SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. _____ [ ]
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 [X]
Amendment No. [ ]
File Nos. 33- ; 811-
AFBA FIVE STAR FUND, INC.
(Exact Name of Registrant as Specified in Charter)
2440 Pershing Road, Suite G-15, Kansas City, MO 64108
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (816) 471-5200
Larry D. Armel, AFBA Five Star Fund, Inc.
2440 Pershing Road, Suite G-15, Kansas City, MO 64108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
Please address inquiries and and a carbon copy of all
communications to: communications to:
John G. Dyer, Esq. Mark H. Plafker, Esq.
Jones & Babson, Inc. Stradley, Ronon, Stevens & Young, LLP
2440 Pershing Road, Suite G-15 2600 One Commerce Square
Kansas City, MO 64108 Philadelphia, PA 19103-7098
Telephone: (816) 471-5200 Telephone: (215) 564-8000
Registrant hereby elects to register an indefinite number of its shares
pursuant to Rule 24f-2 under the Investment Company Act of 1940. Registrant
hereby amends this Registration Statement on such dates as may be necessary to
delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933
or until this Registration Statement shall become effective on such date as the
Commission, acting pursuant to such Section 8(a), may determine.
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AFBA FIVE STAR FUND, INC.
CROSS REFERENCE SHEET
Form N-1A Item Number Location in Prospectus
Item 1. Cover Page...................................... Cover Page
Item 2. Synopsis........................................ Not Applicable
Item 3. Condensed Financial Information................. Per Share Capital and
Income Changes
Item 4. General Description of Registrant............... Investment Objective
and Portfolio
Management Policy
Item 5. Management of the Fund.......................... Officers and
Directors; Management
and Investment Counsel
Item 6. Capital Stock and Other Securities.............. How to Purchase
Shares; How to Redeem
Shares; How Share
Price is Determined;
General Information
and History;
Dividends,
Distributions and
Their Taxation
Item 7. Purchase of Securities.......................... Cover Page; How to
Purchase Shares;
Shareholder Services
Item 8. Redemption or Repurchase........................ How to Redeem Shares
Item 9. Pending Legal Proceedings....................... Not Applicable
Location in Statement
of Additional
Form N-1A Item Number Information
Item 10. Cover Page.................................... Cover Page
Item 11. Table of Contents............................. Cover Page
Item 12. General Information and History............... Investment Objectives
and Policies;
Management and
Investment Counsel
Item 13. Investment Objectives and Policies............ Investment Objectives
and Policies;
Investment
Restrictions
Item 14. Management of the Fund........................ Management and
Investment Counsel
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Item 15. Control Persons and Principal................. Management and
Holders of Securities Investment Counsel;
Officers and Directors
Item 16. Investment Advisory and Other................. Management and
Services Investment Counsel
Item 17. Brokerage Allocation.......................... Portfolio Transactions
Item 18. Capital Stock and Other Securities............ General Information
and History
(Prospectus);
Financial Statements
Item 19. Purchase, Redemption and Pricing.............. How Share Purchases
of Securities Being Offered are Handled;
Redemption of Shares;
Financial Statements
Item 20. Tax Status.................................... Dividends,
of Money Market Fund Distributions and
Their Taxation
(Prospectus)
Item 21. Underwriters.................................. How the Fund's Shares
are Distributed
Item 22. Calculation of Yield Quotations............... Not Applicable
Item 23. Financial Statements.......................... (To be supplied by
further Amendment)
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PROSPECTUS
dated [____________], 1997
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AFBA Five Star Fund, Inc.
2440 Pershing Road, Suite G-15
Kansas City, MO 64108
Five Star Balanced Fund Five Star USA Global Fund
Five Star Equity Fund Five Star High Yield Fund
Manager:
AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia 22314
Investment Counsel: Distributor and Administrator:
Kornitzer Capital Management, Inc. Jones & Babson, Inc.
7715 Shawnee Mission Parkway 2440 Pershing Road, Suite G-15
Shawnee Mission, Kansas 66202 Kansas City, Missouri 64108
Please contact the Funds toll free at 800-[__________]
INVESTMENT OBJECTIVES
Five Star Balanced Fund
The Five Star Balanced Fund (the "Balanced Fund") seeks both long-term capital
growth and high current income. Long-term capital growth is intended to be
achieved primarily by the Balanced Fund's investment in common stocks and
secondarily by the Balanced Fund's investment in convertible preferred stocks.
High current income is intended to be achieved by the Balanced Fund's investment
in corporate bonds, government bonds, mortgage-backed securities, convertible
bonds, preferred stocks and convertible preferred stocks.
Five Star Equity Fund
The Five Star Equity Fund (the "Equity Fund") seeks long-term capital
appreciation. Long-term capital appreciation is intended to be achieved
primarily by the Equity Fund's investment in common stocks. Realization of
dividend income is a secondary consideration to the extent that it supplements
the return on the Equity Fund's investments and investment in the
dividend-producing securities is consistent with achieving the Equity Fund's
objective of long-term capital appreciation.
Five Star USA Global Fund
The Five Star USA Global Fund (the "USA Global Fund") seeks capital growth.
Capital growth is intended to be achieved primarily by the USA Global Fund's
investment in common stocks of companies based in the United States that receive
greater than 40% of their revenues or pre-tax income from international
operations, measured as of the preceding four completed quarters of business or
the companies' most recently completed fiscal year. At least 65% of the value of
the fund's total assets must be invested in at least three different countries.
This diversification is achieved through the international operations of United
States - based companies as described above. The USA Global Fund will invest in
common stocks considered by the manager to have above
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average potential for appreciation; income is a secondary consideration. The USA
Global Fund will invest primarily in common stocks listed on the New York Stock
Exchange.
Five Star High Yield Fund
The Five Star High Yield Fund (the "High Yield Fund") primarily seeks a high
level of current income and secondarily, capital growth. The High Yield Fund
invests primarily in a diversified portfolio of high-yielding fixed income
securities. The High Yield Fund will invest in debt securities and preferred
stock. The High Yield Fund may invest in any fixed income securities, whether
nonconvertible or convertible, without restriction.
The High Yield Fund will invest in a significant portion, up to 90% of its
assets, in lower rated bonds, commonly known as "junk bonds," that entail
greater risks including default risks, than those found in higher rated
securities. The High Yield Fund's fixed income investments may consist totally
of securities rated below investment grade. Investors should carefully consider
these risks before investing. See "Investment Objective and Portfolio Management
Policy," page ; "Risk Factors," page ; "Investment Restrictions," page and
"Fixed Income Securities Described and Ratings," page . Secondarily, the High
Yield Fund may invest up to 10% of the value of its total assets in common
stocks and other equity securities.
PURCHASE INFORMATION
Minimum Investment
Initial Purchase $1,000
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases $250
Subsequent Purchase:
By Mail $100
By Telephone or Wire $1,000
All Automatic Purchases $100
Shares are purchased and redeemed at net asset value. There are no sales,
redemption or Rule 12b-1 distribution charges. If you need further information,
please call the Funds at the telephone numbers indicated.
ADDITIONAL INFORMATION
This prospectus should be read and retained for future reference. It contains
the information that you should know before you invest. A "Statement of
Additional Information" of the same date as this prospectus has been filed with
the U.S. Securities and Exchange Commission and is incorporated by reference.
Investors desiring additional information about the Funds may obtain a copy
without charge by writing or calling the Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Fund Expenses
Investment Objectives and Portfolio Management Policies
Repurchase Agreements
Risk Factors
Investment Restrictions
Performance Measures
How to Purchase Shares
Initial Investments
Investments Subsequent to Initial Investment
Telephone Investment Service
Automatic Monthly Investment Plan
How to Redeem Shares
Systematic Redemption Plan
How to Exchange Shares Between Five Star Funds
How Share Price is Determined
Officers and Directors
Management and Investment Counsel
General Information and History
Dividends, Distributions and Their Taxation
Shareholder Services
Shareholder Inquiries
Fixed Income Securities Described and Ratings
For more information on
HIGHLIGHTS this subject see page...
The Funds The Five Star Balanced Fund, the Five Star Equity Fund, the Five
Star High Yield Fund and the Five Star USA Global Fund (the
"Funds," the "Five Star Funds" or individually, a "Fund") are
separate series of AFBA Five Star Fund, Inc. (the "Company"),
which is an open-end diversified management investment company
commonly known as a mutual fund. The Funds are sponsored and
managed by AFBA Investment Management Company (the "Manager") and
Kornitzer Capital Management, Inc. (the "Adviser") serves as
investment counsel. Each Fund offers one class of shares of
non-assessable common stock with equal voting rights. Each share
represents an interest in a pool of investment securities
invested in accordance with the particular Fund's investment
objective.
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For more information on
HIGHLIGHTS this subject see page...
The Five Star Balanced Fund seeks long-term growth and high
current income. The Fund will invest in a diversified array of
common stocks, preferred stocks, convertible bonds, convertible
preferred stocks, corporate bonds and government bonds.
The Five Star High Yield Fund primarily seeks a high level of
current income and secondarily, capital growth. The Fund invests
primarily in debt securities and may invest in preferred stock.
The Five Star USA Global Fund seeks capital growth by investing
in common stocks of companies based in the United States that
receive greater than 40% of their revenues or pre-tax income from
international operations.
The Five Star Equity Fund seeks long-term capital appreciation by
investment in a broad array of common stocks, in terms of
companies and industries.
How to Invest Fund shares can only be purchased directly from the Funds through
their distributor, Jones & Babson, Inc. ("Jones & Babson" or the
"Distributor"). Because no sales charges are added to the price
of the shares, the full amount of any purchase is invested for
the benefit of the shareholder. The minimum initial purchase is
$1,000 ($250 for IRA and Uniform Transfers/Gifts to Minors
purchases). Subsequent purchases must be at least $100, except
telephone or wire purchases which must be in the amount of $1,000
or more.
Telephone Investment - You may make investments of $1,000 or more
by telephone if you have authorized such investment in your
application, or, subsequently, on a special authorization form
provided upon request.
Automatic Monthly Investment - You may elect to make monthly
investments in a constant dollar amount from your checking
account ($100 minimum). The Fund will draft your checking account
on the same day each month in the amount you authorize in your
application, or, subsequently, on a special authorization form
provided upon request.
Redemption Shares of the Funds are redeemable at net asset value next
effective after receipt by the Fund of a shareholder's request in
good order. No redemption charge is made.
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For more information on
HIGHLIGHTS this subject see page...
Exchange Shareholders may transfer their investments without charge to any
Privilege with other Five Star Fund sponsored by the Manager. This exchange
Other Funds involves the liquidation of shares from one Fund and a purchase
of shares in the Fund to which the investment is being
transferred. This is a transaction which may or may not be
taxable depending on the shareholder's tax status.
Automatic Exchange - You may exchange shares from your account
($100 minimum) in any of the Five Star Funds to an identically
registered account in any other Fund in the Five Star Group
according to your instructions. Monthly exchanges will be
continued until all shares have been exchanged or until you
terminate the Automatic Exchange authorization. A special
authorization form will be provided upon request.
Management of The Funds' investments and business operations are managed by the
the Funds Manager which employs as the Adviser an investment counsel to
assist in the investment advisory function for each of the Five
Star Funds.
The Management The Manager agrees to provide overall investment supervision of
Fee Covers the the Funds' portfolios and of the activities of the Adviser. The
Investment Manager will also provide certain business management services to
Advisory Fee the Funds. Jones & Babson will supply to the Funds all normal
and All Other services necessary for their functions as series of an open-end
Normal diversified investment company not provided by the Manager,
Operating exclusive of taxes and other charges of governments and their
Costs agencies (including the cost of filing notices and fees in
jurisdictions indicating that the Funds' shares are for sale),
certain fees, dues, interest, brokerage commissions and
extraordinary costs, if any. For its services, the Manager
charges each Fund a fee based on an annual rate of one percent
(1.0%) of average daily net assets of the particular Fund from
which the Manager pays the Adviser an investment counsel fee of
one-third of one percent (0.33%) of average daily net assets and
Jones & Babson an administrative services fee of one-third of one
percent (0.33%) of average daily net assets.
Although these fees are higher than the fees of some other
advisers whose charges cover only investment advisory services
with all remaining operational expenses absorbed directly by the
Fund, the combined charges compare favorably with other fund fee
structures when all expenses to shareholders are taken into
account.
Dividend Five Star Balanced Fund and Five Star High Yield Fund will pay
Policies substantially all of their net investment income quarterly,
usually in March, June, September and December. It is
contemplated that distributions from capital gains, if any, will
be declared annually on or before December 31 for Five Star
Balanced Fund. Distributions from capital gains, if any, will be
declared semi-annually, usually in June and December for Five
Star High Yield Fund.
Five Star Equity Fund and Five Star USA Global Fund will pay
dividends from net investment income and capital gains
semi-annually, usually in June and December.
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Taxes The Funds will distribute substantially all of their net income
each year in order to be exempt from federal income tax. Dividend
and capital gains distributions will be taxable to each
shareholder whether taken in cash or reinvested in additional
shares in accordance with the shareholder's tax status.
Risk Factors For a discussion of risk factors applicable to repurchase
agreements....................................
For a discussion of risk factors applicable to covered call
options.....................................
For a discussion of risk factors applicable to
ADRs.....................................................
For a discussion of risk factors applicable to common
stocks............................................
For a discussion of risk factors applicable to global
operations........................................
For a discussion of risk factors applicable to high yield high
risk debt securities.....................
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FUND EXPENSES
<TABLE>
<CAPTION>
Five Star Five Star Five Star Five Star
Balanced Fund Equity Fund USA Global Fund High Yield Fund
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on
purchases................................ None None None None
Maximum sales load imposed on
reinvested dividends..................... None None None None
Deferred sales load....................... None None None None
Redemption fee............................ None None None None
Exchange fee.............................. None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees........................... 1.00% 1.00% 1.00% 1.00%
12b-1 fees................................ None None None None
Other expenses (after voluntary waiver)* 0.08% 0.08% 0.08% 0.08%
--------------------------------------- ----- ----- ----- -----
Total Fund operating expenses............. 1.08% 1.08% 1.08% 1.08%
</TABLE>
* Jones & Babson, has voluntarily agreed to assume certain expenses of the
Funds so that the total annual operating expenses of a Fund will not exceed
1.08% of its average daily net assets.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) a
5% annual return and (2) redemption at the end of each time period:
1 Year 3 Year
$11 $34
The above information is provided in order to assist you in understanding the
various costs and expenses that a shareholder of each Fund will bear directly or
indirectly. The amount of "Other Expenses (after voluntary waiver)" in the
Expense Table and the numbers in the Example are based on estimated amounts for
the current fiscal year. Actual expenses may be greater or less than those
shown. The assumed 5% annual return is hypothetical and should not be considered
a representation of past or future annual return. The actual return may be
greater or less than the assumed amount.
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INVESTMENT OBJECTIVES AND
PORTFOLIO MANAGEMENT POLICIES
Each Fund's objectives and policies as described in this section will not be
changed without approval of a majority of the Fund's outstanding shares.
FIVE STAR BALANCED FUND
The Five Star Balanced Fund seeks both long-term capital growth and high current
income. Long- term capital growth is intended to be achieved primarily by the
Fund's investment in common stocks and secondarily by the Fund's investment in
convertible bonds and convertible preferred stocks. High current income is
intended to be achieved by the Fund's investment in corporate bonds, government
bonds, mortgage-backed securities, convertible bonds, preferred stocks and
convertible preferred stocks.
The Five Star Balanced Fund will normally invest in a broad array of securities,
diversified not only in terms of companies and industries, but also in terms of
types of securities. The types of securities include common stocks, preferred
stocks, convertible bonds, convertible preferred stocks, corporate bonds and
government bonds. It is expected that the majority of common stocks purchased in
the Fund will be large capitalization companies with most if not all listed on
the New York Stock Exchange. Large capitalization stocks are considered to be
those with capitalization in excess of $1 billion.
It is not the Manager's intention to make wide use of NASDAQ traded, smaller
capitalization common stocks. Smaller capitalization stocks are considered to be
those with capitalization of less than $1 billion. The Fund may invest up to 75%
of its assets in corporate bonds, convertible bonds, preferred stocks and
convertible preferred stocks. The Manager expects that from time-to-time these
securities may be rated below investment grade (BBB) by the major rating
agencies. The Manager believes this policy is justified given the Adviser's view
that these securities from time-to-time offer superior value and given the
Adviser's experience and substantial in-house credit research capabilities with
higher yielding securities.
Securities rated Baa or higher by Moody's or BBB by Standard & Poor's or higher
are classified as investment grade securities. Although securities rated Baa by
Moody's and BBB by Standard & Poor's have speculative characteristics, they are
considered to be investment grade. Such securities carry a lower degree of risk
than lower rated securities. (See "Risk Factors Applicable to High Yielding High
Risk Debt Securities" on page 6.)
Securities rated below Baa by Moody's or BBB by Standard & Poor's are commonly
known as junk bonds and are considered to be high risk. Yields on such bonds
will fluctuate over time, and achievement of the Fund's investment objective may
be more dependent on the Fund's own credit analysis than is the case for higher
rated bonds. (See "Risk Factors Applicable to High Yielding High Risk Debt
Securities.")
The Fund may also invest in high-yielding, high-risk corporate debt securities
(so-called "junk bonds"). Up to 20% of the Fund's assets may be invested in debt
securities which are rated less than B or unrated.
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The Fund will not invest in securities that, at the time of initial investment,
are rated less than B by Moody's or Standard & Poor's. Securities that are
subsequently downgraded in quality below B may continue to be held by the Fund,
and will be sold only if the Fund's Adviser believes it would be advantageous to
do so. In addition, the credit quality of unrated securities purchased by the
Fund must be, in the opinion of the Fund's Adviser, at least equivalent to a B
rating by Moody's or Standard & Poor's.
Securities rated less than Baa by Moody's or BBB by Standard & Poor's are
classified as non- investment grade securities. Such securities carry a high
degree of risk and are considered speculative by the major credit rating
agencies. (See "Risk Factors Applicable to High Yielding Debt Securities.")
The proportion of the Fund invested in each type of security is expected to
change over time in accordance with the Manager's and Adviser's interpretations
of economic conditions and underlying security values. However, it is expected
that a minimum of 25% of the Fund's total assets will always be invested in
fixed income senior securities and that a minimum of 25% of its total assets
will always be invested in equity securities. When, in the Manager's and
Adviser's judgment, market conditions warrant substantial temporary investments
in high-quality money market securities, the Fund may do so.
The Fund is authorized to write (i.e. sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to certain of such options. A covered call option is
an option where the Fund in return for a premium gives another party a right to
buy specified securities owned by the Fund at a specified future date and price
set at the time of the contract. (See "Risk Factors Applicable to Covered Call
Options.")
Covered call options serve as a partial hedge against the price of the
underlying security declining.
Investments in money market securities shall include government securities,
commercial paper, bank certificates of deposit and repurchase agreements
collateralized by government securities. Investment in commercial paper is
restricted to companies in the top two rating categories by Moody's and Standard
& Poor's.
The Fund may also invest in issues of the United States Treasury or a United
States government agency subject to repurchase agreements. The use of repurchase
agreements by the Fund involves certain risks. For a discussion of these risks,
see "Risk Factors Applicable to Repurchase Agreements."
There is no assurance that the Fund's objective of long-term growth of capital
and high current income can be achieved. Portfolio turnover will be no more than
is necessary to meet the Fund's objective. Under normal circumstances, it is
anticipated that portfolio turnover for common stocks in the Fund's portfolio
will not exceed 100% on an annual basis, and that portfolio turnover for other
securities will not exceed 100% on an annual basis.
FIVE STAR EQUITY FUND
The Five Star Equity Fund seeks long-term capital appreciation. Long-term
capital appreciation is intended to be achieved primarily by the Fund's
investment in common stocks. Realization of
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dividend income is a secondary consideration to the extent that it supplements
the return on the Fund's investments and investment in the dividend-producing
securities is consistent with achieving the Fund's objective of long-term
capital appreciation.
The Fund will normally invest in a broad array of common stocks, in terms of
companies and industries. It is expected that the majority of common stocks
purchased in the Fund will be large capitalization companies with most, if not
all, listed on the New York Stock Exchange. Large capitalization stocks are
considered to be those with capitalization in excess of $1 billion.
The Fund may purchase foreign securities through dollar-denominated American
Depository Receipts (ADRs), which do not involve the same direct currency and
liquidity risks as securities denominated in foreign currency and which are
issued by domestic banks and publicly traded in the United States. The Fund does
not intend to invest directly in foreign securities or foreign currencies.
The Fund will invest at least 65% of its assets in common stocks under normal
circumstances. When, in the Manager's judgment, market conditions warrant
substantial temporary defensive investments in high-quality money market
securities, the Fund may do so.
The Fund is authorized to write (i.e. sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to certain of such options. A covered call option is
an option where the Fund in return for a premium gives another party a right to
buy specified securities owned by the Fund at a specified future date and price
set at the time of the contract.
Covered call options serve as a partial hedge against the price of the
underlying security declining. (See "Risk Factors Applicable to Covered Call
Options.")
Investments in money market securities shall include government securities,
commercial paper, bank certificates of deposit and repurchase agreements
collateralized by government securities. Investment in commercial paper is
restricted to companies in the top two rating categories by Moody's and Standard
& Poor's. The Fund may also invest in issues of the United States Treasury or a
United States government agency subject to repurchase agreements. The use of
repurchase agreements by the Fund involves certain risks. For a discussion of
these risks, see "Risk Factors Applicable to Repurchase Agreements."
There is no assurance that the Fund's objective of long-term capital
appreciation can be achieved. Portfolio turnover will be no more than is
necessary to meet the Fund's objective. Under normal circumstances, it is
anticipated that portfolio turnover will not exceed 100% on an annual basis.
FIVE STAR USA GLOBAL FUND
The Five Star USA Global Fund seeks capital growth. Capital growth is intended
to be achieved primarily by the Fund's investment in common stocks of companies
based in the United States that receive greater than 40% of their revenues or
pre-tax income from international operations, measured as of the preceding four
completed quarters of business or the respective company's most recently
completed fiscal year. At least 65% of the value of the Fund's total assets must
be invested in at least three different countries. This diversification is
achieved through the international operations of United States - based companies
as described above. The Fund will invest in common stocks
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considered by the Manager to have above average potential for appreciation;
income is a secondary consideration. Under normal circumstances, the Fund will
invest in a majority of its assets in common stocks listed on the New York Stock
Exchange.
The Fund's Manager believes that the investment policies of the Fund reduce or
eliminate several risks associated with direct investment in foreign securities.
Trading costs are usually higher in foreign countries because commission rates
are generally fixed rather than negotiated as in the U.S. Liquidity risk is
lowered because trading volumes are generally higher on U.S. exchanges.
When, in the Manager's judgment, market conditions warrant substantial temporary
defensive investments in high-quality money market securities, the Fund may do
so.
The Fund is authorized to write (i.e. sell) covered call options on the
securities in which it may invest and to enter into closing purchased
transactions with respect to certain of such options. A covered call option is
an option where the Fund in return for a premium gives another party a right to
buy specified securities owned by the Fund at a specified future date and price
set at the time of the contract. (See "Risk Factors Applicable to Covered Call
Options.")
Covered call options serve as a partial hedge against the price of the
underlying security declining.
Investments in money market securities shall include government securities,
commercial paper, bank certificates of deposit and repurchase agreements
collateralized by government securities. Investment in commercial paper is
restricted to companies in the top two rating categories by Moody's and Standard
& Poor's.
The Fund may also invest in issues of the United States Treasury or a United
States government agency subject to repurchase agreements. The use of repurchase
agreements by the Fund involves certain risks. For a discussion of these risks,
see "Risk Factors Applicable to Repurchase Agreements."
There is no assurance that the Fund's objective of capital growth can be
achieved. Portfolio turnover will be no more than is necessary to meet the
Fund's objective. Under normal circumstances, it is anticipated that portfolio
turnover for the Fund will not exceed 100% on an annual basis.
FIVE STAR HIGH YIELD FUND
The Five Star High Yield Fund primarily seeks a high level of current income and
secondarily, capital growth. The Fund invests primarily in a diversified
portfolio of high-yielding fixed income securities. High current income is
intended to be achieved by the Fund's investment in any fixed income securities,
without restrictions, such as corporate bonds, government bonds, convertible
bonds, preferred stocks and convertible preferred stocks. The Fund may not
invest in foreign government bonds. Capital growth is intended to be achieved by
the appreciation of fixed income and equity investments held in the Fund. The
Fund is a no-load, open-end diversified management company commonly referred to
as a "mutual fund."
The Fund may invest up to 90% of its assets in any fixed income securities,
including without limitation, corporate bonds, convertible bonds, preferred
stocks and convertible preferred stocks. These securities may be rated below
investment grade (BB/Ba and B/B) by the major rating agencies
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or, if unrated, are in the opinion of the Manager of similar quality. The
Manager believes this policy is justified given the Manager's view that these
securities from time-to-time offer superior value and given the Adviser's
experience and substantial in-house credit research capabilities with higher
yielding securities.
