<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Addison Capital Shares, Inc.
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(Exact name of Registrant as Specified in its Charter)
____________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: 1/
4) Proposed maximum aggregate value of transaction:
5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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1/ Set forth the amount on which the filing fee is calculated and state how it
was determined.
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ADDISON CAPITAL SHARES, INC.
c/o Janney Montgomery Scott LLC
2 Bala Cynwyd Plaza
Bala Cynwyd, Pennsylvania 19004
-----------------------------------
Notice of Special Meeting of Shareholders
to be held
December 16, 1999
TO THE SHAREHOLDERS OF ADDISON CAPITAL SHARES, INC.:
You are cordially invited to a special meeting (the "Special Meeting")
of the shareholders of Addison Capital Shares, Inc. (the "Fund"). The Special
Meeting will be held on Thursday, December 16, 1999, at 10:00 a.m. Eastern Time
at the offices of Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia,
Pennsylvania 19103, in Conference Room A on the 18th floor. The purpose of the
Special Meeting is to consider the proposals set forth below and to transact
such other business as may be properly brought before the Special Meeting:
PROPOSAL 1: To approve a new Investment Advisory Agreement between the Fund and
Independence Capital Management, Inc.
PROPOSAL 2: To amend the Fund's fundamental investment policy regarding
investment in securities of other investment companies.
Only shareholders of the Fund at the close of business on November 12,
1999 are entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof.
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE SO THAT YOU MAY RETURN YOUR PROXY CARD AS SOON AS
POSSIBLE. [YOU MAY ALSO VOTE EASILY AND QUICKLY BY TELEPHONE OR THROUGH THE
INTERNET. TO DO SO, PLEASE FOLLOW THE INSTRUCTIONS INCLUDED ON YOUR ENCLOSED
PROXY CARD.] IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO VOTE SO THAT A
QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER OF SHARES MAY BE VOTED. YOU MAY
REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS USE.
James W. Jennings
Secretary
Dated: November ___, 1999
<PAGE>
ADDISON CAPITAL SHARES, INC.
c/o Janney Montgomery Scott LLC
2 Bala Cynwyd Plaza
Bala Cynwyd, Pennsylvania 19004
--------------------
PROXY STATEMENT
--------------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
December 16, 1999
This Proxy Statement is furnished by the Board of Directors (the
"Board") of Addison Capital Shares, Inc. (the "Fund") in connection with the
solicitation of proxies for use at the special meeting of shareholders of the
Fund to be held on Thursday, December 16, 1999, at 10:00 a.m. Eastern Time, or
at any adjournment thereof (the "Special Meeting"), at the offices of Morgan,
Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania 19103, in
Conference Room A on the 18th floor. It is expected that the Notice of Special
Meeting, the Proxy Statement and a Proxy Card will be mailed to shareholders on
or about [November 17], 1999.
At the Special Meeting, shareholders will be asked to consider two
proposals. Proposal 1 asks shareholders to consider a new Investment Advisory
Agreement between the Fund and Independence Capital Management, Inc. ("ICMI").
Proposal 2 asks shareholders to approve an amendment to the Fund's fundamental
investment policy regarding investment in securities of other investment
companies.
If you do not expect to be present at the Special Meeting and wish your
shares to be voted, please return your proxy ("the Proxy") by mail, [telephone
or Internet], allowing sufficient time for the Proxy to be received on or before
10:00 a.m. Eastern Time on Thursday, December 16, 1999. If your Proxy is
returned prior to the Special Meeting, your shares will be voted at the Special
Meeting in accordance with your instructions. If you do not give instructions
with respect to a Proposal, your shares will be voted FOR the approval of that
Proposal, and in accordance with the judgment of the persons appointed as
proxies on any other matter that may properly come before the Special Meeting.
Shareholders may revoke their Proxies at any time prior to the time they are
voted by giving written notice to the Secretary of the Fund, by delivering a
subsequently dated Proxy, or by attending and voting at the Special Meeting.
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The close of business on November 12, 1999, has been fixed as the
record date (the "Record Date") for the determination of shareholders entitled
to notice of, and to vote at, the Special Meeting and at any adjournment(s)
thereof. On the Record Date, the Fund had ___________ shares outstanding. Each
full share will be entitled to one vote at the Special Meeting and each fraction
of a share will be entitled to the fraction of a vote equal to the proportion of
a full share represented by the fractional share.
