation shall be indemnified for any liability, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office or in performance of it contract. Subject to the limitation of any
applicable law, the determination of whether or not there has been such
disabling conduct may be determined by (1) a final decision on the merits by a
court or other body before whom the proceeding was brought that such person to
be indemnified was not liable by reason of such disabling conduct, or (2) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that such person to be indemnified was not liable by reason of such
disabling conduct, by (i) the vote of a majority of a quorum of directors which
are neither "interested persons", as defined in the Investment Company Act of
1940 ("disinterested directors") nor parties to the proceeding, or (ii) whether
or not such quorum is obtainable, if a majority of a quorum of disinterested
directors so directs, by an independent legal counsel in a written opinion.
(b) Notwithstanding anything herein to the contrary, no
expenses (including attorneys' fees) incurred by the Corporation's Directors and
officers in any pending proceeding shall be paid by the Corporation in advance
unless such person to be indemnified, or someone on his behalf, undertakes to
repay the advance unless it is ultimately determined that he is entitled to
indemnification and (1) such person provides security for his undertaking, (2)
the Corporation is insured against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of the disinterested directors who are
not parties to the proceeding, or an independent legal counsel (chosen by a
majority of a quorum of disinterested directors) in a written opinion, shall
determine, based upon a review of readily available facts, that there is reason
to believe that such person will ultimately be entitled to indemnification.
ARTICLE IX
INVESTMENT LIMITATIONS
The Corporation may not:
(a) Borrow money, except for temporary purposes in an
aggregate amount not to exceed 5% of the value of the total assets of the
Corporation at the time of borrowing;
(b) Mortgage, pledge or hypothecate any of its assets,
except to the extent necessary to secure borrowings permitted by subparagraph
(a), provided that the deposit in escrow of underlying securities in connection
with the writing of call options is not deemed to be a pledge;
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(c) Purchase securities on "margin";
(d) Invest more than 5% of its total assets (taken at
market value) in the securities of any one issuer, other than the U.S.
Government or its agencies and instrumentalities;
(e) Purchase more than 10% of the voting securities or
more than 10% of all the securities of any one issuer, or invest to control or
manage any company;
(f) Invest more than 25% of the total assets of the
Corporation (taken at market value) in securities of issuers in any one
industry;
(g) Purchase securities issued by any other investment
company, except in connection with a merger, consolidation, acquisition or
reorganization or by purchase in the open market of securities of closed-end
investment companies where no underwriter or dealer's commission or profit,
other than a customary brokerage commission, is involved and only if immediately
thereafter not more than 10% of the Corporation's total assets (taken at market
value) would be invested in such securities;
(h) Purchase or sell any commodity or commodity future
contracts, or interests in oil and gas or other mineral exploration or
development programs; except that the Fund may invest in so-called master
limited partnerships which have oil and gas interests so long as such
partnerships are listed on the New York Stock Exchange or the American Stock
Exchange or are included in the National Association of Securities Dealers, Inc.
national market system.
(i) Underwrite the securities of other issuers, except
that the Corporation may invest in securities that are not readily marketable
without registration under the Securities Act of 1933 if immediately after the
making of such investment not more than 5% of the value of its total assets
(taken at cost) would be so invested;
(j) Invest more than 5% of its total assets (taken at
market value) in securities of companies which, including their predecessors,
have been in operation for less than three years or in equity securities which
are not readily marketable;
(k) Make loans, except loans of portfolio securities and
except to the extent that the purchase of a portion of an issue of publicly
distributed notes, bonds or debt obligations, or the entry into repurchase
agreements, or deposits may be considered loans;
(l) Write or purchase put, call, straddle or spread
options except that the Corporation may sell covered call options with respect
to its portfolio securities listed on a national securities exchange or quoted
on NASDAQ and enter into closing purchase transactions with respect to call
options so listed or quoted; or
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(m) Purchase or sell real estate, provided that the
Corporation may invest in readily marketable securities secured by real estate
or interests therein or issued by companies which invest in real estate or
interests therein.
(n) Purchase or retain the securities of any issuer if the
officers or directors of the Fund, its investment advisers, or other managers
owning beneficially more than one-half of one percent of such outstanding
securities together own beneficially more than five percent of such outstanding
securities.
If a percentage restriction described above is complied
with at the time an investment is made, a later increase or decrease in
percentage resulting from a change in values of portfolio securities or in the
amount of net assets of the Corporation will not be considered a violation of
any of those restrictions.
ARTICLE X
AMENDMENTS
ARTICLE X.1. General. Except as provided in ARTICLE X.2
hereof, all By- Laws of the Corporation, whether adopted by the Board of
Directors or the stockholders, shall be subject to amendment, alteration or
repeal, and new By-Laws may be made, by the affirmative vote of a majority of
either:
(a) the holders of record of the outstanding shares of
stock of the Corporation entitled to vote at any annual or special meeting, the
notice or waiver of notice of which shall have specified or summarized the
proposed amendment, alteration, repeal or new By-Law; or
(b) the entire Board of Directors at any regular or
special meeting, the notice or waiver of notice of which shall have specified or
summarized the proposed amendment, alteration, repeal or new By-Law.
ARTICLE X.2. Amendment by Stockholders Only.
(a) No amendment of any Article of these By-Laws shall be
made except by the stockholders of the Corporation, if the By Laws provide that
such Article shall not be amended, altered or repealed except by the
stockholders
(b) From and after the issue of any shares of the capital
stock of the Corporation, no amendment of this Article X or of Article IX shall
be made except by the stockholders of the Corporation.
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INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT, made this 8th day of
September, 1986, by and between Addison Capital Shares, Inc., a Maryland
corporation (the "Fund"), and Addison Capital Management Company, a Pennsylvania
corporation (the "Adviser").
WHEREAS, the Fund is registered as an open-end, diversified
investment company under the Investment Company Act pf 1940 (the "1940 Act") and
has registered its shares of common stock for sale to the public under the
Securities Act of 1933 and various state securities laws; and
WHEREAS, the Fund wishes to retain the Adviser to provide
investment advisory services to the Fund; and
WHEREAS, the Adviser is willing to furnish such services on
the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, and intending to be legally bound, the Fund and the
Adviser agree as follows:
1. The Fund shall at all times keep the Adviser fully informed
with regard to the securities owned by it, its funds available, or to become
available, for investment, and generally as to the condition of its affairs. It
shall furnish the Adviser with such other documents and information with regard
to its affairs as the Adviser may from time to time reasonably request.
2. (a) Subject to the direction and control of the Fund's
Board of Directors, the Adviser shall regularly provide the Fund with investment
research, advice,
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management and supervision and shall furnish a continuous investment program for
the Fund's portfolio of securities consistent with the Fund's investment goals
and policies. The Adviser shall determine from time to time what securities will
be purchased, retained or sold by the Fund, and shall implement those decisions,
all subject to the provisions of the Fund's Articles of Incorporation and
By-laws, the 1940 Act, the applicable rules and regulations of the Securities
and Exchange Commission, and other applicable federal and state laws, as well as
the investment goals and policies of the Fund.
(b) The Adviser will place orders pursuant to its
investment determinations for the Fund either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers the Adviser
shall use its best efforts to obtain for the Fund the best execution available.
In using its best efforts to obtain the best execution available, the Adviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Board of Directors of the
Fund may determine, the Adviser shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Fund to pay a broker or dealer that provides
brokerage and research services to the Adviser an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in
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good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion. The Fund hereby authorizes
any entity or person associated with the Adviser which is a member of a national
securities exchange to effect any transaction on any such exchange for the
account of the Fund which is permitted by Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Fund hereby
consents to the retention of compensation for such transactions in accordance
with Rule 11a2-2(T)(2)(iv).
3. (a) The Adviser, at its expense, shall supply the Board of
Directors and officers of the Fund with all statistical information and reports
reasonably required by them and reasonably available to the Adviser. The Adviser
shall maintain and preserve all books and records with respect to the Fund's
securities and transactions in accordance with all applicable federal and state
laws and regulations. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Adviser agrees that all records which it maintains for the
Fund are the property of the Fund and further agrees to surrender promptly to
the Fund any of such records upon the Fund's request. The Adviser further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
(b) Other than as herein specifically indicated, the
Adviser shall not be responsible for the Fund's expenses. Specifically, the
Adviser will not be responsible for any of the following expenses of the Fund,
which expenses shall be the responsibility of the Fund: legal expenses;
interest, taxes, governmental fees or membership dues; brokerage commissions or
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charges, if any; fees of custodians, transfer agents, registrars or other
agents; expense of preparing share certificates; expenses relating to the
redemption or repurchase of the Fund's shares; expenses or registering and
qualifying Fund shares for sale under applicable federal and state law; expenses
of preparing, setting in print, printing and distributing prospectuses, reports,
notices and dividends to Fund stockholders; costs of stationary; costs of
stockholders and other meetings of the Fund; traveling expenses of officers,
directors and employees of the Fund, if any; and the Fund's premiums on any
fidelity bond and other insurance covering the Fund and its officers and
directors. The Adviser shall, however, be responsible for all expenses incurred
by it in connection with its activities under this Agreement other than the cost
of securities (including brokerage commissions if any) purchased for the Fund.
4. No director, officer or employee of the Fund shall receive
from the Fund any salary or other compensation as such director, officer or
employee while he is at the same time a director, officer or employee of the
Adviser or any affiliated company of the Adviser. This paragraph shall not apply
to directors, executive committee members, consultants and other persons who are
not regular members of the Adviser's or any affiliated company's staff.
5. (a) As compensation for the services performed by the
Adviser, including the services of any consultants retained by the Adviser, the
Fund shall pay the Adviser, as promptly as possible after the last day of each
month, a fee, calculated daily, of 0.75% annually of the Fund's first $100
million in average daily net assets; 0.50% annually of average daily net assets
in excess of $100 million but less than $250 million, and 0.25% annually of
average daily net assets in excess of $250 million. The first payment of the fee
shall be made as promptly as possible at the end of the month next succeeding
the effective date of this
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Agreement, and shall constitute a full payment of the fee due the Adviser of all
services prior to that date. If this Agreement is terminated as of any date not
the last day of a month, such fee shall be paid as promptly as possible after
such date of termination, shall be based on the average daily net assets of the
Fund in that period from the beginning of such month to such date of
termination, and shall be that proportion of such average daily net assets as
the number of business days in such period bears to the number of business days
in such month.
(b) The average daily net assets of the Fund shall in
all cases be based only on business days and be computed as of the time of the
regular close of business of the New York Stock Exchange, or such other time as
may be determined by the Board of Directors of the Fund.
(c) If the expenses borne by the Fund in any fiscal
year exceed the applicable expense limitations imposed by the securities
regulations of any state in which Fund shares are registered or qualified for
sale to the public, the Adviser will reimburse the Fund for its pro rate share
of the excess up to the amount of the Fee payable to it during the fiscal year
pursuant to subparagraph (a) above, provided however that no reimbursement shall
be due unless Janney Montgomery Scott Inc. ("Janney") shall have waived the
entire amount of the fee due to it for such year under the Service Agreement
dated the date hereof between the Fund and Janney. The Adviser's "pro rata share
of the excess" shall mean the percentage reduction of the Adviser's fee that is
equal, on a percentage basis, to a reduction of Janney's Distribution Fee due
for such year under, and as defined in, the Underwriting Agreement between
Janney and the Fund dated the date hereof, such that the sum, in dollars, of
both reductions equals, in aggregate, the total excess.
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<PAGE>
(d) Each payment due under this Section 5 shall be
accompanied by a report of the Fund prepared either by the Fund or by a
reputable firm of independent accountants which shall show the amount properly
payable to the Adviser under this Agreement and detailed computation thereof.
6. The Adviser assumes no responsibility under this Agreement
other than to render the services called for hereunder, in good faith, and shall
not be responsible for any action of the Board of Directors of the Fund in
following or declining to follow any advice or recommendations of the Adviser;
provided, that nothing in this Agreement shall protect the Adviser against any
liability to the Fund or its stockholders to which it would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
7. Nothing in this Agreement shall limit or restrict the right
of any director, officer, or employee of the Adviser who may also be a director,
officer, or employee of the Fund, to engage in any other business or to devote
his time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature, or to limit or
restrict the right of the Adviser to engage in any other business or to render
services of any kind, including investment advisory and management services, to
any other corporation, firm, individual or association.
8. As used in this Agreement, the terms "securities", and "net
assets", shall have the meanings ascribed to them in the Articles of
Incorporation of the Fund; and the terms "assignment", "interested person", and
"majority of the outstanding voting securities" shall have
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<PAGE>
the meanings given to them by Section 2(a) of the 1940 Act, subject to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
9. Subject to the provisions of paragraph 10 below, this
Agreement will remain in effect for two years from the date of its execution and
from year to year thereafter, provided that the Adviser does not notify the Fund
in writing at least sixty (60) days prior to the expiration date in any year
that it does not wish continuance of the Agreement for an additional year, and
provided further that such continuance is specifically approved at least
annually (a) by the vote of a majority of the directors of the Fund who are not
parties to this Agreement or interested persons of such parties, cast in person
at a meeting called for that purpose, and (b) vote of the holders of a majority
of the outstanding voting securities of the Fund or by majority vote of the
Fund's Board of Directors.
