SCHEDULE 14A
[ 40,151] Information Required by Proxy Statement
Reg. 240.14a-101.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
BERWYN INCOME
FUND, INC.
(Name of Registrant as Specified In Its Charter)
KEVIN
M.
RYAN
(Name of Person(s) Filing Proxy Statement, if other than the
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 (set forth the amount on
which the filing fee is calculated and state how it was determined):
_________________________________________________________________
_____________
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.:
BERWYN INCOME FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
Robert E. Killen and Kevin M. Ryan, or either of them, with power of
substitution, are hereby authorized as proxies to represent, and to
vote the shares of common stock (the "Shares") of Berwyn Income Fund,
Inc. (the "Fund") owned by the undersigned shareholder(s) at the
Annual Meeting of Shareholders of the Fund, to be held at 11:00 a.m.
or immediately following the Annual Meeting of Shareholders of The
Berwyn Fund, Inc., which is scheduled for 10:00 a.m. on Friday, March
27, 1998 at 1199 Lancaster Avenue, Berwyn, Pennsylvania, and at any
adjournment thereof. The proxies are to vote the Shares of the
undersigned as instructed below and in accordance with their judgment
on all other matters which may properly come before the meeting. If
no specification is made below, this proxy shall be voted in favor of
each listed proposal (including each nominee for Director).
The Board of Directors recommends voting for Proposals 1, 2, 3, 4 and
5.
1. Election of Directors:
Nominees: Robert E. Killen, Denis P. Conlon, Anthony N. Carrelli,
Edward A. Killen II,
and William H. Vonier
For All Nominees____ Withhold All Nominees____
Withhold Those Listed Below____
Instruction: To withhold authority to vote for any individual
nominee, please print his name below:
2. Annual Continuation of Contract for Investment Advisory Services:
Approve____ Disapprove____ Abstain____
3. Ratification of Price Waterhouse, LLP as independent accountants:
For____ Against____ Abstain____
4. Amendment of the Articles of Incorporation of the Fund to increase
the number of authorized shares of
the Fund:
For____ Against____ Abstain____
5. Amendments of the fundamental investment restriction and Bylaws of
the Fund to permit purchase
and sale of Rule 144A securities:
For____ Against____ Abstain____
Please sign and date this proxy and return it promptly in the enclosed
envelope.
_____________________________________
Dated____________________, 1998
_____________________________________
Dated____________________, 1998
Joint Tenant (if any)
Please check here _______ if planning to attend the Annual Meeting of
Shareholders.
Please check here _______ if you have comments and use back of form.
YOUR VOTE IS IMPORTAN
BERWYN INCOME FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 27, 1998
BERWYN, PENNSYLVANIA
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
the Berwyn Income Fund, Inc. (the "Fund"), a registered investment
company, will be held at the executive offices of The Killen
Group, Inc., 1199 Lancaster Avenue, Berwyn, Pennsylvania on
Friday, March 27, 1998, at 11:00 a.m. or immediately following The
Berwyn Fund, Inc. Shareholder Meeting, which is scheduled for
10:00 a.m., for the following purposes:
1. To elect 5 Directors to serve until the next annual meeting of
shareholders and until their successors are elected;
2. To consider and approve the Investment Advisory Agreement
between the Fund and The Killen Group, Inc. for the period from
March 27, 1998 to March 26, 1999, or until the next annual
meeting of shareholders;
3. To consider and ratify the appointment of Price Waterhouse, LLP
as independent accountants for the fiscal year ending December
31, 1998.
4. To consider and approve an amendment to the Articles of
Incorporation of the Fund to increase the number of shares of
the Fund that the Fund is authorized to issue from 20,000,000
to 100,000,000.
5. To consider and approve an amendment to (a) Section (1)(k) of
Article XI of the Bylaws of the Fund and (b) the Fund's
fundamental investment restrictions in order to permit the Fund
to invest in unregistered securities that are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933,
as amended.
At such meeting, only holders of common stock of record at the
close of business on February 12, 1998 will be entitled to vote.
You are encouraged to attend this meeting in person, but if you
cannot do so, please complete, date, sign and return the
accompanying proxy at your earliest convenience. YOUR
PARTICIPATION, IN PERSON OR BY PROXY, IS IMPORTANT. BUSINESS MAY
BE TRANSACTED ONLY IF A MAJORITY OF THE SHARES ENTITLED TO VOTE
ARE PRESENT IN PERSON OR BY PROXY.