The expenses of the Special Meeting will be borne by [the Fund] and may
include reimbursement to brokerage firms and others for expenses in forwarding
Proxy solicitation materials to beneficial owners. The solicitation of Proxies
will be largely by mail, [but may include telephonic, telegraphic, Internet or
oral communication by employees and officers of Janney Montgomery Scott LLC, the
Fund's distributor, and PFPC Inc., the Fund's administrator.
Upon request, the Fund will furnish to shareholders, without charge, a
copy of its Annual Report for the fiscal year ended June 30, 1999. The Annual
Report of the Fund may be obtained by written request to the Fund, c/o PFPC
Inc., P.O. Box 8916, Wilmington, Delaware 19899-8916 or by calling
1-800-331-3186.
PROPOSAL 1: To approve a new Investment Advisory Agreement between the Fund
and Independence Capital Management, Inc.
General Information
This Proposal seeks shareholder approval of a new investment advisory
agreement with ICMI. If approved, the Fund will terminate its current investment
advisory agreement with Addison Capital Management Company ("Addison").
In order to change investment advisers, a new investment advisory
agreement must be approved by shareholder vote. Accordingly, at the Special
Meeting, shareholders are being asked to approve a proposed new advisory
agreement between the Fund and ICMI (the "Proposed Advisory Agreement"). The
Board, including a majority of the Independent Directors, approved the Proposed
Advisory Agreement at a meeting held on October 27, 1999. A form of the Proposed
Advisory Agreement is attached as Exhibit A. If approved, ICMI will have the
same duties and responsibilities and will receive the same compensation under
the Proposed Advisory Agreement as Addison does under its current investment
advisory agreement with the Fund.
The Current Advisory Agreement
Addison has served as investment adviser to the Fund since the Fund's
inception pursuant to an Investment Advisory Agreement between Addison and the
Fund, dated September 8, 1986 (the "Current Advisory Agreement"). The Current
Advisory Agreement was initially approved
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by the shareholders of the Fund on October 29, 1987 and was most recently
approved for continuance by the Board, including a majority of the Independent
Directors, on September 1, 1999.
The Proposed Advisory Agreement
The terms of the Proposed Advisory Agreement are substantially
identical to the terms of the Current Advisory Agreement, except for the
parties, date of execution, effectiveness and initial term. The Proposed
Advisory Agreement also differs in that two provisions relating to regulatory
matters that, since the date of the Current Advisory Agreement, have been
superseded by changes in the law. The terms of the Proposed Advisory Agreement,
subject to qualification by reference to Exhibit A, are summarized below.
Advisory Fees. The investment advisory fee as a percentage of net
assets payable by the Fund will be the same under the Proposed Advisory
Agreement as under the Current Advisory Agreement. The fee is calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly, at
the annual rate of 0.75% of the first $100 million, 0.50% in excess of $100
million but less than $250 million and 0.25% of the amount in excess of $250
million. If the investment advisory fee under the Proposed Advisory Agreement
had been in effect for the Fund's most recently completed fiscal year, ICMI
would have received the same compensation as Addison received under the Current
Advisory Agreement.
Duties of ICMI. The Proposed Advisory Agreement provides that ICMI, in
return for its fee, will provide the same services to the Fund as Addison
provides under the Current Advisory Agreement. In particular, the Proposed
Advisory Agreement provides that ICMI will (a) provide the Fund with investment
research, advice, management and supervision and be responsible for a continuous
investment program for the Fund's securities consistent with the Fund's
investment objective and policies; (b) decide, subject to SEC rules and
provisions outlined in the Fund's Articles of Incorporation and By-Laws, which
securities will be purchased, retained or sold by the Fund and take all actions
necessary to effect those decisions; (c) give the Fund's Board all relevant
statistical information and reports that are reasonably available; and (d)
maintain and preserve all books and records with respect to the Fund's
securities and transactions.
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Term. The Proposed Advisory Agreement has an initial term of two years.