10. This Agreement shall terminate automatically in the event
of its assignment by the Adviser and shall not be assignable by the Fund without
the consent of the Adviser. This agreement may also be terminated at any time,
without the payment of any penalty, by the Board of Directors of the Fund or by
vote of a majority of the outstanding voting securities of the Fund by sixty
(60) days' written notice addressed to the Adviser at its principal place of
business.
11. In the event this Agreement is terminated by either party
or upon written notice from the Adviser at any time, the Fund hereby agrees that
it will eliminate from its corporate name any references to the name of
"Addison". The Fund shall have the non-exclusive use of the name "Addison" in
whole or in part so long as this Agreement is effective of until such notice is
given.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized.
(SEAL) ADDISON CAPITAL SHARES, INC.
Attest:
/s/ Radcliffe Cheston By: /s/ Richard Boorse
- ---------------------------- -------------------------
Secretary Treasurer
(SEAL) ADDISON CAPITAL MANAGEMENT
COMPANY
Attest:
/s/ Radcliffe Cheston By: /s/ Jay Massey
- ---------------------------- -------------------------
Secretary President
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Exhibit 6(a)
UNDERWRITING AGREEMENT
This UNDERWRITING AGREEMENT, made this 8th day of September,
1986, by and between ADDISON CAPITAL SHARES, INC., a Maryland corporation (the
"Fund") and JANNEY MONTGOMERY SCOTT INC., a Delaware corporation (the
"Distributor").
WHEREAS, the Fund is registered as an open-end, diversified
investment company under the Investment Company Act of 1940 (the "1940 Act") and
has registered its shares of common stock (the "Shares") for sale to the public
under the Securities Act of 1933 (the "1933 Act") and various state securities
laws; and
WHEREAS, the Fund wishes to retain the Distributor as the
principal underwriter in connection with the offering and sale of the Shares and
to furnish certain other services to the Fund as specified in this Agreement;
and
WHEREAS, this Agreement has been approved by a vote of the
Fund's Board of Directors and certain disinterested directors in conformity with
Paragraph (b)(2) of Rule 12b-1 under the 1940 Act; and
WHEREAS, the Distributor is willing to act as principal
underwriter and to furnish such services on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and intending to be legally bound, the Fund and the
Distributor agree as follows:
1. The Fund hereby appoints the Distributor as principal
underwriter in connection with the offering and sale of the Shares. The Fund
authorizes the Distributor, as exclusive agent for the Fund, subject to
applicable federal and state law and the Articles of
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Incorporation and By-Laws of the Fund: (a) to promote the Fund; (b) to solicit
orders for the purchase of the Shares subject to such terms and conditions as
the Fund may specify; and (c) to accept orders for the purchase of the Shares on
behalf of the Fund. The Distributor shall comply with all applicable federal and
state laws and offer the Shares on an agency or "best efforts" basis under which
the Fund shall only issue such Shares as are actually sold.
2. The public offering price of each Share shall be (a) the
net asset value per share (as determined by the Fund) of the outstanding Shares
of the Fund Plans (b) a sales charge equal to 3% of such net asset value per
share, subject to reduction in the circumstances set forth in the Fund's current
Prospectus. The Fund shall furnish the Distributor with a statement of each
computation of the public offering price of Shares and of the details entering
into such computation.
3. (a) As compensation for the services performed and the
expenses assumed by the Distributor under this Agreement including, but not
limited to, any commissions paid for sales of Shares, the Fund shall pay the
Distributor, as promptly as possible after the last day of each month, an amount
equal to (i) the aggregate of the per share loads paid on sales of Shares during
such month, plus (ii) a fee (the "Distribution Fee"), calculated daily, of 0.65%
per annum of the Fund's average daily net assets. The first payment of this
amount shall be made as promptly as possible at the end of the month next
succeeding the effective date of this Agreement, and shall constitute a full
payment of the fee due the Distributor for all services performed prior to that
date.
(b) If this Agreement is terminated as of any date not the
last day of a month, the amounts due under this section shall be paid as
promptly as possible after such date of
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<PAGE>
termination, and the fee described in clause (a)(ii) shall be based on the
average daily net assets of the Fund in that period from the beginning of such
month to such date of termination, and shall be that proportion of such average
daily net assets as the number of business days in such period bears to the
number of business days in such month.
(c) The average daily net assets of the Fund shall in all
cases be based only on business days and be computed as of the regular close of
business of the New York Stock Exchange, or such other time as may be determined
by the Board of Directors of the Fund.
(d) If the expenses borne by the Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which Fund shares are registered or qualified for sale to the
public, the Distributor will reimburse the Fund for its pro rate share of the
excess up to the amount of the Distribution Fee payable to it during the fiscal
year pursuant to subclause (a)(ii) above. The Distributor's "pro rata share of
the excess" shall mean the percentage reduction of the Distributor's fee that is
equal, on a percentage basis, to a reduction of the normal advisory fee due to
the Fund's Investment Adviser for such year, such that the sum, in dollars of
both reductions equals, in aggregate, the total excess.
(e) Each payment due under this Section 3 shall be accompanied
by a report of the Fund prepared either by the Fund or by a reputable firm of
independent accountants which shall show the amount properly payable to the
Distributor under this Agreement and the detailed computation thereof.
4. As used in this Agreement, the term "Registration
Statement" shall mean the Registration Statement most recently filed by the Fund
with the Securities and Exchange Commission and effective under the 1933 Act, as
such Registration Statement is amended by any
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amendments thereto at the time in effect, and the term "Prospectus" shall mean
the form of prospectus filed by the Fund as part of the Registration Statement.
5. The Distributor, at no expense to the Fund, shall print and
distribute to prospective investors Prospectuses, and may print and distribute
such other sales literature, reports, forms, and advertisements in connection
with the sale of the Shares as comply with the applicable provisions of federal
and state law. The Distributor shall also pay its brokers commissions on sales
of Fund shares made by or through them, except that no commission need be paid
when the sale price does not include a per share load. In connection with such
sales and offers of sale, the Distributor shall give only such information and
make only such statements or representations as are contained in the
Registration Statement or in information furnished in writing to the Distributor
by the Fund, and the Fund shall not be responsible in any way for any other
information, statements or representations given or made by Distributor or its
representatives or agents. Except as specifically provided in this Agreement,
the Fund shall bear none of the expenses of the Distributor in connection with
its offer and sale of the Shares.
6. The Fund agrees, at its own expense, to register the Shares
with the Securities and Exchange Commission, state and other regulatory bodies,
and to prepare and file from time to time such Prospectuses, amendments, reports
and other documents as may be necessary to maintain the Registration Statement.
The Fund shall bear all expenses related to preparing and typesetting such
Prospectuses and other materials required by law and such other expenses,
including printing and mailing expenses. Related to the Fund's communications
with persons who are stockholders of the Fund.
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<PAGE>
7. The Fund agrees to indemnify, defend and hold harmless the
Distributor, its several officers and directors, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers and directors, or any such controlling person may
incur, under the 1933 Act or under common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus or arising out of or based upon any alleged
omission to state a material fact required to be stated in either thereof or
necessary to make the statements in either thereof not misleading, provided that
in no event shall anything contained in this Agreement be construed as to
protect the Distributor against any liability to the Fund or its stockholders to
which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties under this
Agreement.
8. The Distributor agrees to indemnify, defend and hold the
Fund, its several officers and directors, and any person who controls the Fund
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its officers or
directors, or any such controlling person may incur, under the 1933 Act or under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
the Distributor to the Fund for use in the Registration
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<PAGE>
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact in connection with such information required to be stated
in the Registration Statement or Prospectus or necessary to make such
information not misleading.
9. The Fund reserves the right at any time to withdraw all
offerings of the Shares by written notice to the Distributor at its principal
office.
10. The Fund shall not issue certificates representing Shares
unless requested by a shareholder. If such request is transmitted through the
Distributor, the Fund will cause certificates evidencing the Shares owned to be
issued in such names and denominations as the Distributor shall from time to
time direct, provided that no certificates shall be issued for fractional
Shares.
11. The Distributor may at its sole discretion repurchase
Shares offered for sale by the stockholders. A repurchase of Shares by the
Distributor shall be at the net asset value next determined after a repurchase
order has been received. The Distributor will receive no commission or other
remuneration for repurchasing Shares. At the end of each business day, the
Distributor shall notify by telex or in writing, the Fund and Provident
Financial Processing Corporation, the Fund's transfer agent, of the orders for
repurchase of shares received by the Distributor since the last such report, the
amount to be paid for such Shares, and the identity of the stockholders offering
Shares for repurchase. Upon such notice, the Fund shall pay the Distributor such
amounts as are required by the Distributor for the repurchase of such Shares in
cash or in the form of a credit against moneys due the Fund from the Distributor
as proceeds from the sale of Shares. The Fund reserves the right to suspend such
repurchases upon written notice to the Distributor. The Distributor further
agrees to act as agent for the Fund to receive
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<PAGE>
and transmit promptly to the Fund's transfer agent shareholder requests for
redemption of Shares.
12. The Distributor is an independent contractor and shall be
agent for the Fund only in respect to the sale and redemption of the Shares.
13. The services of the Distributor to the Fund under this
Agreement are not to be deemed exclusive, and the Distributor shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
14. The Distributor shall prepare reports for the Board of
Directors of the Fund on a quarterly basis showing such information concerning
expenditures related to this Agreement as from time to time shall be reasonably
requested by the Board of Directors.
15. As used in this Agreement, the terms "securities", and
"net assets", shall have the meanings ascribed to them in the Articles of
Incorporation of the Fund; and the terms "assignment", "interested person", and
"Majority of the outstanding voting securities" shall have the meanings given to
them by Section 2(a) of the 1940 Act, subject to such exemptions as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order.
16. Subject to the provisions of paragraph 17 below, this
Agreement will remain in effect for two years from the date of its execution and
from year to year thereafter, provided however that (a) the Distributor does not
notify the Fund in writing at least sixty (60) days prior to the expiration date
in any year that it does not wish continuance of the Agreement for an additional
year, (b) such continuance is specifically approved at least annually (i) by a
majority vote of the Fund's Board of Directors, and (ii) by the vote of a
majority of the directors of the Fund who are not interested persons of the Fund
and who have no direct or indirect
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financial interest in the operation of the Fund's Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), in this Agreement or in any
agreement related to the Fund's Distribution Plan (the "Rule 12b-1 Directors"),
cast in person at a meeting called for the purpose of voting on such approval,
and (c) the amount of the Distribution Fee may be reduced or eliminated after
the date one year from the date hereof if the Fund's 12b-1 Plan is discontinued
or modified to provide for a lower Distribution Fee, in which event the
Distributor shall have the option of terminating this Agreement on sixty (60)
days notice.
17. This Agreement shall automatically terminate in the event
of its assignment and may be terminated at any time without the payment of any
penalty by the Fund or by the Distributor on sixty (60) days' written notice to
the other party. The Fund may effect such termination by a vote of (i) a
majority of the Board of Directors of the Fund, (ii) a majority of the Fund's
12b-1 Directors, or (iii) a majority of the outstanding voting securities of the
Fund.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized.
(SEAL) ADDISON CAPITAL SHARES, INC.
Attest:
/s/ Radcliffe Cheston By: /s/ Jay Massey
- -------------------------------- --------------------------------
Secretary President
(SEAL) JANNEY MONTGOMERY SCOTT INC.
Attest:
/s/ W. Gresham O'Malley By: /s/ Edgar Scott, Jr.
- --------------------------------- --------------------------------
Secretary Co-Chairman of the Board of
Directors
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Exhibit 6(b)
DEALER AGREEMENT
This DEALER AGREEMENT, made this 8th day of September, 1986,
by and between JANNEY MONTGOMERY SCOTT INC., a Delaware corporation (the
"Distributor") and Penn Mutual Equity Services, Inc., a Pennsylvania corporation
("PMES").
WHEREAS, Addison Capital Shares, Inc., a Maryland corporation
(the "Fund"), is registered as an open-end, diversified investment company under
the Investment Company Act of 1940 (the "1940 Act") and has registered its
shares of common stock (the "Shares") for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Fund has retained the Distributor as the
principal underwriter in connection with the offering and sale of the Shares
pursuant to an underwriting agreement between the Fund and the Distributor (the
"Underwriting Agreement"); and
WHEREAS, the Distributor wishes to engage PMES, and PMES
wishes to act for Distributor, as a dealer in connection with the offering and
sale of the Shares pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and intending to be legally bound, the Distributor
and PMES agree as follows:
1. The Distributor hereby appoints PMES as a dealer in
connection with the offering and sale of the Shares. The Distributor authorizes
PMES, as its sales agent for the Shares, subject to applicable federal and state
law and the Underwriting Agreement: (a) to promote the Fund; (b) to solicit
orders for the purchase of the Shares subject to such terms and
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conditions as the Fund and the Distributor may specify; and (c) to accept orders
for the purchase of the Shares and to transmit them to the Distributor for
transmission to the Fund. PMES shall comply with all applicable federal and
state laws and offer the Shares on an agency or "best efforts" basis.