By Order of the
Board of Directors
February 13, 1998 Kevin M. Ryan,
Secretary
PROXY STATEMENT
SOLICITATION, REVOCATION AND VOTING OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Berwyn Income Fund, Inc. (the "Fund"), for use at the
Annual Meeting of Shareholders (the "Annual Meeting"), or any
adjournment thereof, to be held on March 27, 1998, at 11:00 a.m. or
immediately following the Annual Meeting of Shareholders of The Berwyn
Fund, Inc., which is scheduled for 10:00 a.m., at the executive
offices of The Killen Group, Inc. (the "Adviser" or "Killen Group"),
1199 Lancaster Avenue, Berwyn, Pennsylvania. The Fund's address is
1189 Lancaster Avenue, Berwyn, Pennsylvania 19312. This proxy
statement and the enclosed proxy are first being sent to shareholders
of the Fund (the "Shareholders") on or about March 2, 1998. The close
of business on February 12, 1998 has been fixed as the record date for
the determination of shareholders entitled to vote at the Annual
Meeting. On that date there were outstanding 14,487,653 shares of
common stock of the Fund. (The Fund issues only common stock.)
Shareholders will be entitled to one vote on each matter for each
share held.
A majority of the shares entitled to vote, represented in person or by
proxy, will constitute a quorum and the presence of a quorum is
necessary for the transaction of business. Abstentions and broker
non-votes will be included for purposes of determining whether a
quorum is present at the meeting, but will be treated as votes not
cast and, therefore, will not be counted in determining whether
matters to be voted upon at the meeting have been approved.
The proposed contract for Investment Advisory Services between the
Fund and the Adviser, (the "Advisory Agreement"), and the proposed
Amendments to the Fund's fundamental investment restriction and Bylaws
(Proposals 2 and 5 below) require approval by a vote of a majority of
the Fund's outstanding voting securities as defined in the Investment
Company Act of 1940, as amended ("1940 Act"). Under the 1940 Act,
such approval means the affirmative vote at a meeting of shareholders
of the lesser of (a) more than 50% of the Fund's outstanding shares,
or (b) 67% or more of the shares present or represented by proxy at
the meeting, if the holders of more than 50% of the Fund's outstanding
shares are present in person or represented by proxy. The election of
the nominees for Director, the Amendment of the Articles of
Incorporation and the ratification of the appointment of Price
Waterhouse, LLP as independent accountants of the Fund (Proposals 1,
3 and 4 below) require the affirmative vote of a majority of shares
present at the meeting either in person or by proxy.
All shares represented by properly executed proxies, unless such
proxies have been previously revoked, will be voted at the Annual
Meeting in accordance with the directions on the proxies. A
shareholder who executes and returns a proxy may revoke it at any time
prior to its exercise by delivering to the Secretary of the Fund
written notice of its revocation, sending the Fund a proxy with a
later date, or voting in person at the meeting. The cost of
soliciting proxies, which is estimated at $2,500, is being paid by the
Fund. In addition to solicitation by mail, Officers of the Fund may
ask Shareholders to return proxies in personal conversations or by
telephone or telecopy.
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Since the Fund is bearing all proxy solicitation costs, it is requested
that Shareholders who will not attend the meeting, execute and return a
proxy so as to avoid any additional solicitation expense.
OWNERSHIP OF SHARES
Shareholders known by the Board of Directors to own more than 5% of the
outstanding shares of the Fund
on February 12, 1998 and the percentage of the outstanding shares owned on
that date are listed below.
Name of Shareholder Amount of Percentage of
and Address Shares Owned Outstanding Shares
Charles Schwab & Co. (1) 6,794,221 47%
101 Montgomery Street
San Francisco, CA
National Financial Services Corp. (1) 1,267,123 9%
1 World Financial Center
200 Liberty Street
New York, NY
(1) Indicated owner of record; the record owner is a registered broker-
dealer and holds the shares listed for the benefit of its customers.
To the Fund's knowledge, no person beneficially owned more than 5% of the
outstanding shares of the Fund on February 12, 1998.
PROPOSAL 1. NOMINEES FOR ELECTION AS DIRECTORS
Five Directors are to be elected to serve on the Board of Directors of
the Fund (the "Board") until the next Annual Meeting of Shareholders
and until their successors are elected. The Board's nominees are
named in the following table, which also sets forth information about
each of them concerning age, principal occupation, business experience
for at least the past five years, and ownership of Fund shares. This
information is also provided for Kevin M. Ryan who serves as
Secretary-Treasurer of the Fund. Robert E. Killen, Anthony N.
Carrelli, Denis P. Conlon, Edward A. Killen II and William H. Vonier
are currently members of the Fund's Board of Directors and all are
nominees for election.
