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:
/_/ 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 ss.240.14a-11(c) or
ss. 240.14a-12
Penn Street 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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/_/ 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:
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4) Date Filed:
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<PAGE>
Penn Street Fund, Inc.
2 Bryn Mawr Avenue
Suite 100
Bryn Mawr, PA 19010
October 1, 1998
Dear Stockholder,
Millennium Bank, a Pennsylvania banking institution, has entered into
an agreement to acquire Penn Street Advisors, Inc., the investment adviser to
the Global Equity and Global Bond Portfolios of Penn Street Fund, Inc. As part
of the arrangement, I will enter into an employment arrangement with Millennium
Bank and will continue to manage the Portfolios of the Fund.
The proposed transaction will not affect the way the Fund or its
Portfolios are managed or operated. We expect that the acquisition will enable
us to hire additional investment and administrative personnel to increase the
Fund's investment research and stockholder service capabilities. Also, it is
expected that the Fund's association with Millennium Bank may result in
increased cash inflows that could enhance the Fund's access to outside
investment research and ultimately result in lower Fund operating expenses.
Before the proposed acquisition of Penn Street Advisors can be
completed, certain conditions must be met, including the approval by
stockholders of new investment management agreements for each Portfolio of the
Fund.
In a separate matter, the Fund's Board of Directors has approved a
reduction in the investment management fees to be paid to Penn Street Advisors
by each Portfolio of the Fund and also approved other steps to reduce the
overall operating expenses of the Portfolios. The management fee reductions will
be reflected in the proposed new investment management agreements for each
Portfolio which must be approved by stockholders.
The Board of Directors of the Fund has unanimously approved each of
the proposed investment management agreements and recommends that you approve
the agreement for your Portfolio or Portfolios of the Fund. Please vote your
shares promptly by completing and signing the enclosed Proxy Card and returning
it in the enclosed self-addressed postage-paid envelope. Thank you for your
attention to this matter.
Sincerely,
/S/ RICHARD T. COGHLAN
Richard T. Coghlan
Chairman
<PAGE>
Global Equity Portfolio
Global Bond Portfolio
of
Penn Street Fund, Inc.
2 Bryn Mawr Avenue
Suite 100
Bryn Mawr, Pa 19010
(610) 520-5201
COMBINED PROXY STATEMENT AND
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF
PENN STREET FUND, INC.
To be Held on October 20, 1998
To the Stockholders of the Global Equity and Global Bond Portfolios of Penn
Street Fund, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of the Global Equity and Global Bond Portfolios (each, a "Portfolio")
of Penn Street Fund, Inc. (the "Fund") will be held on Tuesday, October 20, 1998
at 9:00 a.m. at the offices of Stradley, Ronon, Stevens & Young, LLP, 30 Valley
Stream Parkway, Malvern, Pennsylvania, for the purpose of considering and acting
on the following proposal:
To Approve a New Investment Management Agreement
Between the Fund and Penn Street Advisors, Inc.
for each of the Global Equity and Global Bond
Portfolios.
The Board of Directors has fixed the close of business on September 15,
1998 as the record date for the determination of those stockholders who will be
entitled to vote at the Meeting.
The Fund's Annual Report to Stockholders for the fiscal year ended October
31, 1997 and the Semi-Annual Report to Stockholders dated April 30, 1998, were
previously mailed to stockholders. Copies of these reports are available upon
request, without charge, by writing or calling the Fund at the address and
telephone number shown above.
Whether or not you plan on attending the Meeting, it is important that you
mark your instructions on the enclosed Proxy Card, date and sign it and return
it promptly in the enclosed self-addressed, stamped envelope. The enclosed Proxy
Card is solicited on behalf of the Board of Directors, is revocable, and will
not affect your right to vote in person if you attend the Meeting.
October 1, 1998 By Order of the Board of Directors
/S/ RICHARD T. COGHLAN
Richard T. Coghlan, Chairman
<PAGE>
PROXY STATEMENT
GLOBAL EQUITY PORTFOLIO
GLOBAL BOND PORTFOLIO
OF
PENN STREET FUND, INC.