2. The public offering price of each Share shall be (a) the
net asset value per share (as determined by the Fund) of the outstanding Shares
of the Fund plus (b) a sales charge equal to 3% of such net asset value per
share, subject to reduction in the circumstances set forth in the Fund's current
Prospectus. As received from the Fund, the Distributor shall furnish PMES with a
statement of each computation of the public offering price of Shares and of the
details entering into such computation.
3. (a) As compensation for the services performed by PMES
under this Agreement including, but not limited to, any commissions paid for
sales of Shares, the Distributor shall pay PMES, as promptly as possible after
the last day of each month (but not earlier than the Distributor shall have
received from the Fund the amount owed to the Distributor with respect to such
month under Section 3(a) of the Underwriting Agreement), an amount equal to (i)
the aggregate of the per share loads paid on sales by PMES of Shares during such
month, plus (ii) a fee (the "Dealer's Fee"), calculated daily, of 0.44% per
annum of the average daily net asset value of all outstanding Shares sold by
PMES. The Dealer's Fee shall then be paid by PMES to its agents responsible for
sales of Shares in proportion to Shares held in accounts for which such agents
are responsible. The first payment of the amount due under this section shall be
made as promptly as possible at the end of the month next succeeding the
effective date of this Agreement.
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<PAGE>
(b) If this Agreement is terminated as of any date not the
last day of a month, the amounts due under this section shall be paid as
promptly as possible after such date of termination, and the Dealer's Fee shall
be based on the average daily net assets of the Fund in that period from the
beginning of such month to such date of termination, and shall be that
proportion of such average daily net assets as the number of business days in
such period bears to the number of business days in such month.
(c) The average daily net assets of the Fund shall in all
cases be based only on business days and shall be computed in the manner set
forth in the Underwriting Agreement then in effect.
(d) Each payment due under this Section 3 shall be accompanied
by a report prepared by the Distributor or by a reputable firm of independent
accountants which shall show the amount properly payable to PMES under this
Agreement and the detailed computation thereof.
4. As used in this Agreement, the term "Registration
Statement" shall mean the Registration Statement most recently filed by the Fund
with the Securities and Exchange Commission and effective under the 1933 Act, as
such Registration Statement is amended by any amendments thereto at the time in
effect, the term "Prospectus" shall mean the form of prospectus filed by the
Fund as part of the Registration Statement, and the term "net assets" shall have
the meaning ascribed to it in the Articles of Incorporation of the Fund.
5. PMES shall distribute to prospective investors Prospectuses
and such other sales literature, reports, forms, and advertisements in
connection with the sale of the Shares as are provided by the Distributor and as
comply with the applicable provisions of federal and
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<PAGE>
state law. PMES agrees to pay its broker/representatives commissions on sales of
Fund shares made by or through them, except that no commission need be paid when
the sale price does not include a per share load. In connection with such sales
and offers of sale, PMES shall give only such information and make only such
statements or representations as are contained in the Registration Statement or
in information furnished in writing to PMES by the Distributor or the Fund, and
neither the Fund nor shall the Distributor be responsible in any way for any
other information, statements or representations given or made by PMES or its
representatives or agents. Except as specifically provided in this Agreement,
the Distributor shall bear none of the expenses of PMES in connection with its
offer and sale of the Shares.
6. The Distributor will inform PMES, from time to time, of the
states in which the Shares are qualified for sale to the public. PMES will not
make offers or sales of Shares in a state in which the Shares are not so
qualified without a written confirmation from the Distributor that the Shares
may be sold without registration therein.
7. The Distributor reserves the right at any time to withdraw
all offerings of the Shares by PMES by written notice to PMES at its principal
office, upon receipt by the Distributor of notice from the Fund pursuant to
Section 9 of the Underwriting Agreement.
8. PMES further agrees to act as agent for the Distributor to
receive and transmit promptly to the Distributor, for retransmission to the
Fund's transfer agent, shareholder requests for redemption of Shares.
9. PMES is an independent contractor and shall be agent for
the Distributor only in respect to the sale and redemption of the Shares.
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<PAGE>
10. The services of PMES to the Distributor under this
Agreement are not to be deemed exclusive. PMES shall be free to render similar
services or other services to others so long as its services hereunder are not
impaired thereby, and the Distributor shall be free to engage others as sales
agents or dealers for sales of Shares.
11. Either party may terminate this Agreement, without
penalty, upon sixty (60) days notice to the other party. In addition, the
Distributor may terminate this Agreement at any time that the Underwriting
Agreement is terminated, and may reduce or eliminate the Dealer's Fee if the
Distribution Fee (as defined in the Underwriting Agreement) is reduced or
eliminated, in which event PMES shall have the option of terminating this
Agreement on sixty (60) days notice.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized.
Attest: JANNEY MONTGOMERY SCOTT INC.
By: /s/ W. Gresham O'Malley By: /s/ Edgar Scott, Jr.
----------------------------- ----------------------------------
Secretary Co-Chairman of the
Board of Directors
Attest: PENN MUTUAL EQUITY SERVICES,
INC.
By: By: /s/ D. M. DuPont
------------------------------ ----------------------------------
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<PAGE>
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of September 8, 1986, by and between ADDISON
CAPITAL SHARES, INC., a Maryland corporation (the "Fund"), and PROVIDENT
NATIONAL BANK, a national banking association ("Provident").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended ("the
1940 Act"); and
WHEREAS, the Fund desires to retain Provident to serve as the Fund's
custodian and Provident is willing to serve as the Fund's custodian;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Provident to act as custodian
of the portfolio securities, cash and other property belonging to the Fund for
the period and on the terms set forth in this Agreement. Provident accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 20 of this Agreement. Provident agrees
to comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder.
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<PAGE>
2. Delivery of Documents. The Fund has furnished Provident with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of Provident as custodian of the portfolio securities, cash and
other property belonging to the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of
the Fund's officers and/or other persons authorized to sign Written
Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Articles of Incorporation filed with the
Department of Assessments and Taxation of the State of Maryland on June 4, 1986
and all amendments thereto (such Articles of Incorporation, as presently in
effect and as they shall from time to time be amended, are herein called the
"Charter");
(d) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "ByLaws");
(e) The Investment Advisory Agreement between Addison Capital
Management Company (the "Advisor") and the Fund dated as of September 6, 1986
(the "Advisory Agreement");
(f) The Services Agreement between Janey Montgomery Scott Inc.
("Janey") and the Fund dated as of 1986 (the "Management Agreement");
(g) The Underwriting Agreement between the Fund and Janney
dated September 8, 1986 (the "Underwriting Agreement");
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<PAGE>
(h) The Transfer Agency Agreement between PFPC and the Fund
dated as of September 8, 1986 (the "Transfer Agency Agreement");
(i) The Administration and Accounting Services Agreement
between Provident Institutional Management Corporation and the Fund dated as of
September 8, 1986 (the "Administration Agreement");
(j) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC") on June 10, 1986;
(k) The Fund's most recent Pre-Effective Amendment to its
Registration Statement on Form N-lA under the Securities Act of 1933, as amended
("the 1933 Act") (File No. 33-6364) and under the 1940 Act as filed with the SEC
on September 9, 1986 relating to shares of the Fund's Capital Stock, par value
per share $0.001 ("Shares"), and all amendments thereto; and
(l) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements thereto are herein called
the "Prospectus").
The Fund will furnish Provident from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the officers of the Fund and any other person,
whether or not any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Oral and Written
Instructions on behalf of the Fund and listed on the Certificate
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<PAGE>
annexed hereto as Appendix A or any amendment thereto as may be received by
Provident from time to time.
(b) "Book-Entry System". As used in this Agreement, the-term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term
"Oral- Instructions" means oral instructions actually received by Provident from
an Authorized Person or from a person reasonably believed by Provident to be an
Authorized Person. The Fund agrees to deliver to Provident, at the time and in
the manner specified in Paragraph 8(b) of this Agreement, Written Instructions
confirming Oral Instructions.
(d) "Property". The term "Property", as used in this
Agreement, means:
(i) any and all securities and other property which
the Fund may from time to time deposit, or cause to be deposited, with Provident
or which Provident may from time to time hold for the Fund,
(ii) all income in respect of any of such securities
or other property;
(iii) all proceeds of the sale of any of such
securities or other property; and
(iv) all proceeds of the sale of securities issued by
the Fund, which are received by Provident from time to time from or on behalf of
the Fund.
(e) "Written Instructions". As used in this Agreement, the
term "Written
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<PAGE>
Instructions" means written instructions delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device, and received by Provident
and signed by an Authorized Person.
4. Delivery and Registration of the Property. The Fund will deliver or
cause to be delivered to Provident all securities and all moneys owned by it,
including cash received for the issuance of its Shares, at any time during the
period of this Agreement. Provident will not be responsible for such securities
and such moneys until actually received by it. All securities delivered to
Provident (other than in bearer form) shall be registered in the name of the
Fund or in the name of a nominee of the Fund or in the name of any nominee of
Provident (with or without indication of fiduciary status), or in the name of
any subcustodian or any nominee of any such subcustodian appointed pursuant to
Paragraph 6 hereof or shall be properly endorsed and in form for transfer
satisfactory to Provident.
5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate custodial
account or accounts in the name of the Fund, subject only to draft or order by
Provident acting pursuant to the terms of this Agreement, and shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Fund. Provident shall make payments of cash to,
or for the account of, the Fund from such cash only (i) for the purchase of
securities for the Fund's portfolio, as provided in Paragraph 13 hereof; (ii)
for the redemption of Fund Shares; (iii) upon receipt of Written Instructions,
for the payment of interest, dividends, taxes, administration, distribution,
advisory or management fees or expenses which are to be borne by the Fund under
the terms of this Agreement, the Advisory Agreement, the Management Agreement,
the Administration Agreement, the Transfer Agency Agreement and the Underwriting
Agreement;
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<PAGE>
(iv) upon receipt of Written Instructions, for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by the
Fund and held by or to be delivered to Provident; (v) to a subcustodian pursuant
to Paragraph 6 hereof; or (vi) upon receipt of Written Instructions, for other
proper Fund purposes. No payment pursuant to (i) above shall be made unless
Provident has received a copy of the broker's or dealer's confirmation or the
payee's invoice, as appropriate.
(b) Provident is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the account of the Fund.
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof, Provident shall
hold and physically segregate in a separate account, identifiable at all times
from those of any other persons, firms, or corporations, all securities and
non-cash property received by it for the account of the Fund. All such
securities and non-cash property are to be held or disposed of by Provident for
the Fund pursuant to the terms of this Agreement. In the absence of Written
Instructions accompanied by a certified resolution of the Fund's Board of
Directors authorizing the transaction, Provident shall have no power or
authority to withdraw, deliver, assign, hypothecate, pledge or otherwise dispose
of any such securities and investments except in accordance with the express
terms provided for in this Agreement. In no case may any Director, officer,
employee or agent of the Fund withdraw any securities. In connection with its
duties under this Paragraph 6, Provident may, at its own expense, enter into
subcustodian agreements with other banks or trust companies for the receipt of
certain securities and cash to be held by Provident for the account of the Fund
pursuant to this Agreement; provided that each such bank or trust company has an
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<PAGE>
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than one million dollars ($1,000,000) for a Provident
subsidiary or affiliate, or of not less than twenty million dollars
($20,000,000) if such bank or trust company is not a Provident subsidiary or
affiliate and that in either case such bank or trust company agrees with
Provident to comply with all relevant provisions of the 1940 Act and applicable
rules and regulations thereunder. Provident shall remain responsible for the
performance of all of its duties under this Agreement and shall hold the Fund
harmless from the acts and omissions of any bank or trust company that it might
choose pursuant to this Paragraph 6.
(b) Promptly after the close of business each day, Provident
shall furnish the Fund with confirmations and a summary of all transfers to or
from the account of the Fund during said day. Where securities are transferred
to an account of the Fund established pursuant to Paragraph 7 hereof, Provident
shall also by book-entry or otherwise identify as belonging to the Fund the
quantity of securities in a fungible bulk of securities registered in the name
of Provident (or its nominee) or shown in Provident's account on the books of
the Book-Entry System. At least monthly and from time to time, Provident shall
furnish the Fund with a detailed statement of the Property held for the Fund
under this Agreement.
7. Use of Book-Entry System. The Fund shall deliver to Provident
certified resolutions of the Board of Directors of the Fund approving,
authorizing and instructing Provident on a continuous and on-going basis until
instructed to the contrary by Oral or Written Instructions actually received by
Provident (a) to deposit in the Book-Entry System all securities belonging to
the Fund eligible for deposit therein and (b) to utilize the Book-Entry System
to the extent possible in connection with Settlements of purchases and sales of
securities by the Fund,
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<PAGE>
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. Without limiting
the generality of such use, it is agreed that the following provisions shall
apply thereto:
(a) Securities and any cash of the Fund deposited in the
Book-Entry System will at all times be segregated from any assets and cash
controlled by Provident in other than a fiduciary or custodian capacity but may
be commingled with other assets held in such capacities. Provident will pay out
money only upon receipt of securities and will deliver securities only upon the
receipt of money.