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Number of Shares
Principal Occupation Beneficially
and Other Business Owned & Percent
Experience During the of Class as of
Name (Age) Past Five Years February 12, 1998
*Robert E. Killen Director and shareholder, Berwyn Financial
Services 119,236
(56) Corp. ("BFS"), a financial services company
(registered (1)
with the U.S. Securities and Exchange
Commission +
(the "SEC") as a broker-dealer since December
1993
and a member of the National Association of
Securities
Dealers (the "NASD" since July 1994), since
October 1991.
President and Director of The Berwyn Fund,
Inc., since
February 1983. President and Director of
Berwyn
Income Fund, Inc., since December 1986.
Director of
Westmoreland Coal Co. (a mining company) since
July
1996. Chairman, CEO, and sole shareholder of
Killen
Group (an investment advisory firm and the
investment
adviser to the Fund) since April 1996.
President,
Treasurer, Director and sole shareholder of
Killen Group,
from September 1982 to March 1996.
*Anthony N. Carrelli Director of Berwyn Income Fund, Inc., since
December 497
(49) 1986. Director of The Berwyn Fund, Inc.,
since January +
1995. Vice President of Killen Group (an
investment
advisory firm and the investment adviser to
the Fund)
since August 1986.
*Edward A. Killen II Director, Secretary and shareholder, BFS, a
financial services 3,357
(46) (registered as a broker-dealer with the SEC
since December +
1993 and a member of the NASD since July
1994), since
October 1991. Director of Berwyn Income Fund,
Inc.,
since January 1995. Director of The Berwyn
Fund, Inc.,
from February 1983 to January 1995. Vice
President,
Secretary and Director of Killen Group (an
investment
advisory firm and the investment adviser to
the Fund)
since February 1983.
Denis P. Conlon Director of The Berwyn Fund, Inc., and Berwyn
Income 1,230
(50) Fund, Inc., since June 1992. President & CEO
of CRC +
Industries (a worldwide manufacturer of
chemical
specialties for industrial and automotive
markets) since
September 1996. Vice President, Corporate
Development,
Berwind Corporation (diversified manufacturing
and
financial company) from 1990 to September
1996.
- -4-
Number of Shares
Principal Occupation Beneficially
and Other Business Owned & Percent
Experience During the of Class as of
Name (Age) Past Five Years February 12, 1998
William H. Vonier Director of The Berwyn Fund, Inc., and Berwyn
Income
(69) Fund, Inc., since June 1992. Independent Consultant
Sales and Marketing since 1989.
*Kevin M. Ryan President, Treasurer, Director and shareholder
of BFS, 31,106
(50) a financial services company, (registered as a
broker- (2)
dealer with the SEC since December 1993 and a
member +
of the NASD since July 1994), since October
1991.
Secretary-Treasurer of Berwyn Income Fund,
Inc., since
1986. Director of Berwyn Income Fund, Inc.,
from
December 1986 to January 1995. Secretary,
Treasurer
and Director of The Berwyn Fund, Inc., since
February
1983. Legal Counsel to Killen Group (an
investment
advisory firm and the investment adviser to
the Fund)
since September 1985.
All Directors and Officers of the Fund as a group owned 155,426 shares
of the Fund, which constituted approximately 1.0% of its outstanding
shares as of February 12, 1998.
Notes:
(1) The shares listed for Robert E. Killen include shares owned by The
Killen Group, Inc. and shares
owned by his wife.
(2) Shares listed for Kevin M. Ryan include shares owned by two
Partnerships of which he is a
General Partner.
+ Indicates ownership of less than 1% of the outstanding shares of
the Fund.
* Robert E. Killen, Anthony N. Carrelli, Edward A. Killen II and Kevin
M. Ryan are interested persons of the Fund as defined in the 1940 Act.
Messrs. R. Killen, A. Carrelli, and E. Killen are the "Interested
Directors" of the Fund as defined in the 1940 Act. Robert E. Killen
is an Officer, Director and sole shareholder of the Adviser to the
Fund. He is also a Director of BFS, a registered broker-dealer, and
owns 1/3 of its outstanding shares. Anthony N. Carrelli is a Vice
President of the Adviser to the Fund. Edward A. Killen II is an
Officer and Director of the Advisor to the Fund. He is also an
Officer, Director, and the owner of 1/3 of the outstanding shares of
BFS. Kevin M. Ryan is legal counsel to the Adviser and he is an
Officer, Director and owner of the 1/3 of outstanding shares of BFS.
