SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
Schedule 14A. Information Required
In Proxy Statement
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Part 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
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
INVESTORS RESEARCH FUND, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), 14a-6(i)(2) or Item 11(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] 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: Common Stock
(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): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(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:
INVESTORS RESEARCH FUND, INC.
3757 State Street, Suite 204
Santa Barbara, California 93105
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held August 12, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Investors
Research Fund, Inc. will be held at the Pacifica Suites Hotel, 5490 Hollister
Avenue, Santa Barbara, California on Tuesday, August 12, 1997, at 9:00 A.M.
(Pacific Daylight Time) for the following purposes:
1. To approve the proposed Amendment to the Fund's Rule 12b-1 Plan to
increase the upper limit of the Plan's expenditures from 25 basis points to 50
basis points.
2. To transact such other business as may properly come before the Special
Meeting, or any adjournment or adjournments thereof.
Shareholders of record as of the close of business on June 20, 1997, are
entitled to notice of, and to vote at, the Special Meeting or any adjournments
thereof.
By Order of the Board of Directors
July 17, 1997
Hugh J. Haferkamp
President
IMPORTANT: THE MANAGEMENT HOPES THAT YOU CAN ATTEND THE SPECIAL MEETING.
HOWEVER, IF YOU ARE UNABLE TO BE PRESENT IN PERSON, YOU ARE EARNESTLY REQUESTED
TO SIGN AND RETURN THE ENCLOSED PROXY IN ORDER THAT THE NECESSARY QUORUM MAY BE
REPRESENTED AT THE MEETING. IF THE ENCLOSED PROXY IS EXECUTED AND RETURNED, IT
MAY NEVERTHELESS BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY THE SUBSEQUENT
EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF
REVOCATION TO THE FUND AT ANY TIME BEFORE THE PROXY IS VOTED, OR BY VOTING IN
PERSON AT THE SPECIAL MEETING. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO
POSTAGE AND IS INTENDED FOR YOUR CONVENIENCE.
PLEASE PROMPTLY RETURN THE ENCLOSED PROXY. YOU WILL ASSIST YOUR FUND IN AVOIDING
THE EXTRA EXPENSE OF FOLLOW-UP LETTERS.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
OF
INVESTORS RESEARCH FUND, INC.
3757 State Street, Suite 204
Santa Barbara, California 93105
To Be Held August 12, 1997
This statement is furnished in connection with a solicitation of proxies
made by and on behalf of Investors Research Fund, Inc. (hereinafter called the
"Fund"), 3757 State Street, Suite 204, Santa Barbara, California 93105, and its
Board of Directors, to be used at the Special Meeting of Shareholders of the
Fund, to be held on Tuesday, August 12, 1997 at 9:00 A.M. at THE PACIFICA SUITES
HOTEL, 5490 HOLLISTER AVENUE, SANTA BARBARA, CALIFORNIA, for the purposes set
forth in the accompanying Notice of Special Meeting of Shareholders. Such
solicitation is made primarily by the mailing of this Statement with its
enclosures. The approximate date of first mailing is July 15, 1997.
Supplementary solicitation may be made by mail, telephone, telegraph, and
by personal contact by employees of the Fund and others. The expenses in
connection with preparing and mailing this Statement and its enclosures and of
such solicitations will be paid by the Fund. However, no person will be paid
specially by the Fund for the specific purpose of soliciting proxies. In some
instances, said supplementary solicitation may be made by securities dealers by
whom shares of the Fund have been sold and it would then be made at their own
expense.
If the enclosed form of proxy is executed and returned, it may nevertheless
be revoked prior to the voting thereof. A proxy may be revoked by written notice
to the Fund prior to the Special Meeting of Shareholders, or by execution of a
subsequent proxy which is presented at the Special Meeting of Shareholders, or
by personal vote at the Special Meeting of Shareholders. All proxies solicited
by the Board of Directors which are properly executed and received in time will
be voted at the meeting. Such proxies will be voted in accordance with the
instruction thereon, if any, and if no specification is made, the proxy will be
voted in favor of proposal Number 1 thereon and, as to any other matter, in
accordance with the judgment of the proxy holder. Discretionary authority is
conferred by the proxy as to all matters not specifically listed which may
properly come before the meeting. The management of the Fund is not aware that
any other matters are to be presented for action.