(b) All books and records maintained by Provident which relate
to the Fund's participation in the Book-Entry System will at all times during
Provident's regular business hours be open to the inspection of the Fund's duly
authorized employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may require.
(c) Provident will provide the Fund with copies of any report
obtained by Provident on the system of internal accounting control of the
Book-Entry System promptly after receipt of such a report by Provident.
Provident will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.
8. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, Provident
shall act only upon Oral and Written Instructions. Although Provident may take
cognizance of the provisions of the Charter and By-Laws of the Fund, Provident
may assume that any Oral or Written instructions received hereunder are not in
any way inconsistent with any provisions of such Charter or ByLaws or any vote,
resolution or proceeding of the Shareholders, or of the Board of Directors, or
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<PAGE>
of any committee thereof.
(b) Provident shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by Provident
pursuant to this Agreement. The Fund agrees to forward to Provident Written
Instructions confirming Oral Instructions in such manner that the Written
Instructions are received by Provident by the close of business of the same day
that such Oral Instructions are given to Provident. The Fund agrees that the
fact that such confirming Written Instructions are not received by Provident
shall in no way affect the validity of the transactions or enforceability of the
transactions authorized by the Fund by giving Oral Instructions. The Fund agrees
that Provident shall incur no liability to the Fund in acting upon Oral
Instructions given to Provident hereunder concerning such transactions provided
such instructions reasonably appear to have been received from an Authorized
Person.
9. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, Provident is authorized to take the following actions:
(a) Collection of Income and Other Payments. Provident shall:
(i) collect and receive for the account of the Fund,
all income and other payments and distributions, including (without limitation)
stock dividends, rights, option premiums and similar items, included or to be
included in the Property, and promptly advise the Fund of such receipt and shall
credit such income, as collected, to the Fund's custodian account;
(ii) endorse and deposit for collection, in the name
of the Fund, checks, drafts, or other orders for the payment of money on the
same day as received;
(iii) receive and hold for the account of the Fund
all securities received
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<PAGE>
as a distribution on the Fund's portfolio securities as a result of a stock
dividend, share split-up or reorganization, recapitalization, readjustment or
other rearrangement or distribution of rights or similar securities issued with
respect to any portfolio securities belonging to the Fund held by Provident
hereunder;
(iv) present for payment and collect the amount
payable upon all securities which may mature or be called, redeemed, or retired,
or otherwise become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper
in connection with. the collection and receipt of such income and other payments
and the endorsement for collection of checks, drafts, and other negotiable
instruments.
(b) Miscellaneous Transactions. Provident is authorized to
deliver or cause to be delivered Property against payment or other consideration
or written receipt therefor in the following cases:
(i) for examination by a broker selling for the
account of the Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or
temporary securities for definitive securities; and
(iii) for transfer of securities into the name of the
Fund or Provident or nominee of either, or for exchange of securities for a
different number of bonds, certificates, or other evidence, representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to Provident.
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<PAGE>
10. Transactions Recruiting Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, Provident, directly or through the use
of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated
in such Oral or Written Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as owner of any securities
may be exercised;
(b) deliver any securities held for the Fund against receipt
of other securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Fund
and take such other steps as shall be stated in said Oral or Written
Instructions to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Fund;
(e) release securities belonging to the Fund to any bank or
trust company for the purpose of pledge or hypothecation to secure any loan
incurred by the Fund; provided, however, that securities shall be released only
upon payment to Provident of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, subject to
proper prior authorization, further securities may be released for that
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<PAGE>
purpose; and repay such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes evidencing the
loan; and
(f) otherwise transfer, exchange or deliver securities in
accordance with Oral or Written Instructions.
11. Segregated Accounts. Provident shall upon receipt of Written or
Oral Instructions establish and maintain a segregated account or accounts on its
records for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities in the Book-Entry
System (i) for the purposes of compliance by the Fund with the procedures
required by a securities or option exchange, providing such complies with the
Investment Company Act and Release No. 10666 or any subsequent release or
releases of the Securities and Exchange Commission relating to the maintenance
of segregated accounts by registered investment companies and (ii) for other
proper corporate purposes, but only, in the case of clause (ii), upon receipt
of, Written Instructions.
12. Dividends and Distributions. The Fund shall furnish Provident with
appropriate evidence of action by the Fund's Board of Directors declaring and
authorizing the payment of any dividends and distributions. Upon receipt by
Provident of Written Instructions with respect to dividends and distributions
declared by the Fund's Board of Directors and payable to shareholders who have
elected in the proper manner to receive their distributions on dividends in
cash, and in conformance with procedures mutually agreed upon by Provident, the
Fund, and the Fund's transfer agent, Provident shall pay to the Fund's transfer
agent, as agent for the shareholders, an amount equal to the amount indicated in
said Written Instructions as payable by the Fund to such shareholders for
distribution in cash by the transfer agent to such shareholders. In lieu of
paying
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<PAGE>
the Fund's transfer agent cash dividends and distributions, Provident may
arrange for the direct payment of cash dividends and distributions to
shareholders by Provident in accordance with such procedures and controls as are
mutually agreed upon from time to time by and among the Fund, Provident and the
Fund's transfer agent.
In accordance with the Prospectus, the Internal Revenue Code and
regulations promulgated and thereunder with such procedures and controls as are
mutually agreed up on from time to time by and among the Fund, Provident and the
Fund's Transfer Agent, Provident shall arrange for the establishment of IRA
custodian accounts for such Shareholders holding Shares through IRA accounts,
and for the segregation of Shares (and dividends paid on such Shares) obtained
through the Letter of Intent Program.
13. Purchases of Securities. Promptly after each decision to purchase
securities by the Advisor, the Fund, through the Advisor, shall deliver to
Provident Oral Instructions specifying with respect to each such purchase: (a)
the name of the issuer and the title of the securities, (b) the number of shares
or the principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person from whom or the
broker through whom the purchase was made. Provident shall upon receipt of
securities purchased by or for the Fund pay out of the moneys held for the
account of the Fund the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral Instructions.
14. Sales of Securities. Promptly after each decision to sell
securities by the Advisor or exercise of an option written by the Fund, the
Fund, through the Advisor, shall deliver to
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<PAGE>
Provident Oral Instructions, specifying with respect to each such sale: (a) the
name of the issuer and the title of the security, (b) the number of shares or
principal amount sold, and accrued interest, if any, (c) the date of sale, (d)
the sale price per unit, (e) the total amount payable to the Fund upon such sale
and (f) the name of the broker through whom or the person to whom the sale was
made. Provident shall deliver the securities upon receipt of the total amount
payable to the Fund upon such sale, provided that the same conforms to the total
amount payable as set forth in such Oral Instructions. Subject to the foregoing,
Provident may accept payment in such form as shall be satisfactory to it, and
may deliver securities and arrange for payment in accordance with the customs
prevailing among dealers in securities.
15. Records. The books and records pertaining to the Fund which are in
the possession of Provident shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at all times during
Provident's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by Provident to the Fund
or the Fund's authorized representative at the Fund's expense.
16. Reports. Provident shall furnish the Fund the following reports:
(a) such periodic and special reports as the Fund may
reasonably request;
(b) a monthly statement summarizing all transactions and
entries for the account of the Fund;
(c) a monthly report of portfolio securities belonging to the
Fund showing the adjusted average cost of each issue and the market value at the
end of such month;
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<PAGE>
(d) a monthly report of the cash account of the Fund showing
disbursements;
(e) the reports to be furnished to the Fund pursuant to Rule
17f-4; and
(f) such other information as may be agreed upon from time to
time between the Fund and Provident.
17. Cooperation With Accountants. Provident shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their opinion, as such may be required from time to time by the Fund.
18. Right to Receive Advice.
(a) Advice of Fund. If Provident shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive, from the
Fund directions or advice, including Oral or Written Instructions where
appropriate.
(b) Advice of Counsel. If Provident shall be in doubt as to
any question of law involved in any action to be taken or omitted by Provident,
it may request advice at its own cost from counsel of its own choosing (who may
be counsel for the Advisor, the Fund or Provident, at the option of Provident).
(c) Conflicting Advice. In case of conflict between
directions, advice or oral or Written Instructions received by Provident
pursuant to subparagraph (a) of this paragraph and advice received by Provident
pursuant to subparagraph (b) of this paragraph, Provident shall be entitled to
rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of Provident. Provident shall be protected in
any action or
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<PAGE>
inaction which it takes in reliance on any directions, advice or Oral or Written
Instructions received pursuant to subparagraphs (a) or (b) of this paragraph
which Provident, after receipt of any such directions, advice or Oral or Written
Instructions, in good faith believes to be consistent with such directions,
advice or Oral or Written Instructions, as the case may be. However, nothing in
this paragraph shall be construed as imposing upon Provident any obligation (i)
to seek such directions, advice or Oral or Written Instructions, or (ii) to act
in accordance with such directions, advice or Oral or Written Instructions when
received, unless, under the terms of another provision of this Agreement, the
same is a condition to Provident's properly taking or omitting to take such
action. Nothing in this subsection shall excuse Provident when an action or
omission on the part of Provident constitutes willful misfeasance, bad faith,
gross negligence or reckless disregard by Provident of any duties or obligations
under this Agreement.
19. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for insuring that the Fund complies with all
applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and any
laws, rules and regulations of governmental authorities having jurisdiction.
20. Compensation. As compensation for the services rendered by
Provident during the term of this Agreement, the Fund will pay to Provident
monthly fees that shall be agreed upon from time to time in writing by Provident
and the Fund.
21. Indemnification. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless Provident and its nominees from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, and any
state and foreign securities and blue sky laws, all as or to be amended from
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<PAGE>
time to time) and expenses, including (without limitation) attorneys' fees and
disbursements, arising directly or indirectly (a) from the fact that securities
included in the Property are registered in the name of any such nominee or (b)
without limiting the generality of the foregoing clause (a) from any action or
thing which Provident takes or does or omits to take or do (i) at the request or
on the direction of or in reliance on the advice of the Fund or (ii) upon Oral
or Written Instructions, provided, that neither Provident nor any of its
nominees shall be indemnified against any liability to the Fund or to its
Shareholders (or any expenses incident to such liability) arising out of (x)
Provident's or such nominee's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties or responsibilities under this
Agreement or (y) Provident's or such nominee's own negligent failure to perform
its duties expressly provided for in this Agreement or otherwise agreed to by
Provident in writing. In the event of any advance of cash for any purpose made
by Provident resulting from orders or Oral or Written Instructions of the Fund,
or in the event that Provident or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the account of the Fund shall be security
therefor.
22. Responsibility of Provident. Provident shall be under no duty to
take any action on behalf of the Fund except as specifically set forth herein or
as may be specifically agreed to by Provident in writing. In the performance of
its duties hereunder, Provident shall be obligated to exercise care and
diligence and to act in good faith and to use its best efforts within reasonable
limits to insure the accuracy and completeness of all services performed under
this Agreement, Provident shall be responsible for its own negligent failure to
perform its duties under this
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<PAGE>
Agreement, but to the extent that duties, obligations and responsibilities are
not expressly set forth in this Agreement, Provident shall not be Liable or any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of Provident or reckless disregard of such duties,
obligations and responsibilities. Without limiting the generality of the
foregoing or of any other provision of this Agreement, Provident in connection
with its duties under this Agreement shall not be under any duty or obligation
to inquire into and shall not be liable for or in respect of (a) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, if any, and which Provident reasonably believes to be genuine; (b)
the validity or invalidity of the issuance of any securities included or to be
included in the Property, the legality or illegality of the purchase of such
securities, or the propriety or impropriety of the amount paid therefor; (c) the
legality or illegality of the sale (or exchange) of any Property or the
propriety or impropriety of the amount for which such Property is sold (or
exchanged); or (d) delays or errors or loss of data occurring by reason of
circumstances beyond Provident's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply, nor shall Provident be
under any duty or obligation to ascertain whether any Property at any time
delivered to or held by Provident may properly be held by or for the Fund.
23. Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by Provident) shall be at the sole risk of the Fund. In any
case in which Provident does not receive any payment due the
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<PAGE>
Fund within a reasonable time after Provident has made proper demands for the
same, it shall so notify the Fund in writing, including copies of all demand
letters, any written responses thereto, and memoranda of all oral responses
thereto and to telephonic demands, and await instructions from the Fund.
Provident shall not be obliged to take legal action for collection unless and
until reasonably indemnified to its satisfaction. Provident shall also notify
the Fund as soon as reasonably practicable whenever income due on securities is
not collected in due course.