In addition, Robert E. Killen and Edward A. Killen II are brothers and
Kevin M. Ryan is brother-in-law to both. BFS serves as the selling
agent for the Fund in certain jurisdictions. The Board of Directors
sets broad policies for the Fund and elects the Officers. The
Officers of the Fund are Robert E. Killen, President, and Kevin M.
Ryan, Secretary-Treasurer. The Officers manage the Fund's daily
operations and are directly responsible to the Directors.
- -5-
The Board held four meetings in the Fund's fiscal year ended December
31, 1997 (the "1997 fiscal year") and all Directors were present at
each meeting. The Board has an Audit Committee composed of Messrs.
Conlon and Vonier, each of whom is not an "interested person" of the
Fund, as that term is defined in the 1940 Act ("Independent
Directors"). The Audit Committee recommends the selection of
independent public accountants for the Fund, reviews the scope of the
audit and evaluates the independent accountants' work and opinions and
reports its findings to the Board. The Audit Committee did not meet
in 1997. In past years, the Audit Committee met with the Fund's
independent accountants at the start of the annual audit. In 1997,
the Audit Committee decided to meet with the auditors at the
conclusion of the annual audit. The Audit Committee will meet with
the Fund's in 1998 at the conclusion of the 1997 audit.
The Independent Directors are paid a fee of $400 for each Board or
Committee meeting attended and are reimbursed for any travel expenses.
If a Board and Committee meeting are held on the same date, the
Independent Directors receive only one fee. In the 1997 fiscal year,
Messrs. Conlon and Vonier were paid Directors' fees of $1,600 and
$1,600, respectively from the Fund. Messrs. Conlon and Vonier also
serve as Independent Directors of The Berwyn Fund, Inc. (another
registered investment company managed by the Adviser and together with
the Fund, the "Funds"). In the fiscal year ended December 31, 1997 of
The Berwyn Fund, Inc., Messrs. Conlon and Vonier received $1,600 and
$1,600, respectively, in Directors' fees from The Berwyn Fund, Inc.
The total Directors' fees paid by both Funds to Messrs. Conlon and
Vonier were $3,200 and $3,200, respectively for the 1997 fiscal year
of each of the Funds.
Officers of the Fund are not paid compensation by the Fund for their
work as Officers and no fees are paid to the Interested Directors for
the performance of their duties.
PROPOSAL 2. INVESTMENT ADVISORY AGREEMENT
Investment Adviser
Killen Group currently serves as the investment adviser to the Fund.
The Adviser is a Pennsylvania corporation formed in September 1982 and
its offices are located at 1199 Lancaster Avenue, Berwyn, Pennsylvania
19312.
The Officers and Directors of the Adviser are Robert E. Killen,
Chairman, CEO and Treasurer, William A. Siegenthaler, Chief Operating
Officer and Director , Edward A. Killen, II, Executive Vice President,
Secretary and Director, Anthony N. Carrelli, Vice President and Tara
J. Killen, Director. The address of each Officer and Director is 1199
Lancaster Avenue, Berwyn, Pennsylvania 19312.
Robert E. Killen has worked as an investment adviser since 1969. In
that year, he co-founded the partnership of Compu Val Management
Associates (an investment advisory firm) and was a partner until
February 1983 when he was replaced by the Adviser as a general
partner.
- -6-
In December 1983, the partnership of Compu Val Management Associates
was dissolved.
William A. Siegenthaler has been the Chief Operating Officer of Killen
Group since April 1996. Prior to that he was manager of the Capital
Markets Department of Electronics Data Systems Corporation, Wayne,
Pennsylvania from March 1995 to March 1996.
Edward A. Killen II was Portfolio Manager for Compu Val Management
Associates from 1976 until September 1983. At that time he assumed
his present position with the Adviser.
Tara J. Killen has been employed as a writer by First News Corp., Boca
Raton, Florida since September 1997. From June 1994 to June 1997, she
was employed by the Adviser as an assistant portfolio manager and
supervisor for mutual fund communications.
Robert E. Killen is Chairman of the Board and President of the Fund
and currently a nominee for re-election as a Director. Edward A.
Killen II, Executive Vice President, and Anthony N. Carrelli, Vice
President of the Adviser, are currently Directors of the Fund and are
nominees for election as Directors at the Annual Meeting.
Advisory Agreement
The Adviser serves as investment adviser to the Fund pursuant to a
written Advisory Agreement, dated May 14, 1993. Under the terms of
the Advisory Agreement, the Adviser provides the Fund with advice and
recommendations with respect to investments, investment policies, the
purchase and sale of securities and other investments, and the
management of the Fund's resources.
