<PAGE>
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
/X/ Filed by the Registrant
/ / Filed by a party other than the Registrant
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FPA CAPITAL FUND, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(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.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
FPA CAPITAL FUND, INC.
11400 WEST OLYMPIC BOULEVARD, SUITE 1200, LOS ANGELES, CALIFORNIA 90064
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY, OCTOBER 23, 2000
Notice is hereby given that the annual meeting of shareholders of FPA
Capital Fund, Inc. ("Fund") will be held in the Board Room, Twelfth Floor, at
the offices of First Pacific Advisors, Inc., the Fund's investment adviser,
11400 West Olympic Boulevard, Suite 1200, Los Angeles, California 90064, on
Monday, October 23, 2000, at 1:30 P.M. Pacific Time, to consider and vote on the
following matters:
1. Election of the Board of Directors (Five Directors);
2. Approval or disapproval of an investment advisory agreement ("New
Agreement") between the Fund and First Pacific Advisors, Inc., the
Fund's investment adviser ("Adviser");
3. Ratification or rejection of the selection of Ernst & Young LLP as
independent auditors for the Fund for the fiscal year ending March 31,
2001; and
4. Such other matters as may properly come before the meeting or any
adjournment or adjournments thereof.
You are entitled to vote if you held shares of the Fund as of August 24,
2000.
By Order of the Board of Directors
SHERRY SASAKI
Secretary
September 11, 2000
--------------------------------------------------------------------------------
IT IS REQUESTED THAT YOU PROMPTLY EXECUTE THE ENCLOSED PROXY AND RETURN IT IN
THE ENCLOSED ENVELOPE THUS ENABLING THE FUND TO AVOID UNNECESSARY EXPENSE AND
DELAY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. THE PROXY IS
REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE
MEETING.
--------------------------------------------------------------------------------
<PAGE>
FPA CAPITAL FUND, INC.
11400 WEST OLYMPIC BOULEVARD, SUITE 1200, LOS ANGELES, CALIFORNIA 90064
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of the Fund
in connection with the annual meeting of shareholders to be held on Monday,
October 23, 2000. Any shareholder executing a proxy has the power to revoke it
prior to its exercise by submission of a later proxy, by voting in person, or by
letter to the Secretary of the Fund. Unless the proxy is revoked, the shares
represented thereby will be voted in accordance with specifications thereon.
Proxy solicitation will be principally by mail but may also be made by telephone
or personal interview conducted by officers and regular employees of the
Adviser, or Boston Financial Data Services, Inc., the Fund's Shareholder
Servicing Agent. No specially engaged employees or paid solicitors have been
retained by the Fund for such purpose. If any such persons are retained by the
Adviser, the costs will paid by United Asset Management Corporation ("UAM"), the
parent of the Adviser. The cost of solicitation of proxies will be borne by UAM.
The Fund will reimburse banks, brokerage firms, nominees, fiduciaries and other
custodians for reasonable expenses incurred by them in sending the proxy
material to beneficial owners of shares of the Fund. This Proxy Statement was
first mailed to shareholders on or about September 11, 2000. You may obtain a
copy of the Fund's most recent annual report, and of any succeeding semi-annual
report, without charge, by writing to the Secretary of the Fund at the above
address, or by telephoning (800) 982-4372.
On August 24, 2000 (record date for determining shareholders entitled to
notice of and to vote at the meeting), there were outstanding 00,000,000 shares
of Common Stock, $0.01 par value. Each share is entitled to one vote.
On August 24, 2000, no person is known by management to own beneficially as
much as 5% of the outstanding shares of the Fund, except Merrill Lynch, Pierce,
Fenner & Smith, Inc., for the sole benefit of its customers, Attention: Fund
Administration 97224, 4800 Deer Lake Drive, East Floor 2, Jacksonville, Florida
32246-6484, which held 000,000 shares (0.00%).
Signed but unmarked proxies will be voted for the directors nominated below
and in favor of all proposals. Shareholders who return proxies marked as
abstaining from voting on one or more proposals are treated as being present at
the meeting for purposes of obtaining the quorum necessary to hold the meeting,
but are not counted as part of the vote necessary to approve the proposal(s). If
brokers holding shares for their customers in so-called "Street Name" report
that they have not received instructions and are not authorized to vote without
instruction, those shares will be treated the same as abstentions.
1. ELECTION OF THE BOARD OF DIRECTORS
Five directors are to be elected at the meeting, each to hold office until
the next meeting of shareholders and until a successor is elected and qualified.
The five nominees receiving the highest number of votes will be elected.
Because we do not expect meetings of shareholders to be held each year, the
directors' terms will be indefinite in length. Four of the nominees for
director, Willard H. Altman, DeWayne W. Moore, Alfred E. Osborne, Jr. and
Lawrence J. Sheehan, were elected by shareholders at their last meeting on
December 20, 1999. Robert L. Rodriguez was elected by directors in 2000. The
table below sets forth certain information regarding the nominees.
1
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND POSITION PAST FIVE YEARS DIRECTOR
WITH THE FUND AND DIRECTORSHIP OF PUBLIC COMPANIES AGE SINCE
------------------------ --------------------------------------------------------- --- --------
<S> <C> <C> <C>
Willard H. Altman, Jr. Retired. Formerly, until 1995, Partner of Ernst & Young 65 1998
(Director)(1) LLP, independent auditors for the Fund. Vice President
of Evangelical Council for Financial Accountability, an
accreditation organization for Christian non-profit
entities. Director of FPA New Income, Inc., of FPA
Perennial Fund, Inc., of Source Capital, Inc. (2), and
of Current Income Shares, Inc., a closed-end investment
company not advised by the Adviser.