24. Duration and Termination. This Agreement shall continue until
termination by the Fund or by Provident in either case on sixty (60) days'
written notice. Upon any termination of this Agreement, pending appointment of a
successor to Provident or vote of the Shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities or other property,
Provident shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than twenty million dollars ($20,000,000) as a
custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Provident shall not be required to make any
such delivery or payment until full payment shall have been made by the Fund of
all liabilities constituting a charge on or against the properties of the Fund
then held by Provident or on or against Provident and until full payment shall
have been made to Provident of all of its fees, compensation, costs and
expenses, subject to the provisions of Paragraph 19 of this Agreement.
25. Notices. All notices and other Communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a)
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<PAGE>
if to Provident at Provident's address, 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, marked for the attention of the Custodian Services
Department (or its successor); (b) if to the Fund, at the address of the Fund,
attention: Rudolph C. Sander; or (c) if to neither of the foregoing. at such
other address as shall have been notified to the sender of any such Notice or
other communication. If the location of the sender of a Notice and the address
of the addressee thereof are, at the time of sending, more than 100 miles apart,
the Notice may be sent by first-class mail, in which case it shall be deemed to
have been given five days after it is sent, or if sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately, and, if the location of the sender of a Notice and the address of
the addressee thereof are, at the time of sending, not more than 100 miles
apart, the Notice may be sent by first-class mail, in which case it shall be
deemed to have been given three days after it is sent, or if sent by messenger,
it shall be deemed to have been given on the day it is delivered, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. All postage, cable, telegram, telex and
facsimile sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.
26. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
27. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
28. Delegation. On thirty (30) days' prior written notice to the Fund,
Provident may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect
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<PAGE>
subsidiary of Provident National Bank, Provident National Corporation or PNC
Financial Corp, provided that Provident and such delegate shall promptly provide
such information as the Fund may request, and respond to such questions as the
Fund may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate.
29. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to delegated and/or Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the Provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in Pennsylvania and
governed by Pennsylvania law. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
[SEAL] ADDISON CAPITAL SHARES, INC.
Attest: /s/ Radcliffe Cheston By: /s/ Jay R. Massey
------------------------------- ---------------------------
Secretary President
[SEAL] PROVIDENT NATIONAL BANK
Attest /s/ John Kinec By: /s/ Francis J. Krohmer, Jr.
------------------------------- ---------------------------
Assistant Secretary Vice President
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<PAGE>
Appendix A
ADDISON CAPITAL SHARES, INC.
Name Signature
- ---- ---------
Jay R. Massey /s/ Jay R. Massey
------------------------------
Radcliffe Cheston /s/ Radcliffe Cheston
------------------------------
John J. Gray /s/ John J. Gray
------------------------------
Charles J. Sullivan /s/ Charles J. Sullivan
------------------------------
Richard Boorse /s/ Richard Boorse
------------------------------
Maryann T. Perrino /s/ Maryann T. Perrino
------------------------------
Kathryn A. Hardwick /s/ Kathryn A. Hardwick
------------------------------
Donald E. Blum /s/ Donald E. Blum
------------------------------
Karen M. Abbott /s/ Karen M. Abbott
------------------------------
<PAGE>
Exhibit 9(a)
SERVICES AGREEMENT
This SERVICES AGREEMENT, made this 8th day of September, 1986,
by and between Addison Capital Shares, Inc., a Maryland corporation (the
"Fund"), and Janney Montgomery Scott Inc., a Delaware corporation ("Janney").
WHEREAS, the Fund is registered as an open-end, diversified
investment company under the Investment Company Act of 1940 (the "1940 Act") and
has registered its shares of common stock for sale to the public under the
Securities Act of 1933 and various state securities laws; and
WHEREAS, the Fund wishes to retain Janney to provide certain
services to the Fund; and
WHEREAS, Janney is willing to furnish such services on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. Janney hereby agrees to (i) maintain office facilities for
the Fund which may be in the offices of Janney or a corporate affiliate but
shall be in such location as the Fund shall reasonably determine, (ii) oversee
performance by Provident National Bank, Provident Financial Processing
Corporation and Provident Institutional Management Corporation of their
respective duties as the Fund's custodian, transfer and dividend disbursing
agent, and administrator, (iii) respond, orally or in writing as appropriate, to
inquiries concerning accounts, shareholder services, and other Fund matters made
by Fund shareholders, and (iv) provide a toll-free telephone number (which
number may be used for other Janney purposes) for such shareholder inquiries.
Janney may from time to time employ or associate with itself such person or
persons as Janney may believe to be particularly fitted to assist it in the
performance of this Agreement. Such person or persons may be officers and
employees who are employed by both Janney and the Fund. The compensation of such
person or persons shall be paid by Janney and no obligation may be incurred on
behalf of the Fund in such respect.
2. As compensation for the services performed and the
facilities furnished by Janney, and subject to Section 3 hereof, the Fund shall
pay Janney, as promptly as possible after the last day of each month, a fee,
calculated daily, of 0.25% annually of the Fund's average daily net assets.
Janney hereby agrees to waive payment of this fee due for services performed
during the month in which this Agreement becomes effective and the twelve-month
period thereafter (the "Waiver Period"). The first fee payment shall therefore
be made as promptly as possible at the end of the first full month next
succeeding the one-year anniversary. If, following the Waiver Period, this
Agreement is terminated as of any date not the last day of a month, such fee
shall be paid as promptly as possible after such date of termination, shall be
based on the average daily net assets of the Fund in that period from the
beginning of such month to such date of termination, and shall be the proportion
of such average daily net assets as the number of business days in such period
bears to the number of business days in such month. The average daily net assets
of the Fund shall in all cases be based only on business days and be computed as
of the time of the regular close of business of the New York Stock Exchange, or
such other time as may be determined by the Board of Directors of the Fund. Each
such payment shall be accompanied by a report of the Fund prepared either by the
Fund or by a reputable firm of
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<PAGE>
independent accountants which shall show the amount properly payable to Janney
under this Agreement and the detailed computation thereof.
3. If the expenses borne by the Fund in any fiscal year exceed
the applicable expense limitations imposed by the securities regulations of any
state in which Fund shares are registered or qualified for sale to the public,
Janney will reimburse the Fund for any excess up t o the amount of the fee
payable to it during that fiscal year pursuant to Section 2 above.
4. Janney assumes no responsibility under this Agreement other
than to render the services called for hereunder, in good faith, and shall not
be responsible for any action of the Board of Directors of the Fund in following
or declining to follow any advice or recommendations of Janney; provided, that
nothing in this Agreement shall protect Janney against any liability to the Fund
or its stockholders to which it would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder. In
responding to shareholder inquiries, Janney shall give only such information and
make only such statements or representations as are contained in the
Registration Statement or are provided in writing by the Fund, its Transfer
Agent, its Custodian, or its Administrator.
5. Nothing in this Agreement shall limit or restrict the right
of any director, officer, or employee of Janney who may also be a director,
officer, or employee of the Fund, to engage in any other business or to devote
his time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature, nor to limit or
restrict the right of Janney to engage in any other business or to render
services of any kind,
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<PAGE>
including investment advisory and management services, to any other corporation,
firm, individual or association.
6. As used in this Agreement, the terms "securities", and "net
assets", shall have the meanings ascribed to them in the Articles of
Incorporation of the Fund; and the terms "assignment", "interested person", and
"majority of the outstanding voting securities" shall have the meanings given to
them by Section 2(a) of the 1940 Act, subject to such exemptions as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order.
7. Subject to the provisions of paragraph 10 below, this
Agreement will remain in effect for two years from the date of its execution and
from year to year thereafter, provided that Janney does not notify the Fund in
writing at least sixty (60) days prior to the expiration date in any year that
it does not wish continuance of the Agreement for an additional year and
provided further that such continuance is specifically approved at least
annually (a) by vote of a majority of the directors of the Fund who are not
parties to this Agreement or interested persons of such parties, cast in person
at a meeting called for that purpose, and (b) by vote of the holders of a
majority of the outstanding voting securities of the Fund or by majority vote of
the Fund's Board of Directors.
8. This Agreement shall terminate automatically in the event
of its assignment by Janney and shall not be assignable by the Fund without the
consent of Janney. This Agreement may also be terminated at any time, without
the payment of any penalty, by the Board of Directors of the Fund or by vote of
a majority of the outstanding voting securities of the Fund by sixty (60) days'
written notice addressed to Janney at its principal place of business.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized.
Attest: JANNEY MONTGOMERY SCOTT INC.
By: /s/ W. Gresham O'Malley By: /s/ Edgar Scott, Jr.
----------------------------- ---------------------------------
Secretary Co-Chairman of the
Board of Directors
Attest: ADDISON CAPITAL SHARES, INC.
By: /s/ Radcliffe Cheston By: /s/ Jay R. Massey
----------------------------- ---------------------------------
Secretary President
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<PAGE>
Exhibit 9(b)
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of the 8th day of September, 1986, by and
between ADDISON CAPITAL SHARES, INC., a Maryland corporation (the "Fund"), and
PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION ("PIMC"), a Delaware corporation
which is an indirect wholly-owned subsidiary of PNC Financial Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as a open-end, diversified management
investment company under the Investment Company Act of 1940, as amended ("the
1940 Act"); and
WHEREAS, the Fund wishes to retain PIMC to provide certain accounting
services, and PIMC is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PIMC to provide certain
accounting services to the Fund for the period and on the terms set forth in
this Agreement. PIMC accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Paragraph 12 of
this Agreement. PIMC agrees to comply with all relevant provisions of the 1940
Act and applicable rules and regulations thereunder.
2. Delivery of Documents. The Fund has furnished PIMC with copies
properly certified or authenticated of each of the following:
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<PAGE>
(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of PIMC to provide certain accounting services to the Fund and
approving this Agreement;
(b) Appendix A identifying and containing the signatures of
the Fund's officers and/or other persons authorized to sign Written
Instructions, as hereinafter defined, on behalf of the Fund, and specifying the
number of signatures required for Written Instructions;
(c) The Fund's Articles of Incorporation, filed with the
Maryland Department of Assessments and Taxation on June 4, 1986 and all
amendments thereto (such Articles of Incorporation, as presently in effect and
as they shall from time to time be amended, are herein called the "Charter");
(d) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called "By-Laws");
(e) The Investment Advisory Agreement. between Addison Capital
Management Company ("the Advisor") and the Fund dated as of September 8, 1986
(the "Advisory Agreement");
(f) The Management Agreement between Janney Montgomery Scott
Inc. ("Janney") and the Fund dated as of September 8, 1986 (the "Management
Agreement");
(g) The Underwriting Agreement between the Fund and Janney
dated as of 1986 (the "Underwriting Agreement");
(h) The Custodian Agreement between Provident National Bank
("Provident") and the Fund dated as of September 8, 1986 (the "Custodian
Agreement");
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<PAGE>
(i) The Fund's Notification of Registration filed Pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC") on June 10, 1986;
(j) The Fund's most recent Pre-Effective Amendment to its
Registration Statement on Form N-1A under the Securities Act of 1933 ("the 1933
Act") (File No. 33-6364) and under the 1940 Act, as filed with the SEC on
September 9, 1986 relating to shares (hereinafter "Shares") of the Fund's
Capital Stock, $0.001 par value, and all amendments thereto; and
(k) The Fund's most recent prospectus (such prospectus, and
all amendments and supplements thereto are herein called the "Prospectus").
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means the President, Treasurer, Secretary and any Vice
President of the Fund and any other person, whether or not any such person is an
officer or employee of the Fund, duly authorized by the Board of Directors of
the Fund to give Oral and Written Instructions on behalf of the Fund and listed
on the Certificate listing persons duly authorized to give Oral and Written
Instructions on behalf of the Fund as may be received by PIMC from time to time.
(b) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by PIMC from an
Authorized Person or from a person reasonably believed by PIMC to be an
Authorized Person. The Fund agrees to deliver to PIMC, at the time and in the
manner specified in Paragraph 4(b) of this Agreement, Written Instructions
confirming Oral Instructions.
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<PAGE>
(c) "Written Instructions". As used in this Agreement, the
term "Written Instructions" means written instructions delivered by hand, mail,
tested telegram, cable, telex or facsimile sending device, and received by PIMC,
signed by two Authorized Persons.
4. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, PIMC shall
act only upon Oral and Written Instructions. Although PIMC may take cognizance
of the provisions of the Charter and By-Laws of the Fund, PIMC may assume that
any Oral or Written Instructions received hereunder are not in any way
inconsistent with any provisions of such Charter or ByLaws or any vote,
resolution or proceeding of the Shareholders, or of the Board of Directors, or
of any committee thereof.
(b) PIMC shall be entitled to rely upon any Oral Instructions
and any Written Instructions actually received by PIMC pursuant to this
Agreement. The Fund agrees to forward to PIMC Written Instructions confirming
Oral Instructions in such manner that the Written Instructions are received by
PIMC, whether by hand delivery, telex, facsimile sending device or otherwise, by
the close of business of the same day that such Oral Instructions are given to
PIMC. The Fund agrees that the fact that such confirming Written Instructions
are not received by PIMC shall in no way affect the validity of the transactions
or enforceability of the transactions authorized by the Fund by giving Oral
Instructions. The Fund agrees that PIMC shall incur no liability to the Fund in
acting upon Oral Instructions given to PIMC hereunder concerning such
transactions provided such instructions reasonably appear to have been received
from an Authorized Person.