In addition to providing investment services to the Fund, the Adviser
provides and furnishes office space for the Fund and provides
personnel to administer the Fund's operations. The Adviser also pays
all expenses associated with the sales promotion of the Fund.
As compensation for investment services, under the Advisory Agreement,
the Fund has agreed to pay the Adviser monthly compensation at the
annual rate of 1/2 of 1% of the average daily net assets of the Fund.
In the 1997 fiscal year, the Adviser received advisory fees totaling
$806,436. The Advisory Agreement provides that the Adviser's fee will
be reduced in any fiscal year by any amount necessary to prevent the
Fund expenses and liabilities (excluding taxes, interest, brokerage
commissions and extraordinary expenses, as determined by the Fund's or
Adviser, but inclusive of the Adviser's fee) from exceeding 2% of the
average daily net assets of the Fund (1-1/2% when net assets of the
Fund are over $100 million). This expense limitation did not affect
the Adviser's fee in 1997.
The Advisory Agreement is terminable at any time without penalty on 60
days' written notice by the Board of Directors and will terminate
automatically in the event it is assigned. The Advisory Agreement is
also terminable at any time without penalty by a vote of a majority of
the outstanding shares of the Fund on 60 days' written notice. The
Adviser may terminate the Agreement by written notice to the Fund at
least 60 days prior to the date of the annual shareholder meeting of
any year thereafter. The
Advisory Agreement provides that, unless sooner terminated, it will
continue in effect from year to year
- -7-
provided that such continuance is specifically approved at least
annually by a vote of a majority of the outstanding shares of the Fund
as defined in the 1940 Act. Continuance of the Advisory Agreement also
must be approved by the Independent Directors of the Fund annually.
The Board of Directors of the Fund, including the Independent
Directors, unanimously approved continuance of the Advisory Agreement
at a meeting held on January 20, 1998.
In making its recommendation to continue the Advisory Agreement, the
Board considered a number of factors. These factors were the
performance of the Fund in 1997 and from its inception, the nature and
quality of services provided by the Adviser and the Adviser's fee and
the expenses of the Fund in comparison to other mutual funds with a
similar investment objective. The Board was also aware that the
Adviser placed portfolio transactions through brokers affiliated with
the Adviser and the Fund and that the Adviser allocated transactions
to brokers that sold shares of the Fund and that provided research to
the Fund and the Adviser. Prior to the Board meeting held on January
20, 1998, the members of the Board were provided with a memorandum
prepared by the Adviser that detailed the experience of the Fund's
portfolio manager, the services provided by the Adviser and the number
of employees engaged in providing those services. Also provided in
the memorandum was the annual performance of the Fund since inception
as well as the annual average total return for 1 year, 5 years and the
life of the Fund. The memorandum listed the total amount of fees paid
to the Adviser for 1997, the ratio of expenses to average net assets
for the year and the rate at which the Fund pays the Adviser.
In addition to the Adviser's memorandum, the members of the Board were
provided with information which compared the various expenses and fees
of funds with similar investment objectives to the Fund's expenses and
fees.
After a discussion regarding the Advisory Agreement, the Board
unanimously determined that it was in the best interest of the Fund's
shareholders to continue the Advisory Agreement. The Board determined
that the performance of the Fund in 1997 was satisfactory and that the
performance of the Fund and level and quality of services provided by
the Adviser since the Fund's inception have been good. The Board also
determined that the fee charged by the Adviser was fair and reasonable
considering the nature and quality of the services provided to the
Fund and the other factors described above.
The terms of the Advisory Agreement require that the renewal of the
agreement be submitted to the shareholders at the Annual Meeting for
their approval. The Advisory Agreement was last submitted for
shareholder approval at the Annual Meeting of Shareholders held on
March 22, 1997. At that time, the Advisory Agreement was approved for
continuance. No changes have been made in the Agreement since March
22, 1997.
A copy of the Advisory Agreement is attached as Appendix A.
The Board recommends approval by Shareholders of the Advisory
Agreement.
Affiliated Brokers
The Fund places a portion of its portfolio transactions through
brokers affiliated with the Adviser and the Fund. In the 1997 fiscal
year, the affiliated broker used by the Fund was BFS. BFS is
affiliated with the
- -8-
Adviser and the Fund by reason of the fact that Officers and Directors
of the Fund and the Adviser are Officers, Directors and shareholders
of BFS. In addition, BFS serves as the selling agent for the Fund in
various jurisdictions pursuant to a written agreement.
In the 1997 fiscal year, the Fund paid a total of $193,023 in
commissions to BFS. This figure represents 77% of the total
commissions paid by the Fund.
