SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14
The Chaconia Income & Growth Fund, Inc.
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(Name of Registrant as Specified in its Charter)
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(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)(4) 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.:
3. Filing Party:
4. Date Filed:
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THE CHACONIA INCOME & GROWTH FUND, INC.
c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the annual meeting (the "Annual Meeting")
of stockholders of The Chaconia Income & Growth Fund (the "Fund"), a series of
The Chaconia Income & Growth Fund, Inc., a Maryland corporation (the "Company"),
will be held at the offices of FOLEY & LARDNER, 3000 K Street, N.W., Suite 500,
Washington, D.C. 20007-5109 on Wednesday, May 17, 2000 at 10:00 A.M. (EASTERN
TIME) for the following purposes:
1. To approve or disapprove a new investment advisory agreement
between the Company, on behalf of the Fund, and EARNEST Partners, LLC.
2. To ratify or reject the selection of PricewaterhouseCoopers LLP,
independent certified public accountants, to audit the accounts of the Fund for
the fiscal year ending December 31, 2000.
3. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournment or postponement thereof.
The close of business on March 31, 2000 has been fixed as the record
date for the determination of stockholders entitled to receive notice of, and to
vote at, the Annual Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person, if possible. Stockholders who are unable to be present in person are
requested to execute and promptly return the accompanying proxy in the enclosed
envelope. The proxy is being solicited by the directors of the Fund. Your
attendance at the Annual Meeting, whether in person or by proxy, is important to
ensure a quorum. If you return the proxy, you still may vote your shares in
person by giving notice (by subsequent proxy or otherwise) to the Secretary of
the Fund at any time prior to its vote at the Annual Meeting.
By Order of the Board of Directors
/s/ Ulice Payne, Jr.
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Ulice Payne, Jr., Secretary
April __, 2000
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY
BE. TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED
PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY AS YOUR NAME
APPEARS THEREON AND RETURN IMMEDIATELY.
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THE CHACONIA INCOME & GROWTH FUND, INC.
American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Suite 109
Hauppauge, NY 11788
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
OF THE CHACONIA INCOME & GROWTH FUND
TO BE HELD MAY 17, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board of Directors") of The Chaconia
Income & Growth Fund, Inc., a Maryland corporation (the "Company"), to be voted
at the annual meeting (the "Annual Meeting") of stockholders of The Chaconia
Income & Growth Fund (the "Fund"), to be held on Wednesday, May 17, 2000 at
10:00 A.M. Eastern Time, at the offices of Foley & Lardner, 3000 K Street, N.W.,
Suite 500, Washington, D.C. 20007-5109, and all adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. The mailing of the Notice of Annual Meeting, this Proxy
Statement and the accompanying forms hereof will take place on or about April
30, 2000.
GENERAL INFORMATION
All properly executed proxies received prior to the Annual Meeting
will be voted at the Annual Meeting in accordance with the instructions marked
thereon or otherwise provided therein. Accordingly, unless instructions to the
contrary are marked, the shares represented by executed but unmarked proxies
will be voted FOR a new investment advisory agreement between the Company, on
behalf of the Fund, and Earnest Partners, LLC (the "New Advisor"), and FOR the
ratification of the selection of PricewaterhouseCoopers LLP as the independent
certified public accountants for the fiscal year ending December 31, 2000 and
such other business or matters which may properly come before the Annual Meeting
in accordance with the best judgment of the persons named as proxies in the
enclosed form of proxy. Other than the ratification of the independent public
accountants and the approval of a new investment advisory agreement, the Board
of Directors has no knowledge of any matters to be presented for action by the
stockholders at the Annual Meeting.
Any stockholder may revoke his or her proxy at any time prior to the
exercise thereof by (i) giving written notice to Ulice Payne, Jr., the Secretary
of the Fund, c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202; (ii) by signing another proxy of a later date; or (iii) by
personally casting his or her vote in person. Presence at the Annual Meeting of
a stockholder who has signed a proxy does not in itself revoke a proxy.
The Board of Directors has fixed the close of business on March 31,
2000 as the record date (the "Record Date") for the determination of
stockholders entitled to receive notice of and to vote at the Annual Meeting and
any adjournment or postponement thereof. On the Record Date, the Fund had,
outstanding and entitled to vote, 4,900,664.323 shares of common stock.