Meeting Information. The Board of Directors of Penn Street
Fund, Inc. (the "Fund") is soliciting your proxy to be voted at
the Special Meeting of Stockholders (the "Meeting") to be held on
Tuesday October 20, 1998 at 9:00 a.m. at the offices of Stradley,
Ronon, Stevens & Young, LLP, 30 Valley Stream Parkway, Malvern,
Pennsylvania and at any adjournment of the Meeting. The purpose
of the Meeting is to act on the proposal listed in the
accompanying Notice.
The Fund is an open-end, management investment company registered under
the Investment Company Act of 1940 (as amended, the "1940 Act"), which issues
shares of its common stock in two separate series, each representing interests
in a separate portfolio of investments. The two series are the Global Equity
Portfolio and the Global Bond Portfolio (each a "Portfolio" and collectively,
the "Portfolios").
General Voting Information. Stockholders are entitled to cast one vote for
each full share and a partial vote for each partial share of a Portfolio that
they own at the close of business on September 15, 1998, which is the record
date. Shares of each Portfolio may be voted for the Investment Management
Agreement relating to that Portfolio.
Approval of the proposed Investment Management Agreement for each
Portfolio requires the affirmative vote of a "majority of the outstanding voting
securities" of the particular Portfolio, which is defined in the 1940 Act as the
vote of: (i) more than 50% of the outstanding voting securities of the
Portfolio; or (ii) 67% or more of the voting securities of the Portfolio present
at a meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, whichever is less.
The Board of Directors urges you to complete, sign and return the Proxy
Card included with this Proxy Statement, whether or not you intend to be present
at the Meeting. It is important that you return the signed Proxy Card promptly
to help assure a quorum for the Meeting.
The persons designated as proxies will vote your shares as you instruct on
the Proxy Card and, if your signed Proxy Card is returned without any voting
instructions, your shares will be voted "FOR" any Proposal. If you sign and
return a Proxy Card, you may still attend the Meeting to vote your shares in
person. You may also revoke your proxy at any time before the Meeting: (i) by
notifying the Fund in writing; (ii) by submitting a later signed Proxy; or (iii)
by voting your shares in person at the Meeting.
If a sufficient number of shares are not present at the Meeting in person
or by proxy so as to constitute a stockholder quorum of either Portfolio (which
is a majority of the shares of the Portfolio which are entitled to vote), or to
approve the proposal set forth in the Notice, the persons named as proxies may
adjourn the Meeting to a later date to permit further solicitation of proxies
with respect to the proposals. Abstentions will be counted for purposes of
determining whether a quorum is present at the Meeting, but will not be counted
for purposes of determining whether matters to be acted upon at the Meeting have
been approved.
This solicitation is being made largely by mail, but may also be made by
officers or employees of the Fund or its investment adviser, Penn Street
Advisors, Inc. ("Penn Street") through telephonic, internet, facsimile or oral
communications. This Proxy Statement was first mailed to stockholders on or
about October 1, 1998. Millennium Bank and Penn Street will divide any costs of
this solicitation equally.
As of the record date, there were 287,629 shares outstanding of the Global
Equity Portfolio and 1,991,833 shares outstanding of the Global Bond Portfolio.
In addition, the following persons owned beneficially more than 5% of the shares
of each Portfolio:
Name and Address of Number Percentage
Beneficial Owner of Shares
Global Income Portfolio
Fox Family Partnership 934,155 47%
1325 Morris Drive, Suite 200
Wayne, PA 19087
GDF Foundation 153,703 8%
1325 Morris Drive, Suite 200
Wayne, PA 19087
IBIR 307,076 15%
1325 Morris Drive, Suite 200
Wayne, PA 19087
RJF Foundation 458,368 23%
1325 Morris Drive, Suite 200
Wayne, PA 19087
Global Equity Portfolio
Richard T. Coghlan 20,877 7%
Penn Street Advisors, Inc.