As of June 20, 1997 there were issued and outstanding 7,337,029 shares of
capital stock of the Fund. Shareholders are entitled to one (1) vote for each
share of record held at the close of business on June 20, 1997. The presence in
person or by proxy of persons entitled to vote a majority of the outstanding
voting shares at any meeting shall constitute a quorum for the transaction of
business. The favorable vote by a majority of the Fund shares as determined
under Section 2(a)(42) of the Investment Company Act of 1940 (the "1940 Act") is
required for approval of the proposed amendment to the Fund's Rule 12b-1 Plan.
Abstentions and broker non-votes will be counted as present or represented
at the Special Meeting for purposes of determining whether a quorum exists.
However, abstentions and broker non-votes with respect to any matter brought to
a vote at the Special Meeting will be treated as shares not voted for purposes
of determining whether the requisite vote has been obtained. In view of the
requirement that there be a certain number of affirmative votes, an abstention
or a broker no-vote has a negative impact as to a matter brought to a vote. See
section below entitled "Vote Required."
None of the officers of the Fund has received any compensation directly
from the Fund for serving in such capacity since the date of inception of the
Fund, with the exception that the president of the Fund has been compensated at
the rate of $1,200 per month since January 1, 1994. The Fund has no pension or
retirement benefits for any officers or employees. The attendance fee payable to
the Board of Directors and members of the Executive Committee is $250 for each
meeting actually attended. These payments have been made by the Fund. However,
no such attendance fees are payable to those directors who are associated with
the investment adviser. No expense reimbursement is made to the directors. The
total compensation paid by the Fund to all Directors during the fiscal year
1995-96 was $17,750.
The aggregate dollar amount of brokerage commissions paid during Fiscal
1995-96 was $424,531. Of that amount, $46,392 was paid to Diversified
Securities, Inc., the Fund's principal underwriter. That latter figure
represents 11% of the aggregate dollar amount of the commissions paid by the
Fund. Diversified Securities, Inc. handled 11.28% of the brokerage transactions
effected during the year.
THE MATTER FOR SHAREHOLDER ACTION
The matter to be acted upon pursuant to the proxy is the approval of the
proposed amendment to the Fund's Rule 12b-1 to increase the annual upper limit
of the Plan's expenditures from 25 basis points to 50 basis points. It is the
present intention that the enclosed proxy will, in the absence of special
designation by the shareholder(s) signing it, be used for the purpose of voting
approval of the proposed plan amendment.
APPROVAL OF THE AMENDMENT TO THE DISTRIBUTION PLAN
The Board of Directors (the "Board") is presenting to the shareholders of
the Fund for approval a proposed amendment to the existing plan which would
increase the annual upper limit of Fund assets for distribution purposes from
.25 of 1% to .50 of 1%. At the present time, Paragraph 1(b) of the Fund's
distribution plan reads as follows:
"Payments made out of or charged against the
assets of the Fund are subject, in total, to a
maximum annual limit of .25% of the Fund's average
daily net assets."
If the proposal is approved, the paragraph would read as follows:
"Payments made out of or charged against the
assets of the Fund are subject, in total, to a
maximum annual limit of .50% of the Fund's average
daily net assets."
Under federal law and under the wording of the plan, that proposed
amendment must be approved by the Fund's shareholders before it can become
effective because it will increase the amount of Fund assets which can be
devoted to distribution.
It should be noted that the Board does not intend that the full amount of
funds which would become available if the proposed amendment is approved will
necessarily be expended under the plan. As discussed in more detail below, the
Board wishes primarily to have the funds available for more extensive marketing
efforts as such efforts prove desirable. There is no specific amount of funds
budgeted at the present time to be expended for distribution purposes.