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Each share of common stock is entitled to one vote on each matter to be
presented at the meeting. The only voting securities of the Fund are its shares
of common stock. At the Annual Meeting, a quorum will exist with respect to each
matter to be voted upon if one-third of the shares of common stock entitled to
be cast thereon is represented in person or by proxy.
As of the Record Date, no stockholder had beneficial ownership of 5%
or more of the Fund's issued and outstanding common stock. The Board of
Directors and executive officers of the Fund did not own 1% or more of the
outstanding Fund shares as of the Record Date.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE ANNUAL REPORT AND
MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF ANY, TO ANY
STOCKHOLDER UPON REQUEST BY SENDING THE ATTACHED SELF-ADDRESSED POSTAGE PAID
CARD TO THE CHACONIA INCOME & GROWTH FUND, INC., C/O AMERICAN DATA SERVICES,
INC., 150 MOTOR PARKWAY, SUITE 109, HAUPPAUGE, NEW YORK 11788.
PROPOSAL ONE: APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
General Information
This proposal seeks stockholder approval of a new investment advisory
agreement with the New Advisor. If approved, the Company will terminate its
current advisory agreement with INVESCO Capital Management, Inc.
In order to change investment advisors, a new investment advisory
agreement must be approved by stockholder vote. Importantly, at the Annual
Meeting, stockholders are being asked to approve a proposed new advisory
agreement between the Company and the New Advisor (the "Proposed Advisory
Agreement"). The Board of Directors, including a majority of the independent
directors, approved the Proposed Advisory Agreement at a meeting held on April
15, 2000. A form of the Proposed Advisory Agreement is attached as Exhibit A. If
approved, the New Advisor will have the same duties and responsibilities and
will receive the same compensation under the Proposed Advisory Agreement as
INVESCO Capital Management, Inc. does under its current investment advisory
agreement with the Company.
The Current Advisory Agreement
The Fund's current investment advisor is INVESCO Capital Management,
Inc. (the "Current Advisor"), pursuant to an investment advisory agreement
entered into between the
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Company, on behalf of the Fund, and the Current Advisor, in November 1997 (the
"Current Advisory Agreement"). The Current Advisor provides a continuous
investment program for the Fund and places orders to buy, sell or hold
particular securities and futures. The Current Advisor also supervises all
matters relating to the operation of the Fund and obtains clerical staff, office
space, equipment and services. As compensation for its services, the Current
Advisor receives a monthly fee at an annual rate of the greater of $50,000 or
0.75% of 1% on the first $10 million, 0.50% of 1% on the next $10 million and
0.25% of 1% over $20 million of the Fund's average daily net assets. During the
fiscal year ending on December 31, 1999, the Fund paid the Current Advisor fees
of $216,700.
Under the Current Advisory Agreement, the Current Advisor is not
liable to the Fund for any error of judgment by the Current Advisor or any loss
sustained by the Fund except in the case of a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages will be limited as provided in the 1940 Act) or of willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.
The Current Advisory Agreement was unanimously approved by the Board
of Directors and by a majority of the directors who neither are interested
persons of the Fund nor have any direct or indirect financial interest in the
Current Advisory Agreement or any agreement related thereto in February 1997,
and by the Fund's stockholders in November 1997.
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 and effectiveness. 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 substantially similar under the Proposed
Advisory Agreement as under the Current Advisory Agreement. The fee is
calculated and accrued daily and the amounts of the daily accrual shall be paid
monthly, at an annual rate of 0.75% of 1% on the first $10 million, 0.50% of 1%
on the next $10 million and 0.25% of 1% over $20 million of the Fund's average
daily net assets. If the investment advisory fee under the Proposed Advisory
Agreement had been in effect for the Fund's most recently completed fiscal year,
the New Advisor would have received the same compensation as the Current Advisor
received under the Current Advisory Agreement.
Duties of the New Advisor. The Proposed Advisory Agreement provides
that the New Advisor, in return for its fee, will provide the same services to
the Company as the Current Advisor provides under the Current Advisory
Agreement. In particular, the Proposed Advisory Agreement provides that the New
Advisor will: (a) provide the Fund with a continuous investment program for the
Fund consistent with the Fund's investment objective and policies; (b) buy, sell
or hold particular securities and futures; (c) supervise all matters relating to
the operation of the Fund, including obtaining clerical staff, office space,
equipment and services; and (d) give the Company's Board of Directors all
relevant statistical information and reports that are reasonably available.