2 Bryn Mawr Avenue, Suite 100
Bryn Mawr, PA 19010
Colin Reiff Trust 19,547 7%
1429 Walnut Street, 12th Floor
Philadelphia, PA 19102
Justin Reiff Trust 20,213 7%
1429 Walnut Street, 12th Floor
Philadelphia, PA 19102
Jeffrey & Dominique Reiff 110,302 38%
1429 Walnut Street, 12th Floor
Philadelphia, PA 19102
31,049 11%
James W. Hovey
1325 Morris Drive, Suite 200
Wayne, PA 19087
Fred D. Fox 20,040 7%
76 Militia Hill Drive
Wayne, PA 19087
Marilyn B. Day 19,946 7%
947 Rock Creek Road
Bryn Mawr, PA 19010
Proposal: To Approve a New Investment Management Agreement
Between the Fund and Penn Street Advisors, Inc. for each
of the Global Equity and Global Bond Portfolios
Introduction
Stockholders are being asked to approve new Investment Management
Agreements for each Portfolio between the Fund and Penn Street ("New
Agreements"), which will replace the current Investment Management Agreements
between the Fund and Penn Street ("Current Agreements"). The New Agreements
reflect a reduction in the annual investment management fee rates from 0.90% of
average daily net assets to 0.75% of average daily net assets and are presented
to stockholders for approval at this time because of the proposed management fee
reduction and because of the proposed acquisition of Penn Street by Millennium
Bank, a recently organized Pennsylvania banking institution. Under the 1940 Act,
the sale of a controlling interest of an investment advisory firm results in the
automatic termination of any investment advisory agreement the firm has with a
registered investment company, such as the Fund. Therefore, New Agreements are
proposed under which Penn Street will continue to manage the Portfolios after
the acquisition at the new, lower management fee rates.
Millennium Bank has agreed to purchase Penn Street from Richard T.
Coghlan, Ph.D., who is Penn Street's chief investment officer, founder and sole
stockholder. Dr. Coghlan is also the Chairman and President of the Fund. In
connection with the acquisition (hereafter, the "Transaction"), Dr. Coghlan has
also agreed to enter into an employment agreement with Millennium Bank, under
which he will continue to manage the Portfolios of the Fund as Penn Street's
President and will serve as Millennium Bank's Managing Director - Investment
Strategy. The employment agreement initially extends until December 31, 2001 and
thereafter automatically renews for additional one year terms, as agreed by the
parties.
The Transaction is expected to be completed on or about October 31,
1998 and is subject to certain key conditions, including the approval by
stockholders of each Portfolio of new Investment Management Agreements for each
Portfolio between Penn Street and the Fund. If the key conditions are not met
and the Transaction is not completed, Dr. Coghlan will continue to own and
operate Penn Street and manage the Portfolios.
The Transaction will not affect the way the Portfolios are currently
managed or operated, as the current Board of Directors will continue as
Directors of the Fund and Dr. Coghlan will continue to be responsible for
managing the Portfolios. Dr. Coghlan and Millennium Bank management anticipate
that Penn Street will hire at least one additional investment professional, as
well as additional administrative personnel, in order to increase Penn Street's
investment research and administrative capabilities. In addition, the parties
believe that the Fund's association with Millennium Bank may result in an
expansion of the Fund's stockholder base, bringing increased cash inflows,
thereby enhancing the Fund's access to outside research and ultimately, reducing
Fund expense levels.
The proposed management fee reductions, together with certain other
actions of the Fund's Board to reduce other expenses of the Fund, will result in
a reduction in overall operating expenses of each Portfolio.
The Board of Directors of the Fund has unanimously approved
the New Agreements, and recommends that you vote "FOR" the New
Agreement for your Portfolio.
Information Concerning Penn Street Advisors, Inc.
Penn Street is a Pennsylvania corporation registered as an investment
advisory firm under the Investment Advisers Act of 1940. Dr. Coghlan is the
president, chief executive officer and sole director of Penn Street and is also
the person with primary investment management responsibility for the firm's
clients, including the Fund. Dr. Coghlan and his associates have provided
investment management services to individual and institutional accounts since
1989, when he founded Penn Street's predecessor, Strategic Investment Services.
The firm is located at 2 Bryn Mawr Avenue, Suite 100, Bryn Mawr, PA 19010.