The existing Rule 12b-1 Plan was approved by the shareholders at a special
shareholders meeting held March 30, 1993. The basic objective of the plan as
first adopted was to have funds available to compensate broker-dealers who had
engaged in marketing and distribution of the Fund shares and who would agree to
provide certain services of value to the Fund's shareholders. In other words,
the principal objective of the plan initially was to secure better services for
the shareholders in addition to encouraging broker-dealers to sell Fund shares.
During the 1995-96 fiscal year, the Fund's principal underwriter,
Diversified Securities, Inc., received $30,241.41 in payments under the Fund's
12b-1 plan. Other broker-dealers who have participated in the sale of Fund
shares received, collectively, a total of $20,114.36 in payments under the plan.
Payments are made to qualifying broker-dealers who have signed a "12b-1
Plan Dealer and Broker Servicing Agreement" with the Fund. The agreement
currently provides that such payments will be made quarterly at the rate of
.0625% of the average daily net asset value of that broker-dealer's "qualified
holdings" held during the quarter for which payment is to be made. That
percentage ultimately equals the maximum plan expenditure of .25% for a
particular broker-dealer on an annual basis. Currently, a broker-dealer must be
accountable for a minimum of $100,000 in net asset value of Investors Research
Fund shares to be credited with the minimum "qualified holdings" required to be
eligible for 12b-1 plan payments.
A reference to the proxy statement dated December 1, 1992, which was issued
to explain the reasons for the Board's recommendation for approval of the
original distribution plan, indicates that there were several reasons for
recommending the approval of the plan at that time. The stated reasons included:
(1) the prospect of enhanced shareholders services, (2) the ability to remain
competitive with other funds of a similar nature, (3) enlargement of the Fund's
asset base, which would have beneficial effects on performance, (4) the
potential for efficiencies of scale, and (5) the limitation on the amount
expendable for distribution purposes.
As discussed in greater detail below, the contemplated impacts of the
distribution plan as of the time that it was adopted have not yet been realized.
The redemptions of shares have far exceeded the sales of new shares. In order to
more effectively stimulate marketing of the Fund, the Board amended the original
plan on May 13, 1997 by unanimous vote. The amendment adopted May 13, 1997 reads
as follows:
"The amount of any difference between the funds
paid out to broker-dealers under the first
sentence of this sub-paragraph and the total sum
of .25% of average daily net asset value may be
expended under supervision of the Board of
Directors for purposes of financing distribution
of the Fund's shares. To the extent that any Rule
12b-1 funds are expended for distribution purposes
pursuant to the immediately preceding sentence,
such funds are re-designated to be asset based
sales charges and are not service charges under
the Board resolution adopted on July 21, 1993."
The effect of that amendment was to authorize the expenditure of a portion
of the 25 basis points for marketing of the Fund's shares under direct
supervision of the Board.
The Board resolution adopted on July 21, 1993, which was referenced in the
amendment to the plan adopted by the Board on May 13, 1997, set specific
requirements for payments to broker- dealers who were providing services to the
shareholders. Basically, in accordance with the resolution, the only payments
which had been made under the distribution plan up until May 13, 1997 were
payments to broker-dealers who had made sales of more than $100,000 to Fund
shareholders and who had signed agreements to provide services to Fund
shareholders.
If the proposed amendment is adopted, the net effect will be to make
available for expenditure under the supervision of the Fund directors an
additional sum up to 25 basis points to be devoted to marketing of Fund shares.
The precise sum authorized by the new amendment would be supplemental to the sum
of money made available from the original distribution plan pursuant to the
amendment effected by the Board on May 13, 1997. That May 13, 1997 amendment did
not require approval by the shareholders because it did not increase the
percentage of assets authorized under the original distribution plan approved by
the shareholders on March 30, 1993. This presently proposed amendment does
require approval by the shareholders because it would increase the amount which
could be expended for distribution purposes under the distribution plan.
The Board, including the independent directors, has reviewed the
expenditures of the Fund on a quarterly basis since the adoption of the plan and
has annually approved continuation of the plan. These approvals have been based
primarily upon the evidence that shareholders of the Fund were receiving
enhanced services. However, recent reviews have indicated that a number of the
other projected benefits of adopting such plan have not been realized. For
example, redemptions of Fund shares have not decreased significantly. New sales
of Fund shares have not been realized in a significant number. The Fund's
ability to remain competitive does not appear to have been significantly
enhanced by expenditures restricted to servicing brokers. Therefore, the Board
has decided to recommend more extensive action by the Fund.