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Term. The Proposed Advisory Agreement will remain in effect until
terminated by either party. The Proposed Advisory Agreement shall be
specifically approved at least annually: (1) by a majority vote 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) cast in person at a meeting
called for the purpose of voting on such approval and (2) by the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund.
The Proposed Advisory Agreement may be terminated anytime, on thirty
(30) days written notice, and without any penalty, by vote of the Fund's Board
of Directors, by vote of the majority of the Fund's outstanding voting
securities or by the New Advisor. The Proposed Advisory Agreement would
terminate automatically in the event of its assignment.
Standard of Care. Under the Proposed Advisory Agreement, the New
Advisor is not liable to the Fund for any error of judgment by the New Advisor
or any loss sustained by the Fund except in the case of a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case any
award of damages will be limited as provided in the 1940 Act) or of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
Board of Directors' Considerations
At a meeting of the Board of Directors held on April 15, 2000, the
Board of Directors affirmatively voted to terminate the Current Advisory
Agreement, subject to stockholder approval of the Proposed Advisory Agreement.
Termination of the Current Advisory Agreement. In determining whether
to terminate the Current Advisory Agreement, the Board of Directors considered
several significant factors, including but not limited to: (1) the Fund's
underperformance relative to its benchmark in other similarly managed mutual
funds; (2) the impact of professional personnel changes at the Current Advisor;
and (3) discussions with the Current Advisor regarding investment philosophy and
strategies in the changing market environment. Further, the Board of Directors
considered information regarding the effects on Fund expenses of the expected
stockholder redemptions.
Recommendation of the Proposed Advisory Agreement. In considering
whether to recommend approval of the Proposed Advisory Agreement, the Board of
Directors considered a variety of factors, based both on information presented
at the meeting and three other investment advisor candidates and on information
regarding the New Advisor that had been furnished previously to the Board of
Directors. The Board of Directors also met with the Principal of the New Advisor
and considered information presented to them regarding the New Advisor's
qualifications to act as investment advisor to the Fund, including the
background experience of the New Advisor's key management personnel who would
assume day-to-day portfolio management responsibility and the past performance
of the New Advisor and any partners or employees of the New Advisor related to
other funds with similar objectives and policies as the Fund. One of the most
important factors considered by the Board of Directors was that the Principal
and some members of the New Advisor formerly worked for the Current Advisor from
the inception of the Fund until January 1, 1999. They also reviewed information
presented by the New Advisor regarding anticipated benefits to the Fund's
stockholders from a new advisory relationship with the New Advisor, its
investment performance record, its financial condition and growth strategy of
the Fund. In particular, the Board of Directors reviewed the New Advisor's
growth and income investment strategy. The Board of Directors also considered
steps that the New Advisor would take to
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assist in the marketing of the Fund. It is also noted that the terms of the
Proposed Advisory Agreement, including an advisory fee payable by the Fund, are
substantially identical to the terms of the Current Advisory Agreement.
Information About the New Advisor
The New Advisor, a Georgia limited liability company located at 75
Fourteenth Street, Suite 2300, Atlanta, Georgia 30309, is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended. The
New Advisor is a wholly owned subsidiary of EARNEST Holdings, LLC, a Delaware
limited liability company. The principal executive office of EARNEST Holdings,
LLC is located at the same address as the New Advisor.
As of March 31, 2000, the New Advisor had $1,100,000,000 in assets
under management. The New Advisor provides investment counsel, utilizing
investment strategies substantially similar to that of the Fund, to individuals,
banks and thrift institutions, pension and profit sharing plans, trusts,
estates, charitable organizations, and corporations.
The current directors and principal executive officers of the New
Advisor are:
Principal Occupation and
Name Position with New Advisor
- ---- -------------------------
Paul E. Viera, Jr. Chief Executive Officer and Managing Member
Douglas S. Folk Executive Officer
John M. Friedman Executive Officer
Maricia A. Kubovetz Executive Officer
Michael T. McRee Executive Officer
Wendell M. Starke Executive Officer
The address of each officer and director is at the principal executive
office of the New Advisor.