DeWayne W. Moore Retired. Formerly Senior Vice President, Chief 86 1980
(Director)(1) Financial Officer and director of Guy F. Atkinson
Company of California (construction). Director of FPA
New Income, Inc. (2).
Alfred E. Osborne, Jr. Director of the Harold Price Center for 55 1999
(Director)(1) Entrepreneurial Studies and Associate Professor of
Business Economics at The John E. Anderson Graduate
School of Management at UCLA. Dr. Osborne has been at
UCLA since 1972. Director of FPA New Income, Inc.
(2), of K2 Inc., of Nordstrom, Inc., and of E* Capital
Corporation, a privately held company which operates a
venture capital fund and owns Wedbush Morgan
Securities, Inc., a broker-dealer. Independent general
partner of Technology Funding Venture Partners V L.P.,
a business development company. Trustee of the WM
Group of Funds, a mutual fund complex not advised by
the Adviser.
2
<PAGE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND POSITION PAST FIVE YEARS DIRECTOR
WITH THE FUND AND DIRECTORSHIP OF PUBLIC COMPANIES AGE SINCE
------------------------ --------------------------------------------------------- --- --------
<S> <C> <C> <C>
Robert L. Rodriguez* Director (since March 1996), Principal (since March 51 2000
(Director, President 1996), Chief Executive Officer (since May 2000) and
and Chief Investment Chief Investment Officer (since March 1996) of the
Officer) Adviser; and director of FPA Fund Distributors, Inc.
("Distributor") since March 1996. Director, President
and Chief Investment Officer of FPA New Income, Inc.
(2). Executive Vice President from January 1996 to
March 1996, and Senior Vice President from February
1993 to January 1996, of the Adviser; and director
from March 1996 to August 2000 and Senior Vice
President from March 1996 to November 1999 of Source
Capital, Inc.
Lawrence J. Sheehan** Of counsel to, and Partner (1969 to 1994) of, the law 68 1991
(Director)(1) firm of O'Melveny & Myers LLP, legal counsel to the
Fund. Director of FPA New Income, Inc., of FPA
Perennial Fund, Inc., of Source Capital, Inc. (2) and
of TCW Convertible Securities Fund, Inc., a closed-end
investment company not advised by the Adviser.
</TABLE>
-------------------------
* Director who is an interested person of the Fund and of the Adviser as
defined in the Investment Company Act of 1940 ("Act") by virtue of being an
officer of the Fund and of the Adviser.
** Director who is an interested person of the Fund as defined in the Act by
virtue of being affiliated with legal counsel to the Fund.
(1) Member of the Audit Committee and of the Corporate Responsibility Committee
of the Board of Directors.
(2) FPA New Income, Inc., FPA Paramount Fund, Inc., FPA Perennial Fund, Inc.,
and Source Capital, Inc. are other investment companies advised by the
Adviser ("FPA Fund Complex"). See "Information Concerning the Adviser"
herein.
3
<PAGE>
As of August 24, 2000, the following directors and nominees owned shares of
the Fund, including shares held in the name of a spouse and trust accounts: Mr.
Altman owned 000 shares; Mr. Moore owned 000 shares; Mr. Osborne owned no
shares; Mr. Rodriguez owned 0,000 shares; and Mr. Sheehan owned 0,000 shares. On
the same date, all officers and directors of the Fund as a group owned of record
and beneficially less than 1% of the Fund's shares.
All nominees have consented to being named in this Proxy Statement and have
indicated their intention to serve if elected. Should any nominee for director
withdraw or otherwise become unavailable for reasons not presently known, it is
intended that the proxy holders will vote the signed but unmarked proxies and
those marked for the nominated directors for such other nominee as the Board of
Directors may designate.
The Board of Directors has designated the four members identified by
footnote (1) to the preceding table as the Audit Committee of the Board. The
Committee makes recommendations to the Board of Directors concerning the
selection of the Fund's independent auditors and reviews with such auditors the
results of the annual audit, including the scope of auditing procedures, the
adequacy of internal controls, and compliance by the Fund with the accounting,
recording and financial reporting requirements of the Act. The Audit Committee
met four times during the last fiscal year.
The Board of Directors has designated the four members identified by
footnote (1) to the preceding table as the Corporate Responsibility Committee.
The Committee recommends to the full Board of Directors nominees for election as
directors of the Fund to fill vacancies on the Board, when and as they occur.
While the Committee expects to be able to identify from its own resources an
ample number of qualified candidates, it will review recommendations from
shareholders of persons to be considered as nominees to fill future vacancies.
The determination of nominees recommended by the Committee is within the sole
discretion of the Committee and the final selection of management nominees is
within the sole discretion of the Board. Therefore, no assurance can be given
that persons recommended by shareholders will be nominated as directors. The
Corporate Responsibility Committee met three times during the last fiscal year.
During the fiscal year ended March 31, 2000, the Board of Directors held
five meetings. Each director attended more than 75% of the aggregate of (1) the
total number of meetings of the Board of Directors and (2) the total number of
meetings held by all Committees of the Board on which they served.
During the fiscal year ended March 31, 2000, the Fund did not pay any
salaries directly to officers but paid an investment advisory fee to the Adviser
as described herein. The following information relates to director compensation.
Each director who was not an interested person of the Adviser was compensated by
the Fund at the rate of $6,000 per year plus a fee of $1,000 per day for each
Board of Directors meeting attended. The directors who were not interested
persons of the Adviser received total directors' fees of $33,280 for such year.
Each such director is also reimbursed for out-of-pocket expenses incurred as a
director. During the year, the Fund incurred legal fees of $26,255, to the law
firm of O'Melveny & Myers LLP, with which Mr. Sheehan is affiliated.