Securities rated Baa or higher by Moody's or BBB by Standard & Poor's or higher
are classified as investment grade securities. Although securities rated Baa by
Moody's and BBB by Standard & Poor's have speculative characteristics, they are
considered to be "medium" investment grade. Such securities carry a lower degree
of risk than lower rated securities.
Securities rated Baa and below by Moody's or BBB and below by Standard & Poor's
are commonly known as "junk bonds" and are considered to be high risk. Yields on
such bonds will fluctuate over time, and achievement of the Fund's investment
objective may be more dependent on the Fund's own credit analysis than is the
case for higher rated bonds. (See "Risk Factors Applicable to High Yielding High
Risk Debt Securities.")
Up to 20% of the Fund's assets may be invested in debt securities which are
rated less than B at the time of purchase, or if unrated are in the opinion of
the Manager of similar quality. Securities rated B or higher at the time of
purchase, which are subsequently downgraded, will not be subject to this
limitation.
The lowest rating that may be held in the Fund is D, or that of defaulted
securities. (See "Risk Factors Applicable to High Yielding High Risk Debt
Securities.") The Fund will not purchase obligations that are in default, but
may hold in the portfolio securities which go into default subsequently to
acquisition by the Fund.
The proportion of the Fund invested in each type of security is expected to
change over time in accordance with the Manager's interpretation of economic
conditions and underlying security values. However, it is expected that a
minimum of 65% of the Fund's total assets will always be invested in fixed
income securities and that a maximum of 10% of its total assets will be invested
in equity securities. The Fund's flexible investment policy allows it to invest
in securities with varying maturities; however, it is anticipated that the
average maturity of securities acquired by the Fund will not exceed 15 years.
The average maturity of the Fund will be generally ten years or less. The
Manager may look at a number of factors in selecting securities for the Fund's
portfolio. These include the past, current and estimated future: (1) financial
strength of the issuer; (2) cash flow; (3) management; (4) borrowing
requirements; and (5) responsiveness to changes in interest rates and business
conditions. Sometimes the Manager may believe that a full or partial temporary
defensive position is desirable, due to present or anticipated market or
economic conditions. To achieve a defensive posture, the Manager may take any
one or more of the following steps with respect to assets in the Fund's
portfolio: (1) shortening the average maturity of the Fund's debt portfolio; (2)
holding cash or cash equivalents; and (3) emphasizing high-grade debt
securities. Going defensive in any one or more of these manners might involve a
reduction in the yield on the Fund's portfolio.
The Fund is authorized to write (i.e. sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to certain of such options. A covered call option is
an option where the Fund in return for a premium gives another party a right to
buy specified securities owned by the Fund at a specified future date and price
set at the time of the contract. (See "Risk Factors Applicable to Covered Call
Options.")
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Covered call options serve as a partial hedge against the price of the
underlying security declining.
Investments in money market securities shall include government securities,
commercial paper, bank certificates of deposit and repurchase agreements
collateralized by government securities. Investment in commercial paper is
restricted to companies in the top two rating categories by Moody's and Standard
& Poor's.
REPURCHASE AGREEMENTS
A repurchase agreement involves the sale of securities to the Fund with the
concurrent agreement by the seller to repurchase the securities at the Fund's
cost plus interest at an agreed rate upon demand or within a specified time,
thereby determining the yield during the purchaser's period of ownership. The
result is a fixed rate of return insulated from market fluctuations during such
period. Under the Investment Company Act of 1940, repurchase agreements are
considered loans by a Fund.
A Fund will enter into such repurchase agreements only with United States banks
having assets in excess of $1 billion which are members of the Federal Deposit
Insurance Corporation, and with certain securities dealers who meet the
qualifications set from time to time by the Board of Directors of the Fund. The
term to maturity of a repurchase agreement normally will be no longer than a few
days. Repurchase agreements maturing in more than seven days and other illiquid
securities will not exceed 10% of the total assets of any Fund.
During the initial month of operations, it is anticipated that a Fund may be
invested up to 100% in repurchase agreements; however under normal
circumstances, a Fund may invest up to 25% of its assets in repurchase
agreements. (See "Risk Factors Applicable to Repurchase Agreements.") Each of
the Five Star Funds may enter into repurchase agreements.
ASSET-BACKED SECURITIES
The Five Star High Yield Fund may invest in asset-backed securities.
Asset-backed securities are collateralized by short maturity loans such as
automobile receivables, credit card receivables, other types of receivables or
assets. Credit support for asset-backed securities may be based on the
underlying assets and/or provided through credit enhancements by a third party.
Credit enhancement techniques include letters of credit, insurance bonds,
limited guarantees (which are generally provided by the issuer),
senior-subordinated structures and over-collateralization.
RISK FACTORS
Risk Factors Applicable to Covered Call Options
Each of the Five Star Funds may engage in covered call option transactions as
described herein. Up to 25% of a Fund's total assets may be subject to covered
call options. By writing covered call options, the Fund gives up the
opportunity, while the option is in effect, to profit from any price increase in
the underlying security above the option exercise price. In addition, a Fund's
ability to sell the underlying security will be limited while the option is in
effect unless the Fund effects a closing purchase transaction. A closing
purchase transaction cancels out a Fund's position as the writer of an option by
means of an offsetting purchase of an identical option prior to the expiration
of the option it has written.
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Upon the termination of a Fund's obligation under a covered call option other
than through exercise of the option, the Fund will realize a short-term capital
gain or loss. Any gain realized by a Fund from the exercise of an option will be
short- or long-term depending on the period for which the stock was held. The
writing of covered call options creates a straddle that is potentially subject
to the straddle rules, which may override some of the foregoing rules and result
in a deferral of some losses for tax purposes.
Risk Factors Applicable To Repurchase Agreements
Each of the Five Star Funds may enter into repurchase agreements. The use of
repurchase agreements involves certain risks. For example, if the seller of the
agreement defaults on its obligation to repurchase the underlying securities at
a time when the value of these securities has declined, a Fund may incur a loss
upon disposition of them. If the seller of the agreement becomes insolvent and
subject to liquidation or reorganization under the Bankruptcy Code or other
laws, disposition of the underlying securities may be delayed pending court
proceedings. Finally, it is possible that a Fund may not be able to perfect its
interest in the underlying securities. While the Fund management acknowledges
these risks, it is expected that they can be controlled through stringent
security selection criteria and careful monitoring procedures.
Risk Factors Applicable to ADRs
Up to 25% of the Five Star Equity Fund's total assets may be invested in ADRs.
ADRs (sponsored or unsponsored) are receipts typically issued by a U.S. bank or
trust company evidencing ownership of the underlying foreign securities. Most
ADRs are traded on a U.S. stock exchange. Issuers of unsponsored ADRs are not
contractually obligated to disclose material information in the U.S. and,
therefore, there may not be a correlation between such information and the
market value of the unsponsored ADR.
Risk Factors Applicable to Common Stocks
The Five Star Equity Fund, the Five Star Balanced Fund and the Five Star USA
Global Fund invest in common stocks. The Five Star High Yield Fund may invest up
to 10% of its assets in common stocks. The Funds are subject to market risk and
fund risk. Market risk is the possibility that stock prices in general will
decline over short or even extended periods of time. Stock markets tend to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline. Fund risk is the possibility that a fund's performance
during a specific period may not meet or exceed that of the stock market as a
whole.
Risk Factors Applicable to High Yielding High Risk Debt Securities
The Five Star Balanced Fund and the Five Star High Yield Fund invest in
high-yielding, high-risk debt securities. Lower rated bonds involve a higher
degree of credit risk, the risk that the issuer will not make interest or
principal payments when due. In the event of an unanticipated default, a Fund
would experience a reduction in its income, and could expect a decline in the
market value of the securities so affected. More careful analysis of the
financial condition of each issuer of lower grade securities is therefore
necessary. During an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their
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ability to service their principal and interest payment obligations, to meet
projected business goals and to obtain additional financing.
The market prices of lower grade securities are generally less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic or political changes or, in the case of corporate issuers,
individual corporate developments. Periods of economic or political uncertainty
and change can be expected to result in volatility of prices of these
securities. Since the last major economic recession, there has been a
substantial increase in the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings, so past experience with
high-yield securities in a prolonged economic downturn may not provide an
accurate indication of future performance during such periods. Lower rated
securities also may have less liquid markets than higher rated securities, and
their liquidity as well as their value may be adversely affected by adverse
economic conditions. Adverse publicity and investor perceptions as well as new
or proposed laws may also have a negative impact on the market for
high-yield/high-risk bonds.
Credit quality of high-yield high-risk securities (so-called "junk bonds") can
change suddenly and unexpectedly and even recently issued credit ratings may not
fully reflect the actual risks posed by a particular high-yield high-risk
security. For these reasons, it is the Funds' policy not to rely primarily on
ratings issued by established credit rating agencies, but to utilize such
ratings in conjunction with the Manager's own independent and ongoing review of
credit quality. As a mutual fund investing in fixed income securities, each of
the Funds is subject primarily to interest rate income and credit risk. Interest
rate risk is the potential for a decline in bond prices due to rising interest
rates. In general, bond prices vary inversely with interest rates. When interest
rates rise, bond prices generally fall. Conversely, when interest rates fall,
bond prices generally rise. The change in price depends on several factors,
including the bond's maturity date. In general, bonds with longer maturities are
more sensitive to interest rates than bonds with shorter maturities.
Each of the Funds is also subject to income risk, which is the potential for a
decline in the respective Fund's income due to falling market interest rates.
In addition to interest rate and income risks, each Fund is subject to credit
risk. Credit risk, also known as default risk, is the possibility that a bond
issuer will fail to make timely payments of interest or principal to a Fund. The
credit risk of a Fund depends on the quality of its investments. Reflecting
their higher risks, lower-quality bonds generally offer higher yields (all other
factors being equal). Rating of debt securities are defined under the caption
"Fixed Income Securities Described and Ratings."
Risk Factors Applicable to Global Operations
The risks to which the U.S. companies in which the Five Star USA Global Fund
plans to invest are exposed and, consequently, the concurrent risks experienced
by the Fund as a result of investing in such companies include: the risk of
fluctuations in the value of foreign currencies; adverse political and economic
developments; and the possibility of expropriation, nationalization or
confiscatory taxation or limitations on the removal of funds or other assets.
The performance of foreign currencies relative to the U.S. dollar and the
relative strength of the U.S. dollar may be an important factor in the
performance of the Fund.
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INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio management policies set
forth under the caption "Investment Objectives and Portfolio Management
Policies," the Funds are subject to certain other restrictions which may not be
changed without approval of the lesser of: (1) at least 67% of the voting
securities present at a meeting if the holders of more than 50% of the
outstanding securities of the Fund are present or represented by proxy, or (2)
more than 50% of the outstanding voting securities of the Fund. Among these
restrictions, the more important ones are that the Fund will not purchase the
securities of any issuer if more than 5% of the Fund's total assets would be
invested in the securities of such issuer, or the Fund would hold more than 10%
of any class of securities of such issuer; the Fund will not make any loan (the
purchase of a security subject to a repurchase agreement or the purchase of a
portion of an issue of publicly distributed debt securities is not considered
the making of a loan); and the Fund will not borrow or pledge its credit under
normal circumstances, except up to 10% of its total assets (computed at the
lower of fair market value or cost) temporarily for emergency or extraordinary
purposes, and not for the purpose of leveraging its investments; and provided
further that any borrowings shall have asset coverage of at least 3 to 1. The
Fund will not buy securities while borrowings are outstanding. The full text of
these restrictions are set forth in the "Statement of Additional Information."
PERFORMANCE MEASURES
From time-to-time, each of the Funds may advertise its performance in various
ways, as summarized below. Further discussion of these matters also appears in
the "Statement of Additional Information." A discussion of each Fund's
performance will be included in the Fund's Annual Report to Shareholders which
will be available from the Fund upon request at no charge.
Total Return
The Funds may advertise "average annual total return" over various periods of
time. Such total return figures show the average percentage change in value of
an investment in the respective Fund from the beginning date of the measuring
period to the end of the measuring period. These figures reflect changes in the
price of the Fund's shares and assume that any income dividends and/or capital
gains distributions made by the respective Fund during the period were
reinvested in shares of the Fund. Figures will be given for recent one-, five-
and ten-year periods (if applicable), and may be given for other periods as well
(such as from commencement of the Fund's operations, or on a year-by-year
basis). When considering "average" total return figures for periods longer than
one year, it is important to note that a Fund's annual total return for any one
year in the period might have been greater or less than the average for the
entire period.
Yield
The Five Star High Yield Fund may advertise a yield figure derived by dividing
the Fund's net investment income per share during a 30-day base period by the
per share price on the last day of the base period.
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Performance Comparisons
In advertisements or in reports to shareholders, each of the Funds may compare
its performance to that of other mutual funds with similar investment objectives
and to stock or other relevant indices. For example, the Five Star Funds may
compare their performance to rankings prepared by Lipper Analytical Services,
Inc. (Lipper), a widely recognized independent service which monitors the
performance of mutual funds. The Five Star Balanced Fund, the Five Star Equity
Fund and the Five Star USA Global Fund may compare their performance to the
Standard & Poor's 500 Stock Index (S&P 500), an index of unmanaged groups of
common stocks; the Dow Jones Industrial Average, a recognized unmanaged index of
common stocks of 30 industrial companies listed on the NYSE; or the Consumer
Price Index. The Five Star Balanced Fund may compare its performance to a
hypothetical equal weighted composite of the S&P 500 and the Merrill Lynch Bond
Fund Index, an unmanaged index of corporate bond funds. The Five Star High Yield
Fund may compare its performance to the Shearson/Lehman Government/Corporate
Index, an unmanaged index of government and corporate bonds, the Merrill Lynch
High Yield Bond Fund Index, an unmanaged index of high yield bond funds, or the
Consumer Price Index. Performance information, rankings, ratings, published
editorial comments and listings as reported in national financial publications
such as Kiplinger's Personal Finance Magazine, Business Week, Morningstar,
Investor's Business Daily, Institutional Investor, The Wall Street Journal,
Mutual Fund Forecaster, No-Load Investor, Money, Forbes, Fortune and Barron's,
may also be used in comparing performance of the Funds. Performance comparisons
should not be considered as representative of the future performance of any
Fund. Further information regarding the performance of the Five Star Funds is
contained in the "Statement of Additional Information."
Performance rankings, recommendations, published editorial comments and listings
reported in Money, Barron's, Kiplinger's Personal Finance Magazine, Financial
World, Forbes, U.S. News & World Report, Business Week, The Wall Street Journal,
Investors Business Daily, USA Today, Fortune and Stanger's, may also be cited
(if any of the Funds are listed in any such publication) or used for comparison,
as well as performance listings and rankings from Morningstar Mutual Funds,
Income and Safety, The Mutual Fund Letter, No-Load Fund Investor, United Mutual
Fund Selector, No-Load Fund Analyst, No-Load Fund X, Louis Rukeyeser's Wall
Street Newsletter, Donoghue's Money Letter, CDA Investment Technologies, Inc.,
Wiesenberger Investment Company Service and Donoghue's Mutual Fund Almanac.
HOW TO PURCHASE SHARES
You must specify the Fund in which you desire to invest on your application
form. Failure to do so will result in the application and your check or bank
wire being returned to you.
Shares are purchased at net asset value (no sales charge) from the Fund through
its agent, Jones & Babson, Inc., 2440 Pershing Road, Suite G-15, Kansas City, MO
64108. For information call toll free 1-800-4-[ ] (1-800-[ ]). If an investor
wishes to engage the services of any other broker to purchase (or redeem) shares
of the Fund, a fee may be charged by such broker. The Fund will not be
responsible for the consequences of delays including delays in the banking or
Federal Reserve wire systems.
You do not pay a sales commission when you buy shares of a Fund. Shares are
purchased at the Fund's net asset value (price) per share next effective after a
purchase order and payment have been
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received by the Fund. In the case of certain institutions which have made
satisfactory payment arrangements with a Fund, orders may be processed at the
net asset value per share next effective after a purchase order has been
received by the Fund.
The Funds reserve the right in their sole discretion to withdraw all or any part
of the offerings made by this prospectus or to reject purchase orders when, in
the judgment of management, such withdrawal or rejection is in the best interest
of a Fund and its shareholders. The Funds also reserve the right at any time to
waive or increase the minimum requirements applicable to initial or subsequent
investments with respect to any person or class of persons, which include
shareholders of the Funds' special investment programs. The Funds reserve the
right to refuse to accept orders for Fund shares unless accompanied by payment,
except when a responsible person has indemnified the Fund against losses
resulting from the failure of investors to make payment. In the event that a
Fund sustains a loss as the result of failure by a purchaser to make payment,
the Fund's Distributor, Jones & Babson will cover the loss.
INITIAL INVESTMENTS
Initial investments -- By mail. You may open an account and make an investment
by completing and signing the application which accompanies this prospectus.
Make your check ($2,500 minimum unless your purchase is pursuant to an IRA or
the Uniform Transfers (Gifts) to Minors Act in which case the minimum initial
purchase is $250) payable to UMB Bank, n.a. Mail your application and check to:
The AFBA Five Star Fund Group
c/o Jones & Babson, Inc.
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Initial investments -- By wire. You may purchase shares of a Fund by wiring
funds ($2,500 minimum) through the Federal Reserve Bank to the custodian, UMB
Bank, n.a. Prior to sending your money, you must call the Fund toll free
1-800-[number], [or in the Kansas City area 471-5200], and provide it with the
identity of the registered account owner, the registered address, the Social
Security or Taxpayer Identification Number of the registered owner, the amount
being wired, the name and telephone number of the wiring bank and the person to
be contacted in connection with the order. You will then be provided a Fund
account number, after which you should instruct your bank to wire the specified
amount, along with the account number and the account registration to:
UMB Bank, n.a.
Kansas City, Missouri, ABA #101000695
For Five Star Balanced Fund/
AC=
For Five Star Equity Fund/
AC=
For Five Star USA Global Fund/
AC=
For Five Star High Yield Fund/
AC=
OBI=(assigned Fund number and name in
which registered)
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A completed application must be sent to the Fund as soon as possible so the
necessary remaining information can be recorded in your account. Payment of
redemption proceeds will be delayed until the completed application is received
by the Fund.
INVESTMENTS SUBSEQUENT TO
INITIAL INVESTMENT
You may add to your Fund account at any time in amounts of $100 or more if
purchases are made by mail, or $1,000 or more if purchases are made by wire or
telephone. Automatic monthly investments must be in amounts of $100 or more.
Checks should be mailed to the Fund at its address, but make them payable to UMB
Bank, n.a. Always identify your account number or include the detachable
reminder stub which accompanies each confirmation.
Wire share purchases should include your account registration, your account
number and the Five Star Fund in which you are purchasing shares. It also is
advisable to notify the Fund by telephone that you have sent a wire purchase
order to the bank.
TELEPHONE INVESTMENT SERVICE
To use the Telephone Investment Service, you must first establish your Fund
account and authorize telephone orders in the application form, or,
subsequently, on a special authorization form provided upon request. If you
elect the Telephone Investment Service, you may purchase Fund shares by
telephone and authorize the Fund to draft your checking account for the cost of
the shares so purchased. You will receive the next available price after the
Fund has received your telephone call. Availability and continuance of this
privilege is subject to acceptance and approval by the Fund and all
participating banks. During periods of increased market activity, you may have
difficulty reaching the Fund by telephone, in which case you should contact the
Fund by mail or telegraph. The Funds will not be responsible for the
consequences of delays, including delays in the banking or Federal Reserve wire
systems.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are not followed,
the Funds may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to, requiring
personal identification prior to acting upon instructions received by telephone,
providing written confirmations of such transactions and/or tape recording of
telephone instructions.
The Funds reserve the right to initiate a charge for this service and to
terminate or modify any or all of the privileges in connection with this service
at any time upon 15 days written notice to shareholders, and to terminate or
modify the privileges without prior notice in any circumstances where such
termination or modification is in the best interest of the Fund and its
investors.
AUTOMATIC MONTHLY
INVESTMENT PLAN
You may elect to make monthly investments in a constant dollar amount from your
checking account ($100 minimum). The relevant Fund will draft your checking
account on the same day each month in
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the amount you authorize in your application, or, subsequently, on a special
authorization form provided upon request. Availability and continuance of this
privilege is subject to acceptance and approval by the Fund and all
participating banks. If the date selected falls on a day upon which the Fund's
shares are not priced, investment will be made on the first date thereafter upon
which the Fund's shares are priced. The Funds will not be responsible for the
consequences of delays, including delays in the banking or Federal Reserve wire
systems.
The Funds reserve the right to initiate a charge for this service and to
terminate or modify any or all of the privileges in connection with this service
at any time upon 15 days written notice to shareholders, and to terminate or
modify the privileges without prior notice in any circumstances where such
termination or modification is in the best interest of the Fund and its
investors.
HOW TO REDEEM SHARES
Each of the Funds will redeem shares at the price (net asset value per share)
next computed after receipt of a redemption request in "good order." (See "How
Share Price is Determined," page __.)
A written request for redemption, together with an endorsed share certificate
where a certificate has been issued, must be received by the Fund in order to
constitute a valid tender for redemption. For authorization of redemptions by a
corporation, it will also be necessary to have an appropriate certified copy of
resolutions on file with the Fund before a redemption request will be considered
in "good order." In the case of certain institutions which have made
satisfactory redemption arrangements with a Fund, redemption orders may be
processed by facsimile or telephone transmission at net asset value per share
next effective after receipt by the Fund. If an investor wishes to engage the
services of any other broker to redeem (or purchase) shares of any Fund, a fee
may be charged by such broker.
To be in "good order" the request must include the following:
(1) a written redemption request or stock assignment (stock power)
containing the genuine signature of each registered owner exactly as the shares
are registered, with clear identification of the account by registered name(s)
and account number and the number of shares or the dollar amount to be redeemed;
(2) any outstanding stock certificates representing shares to be
redeemed;
(3) signature guarantees as required (See Signature Guarantees page
__); and
(4) any additional documentation which the Fund may deem necessary to
insure a genuine redemption.
Where additional documentation is normally required to support redemptions as in
the case of corporations, fiduciaries and others who hold shares in a
representative or nominee capacity such as certified copies of corporate
resolutions, or certificates of incumbency, or such other documentation as may
be required under the Uniform Commercial Code or other applicable laws or
regulations, it is the responsibility of the shareholder to maintain such
documentation on file and in a current status. A failure to do so will delay the
redemption. If you have questions concerning redemption requirements, please
write or telephone the Fund well ahead of an anticipated redemption in order to
avoid any possible delay.
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<PAGE>
Requests which are subject to special conditions or which specify an effective
date other than as provided herein cannot be accepted. All redemption requests
must be transmitted to the relevant Fund c/o Jones & Babson, Inc. at 2440
Pershing Road, Suite G-15, Kansas City, Missouri 64108. Each of the Funds will
redeem shares at the price (net asset value per share) next computed after
receipt of a redemption request in "good order." (See "How Share Price is
Determined," page __.)
Each of the Funds will endeavor to transmit redemption proceeds to the proper
party, as instructed, as soon as practicable after a redemption request has been
received in "good order" and accepted, but in no event later than the seventh
day thereafter. Transmissions are made by mail unless an expedited method has
been authorized and specified in the redemption request. The Funds will not be
responsible for the consequences of delays, including delays in the banking or
Federal Reserve wire systems. Redemptions will not become effective until all
documents in the form required have been received. In the case of redemption
requests made within 15 days of the date of purchase, the Fund will delay
transmission of proceeds until such time as it is certain that unconditional
payment in federal funds has been collected for the purchase of shares being
redeemed or 15 days from the date of purchase. You can avoid the possibility of
delay by paying for all of your purchases with a transfer of federal funds.
Signature Guarantees are required in connection with all redemptions by mail, or
changes in share registration, except as hereinafter provided. These
requirements may be waived by a Fund in certain instances where it appears
reasonable to do so and will not unduly affect the interests of other
shareholders. Signature(s) must be guaranteed by an "eligible guarantor
institution" as defined in Rule l7Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include: (1) national or state banks,
savings associations, savings and loan associations, trust companies, savings
banks, industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; or (3)
securities broker/dealers which are members of a national securities exchange or
clearing agency or which have a minimum net capital of $100,000. A notarized
signature will not be sufficient for the request to be in proper form.
Signature guarantees will be waived for mail redemptions of $10,000 or less, but
they will be required if the checks are to be payable to someone other than the
registered owner(s), or are to be mailed to an address different from the
registered address of the shareholder(s), or where there appears to be a pattern
of redemptions designed to circumvent the signature guarantee requirement, or
where a Fund has other reason to believe that this requirement would be in the
best interests of the Fund and its shareholders.
The right of redemption may be suspended or the date of payment postponed beyond
the normal seven-day period when the New York Stock Exchange is closed or under
emergency circumstances as determined by the Securities and Exchange Commission.
Further, each of the Funds reserves the right to redeem its shares in kind under
certain circumstances. If shares are redeemed in kind, the shareholder may incur
brokerage costs when converting into cash. Redemptions in kind must be in the
form of readily marketable securities. Additional details are set forth in the
"Statement of Additional Information."