Dr. Coghlan received a Ph.D in Economics from Cambridge University in
England. In a varied career, he has lectured at university, worked at the Bank
of England and within financial markets in London, Canada, the United States and
Switzerland. Dr. Coghlan first moved to North America in 1980 but then returned
to Europe to take up the position of chief economist and strategist with Bank
Julius Baer, serving as a member of the Zurich Investment Advisory Group and
director of the European-Asia Fund managed jointly by Bank Julius Baer and
Nomura Securities. Dr. Coghlan has written extensively on financial markets,
publishing numerous articles in journals and newspapers, including The Times and
Barrons, and four books. He has been the editor of the newsletter "The Financial
Economist" for over fifteen years.
Information Concerning Millennium Bank
Millennium Bank is a newly organized, Pennsylvania chartered, FDIC
insured, full service bank and trust company headquartered at 30 Valley Stream
Parkway, Malvern, Pennsylvania. The Bank's primary business purpose is to
provide high service level commercial banking, asset management, and traditional
trust products and service. The Bank intends to provide specialized financial
services, including investment, asset management, trust and estate planning
products; personal and business lending and deposit products; and advisory
services. Its target clients are the rapidly expanding group of individuals with
investable assets of $250,000 and up, and small to medium sized privately owned
businesses. The Bank's geographic focus will be in central and southeastern
Pennsylvania.
The management and operations of Millennium Bank is supervised by a highly
qualified Board of Directors, with extensive banking industry experience. The
Directors and their backgrounds are discussed below.
David E. Sparks, Chairman
Mr. Sparks has over 25 years of banking management experience and, prior to
founding Millennium Bank, was Director, Vice Chairman and Chief Financial
Officer of Meridian Bancorp. He is the President and Chief Executive Officer of
Millennium and is primarily responsible for the strategic direction and growth
of the Bank.
Roger S. Hillas
Mr. Hillas has been a business leader for over 45 years in Philadelphia and is
currently a financial consultant. He is the former Chairman of PNC Bank and
former Chairman of Philadelphia Savings Fund Society as well as the former
Chairman and Chief Executive Officer of Provident National Bank. He is currently
a director with ConRail Corporation, Toll Brothers, Inc., The Bon-Ton
Corporation and P.H. Glatfelter companies. Mr. Hillas is a graduate of Dartmouth
College and the Wharton School of the University of Pennsylvania.
Thomas W. Martell
Mr. Martell has spent 22 years with Hub Fabricating Company, Reading, PA, where
he has been President, Chief Executive Officer and owner. He is on the board of
Tamaqua Cable Products and serves on the United Way Cabinet in Reading, PA. Mr.
Martell is a graduate of Bucknell University and received has MBA from George
Washington University.
Samuel A. McCullough
Mr. McCullough has been a business and community leader for 40
years and is currently serving as Secretary of Community and
Economic Development for the Commonwealth of Pennsylvania. He is
the former President of CoreStates Financial Corp. and Former
Chairman and Chief Executive Officer of Meridian Bancorp. He is
a board member of the Commonwealth Foundation and trustee of the
University of Pittsburgh, Albright College and the Reading
Hospital and Medical Center. Mr. McCullough is a graduate of the
University of Pittsburgh.
Mel A. Shaftel
Mr. Shaftel is the former vice chairman of Lehman Brothers, Inc.
where he spent a twenty-five year Wall Street career including
the development of the Commercial Banking & Financial
Institutions Departments of the firm before advancing to run the
Investment Banking Division of the firm. Mr. Shaftel is a
graduate of Yale University and received his MBA from New York
University. He is a trustee of Colby-Sawyer College in New
Hampshire.
The Bank intends to commence business operations on November 1, 1998. It
recently completed an initial offering of its common stock, which was fully
subscribed. The Bank's current equity capital is approximately $21 million.
Before it can commence business operations, the Bank must receive final
regulatory approval from the Pennsylvania Department of Banking and approval for
deposit insurance by the FDIC. The Bank has already met one of the key
requirements for approval by Pennsylvania regulators, by raising a sufficient
level of equity capital. If appropriate regulatory approvals are not obtained,
the proposed acquisition of Penn Street will not occur, and the firm will
continue to be owned by Dr. Coghlan and will continue to manage the Fund.