5. Services on a Continuing Basis.
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<PAGE>
(a) PIMC will perform the following accounting functions on a
daily basis:
(1) Journalize the Fund's investment, capital share
and income and expense activities;
(2) Verify investment buy/sell trade tickets when
received from the Advisor and transmit trades to the Fund's custodian for proper
settlement;
(3) Maintain individual ledgers for investment
securities;
(4) Maintain historical tax lots for each security;
(5) Reconcile cash and investment balances of the
Fund with the custodian, and provide the Advisor with the beginning cash balance
available for investment purposes;
(6) Update the cash availability throughout the day
as required by the Advisor;
(7) Post to and prepare the Fund's Statement of
Assets and Liabilities and the Statement of Operations;
(8) Calculate various contractual expenses (e.g.,
advisory and custody fees);
(9) Control all disbursements from the Fund and
authorize such disbursements upon Written Instructions;
(10) Calculate capital gains and losses;
(11) Determine the Fund's net income;
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<PAGE>
(12) Obtain security market quotes from services
approved by the Advisor, or if such quotes are unavailable, then obtain such
prices from the Advisor, and in either case calculate the market value of the
Fund's investments;
(13) Transmit or mail a copy of the daily portfolio
valuation to the Advisor;
(14) Compute the net asset value of the Fund;
(15) Compute the Fund's yields, total return, expense
ratios, portfolio turnover rate, and portfolio average dollar-weighted maturity;
and,
(16) Monitor the expense accruals and notify Fund
management of any proposed adjustments.
(b) In addition to the accounting services described in the
foregoing Paragraph 5(a), PIMC will:
(1) Prepare monthly financial statements, which will
include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses;
(2) Prepare monthly security transactions listings;
(3) Prepare quarterly broker security transaction
summaries; and
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<PAGE>
(4) Supply various Fund statistical data as requested
on an ongoing basis.
(c) PIMC will provide the following administrative services:
(1) Prepare for execution and file the Fund's Federal
and state tax returns;
(2) Prepare and file the Fund's Semi-Annual Reports
with the SEC on Form N-SAR;
(3) Prepare and file with the SEC the Fund's annual,
semi-annual, and quarterly shareholder reports;
(4) File and assist with the preparation of
registration statements on form N-lA and other filings relating to the
registration of Shares;
(5) Monitor the Fund's status as a regulated
investment company under Sub-chapter M of the Internal Revenue Code of 1954, as
amended; and
(6) Maintain the Fund's fidelity bond as required by
the 1940 Act and obtain a directors and officers liability policy.
6. Records. PIMC shall keep the following records:
(a) all books and records with respect to the Fund's books of
account; and
(b) records of the Fund's securities transactions.
The books and records pertaining to the Fund which are in the
possession of PIMC shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
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<PAGE>
times during PIMC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PIMC to the Fund
or the Fund's authorized representative at the Fund's expense.
7. Liaison With Accountants. PIMC shall act as liaison with the Fund's
independent public accountants and shall provide detailed account analyses,
fiscal year summaries, and other audit related schedules. PIMC shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the expression of their opinion, as such may be required by the Fund from time
to time.
8. Confidentiality. PIMC agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present or potential Shareholders and relative to the Advisor and
its prior, present or potential customers, except, after prior notification to
and approval in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where PIMC may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Fund.
9. Equipment Failures. In the event of equipment failures beyond PIMC's
control, PIMC shall, at no additional expense to the Fund, take reasonable steps
to minimize service interruptions but shall have no liability with respect
thereto. PIMC shall enter into and shall maintain in effect with appropriate
parties one or more agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
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<PAGE>
10. Right to Receive Advice.
(a) Advice of Fund. If PIMC shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the Fund
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If PIMC shall be in doubt as to any
question of law involved in any action to be taken or omitted by PIMC, it may
request advice at its own cost from counsel of its own choosing (who may be
counsel for the Advisor, the Fund or PIMC, at the option of PIMC).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by PIMC pursuant to
subsection (a) of this paragraph and advice received by PIMC pursuant to
subsection (b) of this paragraph, PIMC shall be entitled to rely on and follow
the advice received pursuant to the latter provision alone.
(d) Protection of PIMC. PIMC shall be protected in any action
or inaction which it takes in reliance on any directions, advice or Oral or
Written Instructions received pursuant to subsections (a) or (b) of this
paragraph which PIMC, after receipt of any such directions, advice or Oral or
Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. However,
nothing in this paragraph shall be construed as imposing upon PIMC any
obligation (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms of another provision of this
Agreement, the same is a condition to PIMC's properly taking or omitting to take
such action. Nothing in this subsection shall excuse PIMC when an action or
omission on the part of PIMC
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<PAGE>
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PIMC of its duties under this Agreement.
11. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for insuring that the Fund complies with all
applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and any
laws, rules and regulations of governmental authorities having jurisdiction.
12. Compensation. As compensation for the services rendered by PIMC
during the term of this Agreement, the Fund will pay to PIMC an annual fee, as
may be agreed to in writing from time to time by the Fund and PIMC.
13. Indemnification. The Fund agrees to indemnify and hold harmless
PIMC and its nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the 1933
Act, the 1934 Act, the 1940 Act, and any state and foreign securities and blue
sky laws, all as or to be amended from time to time) and expenses, including
(without limitation) attorneys' fees and disbursements, arising directly or
indirectly from any action or thing which PIMC takes or does or omits to take or
do (i) at the request or on the direction of or in reliance on the advice of the
Fund or (ii) upon oral or Written Instructions, provided, that neither PIMC nor
any of its nominees shall be indemnified against any liability to the Fund or to
its Shareholders (or any expenses incident to such liability) arising out of
PIMC's own willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties and obligations under this Agreement.
14. Responsibility of PIMC. PIMC shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by PIMC in
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<PAGE>
writing. In the performance of its duties hereunder, PIMC shall be obligated to
exercise care and diligence and to act in good faith and to use its best efforts
within reasonable limits in performing services provided for under this
Agreement, but PIMC shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of
PIMC or reckless disregard by PIMC of its duties under this Agreement. Without
limiting the generality of the foregoing or of any other provision of this
Agreement, PIMC in connection with its duties under this Agreement shall not be
under any duty or obligation to inquire into and shall not be liable for or in
respect of (a) the validity or invalidity or authority or lack thereof of any
Oral or Written Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PIMC reasonably believes to
be genuine; or (b) delays or errors or loss of data occurring by reason of
circumstances beyond PIMC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown
(except as provided in paragraph 9), flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
15. Duration and Termination. This Agreement shall continue until
termination by the Fund or PIMC on 60 days' written notice.
16. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to PIMC at
PIMC's address, Bedford Building, 3531 Silverside Road, Wilmington, Delaware
19810; (b) if to the Fund, at the address of the Fund, attention: Rudolph C.
Sander; or (c) if to neither of the foregoing, at such other address as shall
have been notified to the sender of any
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<PAGE>
such Notice or other communication. If the location of the sender of a Notice
and the address of the addressee thereof are, at the time of sending, more than
100 miles apart, the Notice may be mailed, in which case it shall be deemed to
have been given three days after it is sent, or if sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately, and, if the location of the sender of a notice and the address of
the addressee thereof are, at the time of sending, not more than 100 miles
apart, the Notice may be sent by first-class mail, in which case it shall be
deemed to have been given two days after it is sent, or if sent by messenger, it
shall be deemed to have been given on the day it is delivered, or if sent by
confirming telegram, cable, telex and facsimile sending device it shall be
deemed to have been given immediately. All postage, cable, telex, or facsimile
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
17. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
18. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
19. Assignment. This Agreement and the performance hereunder may not be
assigned without the Fund's consent except that PIMC may assign this agreement
to a subsidiary or affiliate of Provident National Bank, without the Fund's
consent, upon 30 days' written notice.
20. Miscellaneous. This Agreement embodies the entire Agreement and
understanding between the parties thereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate
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<PAGE>
documents their agreement, if any, with respect to delegated and/or Oral
Instructions. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement shall be deemed to
be a contract made in Delaware and governed by Delaware law. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding and shall inure to the benefit of the parties
hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
[SEAL] ADDISON CAPITAL SHARES, INC.
Attest: /s/ Radcliffe Cheston By: /s/ Jay R. Massey
---------------------------- ------------------------------
[SEAL] PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
Attest: /s/ John p. Silcox, Jr. By: /s/ Vincent J. Ciaccardini
---------------------------- ------------------------------
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<PAGE>
Appendix A
ADDISON CAPITAL SHARES, INC.
Name Signature
- ---- ---------
Jay R. Massey /s/ Jay R. Massey
-------------------------------
Radcliffe Cheston /s/ Radcliffe Cheston
-------------------------------
John J. Gray /s/ John J. Gray
-------------------------------
Charles J. Sullivan /s/ Charles J. Sullivan
-------------------------------
Richard Boorse /s/ Richard Boorse
-------------------------------
Maryann T. Perrino /s/ Maryann T. Perrino
-------------------------------
Kathryn A. Hardwick /s/ Kathryn A. Hardwick
-------------------------------
Donald E. Blum /s/ Donald E. Blum
-------------------------------
Karen M. Abbott /s/ Karen M. Abbott
-------------------------------
<PAGE>
Exhibit 9(c)
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of the 8th day of September, 1986, between
ADDISON CAPITAL SHARES, INC., a Maryland corporation (the "Fund"), and PROVIDENT
FINANCIAL PROCESSING CORPORATION, a Delaware corporation ("PFPC") which is an
indirect, wholly-owned subsidiary of Provident National Corporation.
R E C I T A L
WHEREAS, the Fund is registered as a open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and
WHEREAS, the Fund desires to retain PFPC to serve as the Fund's
transfer agent, registrar, and dividend disbursing agent, and PFPC is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PFPC to serve as transfer
agent, registrar and dividend disbursing agent for the Fund with respect to the
shares of the Fund's Capital Stock, par value $0.001 per share ("Shares") for
the period and on the terms set forth in this Agreement. PFPC accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 16 of this Agreement.
2. Delivery of Documents. The Fund has furnished PFPC with copies
properly certified or authenticated of each of the following:
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(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of PFPC as transfer agent and registrar and dividend disbursing
agent for the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of
the Fund's officers and/or other persons authorized to sign Written
Instructions, as hereinafter defined, on behalf of the Fund and to execute stock
certificates representing Shares;
(c) The Fund's Articles of Incorporation filed with the
Department of Assessments and Taxation of the State of Maryland on June 4, 1986
and all amendments thereto (such Articles of Incorporation, as presently in
effect and as they shall from time to time be amended, are herein called the
"Charter");
(d) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
(e) Copies of all documents relating to any voluntary investor
service plans sponsored by the Fund, including periodic investment plans such as
Individual Retirement Accounts;
(f) The Investment Advisory and Administration Agreement
between Addison Capital Management Company (the "Adviser") and the Fund dated as
of September 8, 1986;
(g) The Services Agreement between Janney Montgomery Scott
Inc. ("Janney") and the Fund dated as of September 8, 1986 (the "Management
Agreement");
(h) The Custodian Agreement between Provident National Bank
and the Fund dated as of September 8, 1986;
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<PAGE>
(i) The Underwriting Agreement between the Fund and Janney
dated as of September 8, 1986 (the "Underwriting Agreement");
(j) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC") on or about June 10, 1986;
(k) The Fund's most recent Pre-Effective Amendment to its
Registration Statement on Form N-lA under the Securities Act of 1933, as amended
(the "1933 Act") (File No. 33-6364) and under the 1940 Act as filed with the SEC
on September 9, 1986 relating to Shares, and all amendments thereto; and
(l) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements thereto are herein called
the "Prospectus").
The Fund will furnish PFPC from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any officer of the Fund and any other person, whether
or not any such person is an officer or employee of the Fund, duly authorized by
the Board of Directors of the Fund to give Oral and Written Instructions on
behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or
any amendment thereto as may be received by PFPC from time to time.
(b) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person. The Fund agrees to deliver to PFPC, at
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<PAGE>
the time and in the manner specified in Paragraph 4(b) of this Agreement,
Written Instructions confirming Oral Instructions.
(c) "Written instructions". As used in this Agreement, the
term "Written Instructions" means written instructions delivered by hand, mail,
tested telegram, cable, telex or facsimile sending device, and received by PFPC
and signed by an Authorized Person.
4. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, PFPC shall
act only upon Oral or Written Instructions. Although PFPC may take cognizance of
the provisions of the Charter and By-Laws of the Fund, PFPC may assume that any
Oral or Written Instructions received hereunder are not in any way inconsistent
with any provisions of such Charter or By-Laws or any vote, resolution or
proceeding of the Shareholders, or of the Board of Directors, or of any
committee thereof.