Due to the high cost of maintaining smaller accounts, the Board of Directors has
authorized each of the Funds to close shareholder accounts where their value
falls below the current minimum initial investment requirement at the time of
initial purchase as a result of redemptions and not as the result of market
action, and remains below this level for 60 days after each such shareholder
account is
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mailed a notice of: (1) the Fund's intention to close the account, (2) the
minimum account size requirement, and (3) the date on which the account will be
closed if the minimum size requirement is not met.
SYSTEMATIC REDEMPTION PLAN
If you own shares in an open account valued at $10,000 or more, and desire to
make regular monthly or quarterly withdrawals without the necessity and
inconvenience of executing a separate redemption request to initiate each
withdrawal, you may enter into a Systematic Withdrawal Plan by completing forms
obtainable from the Fund. For this service, the Manager may charge you a fee not
to exceed $1.50 for each withdrawal. Currently the Manager assumes the
additional expenses arising out of this type of plan, but it reserves the right
to initiate such a charge at any time in the future when it deems it necessary.
If such a charge is imposed, participants will be provided 30 days notice.
Subject to a $50 minimum, you may withdraw each period a specified dollar
amount. Shares also may be redeemed at a rate calculated to exhaust the account
at the end of a specified period of time.
Dividends and capital gains distributions must be reinvested in additional
shares. Under all withdrawal programs, liquidation of shares in excess of
dividends and distributions reinvested will diminish and may exhaust your
account, particularly during a period of declining share values.
You may revoke or change your plan or redeem all of your remaining shares at any
time. Withdrawal payments will be continued until the shares are exhausted or
until the Fund or you terminate the plan by written notice to the other.
HOW TO EXCHANGE SHARES
BETWEEN FIVE STAR FUNDS
Shareholders may exchange their Fund shares, which have been held in open
account for 30 days or more, and for which good payment has been received, for
identically registered shares of any Fund in the Five Star Fund Group which is
legally registered for sale in the state of residence of the investor, provided
that the minimum amount exchanged has a value of $1,000 or more and meets the
minimum investment requirement of the Fund into which it is exchanged.
To authorize the Telephone/Telegraph Exchange Privilege, all registered owners
must sign the appropriate section on the original application, or the Fund must
receive a special authorization form, provided upon request. During periods of
increased market activity, you may have difficulty reaching the Fund by
telephone, in which case you should contact the Fund by mail or telegraph. The
Funds reserve the right to initiate a charge for this service and to terminate
or modify any or all of the privileges in connection with this service at any
time and without prior notice under any circumstances, where continuance of
these privileges would be detrimental to the Fund or its shareholders, such as
an emergency, or where the volume of such activity threatens the ability of the
Fund to conduct business, or under any other circumstances, upon 60 days written
notice to shareholders. The Funds will not be responsible for the consequences
of delays including delays in the banking or Federal Reserve wire systems.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are not followed,
the Funds may be liable for losses due to
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unauthorized or fraudulent instructions. Such procedures may include, but are
not limited to requiring personal identification prior to acting upon
instructions received by telephone, providing written confirmations of such
transactions and/or tape recording of telephone instructions.
Exchanges by mail may be accomplished by a written request properly signed by
all registered owners identifying the account, the number of shares or dollar
amount to be redeemed for exchange and the Five Star Fund into which the account
is being transferred.
If you wish to exchange part or all of your shares in the Fund for shares of a
Fund in the Five Star Fund Group, you should review the prospectus of the Fund
to be purchased, which can be obtained from Jones & Babson. Any such exchange
will be based on the respective net asset values of the shares involved. Any
exchange between Funds involves the sale of an asset. Unless the shareholder
account is tax-deferred, this is a taxable event.
HOW SHARE PRICE IS DETERMINED
In order to determine the price at which new shares will be sold and at which
issued shares presented for redemption will be liquidated, the net asset value
per share of each Fund is computed once daily, Monday through Friday, at the
specific time during the day that the Board of Directors sets at least annually,
except on days on which changes in the value of portfolio securities will not
materially affect the net asset value, or days during which no security is
tendered for redemption and no order to purchase or sell such security is
received by a Fund, or customary holidays. For a list of the holidays during
which the Funds are not open for business, see "How Share Price is Determined"
in the "Statement of Additional Information."
The price at which new shares of a Fund will be sold and at which issued shares
presented for redemption will be liquidated is computed once daily at 4:00 P.M.
(Eastern Time), except on those days when the Fund is not open for business.
The per share calculation is made by subtracting from each of the Fund's total
assets any liabilities and then dividing into this amount the total outstanding
shares as of the date of the calculation. Each security listed on an exchange is
valued at its last sale price on that exchange on the date as of which assets
are valued. Where the security is listed on more than one exchange, each of the
Funds will use the price of that exchange which it generally considers to be the
principal Exchange on which the security is traded. Lacking sales, the security
is valued at the mean between the current closing bid and asked prices. An
unlisted security for which over-the-counter market quotations are readily
available is valued at the mean between the last current bid and asked prices.
When market quotations are not readily available, any security or other asset is
valued at its fair value as determined in good faith by the Board of Directors.
OFFICERS AND DIRECTORS
The officers of the Company manage its day-to-day operations. The Manager and
the officers of the Company are subject to the supervision and control of the
Board of Directors. A list of the officers and directors of the Company and a
brief statement of their present positions and principal occupations during the
past five years is set forth in the "Statement of Additional Information."
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MANAGEMENT AND
INVESTMENT COUNSEL
The Manager is registered as an investment adviser under the Investment Advisers
Act of 1940. It organized the Company in 1997, and acts as its' investment and
business manager. Pursuant to the current Management Agreement for the Five Star
Funds, the Manager is responsible for providing or obtaining all management,
supervisory and administrative services required in the normal operation of the
Fund. This includes investment management and supervision; fees of the
custodian, independent auditors and legal counsel; remuneration of officers,
directors and other personnel; rent; shareholder services, including the
maintenance of the shareholder accounting system and transfer agency; and such
other items as are incidental to corporate administration.
Not considered normal operating expenses, and therefore payable by each of the
Funds, are taxes; interest; governmental charges and fees, including
registration of a Fund and its shares with the U.S. Securities and Exchange
Commission and notifications and fees to the Securities Departments of the
various states; brokerage costs; dues; and all extraordinary costs and expenses,
including but not limited to legal and accounting fees incurred in anticipation
of or arising out of litigation or administrative proceedings to which a Fund,
its officers or directors may be subject or a party thereto.
As part of the Management Agreement, the Manager employs at its own expense
Kornitzer Capital Management, Inc. (previously defined as the "Adviser") as its
investment counsel to assist in the investment advisory function for the Five
Star Balanced Fund, the Five Star Equity Fund, the Five Star USA Global Fund and
the Five Star High Yield Fund. The Adviser is an independent investment
counseling firm founded in 1989 which is registered as an investment adviser
under the Investment Advisers Act of 1940. It serves a broad variety of
individual, corporate and other institutional clients by maintaining an
extensive research and analytical staff. It has an experienced investment
analysis and research staff which eliminates the need for the Manager and the
Fund to maintain an extensive duplicate staff, with the consequent increase in
the cost of investment advisory service. The cost of the services of the Adviser
is included in the fee of the Manager under the Management Agreement. The
Management Agreement limits the liability of the Manager and the Adviser, as
well as their officers, directors and personnel, to acts or omissions involving
willful misfeasance, bad faith, gross negligence or reckless disregard of their
duties. The organizational arrangements of the Adviser require that all
investment decisions be made by committee, and no person is primarily
responsible for making recommendations to that committee.
As compensation for all the foregoing services, the Five Star Balanced Fund, the
Five Star Equity Fund, the Five Star USA Global Fund and the Five Star High
Yield Fund each pay the Manager a fee at the annual rate of one percent (1.0%)
of average daily net assets from which the Manager pays the Adviser a fee of
one-third of one percent (0.33%) of average daily net assets for investment
counsel services, and also pays Jones & Babson a fee of one-third of one percent
(0.33%) for administrative and other services provided to the Funds, which are
not otherwise provided by the Manager. The fees are computed daily and paid
semi-monthly.
The annual fee charged by the Manager is higher than the management fees of many
other mutual fund advisers whose charges cover only investment advisory services
with all remaining operational expenses absorbed directly by the Funds. However,
it is anticipated that the total expenses of the Funds will compare favorably
with those of other mutual funds whose advisers' fees cover only
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investment advisory services with all remaining operational expenses absorbed by
the Funds. For the current fiscal year, Jones & Babson has voluntarily agreed to
assume certain expenses of the Funds so that a Fund's total annual operating
expenses will not exceed 1.08% of its average daily net assets.
Certain officers and directors of the Company are also officers or directors or
both of the Manager, Jones & Babson or the Adviser.
AFBA Investment Management Company is a wholly owned subsidiary of Armed Forces
Benefit Services, Inc. ("AFBSI"). The Manager has not previously served as
manager of an investment company. AFBSI is a for-profit services entity which is
wholly-owned by Armed Forces Benefit Association ("AFBA"). All voting stock of
AFBSI is held in a voting trust, with sole voting power for the trust held by
Lieutenant General C.C. Blanton, a director of the Company. AFBA is a voluntary
employee benefit association organized under Internal Revenue Code Section
501(c)(9), the membership of which is open to federal employees and uniform
services members and their dependents.
Kornitzer Capital Management, Inc. is a closely held corporation and has
limitations in the ownership of its stock designed to maintain control in those
who are active in management. Owners of 5% or more of Kornitzer Capital
Management, Inc. are John C. Kornitzer, Kent W. Gasaway, Willard R. Lynch,
Thomas W. Laming and Susan Stack.
Jones & Babson, Inc. is a wholly-owned subsidiary of Business Men's Assurance
Company of America, which is considered to be a controlling person under the
Investment Company Act of 1940. Assicurazioni Generali S.p.A., an insurance
organization founded in 1831 based in Trieste, Italy, is considered to be a
controlling person and is the ultimate parent of Business Men's Assurance
Company of America. Mediobanca is a 5% owner of Assicurazioni Generali S.p.A.
The current Management Agreement between the Company and the Manager, which
includes the Investment Counsel Agreement between the Manager and the Adviser,
will continue in effect until __________, 1999. The Agreements will continue
automatically for successive annual periods ending each [______________] so long
as such continuance is specifically approved at least annually by the Board of
Directors of the Company or by the vote of a majority of the outstanding voting
securities of the respective Fund, and, provided also that such continuance is
approved by the vote of a majority of the directors who are not parties to the
Agreements or interested persons of any such party at a meeting held in person
and called specifically for the purpose of evaluating and voting on such
approval. Both Agreements provide that either party may terminate by giving the
other 60 days written notice. The Agreements terminate automatically if assigned
by either party, as required under the Investment Company Act of 1940.
ADVISER'S HISTORICAL PERFORMANCE
Below are certain performance data provided by the Adviser pertaining to four
registered, open-end investment companies (the "mutual funds") that are managed
by the Adviser with identical objectives, policies, and strategies as those of
the Funds. The investment returns of the Funds may differ from those of the
mutual funds because fees and expenses of the mutual funds may differ from those
of the Funds. The Adviser is primarily responsible for the day-to-day management
of the mutual funds' investments, and no other person has a significant role in
achieving the mutual funds' performance. The Company and the mutual funds are
separate funds, and are members of different families of
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investment companies. The results presented are not intended to predict or
suggest the return to be experienced by the series of the Company or the return
an investor might achieve by investing in the series of the Company.
Mutual Fund Total Returns1
Ended March 31, 1996
Inception2
Year Ended to Year Ended
March 31, 1996 March 31, 1996
Buffalo Balanced Fund 17.87% 12.53%
S&P 500 and Merrill Lynch Bond
Fund Weighted Index 22.20% 18.55%
Buffalo Equity Fund N/A 29.11%
S&P 500 Index 32.10% 26.87%
Buffalo USA Global Fund N/A 17.49%
S&P 500 Index 32.10% 26.87%
Buffalo High Yield Fund N/A 16.67%
Merrill Lynch High Yield Bond Fund Index 12.30% 9.61%
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1 Mutual fund total return (price change and reinvested distributions).
2 The inception dates of the mutual funds are: Buffalo Balanced Fund -
August 12, 1994; Buffalo Equity Fund; Buffalo USA Global Fund; and
Buffalo High Yield Fund - May 19, 1995.
The comparative indices are not adjusted to reflect expenses or other
fees that the SEC requires to be reflected in mutual fund performance.
The fees if reflected, would reduce the performance quoted. The mutual
fund performance assumes the reinvestment of all dividends and
distributions. The comparative indices have been adjusted to reflect
reinvestment of dividends on securities in the index.
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Merrill Lynch Bond Fund Index is an unmanaged index composed of
all corporate bond funds including short, intermediate and long-term
bond funds.
The Merrill Lynch High Yield Bond Fund Index is an unmanaged index
composed of all high yield bond funds.
The S&P 500 and Merrill Lynch Bond Fund Index Weighted Average is a
hypothetical combination of unmanaged indices and reflects a 50% each
equal weighting; at 3-31-96, the Buffalo Balanced Fund's portfolio
consisted of an approximate mix of 33% stocks and 67% bonds.
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GENERAL INFORMATION
AND HISTORY
The Company was incorporated in Maryland on January 9, 1997. The Articles of
Incorporation permit the Directors to issue 40,000,000 shares of common stock in
various series or classes (sub- series), with a par value of $1.00 per share.
Each series of shares, in effect, represents a separate mutual fund, with each
share of a series representing a pro rata interest in a separate pool of
investments held by the series, managed according to specified investment
objectives and policies. The Company is currently authorized to issue four
series of shares (10,000,000 shares each) which consist of the Five Star
Balanced Fund, the Five Star Equity Fund, the Five Star USA Global Fund and the
Five Star High Yield Fund. All shares of the same series have like rights and
privileges. Each full and fractional share, when issued and outstanding, has:
(1) equal voting rights with respect to matters which affect the Company as a
whole; (2) equal voting rights with other shares of the series with respect to
matters which only affect that series; and (3) equal dividend, distribution and
redemption rights to the assets of the series. Shares when issued are fully paid
and non-assessable. The Funds may create other series of stock but will not
issue any senior securities. Shareholders do not have pre-exemptive or
conversion rights.
Non-cumulative voting - The shares of the series of the Company have
non-cumulative voting rights, which means that the holders of more than 50% of
the Company's shares voting for the election of directors can elect 100% of the
directors, if they choose to do so, and in such event, the holders of the
remaining less than 50% of the shares voting will not be able to elect any
directors.
The Maryland General Corporation Law permits registered investment companies,
such as the Funds, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the Investment
Company Act of 1940. There are procedures whereby the shareholders may remove
directors. These procedures are described in the Statement of Additional
Information under the caption "Officers and Directors." The Company has adopted
the appropriate provisions in its By-Laws and may not, at its discretion, hold
annual meetings of shareholders for the following purposes unless required to do
so: (1) election of directors; (2) approval of any investment management
agreement; (3) ratification of the selection of independent auditors; and (4)
approval of a distribution plan. As a result, the Company does not intend to
hold annual meetings.
This prospectus omits certain of the information contained in the registration
statement filed with the Securities and Exchange Commission, Washington, D.C.
These items may be inspected at the offices.of the Commission or obtained from
the Commission upon payment of the fee prescribed.
DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION
The Five Star Balanced Fund and the Five Star High Yield Fund pay dividends from
net investment income quarterly, usually in March, June, September and December.
Distribution from capital gains realized on the sale of securities, if any, will
be declared by the Five Star Balanced Fund annually on or before December 31 and
by the Five Star High Yield Fund semiannually, usually in June and December. The
Five Star Equity Fund and the Five Star USA Global Fund pay dividends from net
investment income and capital gains semiannually, usually in June and December.
Dividend and capital gains distributions will be reinvested automatically in
additional shares at the net asset value per share computed and effective at the
close of business on the day after the record date, unless the
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shareholder has elected on the original application, or by written instructions
filed with the Fund, to have them paid in cash.
Each of the Funds intends to qualify for taxation as a "regulated investment
company" under the Internal Revenue Code so that the Funds will not be subject
to federal income tax to the extent that they distribute their income to its
shareholders. Dividends, either in cash or reinvested in shares, paid by a Fund
from net investment income will be taxable to shareholders as ordinary income,
and will generally qualify in part for the 70% dividends-received deduction for
corporations. The portion of the dividends so qualified depends on the aggregate
taxable qualifying dividend income received by a Fund from domestic (U.S.)
sources. The Funds will send to shareholders a statement each year advising the
amount of the dividend income which qualifies for such treatment.
Whether paid in cash or additional shares of a Fund, and regardless of the
length of time Fund shares have been owned by the shareholder, distributions
from long-term capital gains are taxable to shareholders as such, but are not
eligible for the dividends-received deduction for corporations. Shareholders are
notified annually by the Funds as to federal tax status of dividends and
distributions paid by the Funds. Such dividends and distributions may also be
subject to state and local taxes. Exchange and redemption of Fund shares are
taxable events for federal income tax purposes. Shareholders may also be subject
to state and municipal taxes on such exchanges and redemptions. You should
consult your tax adviser with respect to the tax status of distributions from
the Funds in your state and locality.
The Funds intend to declare and pay dividends and capital gains distributions so
as to avoid imposition of the federal excise tax. To do so, each Fund expects to
distribute during each calendar year an amount equal to: (1) 98% of its calendar
year ordinary income; (2) 98% of its capital gains net income (the excess of
short- and long-term capital gain over short- and long-term capital loss) for
the one-year period ending each November 30; and (3) 100% of any undistributed
ordinary or capital gain net income from the prior fiscal year. Dividends
declared in October, November or December and made payable to shareholders of
record in such a month are deemed to have been paid by the Fund and received by
shareholders on December 31 of such year, so long as the dividends are actually
paid before February 1 of the following year.
To comply with IRS regulations, each of the Funds is required by federal law to
withhold 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions) paid to shareholders who have not complied with
IRS regulations. In order to avoid this withholding requirement, shareholders
must certify on their Application, or on a separate form supplied by the Fund,
that their Social Security or Taxpayer Identification Number provided is correct
and that they are not currently subject to backup withholding, or that they are
exempt from backup withholding.
The federal income tax status of all distributions will be reported to
shareholders each January as a part of the annual statement of shareholder
transactions. Shareholders not subject to tax on their income will not be
required to pay tax on amounts distributed to them.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT
IN THE FUNDS.
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DESCRIPTION OF SECURITIES RATINGS
Fixed Income Securities
Described And Ratings
Description of Bond Ratings:
Standard & Poor's Corporation (S&P).
AAA - Highest Grade. These securities possess the ultimate degree of protection
as to principal and interest. Marketwise, they move with interest rates, and
hence provide the maximum safety on all counts.
AA - High Grade. Generally, these bonds differ from AAA issues only in a small
degree. Here too, prices move with the long-term money market.
A - Upper-medium Grade. They have considerable investment strength, but are not
entirely free from adverse effects of changes in economic and trade conditions.
Interest and principal are regarded as safe. They predominately reflect money
rates in their market behavior but, to some extent, also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Moody's Investors Service, Inc. (Moody's)
Aaa - Best Quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt-edge." Interest payments are
protected by a large, or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - High Quality by All Standards. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater.
A - Upper-medium Grade. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
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Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have predominantly speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
SHAREHOLDER SERVICES
The Funds, the Manager and Jones & Babson offer shareholders a broad variety of
services described throughout this prospectus. In addition, the following
services are available:
Automatic Monthly Investment - You may elect to make monthly investments in a
constant dollar amount from your checking account ($100 minimum). A Fund will
draft your checking account on the same day each month in the amount you
authorize in your application, or, subsequently, on a special authorization form
provided upon request.
Automatic Reinvestment - Dividends and capital gains distributions may be
reinvested automatically, or shareholders may elect to have dividends paid in
cash and capital gains reinvested, or to have both paid in cash.
Telephone Investments - You may make investments of $1,000 or more by telephone
if you have authorized such investments in your application, or, subsequently,
on a special authorization form provided upon request. See "Telephone Investment
Service."
Automatic Exchange - You may exchange shares from your account ($100 minimum) in
any of the Five Star Funds to an identically registered account in any other
Fund in the Five Star Group according to your instructions. Monthly exchanges
will be continued until all shares have been exchanged or until you terminate
the Automatic Exchange authorization. A special authorization form will be
provided upon request.
Transfer of Ownership - A shareholder may transfer shares to another shareholder
account. The requirements which apply to redemptions apply to transfers. A
transfer to a new account must meet initial investment requirements.
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Systematic Redemption Plan - Shareholders who own shares in open account valued
at $10,000 or more may arrange to make regular withdrawals without the necessity
of executing a separate redemption request to initiate each withdrawal.
Sub-Accounting - Keogh and corporate tax qualified retirement plans, as well as
certain other investors who must maintain separate participant accounting
records, may meet these needs through services provided by the Funds'
Administrator, Jones & Babson. Investment minimums may be met by accumulating
the separate accounts of the group. Although there is currently no charge for
sub- accounting, the Funds and their Manager reserve the right to make
reasonable charges for this service.
Prototype Retirement Plans - Jones & Babson offers a defined contribution
prototype plan - The Universal Retirement Plan - which is suitable for all who
are self-employed, including sole proprietors, partnerships and corporations.
The Universal Prototype includes both money purchase pension and profit-sharing
plan options.
Individual Retirement Accounts - Also available is an Individual Retirement
Account (IRA). The IRA uses the IRS model form of plan and provides an excellent
way to accumulate a retirement fund which will earn tax-deferred dollars until
withdrawn. An IRA may also be used to defer taxes on certain distributions from
employer-sponsored retirement plans. You may contribute up to $2,000 of
compensation each year ($2,250 if a spousal IRA is established), some or all of
which may be deductible. Consult your tax adviser concerning the amount of the
tax deduction, if any.
Simplified Employee Pensions (SEPs) - The Jones & Babson IRA may be used with
IRS Form 5305 - SEP to establish a SEP-IRA, to which the self-employed
individual may contribute up to 15% of net earned income or $30,000, whichever
is less. A SEP-IRA offers the employer the ability to make the same level of
deductible contributions as a Profit-Sharing Plan with greater ease of
administration, but less flexibility in plan coverage of employees.
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SHAREHOLDER INQUIRIES
Telephone inquiries may be made toll free to the Funds, 1-800-[Number]
Shareholders may address written inquiries to the Funds at:
AFBA Five Star Fund, Inc.
c/o Jones & Babson, Inc.
2440 Pershing Road, Suite G-15
Kansas City, MO 64108
FIVE STAR BALANCED FUND
FIVE STAR EQUITY FUND
FIVE STAR USA GLOBAL FUND
FIVE STAR HIGH YIELD FUND
MANAGER
AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia
INVESTMENT COUNSEL
Kornitzer Capital Management, Inc.
Shawnee Mission, Kansas
INDEPENDENT AUDITORS
Ernst & Young LLP
Kansas City, Missouri
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
Philadelphia, Pennsylvania
John G. Dyer
Kansas City, Missouri
CUSTODIAN
UMB Bank, n.a.
Kansas City, Missouri
ADMINISTRATOR AND DISTRIBUTOR
Jones & Babson, Inc.
Kansas City, Missouri
PROSPECTUS
[___________________], 1997
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PART B
AFBA FIVE STAR FUND, INC.
consisting of:
FIVE STAR BALANCED FUND
FIVE STAR EQUITY FUND
FIVE STAR USA GLOBAL FUND
FIVE STAR HIGH YIELD FUND
STATEMENT OF ADDITIONAL INFORMATION
[____________], 1997
This Statement is not a prospectus but should be read in conjunction with the
Funds' current prospectus dated [____________], 1997. To obtain the prospectus
please call the Fund toll free, 1-800-[Number].
TABLE OF CONTENTS
Page
Investment Objectives and Policies
Portfolio Transactions
Investment Restrictions
Five Star Balanced Fund
Five Star Equity Fund
Five Star USA Global Fund
Five Star High Yield Fund
Performance Measures
How the Funds' Shares are Distributed
How Share Purchases are Handled
Redemption of Shares
Signature Guarantees
Management and Investment Counsel
How Share Price is Determined
Officers and Directors
Custodian
Independent Auditors
Other Funds
Description of Commercial Paper Ratings
Financial Statements
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the Funds' investment objectives and policies
set forth in the prospectus.
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PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Funds are made by AFBA Investment
Management Company (the "Manager") pursuant to recommendations by Kornitzer
Capital Management, Inc., investment counsel to the Funds (the "Adviser").
Officers of the Funds and the Manager are generally responsible for implementing
or supervising these decisions, including allocation of portfolio brokerage and
principal business as well as the negotiation of commissions and/or the price of
the securities. In instances where securities are purchased on a commission
basis, each of the Funds will seek competitive and reasonable commission rates
based on circumstances of the trade involved and to the extent that they do not
detract from the quality of the execution.
Each of the Funds, in purchasing and selling portfolio securities, will seek the
best available combination of execution and overall price (which shall include
the cost of the transaction) consistent with the circumstances which exist at
the time. The Funds do not intend to solicit competitive bids on each
transaction.