Stockholder 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"). "Majority" for this
purpose under the 1940 Act means the lesser of (1) more than 50% of the
outstanding shares of the Fund or (2) 67% or more of the Shares of the Fund
represented at the meeting if more than 50% of such shares are represented. In
the event that the stockholders of the Fund do not approve the Proposed Advisory
Agreement, the Board of Directors will take such action as it deems in the best
interest of the Fund and its stockholders,
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which may include proposing that stockholders approve an agreement in lieu of
the Proposed Advisory Agreement.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE STOCKHOLDERS OF
THE FUND VOTE "FOR" THE APPROVAL OF THE PROPOSED ADVISORY AGREEMENT.
PROPOSAL TWO: RATIFICATION OR REJECTION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders ratify the
selection of PricewaterhouseCoopers LLP, independent certified public
accountants, to audit the accounts of the Fund for the fiscal year ending
December 31, 2000. Their selection was approved by the unanimous written consent
of all of the directors of the Fund, including all of the directors who are not
"interested persons" of the Fund within the meaning of the 1940 Act.
PricewaterhouseCoopers LLP has audited the accounts of the Fund since prior to
the Fund's commencement of business on April 8, 1993, and does not have any
direct financial interest or any material financial interest in the Fund. A
representative of PricewaterhouseCoopers LLP is expected to attend the meeting
and to have the opportunity to make a statement and respond to appropriate
questions from stockholders.
Stockholder Approval of Independent Certified Public Accountants
An affirmative vote of the holders of a "Majority" of the outstanding
voting securities of the Fund is required for approval of this Proposal. The
requirements for such "Majority" vote under the Investment Company Act are the
same as those described above for Proposal One.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE STOCKHOLDERS OF
THE FUND VOTE "FOR" THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS
LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE FUND. SHARES OF COMMON
STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTS OF THE FUND.
ADDITIONAL INFORMATION
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Current Advisor is authorized on behalf of the Fund to employ
brokers to effect the purchase or sale of portfolio securities with the
objective of obtaining prompt, efficient and reliable execution and clearance of
such transactions at the most favorable price obtainable ("best execution") at
reasonable expense. Transactions in securities other than those for which a
securities exchange is the principal market are generally done through a
principal market maker. However, such transactions may be effected through a
brokerage firm and a commission paid whenever it appears that the broker can
obtain a more favorable overall price. All brokerage
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commissions paid by the Fund will be paid to non-affiliated brokers. In general,
there may be no stated commission in the case of securities traded on the
over-the-counter markets, but the prices of those securities may include
undisclosed commissions or markups. The Fund also expects that securities will
be purchased at times in underwritten offerings where the price includes a fixed
amount of compensation generally referred to as the underwriter's concession or
discount. During the Fund's fiscal year ended December 31, 1999, the Fund paid
$57,191.30 in brokerage commissions, none of which were paid to affiliates of
the Fund or the Current Advisor.
The Current Advisor presently does, and may in the future, act as
advisor to others. It is the practice of the Current Advisor to cause purchase
and sale transactions to be allocated among the Fund and others whose assets it
manages in such manner as it deems equitable. In making such allocations among
the Fund and other client accounts, the main factors considered are the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sale of securities for
its portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Current Advisor effects transactions with
those brokers and dealers who the Current Advisor believes provide the most
favorable prices and are capable of providing efficient executions. If the
Current Advisor believes such price and execution are obtainable from more than
one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Current Advisor of the type described in section
28(e) of the Securities Exchange Act of 1934, as amended. In doing so, the Fund
may also pay higher commission rates than the lowest available when the Current
Advisor believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. Such services may include, but are not limited to, any one or more
of the following: information as to the availability of securities for purchase
or sale; statistical or factual information or opinions pertaining to investment
wire services; and appraisals or evaluations of portfolio securities. During the
Fund's fiscal year ended December 31, 1999, the Current Advisor placed no
portfolio transactions with firms supplying investment information to the
Current Advisor.
SUBMISSION OF PROPOSALS FOR MEETING OF STOCKHOLDERS
Under the current law of Maryland, in which state the Company is
incorporated, meetings of stockholders are required to be held only as provided
in the Articles of Incorporation, By-Laws or, when necessary, under the Maryland
Business Corporation Act. A stockholder proposal intended to be presented at any
meeting hereafter called must be received by the Fund within a reasonable time
before the solicitation relating thereto is made in order to be included in the
proxy statement and form of proxy related to such meeting.