PROPOSAL 3. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board is requesting ratification of its selection of Price
Waterhouse, LLP as independent accountants of the Fund for the fiscal
year ending December 31, 1998. Price Waterhouse, LLP has served as
independent accountants for the Fund since the Fund began operations.
No representative of Price Waterhouse, LLP is expected to be present
or make a statement at the Annual Meeting.
The Board recommends the ratification by Shareholders of such
selection of Price Waterhouse, LLP as independent accountants for the
Fund.
PROPOSAL 4. AMENDMENT OF THE ARTICLES OF INCORPORATION
The Fund's Articles of Incorporation (the "Articles") currently read
as follows:
"The Aggregate Number of Shares, Classes of Shares and
Par Value of Shares Which the Corporation Shall Have
the Authority to Issue:
20,000,000 shares with a stated Par Value Per Share of
$1.00 Par."
The Board of the Fund has proposed to amend the Articles to increase
the number of shares authorized to be issued. The proposed amendment
would read as follows:
"The Aggregate Number of Shares, Classes of Shares and
Par Value of Shares Which the Corporation Shall Have
the Authority to Issue:
100,000,000 shares with a Stated Par Value Per Share of
$1.00 Par."
The Board believes that it is in the best interest of the Fund and its
Shareholders to increase the authorized number shares of the Fund.
- -9-
When the Fund was established in December 1986, 20,000,000 shares of
stock were deemed adequate. Circumstances, however, have changed and
the Fund needs to increases the number of authorized shares to insure
its continued operation. As of February 12, 1998, there were
14,487,653 shares of the Fund outstanding.
Each share has equal voting, dividend, distribution and liquidation
rights. There are no conversion or preemptive rights applicable to
any shares of the Fund. All shares issued are fully paid and
nonassessable. Fund shares do not have cumulative voting rights,
which means that the holders of more than 50% of the share voting for
election of Directors may elect 100% of the Directors if they choose
to do so and, in such event, the holders of the remaining shares so
voting will not be able to elect any Directors. Share certificates
will be issued only upon written request.
The Board of Directors may declare and pay dividends upon the
outstanding shares of the Fund, from time to time and to such extent
as they deem advisable, in the manner and upon the terms and
conditions provided by statute and the Articles of Incorporation,
prospectus and statement of additional information ("SAI") of the
Fund.
The registered holders of shares of the Fund may require the Fund to
redeem the shares of the Fund by delivering to the Fund a written
request for redemption as described in the prospectus and SAI of the
Fund.
The additional shares of the Fund are being authorized for the same
purpose as the currently authorized shares of the Fund. The
additional shares will be issued to investors form time to time in the
same manner and for the same consideration as the currently authorized
shares, as described in the prospectus and SAI of the Fund.
If the present trend of sales continues, the Fund soon will issue all
20,000,000 shares authorized and no shares would be left to sell to
investors or Shareholders who wish to reinvest their dividends.
The financial statements of the Fund are contained in the Annual
Report to Shareholders for the fiscal year ended December 31, 1997,
which accompanies this Proxy Statement.
The Board recommends approval by the Shareholders of the Amendment of
the Articles to increase the number and authorized shares to
100,000,000 shares.
5. PROPOSAL TO AMEND THE FUNDAMENTAL INVESTMENT RESTRICTION AND
BYLAWS OF THE FUND
The Fund currently is subject to a fundamental policy and Bylaw
provision that provides:
"The corporation will not invest in restricted securities
(securities that must be registered under the Securities Act of
1933, as amended, before they may be offered and sold to the
public)."
- -10-
The Board has proposed to amend this fundamental policy and bylaw
provision as follows:
"The corporation will not invest in restricted securities
(securities that must be registered in the Securities Act of
1933, as amended, before they may be offered and sold to the
public, except that the corporation will be permitted to
purchase restricted securities that are eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, as
amended."
The Board believes that it is in the best interest of the Fund and its
Shareholders to amend its Bylaws to permit the purchase of securities
eligible for resale under Rule 144A ("Rule 144A") under the Securities
Act of 1933, as amended ("Securities Act").
Rule 144A provides an exemption from the registration requirements of
the Securities Act for the purchase and sale of certain restricted
securities by institutional investors that meet certain
qualifications. The rule provides a way for such institutional
investors to buy and sell restricted securities in private
transactions.
The Adviser to the Fund has requested that the Board take action to
change the fundamental policy and Bylaws restriction as proposed
above. The Adviser believes that the Fund will benefit by being able
to participate in transactions in restricted securities exempt from
registration under Rule 144A.