(b) PFPC shall be entitled to rely upon any Oral Instructions
and any Written Instructions actually received by PFPC pursuant to this
Agreement. The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions in such manner that the Written Instructions are received by
PFPC by the close of business of the same day that such Oral Instructions are
given to PFPC. The Fund agrees that the fact that such confirming Written
Instructions are not received by PFPC shall in no way affect the validity of the
transactions or enforceability of the transactions authorized by the Fund by
giving Oral Instructions. The Fund agrees that PFPC shall incur no liability to
the Fund in acting upon Oral Instructions given to PFPC hereunder concerning
such transactions provided such instructions reasonably appear to have been
received from an Authorized Person.
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<PAGE>
5. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, PFPC is authorized to take the following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from
Janney for the purchase of Shares and sufficient information to enable PFPC to
establish a Shareholder account, and after confirmation of receipt or crediting
of Federal funds for such order from the Fund's Custodian, PFPC shall issue and
credit the account of the investor or other record holder with Shares.
(b) Transfer of Shares.
1. Certificated Securities. Upon receipt of signed
stock certificates, which shall be in proper form for transfer, and upon
cancellation or destruction thereof, PFPC shall countersign, register and issue
new certificates for the same number of Shares and shall deliver them pursuant
to instructions received from the transferor, pursuant to the rules of the
exchange upon which Shares are listed, the rules and regulations of the
Securities and Exchange Commission, and the law of the State of Maryland
relating to the transfer of shares of common stock.
2. Uncertificated Securities. Where a Shareholder
does not hold a certificate representing the number of Shares in his account and
does provide PFPC with instructions for the transfer of such shares which
include a signature guaranteed by a national bank or registered broker/dealer
and such other appropriate documentation to permit a transfer, then PFPC shall
register such shares and shall deliver them pursuant to instructions received
from the transferor, pursuant to the rules of the exchange upon which Shares are
listed, the rules and regulations of the Securities and Exchange Commission, and
the law of the State of Maryland relating to the transfer of shares of common
stock.
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<PAGE>
(c) Stock Certificates. The Fund will supply PFPC with a
sufficient supply of stock Certificates representing Shares, in the form
approved from time to time by the Board of Directors of the Fund, and, from time
to time, shall replenish such supply upon request of PFPC. Such stock
certificates shall be properly signed, manually or by facsimile signature, by
the duly authorized officers of the Fund, whose names and positions shall be set
forth on Appendix A, and shall bear the corporate seal or facsimile thereof of
the Fund, and notwithstanding the death, resignation or removal of any officer
of the Fund, such executed certificates bearing the manual or by facsimile
signature of such officer shall remain valid and may be issued to Shareholders
until PFPC is otherwise directed by Written Instructions.
(d) Lost or Destroyed Certificates. In the case of the loss or
destruction of any certificate representing Shares, no new Certificate shall be
issued in lieu thereof, unless there shall first have been furnished an
appropriate bond of indemnity issued by the surety company approved by PFPC.
(e) Uncertificated Securities. Upon receipt of the stock
certificates, which shall be in proper form for transfer, together with
Shareholder's instructions to hold such stock certificates for safekeeping, PFPC
shall reduce such shares to uncertificated status, while retaining the
appropriate registration in the name of Shareholder upon the transfer books.
Upon receipt of written instructions from a Shareholder of
uncertificated securities for a certificate in the number of shares in his
account, PFPC will issue such stock certificates and deliver them to
Shareholder.
6. Authorized Shares. The Fund's authorized capital stock consists of
Two Billion (2,000,000,000) shares of Capital Stock par value $0.001 per Share,
of which 50,000,000 are
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<PAGE>
classified as Class A Common Stock and the remainder of which are unclassified.
PFPC shall record issues of all Shares and shall notify the Fund in case any
proposed issue of Shares by the Fund shall result in an over-issue as defined by
Section 8-104(2) of Article 8 of the Maryland Uniform Commercial Code. In case
any issue of Shares would result in such an over-issue, PFPC shall refuse to
issue said Shares and shall not countersign and issue certificates for such
Shares. The Fund agrees to notify PFPC promptly of any change in the number of
authorized Shares and of any change in the number of Shares registered under the
1933 Act or termination of the Fund's declaration under Rule 24f-2 of the 1940
Act.
7. Dividends and Distributions. The Fund shall furnish PFPC with
appropriate evidence of action by the Fund's Board of Directors authorizing the
declaration and payment of dividends and distributions as described in the
Prospectus. After deducting any amount required to be withheld by any applicable
tax laws, rules and regulations or other applicable laws, rules and regulations,
PFPC shall in accordance with the instructions in proper form from such
Shareholders and the provisions of the Fund's Charter and Prospectus, issue and
credit the account of the Shareholder with Shares, or, if the Shareholder so
elects pay such dividends or distribution in cash, in the manner described in
the Prospectus. In lieu of receiving from the Fund's Custodian and paying to
Shareholders cash dividends or distributions, PFPC may arrange for the direct
payment of cash dividends and distributions to Shareholders by the Fund's
Custodian, in accordance with such procedures and controls as are mutually
agreed upon from time to time by and among the Fund, PFPC and the Fund's
Custodian.
PFPC shall prepare, file with the Internal Revenue Service and other
appropriate taxing authorities, and address and mail to Shareholders such
returns and information relating to dividends
-7-
<PAGE>
and distributions paid by the Fund as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations, or such substitute form of
notice as may from time to time be permitted or required by the Internal Revenue
Service. On behalf of the Fund, PFPC shall mail certain requests for
shareholders' certifications under penalties of perjury and pay on a timely
basis to the appropriate Federal authorities any taxes to be withheld on
dividends and distributions paid by the Fund, all as required by applicable
Federal tax laws and regulations.
In accordance with Prospectus and such procedures and controls as are
mutually agreed upon from time to time by and among the Fund, PFPC and the
Fund's Custodian, PFPC shall (a) arrange for issuance of shares obtained through
(1) transfers of funds from shareholders' accounts at financial institutions,
(2) the Pre-Authorized Check Plan, (3) the Right of Accumulation, and (4) the
Letter of Intent Program; (b) arrange for the exchange of Shares for shares of
the Reserve Fund, Inc., Reserve Tax-Exempt Trust-Interstate Portfolio, and
Reserve New York Tax-Exempt Trust; and (c) arrange for systematic withdrawals
from the account of a Shareholder participating in the Systematic Withdrawal
Plan.
8. Communications with Shareholders.
(a) Communications to Shareholders. PFPC will address and mail
all communications by the Fund to its Shareholders, including reports to
Shareholders, confirmations of purchases and sales of Fund Shares, monthly
statements, dividend and distribution notices and proxy material for its
meetings of Shareholders. PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's Shareholders.
(b) Correspondence. PFPC will answer such correspondence from
Shareholders, securities brokers and others relating to its duties hereunder and
such other correspondence as may
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<PAGE>
from time to time be mutually agreed upon between PFPC and the Fund.
9. Records. PFPC shall maintain records of the accounts for
each Shareholder showing the following information:
(a) name, address and United States Tax Identification or
Social Security number;
(b) number and class of Shares held and number of Shares for
which certificates, if any, have been issued, including certificate numbers and
denominations;
(c) historical information regarding the account of each
Shareholder, including dividends and distributions paid and the date and price
for all transactions on a Shareholder's account;
(d) any stop or restraining order placed against a
Shareholder's account;
(e) any correspondence relating to the current maintenance of
a Shareholder's account;
(f) information with respect to withholdings; and,
(g) any information required in order for PFPC to perform any
calculations contemplated or required by this Agreement.
The books and records pertaining to the Fund which are in the
possession of PFPC shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during PFPC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books
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<PAGE>
and records shall be provided by PFPC to the Fund or the Fund's authorized
representative at the Fund's expense.
10. Reports. PFPC shall furnish state by state registration reports,
and such other information, including Shareholder lists and statistical
information concerning accounts as may be agreed upon from time to time between
the Fund and PFPC.
11. Cooperation With Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
opinion as such may be required by the Fund from time to time.
12. Confidentiality. PFPC agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present or potential Shareholders and relative to the Advisor,
Janney and its prior, present or potential customers, except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld, where PFPC may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund.
13. Equipment Failures. In the event of equipment failures beyond
PFPC's control, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall have no liability
with respect thereto. The foregoing obligation shall not extend to computer
terminals located outside of premises maintained by PFPC. PFPC shall enter into
and shall maintain in effect with appropriate parties one or more agreements
making reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate
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<PAGE>
equipment is available.
14. Right to Receive Advice.
(a) Advice of Fund. If PFPC shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the Fund
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
question of law involved in any action to be taken or omitted by PFPC, it may
request advice at its own cost from counsel of its own choosing (who may be
counsel for the Adviser, the Fund or PFPC, at the option of PFPC).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by PFPC pursuant to
subparagraph (a) of this paragraph and advice received by PFPC pursuant to
subparagraph (b) of this paragraph, PFPC shall be entitled to rely on and follow
the advice received pursuant to the latter provision alone.
(d) Protection of PFPC. PFPC shall be protected in any action
or inaction which it takes in reliance on any directions, advice or Oral or
Written Instructions received pursuant to subparagraphs (a) or (b) of this
paragraph which PFPC, after receipt of any such directions, advice or Oral or
Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. However,
nothing in this paragraph shall be construed as imposing upon PFPC any
obligation (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms of another provision of this
Agreement, the same is a condition to PFPC's properly taking or omitting to take
such action. Nothing in this
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<PAGE>
subsection shall excuse PFPC when an action or omission on the part of PFPC
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PFPC of its duties and obligations under this Agreement.
15. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for insuring that the contents of each prospectus of
the Fund complies with all applicable requirements of the 1933 Act, the 1934
Act, the 1940 Act, and any laws, rules and regulations of governmental
authorities having jurisdiction.
16. Compensation. As compensation for the services rendered by PFPC
during the term of this Agreement, the Fund will pay to PFPC monthly fees that
shall be agreed to from time to time by the Fund and PFPC, for each account open
at any time during the month for which payment is being made, plus certain of
PFPC's expenses relating to such services, as shall be agreed to from time to
time by the Fund and PFPC.
17. Indemnification. The Fund agrees to indemnify and hold harmless
PFPC and its nominees and sub-contractors from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the 1933 Act, the Securities Exchange Act of 1934, the 1940 Act,
and any state and foreign securities and blue sky laws, all as or to be amended
from time to time) and expenses, including (without limitation) attorneys' fees
and disbursements, arising directly or indirectly from any action or thing which
PFPC takes or does or omits to take or do (i) at the request or on the direction
of or in reliance on the advice of the Fund or (ii) upon Oral or Written
Instructions, provided, that neither PFPC nor any of its nominees or
subcontractors shall be indemnified against any liability to the Fund or to its
Shareholders (or any expenses incident to such liability) arising out of (x)
PFPC's or such nominee's or such sub-contractors' own willful
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<PAGE>
misfeasance, bad faith or gross negligence or reckless disregard of its duties
in connection with the performance of its duties and obligations under this
Agreement or (y) PFPC's or such nominee's or sub-contractors' own negligent
failure to perform its duties expressly provided for in this Agreement or
otherwise agreed to by PFPC in writing.
18. Responsibility of PFPC. PFPC shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by PFPC in writing. In the performance of its duties
hereunder, PFPC shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits to insure the
accuracy and completeness of all services performed under this Agreement. PFPC
shall be responsible for its own negligent failure to perform its duties under
this Agreement, but to the extent that duties, obligations and responsibilities
are not expressly set forth in this Agreement, PFPC shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of PFPC or reckless disregard of such duties,
obligations and responsibilities. Without limiting the generality of the
foregoing or of any other provision of this Agreement, PFPC in connection with
its duties under this Agreement shall not be under any duty or obligation to
inquire into and shall not be liable for or in respect of (a) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, if any, and which PFPC reasonably believes to be genuine, or (b)
delays or errors or loss of data occurring by reason of circumstances beyond
PFPC's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown (except as provided
in Paragraph 13), flood or catastrophe, acts of God, insurrection, war, riots or
failure of the mails, transportation, communication or power
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<PAGE>
supply.
19. Duration and Termination. This Agreement shall continue until
termination by the Fund or by PFPC on sixty (60) days' written notice.
20. Registration as a Transfer Agent. PFPC represents that it is
currently registered with the appropriate Federal authority for the registration
of transfer agents, and that it will remain so registered for the duration of
this Agreement. PFPC agrees that it will promptly notify the Fund in the event
of any material change in its status as a registered transfer agent.
21. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to PFPC at
P.O. Box 8950, Wilmington, Delaware 19899; (b) if to the Fund, at the address of
the Fund attention: Rudolph C. Sander; or (c) if to neither of the foregoing, at
such other address as shall have been notified to the sender of any such Notice
or other communication. If the location of the sender of a Notice and the
address of the addressee thereof are, at the time of sending, more than 100
miles apart, the Notice may be sent by first-class mail, in which case it shall
be deemed to have been given five days after it is sent, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately, and, if the location the sender of a
Notice and the address of the addressee thereof are, at the time of sending, not
more than 100 miles apart, the Notice may be sent by first-class mail, in which
case it shall be deemed to have been given three days after it is sent, or if
sent by messenger, it shall be deemed to have been given on the day it is
delivered, or if sent by confirming telegram, cable, telex or facsimile sending
device, it shall be deemed to have been given immediately. All postage, cable,
telegram, telex and facsimile
-14-
<PAGE>
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
22. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
23. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
24. Assignment. The performance hereunder may be assigned and
sub-contracted by PFPC to an affiliate or wholly-owned subsidiary of it,
Provident National Bank, Provident National Corporation or PNC Financial Corp
without the Fund's consent but with at least thirty (30) days' prior written
notice.
25. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to Oral Instructions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in Pennsylvania and governed by
Pennsylvania law. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
-15-
<PAGE>
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding and shall inure to the benefit of the parties hereto and their
respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
[SEAL] ADDISON CAPITAL SHARES, INC.
Attest: /s/ Radcliffe Cheston By: /s/ Jay Massey
---------------------------- -------------------------
Secretary President
[SEAL] PROVIDENT FINANCIAL, PROCESSING
CORPORATION
Attest: /s/ John P. Silcox, Jr. By: /s/ Clayton H. Banks III
----------------------------- --------------------------
-16-
<PAGE>
Appendix A
ADDISON CAPITAL SHARES, INC.
Name Signature
- ---- ---------
Jay R. Massey /s/ Jay R. Massey
-------------------------------
Radcliffe Cheston /s/ Radcliffe Cheston
-------------------------------
John J. Gray /s/ John J. Gray
-------------------------------
Charles J. Sullivan /s/ Charles J. Sullivan
-------------------------------
Richard Boorse /s/ Richard Boorse
-------------------------------
Maryann T. Perrino /s/ Maryann T. Perrino
-------------------------------
Kathryn A. Hardwick /s/ Kathryn A. Hardwick
-------------------------------
Donald E. Blum /s/ Donald E. Blum
-------------------------------
Karen M. Abbott /s/ Karen M. Abbott
-------------------------------
-17-
<PAGE>
Exhibit 10(b)
September 19, 1986
Addison Capital Shares, Inc.
Two Bala Cynwyd Plaza
Bala Cynwyd, PA 19004
Re: Class A Common Stock, par value .001 per share, of Addison Capital Shares,
Inc.
Gentlemen:
We have acted as counsel to Addison Capital Shares, Inc. (the "Fund"), a
Maryland corporation, in connection with the preparation of a registration
statement on Form N1-A (File No. 33-6364) filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, on June 10, 1986, the preparation of
Pre-Effective Amendment No. 1 thereto filed with the Commission on August 1,
1986, and the preparation of Pre-Effective Amendment No. 2 thereto filed with
the Commission on September 9, 1986, to register the public offering of an
indefinite number of shares of Class A Common Stock, par value $.001 per share
(the "Shares"), of the Fund.
We have examined such records, certificates and documents as we have deemed
necessary or desirable in order to render the opinion hereinafter set forth.
In our opinion, the Shares are exempt from existing personal property tax in
Pennsylvania.
In rendering our opinion, we have assumed that the Fund will maintain its
current status as a foreign corporation qualified under the laws of Pennsylvania
to transact business therein.
Very truly yours,
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated July 18, 1996 on the
financial statements and the financial highlights of Addison Capital Shares,
Inc. Such financial statements and financial highlights appear in the 1996
Annual Report to Shareholders which is included in the Statement of
Additional Information filed in Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A of Addison Capital Shares, Inc. We also
consent to the references to our Firm in the Registration Statement and
Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 15, 1996
<PAGE>
Exhibit 13
PURCHASE AGREEMENT
Addison Capital Shares, Inc. (The "Fund"), a Maryland corporation, and
Janney Montgomery Scott Inc. ("Janney"), a Delaware corporation, hereby agree
with each other as follows:
1. The Fund hereby offers Janney and Janney hereby purchases 7,844
shares of Class A Common Stock ($.001 par value per share) of the Fund at a
price of $12.75 per share (the "initial shares") and the Fund hereby
acknowledges receipt from Janney of funds in the amount of $100,011 in full
payment for the initial shares. It is agreed that no certificates for the
initial shares will be issued by the Fund.
2. Janney represents and warrants to the Fund that the initial shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 2nd day of September, 1986.
(SEAL) ADDISON CAPITAL SHARES, INC.
Attest:
/s/ Radcliffe Cheston By: /s/ Richard Boorse
- ----------------------------------- --------------------------------
Secretary Treasurer
(SEAL) JANNEY MONTGOMERY SCOTT INC.
Attest:
/s/ W. Gresham O'Malley By: /s/ Edgar Scott, Jr.
- ----------------------------------- --------------------------------
Secretary Co-Chairman of the Board of
Directors
<PAGE>
Exhibit 15
DISTRIBUTION PLAN
OF
ADDISON CAPITAL SHARES, INC.
WHEREAS, Addison Capital Shares, Inc. (The "Fund") intends to
engage in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to adopt a Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act and the Board of Directors has
determined that there is a reasonable likelihood that adoption of this
Distribution Plan will benefit the Fund and its stockholders; and
WHEREAS, the Fund intends to employ Janney Montgomery Scott
Inc. ("Janney") as underwriter of the securities of which it is the issuer;
NOW THEREFORE, the Fund hereby adopts this Distribution Plan
(the "Plan") in accordance with Rule 12b-1 under the 1940 Act on the following
terms and conditions:
1. The Fund shall pay to Janney a distribution fee for
expenses related to distribution of its shares at the rate of .65% per annum of
the Fund's average daily net assets, such fee to be calculated daily and paid
monthly.
2. The amount set forth in paragraph 1 of this Plan shall be
paid for Janney's services as underwriter of the shares of the Fund in
accordance with an Underwriting Agreement between Janney and the Fund and may be
spent by Janney on any activities or expenses related to the sale and retention
of the Fund's shares, including, but not limited to, advertising, salaries and
other expenses of Janney relating to selling or servicing efforts, expenses of
organizing and conducting sales seminars, printing of prospectuses, statements
of additional information, and
- 1 -
<PAGE>
reports for other than existing shareholders, preparation and distribution of
advertising material and sales literature and payments to dealers whose
customers purchase Fund shares. The Plan shall not be construed to prohibit or
limit additional compensation derived from sales charges or other sources that
may be paid to Janney pursuant to the aforementioned Underwriting Agreement.
3. This Plan shall not take effect until it has been approved
by a vote of at least a majority of the outstanding voting securities, as
defined in the 1940 Act, of the Fund.
4. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of a majority of both (a) the
Board of Directors of the Fund and (b) those directors of the Company who are
not "interested persons" of the Fund, as defined in the 1940 Act, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Rule 12b-1 Directors"), cast in person at a
meeting or meetings called for the purpose of voting on this Plan and such
related agreements.
5. This Plan shall continue in effect for successive periods
of one year from its execution for so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
paragraph 4.
6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Directors and the Board shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Directors or by vote of a majority of the outstanding
voting securities of the Fund.
- 2 -
<PAGE>
8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in paragraph 1 hereof unless such
amendment is approved in the manner provided for initial approval in paragraph 3
hereof, and no material amendment to the Plan shall be made unless such
amendment is approved in the manner provided for initial approval in paragraph 4
hereof.
9. While this Plan is in effect, the selection and nomination
of directors who are not interested persons, as defined in the 1940 Act, of the
Fund shall be committed to the discretion of the directors who are themselves
not interested persons.
10. The Fund shall preserve copies of this Plan and any
related agreements and all reports made pursuant to paragraph 6 hereof for a
period of not less than six years from the date of execution of this Plan, or of
the agreements or of such reports, as the case may be, the first two years in
any easily accessible place.
IN WITNESS WHEREOF, Fund has executed this Distribution Plan
on the day and year set forth below:
Date: September 8, 1986 ADDISON CAPITAL SHARES, INC.
BY: /s/ Jay Massey
----------------------------------
President
Attest:
/s/ Radcliffe Cheston
- --------------------------------
Secretary
- 3 -
<PAGE>
ADDISON CAPITAL SHARES, INC.
POWER OF ATTORNEY
Rudolph C. Sander, whose signature appears below, does hereby
constitute and appoint Radcliffe Cheston his true and lawful attorney and agent,
with power of substitution or resubstitution, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable or which may be required to enable Addison Capital
Shares, Inc. (the "Fund") to comply with the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all amendments thereto, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and on
behalf of the undersigned as a director of the Fund such Registration Statement
and any and all such amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney and agent shall do or cause to be done by virtue hereof.
/s/ Rudolph C. Sander
--------------------------
Rudolph C. Sander
Date: 6/21/93
---------
<PAGE>
ADDISON CAPITAL SHARES, INC.
POWER OF ATTORNEY
Margaret M. Healy, whose signature appears below, does hereby
constitute and appoint Radcliffe Cheston and Rudolph C. Sander, and either of
them, her true and lawful attorney and agent, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable or
which may be required to enable Addison Capital Shares, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all amendments
thereto, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a director of the Fund such Registration Statement and any and
all such amendments filed with the Securities and Exchange Commission under the
1933 Act and the 1940 Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney and agent shall do or cause to be done by virtue hereof.
/s/ Margaret M. Healy
--------------------------
Margaret M. Healy
Date: 6/21/93
---------
<PAGE>
ADDISON CAPITAL SHARES, INC.
POWER OF ATTORNEY
William R. Dimeling, whose signature appears below, does hereby
constitute and appoint Radcliffe Cheston and Rudolph C. Sander, and either of
them, his true and lawful attorney and agent, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable or
which may be required to enable Addison Capital Shares, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all amendments
thereto, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a director of the Fund such Registration Statement and any and
all such amendments filed with the Securities and Exchange Commission under the
1933 Act and the 1940 Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney and agent shall do or cause to be done by virtue hereof.
/s/ William R. Dimeling
--------------------------
William R. Dimeling
Date: 10/8/96
----------
<PAGE>
ADDISON CAPITAL SHARES, INC.
POWER OF ATTORNEY
Charles E. Mather, III, whose signature appears below, does hereby
constitute and appoint Radcliffe Cheston and Rudolph C. Sander, and either of
them, his true and lawful attorney and agent, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable or
which may be required to enable Addison Capital Shares, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all amendments
thereto, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a director of the Fund such Registration Statement and any and
all such amendments filed with the Securities and Exchange Commission under the
1933 Act and the 1940 Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney and agent shall do or cause to be done by virtue hereof.
/s/ Charles E. Mather, III
----------------------------
Charles E. Mather, III
Date: 6/21/93
---------
<PAGE>
ADDISON CAPITAL SHARES, INC.
POWER OF ATTORNEY
James W. Wolitarsky, whose signature appears below, does hereby
constitute and appoint Radcliffe Cheston and Rudolph C. Sander, and either of
them, his true and lawful attorney and agent, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorney and agent may deem necessary or advisable or
which may be required to enable Addison Capital Shares, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all amendments
thereto, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a director of the Fund such Registration Statement and any and
all such amendments filed with the Securities and Exchange Commission under the
1933 Act and the 1940 Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorney and agent shall do or cause to be done by virtue hereof.
/s/ James W. Wolitarsky
-----------------------------
James W. Wolitarsky
Date: 6/21/93
-----------
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000794802
<NAME> ADDISON CAPITAL SHARES, INC.
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 36,162,773
<INVESTMENTS-AT-VALUE> 50,721,945
<RECEIVABLES> 112,729
<ASSETS-OTHER> 14,540
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,849,214
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 145,414
<TOTAL-LIABILITIES> 145,414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,330,793
<SHARES-COMMON-STOCK> 1,919,031
<SHARES-COMMON-PRIOR> 1,679,754
<ACCUMULATED-NII-CURRENT> 146,276
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,667,559
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,559,172
<NET-ASSETS> 50,703,800
<DIVIDEND-INCOME> 1,128,170
<INTEREST-INCOME> 76,347
<OTHER-INCOME> 0
<EXPENSES-NET> 890,340
<NET-INVESTMENT-INCOME> 314,177
<REALIZED-GAINS-CURRENT> 5,495,012
<APPREC-INCREASE-CURRENT> 4,333,438
<NET-CHANGE-FROM-OPS> 10,142,627
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 361,787
<DISTRIBUTIONS-OF-GAINS> 3,269,571
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 237,345
<NUMBER-OF-SHARES-REDEEMED> 148,869
<SHARES-REINVESTED> 150,801
<NET-CHANGE-IN-ASSETS> 12,198,054
<ACCUMULATED-NII-PRIOR> 193,886
<ACCUMULATED-GAINS-PRIOR> 1,442,118
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 340,192
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 890,340
<AVERAGE-NET-ASSETS> 45,358,916
<PER-SHARE-NAV-BEGIN> 22.92
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 5.42
<PER-SHARE-DIVIDEND> .21
<PER-SHARE-DISTRIBUTIONS> 1.88
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<PER-SHARE-NAV-END> 26.42
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