Each of the Funds believes it is in its best interest and that of its
shareholders to have a stable and continuous relationship with a diverse group
of financially strong and technically qualified broker-dealers who will provide
quality executions at competitive rates. Broker-dealers meeting these
qualifications also will be selected for their demonstrated loyalty to the
respective Fund, when acting on its behalf, as well as for any research or other
services provided to the respective Fund. Substantially all of the portfolio
transactions are through brokerage firms which are members of the New York Stock
Exchange because usually the most active market in the size of the Funds'
transactions and for the types of securities predominant in the Funds'
respective portfolios is to be found there. When buying securities in the
over-the-counter market, each of the Funds will select a broker who maintains a
primary market for the security unless it appears that a better combination of
price and execution may be obtained elsewhere. The Funds normally will not pay a
higher commission rate to broker-dealers providing benefits or services to it
than it would pay to broker-dealers who do not provide it such benefits or
services. However, each of the Funds reserves the right to do so within the
principles set out in Section 28(e) of the Securities Exchange Act of 1934 when
it appears that this would be in the best interests of the shareholders.
No commitment is made to any broker or dealer with regard to placing of orders
for the purchase or sale of Fund portfolio securities, and no specific formula
is used in placing such business. Allocation is reviewed regularly by both the
Boards of Directors of the Company and the Manager.
Since the Funds do not market their shares through intermediary brokers or
dealers, it is not the Funds' practice to allocate brokerage or principal
business on the basis of sales of their shares which may be made through such
firms. However, they may place portfolio orders with qualified broker-dealers
who recommend the Funds to other clients, or who act as agent in the purchase of
the Funds' shares for their clients.
Research services furnished by broker-dealers may be useful to the Funds'
Manager or Adviser in serving other clients, as well as the respective Funds.
Conversely, the Funds may benefit from research services obtained by the Manager
or Adviser from the placement of portfolio brokerage of other clients.
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When it appears to be in the best interest of its shareholders, each of the
Funds may join with other clients of the Manager or Adviser in acquiring or
disposing of a portfolio holding. Securities acquired or proceeds obtained will
be equitably distributed among the Funds and other clients participating in the
transaction. In some instances, this investment procedure may affect the price
paid or received by a Fund or the size of the position obtained by a Fund.
INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio management policies set
forth in the Prospectus under the caption "Investment Objectives and Portfolio
Management Policies," restrictions also may not be changed without approval of
the "holders of a majority of the outstanding shares" of a Fund.
Each Fund will not: (1) purchase the securities of any one issuer, except the
United States government, if immediately after and as a result of such purchase
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 5% of the value of the Fund's total assets, or (b) the Fund owns more
than 10% of the outstanding voting securities, or any other class of securities,
of such issuer; (2) engage in the purchase or sale of real estate, commodities
or futures contracts; (3) underwrite the securities of other issuers; (4) make
loans to any of its officers, directors, or employees, or to its manager, or
general distributor, or officers or directors thereof; (5) make any loan (the
purchase of a security subject to a repurchase agreement or the purchase of a
portion of an issue of publicly distributed debt securities is not considered
the making of a loan); (6) invest in companies for the purpose of exercising
control of management; (7) purchase securities on margin, or sell securities
short, except that the Fund may write covered call options; (8) purchase shares
of other investment companies except in the open market at ordinary broker's
commission or pursuant to a plan of merger or consolidation; (9) invest in the
aggregate more than 5% of the value of its gross assets in the securities of
issuers (other than federal, state, territorial, or local governments, or
corporations, or authorities established thereby), which, including
predecessors, have not had at least three years' continuous operations; (10)
except for transactions in its shares or other securities through brokerage
practices which are considered normal and generally accepted under circumstances
existing at the time, enter into dealings with its officers or directors, its
manager or underwriter, or their officers or directors, or any organization in
which such persons have a financial interest; (11) borrow or pledge its credit
under normal circumstances, except up to 10% of its gross assets (computed at
the lower of fair market value or cost) temporarily for emergency or
extraordinary purposes, and not for the purpose of leveraging its investments,
and provided further that any borrowing in excess of 5% of the total assets of
the Fund shall have asset coverage of at least 3 to 1; (12) make itself or its
assets liable for the indebtedness of others; or (13) invest in securities which
are assessable or involve unlimited liability; (14) purchase any securities
which would cause 25% or more of the Fund's total assets at the time of such
purchase to be invested in any one industry.
PERFORMANCE MEASURES
From time-to-time, the Five Star High Yield Fund may quote its yield in
advertisements, shareholder reports or other communications to shareholders.
Yield is calculated according to the following SEC standardized formula.
Current yield reflects the income per share earned by a Fund's investments.
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Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period.
The SEC standardized yield formula is as follows:
Yield = 2[a - b + 1)6 - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the
period
TOTAL RETURN
Each of the Five Star Fund's "average annual total return" figures will be
computed according to a formula prescribed by the Securities and Exchange
Commission. The formula can be expressed as follows:
P(1+T)n = ERV
Where P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment
made at the beginning of the 1, 5 or 10 year (or other)
periods at the end of the 1, 5 or 10 year (or other)
periods (or fractional portions thereof).
HOW THE FUND'S SHARES ARE DISTRIBUTED
Jones & Babson, Inc. ("Jones & Babson"), as agent of the Funds, agrees to supply
its best efforts as sole distributor of the Funds' shares and, at its own
expense, pay all sales and distribution expenses in connection with their
offering other than registration fees and other government charges.
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<PAGE>
Jones & Babson does not receive any fee or other compensation under the
Underwriting Agreement relating to the Five Star Funds, which continues in
effect until [____________] and which will continue automatically for successive
annual periods ending each [_______________] if continued at least annually by
the Company's Board of Directors, including a majority of those Directors who
are not parties to such Agreement or interested persons of any such party. The
Agreement terminates automatically if assigned by either party or upon 60 days
written notice by either party to the other.
Jones & Babson also acts as sole distributor of the shares of David L. Babson
Growth Fund, Inc., D. L. Babson Bond Trust, D. L. Babson Money Market Fund,
Inc., D. L. Babson Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund, Inc., Scout Stock Fund, Inc.,
Scout Bond Fund, Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc. and Buffalo USA Global Fund, Inc.
HOW SHARE PURCHASES ARE HANDLED
Each order accepted will be fully invested in whole and fractional shares,
unless the purchase of a certain number of whole shares is specified, at the net
asset value per share next effective after the order is accepted by a Fund.
Each investment is confirmed by a year-to-date statement which provides the
details of the immediate transaction, plus all prior transactions in your
account during the current year. This includes the dollar amount invested, the
number of shares purchased or redeemed, the price per share and the aggregate
shares owned. A transcript of all activity in your account during the previous
year will be furnished each January. By retaining each annual summary and the
last year-to-date statement, you have a complete detailed history of your
account which provides necessary tax information. A duplicate copy of a past
annual statement is available from Jones & Babson at its cost, subject to a
minimum charge of $5 per account, per year requested.
Normally, the shares which you purchase are held by a Fund in open account,
thereby relieving you of the responsibility of providing for the safekeeping of
a negotiable share certificate. Should you have a special need for a
certificate, one will be issued on request for all or a portion of the whole
shares in your account. There is no charge for the first certificate issued. A
charge of $3.50 will be made for any replacement certificates issued. In order
to protect the interests of the other shareholders, share certificates will be
sent to those shareholders who request them only after a Fund has determined
that unconditional payment for the shares represented by the certificate has
been received by its custodian, UMB Bank, n.a.
If an order to purchase shares must be canceled due to non-payment, the
purchaser will be responsible for any loss incurred by a Fund arising out of
such cancellation. To recover any such loss, the Funds reserve the right to
redeem shares owned by any purchaser whose order is canceled, and such purchaser
may be prohibited or restricted in the manner of placing further orders.
The Funds reserve the right in their sole discretion to withdraw all or any part
of the offering made by the prospectus or to reject purchase orders when, in the
judgment of management, such withdrawal or rejection is in the best interest of
a Fund and its shareholders. The Funds also reserve the right at
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any time to waive or increase the minimum requirements applicable to initial or
subsequent investments with respect to any person or class of persons, which
include shareholders of the Funds' special investment programs.
REDEMPTION OF SHARES
The right of redemption may be suspended, or the date of payment postponed
beyond the normal seven-day period with respect to any Fund by the Company's
Board of Directors under the following conditions authorized by the Investment
Company Act of 1940: (1) for any period (a) during which the New York Stock
Exchange is closed, other than customary weekend and holiday closing, or (b)
during which trading on the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) disposal by the
Fund of securities owned by it is not reasonably practicable, or (b) it is not
reasonably practicable for the Fund to determine the fair value of its net
assets; or (3) for such other periods as the Securities and Exchange Commission
may by order permit for the protection of the Fund's shareholders.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the possibility of forgery and are required
in connection with each redemption method to protect shareholders from loss.
Signature guarantees are required in connection with all redemptions by mail or
changes in share registration, except as provided in the Prospectus.
Signature guarantees must appear together with the signature(s) of the
registered owner(s), on:
(1) a written request for redemption,
(2) a separate instrument of assignment, which should specify the total
number of shares to be redeemed (this "stock power" may be obtained
from the Fund or from most banks or stock brokers), or
(3) all stock certificates tendered for redemption.
MANAGEMENT AND INVESTMENT COUNSEL
As a part of the Management Agreement, AFBA Investment Management Company
employs at its own expense Kornitzer Capital Management, Inc., as its investment
counsel. Kornitzer Capital Management, Inc., was founded in 1989. It is a
private investment research and counseling organization serving individual,
corporate and other institutional clients.
The annual fee charged by the Manager covers all normal operating costs of the
Fund.
Kornitzer Capital Management, Inc., has an experienced investment analysis and
research staff which eliminates the need for the Manager and the Fund to
maintain an extensive duplicate staff, with the consequent increase in the cost
of investment advisory service. The cost of the services of Kornitzer Capital
Management, Inc. is included in the fee of the Manager.
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<PAGE>
HOW SHARE PRICE IS DETERMINED
The net asset value per share of each Fund's portfolio is computed once daily,
Monday through Friday, at the specific time during the day that the Board of
Directors of the Company sets at least annually, except on days on which changes
in the value of a Fund's portfolio securities will not materially affect the net
asset value, or days during which no security is tendered for redemption and no
order to purchase or sell such security is received by a Fund, or the following
holidays:
New Year's Day January 1
Presidents' Holiday Third Monday in February
Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
OFFICERS AND DIRECTORS
The Funds are managed by AFBA Investment Management Company subject to the
supervision and control of the Board of Directors of the Company. The following
table lists the Officers and Directors of the Company.
* John A. Johnson, President and Director.
* Larry D. Armel, Director.
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
President and Director, Jones & Babson, Inc.; David L. Babson Growth
Fund, Inc., D. L. Babson Money Market Fund, Inc., D. L. Babson Tax-Free Income
Fund, Inc., Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc.,
Babson Value Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc; Scout Stock Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc., Scout Tax-Free Money Market Fund, Inc., Scout Regional
Fund, Inc., Scout WorldWide Fund, Inc., Scout Balanced Fund, Inc.; Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High Yield Fund, Inc.
and Buffalo USA Global Fund, Inc. President and Trustee, D. L. Babson Bond
Trust.
* John C. Kornitzer, Vice President and Director.
7715 Shawnee Mission Parkway
Shawnee Mission, Kansas 66202
President, Kornitzer Capital Management, Inc. Formerly Assistant Vice
President, Waddell & Reed, Inc., 6300 Lamar Avenue, Shawnee Mission, Kansas
66202.
* Lieutenant General C.C. Blanton, USAF(Ret.), Director and Chairman.
General Monroe W. Hatch, Jr., USAF(Ret.) Director.
Brigadier General Henry J. Sechler, USAF(Ret.), Director
General Louis C. Wagner, Jr., USA(Ret.) Director.
* Directors who are interested persons as that term is defined in the
Investment Company Act of 1940, as amended.
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<PAGE>
P. Bradley Adams, Vice President and Chief Financial Officer.
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Vice President and Treasurer, Jones & Babson, Inc., David L. Babson Growth Fund,
Inc., D. L. Babson Money Market Fund, Inc., D. L. Babson Tax-Free Income Fund,
Inc., Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson
Value Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory International
Fund, Inc., D. L. Babson Bond Trust; Scout Stock Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money Market Fund, Inc.,
Scout Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout Balanced Fund,
Inc.; Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc..
Martin A. Cramer, Secretary.
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Vice President and Secretary, Jones & Babson, Inc., David L. Babson Growth Fund,
Inc., D. L. Babson Money Market Fund, Inc., D. L. Babson Tax-Free Income Fund,
Inc., Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson
Value Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory International
Fund, Inc., D. L. Babson Fund Trust; Scout Stock Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money Market Fund, Inc.,
Scout Regional Fund, Inc., Scout Worldwide Fund, Inc., Scout Balanced Fund,
Inc.; Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc.
Dionne McNamee, Treasurer.
None of the officers or directors will be remunerated by the Funds for their
normal duties and services. Their compensation and expenses arising out of
normal operations will be paid by the Manager under the provisions of the
Management Agreement.
Messrs. Hatch, Wagner and Sechler have no financial interest in, nor are they
affiliated with, either AFBA Investment Management Company, Jones & Babson, Inc.
or Kornitzer Capital Management, Inc.
The Audit Committee of the Board of Directors is composed of Messrs. Hatch,
Wagner and Sechler.
The officers and directors as a group own less than 1% of each of the respective
Funds.
The Company will not hold annual meetings except as required by the Investment
Company Act of 1940 and other applicable laws. The Company is a Maryland
Corporation. Under Maryland law, a special meeting of stockholders of a fund
must be held if the fund receives the written request for a meeting from the
stockholders entitled to cast at least 25% of all the votes entitled to be cast
at the meeting. The Company has undertaken that its Directors will call a
meeting of stockholders if such a meeting is requested in writing by the holders
of not less than 10% of the outstanding shares of the Fund. To the extent
required by the undertaking, the Company will assist shareholder communications
in such matters.
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<PAGE>
CUSTODIAN
The Funds' assets are held for safekeeping by an independent custodian, UMB
Bank, n.a. This means the custodian bank, rather than the Funds, has possession
of the Funds' cash and securities. The custodian bank is not responsible for the
Funds' investment management or administration. But, as directed by the officers
of the Company, it delivers cash to those who have sold securities to the Funds
in return for such securities, and to those who have purchased portfolio
securities from the Funds, it delivers such securities in return for their cash
purchase price. It also collects income directly from issuers of securities
owned by the Funds and holds this for payment to shareholders after deduction of
the Funds' expenses. The custodian bank is compensated for its services by the
Manager. There is no charge to the Funds.
INDEPENDENT AUDITORS
The Company's financial statements are audited annually by independent auditors
approved by the directors each year, and in years in which an annual meeting is
held the directors may submit their selection of independent auditors to the
shareholders for ratification. Ernst & Young LLP, One Kansas City Place, 1200
Main Street, Suite 2000, Kansas City, Missouri 64105, is the Company's present
independent auditor.
Reports to shareholders will be published at least semiannually.
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DESCRIPTION OF COMMERCIAL
PAPER RATINGS
Moody's. . . Moody's commercial paper rating is an opinion of the ability of an
issuer to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's has one rating - prime. Every such
prime rating means Moody's believes that the commercial paper note will be
redeemed as agreed. Within this single rating category are the following
classifications:
Prime - 1 Highest Quality
Prime - 2 Higher Quality
Prime - 3 High Quality
The criteria used by Moody's for rating a commercial paper issuer under this
graded system include, but are not limited to the following factors:
(1) evaluation of the management of the issuer;
(2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative type risks which may be inherent in certain
areas;
(3) evaluation of the issuer's products in relation to competition and
customer acceptance;
(4) liquidity;
(5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and relationships which exist
with the issue; and
(8) recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to
meet such obligations.
S&P . . . Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely repayment of debt having an original maturity of no
more than 270 days. Ratings are graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the lowest. The four categories
are as follows:
"A" Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree of safety.
"A-1" This designation indicates that the degree of safety regarding timely
payment is very strong.
"A-2" Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming.
"A-3" Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
"B" Issues rated "B" are regarded as having only an adequate capacity for
timely payment. Furthermore, such capacity may be damaged by changing
conditions or short-term adversities.
"C" This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
"D" This rating indicates that the issuer is either in default or is
expected to be in default upon maturity.
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<PAGE>
AFBA FIVE STAR FUND, INC.
FINANCIAL STATEMENTS TO BE
SUPPLIED BY FURTHER AMENDMENT
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<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Included in Part B (to be supplied by amendment)
(b) (1) (a) Registrant's Articles of Incorporation
(b) Articles Supplementary
(2) Form of Registrant's By-laws
(3) Not applicable, because there is no voting trust
agreement.
(4) Specimen copy of each security to be issued by the
registrant.
(5) (a) Form of Management Agreement between
AFBA Investment Management Company and
the Registrant
(b) Form of Investment Counsel Agreement
between AFBA Investment Management
Company and Kornitzer Capital
Management, Inc.
(6) Form of principal Underwriting Agreement between
Jones & Babson, Inc. and the Registrant
(7) Not applicable, because there are no pension,
bonus or other agreement for the benefit of
directors and officers.
(8) Form of Custodian Agreement between Registrant and
UMB Bank, n.a.
(9) Form of Transfer Agency Agreement between AFBA
Investment Management Company and Jones & Babson,
Inc.
(10) Opinion and consent of counsel as to the legality
of the Registrant's securities being registered.
(To be filed annually with Rule 24f-2 notice.)
(11) (a) Powers of Attorney
(b) Auditors Consent(To be supplied by amendment.)
(12) Not applicable.
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<PAGE>
(13) Form of letter from contributors of initial
capital to the Registrant that purchase was made
for investment purposes without any present
intention of redeeming or selling. (To be supplied
by amendment.)
(14) Not applicable.
(15) Not applicable.
(16) Schedule for computation of performance
quotations. (To be supplied by further amendment.)
* Incorporated by reference to Registrant's Registration on N-1A.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE
REGISTRANT.
NONE
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The number of record holders of each series of securities of
the Registrant as of [____________], 1997, is as follows:
(1)
Title of Class
Common Stock (2)
$1.00 par value Number of Record
Holders
Five Star Balanced Fund
Five Star Equity Fund
Five Star USA Global Fund
Five Star High Yield Fund
Item 27. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law and the
Company's Bylaws, the Company shall indemnify any person who was
or is a director, officer or employee of the Company to the
maximum extent permitted by the Maryland General Corporation Law;
provided however, that any such indemnification (unless ordered
by
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a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of such
persons is proper in the circumstances. Such determination shall
be made:
(i) by the Board of Directors by a majority vote of a quorum
which consists of the directors who are neither "interested
persons" of the Company as defined in Section 2(a)(19) of the
1940 Act, nor parties to the proceedings, or
(ii) if the required quorum is not obtainable or if a quorum of
such directors so directs, by independent legal counsel in a
written opinion.
No indemnification will be provided by the Company to any
director or officer of the Company for any liability to the
company or shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duty.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
AFBA Investment Management Company is a wholly-owned subsidiary
of Armed Forces Benefit Services, Inc. ("AFBSI"), which serves as
investment manager to the Registrant. AFBSI is a for-profit
services entity which is wholly-owned by Armed Forces Benefit
Association, a voluntary employee benefit association.
The principal business of Kornitzer Capital Management, Inc. is
to provide investment counsel and advice to a wide variety of
clients. Kornitzer Capital Management, Inc. has _____________
under management.
The information required by this Item 28 with respect to each
director, officer, or partner of the Manager and the Investment
Adviser of the Registrant is incorporated by reference to the
Form ADV, as filed and amended, by the Manager and Investment
Adviser, respectively, with the SEC:
AFBA Investment Management Company
SEC File No. 801-_________
Kornitzer Capital Management, Inc.
SEC File No. 801-34933
Item 29. PRINCIPAL UNDERWRITERS.
(a) Jones & Babson, Inc., the only principal underwriter of the
Registrant, also acts as principal underwriter for the David
L. Babson Growth Fund, Inc., D.L. Babson Money Market Fund,
Inc., D.L. Babson Tax-Free Income Fund, Inc., D.L. Babson
Bond Trust, Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund, Inc., Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout Money Market
Fund, Inc, Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
High Yield Fund, Inc., Buffalo Equity Fund, Inc. and Buffalo
USA Global Fund, Inc.
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<PAGE>
(b) Herewith is the information required by the following table
with respect to each director, officer or partner of the
only underwriter named in answer to Item 21 of Part B:
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
Stephen S. Soden Chairman and Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Larry D. Armel President and Director Director
2440 Pershing Road, G-15
Kansas City, MO 64108
Giorgio Balzer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert T. Rakich Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Edward S. Ritter Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert N. Sawyer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Vernon W. Voorhees Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
P. Bradley Adams Vice President and Treasurer Vice President
2440 Pershing Road, G-15 and Chief
Kansas City, MO 64108 Financial
Officer
Michael A. Brummel Vice President None
Three Crown Center
2440 Pershing Road, G-15
Kansas City, MO 64108
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Martin A. Cramer Vice President and Secretary Secretary
Three Crown Center
2440 Pershing Road, G-15
Kansas City, MO 64108
(c) The principal underwriter does not receive any remuneration
or compensation for the duties or services rendered to the
Registrant pursuant to the principal Underwriting Agreement.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be maintained by
Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder is in the physical possession of
Jones & Babson, Inc., at Three Crown Center, 2440 Pershing Road,
Suite G-15, Kansas City, Missouri 64108.
Item 31. MANAGEMENT SERVICES.
All management services are covered in the Management Agreement
between the Registrant and AFBA Investment Management Company
which are discussed in Parts A and B.
Item 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to
six months from the effective date of Registrant's 1933 Act
Registration Statement.
Registrant undertakes to call a meeting of shareholders, if
requested to do so by the holders of at least 10% of the
registrant's outstanding shares, for the purpose of voting upon
the question of removal of a director or directors and to assist
in communications with other shareholders.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto authorized,
in the City of Alexandria, and State of Virginia on the 22nd day of January,
1997.
AFBA FIVE STAR FUND, INC.
(Registrant)
By /s/ John A. Johnson
John A. Johnson, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ John A. Johnson
President, Principal Executive
Officer, and Director January 22, 1997
/s/ C.C. Blanton
Director January 22, 1997
/s/ Monroe W. Hatch, Jr.*
Director January 22, 1997
/s/ Louis C. Wagner, Jr.*
Director January 22, 1997
/s/Henry J. Sechler*
Director January 22, 1997
/s/ John C. Kornitzer*
Director January 22, 1997
/s/ Larry Armel*
Director January 22, 1997
/s/ P. Bradley Adams
Vice President and Principal
Financial and Accounting
Officer January 22, 1997
*Signed pursuant to Power of
Attorney
By /s/ C. C. Blanton
Attorney-in-Fact
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EXHIBIT INDEX
Item 24.(b)
Page
(1) (a) Articles of Incorporation 55
(b) Articles Supplementary 62
(2) Bylaws 64
(4) Specimen Security 77
(5)(a) Management Agreement 79
(b) Investment Counsel Agreement 84
(6) Underwriting Agreement 87
(8) Custodian Agreement 90
(9) Transfer Agency Agreement 116
(11) Powers of Attorney 144
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Exhibit 1(a)
ARTICLES OF INCORPORATION
OF
AFBA FIVE STAR FUND, INC.
FIRST: I, the undersigned, Larry D. Armel, whose Post-office address is
5540 Belinder Road, Shawnee Mission, Kansas 66205, being at least twenty-one
years of age, do, under and by virtue of the general laws of the state of
Maryland authorizing the formation of corporations, associate myself as
Incorporator with the intention of forming a corporation (hereinafter called the
"Corporation").
SECOND: The name of the Corporation is AFBA FIVE STAR FUND, INC.
THIRD: The purpose for which the Corporation is formed is to act as an
open-end, diversified management investment company under the Investment Company
Act of 1940, as amended, and to exercise and enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations of a similar character by
the general laws of the state of Maryland now or hereafter in force.
FOURTH: The Post-Office address of the principal office of the
Corporation in this state is C/O the Corporation Trust incorporated, 32 South
Street, Baltimore, Maryland, 21202. The name of the Resident Agent of the
Corporation in this state is the Corporation Trust Incorporated, a corporation
of this state, and the Post-office address of the Resident Agent is 32 South
Street, Baltimore, Maryland, 21202.
FIFTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 40,000,000 shares of a par value of
one dollar ($1.00) per share and an aggregate par value of $40,000,000. The
number of the shares of stock of each class is such number, if any, of shares of
unissued stock as is classified or reclassified into such class by the
Corporation's Board of Directors pursuant to the authority contained in Section
2-105 of the Maryland General Corporation Law as filed by the Corporation as
Articles Supplementary under Section 2-208 of the Maryland General Corporation
Law (or any successor provisions). The Board of Directors of the Corporation
shall have the power to classify or reclassify unissued shares into one or more
classes which together with the issued shares of stock of the corporation shall
have such designations as the board may determine and (subject to any applicable
rule, regulation or order of the Securities and Exchange Commission or other
applicable law or regulation) shall have such preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine (or in the absence of contrary determination, such as
set forth herein) . At any time when there are no shares outstanding or
subscribed for a particular class previously established and designated by the
Board of Directors, the class may be liquidated by similar means. If the Board
so determines, one or more classes of stock may be treated for all purposes
other than dividends as if all shares of such classes were shares of one class.