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SOLICITATION OF PROXIES
In addition to the solicitation of proxies by mail, the cost of which
has been paid by the Fund, the directors of the Fund and employees of the
Current Advisor may solicit proxies in person or by telephone. Persons holding
shares as nominees will upon request be reimbursed for their reasonable expenses
in sending soliciting material to their principles.
ADDRESSES
The name and address of the Fund's investment advisor and
administrator are as follows:
Investment Advisor Administrator
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INVESCO Capital Mgmt. Inc. American Data Services, Inc.
1315 Peachtree Street, N.E. 150 Motor Parkway
Suite 500 Suite 109
Atlanta, Georgia 30309 Hauppauge, New York 11788
OTHER MATTERS
The Board of Directors of the Fund does not know of any matters to be
presented at the meeting other than those mentioned in this Proxy Statement. If
an event not now anticipated, or if any other matters properly come before the
meeting, the shares represented by proxies will be voted with respect thereto in
accordance with the best judgment of the person or persons voting the proxies.
By Order of the Board of Directors
/s/ Ulice Payne, Jr.
----------------------------------
Ulice Payne, Jr., Secretary
Trinidad & Tobago, W.I.
April __, 2000
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Exhibit A
FORM OF
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT (the "Agreement"), made on this ___ day of ___________,
2000, by and between The Chaconia Income & Growth Fund, Inc. a Maryland
corporation, (the "Company"), and EARNEST Partners, LLC, a Georgia limited
liability company ("Advisor").
W I T N E S S E T H :
WHEREAS, the Company is the owner or custodian of, or otherwise has
investment authority with respect to, securities, cash and other property (such
securities, cash and other property collectively herein referred to as the
"Fund") held in one or more accounts (the "Account"); and
WHEREAS, the Company desires to appoint Advisor to serve as investment
manager with respect to the Account (in such capacity, Advisor being referred to
hereinafter as "Investment Manager"); and
WHEREAS, Advisor is a "registered investment adviser" under the
Investment Advisers Act of 1940;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
I. APPOINTMENT. Advisor is hereby appointed to serve as Investment
Manager with respect to the Account. Advisor hereby accepts its appointment
subject to the terms and conditions of this Agreement.
II. DUTIES AND POWERS OF INVESTMENT MANAGER.
A. Duties.
1. Subject to any restrictions and/or guidelines contained
in Annex "A" attached hereto and by this reference incorporated herein, and any
additional restrictions and/or guidelines as may from time to time be
communicated in writing by the Company, Advisor shall from time to time invest
and reinvest the Fund and keep the same invested, in its sole discretion,
without distinction between principal and income, in any property, real,
personal or mixed, or share or part thereof, or part interest thereof, or part
interest therein, wherever situated, and whether or not productive of income,
including: capital, common and preferred stock, and short-term investment funds.
2. Advisor shall discharge its duties with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character
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and with like aims, and by diversifying the investments under management so as
to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so. It is agreed that the standard set forth in the
foregoing sentence constitutes the sole standard of care imposed upon Advisor by
this Agreement.
3. In the performance of its duties hereunder, Advisor
shall act in accordance with the investment guidelines which the Company may,
from time to time, have furnished to Advisor in writing subject only to such
limitations as the Company may impose, or as may otherwise be imposed by law.
4. Advisor will provide Company with such periodic reports
as Company and Advisor may mutually agree; provided however, that reports as to
the status and investments in the Account shall be provided no less frequently
than quarterly.