Following the expiration of its initial two-year term, the Proposed Advisory
Agreement will continue in full force and effect from year to year, provided
that such continuance is approved at least annually by the Fund's Board or by
the vote of a majority of the Fund's outstanding voting securities, and by the
affirmative vote of a majority of the Directors who are not parties to the
agreement or "interested persons" of a party to the agreement (other than as
Directors of the Fund) by votes cast in person at a meeting specifically called
for such purpose.
The Proposed Advisory Agreement may be terminated at any time, on 60
days' written notice, and without any penalty, by vote of the Fund's Board of
Directors, by vote of a majority of the Fund's outstanding voting securities or
by ICMI. The Proposed Advisory Agreement would terminate automatically in the
event of its assignment.
Standard of Care. The Proposed Advisory Agreement obligates ICMI to
exercise care and diligence and to act in good faith and to use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
the agreement. ICMI will not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of
ICMI or its officers, directors or employees, or reckless disregard by ICMI of
its duties under the Proposed Advisory Agreement.
Board Considerations
At a meeting of the Board held on October 27, 1999, the Board approved
the termination of the Fund's Current Advisory Agreement, subject to shareholder
approval of the Proposed Advisory Agreement.
Termination of the Current Advisory Agreement. In determining to
terminate the Current Advisory Agreement, the Board considered the Fund's
underperformance relative to its benchmark and other similarly managed mutual
funds. The Board also considered the need to maintain the asset level of the
Fund. In this regard, the Board took into account information provided by Janney
that prompt action to improve Fund performance is necessary to avoid significant
shareholder redemptions before the end of the calendar year. Janney provided
information to the Board regarding the effects on Fund expenses of the expected
shareholder redemptions and represented that the recommendation to terminate the
Current Advisory Agreement is based solely on the Fund's underperformance and
the need to maintain the assets of the Fund.
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Recommendation of the Proposed Advisory Agreement. In considering
whether to recommend approval of the Proposed Advisory Agreement the Board met
with representatives of ICMI and considered information presented to them
regarding ICMI and its qualifications to act as investment adviser to the Fund,
including the background and experience of ICMI's key management and personnel
who would assume day-to-day portfolio management responsibility. They also
reviewed information presented by Janney regarding anticipated benefits to the
Fund and its shareholders from a new advisory relationship with ICMI. In
particular, the Board reviewed ICMI's growth and income investment strategy, and
how it has performed relative to various benchmarks over different time periods.
The Board further discussed how ICMI's strategy differs from the value-oriented
style employed by Addison and how ICMI would initially manage the Fund's current
portfolio. The Board took into consideration information provided by Janney
that, in order to prevent significant shareholder redemptions, a new investment
adviser should be selected immediately. The Board considered steps that ICMI
would take to market the Fund and attract new shareholders, including the
availability of ICMI's in-house marketing department. The Board considered that,
as an affiliate of Janney, ICMI is very familiar with the brokers and other
sales representatives who traditionally have sold Fund shares. ICMI also
identified other distribution channels that it thought could be used to increase
sales of Fund shares. In this regard the Board considered the benefits of
engaging an adviser whose marketing and portfolio management personnel,
investment strategies and performance are well known to Janney and its sales
force. It was also noted that the terms of the Proposed Advisory Agreement,
including the advisory fee payable by the Fund, are substantially identical to
the terms of the Current Advisory Agreement.
Independence Capital Management, Inc.
ICMI is a registered investment adviser that, as of September 30, 1999,
had approximately $1.8 billion under management. ICMI is a wholly-owned
subsidiary of The Penn Mutual Life Insurance Company. The principal address of
ICMI is 600 Dresher Road, Horsham, Pennsylvania, 19044.
The following information is provided for each Director and the
principal executive officer of ICMI.
Directors and Principal Executive Officer of ICMI
<TABLE>
<CAPTION>
Name and Position
with ICMI Address Principal Occupation
- ----------------- ------- ---------------------
<S> <C> <C>
Robert E. Chappell 600 Dresher Road Chairman and Chief Executive Officer,
Director Horsham, PA 19044 The Penn Mutual Life Insurance Company
and Registered Representative, Hornor,
Townsend & Kent, Inc.