The dividends payable to the holders of any class (subject to any applicable
rule, regulation or order of the securities and Exchange Commission or any other
applicable law or regulation) shall be determined by the Board and need not be
individually declared, but may be declared and paid in accordance with a formula
adopted by the Board. Each share of a class shall have equal rights with each
other share of that class of stock with respect to the assets of the Corporation
pertaining to that class. Any fractional shares of capital stock issued by the
corporation shall have proportionately, all the rights of full shares. Except as
otherwise provided herein, all references in these articles of incorporation to
capital stock or class of stock shall apply without discrimination to the shares
of each class of stock.
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(A) The holders of each share of stock of the Corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share of stock, irrespective of the class then standing in his or her
name in the books of the Corporation. On any matter submitted to a vote of
shareholders, all shares of the Corporation then issued and outstanding and
entitled to vote, irrespective of the class, shall be voted in the aggregate and
not by class, except (1) when otherwise expressly provided by the Maryland
General Corporation Law or (2) when required by the Investment Company Act of
1940, as amended, shares shall be voted by individual class; and (3) when the
matter does not affect any interest of a particular class, then only
shareholders of the affected class or classes shall be entitled to vote thereon.
(B) Each class of stock of the Corporation shall have the following
powers, preferences and participating, voting, or other special rights and the
qualifications, restrictions, and limitations thereof shall be as follows:
(1) All consideration received by the Corporation f or the issue
or sale of stock of each class, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably belong to the
class of shares of stock with respect to which such assets, payments or funds
were received by the Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the Corporation.
Such assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof and any assets
derived from any reinvestment of such proceeds, in whatever form the same may
be, are herein referred to as "assets belonging to" such class.
(2) The Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all classes of stock,
the amount of such dividends and the payment of them being wholly in the
discretion of the Board of Directors.
(I) Dividends or distributions on shares of any class of stock
shall be paid only out of earnings, surplus, or other lawfully available assets
belonging to such class.
(II) Inasmuch as one goal of the corporation is to qualify as a
"regulated investment company" under the Internal Revenue code of 1986, as
amended, or any successor or Comparable statute thereto and regulations
promulgated thereunder; and inasmuch as the computation of not income and gains
for federal income tax purposes may vary from the computation thereof on the
books of the corporation, the Board of Directors shall have the power in its
discretion to distribute in any fiscal year as dividends, including designated
in whole or in part as capital gain distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company and to avoid liability for the Corporation for
federal income tax in respect of that year.
(3) In the event of the liquidation or dissolution of the corporation,
shareholders of each class shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to shareholders, but other
than general assets not belonging to any particular class of stock, the assets
belonging to such class; and the assets so distributable to the shareholders of
any class shall be distributed among such shareholders in proportion to the
number of shares of such class held by them and recorded on the books of the
Corporation. In the event that there are any general asset,% not belonging to
any particular class of stock and available for distribution, such distribution
shall be made to the holders of stock of all classes in proportion to the asset
value of the respective classes determined as hereinafter provided.
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(4) The assets belonging to any class of stock shall be charged with the
liabilities in respect to such class, and shall also be charged with its share
of the general liabilities of the Corporation, in proportion to the asset value
of the respective classes determined as hereinafter set out. The determination
of the Board of Directors shall be conclusive as to the amount of liabilities,
including accrued expenses and reserves, as to the allocation of the same as to
a given class, and as to whether the same or-general assets of the Corporation
are allocable to one or more classes.
(C) Each holder of any class of stock of the Corporation, who shall
surrender his certificate in good delivery form to the Corporation or who, if
the shares in question are not represented by certificates, shall deliver to the
Corporation a written request in good order signed by the shareholder, shall be
entitled to require the Corporation, to the extent that the class of stock in
question has assets lawfully available therefor and out of such assets, but not
otherwise, to redeem all or any part of the shares of such stock standing in the
name of such holder on the books of the Corporation, at the net asset value of
such shares, determined in the manner and as of the time, and payable as
provided in the Investment Company Act of 1940, as amended. The Corporation
shall make payment for any such shares to be redeemed as aforesaid, in cash, or
if in the opinion of the Board of Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable, the
Corporation may make payment wholly or partly in securities belonging to the
class to provide for such redemption by it of the shares of such class.
(1) The Board of Directors of the Corporation may, in accordance
with the Investment Company Act of 1940, as amended, suspend the right of the
holders of any class of stock of the Corporation to require the Corporation to
redeem shares of such class.
(2) The Board of Directors, in the economic best interest of the
Corporation and in order to reduce the disproportionately burdensome expenses in
servicing shareholder accounts, may from time to time, establish uniform
standards with respect to the minimum value of a stockholder account or a
minimum investment which may be made by a stockholder. The Board of Directors,
by resolution and without the vote or consent of stockholders, may require that
the aggregate net asset value of a stockholder account shall not be less than
the minimum initial investment requirement of the Corporation at the time of the
resolution. The resolution may authorize the Corporation to close those
stockholder accounts not meeting the specified minimum standards of value by
redeeming all of the shares in such accounts, provided there is mailed to each
affected stockholder account, at least sixty (60) days prior to the planned
redemption date, a notice setting forth the minimum account size requirement and
the date on which the account will be closed if the minimum size requirement is
not met prior to said closing date.
(D) Each holder of any class of stock of the Corporation, who surrenders
his certificate in good delivery form to the Corporation or, if the shares in
question are not represented by certificates, who delivers to the Corporation a
written request in good order signed by the shareholder, shall be entitled to
convert the shares in question on the basis hereinafter set forth, into shares
of stock of any other class of the Corporation. The Corporation shall determine
the net asset value, as hereinafter defined, of the shares to be converted and
shall deduct therefrom such conversion cost, hereinafter described and within
five (5) business days after such surrender and payment, shall issue to the
shareholder such number of shares of stock of the class desired taken at the net
asset value thereof determined in the same manner and at the same time as that
of the shares surrendered, which shall equal the net asset value of the shares
surrendered less conversion cost as aforesaid. Any amount representing a
fraction of a share may be paid in cash at the option of the Corporation. The
conversion cost above mentioned shall be determined by adding a transaction
charge as determined by the Board of Directors. The transaction charge may be
paid and/or assigned by the Corporation to the underwriter and/or any other
agency, as it may elect. Upon any conversion taking place, proper transfer shall
be made between the assets belonging to the respective classes of stock. The
Board of
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Directors may limit this conversion privilege to shares which have been held for
such reasonable period of time as the Directors may determine.
(E) The aggregate net asset value per share of a class of the Corporation's
capital stock shall be determined in accordance with the Investment Company Act
of 1940, as amended, and with generally accepted accounting principles, by
adding the market or appraised value of all securities, cash and other assets of
the Corporation pertaining to that class, subtracting the liabilities determined
by the Board of Directors to be applicable to that class, and dividing the net
result by the number of shares of the class outstanding. Securities and other
investments and assets will be valued at fair value as determined in good faith
by the Board of Directors.
SIXTH: The shares of stock of the Corporation may be issued to such persons
and at such prices from time to time as the Board of Directors may determine.
Such issuance shall be on a non-assessable basis. No holder of shares of stock
shall have pre-emptive rights and the Corporation shall have the right to issue
and sell to any person or persons and shares of its stock or any option rights
exercisable for, or securities convertible into shares of its stock without
first offering such shares, rights or securities to the holders of any shares.
SEVENTH: The number of Directors of the Corporation and their terms of
office shall be determined from time to time by the Directors pursuant to the
by-laws of the corporation. Such number initially shall be seven and shall never
be less than three. The names of the initial Directors are:
C. C. Blanton
Monroe W. Hatch,, Jr.
Louis C. Wagner, Jr.
Thomas P. Carney
John A. Johnson
John C. Kornitzer
Larry D. Armel
who shall serve until their respective successors are elected and qualified.
(A) If a vacancy occurs on the Board of Directors by reason of death,
resignation, or otherwise, the Board of Directors may fill such vacancy for the
remainder of the unexpired term by majority vote of the remaining directors;
provided that after filling any such vacancy, at least two thirds of the
Directors shall have been elected by the stockholders, and provided further that
if at any time less than a majority of the Directors then holding office were
elected by the stockholders, a stockholders' meeting shall be called as promptly
as possible and, in any event, within sixty days, for the purpose of electing
Directors to fill existing vacancies.
EIGHTH: The Corporation is expressly empowered as follows:
(A) The Corporation may enter into a written contract or contracts with
any person, including any firm, corporation, trust, or association in which any
officer, other employee, director or stockholder of this corporation may be
interested, providing for a delegation of the management of all or part of this
corporation's securities portfolio (or portfolios) and also for the delegation
of the performance of administrative corporate functions, subject always to the
direction of the Board of Directors of this corporation. The compensation
payable by this corporation under such contracts shall be such as is deemed fair
and equitable to both parties by the said Board of Directors. Each such contract
shall in all respects be consistent with and subject to the requirements of the
Investment Company Act of 1940, as amended, as then
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in effect and regulations of the securities and exchange commission or any
succeeding governmental authority promulgated thereunder.
(B) The Corporation may appoint one or more distributors or agents or
both for the sale of the shares of the Corporation, may allow such person or
persons a commission on the sale of such shares, and may enter into such
contract or contracts with such person or persons as the Board of Directors of
this Corporation in its discretion may deem reasonable and proper. Any such
contract or contracts for the sale of the shares of this corporation may be made
with any person even though such person may be an officer, other employee,
director or stockholder of this corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
stockholder nay be interested, or such person-may be the same as that person
retained pursuant to the powers granted in Section (A) of this Article EIGHTH.
Each such contract shall in all respects be consistent with and subject to the
requirements of the Investment Company Act of 1940, as amended, as then in
effect and regulations of the Securities and Exchange Commission or any
succeeding governmental authority promulgated thereunder.
(C) The Corporation may employ such custodian or custodians for the
safekeeping of the property of the corporation and of its shares, such dividend
disbursing agent or agents, and such transfer agent or agents and registrar or
registrars for its shares, and may make and perform such contracts for the
aforesaid purposes as in the opinion of the Board of Directors of this
Corporation may be reasonable, necessary or proper for the conduct of the
affairs of the Corporation, and may pay the fees and disbursements of such
custodian, dividend disbursing agents, transfer agents, and registrars out of
the income and/or any other property of the Corporation. Notwithstanding any
other provisions of these articles of incorporation or the by-laws of the
Corporation, the Board of Directors may cause any or all of the property of the
Corporation to be transferred to, or be acquired and held in the name of, a
custodian so appointed or any nominees of this Corporation or nominee or
nominees of such custodian satisfactory to the Board of Directors of this
Corporation.
(D) The same person, partnership (general or limited), association,
trust or corporation may be employed in any multiple capacity under subsections
(A), (B) and (C) of this article EIGHTH and may receive compensation from the
corporation in as many capacities in which such person, partnership (general or
limited), association, trust or corporation shall serve the Corporation.
NINTH: (A) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(B) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Board of Directors may by Bylaw, resolution or agreement make further
provisions for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation Law.
(C) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
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(D) References to the Maryland General corporation Law in this Article
are to the law as from time to time amended. No further amendment to the
Articles of Incorporation of the Corporation shall affect any right of any
person under this Article based on any event, omission or proceeding prior to
such amendment.
(E) Each provision of this Article NINTH shall be severable from the
remainder, and the invalidity of any such provision shall not affect the
validity of the remainder of this Article NINTH.
TENTH: The Corporation may purchase and maintain insurance on its
behalf and on behalf of any person who is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, trust, joint venture,
association or other enterprise against any liability asserted against him and
incurred by him in any such capacity.
ELEVENTH: In furtherance, and not in limitation, of the powers
conferred by the laws of the state of Maryland, the Board of Directors is
expressly authorized:
(A) To make, alter or repeal the by-laws of the Corporation, except
where such power is reserved by the by-laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.
(B) From time to time to determine whether and to what extent and at
what times and places and under what conditions and regulations the books and
accounts of the Corporation, or any of them other than the stock ledger, shall
be open to the inspection of the stockholder, and no stockholder shall have any
right to inspect any account or book or document of the Corporation, except as
conferred by law or authorized by resolution of the Board of Directors or of the
stockholders.
(C) To authorize and issue obligations of the Corporation, secured and
unsecured, without assent or vote of the stockholders, as the Board of Directors
may determine, and to authorize and cause to be executed mortgages and liens
upon the property of the Corporation, real and/or personal, but only to the
extent permitted by the fundamental policies of the Corporation set out in its
registration statement filed with the Federal Securities and Exchange Commission
or any succeeding governmental authority, pursuant to the Investment Company Act
of 1940, as amended.
(D) In addition to the powers and authorities granted herein an(f by
statute expressly conferred upon it, the Board of Directors is authorized to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of Maryland
law, these Articles of Incorporation, and the by-laws of the corporation.
TWELFTH: The books of the Corporation may be kept (subject to any
provisions of Maryland law) outside the state of Maryland at such place or
places as may be designated from time to time by the Board of Directors or in
the by-laws of the Corporation. Elections of directors need not be by ballot
unless the by-laws of the Corporation so provide.
THIRTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein @e granted subject to this reservation.
FOURTEENTH: Notwithstanding any provision of Maryland law requiring
more than a majority vote of the common stock in connection with any corporate
action including, but not limited to, amendment of these Articles of
Incorporation, unless otherwise provided in these Articles of Incorporation the
Corporation
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may take or authorize such action upon the favorable vote of the holders of a
majority of the outstanding shares of common stock.
FIFTEENTH: The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, the undersigned Incorporator of the AFBA FIVE STAR
FUND, INC. who executed the foregoing Articles of Incorporation hereby
acknowledges that to the best of his knowledge the matters and facts set forth
herein are true in all material respects under penalties of perjury.
Dated the 6th day of January, 1997.
/s/ Larry D. Armel
Larry D. Armel
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Exhibit 1(b)
ARTICLES SUPPLEMENTARY
TO ARTICLES OF INCORPORATION
OF AFBA FIVE STAR FUND, INC.
THE AFBA FIVE STAR FUND, INC., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation",
hereby certifies to the State Department of Assessments and Taxation of
Maryland, in accordance with the requirements of Section 2-208 and 2-208.1 of
the Maryland General Corporation Law that:
FIRST: The Corporation is registered as an open-end
management investment company under the Investment Company Act of 1940.
SECOND: The total number of shares which the Corporation currently has
authority to issue is 40,000,000 shares of stock, with a par value of one dollar
($1.00) per share, known as Common Stock and such Common Stock having an
aggregate par value of forty Million Dollars ($40,000,000), is classified and
allocated into one class as follows:
Number of Shares of Common Stock
Name of Class Initially Classified and Allocated
- ------------- ----------------------------------
Common Capital Stock 40,000,000
THIRD: The Board of Directors of the Corporation, at a meeting duly
convened and held on ___________________, 1997, adopted resolutions allocating
and classifying or reclassifying its shares as follows:
Number of Shares of Common Stock
Name of Class Initially Classified and Allocated
- ------------- ----------------------------------
AFBA Five Star Balanced Fund 10,000,000
AFBA Five Star Equity Fund 10,000,000
AFBA Five Star High Yield Fund 10,000,000
AFBA Five Star USA Global Fund 10,000,000
FOURTH: The shares of each series so classified and allocated shall
have all the rights and privileges as set forth in the Corporation's Articles of
Incorporation, including such priority in the assets and liabilities of such
series as may be provided in such Articles.
FIFTH: The shares of each series have been classified by the Board of
Directors pursuant to authority contained in the Articles of Incorporation of
the Corporation.
SIXTH: After giving effect to the allocation, the aggregate par value
of all Common Stock of the Corporation is Forty Million Dollars ($40,000,000)
and the total amount of Common Stock, with a par value of one dollar ($1.00) per
share, allocated to each class is as follows:
Total Number of
Name of Class Shares Allocated
- ------------- ----------------
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AFBA Five Star Balanced Fund 10,000,000
AFBA Five Star Equity Fund 10,000,000
AFBA Five Star High Yield Fund 10,000,000
AFBA Five Star USA Global Fund 10,000,000
IN WITNESS WHEREOF, ABF FIVE STAR FUND INC. has caused these presents to be
signed in its name and on its behalf by its President and attested by its
Secretary on January ______________, 1997.
AFBA FIVE STAR FUND, INC.
By: _______________________________
Attest:
- -------------------------------------
THE UNDERSIGNED, President of AFBA FIVE STAR FUND, INC., who executed on behalf
of said Corporation the foregoing Articles Supplementary to the Articles of
Incorporation of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles Supplementary
to the Articles of Incorporation to be the corporate act of said Corporation and
further certifies that, to the best of his knowledge, information and belief,
the matters set forth therein with respect to the approval thereof are true in
all material respects, under the penalties of perjury.
-----------------------------------
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Exhibit 2
BY-LAWS
OF
AFBA FIVE STAR FUND, INC.
ARTICLE I
FISCAL YEAR AND OFFICES
Section 1. Fiscal Year. Unless otherwise provided by resolution of the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of April and end on the last day of March.
Section 2. Registered Office. The registered office of the corporation
in Maryland shall be C/O the CORPORATION TRUST, INCORPORATED, 32 South Street,
Baltimore, Maryland, 21202.
Section 3. Other Offices. The corporation shall have a place of
business in the State of Missouri, and the corporation shall have the power to
open additional offices for the conduct of its business, either within or
outside the states of Maryland and Missouri, at such places as the Board of
Directors may from time to time designate.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting. Meetings of the stockholders for the
election of directors shall be held in such place as the Board of Directors may
by resolution establish. In the absence of any specific resolution, annual
meetings of stockholders shall be held at the corporation's principal office in
the State of Missouri. Meetings of stockholders for any other purpose may be
held at such place and time as shall be stated in the notice of the meeting, or
in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of stockholders, if
held, shall be held at such time during the month of September as may be fixed
by the Board of Directors by resolution each year. At any annual meeting, the
stockholders shall elect a Board of Directors and transact any other business
which may properly be brought before the meeting. No annual meeting of
stockholders shall be required in any year in which the only business to be
transacted at such meeting does not require action by stockholders on any one or
more of the following:
(1) the election of directors;
(2) approval of the investment advisory agreement;
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(3) ratification of the selection of independent public
accountants;
(4) approval of a distribution agreement.
Section 3. Special Meetings. At any time in the interval between annual
meetings, special meetings of the stockholders may be called by the president or
by a majority of the Board of Directors and shall be called by the president or
secretary upon written request of the holders of shares entitled to cast not
less than ten percent of all the votes entitled to be cast at such meeting.
Section 4. Notice. Not less than ten nor more than ninety days before
the date of every annual or special stockholders' meeting, the secretary shall
give to each stockholder entitled to vote at such meeting written notice stating
the time and place of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
Section 5. Record Date for Meetings. The Board of Directors may fix in
advance a date not more than ninety days, nor less than ten days, prior to the
date of any annual or special meeting of the stockholders as a record date for
the determination of the stockholders entitled to receive notice of, and to vote
at any meeting and any adjournment thereof; and in such case such stockholders
and only such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to receive notice of and to vote only such shares held
and outstanding on such record date that continue to be held and outstanding at
the time of voting.
Section 6. Quorum. At any meeting of stockholders, the presence in
person or by proxy of the holders of a majority of the aggregate shares of stock
at the time outstanding shall constitute a quorum. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting originally notified.
Section 7. Majority. The vote of the holders of a majority of the stock
having voting power, as measured by the applicable quorum requirements set forth
in Section 6, present in person or represented by proxy, at a meeting duly
called and at which a quorum is present, shall be sufficient to take or
authorize action upon any matter which may properly come before the meeting,
unless otherwise required by the Investment Company Act of 1940, as amended.
Section 8. Voting. Each stockholder shall have one vote for each full
share and a fractional vote for each fractional share of stock having voting
power held by such stockholder on each matter submitted to a vote at a meeting
of stockholders. A stockholder may cast his vote in person or by proxy, but no
proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. At all meetings of stockholders, unless the voting is
conducted by inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided by the chairman of the meeting.
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Section 9. Inspectors. At any election of directors, the Board of
Directors prior thereto may, or, if they have not so acted, the chairman of the
meeting may, and upon the request of the holders of ten percent (10%) of the
shares entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath of affirmation to execute faithfully
the duties of inspectors at such election with strict impartiality and according
to the best of their ability, and shall after the election make a certificate of
the result of the vote taken. No candidate for the office of director shall be
appointed such inspector. The chairman of the meeting may cause a vote by ballot
to be taken upon any election or matter, and such vote shall be taken upon the
request of the holders of ten percent (10%) of the stock entitled to vote on
such election or matter.
Section 10. Stockholder List. The officer who has charge of the stock
ledger of the corporation shall, at least ten days before every election of
directors, prepare and make a complete list of the stockholders entitled to vote
at said election, arranged in alphabetical order, showing the address and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, during ordinary business hours, for
a period of at least ten days prior to the election, either at a place within
the city, town or village where the election is to be held and which place shall
be specified in the notice of meeting, or if not specified, at the place where
said meeting is to be held, and the list shall be produced and kept at the time
and place of election during the whole time thereof, and subject to the
inspection of any stockholder who may be present.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business of the corporation shall be
managed by its Board of Directors, which may exercise all powers of the
corporation, except such as are by statute, or the Articles of Incorporation, or
by these By-laws conferred upon or reserved to the stockholders.
Section 2. Number and Term of Office. The number of directors which
shall constitute the whole Board shall be determined from time to time by the
Board of Directors, but shall not be fewer than three. Each director elected
shall hold office until his successor is elected and qualified. Directors need
not be stockholders.
Section 3. Elections. The Directors shall all be of one class and shall
serve until their respective successors are elected and qualified.
Section 4. Place of Meeting. Meetings of the Board of Directors,
regular or special, may be held at any place in or out of the State of Maryland
as the Board may from time to time determine.
Section 5. Quorum. At all meetings of the Board of Directors a majority
of the entire Board of Directors shall constitute a quorum for the transaction
of business and the action of a majority of the directors present at any meeting
at which a quorum is present shall be the action of the Board of Directors
unless the concurrence of a greater proportion is required for such action by
the laws of the State of Maryland, these By-laws or the Articles of
Incorporation
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or a different number is required by the Investment Company Act of 1940, as
amended. If a quorum shall not be present at any meeting of directors, the
directors present thereat may by a majority vote adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 6. First Meeting. The first meeting of each newly constituted
Board of Directors shall be held as soon as practicable after the annual meeting
of stockholders in each year, at such time and place as shall be specified in a
notice given as hereinafter provided for meetings of the Board of Directors, or
as shall be specified in a written waiver signed by all of the directors.
Section 7. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 8. Special Meetings. Special meetings of the Board of Directors
may be called by the president on one day's notice to each director; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two directors.
Section 9. Telephonic Meetings. Regular or special meetings, except for
meetings to approve an investment advisory agreement or a distribution plan, of
the Board of Directors or any committee thereof, may be held by means of a
conference telephone or similar communications equipment so that all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the meeting.
Section 10. Informal Actions. Any action, except approval of an
investment advisory agreement, or a distribution plan, required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting, if written consent to such action is signed in one
or more counterparts by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board or committee.
Section 11. Committees. The Board of Directors may by resolution passed
by a majority of the whole Board appoint from among its members an executive
committee and other committees composed of two or more directors, and may
delegate to such committees, in the intervals between meetings of the Board of
Directors, any or all of the power of the Board of Directors in the management
of the business and affairs of the corporation, except the power to declare
dividends, to issue stock or to recommend to stockholders any action requiring
stockholders' approval. In the absence of any member of such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a member of the Board of Directors to act in the place of such
absent member.
Section 12. Action of Committees. The committees shall keep minutes of
their proceedings and shall report the same to the Board of Directors at the
meeting next succeeding, and any action by committees shall be subject to
revision and alteration by the Board of Directors, provided that no rights of
third persons shall be affected by any such revision or alteration.
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Section 13. Compensation. Any director, whether or not he is a salaried
officer or employee of the corporation, may be compensated for his services as a
director or as a member of a committee of directors, or as chairman of the Board
or chairman of a committee by fixed or periodic payments or by fees for
attendance at meetings or by both, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the Board
of Directors may from time to time determine.
Section 14. Removal. The stockholders of this corporation may remove
any director with or without cause by the affirmative vote of a majority of all
the votes entitled to be cast for the election of directors.
ARTICLE IV
NOTICES
Section 1. Form. Notices to stockholders shall be in writing and
delivered personally or mailed to the stockholders at their addresses appearing
on the books of the corporation. Notice by mail shall be deemed to be given at
the time when the same shall be mailed. Notice to directors need not state the
purpose of a regular or special meeting.
Section 2. Waiver. Whenever any notice of the time, place or purpose of
any meeting of stockholders, directors or committee is required to be given
under the provisions of Maryland law or under the provisions of the Articles of
Incorporation or these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of stockholders in person or by proxy, or at the meeting of
directors or committee in person, shall be deemed equivalent to the giving of
such notice to such persons.