B. Powers. The Company hereby appoints Advisor its agent and
attorney-in-fact with respect to, and hereby confers, and Advisor hereby
acknowledges, the following powers in the performance of its duties as
Investment Manager under this Agreement:
1. To direct the purchase or subscription for any
securities or property;
2. To direct the sale, exchange, conveyance, transfer or
other disposition of any stocks, bonds or other securities held in the Account
or comprising the Fund, by private contract or at public auction, with or
without advertising;
3. To vote any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights or
other options, and to make any payments incidental thereto; to oppose or to
consent to, or otherwise participate in, corporate reorganizations or other
changes affecting corporate securities, and to delegate discretionary powers,
and to pay any assessments or charges in connection therewith, and generally to
exercise any of the powers of an owner with respect to stocks, bonds, or other
securities of the Fund; provided, that all such powers shall be exercised by
Advisor in its sole and absolute discretion subject only to its general
fiduciary obligations to the Company as set forth in Section IIA(2) above;
4. To direct the writing of covered call options and the
purchase or sale of put options and financial futures contracts;
5. To make, execute, acknowledge and deliver any and all
documents that may be necessary to carry out the powers of Advisor, as
Investment Manager;
6. To carry out the duties set forth in Subsection IIA of
this Agreement;
7. To direct the placement of brokerage orders with respect
to assets comprising the Fund with such broker or brokers as Advisor shall
select; and
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8. Investment Manager may not act as a principal in any
transaction with Company, but Investment Manager may effect any agency cross
transaction in compliance with the provisions of applicable law. From time to
time securities to be sold on behalf of another of Investments Manager's clients
may be suitable for purchase on behalf of the Company Account and vice versa. In
such instances, if investment manager determines in good faith that the
transaction is in the best interest of each client, Company agrees that
Investment Manager may arrange for the securities to be transferred between the
Company Account and such other Investment Manager client account at the then
independently determined fair market value (a "cross trade") provided neither
Investment Manager nor any broker-dealer affiliated with Investment Manager
shall receive a commission directly or indirectly in connection with such cross
trade, and provided such transaction is otherwise permissible for Company under
applicable law.
9. Generally, to do all such acts and to execute and
deliver all such instruments as in the judgment of Advisor may be necessary or
desirable to carry out any powers or authority of Advisor under this Agreement,
without advertisement and without order of court, and without having to post
bond or make any returns or report of its doings to any court.
C. Investment Decisions. Advisor shall have full power to make
and act upon all investment decisions with respect to the Fund, in its sole
discretion, subject only to the terms of this Agreement, as amended from time to
time.
D. Compensation. The compensation of Advisor as Investment
Manager shall be such as is set forth in Advisor's separate published fee
schedule in effect from time to time, a current copy of which is attached hereto
as Exhibit "B", except that no increase in fees shall be effective until 90 days
after notice thereof to the Company. Unless otherwise provided in Annex "B",
payment to Advisor shall be made quarterly, based on a calendar year, and the
fee shall be due and payable within 15 days after the end of each quarterly
period. If this Agreement commences at any time other than at the beginning of a
quarterly period, the first quarterly fee shall be prorated to the end of such
first quarterly period. At no time will Advisor be compensated on the basis of a
share of capital gains or capital appreciation of the Fund except as based upon
the total value of the Fund in accordance with Advisor's aforementioned fee
schedule. If this Agreement is terminated all fees due to Advisor shall be
prorated to the date of termination.
III. TRANSACTION PROCEDURES. All transactions will be consummated by
payment to, or delivery by, Company, or such other party as Company may
designate in writing (the "Custodian"), of all cash and/or securities due to or
from the Account. Advisor shall not act as custodian for the Account, but may
issue such instructions to the Custodian as may be appropriate in connection
with the settlement of transactions initiated by Advisor pursuant to the terms
of this Agreement. Instructions of Advisor to Company and/or the Custodian shall
be made in writing sent via facsimile (maintaining fax acknowledgement report as
proof of receipt), by first-class mail or, at the option of Advisor, orally and
confirmed in writing as soon as practical thereafter, and Advisor shall instruct
all brokers and dealers executing orders on behalf of the Account to forward to
Company and/or the Custodian copies of all confirmations promptly after
execution of transactions. Advisor shall not be responsible for any loss
incurred by reason of any act or omission of any broker or dealer or the
Custodian; provided, however, that Advisor will make reasonable efforts to
require that brokers and dealers selected by Advisor perform their obligations
with respect to the Account.