4
<PAGE>
<TABLE>
<CAPTION>
Total Compensation*
Aggregate Compensation* from the FPA Fund Complex
Name of Directors from the Fund including the Fund
----------------------------- ----------------------- -------------------------
<S> <C> <C>
Willard H. Altman, Jr. $10,000 $ 43,000**
Donald E. Cantlay (1) 584 1,168***
DeWayne W. Moore 10,000 20,000***
Alfred E. Osborne, Jr. (2) 2,696 5,392***
Lawrence J. Sheehan 10,000 43,000**
</TABLE>
* No pension or retirement benefits are provided to directors of the Fund or
the FPA Fund Complex.
** Includes compensation from the Fund, two other open-end investment
companies, and one closed-end investment company.
*** Includes compensation from the Fund and one other open-end investment
company.
(1) Director until May, 1999.
(2) Elected December, 1999
5
<PAGE>
The following information relates to each executive officer of the Fund who
is not a director or a nominee for election as a director of the Fund. Each
officer also serves as a director and/or officer of the Adviser and has received
employee stock options to acquire shares of UAM, of which the Adviser is an
indirect wholly owned subsidiary. The business address of each of the following
officers is 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California
90064.
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION DURING OFFICER
WITH THE FUND PAST FIVE YEARS AGE SINCE
------------------------ --------------------------------------------------------- --- -------
<S> <C> <C> <C>
Dennis M. Bryan Vice President of the Adviser since January 1996. Mr. 39 1996
(Vice President) Bryan served as Investment Analyst of the Adviser from
July 1993 to January 1996.
Eric S. Ende Senior Vice President of the Adviser for more than the 56 1985
(Vice President) past five years. Mr. Ende also serves as director,
President and Chief Investment Officer of Source
Capital, Inc.; as director, President and Portfolio
Manager of FPA Paramount Fund Inc.; as President and
Portfolio Manager of FPA Perennial Fund, Inc.; and as
Vice President of FPA New Income, Inc. Nominee for
director of FPA Perennial Fund, Inc.
J. Richard Atwood Director (since May 2000), Principal (since May 2000), 40 1997
(Treasurer) Chief Operating Officer (since May 2000), Chief
Financial Officer (since January 1997) and Treasurer
(since January 1997) of the Adviser; and director
(since May 2000), President (since May 2000), Chief
Executive Officer (since May 2000), Chief Financial
Officer (since March 1998) and Treasurer (since
January 1997) of the Distributor. Mr. Atwood also
serves as Treasurer of FPA New Income, Inc., of FPA
Paramount Fund, Inc., of FPA Perennial Fund, Inc. and
of Source Capital, Inc. Mr. Atwood served as Vice
President and Chief Financial Officer of Transamerica
Investment Services, Inc. from January 1995 to
January 1997; and Senior Vice President from January
1997 to May 2000 of the Adviser and of the Distributor.
Sherry Sasaki Assistant Vice President and Secretary of the Adviser 45 1984
(Secretary) for more than the past five years; and Secretary of the
Distributor for more than the past five years. Ms.
Sasaki also serves as Secretary of FPA New Income,
Inc., of FPA Paramount Fund, Inc., of FPA Perennial
Fund, Inc. and of Source Capital, Inc.
</TABLE>
6
<PAGE>
2. APPROVAL OR DISAPPROVAL OF AN INVESTMENT ADVISORY AGREEMENT
("NEW AGREEMENT")
First Pacific Advisors, Inc. ("Adviser"), a Massachusetts corporation,
maintains its principal office at 11400 West Olympic Boulevard, Suite 1200, Los
Angeles, California 90064. The Adviser has provided investment management and
advisory services to the Fund since July 11, 1984. Such services are presently
provided pursuant to an investment advisory agreement, dated August 1, 1994
("Present Agreement"), which was most recently approved by shareholders of the
Fund on December 20, 1999. The Adviser is a wholly owned subsidiary of United
Asset Management Holdings, Inc. which is a wholly owned subsidiary of UAM, which
is a holding company principally engaged, through affiliated firms, in providing
institutional investment management and acquiring institutional investment
management firms.
UAM has announced an agreement dated June 19, 2000 with Old Mutual plc
("Old Mutual"), a United Kingdom-based financial services group with substantial
asset management, insurance, and banking businesses. This agreement provides for
a tender offer by Old Mutual for all outstanding shares of UAM and following
completion of the tender offer a merger by which UAM will become a wholly-owned
subsidiary of Old Mutual. At such time as 25% or more of the outstanding shares
of UAM are acquired pursuant to the tender offer, there will be change in
control of UAM and thus an assignment which under the Investment Company Act of
1940 will automatically terminate the Present Agreement.
Because the change in control is expected to occur prior to this
shareholders meeting, the Board of Directors of the Fund has approved an interim
investment advisory agreement with the Adviser to allow the continued receipt of
advisory services by the Fund after the assignment and prior to shareholder
approval of a new agreement. Under the Investment Company Act, the Adviser may
continue to serve as investment adviser to the Fund beyond an interim period of
150 days only if shareholders of the Fund approve a new investment advisory
agreement. The Board of Directors of the Fund have approved, and recommend
shareholder approval of, a new investment advisory agreement ("New Agreement")
between the Fund and the Adviser to become effective upon approval by
shareholders of the Fund. Shareholder approval requires the affirmative vote of
(a) 67% or more of the voting securities represented at the meeting, if more
than 50% of the outstanding voting securities are present or represented by
proxy or (b) more than 50% of all outstanding voting securities, whichever is
less.