Richardson T. Merriman 100 Matsonford Road President, Chief Executive Officer and
Senior Vice President and Radnor, PA 19087 Chief Investment Officer, The
Director Pennsylvania Trust Company.
Peter M. Sherman 100 Matsonford Road Executive Vice President and Chief Investment Officer,
Chairman and President Radnor, PA 19087 The Penn Mutual Life Insurance Company.
</TABLE>
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For the fiscal year ended June 30, 1999, the Fund paid Addison an
aggregate fee of $430,263 for advisory services.
Other Funds Advised by ICMI with Similar Investment Objectives
Management Fee
Assets (as a percentage of
Fund (000's) average daily net assets)
- ---- ------- -------------------------
Penn Mutual Separate Account D $46,900(1)
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(1) Information is provided as of September 30, 1999.
Shareholder Approval of the Proposed Advisory Agreement
Approval of the Proposed Advisory Agreement requires the affirmative
vote of a majority of the outstanding voting securities of the Fund, as defined
in the Investment Company Act of 1940 (the "1940 Act"). In the event that
shareholders of the Fund do not approve the Proposed Advisory Agreement, the
Board will take such action as it deems in the best interest of the Fund and its
shareholders, which may include proposing that shareholders approve an agreement
in lieu of the Proposed Advisory Agreement.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE PROPOSED ADVISORY AGREEMENT.
PROPOSAL 2: To approve the amendment of the Fund's fundamental investment
policy regarding investment in securities of other investment
companies.
Shareholders of the Fund are being asked to approve the elimination of
the Fund's current fundamental investment policy regarding investment in
securities of other investment companies and the adoption of a new
non-fundamental policy. The primary purpose of this Proposal is to update the
Fund's policy regarding investment in the securities of other investment
companies in light of current law and regulatory changes. The Fund's current
policy was initially adopted at the Fund's inception in 1986, and was drafted to
comply with regulatory requirements imposed by some states. Since that time,
these state imposed restrictions have been eliminated as a result of federal
legislation.
The Fund's current fundamental policy states that:
The Fund may not 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
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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.
If shareholders approve this Proposal, the Fund intends to eliminate
the current fundamental policy and adopt the following non-fundamental policy:
The Fund may not purchase securities of other investment companies,
except as permitted by the Investment Company Act of 1940, the rules or
regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended from time to time.
Investment in shares of other investment companies is addressed by
section 12(d)(1) of the 1940 Act. Depending on the type and affiliation of the
investment company whose shares are purchased, the 1940 Act generally limits the
Fund (i) to purchasing 3% of the total outstanding voting stock of a single
other investment company; (ii) to investing 5% of its total assets in the
securities of a single other investment company; and (iii) to investing 10% of
its total assets in securities of all other investment companies.
The Board believes that amending this policy will provide the Fund
with increased flexibility in making investment decisions. For example, if
Proposals 1 and 2 are approved, ICMI intends to invest Fund assets in shares of
money market funds for cash management purposes. If approved, the Fund's
registration statement will be amended to provide investors with additional
information regarding the Fund's investments in shares of other investment
companies.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE FOR
AMENDING THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING INVESTMENT IN
SECURITIES OF OTHER INVESTMENT COMPANIES.
ADDITIONAL INFORMATION
Directors and Executive Officers
Information about the Fund's current Directors and principal executive
officers, is set forth below. Each officer of the Fund will hold such office
until a successor has been elected by the Board of Directors.
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<TABLE>
<CAPTION>
Shares
Business Experience Beneficially
Name and During the Past Five Years, Owned as of
Position with the Fund Age including all Directorships ______, 1999** Percentage
---------------------- --- --------------------------- -------------- ----------
<S> <C> <C> <C> <C>
Rudolph C. Sander* 69 Chairman, Janney Montgomery Scott ____ ***
Chairman and Director since LLC (securities).
1986
Margaret M. Healy 65 President, Rosemont College. Formerly, _____ ***
Director since 1986 Chief Financial Officer and Lecturer in
Philosophy, Bryn Mawr College, 1978-
1995.
Charles E. Mather, III 65 President and Director, Mather & Co. _____ ***
Director since 1986 (insurance brokerage); Director,
Christiana Bank & Trust; Director and
President, Finance Company of
Pennsylvania (registered investment
company).