ARTICLE V
OFFICERS
Section 1. Officers of the Corporation. The officers of the corporation
shall be elected by the Board of Directors and shall include a president, who
shall be a director, a secretary and a treasurer. The Board of Directors may,
from time to time, elect or appoint a controller, one or more vice-presidents,
assistant secretaries and assistant treasurers. The president shall preside at
meetings of the Board of Directors, unless the Board of Directors, at its
discretion, elects a chairman of the Board to preside at such meetings. In
addition, such chairman shall perform and execute such executive and
administrative duties and have such powers as the Board of Directors may from
time to time prescribe. Two or more offices may be held by the same person but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity, if such instrument is required by law, the Articles of Incorporation
or these By-laws to be executed, acknowledged or verified by two or more
officers.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a president, a secretary and a
treasurer.
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Section 3. Compensation. The salaries or other compensation of all
officers and agents of the corporation paid directly by the corporation shall be
fixed by the Board of Directors, except that the Board of Directors may delegate
to any person or group of persons the power to fix such salaries or other
compensation.
Section 4. Tenure. The officers of the corporation shall serve for one
year and until their successors are chosen and qualify. Any officer or agent may
be removed by the affirmative vote of a majority of the Board of Directors
whenever, in its judgment, the best interests of the corporation will be served
thereby. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors.
Section 5. President. The president, unless the chairman has been so
designated, shall be the chief executive officer of the corporation. He shall
preside at all meetings of the stockholders and directors and shall see that all
orders and resolutions of the Board are carried into effect. The president shall
also be the chief administrative officer of the corporation and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 6. Vice-Presidents. The vice-presidents, in the order of their
seniority, shall in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties as the Board of Directors may from time to time prescribe.
Section 7. Secretary. The secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings thereof and shall perform like duties for any committee when
required. In the absence of the secretary or an assistant secretary, proceedings
of such meetings shall be recorded by a person selected by the chairman of the
meeting. He shall give, or cause to be given, notice of meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or president, under whose
supervision he shall be. He shall keep in safe custody the seal of the
corporation and, when authorized by the Board of Directors, affix and attest the
same to any instrument requiring it. The Board of Directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the same by affixing his signature.
Section 8. Assistant Secretaries. The assistant secretaries, in order
of their seniority, shall in the absence or disability of the secretary, perform
the duties and exercise the powers of the secretary and shall perform such other
duties as the Board of Directors shall prescribe.
Section 9. Treasurer. The treasurer, unless another officer has been so
designated, shall be the chief financial officer of the corporation. He shall be
responsible for the maintenance of its accounting records and shall render to
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all the corporation's financial transactions and a
report of the financial condition of the corporation.
Section 10. Controller. The controller shall be under the direct
supervision of the treasurer. He shall maintain adequate records of all assets,
liabilities and transactions of the corporation, establish and maintain internal
accounting control and, in cooperation with the
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independent public accountants selected by the Board of Directors, shall
supervise internal auditing. He shall have such further powers and duties as may
be conferred upon him from time to time by the president or the Board of
Directors.
Section 11. Assistant Treasurers. The assistant treasurers, in the
order of their seniority, shall in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties as the president or the Board of Directors may from time to
time prescribe.
Section 12. Other Officers. The Board of Directors from time to time
may appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
The Board of Directors from time to time may delegate to one or more officers or
agents the power to appoint any such subordinate officers or agents, except
assistant treasurers and to prescribe the respective rights, terms of office,
authorities and duties.
ARTICLE VI
NET ASSET VALUE
The net asset value per share of stock of the corporation shall be determined at
least once each day at the close of business on the New York Stock Exchange on
each day the New York Stock Exchange is open for trading. Net asset value shall
be calculated by adding the value of all securities and other assets of the
Fund, deducting its liabilities and dividing by the number of shares
outstanding.
ARTICLE VII
INVESTMENT RESTRICTIONS
The following investment restriction cannot be changed without the
consent of the holders of a majority of the corporation's outstanding shares of
stock; the corporation shall not:
(1) purchase the securities of any one issuer, except the United States
government, if immediately after and as a result of such purchase (a) the value
of the holdings of the Fund in the securities of such issuer exceeds 5% of the
value of the Fund's total assets, or (b) the Fund owns more than 10% of the
outstanding voting securities, or any other class of securities, of such issuer;
(2) engage in the purchase or sale of real estate, commodities or futures
contracts; (3) underwrite the securities of other issuers; (4) make loans to any
of its officers, directors, or employees, or to its manager, or general
distributor, or officers or directors thereof; (5) make any loan (the purchase
of a security subject to a repurchase agreement or the purchase of a portion of
an issue of publicly distributed debt securities is not considered the making of
a loan); (6) invest in companies for the purpose of exercising control of
management; (7) purchase securities on margin, or sell securities short, except
that the Fund may write covered call options; (8) purchase shares of other
investment companies except in the open market at ordinary broker's commission
or pursuant to a plan of merger or consolidation; (9) invest in the aggregate
more than 5% of the
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value of its gross assets in the securities of issuers (other than federal,
state, territorial, or local governments, or corporations, or authorities
established thereby), which, including predecessors, have not had at least three
years' continuous operations; (10) except for transactions in its shares or
other securities through brokerage practices which are considered normal and
generally accepted under circumstances existing at the time, enter into dealings
with its officers or directors, its manager or underwriter, or their officers or
directors, or any organization in which such persons have a financial interest;
(11) borrow or pledge its credit under normal circumstances, except up to 10% of
its gross assets (computed at the lower of fair market value or cost)
temporarily for emergency or extraordinary purposes, and not for the purpose of
leveraging its investments, and provided further that any borrowing in excess of
5% of the total assets of the Fund shall have asset coverage of at least 3 to 1;
(12) make itself or its assets liable for the indebtedness of others; (13)
invest in securities which are assessable or involve unlimited liability; or
(14) purchase any securities which would cause 25% or more of the Fund's total
assets at the time of such purchase to be invested in any one industry.
ARTICLE VIII
OTHER RESTRICTIONS
Section 1. Dealings. The officers and directors of the corporation and
its investment adviser shall have no dealings for or on behalf of the
corporation with themselves as principal or agent, or with any corporation,
partnership, trust, joint venture or association in which they have a financial
interest, provided that this section shall not prevent:
(A) Officers or directors of the corporation from having a financial
interest in the corporation, in any sponsor, manager, investment adviser or
promoter of the corporation, or in any underwriter or securities issued by the
corporation.
(B) The purchase of securities for the portfolio of the corporation, or
sale of securities owned by the corporation through a security dealer, one or
more of whose partners, officers, directors or security holders is an officer or
director of the corporation, provided such transactions are handled in a
brokerage capacity only, and provided commissions charged do not exceed
customary brokerage charges for such services.
(C) The employment of any legal counsel, registrar, transfer agent,
dividend disbursing agent or custodian having a partner, officer, director or
security holder who is an officer or director of the corporation; provided only
customary fees are charged for services rendered to or for the benefit of the
corporation.
(D) The purchase for the portfolio of the corporation of securities
issued by an issuer having an officer, director or security holder who is an
officer or director of the corporation or of any manager of the corporation,
unless the retention of such securities in the portfolio of the corporation
would otherwise be a violation of these By-laws or the Articles of Incorporation
of the corporation.
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ARTICLE IX
STOCK
Section 1. Certificates. Each stockholder shall be entitled to a
certificate or certificates which shall certify the number of shares owned by
him in the corporation. Each certificate shall be signed by the president or a
vice-president and countersigned by the secretary or an assistant secretary or
the treasurer or an assistant treasurer and shall be sealed with the corporate
seal.
Section 2. Signature. When a certificate is signed by a transfer agent
or an assistant transfer agent or by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president,
vice-president, treasurer, assistant treasurer, secretary or assistant secretary
may be facsimile. In case any officer who has signed any certificate ceases to
be an officer of the corporation before the certificate is issued, the
certificate may nevertheless be issued by the corporation with the same effect
as if the officer had not ceased to be such officer as of the date of its issue.
Section 3. Recording and Transfer Without Certificates. Notwithstanding
the foregoing provisions of this article, the corporation shall have full power
to participate in any program approved by the Board of Directors providing for
the recording and transfer of ownership of shares of the corporation's stock by
electronic or other means without the issuance of certificates.
Section 4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been stolen,
lost or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be stolen, lost or destroyed, or upon other
satisfactory evidence of such loss or destruction. When authorizing such
issuance of a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such stolen, lost or destroyed certificate or certificates, or his
legal representative to advertise the same in such manner as it shall require
and to give the corporation a bond with sufficient surety, to the corporation to
indemnify it against any loss or claim that may be made by reason of the
issuance of a new certificate.
Section 5. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except, as otherwise provided by the laws of Maryland.
Section 6. Transfer Agents and Registrars. The corporation may act as
its own transfer agent and/or registrar, or it may delegate those duties to
others. The Board of Directors may from time to time, appoint or remove transfer
agents and/or registrars of stock of the corporation, and it may appoint the
same person as both transfer agent and registrar. Upon any such appointment
being made all certificates representing shares of stock thereafter issued shall
be countersigned by one of such transfer agents or by one of such registrars or
by both and
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shall not be valid unless so countersigned. If the same person shall be both
transfer agent and registrar, only countersignature by such person shall be
required.
Section 7. Stock Ledger. The corporation shall maintain an original
stock ledger containing the names and addresses of all stockholders and the
number and class of shares held by each stockholder. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection.
Section 8. Transfers of Stock. The corporation shall transfer or
otherwise change the registration of its issued and outstanding shares in its
stock ledger upon receipt of an authorization in a form proper and acceptable to
it or its duly appointed agent. To the extent such shares are evidenced by a
certificate or certificates, the surrender of such certificate properly endorsed
shall be required where necessary. Upon receipt of the transfer instructions in
proper order by the corporation, the corporation shall change its stock ledger
records accordingly and record the transaction upon its books.
ARTICLE X
GENERAL PROVISIONS
Section 1. Dividends. With respect to dividends (including "dividends"
designated as "short" or "long" term "capital gains" distributions to satisfy
requirements of the Investment Company Act of 1940, as amended, or the Internal
Revenue Code of 1954, as amended from time to time):
(A) Such dividends, at the election of the stockholders, may be
automatically reinvested in additional shares (or fractions thereof) of the
corporation at the "net asset value" determined on the reinvestment date fixed
by the Board of Directors.
(B) The Board of Directors in declaring any dividend, may fix a record
date not earlier than the date of declaration or more than 40 days prior to the
date of payment, as of which the stockholders entitled to receive such dividend
shall be determined, notwithstanding any transfer or the repurchase or issue (or
sale) of any shares after such record date.
(C) Dividends or distributions on shares of stock whether payable in
stock or cash, shall be paid out of earnings, surplus or other lawfully
available assets; provided that no dividend payment, or distribution in the
nature of a dividend payment, may be made wholly or partly from any source other
than accumulated, undistributed net income, determined in accordance with good
accounting practice, and not including profits or losses realized in the sale of
securities or other properties, unless such payment is accompanied by a written
statement clearly indicating what portion of such payment per share is made from
the following sources:
(i) accumulated or undistributed net income not including profits
or losses from the sale of securities or other properties;
(ii) accumulated undistributed net profits from the sale of
securities or other properties;
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(iii) net profits from the sale of securities or other properties
during the then current fiscal year; and
(iv) paid-in surplus or other capital source.
(D) In declaring dividends and in recognition that the one goal of the
corporation is to qualify as a "regulated investment company" under the Internal
Revenue Code of 1954, as amended, the Board of Directors shall be entitled to
rely upon estimates made in the last two months of the fiscal year as to the
amounts of distribution necessary for this purpose; and the Board of Directors,
acting consistently with good accounting practice and with the express
provisions of these By-laws, may credit receipts and charge payments to income
or otherwise, as it may seem proper.
(E) Any dividends declared, except as aforesaid, shall be deemed
liquidating dividends and the stockholders shall be so informed to whatever
extent may be required by law. A notice that dividends have been paid from
paid-in surplus, or a notice that dividends have been paid from paid-in capital,
shall be deemed to be a sufficient notice that the same constitutes liquidating
dividends.
(F) Anything in these By-laws to the contrary notwithstanding, the
Board of Directors may at any time declare and distribute pro rata among the
stockholders of a record date fixed as above, a "stock dividend" out of either
authorized but unissued, or treasury shares of the corporation, or both.
Section 2. Rights in Securities. The Board of Directors, on behalf of
the corporation, shall have the authority to exercise all of the rights of the
corporation as owners of any securities which might be exercised by any
individual owning such securities in his own right; including but not limited
to, the rights to vote by proxy for any and all purposes (including the right to
authorize any officer of the manager to execute proxies), to consent to the
reorganization, merger or consolidation of any company or to consent to the
sale, lease or mortgage of all or substantially all of the property and assets
of any company; and to exchange any of the shares of stock of any company for
shares of stock issued therefor upon any such reorganization, merger,
consolidation, sale, lease or mortgage.
Section 3. Custodianship. Securities owned by the corporation and cash
representing (A) the proceeds from sales of securities owned by the corporation
and of shares issued by the corporation, (B) payments of principal upon
securities owned by the corporation, or (C) capital distributions in respect of
securities owned by the corporation shall be held by one or more custodians, as
permitted by the Investment Company Act of 1940, as amended, to be selected by
the Board of Directors. Each bank and/or trust company selected as a custodian
shall be organized and existing under a state banking and/or trust company law,
or shall be a national banking association incorporated under the laws of the
United States of America and qualified to act as a trust company, and shall have
an aggregate capital, surplus and undivided profits of not less than $2,000,000.
Each custodian shall enter into an agreement with the corporation to serve as a
custodian of such securities and cash on terms consistent with the provisions of
these By-laws. From the time any such trust company, banking association or
other permissible entity becomes a custodian of such securities and cash, it
shall:
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(A) Deliver securities owned by the corporation, only upon sale of such
securities for the account of the corporation and receipt of payment therefor by
the custodian, or when such securities may be called, redeemed, retired or
otherwise become payable, provided that this provision shall not prevent:
(i) Delivery of securities for examination to the broker selling
the same, in accordance with the "street delivery" custom, whereby
such securities are delivered to such broker in exchange for a
delivery receipt exchanged on the same day for an uncertified check of
such broker to be presented on the same day for certification.
(ii) Delivery of securities of an issuer in exchange for or for
conversion into, other securities alone, or cash and other securities,
pursuant to any plan or merger, consolidation, reorganization,
recapitalization or readjustment of the securities of such issuer or
for deposit with a reorganization committee or protective committee,
pursuant to a deposit agreement.
(iii) The conversion by the custodian of securities owned by the
corporation, pursuant to the provisions of such securities into other
securities.
(iv) The surrender by the custodian of warrants, rights or
similar securities owned by the corporation in the exercise of such
warrants, rights or similar securities, or the surrender of interim
receipts or temporary securities for definitive securities.
(v) The delivery of securities as collateral on borrowing
affected by the corporation, subject to the limitations of Article VII
of these By-laws.
(vi) The delivery of securities owned by the corporation, as a
complete or partial redemption in kind of securities issued by the
corporation.
(B) Deliver funds of the corporation only upon the purchase of
securities for the portfolio of the corporation, and the delivery of such
securities to the custodian; provided always, that such limitation shall not
prevent the release of funds by the custodian for redemption of shares issued by
the corporation, for payment of interest, dividend disbursements, taxes,
management fees, custodian fees, other operating expenses properly authorized by
an officer or officers as required by the custodian agreement, payments in
connection with conversion, exchange or surrender of securities owned by the
corporation (as set forth in Subsection A of this Section) and for
organizational and such other obligations as approved by the Board of Directors
certified in writing.
(C) Upon the resignation or inability of a custodian to serve as
custodian of the assets of the corporation, the corporation shall use its best
efforts to obtain a successor custodian, to require that the cash and securities
owned by the corporation be delivered directly to such successor custodian and,
in the event that no such successor can be found, to submit to the stockholders
- -- before permitting delivery of the cash and securities owned by the
corporation to anyone other than a successor custodian -- the question of
whether the corporation shall be liquidated or shall function without such
custodian.
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(D) Nothing hereinbefore contained shall prevent any such custodian
from delivering assets of the corporation to a successor custodian having the
qualifications hereinabove prescribed.
(E) No directors, officers, employees or agents of the corporation
shall be authorized or permitted to withdraw any assets held by the custodian,
except as permitted in this Article X and in the Custodian Agreement.
Directions, notices or instructions to the custodian, with respect to delivery
of securities, payment of cash or otherwise, shall be given by such officer or
officers and/or such person or persons, and in such manner, as the Board of
Directors may from time to time designate.
Section 4. Reports. The corporation shall transmit to the stockholders,
at least semiannually, a report of the operations of the corporation based at
least annually upon an audit by independent public accountants. Said report
shall clearly set forth the information customarily furnished in a balance sheet
and profit and loss statement, and in addition, shall clearly set forth a
statement of all amounts paid directly to securities dealers, legal counsel,
transfer agents, disbursing agents, registrars, custodians or trustees, where
such payments are made to a firm, corporation, bank or trust company having an
officer, director or partner who is also an officer or director of this
corporation. A copy or copies, of all reports submitted to the stockholders of
this corporation shall also be sent, as required to the regulatory agencies of
the United States of America and the states in which the securities of this
corporation are registered and sold.
Section 5. Bonding of Officers and Employees. All officers and
employees of the corporation shall be bonded to such extent, and in such manner,
as may be required by law.
Section 6. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE XI
AMENDMENTS
These By-laws may be altered, amended, repealed or restated at any regular or
special meeting of the Board of Directors, provided that the provisions of
Article VII may not be altered, amended, repealed or restated without the
consent of a majority of the holders of the corporation's outstanding common
stock (as defined in the Investment Company Act of 1940, as amended, and the
corporation's Articles of Incorporation) and provided further that the right of
the Board of Directors to alter, amend, repeal or restate and the procedures
therefor meet the requirements of the Investment Company Act of 1940, as
amended, if any.
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Exhibit 4
A MARYLAND CORPORATION
AFBA FIVE STAR FUND, INC.
Common Stock Par Value One Dollar Per Share
CUSIP
COM
THIS CERTIFIES THAT __________________________________________________ is the
registered holder of _________________________________________________ Shares
AFBA FIVE STAR [BALANCED][EQUITY][USA GLOBAL][HIGH YIELD] FUND
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ___________day of _____________________A.D. 19__.
- ----------------------- ---------------------------------
Secretary President
Registered and Countersigned
By ________________________________
Authorized Person
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DEMAND FOR REDEMPTION
THE UNDERSIGNED SHAREHOLDER hereby surrenders to the Corporation this
certificate and the shares evidenced thereby and demands redemption in
accordance with the provisions of Article Five of the Articles of Incorporation
and as described in the Prospectus.
__________________________, 19__
________________________________________
Date Shareholder
__________________________
Witness
THE SHAREHOLDER SHOULD REFER TO THE PROSPECTUS
FOR SIGNATURE GUARANTEE REQUIREMENTS
ASSIGNMENT
For Value Received, _________ hereby sell, assign and transfer unto
____________________________________________________ Shares represented by the
within Certificate, and do hereby irrevocably constitute and appoint
________________________________________ Attorney to transfer the said Shares on
the Books of the within named Corporation with full powers of substitution in
the premises.
Dated _____________________, 19__
In the presence of
__________________________ __________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER.
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Exhibit 5(a)
MANAGEMENT AGREEMENT
between
AFBA INVESTMENT MANAGEMENT COMPANY
and
AFBA FIVE STAR FUND, INC.
THIS AGREEMENT, made and entered into this ____ day of ____________,
1997, by and between AFBA FIVE STAR FUND, INC., (a Maryland corporation,
hereinafter referred to as the "Fund") and AFBA INVESTMENT MANAGEMENT COMPANY, a
corporation organized under the laws of the State of Missouri (hereinafter
referred to as the "Manager"), and which Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute but one instrument.
WHEREAS, the Fund was founded and incorporated by the Manager for the
purpose of engaging in the business of investing and reinvesting its property
and assets and to operate as an open-end, diversified , management investment
company, as defined in the Investment Company Act of 1940 as amended ("Act"),
under which it is registered with the Securities and Exchange Commission, and
WHEREAS, the Manager was formed for and is engaged in the business of
supplying investment advice and management service to the Fund, as an
independent contractor, and
WHEREAS, the Fund Manager desires to enter into a contractual
arrangement whereby the Manager provides investment advice and management
service to the Fund for a fee,
NOW THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, receipt of which is hereby
acknowledged, it is mutually agreed and contracted by and between the parties
hereto that:
1. The Fund hereby employs the Manager, for the period set forth in
Paragraph 5 hereof, and on the terms set forth herein, to render investment
advice and management service to the Fund, subject to the supervision and
direction of the Board of Directors of the Fund. The Manager hereby accepts such
employment and agrees, during such period, to render the services and assume the
obligations herein set forth, for the compensation herein provided. The
Management shall, for all purposes herein, be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized, have
no authority
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to act for or represent the Fund in any way, or in any other way be deemed an
agent of the Fund.
The Manager shall furnish the Fund investment management and
administrative services. Investment management shall include analysis, research
and portfolio recommendations consistent with the Fund's objectives and
policies. Administrative services shall include the services and compensation of
such members of the manager's organization as shall be duly elected officers
and/or Directors of the Fund and such other personnel as shall be necessary to
carry out its normal operations; fees of the independent Directors, the
custodian, the independent public accountant and legal counsel (but not legal
and audit fees and other costs in contemplation of or arising out of litigation
or administrative actions to which the Fund, its officers or Directors are a
party or incurred in anticipation of becoming a party); rent; the cost of a
transfer and dividend disbursing agent or similar in-house services;
bookkeeping; accounting; and all other clerical and administrative functions as
may be reasonable and necessary to maintain the Fund's records and for it to
operate as an open-end management investment company. Exclusive of the
management fee, the Fund shall bear the cost of any interest, taxes, dues, fees
and other charges of governments and their agencies including the cost of
qualifying the Fund's shares for sale in any jurisdiction, brokerage
commissions, or any other expenses incurred by it which are not assumed herein
by the Manager.
All property, equipment and information used by the Manager in the
management and administration of the Fund shall belong to the manager. Should
the management and administrative relationship between the Fund and the manager
terminate, the Fund shall be entitled to, and the manager shall provide the
Fund, a copy of all information and records in the Manager's file necessary for
the Fund to continue its functions, which shall include computer systems and
programs in use as of the date of such termination; but nothing herein shall
prohibit thereafter the use of such information, systems or programs by the
manager, so long as such does not unfairly interfere with the continued
operation of the Fund.
2. As compensation for the services to be rendered to the Fund by the
Manager under the provisions of this agreement, the Fund agrees to pay
semimonthly to the Manager an annual fee based on the average total net assets
of the Fund computed daily in accordance with its Certificate of Incorporation
and By-Laws as follows:
a. one percent (1%) of the average total net assets of the Fund.
b. Should the Fund's normal operating expenses exclusive of
taxes, interest, brokerage commission and extraordinary costs exceed limits
established by any law, rule or regulation of any jurisdiction in which the
Fund's shares are registered for sale, the Manager shall reimburse the Fund in
the amount of the excess.
3. It is understood and agreed that the services to be rendered by the
Manager to the Fund under the provisions of the Agreement are not to be deemed
exclusive, and the
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Manager shall be free to render similar or different services to others so long
as its ability to render the services provided for in this Agreement shall not
be impaired thereby.
4. It is understood and agreed that the Directors, officers, agents,
employees, and shareholders of the Fund may be interested in the Manager as
owners, employees, agents or otherwise, and that owners, employees and agents of
the Manager may be interested in the Fund as shareholders or otherwise. It is
understood and agreed that shareholders, officers, Directors, and other
personnel of the Manager are and may continue to be officers and Directors of
the Fund, but that they receive no remuneration from the Fund solely for acting
in those capacities.
5. This Agreement shall become effective pursuant to its approval by
the Fund's Board of Directors and by the vote of a majority of the outstanding
shares of the Fund as prescribed by the Act. It shall remain in force through
the 31st day of October, 1999, and thereafter may be renewed for successive
periods not exceeding one year only so long as such renewal and continuance is
specifically approved at least annually by the Board of Directors or by vote of
a majority of the outstanding shares of the Fund as prescribed by the Act, and
only if the terms and the renewal of this Agreement have been approved by a vote
of a majority of the Directors of the Fund including a majority of the Directors
who are not parties to the Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
No amendment to this Agreement shall be effective unless the terms thereof have
been approved by the vote of a majority of outstanding shares of the Fund as
prescribed by the Act and by vote of a majority of the Directors of the Fund who
are not parties to the Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval. It
shall be the duty of the Directors of the Fund to request and evaluate, and the
duty of the Manager to furnish, such information as may reasonably be necessary
to evaluate the terms of this Agreement and any amendment thereto. This
Agreement may be terminated at any time, without the payment of any penalty, by
the Directors of the Fund, or by the vote of a majority of the outstanding
voting shares of the Fund as prescribed by the Act on not more than sixty days
written notice to the Manager, and it may be terminated by the Manager upon not
less than sixty days written notice to the Fund. It shall terminate
automatically in the event of its assignment by either party unless the parties
hereby, by agreement, obtain an exemption from the Securities and Exchange
Commission from the provisions of the Act pertaining to the subject matter of
this paragraph. Any notice, request or instruction provided for herein, or for
the giving of which, the occasion may arise hereunder, shall be deemed duly
given, if in writing and mailed by registered mail, postage prepaid, addressed
to the regular executive office of the Fund or the Manager as the case may be.