Information Concerning the Current Investment Management
Agreements
Subject to the supervision of the Board of Directors of the Fund, Penn
Street provides portfolio management, research and analysis for the Fund, and is
responsible for directing the investments of each Portfolio in accordance with
its stated investment objective, policies and restrictions. Penn Street also
maintains a trading department for the Fund, and keeps certain books and records
in connection with its services to the Fund. Penn Street provides these services
pursuant to separate Investment Management Agreements between the Fund, on
behalf of each Portfolio, and Penn Street dated June 3, 1996 (previously defined
as the "Current Agreements"). The Current Agreements provide that Penn Street
will bear the costs of the office space, furnishings, equipment and personnel
required to perform its duties under the Agreements. The Fund bears all other
costs of its operations.
Pursuant to the Current Agreements, each Portfolio pays a monthly fee to
Penn Street, at the annual rate of 0.90% of the Portfolio's average net asset
value. For the fiscal year ended October 31, 1997, the Global Equity Portfolio
paid investment management fees to Penn Street of $250,734 and the Global Bond
Portfolio paid investment management fees of $106,170. The Management Agreements
were approved by the initial stockholder of each Portfolio before the Fund
commenced operations and were last approved by the Board of Directors on
September 14, 1998, to continue until November 7, 1998.
Penn Street, in effecting the purchases and sales of portfolio securities
for the Fund, currently seeks execution of trades at the most favorable and
competitive rate of commission charged by any broker, dealer or member of an
exchange. However, Penn Street reserves the right to seek execution of trades at
a higher rate of commission charges if reasonable in relation to brokerage or
research services provided to the Fund or Penn Street by such member, broker, or
dealer. Such research services may include, but are not limited to, the
following: information as to the availability of securities for purchase or sale
and statistical or factual information; or opinions pertaining to investments.
Penn Street may use research services provided to it by brokers and dealers in
servicing all its clients and not all such services will be used by Penn Street
in connection with the Fund.
The Current Agreements also provide that Penn Street will not be liable to
the Fund or any stockholder of the Fund for errors of judgement in the absence
of negligence in the performance of its duties. The Current Agreements will
remain in effect from year-to-year provided they are continued each year by a
vote of the Fund's Board of Directors, including a majority of the Directors who
are not parties to the Agreements or interested persons of such party, or by a
majority of the outstanding voting securities of the particular Portfolio.
The Current Agreements may be terminated without penalty by the Fund's
Board of Directors or stockholders upon 60 days written notice to Penn Street,
or by Penn Street, upon 90 days written notice to the Fund. The Management
Agreements will terminate automatically in the event of an assignment (as
defined in the 1940 Act). An assignment, and resulting terminations, would occur
if the proposed Transaction is completed.
Information Concerning the New Investment Management Agreements
The New Agreements are identical to the Current Agreements, except for the
reduction in the annual management fee rate from 0.90% to 0.75% of average daily
assets, as well as changes in the effective and termination dates. Under the
proposed fee rates, the amount of management fees paid to Penn Street by the
Portfolios during a fiscal year, assuming the same asset levels as the fiscal
year ended October 31, 1997, would be $208,945 for the Global Equity Portfolio
and $88,475 for the Global Income Portfolio. These fee payments would represent
a 17% decrease compared to the dollar amounts paid during the past fiscal year.
Assuming stockholders approve the New Agreements, it is expected that the
New Agreements will be effective on the date that the ownership of Penn Street
is transferred to Millennium Bank or the date of the termination of the Current
Agreements, whichever is earlier. Once effective, the New Agreements will
continue for an initial term of two years. Thereafter, the New Agreements may be
continued for successive one year periods if approved by a majority of the
outstanding voting securities of the Portfolios or by the Board of Directors of
the Fund and, in either event, by a majority of the Directors who are not
parties to the New Agreements or interested persons of any such party.
A form of the new investment management agreement for each Portfolio is
attached to this Proxy Statement as Exhibit A.
Evaluation of the Transaction and New Agreements by the Board
The Fund's Board of Directors met on September 14, 1998 to consider the
proposed Transaction and its anticipated effects upon the investment management
and other services Penn Street currently provides to the Fund. The Board also
considered recommendations by Fund management concerning proposed reductions in
management fee levels, as well as other charges designed to reduce overall Fund
expenses.