If shareholders of the Fund do not approve the New Agreement, the Board of
Directors of the Fund would seek to obtain interim advisory services at the
lesser of cost or the current fee rate either from the Adviser or from another
advisory organization. Thereafter, the Board of Directors would either negotiate
a new investment advisory agreement with an advisory organization selected by
the Board or make other appropriate arrangements, in either event subject to the
approval of shareholders.
INVESTMENT ADVISORY AGREEMENTS
The terms of the Present Agreement and the New Agreement are identical in
all material respects, except for the effective date and termination date. The
initial term of the New Agreement will commence on the date approved by
shareholders of the Fund and continue to September 30, 2002. A copy of the New
Agreement is attached as Exhibit A hereto. Under each Agreement, the Fund
retains
7
<PAGE>
the Adviser to manage the investment of the Fund's assets, including the placing
of orders for the purchase and sale of portfolio securities. The Adviser agrees
to obtain and evaluate economic, statistical and financial information to
formulate and implement the Fund's investment programs. In addition to providing
management and investment advisory services, the Adviser furnishes office space,
facilities and equipment. It also compensates all officers and other personnel
of the Fund except directors who are not affiliated with the Adviser.
The Adviser provides at its expense personnel to serve as officers of the
Fund and office space, facilities and equipment for managing the affairs of the
Fund, subject to cost reimbursement for financial services provided to the Fund
as described below. All other expenses incurred in the operation of the Fund are
borne by the Fund. Expenses incurred by the Fund include brokerage commissions
on portfolio transactions, fees and expenses of directors not affiliated with
the Adviser, taxes, transfer agent fees, dividend disbursement and reinvestment
and custodian fees, auditing and legal fees, the cost of printing and mailing
reports and proxy materials to shareholders, expenses of printing and engraving
stock certificates, expense of trade association memberships, premiums for the
fidelity bond and errors and omissions insurance maintained by the Fund, and
reimbursement of the Adviser's expenses in providing financial services to the
Fund as described below.
For services rendered, the Adviser is paid an investment advisory and
management fee. Such fee is payable monthly at the annual rate of 0.75% of the
first $50 million, and 0.65% of the excess over $50 million, of the Fund's
average net assets. This fee is higher than the fee paid by some other mutual
funds. Average net assets are determined by taking the average of all the daily
determinations of net assets during a calendar month.
In addition to the investment advisory and management fee, the Fund
reimburses the Adviser monthly for the costs incurred by the Adviser in
providing financial services to the Fund including maintaining the accounts,
books and other documents which constitute the record forming the basis for the
Fund's financial statements, preparing such financial statements and other Fund
documents and reports of a financial nature required by federal and state laws,
calculating daily net asset value of the Fund, and participating in the
production of the Fund's registration statements, prospectuses, proxy
solicitation materials and reports to shareholders (including compensation of
the Treasurer or other principal financial officer of the Fund, compensation of
personnel working under such person's direction and expenses of office space,
facilities, and equipment used by such personnel in the performance of their
financial services duties to the Fund). However, for any fiscal year, the cost
of such financial services paid by the Fund cannot exceed 0.10% of the average
daily net assets of the Fund.
The Advisory Agreement includes a provision for a reduction in the
investment advisory and management fee and cost reimbursement paid to the
Adviser in the amount by which certain defined operating expenses of the Fund
(including such advisory fee and cost reimbursement) for any fiscal year exceed
1.50% of the first $30 million of average net assets of the Fund, plus 1% of the
remaining average net assets of the Fund, such values to be taken at the close
of business on the last business day of each
8
<PAGE>
calendar month. Operating expenses, as defined in the Advisory Agreement,
exclude (i) interest, (ii) taxes, (iii) expenditures for brokerage and research
services; and (iv) any extraordinary expenses such as those of litigation,
merger, reorganization or recapitalization, to the extent such extraordinary
expenses are permitted to be excluded by the rules or policies of the states in
which shares of the Fund are periodically qualified for sale. All expenditures,
including costs incurred in connection with the purchase, holding or sale of
portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. This expense limitation provision does
not require any payment by the Adviser beyond the return of the investment
advisory and management fee and cost reimbursement paid to it by the Fund for a
fiscal year.
The Advisory Agreement provides that the Adviser shall have no liability to
the Fund or any shareholders of the Fund for any error of judgment, mistake of
law or any loss arising out of any investment, or for any other act or omission
in the performance by the Adviser of its duties under the Advisory Agreement,
except for liability resulting from willful misfeasance, bad faith or negligence
on the part of the Adviser or the reckless disregard of its duties under the
Advisory Agreement. The Advisory Agreement may be terminated without penalty by
the Board of Directors of the Fund or the vote of a majority (as defined in the
Act) of the outstanding voting securities of the Fund upon 60 days' written
notice to the Adviser or by the Adviser upon like notice to the Fund. The
Advisory Agreement will automatically terminate in the event of its assignment,
as that term is defined in the Act.
The recommendation of the Board of Directors that shareholders approve the
New Agreement is based upon the Board's assessment of the Fund's long-term
investment performance and low volatility. Advisory fees were found by the Board
to be reasonable in comparison to those paid by the other open-end equity funds
in light of the Board's evaluation of the consistency and reliability of the
Fund's long-term performance. The Directors also took into consideration the
benefits derived by the Fund's Adviser from arrangements under which it receives
research services from brokers to whom the Fund's brokerage transactions are
allocated, as described below under "Portfolio Transactions and Brokerage."