There are issues regarding the liquidity and fair market value of
restricted securities sold under the Rule 144A exemption. The Adviser
has informed the Board, however, that investment in restricted
securities should be limited to no more than 10% of the Fund's net
assets. That is, the Fund would not purchase a restricted security in
a transaction under Rule 144A if at the time the combined value of all
the restricted securities held by the Fund and such security comprised
more than 10% of the Fund's net assets. Also, the Board would adopt
procedures to value securities purchased pursuant to Rule 144A if a
market price was not available.
Restricted Securities which can be offered and sold to qualified
institutional buyers under Rule 144A ("144A Securities") may be
determined to be liquid under guidelines adopted by, and subject to
the supervision of, the Board of Directors. Rule 144A Securities may
become illiquid if qualified institutional buyers are not interested
in acquiring the securities. Although 144A Securities may be resold
in negotiated transactions pursuant to Rule 144A, the prices realized
form these sales could be less than those originally paid by the Fund
or less than what may be considered fair value of such securities.
Furthermore, companies whose securities are not publicly traded may
not be subject to the disclosure and other investor protection
requirements which might be applicable if their securities were
publicly traded. If such securities are required to be registered
under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expenses of registration.
The Board recommends approval by the Shareholders of the amendment of
the Fund's Bylaws to permit the Fund to purchase restricted securities
eligible for resale under Rule 144A.
- -11-
Shareholder Proposals
Proposals of Shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Fund by November 1,
1998 for inclusion in the Fund's Proxy Statement and Proxy relating to
that meeting. Upon receipt of any such proposal, the Fund will
determine whether or not to include such proposal in the Proxy
Statement and Proxy, in accordance with regulations governing the
solicitation of proxies.
The financial statements included in the Annual Report to Shareholders
for the fiscal year ended December 31, 997 which accompanies this
Proxy Statement are incorporated by reference in this Proxy Statement.
By Order
of the Board of Directors
February 13, 1998
____________________________________
Kevin M.
Ryan, Secretary
- -12-
APPENDIX A
CONTRACT FOR
INVESTMENT ADVISORY SERVICES
Agreement made May 14, 1993 between The Berwyn Income Fund, Inc., a
Pennsylvania corporation, having its principal place of business at
1189 Lancaster Avenue, Berwyn, Pennsylvania, herein referred to as the
Fund, and The Killen Group, Inc., a Pennsylvania corporation, having
its principal place of business at 1189 Lancaster Avenue, Berwyn,
Pennsylvania, herein referred to as the Adviser.
1. The Fund shall register with the Securities and Exchange
Commission as a diversified, open-end management investment
company under the provisions of the Investment Company Act of
1940 and shall qualify to engage in business under said act and
other applicable federal and state statutes.
2. The Adviser is registered under the Investment Advisors Act and
is engaged in the business of acting as an investment adviser
and rendering research and advisory services.
3. The Fund desires to retain the Adviser to render such services
to the Fund in the manner and on the terms and conditions
hereinafter set forth.
4. Nothing contained herein shall be deemed to require the Fund to
take any action contrary to its certificate of incorporation or
any applicable statute or regulation, or to relieve or deprive
the Board of Directors of the Fund of its responsibility for,
and control of, the conduct of the affairs of the Fund.
For the reasons recited above, and in consideration of the mutual
promises contained herein, the Fund and Adviser agree as follows:
SECTION ONE
INVESTMENT ADVICE AND OTHER SERVICES
a. Adviser shall to the extent reasonably required in the
conduct of the business of the Fund, place at the disposal of the
Fund, its judgment and experience and furnish to the Fund advice and
recommendations with respect to investments, investment policies, the
purchase and sale of securities, and the management of its resources.
Adviser shall also, from time to time, furnish to or place at the
disposal of the Fund such reports and information relating to
industries, businesses, corporations or securities as may be
reasonably required by the Fund or as Adviser may deem to be helpful
to the Fund in the administration of its investments.
b. Adviser agrees to use its best efforts in the furnishing of
such advice and recommendations and in the preparation of such reports
and information, and for this purpose Adviser shall at all times
maintain a staff of Officers and other trained personnel for the
performance of its obligations under this agreement. Adviser, may at
its expense, employ other persons to furnish to Adviser statistical
and other factual information, advice regarding economic factors and
trends, information with respect to technical and scientific
developments and such other information, advice and assistance as
Adviser may desire.
c. The Fund will from time to time furnish to Adviser detailed
statements of the investments and resources of the Fund and
information as to its investment problems, and will make available to
Adviser such financial reports, proxy statements, and legal and other
information relating to its investments as may be in possession of the
Fund or available to it.