A-3
<PAGE>
IV. ALLOCATION OF BROKERAGE. Where Advisor places orders for the
execution of portfolio transactions for the Account, Advisor may allocate such
transactions to such brokers and dealers for execution on such markets, at such
prices and at such commission rates as in the good faith judgment of Advisor
will be in the best interest of the Account, taking into consideration in the
selection of such brokers and dealers not only the available prices and rates of
brokerage commissions, but also other relevant factors (such as, without
limitation, execution capabilities, research and other services provided by such
brokers or dealers which are expected to enhance the general portfolio
management capabilities of Advisor, and the value of an ongoing relationship of
Advisor with such brokers and dealers) without having to demonstrate that such
factors are of a direct benefit to the Account. Company may direct Advisor to
utilize specific brokers or dealers. Company represents that such direction
shall be for the exclusive purpose of providing benefits to participants and
beneficiaries of the Account and shall not constitute, or cause the Account to
be engaged in any violation of federal or state law with regard to "prohibited
transactions" or "parties-in-interest".
V. SERVICES TO OTHER CLIENTS OF ADVISOR. Advisor may perform
investment advisory services for various clients other than the Company and for
accounts other than the Account. Advisor may give advice and take action with
respect to other clients that differs from advice given or action taken with
respect to the Fund, so long as Advisor attempts in good faith reasonably to
allocate investment opportunities to the Company and the Account over a period
of time on a fair and equitable basis compared to investment opportunities
extended to other clients. Advisor is not obligated to initiate the purchase or
sale for the Company, or the Account, of any security that Advisor, its
principals, affiliates or employees may purchase or sell for its or their own
accounts or for the account of any other client, if in the reasonable opinion of
Advisor, such transaction or investment appears unsuitable or undesirable for
the Company or the Account.
VI. CONFIDENTIAL RELATIONSHIP. Except as otherwise provided in this
Section, all information and advice furnished by the Company or Advisor to the
other, with respect to the Account, the Fund or other matters pertaining to this
Agreement, shall be treated as confidential and shall not be disclosed to third
parties except as required by law or as necessary to carry out responsibilities
set forth in this Agreement.
VII. AUTHORITY AND STATUS OF ADVISOR AS INVESTMENT MANAGER. Advisor
represents and warrants (i) that it is a registered investment adviser under the
Investment Advisers Act of 1940, (ii) that it has full power and authority to
enter into this Agreement, and (iii) that this Agreement has been duly
authorized and when executed and delivered will be binding upon Advisor. Advisor
acknowledges that as Investment Manager it is a fiduciary with respect to the
Fund; provided, however, that Advisor shall not be considered a fiduciary to the
extent that it does not have investment discretion under this Agreement as a
result of the restrictions, if any, contained in Annex "A".
VIII. AUTHORITY OF THE CLIENT. The Company represents and warrants (i)
that the Company has full power and authority to enter into this Agreement, and
(ii) that this Agreement has been duly authorized and when executed and
delivered will be binding upon the Company, the Account and the Fund.
A-4
<PAGE>
IX. DURATION OF AGREEMENT; ENTIRE AGREEMENT. This Agreement will
remain in effect until terminated by either party hereto in accordance with
Section X hereof. This Agreement constitutes the entire agreement between
Advisor and Company, and supersedes any prior agreements or understanding with
respect to the subject matter hereof.
X. TERMINATION; PROHIBITION AGAINST ASSIGNMENT.
A. A party to this Agreement may terminate this Agreement at
any time upon notice by registered or certified mail to the other parties in
accordance with Section XI hereof, which notice shall be given at least thirty
(30) days prior to the effective date of termination. Upon receiving or giving
notice of termination, and (if termination occurs by notice from the Company)
upon receipt by Advisor of all fees payable to Advisor pursuant to this
Agreement which are accrued but unpaid as of the date of such termination,
Advisor shall, if so directed by the Company, make a full accounting to the
Company with respect to all assets managed by it since its appointment as
Investment Manager.
B. No assignment (as that term is defined in the Investment
Advisers Act of 1940) of this Agreement shall be made by any party without prior
written consent of the others.
XI. NOTICES.
A. All notices, requests and demands after the date of this
Agreement, and any other communications hereunder shall be deemed to have been
duly given if in writing and if delivered or sent by certified or registered
mail, return receipt requested, to the appropriate address indicated below or
such other address as may be given in a notice sent to the other parties hereto
in accordance with this Section XI. Such communication shall be effectively
delivered or received on the date on which delivered or on the date acknowledged
to have been received in return receipt.
B. Company hereby acknowledges receipt of Advisor's Form ADV,
Part II pursuant to Rule 204-3 under the Investment Advisers Act of 1940.
Advisor annually shall deliver, or offer in writing to deliver, upon written
request of the Company and without charge, Form ADV, Part II.