For the fiscal year ended March 31, 2000, the Adviser received investment
advisory and management fees of $3,538,917, plus reimbursement of $536,756 for
costs incurred in providing financial services to the Fund. The Fund's average
net assets during such fiscal year were $537,776,226. On June 30, 2000, the
Fund's total net assets were $449,376,868.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser makes decisions to buy and sell
securities for the Fund, selects broker-dealers and negotiates commission rates
or net prices. In over-the-counter transactions, orders are placed directly with
a principal market maker unless it is believed better prices and executions are
available elsewhere. Portfolio transactions are effected with broker-dealers
selected for their abilities to give prompt execution at prices which are
favorable to the Fund. If these primary considerations are
9
<PAGE>
met, agency transactions for the Fund are typically placed with brokers which
provide brokerage and research services to the Fund or the Adviser at commission
rates considered to be reasonable, although higher than the lowest brokerage
rates available. No formula for such allocation exists. The Fund thus bears the
cost of such services. While research services may be useful to supplement other
available investment information, the receipt thereof does not necessarily
reduce the expenses of the Adviser. The Fund does not pay any mark-up over the
market price of securities acquired in principal transactions with dealers. Any
solicitation fees which are received by the Adviser in connection with a tender
of portfolio securities of the Fund in acceptance of an exchange or tender offer
are applied to reduce the advisory fees payable by the Fund.
The Advisory Agreement includes direct authorization for the Adviser to pay
commissions on securities transactions to broker-dealers furnishing research
services in an amount higher than the lowest available rate, if the Adviser
determines in good faith that the amount is reasonable in relation to the
brokerage and research services provided (as required by Section 28(e) of the
Securities Exchange Act of 1934), viewed in terms of the particular transaction
or the Adviser's overall responsibilities with respect to accounts as to which
it exercises investment discretion. The term brokerage and research services is
defined to include advice as to the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of securities
or purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions, and performing functions incidental thereto, such as clearance,
settlement and custody.
The Adviser also places portfolio transactions for other advisory accounts,
including other investment companies. Research services furnished by
broker-dealers which effect securities transactions for the Fund may be used by
the Adviser in servicing all of its advisory accounts and not all such research
services may be used by the Adviser in the management of the Fund's portfolio.
Conversely, research services furnished by broker-dealers which effect
securities transactions for other advisory accounts may be used by the Adviser
in the management of the Fund. In the opinion of the Adviser, it is not possible
to measure separately the benefits from research services to each advisory
account. Because the volume and nature of the trading activities of the advisory
accounts are not uniform, the amount of commissions in excess of the lowest
available rate paid by each advisory account for brokerage and research services
will vary. In the opinion of the Adviser, however, total commissions paid by the
Fund are not disproportionate to the benefits received by it on a continuing
basis. During the fiscal year ended March 31, 2000, brokerage commissions paid
by the Fund totaled $585,690 of which $534,521 was paid on transactions having a
total value of $243,461,956 to broker-dealers selected because of research
services provided to the Adviser.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities for the Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities purchased or sold by the
10
<PAGE>
Fund. In making such allocations, the main factors considered by the Adviser 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 recommending the investment.
INFORMATION CONCERNING THE ADVISER
The Advisory Agreement permits the Adviser to render advisory services to
others, and the Adviser also serves as investment adviser to Source Capital,
Inc., a publicly traded (closed-end) investment company, which had net assets of
$416,779,511 on June 30, 2000. Source Capital, Inc. pays an advisory fee at the
annual rate of 0.725% on the first $100 million of its net assets, 0.700% on the
next $100 million of its net assets, and 0.675% on any net assets in excess of
$200 million. The Adviser also advises FPA New Income, Inc., FPA Paramount Fund,
Inc., FPA Perennial Fund, Inc. and FPA Crescent Portfolio, open-end investment
companies, which had net assets of $506,458,635, $78,529,306, $40,802,448 and
$40,525,052, respectively, on June 30, 2000. FPA New Income, Inc. pays an
advisory fee at the annual rate of 0.50% of the average daily net assets. FPA
Paramount Fund, Inc. and FPA Perennial Fund, Inc. each pay advisory fees at the
same annual rate as the Fund. FPA Crescent Portfolio pays an advisory fee at the
annual rate of 1.00% of its average daily net assets. The Adviser also advises
institutional accounts. The Adviser had total assets under management of
approximately $2.9 billion at June 30, 2000.
The directors and principals of the Adviser are the following persons: J.
Richard Atwood, Chief Operating Officer, Chief Financial Officer and Treasurer
of the Adviser; and Robert L. Rodriguez, Chief Executive Officer and Chief
Investment Officer of the Adviser. The principal occupations of Messrs. Atwood
and Rodriguez are described in the preceding tables. The business address of
Messrs. Atwood, Rodriguez is 11400 West Olympic Boulevard, Suite 1200, Los
Angeles, California 90064.
DISTRIBUTOR
FPA Fund Distributors, Inc., 11400 West Olympic Boulevard, Suite 1200, Los
Angeles, California 90064, a wholly owned subsidiary of the Adviser, acts as the
principal distributor of shares of the Fund pursuant to a Distribution Agreement
dated August 1, 1994. During the fiscal year ended March 31, 2000, the
Distributor received $9,764 in net sales commissions (after reallowance to other
dealers) on sales of shares of the Fund. FPA Fund Distributors, Inc. will
continue to serve as distributor for shares of the Fund.
DIRECTORS' RECOMMENDATION AND OTHER INFORMATION
The New Agreement has been approved by the Board of Directors of the Fund,
including those directors who are not "interested persons" of the Fund, as that
term is defined in the Act, at a meeting held on August 7, 2000. In so doing,
the directors have acted in what they believe to be in the best interests of the
shareholders of the Fund.