SECTION TWO
COMPENSATION TO INVESTMENT ADVISER
a. The Fund agrees to pay to Adviser and Adviser agrees to
accept, as full compensation for all services rendered and as full
reimbursement for all expenses assumed by Adviser thereunder, an
annual fee equal to 1/2 of l.0% of the average daily net assets of the
Fund. The fee will be paid monthly.
b. Adviser agrees that neither it nor any of its Officers or
Directors shall take any long or short position in the capital stock
of the Fund; but this prohibition shall not prevent the purchase by or
for Adviser or any of its Officers or Directors of shares of the
capital stock of the Fund at the price at which such shares are
available to the public at the moment of purchase provided that (1)
such purchase be made for investment purposes only and (2) if any
shares of stock so purchased are resold within two months after the
date of purchase, such fact will be immediately reported to the Fund.
SECTION THREE
PAYMENT OF EXPENSES
The Adviser shall provide and furnish office space for Officers and
employees of the Fund. The Adviser shall pay all expenses associated
with the sales promotion of the Fund. The Fund will pay all other
expenses incurred in the operation of the Fund.
The Adviser hereby agrees to reduce its fee in any fiscal year by any
amount necessary to prevent Fund expenses and liabilities (excluding
taxes, interest, brokerage commissions and extraordinary expenses,
determined by the Fund or Adviser, but inclusive of the Adviser's fee)
from exceeding 2% of the net assets of the Fund. When the total net
assets of the Fund exceed $100 million, the Adviser hereby agrees to
reduce its fee in any fiscal year by any amount necessary to prevent
Fund expenses and liabilities (excluding taxes, interest, brokerage
commissions and extraordinary expenses, determined by the Fund or
Adviser, but inclusive of the Adviser's fee) from exceeding 1-1/2% of
the net assets of the Fund.
SECTION FOUR
DURATION; TERMINATION
a. This agreement shall begin on May 14, l993. The agreement
shall continue in effect from year to year thereafter, subject to the
provisions for termination and all of the other terms and conditions
hereof, if (1) such continuation shall be specifically approved at
least annually by vote of a majority of the outstanding voting
securities of the Fund; and (2) Adviser shall not have notified the
Fund, in writing, at least sixty days prior to the date of the Annual
Shareholders Meeting of any year thereafter, that it does not desire
such continuation.
b. This agreement may be terminated by the Fund on 60 days
notice in writing to Adviser, without the payment of any penalty,
provided such termination be authorized by resolution of the Board of
Directors of the Fund or by vote of a majority of its outstanding
voting securities.
SECTION FIVE
AMENDMENT OF AGREEMENT
This agreement may not be amended, transferred, assigned, sold or in
any manner hypothecated or pledged without the affirmative vote or
written consent of the holders of a majority of the outstanding voting
securities of the Fund; and this agreement shall automatically and
immediately terminate in the event of its assignment by Adviser.
In witness whereof, the parties hereto have caused this agreement to
be signed by their respective Officers thereunto duly authorized and
their respective corporate seals to be hereunto affixed, the day and
year first above written.
THE BERWYN INCOME FUND, INC. THE KILLEN GROUP,
INC.
by: Kevin M. Ryan by:
Robert E. Killen
Secretary-Treasurer
Presiden
SECTION FOUR
DURATION; TERMINATION
a. This agreement shall begin on May 14, l993. The agreement
shall continue in effect from year to year thereafter, subject to the
provisions for termination and all of the other terms and conditions
hereof, if (1) such continuation shall be specifically approved at
least annually by vote of a majority of the outstanding voting
securities of the Fund; and (2) Adviser shall not have notified the
Fund, in writing, at least sixty days prior to the date of the Annual
Shareholders Meeting of any year thereafter, that it does not desire
such continuation.
b. This agreement may be terminated by the Fund on 60 days
notice in writing to Adviser, without the payment of any penalty,
provided such termination be authorized by resolution of the Board of
Directors of the Fund or by vote of a majority of its outstanding
voting securities.
SECTION FIVE
AMENDMENT OF AGREEMENT
This agreement may not be amended, transferred, assigned, sold or in
any manner hypothecated or pledged without the affirmative vote or
written consent of the holders of a majority of the outstanding voting
securities of the Fund; and this agreement shall automatically and
immediately terminate in the event of its assignment by Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be signed by their respective Officers thereunto duly authorized and
their respective corporate seals to be hereunto affixed, the day and
year first above written.
THE BERWYN INCOME FUND, INC. THE KILLEN GROUP,
INC.
by:___________________________________
by:___________________________________
Secretary-Treasurer
President