At the meeting, the Board, including the Directors who are not parties to
the Current or New Agreements or interested persons of any such party,
unanimously voted to approve the New Agreement for each Portfolio with Penn
Street, each of which reflects the proposed reduced management fee rates, and to
recommend the New Agreements to stockholders for approval.
In its evaluation of the proposed Transaction, the Board concluded that
Penn Street would be strengthened by its association with the Bank, through the
addition of additional investment and administrative personnel, improved
research capabilities and the potential for increased cash inflows to the Fund,
which could result in lower operating costs due to the resulting economics of
scale. The Board also considered the fact that the terms of the New Agreements
do not contemplate any change in the management or operations of Penn Street
relating to the Fund, change in personnel managing the Fund (other than expected
increases in investment personnel), or reduction in the quality of services
provided to stockholders of the Fund. The Board also concluded that the proposed
Transaction is consistent with the provisions of Section 15(f) of the 1940 Act,
which provides that the owner of an investment adviser to a registered
investment company can profit from the sale of the advisory firm, provided
certain requirements are satisfied. These requirements are that for a period of
three years after the transaction, at least 75% of the investment company's
directors must not be interested persons of the predecessor or successor
investment advisers, and that no unfair burden may be placed upon the investment
company as a result of the transaction.
For these purposes, an "unfair burden" is defined to include any
arrangement, during the two-year period after the date when the transaction
occurs, whereby the predecessor or successor investment adviser, or any
interested person of any such adviser, is entitled to receive any compensation
directly or indirectly from any person in connection with the purchase or sale
of securities or other property to, or from, or on behalf of the investment
company, other than bona fide ordinary compensation as principal underwriter or
for other than bona fide investment advisory or other services.
While the agreement to purchase Penn Street permits the Bank to designate
a slate of nominees for election as Directors of the Fund, the Bank has
indicated a desire that the current Directors continue to serve. After
evaluating the Transaction, the Board unanimously concluded that the terms were
consistent with the requirements of the 1940 Act.
The Board also considered management's recommendation that management fee
rates be reduced for each Portfolio in order to ensure competitive pricing
levels for the Portfolios in view of market conditions and the costs of
competing investment products. In addition, management recommended certain
additional actions to reduce overall Fund operating expenses, including a
reduction in the minimum transfer agency fees payable to Penn Street from
$20,000 per Portfolio on an annual basis, to $20,000 annually for both
Portfolios. After evaluating the proposed changes, the Board unanimously
approved the proposed changes to the Investment Management Agreements and the
other actions designed to reduce Fund operating expenses.
Additional Information Concerning the Proposed Transaction
The proposed acquisition of Penn Street by Millennium Bank is to be
accomplished pursuant to a Stock Purchase Agreement dated as of July 31, 1998
between Millennium Bank and Dr. Coghlan, the sole stockholder of Penn Street
(hereafter, the "Purchase Agreement"). The Purchase Agreement provides for the
sale of all of the outstanding stock of Penn Street to the Bank in exchange for
75,000 shares of the Bank's common stock. Under the Purchase Agreement, the
75,000 Bank shares are deemed to have a value of $750,000. As the sole
stockholder of Penn Street after the Transaction, Millennium Bank will be
entitled to elect additional persons to serve, along with Dr. Coghlan, on Penn
Street's Board of Directors.
The Purchase Agreement contains a number of conditions that must be met
before the Transaction is completed. The conditions include the following:
* The acquisition of Penn Street by the Bank must be approved by the
Pennsylvania Department of Banking.
* New Investment Management Agreements for each Portfolio must be
approved by the Fund's Board and by stockholders of each Portfolio.
* Penn Street clients with separately managed investment accounts
consisting of at least 90% of the aggregate value of separate
accounts under Penn Street's management must consent to the
continuance of their investment advisory agreements after the
Transaction.
* The Bank and Dr. Coghlan must enter into an
Employment Agreement under the terms described below.
The Employment Agreement between the Bank and Dr. Coghlan provides that
Dr. Coghlan will serve as the "Managing Director Investment Strategy" of
Millennium Bank and President of Penn Street through December 31, 2001, with
automatic one year extensions thereafter as agreed by the parties. The
Employment Agreement also contains relatively common terms covering
compensation, benefits, confidentiality, non-competition and termination
provisions.