11
<PAGE>
In approving the New Agreement and recommending that it be approved by the
shareholders, the directors have considered the Adviser's expressed intention to
continue the investment operations of the Fund and the Adviser under the
direction of current management; the nature, quality and extent of the services
to be performed by the Adviser; the investment record of the Fund; comparative
data as to investment performance, advisory fees and expenses; the financial
resources of UAM and Old Mutual; and such other information and factors as the
directors believe to be relevant. The Adviser has assured the directors that
there will be no reduction in the nature or quality of its services to the Funds
as a result of the transaction.
The Act provides that in connection with the sale of any interest in an
investment adviser which results in the "assignment" of an investment advisory
contract, an investment adviser of a registered investment company such as the
Fund, or an affiliated person of such investment adviser, may receive any amount
or benefit if (i) for a period of 3 years after the sale, at least 75% of the
members of the Board of Directors of the investment company are not "interested
persons" of the investment adviser or the predecessor adviser, and (ii) there is
no "unfair burden" imposed on the investment company as a result of such sale or
any expressed or implied terms, conditions or understandings applicable thereto.
For this purpose, "unfair burden" is defined to include any arrangement during
the 2-year period after the transaction, whereby the investment adviser or its
predecessor or successor investment adviser, or any interested persons of any
such adviser, receives or is entitled to receive any compensation directly or
indirectly (i) from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
other than regular type ordinary compensation as principal underwriter for such
company, or (ii) from the investment company or its security holders for other
than regular type investment advisory or other services. This provision of the
Act was enacted by Congress in 1975 to make it clear that an investment adviser
(or an affiliated person of the adviser) can realize a profit on the sale of the
adviser's business, subject to the two safeguards described above. In their
agreement, Old Mutual and UAM have agreed not to take or recommend any action
that would constitute an unfair burden on the Fund within the meaning of this
provision. Old Mutual and UAM have also agreed that, for a period of three years
after the transaction, they will not take or recommend any action that would
cause more than 25% of the directors to be interested persons of the Adviser.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS APPROVE THE NEW AGREEMENT
12
<PAGE>
3. RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
Shareholders are requested to ratify the selection by the Board of
Directors (including a majority of directors who are not interested persons of
the Fund as that term is defined in the Act) of the firm of Ernst & Young LLP as
independent auditors for the Fund for the fiscal year ending March 31, 2001. In
addition to normal audit services, Ernst & Young LLP provides services in
connection with the preparation and review of federal and state tax returns for
the Fund. The employment of Ernst & Young LLP is conditioned upon the right of
the Fund, by vote of a majority of its outstanding voting securities, to
terminate such employment without any penalty. Ernst & Young LLP have served as
independent auditors for the Fund since 1968. Representatives of Ernst & Young
LLP are expected to be present at the meeting, with the opportunity to make a
statement if they desire to do so, and such representatives are expected to be
available to respond to any appropriate questions from shareholders.
4. OTHER MATTERS
The proxy holders have no present intention of bringing before the meeting
for action any matters other than those specifically referred to in the
foregoing, and in connection with or for the purpose of effecting the same, nor
has the management of the Fund any such intention. Neither the proxy holders nor
the management of the Fund are aware of any matters which may be presented by
others. If any other business shall properly come before the meeting, the proxy
holders intend to vote thereon in accordance with their best judgment.
SIMULTANEOUS MEETINGS
The annual meeting of shareholders of the Fund is called to be held at the
same time as the meeting of shareholders of FPA New Income, Inc., FPA Paramount
Fund, Inc. and FPA Perennial Fund, Inc. It is anticipated that such meetings
will be held simultaneously. In the event that any Fund shareholder at the
meeting objects to the holding of a simultaneous meeting and moves for an
adjournment of the meeting so that the meeting of the Fund may be held
separately, the persons named as proxies will vote in favor of such an
adjournment.
SHAREHOLDER PROPOSALS
The Fund does not expect to hold regular annual meetings of shareholders.
Any shareholder who wishes to submit proposals for consideration at a meeting of
the Fund's shareholders should send such proposals to the Fund at the address
shown above. Proposals must be received a reasonable time prior to the date of a
meeting of shareholders to be considered for inclusion in the materials for that
meeting. Timely submission of a proposal does not necessarily mean that such
proposal will be included.
13
<PAGE>
ADJOURNMENT
In the event that sufficient votes in favor of the proposals set forth in
the Notice of Annual Meeting and Proxy Statement are not received by the time
scheduled for the meeting, the persons named as proxies may move one or more
adjournments of the meeting for a period or periods of not more than 30 days in
the aggregate to permit further solicitation of proxies with respect to any such
proposals. Any such adjournment will require the affirmative vote of a majority
of the shares present at the meeting. The persons named as proxies will vote in
favor of such adjournment those shares which they are entitled to vote which
have voted in favor of such proposals. They will vote against any such
adjournment those proxies which have voted against any of such proposals.
By Order of the Board of Directors
SHERRY SASAKI
Secretary
September 11, 2000
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED REPLY ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
14
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated October , 2000 by and between FPA CAPITAL FUND, INC., a
Maryland corporation (hereinafter referred to as the "Fund"), and FIRST PACIFIC
ADVISORS, INC., a Massachusetts corporation (hereinafter referred to as the
"Manager").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as a diversified open-end
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Manager is engaged principally in rendering management and
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Fund desires to retain the Manager to render management and
investment advisory services to the Fund in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Fund on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Manager hereby agree as follows:
ARTICLE I
DUTIES OF THE MANAGER
The Fund hereby employs the Manager to act as the manager and investment
adviser of the Fund and to furnish, or arrange for affiliates to furnish, the
management and investment advisory services described below, subject to the
supervision of the Board of Directors of the Fund, for the period and on the
terms and conditions set forth in this Agreement. The Manager hereby accepts
such employment and agrees during such period, to render, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein.