Under the proposed amendment, the Fund itself will undertake the strategic
and tactical allocation of Fund monies to be disbursed for distribution,
marketing and advertising purposes. The payments for broker-dealers' services
will continue as they were in terms of eligibility, although the amounts may
decrease in the near future because of redemptions decreasing the number of
broker-dealers eligible. However, it is anticipated that the number of
broker-dealers qualifying for service payments will increase over time as new
sales of Fund shares are effected.
The Fund does not have a marketing arm or marketing division. The persons
or companies to provide compensated services will be engaged, instructed and
evaluated by committees of the Board and by the Board as a whole. The services
will primarily involve public relations, advertising and marketing efforts. By
taking superintendent over these functions, the Fund and its Board will directly
supervise and monitor the services to be purchased through the Fund's
distribution plan.
The Board has investigated the possible sources of distribution funds
available from other affiliated companies. The Fund's adviser, Lakeview
Securities Corporation, has heretofore undertaken limited distribution efforts,
including recently acting as a sponsor at the June, 1997 annual meeting of a
large group of financial advisers. However, Lakeview has indicated to the Board
that it is not prepared to make further significant expenditures for Fund
distribution. Our sub-adviser, Merrimac Advisors Company has informed the Fund
that it, also, is not prepared to contribute funds for distribution. The Fund's
principal underwriter, Diversified Securities, Inc., has agreed to contribute
from $10,000 to $15,000 toward advertising and marketing costs. Under those
circumstances, the Board has determined that those sources will not be
sufficient to conduct the substantial marketing efforts required to achieve the
original purposes envisioned for the distribution plan at its initial adoption.
The directors have concluded that there is a reasonable likelihood that
increased marketing and public relations efforts will result in the sale of a
substantial number of new shares. If that result occurs, there will be benefits
to the Fund and its shareholders in the form of more funds to invest and in the
form of efficiencies of scale through the sharing of costs by a larger number of
shareholders. Additionally, the control of marketing services by the Board
should result in more effective expenditures of the Fund's marketing dollars.
The Board recommends that Fund resources be employed on a controlled basis
in an effort to achieve the desired benefits for Fund shareholders and
recommends voting for approval of the proposed amendment.
VOTE REQUIRED
The presence in person or by proxy of the holders of a majority of the
outstanding shares is required to constitute a quorum at the Special Meeting.
Approval of a new Investment Advisory Agreement, as set forth in PROPOSAL 1,
will require the affirmative vote of a majority of Investors Research Fund, Inc.
shares, as determined under Section 2(a)(42) of the Investment Company Act of
1940. That requires the affirmative vote of the holders of the lesser of either
(A) 67% or more of the outstanding shares as of June 20, 1997 present at the
meeting if the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (B) more than 50% of the outstanding
shares.
If the accompanying form of proxy is executed properly and returned, shares
represented by it will be voted at the Special Meeting in accordance with the
instructions on the proxy. However, if no instructions are specified, shares
will be voted in favor of the proposed Amendment to the Rule 12b-1 Plan.
SHAREHOLDER PROPOSALS FOR NEXT MEETING
The next scheduled meeting of shareholders of the Fund is to be held on
March 25, 1998. Any proposal by a shareholder to be presented at that meeting
has to have been received by the Fund no later than November 1, 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
PROPOSED AMENDMENT TO THE FUND'S RULE 12b-1 PLAN.
No other business is currently expected to come before the Meeting. As to
any matter which has not been brought to the attention of the proxies prior to
the date of this proxy statement, which is presented at the meeting, the proxies
will deal with such matter in accordance with their best judgment and the
discretionary authority granted by the proxy.
COPIES OF THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS TO ITS
SHAREHOLDERS ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO THE FUND'S OFFICE
LOCATED AT 3757 STATE STREET, SUITE 204, SANTA BARBARA, CALIFORNIA 93105 or CALL
1-800-473-8631.