XII. INDEMNIFICATION. The Company shall indemnify and hold harmless
Advisor as Investment Manager, from and against any and all claims, losses,
costs, expenses (including, without limitation, attorneys' fees and court
costs), damages, actions or causes of action arising from, on account of or in
connection with the performance by Advisor of its duties as Investment Manager
hereunder, other than such of the foregoing arising from, on account of or in
connection with the bad faith, gross negligence or breach of trust of Advisor.
The federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith; nothing in this Agreement shall
constitute a waiver or limitation of any rights which the Company may have under
applicable federal and state securities laws.
XIII. GOVERNING LAW. The validity, construction and operation of this
Agreement shall be governed by the laws of the State of Georgia, except where
preempted by the provisions of federal law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal by their officers or agents thereunto duly authorized as
of the day and year first above written.
THE CHACONIA INCOME & GROWTH FUND, INC.
ATTEST: By:
------------------------------------
- ---------------------------------- Title:
---------------------------------
- ----------------------------------
Title ---------------------------------
(SEAL) Address
EARNEST PARTNERS, LLC
ATTEST: By:
------------------------------------
- ---------------------------------- Title:
---------------------------------
- ----------------------------------
Title ---------------------------------
(SEAL) Address
A-6
<PAGE>
ANNEX A
DESCRIPTION OF ANY RESTRICTION TO SECTION II(A)(1)
Initials
----------
----------
Date:
-------------
<PAGE>
ANNEX B
COMPENSATION
In accordance with Section II (D) the fee to be paid to Earnest
Partners, LLC shall be computed as follows:
Fee Schedule:
- ------------
Market Value Fee in Percent
- --------------------------------------------------------------------------------
First $10 Million .75%
Next $10 Million .50%
Excess over $20 Million .25%
The fee provided above is the annual fee charged by Earnest
Partners, LLC for investment management services. Fees are based on the market
value of the assets under management at the end of each calendar or fiscal
quarter and are charged in arrears. The quarterly fee is calculated by applying
the annual rate above to the total market value of the assets and then taking
one-quarter of the total as the quarterly fee. The fee payable to Advisor may be
revised from time to time but no increase in fees shall be effective until 90
days after notice to the Company.
Initials
----------
----------
Date:
-------------
<PAGE>
THE CHACONIA INCOME & GROWTH FUND, INC.
THE CHACONIA INCOME & GROWTH FUND
c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointments, the undersigned appoints Clarry Benn as
proxy with the power of substitution to vote all the common stock of The
Chaconia Income & Growth Fund (the "Fund"), a series of The Chaconia Income &
Growth Fund, Inc., a Maryland corporation (the "Company"), registered in the
name of the undersigned at the annual meeting of stockholders to be held at the
offices of Foley & Lardner, 3000 K Street, N.W., Suite 500, Washington, D.C.
20007-5109, on Wednesday, May 17, 2000 at 10:00 A.M.
(Eastern Time) and at any adjournments thereof.
1. To approve or disapprove a new investment advisory agreement between the
Company, on behalf of the Fund, and EARNEST Partners, LLC.
_____ FOR _____ AGAINST _____ ABSTAIN
2. To ratify or reject the selection of PricewaterhouseCoopers LLP,
independent certified public accountants, to audit the accounts of the Fund
for the fiscal year ending December 31, 2000.
_____ FOR _____ AGAINST _____ ABSTAIN
3. To transact such other business as may properly come before the meeting.
The shares of common stock represented by this Proxy will be voted in accordance
with the specifications made above. If no specifications are made, such shares
will be voted to FOR Proposal 1 and FOR Proposal 2.
NOTE: Please sign exactly as name appears on this card. All joint owners
should sign. When signing as executor, administrator, attorney,
trustee or guardian or as custodian for a minor, please give full
title as such. If a corporation, please sign in full corporate name
and indicate the title of the signing officer. If a partner, please
sign in the partnership name.
<PAGE>
Receipt acknowledged of the Proxy
Statement for the annual meeting of
stockholders to be held on May 17, 2000.
----------------------------------------
(Signature of Stockholder)
----------------------------------------
(Print First Name) (Print Last Name)
Date: , 2000
-----------------------------
I (we) do _____ do not _____ expect to
be present at the meeting