As used in this Agreement, the terms "assignment", "a majority of the
outstanding voting shares", and "interested persons" shall have the same meaning
as similar terms contained in the Act.
6. It is specifically provided in this Agreement that the Manager is to
secure the services of KORNITZER CAPITAL MANAGEMENT, INC. of Shawnee Mission,
Kansas (at the sole expense of the Manager), as its Investment Counsel to
furnish advice and
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recommendations with respect to the purchase and sale of securities and the
making of portfolio commitments; to place at the disposal of the Manager such
statistical information as may reasonably be required and in general to
superintend the investments of the Fund, subject to the control and approval of
the Board of Directors of the Manager and the Board of Directors of the Fund.
It is also specifically provided in this Agreement that the
Manager is to secure the services of JONES & BABSON, INC. of Kansas City,
Missouri (at the sole expense of the Manager), to provide all clerical and
administrative functions as may be reasonable and necessary to maintain the
Fund's records and for it to operate as an open-end management investment
company, including serving as transfer and dividend disbursing agent.
7. As a condition of this agreement, the Fund shall have the right to
use the name "AFBA" as part of its name, so long as the Manager, or any
successor in interest, continues as a manager to the Fund. However, nothing
herein shall prohibit the right of the Manager from granting to another
investment company with the Manager as its manager, and which has investment
objectives and policies different from those of the Fund, to use in its name the
name "AFBA". Should the Fund terminate the Manager, or its successor, as its
investment manager, either JONES & BABSON, INC., KORNITZER CAPITAL MANAGEMENT,
INC., or the Manager, or their respective successors in interest, may elect to
notify the Fund in writing that permission to use the name "AFBA" has been
withdrawn, whereupon the Fund, its officers, directors and shareholders,
expressly agree to take all necessary corporate action and to proceed
expeditiously to change the name of the Fund and not use any other name or take
any other action which would indicate the Fund's continued association with the
Manager. If the use of the name "AFBA" is so withdrawn as aforesaid, the Fund,
its officers, directors and shareholders, understand and agree that there shall
be no limitation with respect to the future use of the name "AFBA" by the
Manager, or its successor in interest, or with the permission of the Manager, or
its successor, by JONES & BABSON, INC. or its successor.
8. It is further agreed that the provisions of Paragraph 7 shall inure
to the benefit of the Manager and may be imposed by it or any successor in
interest as if it or such successor in interest were parties to this Agreement.
10. The Manager shall not be liable for any error in judgment or
mistake at law for any loss suffered by the Fund in connection with any matters
to which this Agreement relates, except that nothing herein contained shall be
construed to protect the Investment Manager against any liability by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reckless disregard of its obligations or duties under this Agreement.
11. This Agreement may not be amended, transferred, assigned, sold or
in any manner hypothecated or pledged nor may any new Agreement become effective
without affirmative vote or written consent of the holders of a majority of the
shares of the Fund.
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AFBA FIVE STAR FUND, INC.
By __________________________
ATTEST:
AFBA INVESTMENT MANAGEMENT COMPANY
By __________________________
ATTEST:
-83-
Exhibit 5(b)
INVESTMENT COUNSEL AGREEMENT
between
AFBA INVESTMENT MANAGEMENT COMPANY
and
KORNITZER CAPITAL MANAGEMENT, INC.
THIS AGREEMENT by and between AFBA INVESTMENT MANAGEMENT
COMPANY, a Virginia corporation with its principal office at 909 N. Washington
Street, Alexandria, Virginia 22314 (hereinafter referred to as the "Manager")
and KORNITZER CAPITAL MANAGEMENT, INC., a Kansas corporation with its principal
office at KCM Building, Shawnee Mission, Kansas 66201-0918 (hereinafter referred
to as the "Investment Counsel"), is made pursuant to the approval and direction
of the parties' respective Board of Directors and may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute but one instrument.
WITNESSETH:
WHEREAS, the Manager has entered into a Management Agreement with the
AFBA FIVE STAR FUND, INC. ("Fund") of concurrent date to provide management
services, including investment advisory services, the Manager desires the
assistance of the Investment Counsel which can supply the following services:
Research, analysis, advice and recommendations with respect to the
purchase and sale of securities and the making of investment commitments;
statistical information and reports as may reasonably be required, and general
assistance in the supervision of the investments of the Fund, subject to the
control of the Directors of the Fund and the Directors of AFBA INVESTMENT
MANAGEMENT COMPANY.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. During the term of this Agreement, or any extension or extensions
thereof, the Investment Counsel will, to the best of its ability, furnish the
foregoing services.
2. As compensation, the Manager will pay Investment Counsel for its
services the following annual fee computed daily as determined by the Fund's
price make-up sheet and which shall be payable monthly or at such other
intervals as agreed by the parties.
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a. thirty-three one-hundredths of one percent (33/100%) of the average
daily total net assets of the Fund.
3. This Agreement shall become effective and run concurrently with the
Management Agreement of the same date between the Manager and the Fund, an
executed copy of which shall be supplied the Investment Counsel.
4. The last day of the initial period of this Agreement shall coincide
with the last day of the Management Agreement which shall be the 31st day of
October, 1999. Thereafter this Agreement may be renewed in conjunction with the
Management Agreement for successive periods not exceeding one year only so long
as such renewal and continuance is specifically approved at least annually by
the Board of Directors of the Fund or by a vote of the majority of the
outstanding voting securities of the Fund as prescribed by the Investment
Company Act of 1940 ("Act") and provided further that such continuance is
approved at least annually thereafter by a vote of a majority of the Directors
who are not parties to such Agreement or interested persons (as defined by the
Act) of such party, cast in person at a meeting called for the purpose of voting
on such approval. The Investment Counsel shall provide the Manager such
information as may be reasonably necessary to assist the Directors of the Fund
to evaluate the terms of the Management Agreement. This Agreement automatically
will terminate with the Management Agreement without the payment of any penalty,
upon sixty days written notice by the Fund to the Manager that the Board of
Directors or the shareholders by vote of a majority of the outstanding voting
securities of the Fund, as provided by the Act, has terminated the Management
Agreement. This Agreement shall automatically terminate in the event of its
assignment or assignment of the Management Agreement unless such assignment is
approved by the Directors and the shareholders of the Fund as hereinbefore
provided or unless an exemption is obtained from the Securities and Exchange
Commission from the provisions of the Act pertaining to the subject matter of
this paragraph. The Manager shall promptly notify the Investment Counsel of any
notice of termination or of any circumstances which are likely to result in a
termination of the Management Agreement.
5. It is understood and agreed that the services to be rendered by the
Investment Counsel to the Manager under the provisions of this Agreement are not
to be deemed to be exclusive, and the Investment Counsel shall be free to render
similar or different services to others so long as its ability to render the
services provided for in this Agreement shall not be impaired thereby, and
provided further that the services to be rendered by the Investment Counsel to
the Manager under this Agreement and the compensation provided for in Paragraph
2 here of shall be limited solely to services with reference to the Fund.
6. The Manager agrees that it will furnish currently to Investment
Counsel all information reasonably necessary to permit Investment Counsel to
give the advice called for under this Agreement and such information with
reference to the Fund that is reasonably necessary to permit Investment Counsel
to carry out
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its responsibilities under this Agreement, and the parties agree that they will
from time to time consult and make appropriate arrangements as to specific
information that it is required under this paragraph and the frequency and
manner with which it shall be supplied.
7. The Investment Counsel shall not be liable for any error of judgment
or mistake at law or for any loss suffered by Manager of the Fund in connection
with any matters to which this Agreement relates except that nothing herein
contained shall be construed to protect the Investment Counsel against ant
liability by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reckless disregard of its obligations or duties
under this agreement.
8. In compliance with the provisions of the Management Agreement
between the Fund and AFBA INVESTMENT MANAGEMENT COMPANY, Investment Counsel
agrees with the Manager that subject to the terms and conditions of this
Paragraph 8, the Fund may use the name of "AFBA" as part of its name so long as
AFBA INVESTMENT MANAGEMENT COMPANY, or any successor in interest, continues as
Manager. Should the Fund terminate AFBA INVESTMENT MANAGEMENT COMPANY, or its
successor as Manager, AFBA INVESTMENT MANAGEMENT COMPANY, or its successor in
interest, may elect to notify the Fund in writing that permission to use the
name "AFBA" has been withdrawn. It is understood that the Fund has, in its
Management Agreement with AFBA INVESTMENT MANAGEMENT COMPANY, expressly agreed
that it, its officers, directors and shareholders will take all necessary
corporate action and proceed expeditiously to change the name of the Fund and
not use any other name or take any action which would indicate the Fund's
continued association with the Manager. If the use of the name "AFBA" is so
withdrawn as aforesaid, it is understood and agreed that there shall be no
limitation with respect to the future use of the name "AFBA" by the Manager, or
its successor in interest.
Each party hereby executes this Agreement as of the ____ day of
_______________, 1997, pursuant to the authority granted by its Board of
Directors.
KORNITZER CAPITAL MANAGEMENT, INC.
By __________________________
ATTEST:
AFBA INVESTMENT MANAGEMENT COMPANY
By __________________________
ATTEST:
-86-
Exhibit 6
UNDERWRITING AGREEMENT
between
AFBA FIVE STAR FUND, INC.
and
JONES & BABSON, INC.
THIS AGREEMENT, made and entered into this ____ day of _____________,
1997, by and between AFBA FIVE STAR FUND, INC., (a Maryland corporation,
hereinafter referred to as the "Fund") and JONES & BABSON, Inc. (a Missouri
corporation, hereinafter referred to as "Principal Underwriter").
1. Subject to the provisions of its Certificate of Incorporation and
By-Laws, copies of which have been delivered to and are acknowledged by the
Principal Underwriter, the Board of Directors of the Fund hereby appoint the
firm of Jones & Babson, Inc. as the Principal Underwriter and sole distributor
of the shares of the Fund, except for shares which the Fund may elect pursuant
to authority of its Board of Directors to issue direct to registered owners,
which shall include by definition but not by limitation stock issued by virtue
of reinvestment of dividends, or as the result of a splitting of shares, or as
the result of the Fund merging or consolidating with another organization, or in
return for acquisition of assets, or as the result of shares issued in
connection with a contractual plan for which the Fund is the underlying
investment, or for the purpose of complying with the registration laws of a
particular state or jurisdiction.
2. In consideration of its appointment under this Agreement as
Principal Underwriter, Jones & Babson, Inc. agrees to pay all costs of all
administrative services required in the normal operation of the Fund. This
includes rent; shareholder services, including the maintenance of the
shareholder accounting system and transfer agency; and such other items as are
incidental to corporate administration. Not considered normal operating expenses
and therefore payable by the Fund, are taxes, interest, fees and other charges
of governments and their agencies including the cost of qualifying the Fund's
shares for sale in any jurisdiction, brokerage costs, dues and all extraordinary
costs and expenses including but not limited to legal and accounting fees
incurred in anticipation of or arising out of litigation or administrative
proceedings to which the Fund, its directors or officers may be subject or a
party thereto.
3. The Fund agrees to prepare and file registration statements with the
Securities and Exchange Commission and the Securities Departments of the various
states and other jurisdictions in which the shares may be offered, and do such
other things and to take such other actions as may be mutually agreed upon by
and between the parties as shall be reasonably necessary in order to effect the
registration and the sale of the Fund's shares.
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<PAGE>
4. The Principal Underwriter agrees to place its full facilities at the
disposal of the Fund and to assist and cooperate fully with respect to the
registration and qualification of the Fund's shares, as well as perform all
functions required in connection with any offering including, but not limited
to, the creation and preparation of literature, advertising, and any other
promotional material for the purpose of selling the Fund's shares.
5. Jones & Babson, Inc. will act as agent of the Fund and not as
principal in the solicitation and sale of the shares of the Fund unless
expressly agreed to in writing by the Principal Underwriter and the Fund.
6. Normally, the Fund shall not exercise any direction or control over
the time and place of solicitation, the persons to be solicited, or the manner
of solicitation; but the Principal Underwriter agrees that solicitations shall
be in a form acceptable to the Fund and shall be subject to such terms and
conditions as may be prescribed from time to time by the Fund, the Registration
Statement, the Prospectus, the Certificate of Incorporation, and By-Laws of the
Fund, and shall not violate any provision of the laws of the United States or of
any other jurisdiction to which solicitations are subject, or violate any rule
or regulation promulgated by any lawfully constituted authority to which the
Fund or Principal Underwriter may be subject.
7. The Fund agrees to issue new shares direct to the registered owner
pursuant to this Agreement and according to instructions from the Principal
Underwriter, subject to the net asset value of such shares next effective after
acceptance of the order by the Fund and as more fully set out in paragraph 8.
8. The Fund hereby authorizes the Principal Underwriter to sell its
shares in accordance with the following schedule of prices:
The applicable price will be the net asset value per share next
effective after receipt and acceptance by the Fund of a proper offer to
purchase, determined in accordance with the Certificate of Incorporation,
By-Laws, Registration Statement and Prospectus of the Fund.
9. The Fund agrees that, as long as this Agreement is in effect, it
will not authorize anyone else to offer or solicit applications for shares of
the Fund and will not accept any such application if submitted by or through
anyone other than the Principal Underwriter, unless the Principal Underwriter
shall first have agreed in writing to such authorization.
10. This Agreement (i) may be terminated without the payment of any
penalty, either by vote of the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of the Fund, on sixty (60) days
written notice to the Principal Underwriter; (ii) may be terminated without
penalty by the Principal Underwriter on sixty (60) days written notice to the
Fund; and (iii) shall immediately terminate in the event of its assignment.
11. The Principal Underwriter agrees that it will not take either a
short or long position with respect to shares of the Fund; that it will not
place orders for more shares than
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are required to fill the requests received by it as agent of the Fund; and that
it will expeditiously transmit all such orders to the Fund.
12. Nothing contained in this Agreement shall be deemed to protect the
Principal Underwriter against any liability to the Fund or to its securities
holders to which the Principal Underwriter would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the performance of its
duties hereunder, or by reason of its reckless disregard of its obligations and
duties hereunder.
13. This Agreement shall become effective on the date first above
written, and continue in effect through the 31st day of October, 1998 and
thereafter shall continue automatically for successive annual periods ending
with each 31st day of October, provided that such continuance is specifically
approved at least annually by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund and provided further that this
Agreement or any renewal thereof shall be approved by the vote of a majority of
the Directors who are not parties to the Agreement or interested persons of any
such party, cast in person, at a meeting called for the purpose of voting on
such approval.
AFBA FIVE STAR FUND, INC.
By __________________________
ATTEST:
JONES & BABSON, INC.
By __________________________
ATTEST:
-89-
Exhibit 8
CUSTODY AGREEMENT
Dated ___________, 1997
Between
UMB BANK, N.A.
and
AFBA Five Star Fund, Inc.
Registered Investment Company
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Table of Contents
SECTION PAGE
1. Appointment of Custodian 1
2. Definitions
Securities 1
Assets 1
Instructions and Special Instructions 1
3. Delivery of Corporate Documents 2
Powers and Duties of Custodian and Domestic Subcustodian 3
Safekeeping 3
Manner of Holding Securities 3
Free Delivery of Assets 5
Exchange of Securities 5
Purchases of Assets 5
Sales of Assets 6
Options 6
Futures Contracts 7
Segregated Accounts 7
Depositary Receipts 8
Corporate Actions, Put Bonds, Called Bonds, Etc. 8
Interest Bearing Deposits 9
Foreign Exchange Transactions Other than as Principal 9
Pledges or Loans of Securities 9
Stock Dividends, Rights, Etc. 10
Routine Dealings 10
Collections 10
Bank Accounts 11
Dividends, Distributions and Redemptions 11
Proceeds from Shares Sold 11
Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985 11
Books and Records 12
Opinion of Fund's Independent Certified Public
Accountants 12
Reports by Independent Certified Public Accountants 12
Bills and Others Disbursements 12
5. Subcustodians 12
(a) Domestic Subcustodians 13
(b) Foreign Subcustodians 13
(c) Interim Subcustodians 13
(d) Special Subcustodians 14
(e) Termination of a Subcustodian 14
(f) Certification Regarding Foreign Subcustodians 14
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Standard of Care 14
General Standard of Care 14
Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed Conflict, Sovereign
Risk, Etc. 15
Liability for Past Records 15
Advice of Counsel 15
Advice of the Fund and Others 15
Instructions Appearing to be Genuine 16
Exceptions from Liability 16
7. Liability of the Custodian for Actions of Others 16
(a) Domestic Subcustodians 16
Liability for Acts and Omissions of Foreign
Subcustodians 16
Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities Depositories and
Clearing Agencies 17
(d) Defaults or Insolvencies of Brokers, Banks, Etc. 17
(e) Reimbursement of Expenses 17
8. Indemnification 17
(a) Indemnification by Fund 17
(b) Indemnification by Custodian 17
9. Advances 18
10. Liens 18
11. Compensation 19
12. Powers of Attorney 19
13. Termination and Assignment 19
14. Notices 19
15. Miscellaneous 19
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CUSTODY AGREEMENT
This agreement made as of this ____ day of ___________, 1997 between
AFBA Five Star Fund, Inc. with its principal place of business located at Three
Crown Center, 2440 Pershing Road, Kansas City, Missouri, (hereinafter "Fund"),
and UMB Bank, n.a., a national banking association with its principal place of
business located at Kansas City, Missouri (hereinafter "Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, the Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by the Fund which Assets are to
be held in such accounts as the Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms
and conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN.
The Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to the Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the meanings so
indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
scrip, warrants, interim certificates and all negotiable or nonnegotiable paper
commonly known as Securities and other instruments or obligations.
(b) "Assets" shall mean Securities, monies and other property held by
the Custodian for the benefit of the Fund.
(c)(l) "Instructions", as used herein, shall mean: (i) a tested telex,
a written (including, without limitation, facsimile transmission) request,
direction, instruction or certification signed or initialed by or on behalf of
the Fund by an Authorized Person; (ii) a telephonic or other oral communication
from a person the Custodian reasonably believes to be an Authorized Person; or
(iii) a communication effected directly between an electro-mechanical or
electronic device or system
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(including, without limitation, computers) on behalf of the Fund. Instructions
in the form of oral communications shall be confirmed by the Fund by tested
telex or in writing in the manner set forth in clause (i) above, but the lack of
such confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral Instructions prior to the Custodian's receipt of such
confirmation. The Fund authorizes the Custodian to record any and all telephonic
or other oral Instructions communicated to the Custodian.
(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of the Fund or any other person designated by the Treasurer of the
Fund in writing, which countersignature or confirmation shall be included on the
same instrument containing the Instructions or on a separate instrument relating
thereto.
(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and the Fund.
(c)(4) Where appropriate, Instructions and Special Instructions shall
be continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution
does not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
The Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the
Fund as in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing
the Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
The Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, the Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of the Fund who will have continuing
authority to certify to the Custodian: (a) the names, titles, signatures and
scope of authority of all persons authorized to give Instructions or any other
notice, request, direction, instruction, certificate or instrument on behalf of
the Fund, and (b)
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the names, titles and signatures of those persons authorized to countersign or
confirm Special Instructions on behalf of the Fund (in both cases collectively,
the "Authorized Persons" and individually, an "Authorized Person"). Such
Resolutions and certificates may be accepted and relied upon by the Custodian as
conclusive evidence of the facts set forth therein and shall be considered to be
in full force and effect until delivery to the Custodian of a similar Resolution
or certificate to the contrary. Upon delivery of a certificate which deletes or
does not include the name(s) of a person previously authorized to give
Instructions or to countersign or confirm Special Instructions, such persons
shall no longer be considered an Authorized Person authorized to give
Instructions or to countersign or confirm Special Instructions. Unless the
certificate specifically requires that the approval of anyone else will first
have been obtained, the Custodian will be under no obligation to inquire into
the right of the person giving such Instructions or Special Instructions to do
so. Notwithstanding any of the foregoing, no Instructions or Special
Instructions received by the Custodian from the Fund will be deemed to authorize
or permit any director, trustee, officer, employee, or agent of the Fund to
withdraw any of the Assets of the Fund upon the mere receipt of such
authorization, Special Instructions or Instructions from such director, trustee,
officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC
SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed pursuant to
Sections 5(b), (c), or (d) of this Agreement, the Custodian shall have and
perform the powers and duties hereinafter set forth in this Section 4. For
purposes of this Section 4 all references to powers and duties of the
"Custodian" shall also refer to any Domestic Subcustodian appointed pursuant to
Section 5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of the Fund which are delivered to it
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of the Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities which have
been delivered to it in physical form, by registering the same in the name of
the Fund or its nominee, or in the name of the Custodian or its nominee, for
whose actions the Fund and Custodian, respectively, shall be fully responsible.
Upon the receipt of Instructions, the Custodian shall hold such Securities in
street certificate form, so called, with or without any indication of fiduciary
capacity. However, unless it receives Instructions to the contrary, the
Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the Fund or only assets held by the
Custodian as a fiduciary, provided that the records of the
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Custodian shall indicate at all times the Fund or other customer for which such
Securities are held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities owned
by the Fund in, and the Fund hereby approves use of: (a) The Depository Trust
Company; (b) The Participants Trust Company; and (c) any book-entry system as
provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by the Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities system", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through
one or more agents or Subcustodians which are also qualified to act as
custodians for investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities
in a Securities System, provided that such Securities are represented
in an account ("Account") of the Custodian in the Securities System
that includes only assets held by the Custodian as a fiduciary,
custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to the Fund which are maintained
in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of the Fund only upon (a) receipt of advice from the
Securities System that such Securities have been transferred to the
Account of the Custodian in accordance with the rules of the
Securities System, and (b) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the account of
the Fund. The Custodian shall transfer Securities sold for the account
of the Fund only upon (a) receipt of advice from the Securities System
that payment for such Securities has been transferred to the Account
of the Custodian in accordance with the rules of the Securities
System, and (b) the making of an entry on the records of the Custodian
to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System relating to transfers
of Securities for the account of the Fund shall be maintained for the
Fund by the Custodian. The Custodian shall deliver to the Fund on the
next succeeding business day daily transaction reports which shall
include each day's transactions in the Securities System for the
account of the Fund. Such transaction reports shall be delivered to
the Fund or any agent designated by the Fund pursuant to Instructions,
by computer or in such other manner as the Fund and Custodian may
agree.
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(v) The Custodian shall, if requested by the Fund pursuant to
Instructions, provide the Fund with reports obtained by the Custodian
or any Subcustodian with respect to a Securities System's accounting
system, internal accounting control and procedures for safeguarding
Securities deposited in the Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of the Fund as
promptly as practicable and shall take all actions reasonably
practicable to safeguard the Securities of the Fund maintained with
such Securities System.
(c) Free Delivers of Assets.
Notwithstanding any other provision of this Agreement and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with the Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for the Fund for other Securities or cash paid in
connection with any reorganization, recapitalization, merger, consolidation, or
conversion of convertible Securities, and will deposit any such Securities in
accordance with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for the Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has received
Special Instructions to the contrary, such payment will be made only upon
receipt of Securities by the Custodian, a clearing corporation of a national
Securities exchange of which the Custodian is a member, or a Securities System
in accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, upon receipt of Instructions: (i) in connection with a repurchase
agreement, the Custodian may release funds to a Securities System prior to the
receipt of advice from the Securities System that the Securities underlying such
repurchase agreement have been transferred by book-entry into the Account
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the Securities
System may make payment of such funds to the other party to the repurchase
agreement only upon transfer by book-entry
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of the Securities underlying the repurchase agreement into such Account; (ii) in
the case of Interest Bearing Deposits, currency deposits, and other deposits,
foreign exchange transactions, futures contracts or options, pursuant to
Sections 4(g), 4(h), 4(1), and 4(m) hereof, the Custodian may make payment
therefor before receipt of an advice of transaction; and (iii) in the case of
Securities as to which payment for the Security and receipt of the instrument
evidencing the Security are under generally accepted trade practice or the terms
of the instrument representing the Security expected to take place in different
locations or through separate parties, such as commercial paper which is indexed
to foreign currency exchange rates, derivatives and similar Securities, the
Custodian may make payment for such Securities prior to delivery thereof in
accordance with such generally accepted trade practice or the terms of the
instrument representing such Security.
(2) Other Assets Purchased. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of the Fund as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the Custodian
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, Securities held in physical form may be delivered
and paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of the Fund as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of an option
or sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by the Fund; (b) if the transaction involves the sale of a covered
call option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of the Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the
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Custodian by the Options Clearing Corporation (the "OCC"j, the securities or
options exchanges on which such options were traded, or such other organization
as may be responsible for handling such option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked option
including stock index and commodity options), the Custodian, the Fund and the
broker-dealer shall enter into an agreement to comply with the rules of the OCC
or of any registered national securities exchange or similar organizations(s).