A-1
<PAGE>
(a) INVESTMENT ADVISORY SERVICES. The Manager shall provide the Fund with
such investment research, advice and supervision as the Fund may from time to
time consider necessary for the proper supervision of the assets of the Fund,
shall furnish continuously an investment program for the Fund and shall
determine from time to time which securities shall be purchased, sold or
exchanged and what portion of the assets of the Fund shall be held in the
various securities in which the Fund invests or cash, subject always to the
restrictions of the Articles of Incorporation and By-Laws of the Fund, as
amended from time to time, the provisions of the Investment Company Act and the
statements relating to the Fund's investment objectives, investment policies and
investment restrictions as the same are set forth in the currently effective
registration statement relating to the shares of the Fund under the Securities
Act of 1933, as amended (the "Registration Statement"). The Manager shall
furnish to the Fund research and statistical and other factual information and
reports with respect to securities held by the Fund or which the Fund might
purchase. It will also furnish to the Fund such information as may be
appropriate concerning developments which may affect issuers of securities held
by the Fund or which the Fund might purchase or the businesses in which such
issuers may be engaged. Such statistical and other factual information and
reports shall include information and reports on industries, businesses,
corporations and all types of securities, whether or not the Fund has at any
time any holdings in such industries, businesses, corporations or securities.
The Manager shall take, on behalf of the Fund, all actions which it deems
necessary to implement the investment policies determined as provided above, and
in particular to place all orders for the purchase or sale of portfolio
securities for the Fund's account with brokers or dealers selected by the
Manager, and to that end, the Manager is authorized as the agent of the Fund to
give instructions to the custodian of the Fund as to deliveries of securities
and payments of cash for the account of the Fund. In connection with the
selection of such brokers or dealers and the placing of such orders with respect
to assets of the Fund, the Manager will take the following into consideration:
the best net price available; the reliability, integrity and financial condition
of the broker-dealer; the size of and difficulty in executing the order; and the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may determine, the Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage and research services to the Manager an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Fund. The Manager is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Manager. Such
allocation shall be in such amounts and proportions as the Manager shall
determine and the Manager will report on said allocations regularly to the Board
of Directors of the Fund indicating the brokers to whom such allocations have
been made and the basis therefor.
A-2
<PAGE>
(b) MANAGEMENT SERVICES. The Manager shall furnish to the Fund necessary
assistance in the preparation of all reports now or hereafter required by
Federal or other laws, and in the preparation of prospectuses, registration
statements and amendments thereto that may be required by Federal or other laws
or by the rule or regulation of any duly authorized commission or administrative
body. However, nothing herein shall obligate the Manager to pay the costs of
preparation, printing, or mailing of prospectuses being used in connection with
sales of the Fund's shares or otherwise, except as provided in Article II(b)
herein. The Manager also shall furnish to the Fund office space in the offices
of the Manager or in such other place or places as may be agreed upon from time
to time, and all necessary office facilities, simple business equipment,
supplies, utilities and telephone service for managing the affairs and
investments and keeping the general accounts and records of the Fund (exclusive
of the necessary records of the transfer agent, registrar and custodian), and
shall arrange, if desired by the Fund, for members of the Manager's organization
to serve without salaries from the Fund as officers of the Fund.
When Fund portfolio securities are tendered by the Manager or an
affiliate of the Manager, the Manager will arrange to receive the solicitation
fees, less expenses, received and will deduct the net amount of any such fees
received by the Manager, or any affiliate of the Manager, from the management
fee payable by the Fund. The Manager reserves the right, in its discretion, to
purchase statistical information and other services from other sources,
including affiliates of the Manager.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
(a) THE MANAGER. The Manager assumes responsibility for and shall pay for
maintaining the staff and personnel necessary to perform its obligations under
this Agreement, and shall at its own expense, provide the office space,
equipment and facilities which it is obligated to provide under Article I
hereof, except as specified otherwise in Section III(b) hereof.
(b) THE FUND. Except as expressly provided for above, the Fund assumes
responsibility for and shall pay or cause to be paid all other expenses of the
Fund including, without limitation: the charges and expenses of any registrar
and any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property; the charges and expenses of
auditors; the charges and expenses of any stock transfer or dividend agent or
agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including issuance and transfer taxes, and corporate fees payable by
the Fund to Federal, state or other governmental agencies; the cost of stock
certificates representing shares of the Fund; fees involved in registering and
maintaining registrations of the Fund and of its shares with the Securities and
Exchange Commission and various states and other jurisdictions; all expenses of
shareholders' and directors' meetings and of preparing, printing and mailing
proxy statements and semi-annual and annual reports to shareholders except as
set forth in the Distribution Agreement between the Fund and FPA Fund
Distributors, Inc.; fees and travel expenses of independent and unaffiliated
directors; the expense of
A-3
<PAGE>
furnishing, or causing to be furnished, all shareholders a statement of account
after every non-commissionable transaction affecting their account, including
the expense of mailing; charges and expenses of legal counsel in connection with
matters relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund's corporate and financial structure and
relations with its shareholders, issuance of Fund shares, and registrations and
qualifications of securities under Federal, state and other laws; association
dues; interest payable on Fund borrowings; and postage.
ARTICLE III
COMPENSATION OF THE MANAGER
(a) INVESTMENT MANAGEMENT FEE. For the services rendered, the facilities
furnished and expenses assumed by the Manager, the Fund shall pay to the Manager
compensation at the annual rate of 0.75% of the first $50 million of the value
of the net assets of the Fund, and 0.65% on the excess over $50 million of the
value of the net assets of the Fund, calculated as hereinafter set forth.