Other Agreements Between the Fund and Penn Street or its
Affiliates
Penn Street also serves as the Administrator and Transfer Agent of the
Fund under Administration Agreements and a Transfer Agency Agreement. The
services provided by Penn Street in this regard include the administration of
the Fund's business affairs, supervision of services provided by other
organizations to the Fund, including the custodian, dividend disbursing agent,
legal counsel and independent accountants; preparation of certain Fund records
and documents; and record keeping and accounting services. The total amounts
paid to Penn Street for these services for the fiscal year ended October 31,
1997 were $95,451 for the Global Equity Portfolio and $45,044 for the Global
Income Portfolio.
East Coast Consultants, Inc. (the "Distributor") serves as the distributor
of the Fund's shares pursuant to a Distribution Agreement with the Fund. The
Distributor is wholly-owned by Dr. Coghlan and is located at 2 Bryn Mawr Avenue,
Suite 100, Bryn Mawr, PA 19010. The Fund has adopted a separate Distribution
Plan for each Portfolio pursuant to Rule 12b-1 under the 1940 Act which permits
each Portfolio to make payments to the Distributor which, on an annual basis,
may not exceed 0.25% of each Portfolio's average net assets. Payments under the
plan may be used by the Distributor to pay others for providing certain
distribution services, including: promotion of the sale of Portfolio shares;
preparation of advertising and promotional materials; and for other services and
materials, including the cost of printing Fund prospectuses, reports and
advertising material provided to investors; and to defray overhead expenses of
the Distributor incurred in connection with the promotion and sale of Fund
shares. The Fund has also adopted separate Shareholder Services Plans for each
Portfolio pursuant to Rule 12b-1 which permit each Portfolio to make payments to
persons for shareholder servicing activities in amounts not exceeding 0.25% of
average annual net assets. Payments for shareholder servicing may be used, among
other things, to compensate persons and/or organizations that provide services
to shareholders that are designed to encourage them to maintain their
investments in the Portfolios. Payments made to East Coast Consultants under
such plans for the period ending October 31, 1997 were $5,210 for the Global
Equity Portfolio and $708 for the Global Income Portfolio.
Stockholder Proposals
Any stockholder who desires to submit a stockholder proposal may do so by
submitting such proposal in writing, addressed to the Fund, at the address
listed in the Notice. The Fund is organized as a Maryland corporation, and
ordinarily does not hold annual stockholder meetings. Any proposal received a
reasonable time in advance of the preparation of material relating to a future
stockholder meeting will be included in such material.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ RICHARD T. COGHLAN
Richard T. Coghlan
October 1, 1998 Chairman
<PAGE>
EXHIBIT A
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ____________, 1998, by and between
PENN STREET FUND, INC., a Maryland corporation (the "Fund") and Penn Street
Advisors, Inc., a Pennsylvania corporation (the "Manager").
1. Duties of Advisor
The Fund hereby employs the Manager to manage the investment and
reinvestment of the assets of the _________ Portfolio (the "Portfolio"), to
continuously review, supervise and administer the Portfolio's investment
program, to determine in its discretion the securities to be purchased or sold
and the portion of the Portfolio's assets to be uninvested, to provide the Fund
with records concerning the Manager's activities which the Fund is required to
maintain, and to render regular reports to the Fund's officers and the Board of
Directors of the Fund, all in compliance with the objectives, policies and
limitations set forth in the Fund's registration statement. The Manager accepts
such employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided herein.
2. Portfolio Transactions
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Portfolio and is
directed to use its best efforts to obtain the best available price and most
favorable execution. It is understood, however, that the Manager shall not be
deemed to have acted unlawfully, or to have breached a fiduciary duty to the
Fund or in respect of the Portfolio, or be in breach of any obligation owing to
the Fund or in respect of the Portfolio under this Agreement, or otherwise,
solely by reason of its having caused the Portfolio to pay a member of a
securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the Portfolio in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Manager determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Manager's
overall responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion. The Manager will promptly communicate
to the officers and directors of the Fund such information relating to
transactions for the Portfolio as they may reasonably request.