Radcliffe Cheston 52 President & Director, Addison Capital ____ ***
President and Chief Executive Management Company.
Officer since 1990
Charles J. Sullivan 60 Senior Vice President and Director, ____ ***
Vice President since 1986 Janney Montgomery Scott LLC.
James V. Kelly, CFA 52 Senior Vice President and Director, ____ ***
Vice President since 1992 Addison Capital Management Company.
James W. Jennings, Esq. 62 Partner, Morgan, Lewis & Bockius LLP. ____ ***
Secretary since 1990
James W. Wolitarsky 53 Senior Vice President, Treasurer and ____ ***
Treasurer, Chief Financial Director, Janney Montgomery Scott LLC.
Officer and Chief Accounting
Officer since 1992
</TABLE>
* Denotes an individual who is an "interested person" of the Fund as
defined in the 1940 Act.
** This information has been provided by each Nominee.
*** As of __________, 1999 the Directors and officers of the Fund as a
group (8 persons) beneficially owned an aggregate of less than 1% of
the Fund.
Principal Underwriter
Janney Montgomery Scott LLC, located at 1801 Market Street,
Philadelphia, Pennsylvania, 19103, acts as the Fund's principal underwriter.
Portfolio Transactions
In the fiscal year ended June 30, 1999, the Fund paid no brokerage
commissions to Janney Montgomery Scott LLC or its affiliates.
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Independent Accountants
A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected Tait, Weller & Baker as the independent
accountants of the Fund for the fiscal year ending June 30, 2000. [A
representative of Tait, Weller & Baker will be available by telephone during the
Special Meeting, if needed, to make a statement if desired and to respond to
appropriate questions from shareholders.]
Beneficial Owners
To the knowledge of Fund management, as of the Record Date, the
following was a beneficial owner of 5% or more of the outstanding shares of the
Fund.
Amount of Beneficial Percent of Total
Name and Address Ownership Outstanding Shares
---------------- --------- ------------------
Submission of Shareholder Proposals
The Fund is incorporated under the laws of the State of Maryland. Under
Maryland General Corporation Law, a corporation registered under the 1940 Act,
such as the Fund, is not required to hold an annual meeting in any year in which
the election of Directors is not required to be acted upon under the 1940 Act.
The Fund has availed itself of this provision and achieves cost savings by
eliminating printing costs, mailing charges and other expenses involved in
routine annual meetings.
Even with the elimination of routine annual meetings, the Board may
call special meetings of shareholders for action by shareholder vote as may be
required by the 1940 Act, or as required or permitted by the Articles of
Incorporation and By-Laws of the Fund. As described above, shareholder meetings
will be held, in compliance with the 1940 Act, to elect Directors under certain
circumstances. Shareholder meetings may also be held by the Fund for other
purposes, including to approve a new Investment Advisory Agreement or other
matters requiring shareholder action under the 1940 Act.
A meeting may also be called by shareholders holding at least 10% of
the shares entitled to vote at the meeting for the purpose of voting upon the
removal of Directors. Upon written request by ten or more shareholders, who have
been shareholders for at least six months and who hold shares constituting at
least 1% of the outstanding shares, stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary
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to demand a meeting to consider removal of a Director, the Fund has undertaken
to provide a list of shareholders or to disseminate appropriate materials. In
addition, Maryland General Corporation Law provides for the calling of a special
meeting by the written request of shareholders holding at least 25% of the
shares entitled to vote at the meeting.
Shareholders who wish to present a proposal for action at the next
meeting or suggestions as to nominees for the Board of Directors should submit
the proposal or suggestions to be considered to the Fund 60 days in advance of
any such meeting for inclusion in the Fund's proxy statement and form of proxy
for such meeting as is held. The Nominating Committee of the Board of Directors
will give consideration to shareholder suggestions as to nominees for the Board
of Directors. Shareholders retain the right, under limited circumstances, to
request that a meeting of the shareholders be held for the purpose of
considering the removal of a Director from office and, if such a request is
made, the Fund will assist with shareholder communications in connection with
the meeting.