Compensation under this Agreement shall be calculated and accrued for each
calendar day by applying the annual rate to the net assets of the Fund as of the
close of the last business day preceding the day for which the fee is being
calculated, and dividing the sum so computed by the number of calendar days in
the fiscal year. The fees thus accrued will be payable monthly, provided that
such compensation shall be paid proportionately for any other period ending with
the termination of this Agreement.
(b) COST REIMBURSEMENT. In addition to the above-stated fee, the Fund
shall reimburse the Manager monthly for the costs incurred by the Manager in
providing financial services to the Fund including, among other normal financial
services for the Fund, maintaining the accounts, books and other documents which
constitute the record forming the basis for the Fund's financial statements,
preparation of such financial statements and other Fund documents and reports of
a financial nature required by Federal and state laws, calculating daily net
asset value of the Fund, and participating in the production of the Fund's
registration statements, prospectuses, proxy solicitation materials and reports
to stockholders (including compensation of the Treasurer or other principal
financial officer of the Fund, compensation of personnel working under such
person's direction and expenses of office space, facilities and equipment used
by such personnel in the performance of their financial services duties to the
Fund); provided, however, that such reimbursement shall not exceed for any
fiscal year of the Fund 0.10% of the average net asset value of the Fund. Such
maximum reimbursement shall be calculated in the same manner as the fee referred
to in Section III(a).
(c) EXPENSE LIMITATIONS. In the event the operating expenses of the Fund,
including amounts payable to the Manager pursuant to subsection (a) hereof (but
excluding interest, taxes, and brokerage fees and commissions payable by the
Fund in connection with the purchase or sale of portfolio securities), for any
fiscal year ending on a date on which this Agreement is in effect exceed one and
one-half percent (1/2%) of the first Thirty Million Dollars ($30,000,000) of the
average net asset value of the Fund, plus one percent (1%) of the average net
assets of the Fund in excess of Thirty Million Dollars ($30,000,000) calculated
on the basis of the average of all of the valuations of the net assets of the
Fund in effect for
A-4
<PAGE>
the sale of Fund shares as of the close of business on the last business day of
each month during the fiscal year, the Manager shall thereupon pay to the Fund
the amount by which such expenses exceed such limits.
ARTICLE IV
LIMITATION OF LIABILITY OF THE MANAGER
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the management of the Fund, except for willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Article IV, the term
"Manager" shall include any affiliates of the Manager performing services for
the Fund contemplated hereby and directors, officers and employees of the
Manager and such affiliates.
ARTICLE V
ACTIVITIES OF THE MANAGER
The services of the Manager to the Fund are not to be deemed to be
exclusive, the Manager being free to render services to others so long as its
services hereunder are not impaired thereby. Nothing in this Agreement shall
limit or restrict the right of any director, officer or employee of the Manager
to engage in any other business or to devote his time and attention in part to
the management or other aspects of any other business, whether of a similar or
dissimilar nature.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall continue in effect to September 30, 2002. It may be
continued in effect thereafter by mutual consent, provided that such continuance
shall be specifically approved at least annually by (a) the Board of Directors
of the Fund or by a majority of the outstanding shares of the Fund and (b) by a
majority of the directors who are not parties to this Agreement or interested
persons (as defined in the Investment Company Act) of any such party. This
Agreement will terminate upon assignment and may be terminated without penalty
on sixty days' written notice at the option of either party hereto or by the
vote of the shareholders of the Fund. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed postpaid, to the other
party at the principal office of such party.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of Directors of the Fund, or by the vote
of a majority of outstanding voting securities of the Fund, and (b) a majority
of those 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
on such approval.
A-5
<PAGE>
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
Investment Company Act shall be resolved by reference to such term or provision
of the Act and to interpretations thereof, if any, by the United States Courts
or in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued pursuant
to said Act. In addition, where the effect of a requirement of the Investment
Company Act reflected in any provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with laws of the State of
California and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of California, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
FPA CAPITAL FUND, INC.
By:________________________________
Robert L. Rodriguez,
President
FIRST PACIFIC ADVISORS, INC.
By:________________________________
J. Richard Atwood,
Principal
A-6
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
--------------------------------------------------------------------------------
FPA CAPITAL FUND, INC.
--------------------------------------------------------------------------------
Mark box at right if an address change or comment has been / /
noted on the reverse side of this card.
CONTROL NUMBER:
--------------------------
Please be sure to sign and date this Proxy. Date
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholder sign here Co-owner sign here (if any)
If no direction is given, this Proxy will be voted for proposals 1, 2 and 3.
1. Election of Directors. Nominees:
With- For All
For hold Except
W.H. ALTMAN, JR. R.L. RODRIGUEZ / / / / / /
D.W. MOORE L.J. SHEEHAN
A.E. OSBORNE, JR.
Instruction: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the name(s) of the
nominees(s). Your shares will be voted for the remaining nominee(s).
2. Approval of an investment advisory agreement between the Fund and First
Pacific Advisors, Inc., the Fund's investment adviser.
For Against Abstain
/ / / / / /
3. Selection of Ernst & Young LLP as independent auditors.
/ / / / / /
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement, dated September 2000.
RECORD DATE SHARES:
<PAGE>
FPA CAPITAL FUND, INC.
STATE STREET BANK & TRUST CO.
P.O. BOX 8115, BOSTON, MA 02266-8115
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLARD H. ALTMAN, JR., DEWAYNE W. MOORE and
LAWRENCE J. SHEEHAN, and each of them proxies with power of substitution, and
hereby authorizes each of them to represent and to vote, as provided on the
reverse side, all shares of stock of the above Fund which the undersigned is
entitled to vote at the annual meeting to be held on Monday, October 23, 2000,
and at any adjournments thereof.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