3. Compensation of the Manager
For the services to be rendered by the Manager as provided in Section
1 of this Agreement, the Fund shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of 0.75 percent of the average daily net
assets of the Portfolio. In the event that this Agreement is terminated at other
than a month-end, the fee for such month shall be prorated.
4. Reports
The Fund and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
5. Status of the Manager
The services of the Manager to the Fund or in respect of the
Portfolio, are not to be deemed exclusive, and the Manager shall be free to
render similar services to others as long as its services to the Fund, or in
respect of the Portfolio, are not impaired thereby. The Manager shall be deemed
to be an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
6. Liability of Manager
The Manager shall not be liable to the Fund or any shareholder
thereof for errors of judgment or in absence of negligence in the performance of
its duties hereunder.
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Fund to which it might otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or the reckless disregard of its obligations under this Agreement.
7. Duration and Termination
This Agreement shall become effective on __________, 1998 (the
"Effective Date") and shall continue in effect until _______________, provided
that it has first been approved in accordance with Section 15 of the Investment
Company Act of 1940, as amended ("Act"). Thereafter, this Agreement may be
continued in effect for successive one-year periods provided each such
continuance is approved at least annually by a vote of the Fund's Board of
Directors, including the vote of a majority of the directors who are not parties
to this Agreement or interested persons of any such party, cast in person, at a
meeting called for the purpose of voting such approval. In addition, the
question of continuance of this Agreement may be presented to the shareholders
of the Fund; in such event, such continuance shall be effected only if approved
by the affirmative vote of the holders of a majority of the outstanding voting
securities of the Portfolio.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Directors of the Fund or by vote of the
holders of a majority of the outstanding voting securities of the Portfolio, on
sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Fund.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Act and Rule l8f-2 thereunder.
8. Severability
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be executed this ____ day of _________, 1998.
Penn Street Advisors, Inc. Penn Street Fund, Inc.
By:_________________________ By:_________________________
President
<PAGE>
BY SIGNING AND DATING THIS CARD, YOU AUTHORIZE THE PROXIES TO VOTE EACH PROPOSAL
AS MARKED. IF A SIGNED CARD IS NOT MARKED, THE PROXIES WILL VOTE "FOR" THE
PROPOSAL. PLEASE COMPLETE AND MAIL THIS CARD AT ONCE IN THE ENCLOSED ENVELOPE.
PENN STREET FUND, INC.
GLOBAL EQUITY PORTFOLIO
GLOBAL BOND PORTFOLIO
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - OCTOBER 20, 1998
The undersigned hereby constitutes and appoints Jan Gill and Josephine
Coghlan, or any of them, with power of substitution, as proxies to appear and
vote all of the shares of common stock standing in the name of the undersigned
as of the record date at the special meeting of stockholders of the Global
Equity Portfolio and Global Bond Portfolio of Penn Street Fund, Inc. to be held
at the offices of Stradley, Ronon, Stevens & Young, LLP, 30 Valley Stream
Parkway, Malvern, PA at 9:00 a.m. local time, or at any postponement or
adjournment thereof; and the undersigned hereby instructs said proxies to vote
as indicated on this proxy card.
The shares represented by this Proxy will be voted as specified in the
following items. If no choice is specified, they will be voted to approve each
Proposal. Please refer to the Proxy Statement discussion of these matters. This
Proxy is solicited on behalf of the Fund's Board Of Directors.
To be voted on by stockholders of the Global Equity Portfolio only:
To Approve a New Investment Management Agreement Between the
Fund and Penn Street Advisors, Inc. for the Global Equity
Portfolio
FOR /_/ AGAINST /_/ ABSTAIN /_/
To be voted on by stockholders of the Global Bond Portfolio only:
To Approve a New Investment Management Agreement Between the
Fund and Penn Street Advisors, Inc. for the Global Bond
Portfolio.
FOR /_/ AGAINST /_/ ABSTAIN /_/
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SIGNATURE DATE
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SIGNATURE OF JOINT OWNER DATE
Please Date And Sign Name (Or Names) To Authorize The Voting Of
Your Shares As Indicated Above. Where Shares Are Registered With
Joint Owners, All Joint Owners Should Sign. Persons Signing As
An Executor, Administrator, Trustee Or Other Representative
Should Give Full Title As Such.