Required Vote
Approval of Proposal 1 requires the approval of a majority of the
outstanding voting securities of the Fund. Approval of Proposal 2 requires the
affirmative vote of a majority of all votes cast at the Special Meeting. As
defined in the 1940 Act, the vote of a "majority of the outstanding voting
securities" of the Fund means the vote of (i) 67% or more of the Fund's
outstanding shares present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares, whichever is less.
Abstentions and "broker non-votes" will not be counted for or against
the Proposals, but will be counted for purposes of determining whether a quorum
is present. Abstentions will be counted as votes present for purposes of
determining a "majority of the outstanding voting securities" present at the
Special Meeting and will therefore have the effect of counting against each
Proposal.
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Other Matters
No business other than the matters described above is expected to come
before the Special Meeting, but should any matter incident to the conduct of the
Special Meeting or any question as to an adjournment of the Special Meeting
arise, the persons named in the enclosed Proxy will vote thereon according to
their best judgment in the interest of the Fund.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO VOTE BY MAIL, [TELEPHONE OR
INTERNET] AS EXPLAINED IN THE INSTRUCTIONS INCLUDED ON YOUR PROXY CARD.
By Order of the Directors,
James W. Jennings, Esq.
Secretary
Dated: November __, 1999
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<PAGE>
EXHIBIT A
FORM OF
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT, made this ___th day of
________, 1999, by and between Addison Capital Shares, Inc., a Maryland
corporation (the "Fund"), and Independence Capital Management, Inc., a
Pennsylvania corporation (the "Adviser").
WHEREAS, the Fund is registered as an open-end, management
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 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,
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.
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(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 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.
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
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Fund, which expenses shall be the responsibility of the Fund: legal expenses;
interest, taxes, governmental fees or membership dues; brokerage commissions or
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 for 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 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.
A-3
<PAGE>
(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) 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.
A-4
<PAGE>
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 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.
A-5
<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:
By:
- ------------------------------ -----------------------------------
President
(SEAL) INDEPENDENCE CAPITAL MANAGEMENT, INC.
Attest:
By:
- ------------------------------ -----------------------------------
A-6
<PAGE>
ADDISON CAPITAL SHARES, INC.
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
December 16, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
ADDISON CAPITAL SHARES, INC.
This proxy is for your use in voting on various matters relating to Addison
Capital Shares, Inc. (the "Fund"). The undersigned shareholder(s) of the Fund,
revoking previous proxies, hereby appoint(s) Charles J. Sullivan and James W.
Wolitarsky and each of them (with full power of substitution) the proxies of the
undersigned to attend the Special Meeting of Shareholders of the Fund to be held
on December 16, 1999 (the "Special Meeting") and any adjournments thereof, to
vote all of the shares of the Fund that the signer would be entitled to vote if
personally present at the Special Meeting and on any matter incident to the
conduct of the Special Meeting, all as set forth in the notice of Special
Meeting of Shareholders and Proxy Statement of the Board of Directors. Said
proxies are directed to vote or refrain from voting pursuant to the Proxy
Statement as indicated upon the matters set forth below.
This proxy will be voted as indicated below. If no indication is made, this
proxy will be voted FOR the proposals set forth below. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Directors.
TO VOTE, MARK BLOCKS BELOW INK BLUE OR BLACK INK AS FOLLOWS: |X|
KEEP THIS PORTION FOR YOUR RECORDS
- -------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
ADDISON CAPITAL SHARES, INC.
Vote on Proposals:
1. To approve a new Investment Advisory Agreement between the Fund and
Independence Capital Management, Inc.
|_| For |_| Against |_| Abstain
2. To amend the Fund's fundamental investment policy regarding investment
in securities of other investment companies.
|_| For |_| Against |_| Abstain
<TABLE>
<S> <C> <C>
Please print and sign your
name in the space provided to
authorize the voting of your _______________________________ ___________________________
shares as indicated and return Signature [PLEASE SIGN WITHIN BOX] Date
promptly. When signing on
behalf of a corporation,
partnership, estate, trust
or in any other _____________________________ ___________________________
representative capacity, Signature (Joint Owners) Date
please sign your name and
title. For joint accounts,
each joint owner must sign.
</TABLE>
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