Pursuant to that agreement and the Fund's Instructions, the Custodian shall: (a)
receive and retain confirmations or other documents, if any, evidencing the
writing of the option; (b) deposit and maintain in a segregated account,
Securities (either physically or by book-entry in a Securities System), cash
and/or other Assets; and (c) pay, release and/or transfer such Securities, cash
or other Assets in accordance with any such agreement and with any notices or
other communications evidencing the expiration, termination or exercise of such
option which are furnished to the Custodian by the OCC, the securities or
options exchanges on which such options were traded, or such other organization
as may be responsible for handling such option transactions. The Fund and the
broker-dealer shall be responsible for determining the quality and quantity of
assets held in any segregated account established in compliance with applicable
margin maintenance requirements and the performance of other terms of any option
contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the Fund, the Custodian and the designated
futures commission merchant (a "Procedural Agreement"). Under the Procedural
Agreement the Custodian shall: (a) receive and retain confirmations, if any,
evidencing the purchase or sale of a futures contract or an option on a futures
contract by the Fund; (b) deposit and maintain in a segregated account cash,
Securities and/or other Assets designated as initial, maintenance or variation
"margin" deposits intended to secure the Fund's performance of its obligations
under any futures contracts purchased or sold, or any options on futures
contracts written by the Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements. The
Fund and such futures commission merchant shall be responsible for determining
the type and amount of Assets held in the segregated account or paid to the
broker-dealer in compliance with applicable margin maintenance requirements and
the performance of any futures contract or option on a futures contract in
accordance with its terms.
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish and
maintain on its books a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred Assets of the Fund,
including Securities maintained by the Custodian in a Securities System pursuant
to Paragraph (b)(3) of this Section 4, said account or accounts to be maintained
(i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and (ii) for the
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purpose of compliance by the Fund with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to
be surrendered Securities to the depositary used for such Securities by an
issuer of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to
be surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds. Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar Securities to the issuer or trustee
thereof (or to the agent of such issuer or trustee) for the purpose of exercise
or sale, provided that the new Securities, cash or other Assets, if any,
acquired as a result of such actions are to be delivered to the Custodian; and
(b) deposit Securities upon invitations for tenders thereof, provided that the
consideration for such Securities is to be paid or delivered to the Custodian,
or the tendered Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the Fund of such action in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing.
The Fund agrees that if it gives an Instruction for the performance of
an act on the last permissible date of a period established by any optional
offer or on the last permissible date for the performance of such act, the Fund
shall hold the Bank harmless from any adverse consequences in connection with
acting upon or failing to act upon such Instructions.
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(1) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to,
collectively, as "Interest Bearing Deposits") for the account of the Fund, the
Custodian shall purchase such Interest Bearing Deposits in the name of the Fund
with such banks or trust companies, including the Custodian, any Subcustodian or
any subsidiary or affiliate of the Custodian (hereinafter referred to as
"Banking Institutions"), and in such amounts as the Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in US Dollars or
other currencies, as the Fund may determine and direct pursuant to Instructions.
The responsibilities of the Custodian to the Fund for Interest Bearing Deposits
issued by the Custodian shall be that of a US bank for a similar deposit. With
respect to Interest Bearing Deposits other than those issued by the Custodian,
(a) the Custodian shall be responsible for the collection of income and the
transmission of cash to and from such accounts; and (b) the Custodian shall have
no duty with respect to the selection of the Banking Institution or for the
failure of such Banking Institution to pay upon demand.
(m) Foreign Exchange Transactions Other than as Principal.
(1) Upon receipt of Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies for spot
and future delivery on behalf of and for the account of the Fund with such
currency brokers or Banking Institutions as the Fund may determine and direct
pursuant to Instructions. The Fund accepts full responsibility for its use of
third party foreign exchange brokers and for execution of said foreign exchange
contracts and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred as a result of the failure or
delay of its third party broker to deliver foreign exchange. The Custodian shall
have no responsibility with respect to the selection of the currency brokers or
Banking Institutions with which the Fund deals or, so long as the Custodian acts
in accordance with Instructions, for the failure of such brokers or Banking
Institutions to comply with the terms of any contract or option.
(2) Notwithstanding anything to the contrary contained herein, upon
receipt of Instructions the Custodian may, in connection with a foreign exchange
contract, make free outgoing payments of cash in the form of U.S. Dollars or
foreign currency prior to receipt of confirmation of such foreign exchange
contract or confirmation that the countervalue currency completing such contract
has been delivered or received.
(n) Pledges or Loans of Securities.
(l) Upon receipt of Instructions from the Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by the Fund with various lenders including but not limited to UMB
Bank, n.a.; provided, however, that the Securities shall be released only upon
payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions, the
Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu
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of delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the Fund to the borrower thereof
only upon receipt of the collateral for such borrowing. The Custodian shall have
no responsibility or liability for any loss arising from the delivery of
Securities prior to the receipt of collateral. Upon receipt of Instructions and
the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights Etc.
The Custodian shall receive and collect all stock dividends, rights,
and other items of like nature and, upon receipt of Instructions, take action
with respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of the Fund except as may be otherwise provided in this Agreement
or directed from time to time by Instructions from the Fund. The Custodian may
also make payments to itself or others from the Assets for disbursements and
out-of-pocket expenses incidental to handling Securities or other similar items
relating to its duties under this Agreement, provided that all such payments
shall be accounted for to the Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to the Fund
with respect to portfolio Securities and other Assets; (b) promptly credit to
the account of the Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and the Fund; (c) promptly endorse and deliver any instruments
required to effect such collection; and (d) promptly execute ownership and other
certificates and affidavits for all federal, state, local and foreign tax
purposes in connection with receipt of income or other payments with respect to
portfolio Securities and other Assets, or in connection with the transfer of
such Securities or other Assets; provided, however, that with respect to
portfolio Securities registered in so-called street name, or physical Securities
with variable interest rates, the Custodian shall use its best efforts to
collect amounts due and payable to the Fund. The Custodian shall notify the Fund
in writing by facsimile transmission or in such other manner as the Fund and
Custodian may agree in writing if any amount payable with respect to portfolio
Securities or other Assets is not received by the Custodian when due. The
Custodian shall not be responsible for the
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collection of amounts due and payable with respect to portfolio Securities or
other Assets that are in default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank account
or accounts on the books of the Custodian; provided that such bank account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
the Fund, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit.
(s) Dividends, Distributions and Redemptions.
To enable the Fund to pay dividends or other distributions to
shareholders of the Fund and to make payment to shareholders who have requested
repurchase or redemption of their shares of the Fund (collectively, the
"Shares"), the Custodian shall release cash or Securities insofar as available.
In the case of cash, the Custodian shall, upon the receipt of Instructions,
transfer such funds by check or wire transfer to any account at any bank or
trust company designated by the Fund in such Instructions. In the case of
Securities, the Custodian shall, upon the receipt of Special Instructions, make
such transfer to any entity or account designated by the Fund in such Special
Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments received
for shares issued or sold from time to time by the Fund, and shall credit such
funds to the account of the Fund. The Custodian shall notify the Fund of
Custodian's receipt of cash in payment for shares issued by the Fund by
facsimile transmission or in such other manner as the Fund and the Custodian
shall agree. Upon receipt of Instructions, the Custodian shall: (a) deliver all
federal funds received by the Custodian in payment for shares as may be set
forth in such Instructions and at a time agreed upon between the Custodian and
the Fund; and (b) make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian, in the amount of
checks received in payment for shares which are deposited to the accounts of the
Fund.
(u) Proxies and Notices: Compliance with the Shareholders Communication
Act of 1985.
The Custodian shall deliver or cause to be delivered to the Fund all
forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by the Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt c Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of the Fund to an issuer
which requests such information pursuant to the Shareholder Communications Act
of 1985 for the specific
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purpose of direct communications between such issuer and the Fund unless the
Fund directs the Custodian otherwise in writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its activities
under this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be open
for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the Fund during normal business hours of the
Custodian.
The Custodian shall provide accountings relating to its activities
under this Agreement as shall be agreed upon by the Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as the Fund may request
to obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of the Fund's periodic reports
to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of the Fund, the Custodian shall deliver to the Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
the Fund and as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of the Fund.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of the Fund. A Domestic Subcustodian, in
accordance with the provisions of this Agreement, may also appoint a Foreign
Subcustodian, Special Subcustodian, or Interim Subcustodian to act on behalf of
the Fund. For purposes of this Agreement, all Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians and Interim Subcustodians shall be referred
to collectively as "Subcustodians".
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(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time, appoint any bank
as defined in Section 2(a)(5) of the 1940 Act or any trust company or other
entity, any of which meet the requirements of a custodian under Section 17(f) of
the 1940 Act and the rules and regulations thereunder, to act for the Custodian
on behalf of the Fund as a subcustodian for purposes of holding Assets of the
Fund and performing other functions of the Custodian within the United States (a
"Domestic Subcustodian"). The Fund shall approve in writing the appointment of
the proposed Domestic Subcustodian; and the Custodian's appointment of any such
Domestic Subcustodian shall not be effective without such prior written approval
of the Fund. Each such duly approved Domestic Subcustodian shall be listed on
Appendix A attached hereto, as it may be amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic Subcustodian
to appoint, any bank, trust company or other entity meeting the requirements of
an "eligible foreign custodian" under Section 17(f) of the 1940 Act and the
rules and regulations thereunder to act for the Custodian on behalf of the Fund
as a subcustodian or sub-subcustodian (if appointed by a Domestic Subcustodian)
for purposes of holding Assets of the Fund and performing other functions of the
Custodian in countries other than the United States of America (hereinafter
referred to as a "Foreign Subcustodian" in the context of either a subcustodian
or a sub-subcustodian); provided that the Custodian shall have obtained written
confirmation from the Fund of the approval of the Board of Directors or other
governing body of the Fund (which approval may be withheld in the sole
discretion of such Board of Directors or other governing body or entity) with
respect to (i) the identity of any proposed Foreign Subcustodian (including
branch designation), (ii) the country or countries in which, and the securities
depositories or clearing agencies (hereinafter "Securities Depositories and
Clearing Agencies"), if any, through which, the Custodian or any proposed
Foreign Subcustodian is authorized to hold Securities and other Assets of the
Fund, and (iii) the form and terms of the subcustodian agreement to be entered
into with such proposed Foreign Subcustodian. Each such duly approved Foreign
Subcustodian and the countries where and the Securities Depositories and
Clearing Agencies through which they may hold Securities and other Assets of the
Fund shall be listed on Appendix A attached hereto, as it may be amended, from
time to time. The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held in a
country in which no Foreign Subcustodian is authorized to act, in order that
there shall be sufficient time for the Custodian, or any Domestic Subcustodian,
to effect the appropriate arrangements with a proposed Foreign Subcustodian,
including obtaining approval as provided in this Section 5(b). In connection
with the appointment of any Foreign Subcustodian, the Custodian shall, or shall
cause the Domestic Subcustodian to, enter into a subcustodian agreement with the
Foreign Subcustodian in form and substance approved by the Fund. The Custodian
shall not consent to the amendment of, and shall cause any Domestic Subcustodian
not to consent to the amendment of, any agreement entered into with a Foreign
Subcustodian, which materially affects the Fund's rights under such agreement,
except upon prior written approval of the Fund pursuant to Special Instructions.
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(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that the Fund shall invest
in an Asset to be held in a country in which no Foreign Subcustodian is
authorized to act, the Custodian shall notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian shall agree in
writing of the unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from the Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an n Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on behalf of
the Fund, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act for the Custodian on behalf of
the Fund as a subcustodian for purposes of: (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities through the use of a
common custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
the Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the Fund in Special Instructions. The Custodian shall not
amend any subcustodian agreement entered into with a Special Subcustodian, or
waive any rights under such agreement, except upon prior approval pursuant to
Special Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon notification to
the Fund, terminate any Subcustodian of the Fund in accordance with the
termination provisions under the applicable subcustodian agreement, and upon the
receipt of Special Instructions, the Custodian will terminate any Subcustodian
in accordance with the termination provisions under the applicable subcustodian
agreement.
(f) Certification Regarding Foreign Subcustodians.
Upon request of the Fund, the Custodian shall deliver to the Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of the Fund; and (iii) such
other information as may be requested by the Fund, and as the Custodian shall be
reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
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6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to the Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by the Fund resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder if the Custodian or any Subcustodian or Securities System,
or any subcustodian, Securities System, Securities Depository or Clearing Agency
utilized by the Custodian or any such Subcustodian, or any nominee of the
Custodian or any Subcustodian (individually, a "Person") is prevented, forbidden
or delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason of:
(i) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or of any foreign country, or
political subdivision thereof or of any court of competent jurisdiction (and
neither the Custodian nor any other Person shall be obligated to take any action
contrary thereto); or (ii) any event beyond the control of the Custodian or
other Person such as armed conflict, riots, strikes, lockouts, labor disputes,
equipment or transmission failures, natural disasters, or failure of the mails,
transportation, communications or power supply; or (iii) any "Sovereign Risk." A
"Sovereign Risk" shall mean nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar action
by any governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges affecting the
Fund's Assets; or acts of armed conflict, terrorism, insurrection or revolution;
or any other act or event beyond the Custodian's or such other Person's control.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by the Fund,
insofar as such loss, damage or expense arises from the performance of the
Custodian or any * Domestic Subcustodian in reliance upon records that were
maintained for the Fund by entities other than the Custodian or any Domestic
Subcustodian prior to the Custodian's employment hereunder.
(d) Advice of Counsel.
On a mutually agreeable basis, the Custodian and all Domestic
Subcustodians shall be entitled to receive and act upon advice of counsel on all
matters. The Custodian and all Domestic Subcustodians shall be without liability
for any actions taken or omitted in good faith pursuant to the advice of
counsel.
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<PAGE>
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice of
the Fund and upon statements of the Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully protected
and indemnified in acting as a custodian hereunder upon any Resolutions of the
Board of Directors or Trustees, Instructions, Special Instructions, advice,
notice, request, consent, certificate, instrument or paper appearing to it to be
genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from the Fund hereunder a certificate
signed by any officer of the Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liabilities.
Without limiting the generality of any other provisions hereof, neither
the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for
the Fund, the legality of the purchase thereof or evidence of
ownership required to be received by the Fund, or the propriety of the
decision to purchase or amount paid therefor;
(ii) the legality of the sale of any Securities by or for the Fund, or
the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings
or similar actions with respect to the Fund's Assets;
and may, until notified to the contrary, presume that all Instructions
or Special Instructions received by it are not in conflict with or in
any way contrary to any provisions of the Fund's Declaration of Trust,
Partnership Agreement, Articles of Incorporation or By-Laws or votes
or proceedings of the shareholders, trustees, partners or directors of
the Fund, or the Fund's currently effective Registration Statement on
file with the SEC.
7. LIABILITY OP THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
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(b) Liability for Acts and Omissions of Foreign Subcustodians.
The Custodian shall be liable to the Fund for any loss or damage to the
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under
the applicable subcustodian agreement.
(c) Securities Systems, Interim Subcustodians, Special Subcustodians,
Securities Depositories and clearing Agencies.
The Custodian shall not be liable to the Fund for any loss, damage or
expense suffered or incurred by the Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the negligence or willful
misfeasance of the Custodian.
(d) Defaults or Insolvency's of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense
suffered or incurred by the Fund resulting from or occasioned by the actions,
omissions, neglects, defaults or insolvency of any broker, bank, trust company
or any other person with whom the Custodian may deal (other than any of such
entities acting as a Subcustodian, Securities System or Securities Depository
and Clearing Agency, for whose actions the liability of the Custodian is set out
elsewhere in this Agreement) unless such loss, damage or expense is caused by,
or results from, the gross negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
The Fund agrees to reimburse the Custodian for all reasonable
out-of-pocket expenses incurred by the Custodian in connection with this
Agreement, but excluding salaries and usual overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by Fund.
Subject to the limitations set forth in this Agreement, the Fund agrees
to indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
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If the Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in addition
to the obligations provided in Sections 6 and 7, the Custodian agrees to
indemnify and hold harmless the Fund from all losses, damages and expenses
suffered or incurred by the Fund caused by or resulting from the negligence or
willful misfeasance of the Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of the Fund as to which there would
be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of the Fund, the Custodian
may, in its discretion without further Instructions, provide an advance
("Advance") to the Fund in an amount sufficient to allow the completion of the
transaction by reason of which such payment or transfer of funds is to be made.
In addition, in the event the Custodian is directed by Instructions to make any
payment or transfer of funds on behalf of the Fund as to which it is
subsequently determined that the Fund has overdrawn its cash account with the
Custodian as of the close of business on the date of such payment or transfer,
said overdraft shall constitute an Advance. Any Advance shall be payable by the
Fund on demand by Custodian, unless otherwise agreed by the Fund and the
Custodian, and shall accrue interest from the date of the Advance to the date of
payment by the Fund to the Custodian at a rate agreed upon in writing from time
to time by the Custodian and the Fund. It is understood that any transaction in
respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund, and not, by reason of such Advance, deemed to be a transaction
undertaken by the Custodian for its own account and risk. The Custodian and the
Fund acknowledge that the purpose of Advances is to finance temporarily the
purchase or sale of Securities for prompt delivery in accordance with the
settlement terms of such transactions or to meet emergency expenses not
reasonably foreseeable by the Fund. The Custodian shall promptly notify the Fund
of any Advance. Such notification shall be sent by facsimile transmission or in
such other manner as the Fund and the Custodian may agree.
10. LIENS.
The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
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connection with the performance of its duties hereunder, except such as may
arise from its or its nominee's negligent action, negligent failure to act or
willful misconduct, any Property at any time held for the Custody Account shall
be security therefor and the Fund hereby grants security interest therein to the
Bank. The Fund shall promptly reimburse the Bank for any such advance of cash or
securities or any such taxes, charges, expenses, assessments, claims or
liabilities upon request for payment, but should the Fund fail to so reimburse
the Bank, the Bank shall be entitled to dispose of such Property to the extent
necessary to obtain reimbursement. The Bank shall be entitled to debit any
account of the Fund with the Bank including, without limitation, the Custody
Account, in connection with any such advance and any interest on such advance as
the Bank deems reasonable.
11. COMPENSATION.
The Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and the Fund from time to time. Such compensation,
together with all amounts for which the Custodian is to be reimbursed in
accordance with Section 7(e), shall be billed to the Fund and paid in cash to
the Custodian.
12. POWERS OF ATTORNEY.
Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
13. TERMINATION AND ASSIGNMENT.
The Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the Fund
shall pay to the Custodian such fees as may be due the Custodian hereunder as
well as its reimbursable disbursements, costs and expenses paid or incurred.
Upon termination of this Agreement, the Custodian shall deliver, at the
terminating party's expense, all Assets held by it hereunder to the Fund or as
otherwise designated by the Fund by Special Instructions Upon such delivery, the
Custodian shall have no further obligations or liabilities under this Agreement
except as to the final resolution of matters relating to activity occurring
prior to the effective date of termination.
This Agreement may not be assigned by the Custodian or the Fund without
the respective consent of the other, duly authorized by a resolution by its
Board of Directors or Trustees.
14. NOTICES.
Notices, requests, instructions and other writings delivered to the
Fund at Three Crown Center, 2440 Pershing Road, Kansas City, Missouri 64108,
postage prepaid, or to such other address as the Fund may have designated to the
Custodian in writing, shall be deemed to have been properly delivered or given
to the Fund.
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Notices, requests, instructions and other writings delivered to the
Securities Administration Department of the Custodian at its office at 928 Grand
Avenue, Kansas City, Missouri, or mailed postage prepaid, to the Custodian's
Securities Administration Department, Post Office Box 226, Kansas City, Missouri
64141, or to such other addresses as the Custodian may have designated to the
Fund in writing, shall be deemed to have been properly delivered or given to the
Custodian hereunder; provided, however, that procedures for the delivery of
Instructions and Special Instructions shall be governed by Section 2(c) hereof.
15. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State of
Missouri and shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or
waived, in any manner except in writing, properly executed by both
parties hereto; provided, however, Appendix A may be amended from time
to time as Domestic Subcustodians, Foreign Subcustodians, Special
Subcustodians, and Securities Depositories and Clearing Agencies are
approved or terminated according to the terms of this Agreement.
(d) The captions in this Agreement are included for convenience
of reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of execution
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of
this Agreement, and the definitions thereof are found in the following
sections of the Agreement:
Term Foreign Subcustodian
Instruction
Account Interim Subcustodian
ADR'S Interest Bearing Deposit
Advance Liens
Assets OCC
Authorized Person Person
Banking Institution Procedural Agreement
Domestic Subcustodian
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<PAGE>
Section
SEC
4(b)(3)(ii) Securities
4(j) Securities Depositories and
9 Clearing Agencies
2(b) Securities System
3 Shares
4(1) Sovereign Risk
5(a) Special Instruction
5(b) Special Subcustodian
2(c)(1) Subcustodian
5(c) 1940 Act
4(1)
10
4(g)(2)
6(b)
4(h)
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4(b)(3)
2(a)
5(b)
4(b)(3)
4(s)
6(b)
2(c)(2)
5(d)
5
4(v)
(h) If any part, term or provision of this Agreement is held
to be illegal, in conflict with any law or otherwise invalid by any court of
competent jurisdiction, the remaining portion or portions shall be considered
severable and shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and
agreement the parties hereto with respect to the subject matter hereof, and
accordingly supersedes, as of the effective date of this Agreement, any
custodian agreement heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody
Agreement be executed by their duly respective authorized officers.
AFBA FIVE STAR FUND, INC.
By: _________________________________
ATTEST:
_________________________________
UMB Bank, n.a.
By: _________________________________
ATTEST:
_________________________________
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APPENDIX A
DOMESTIC SUBCUSTODIANS:
United Missouri Bank Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS AND CLEARING AGENCIES
Euroclear
AFBA Five Star Fund, Inc.
By: _________________________________
Title: _________________________________
Date: _________________________________
UMB Bank, n.a.
By: _________________________________
Title: _________________________________
-115-
Exhibit 9
TRANSFER AGENCY AGREEMENT
This Agreement made as of the ____ day of __________, 1997 between AFBA
Investment Management Company (the "Manager"), a Virginia corporation, for the
benefit of AFBA Five Star Fund, Inc., a Maryland corporation (the "Fund"), and
Jones & Babson, Inc., a Missouri corporation (the "Transfer Agent").
WITNESSETH
That in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall
have the following meanings:
1. "Approved Institution" shall mean an entity so named in a
Certificate, as hereinafter defined. From time to time, the Fund may amend a
previously delivered Certificate by delivering to the Transfer Agent a
Certificate naming an additional entity or deleting any entity named in a
previously delivered Certificate.
2. The "Board of Directors" shall mean the Board of Directors of the
Fund.
3. "Certificate" shall mean any notice, instruction or other instrument
in writing, authorized or required by this Agreement to be given to the Transfer
Agent by the Fund which is signed by any Officer, as hereinafter defined, and
actually received by the Transfer Agent.
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4. "Custodian" shall mean the financial institution appointed as
custodian under the terms and conditions of the Custody Agreement between the
financial institution and the Fund, or its successor(s).
5. "Fund Business Day" shall be determined as set out in the Fund's
prospectuses as shall be effective from time to time.
6. "Officer" shall be deemed to be the Fund's President, any Vice
President, Secretary, Treasurer, Controller, any Assistant Controller, any
Assistant Treasurer and any Assistant Secretary, and any other person duly
authorized by the Board of Directors of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the Fund, and any person
reasonably believed by the Transfer Agent to be such a person.
7. "Out-of-Pocket Expenses" means amounts reasonably necessary and
actually incurred by Transfer Agent in the provision of Transfer Agent services
or pursuant to this Agreement for the following purposes: postage (and first
class mail insurance in connection with mailing Share certificates), envelopes,
check forms, continuous forms, forms for reports and statements, stationery and
other similar items, telephone and telegraph charges incurred in answering
inquiries from dealers or shareholders, microfilm used to record transactions in
shareholder accounts and computer tapes used for permanent storage of records
and cost of insertion of materials in mailing envelopes by outside firms. Any
charges associated with special or exception processing shall also be considered
Out-of-Pocket Expenses.
8. "Prospectus" shall mean the most recent Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Securities Act of 1933, as amended,
has become effective, including the Statement of Additional Information,
incorporated by reference therein.
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9. "Shares" shall mean all or any part of each class or series of the
shares of beneficial interest of the Fund or portfolio listed in the Certificate
as to which the Transfer Agent acts as transfer agent hereunder, as may be
amended from time to time, which are authorized and/or issued by the Fund.
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. Effective as of the date of this Agreement, the Manager, acting for
the benefit of the Fund, hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform duties thereof as hereinafter
set forth.
3. In connection with such appointment, the Fund upon the request of
the Transfer Agent, shall deliver the following documents to the Transfer Agent:
(i) A copy of the Articles of Incorporation of the Fund and all
amendments thereto certified by the Secretary of the Fund;
(ii) A copy of the By-laws of the Fund certified by the Secretary
of the Fund;
(iii) A copy of a resolution of the Board of Directors of the
Fund certified by the Secretary of the Fund appointing the Transfer
Agent and authorizing the execution of this Transfer Agency Agreement;
(iv) A Certificate signed by the Secretary of the Fund
specifying: the number of authorized Shares, the number of such
authorized Shares issued, the number of such authorized Shares issued
and currently outstanding, the names and specimen signatures of the
Officers of the Fund and the name and address of the legal counsel for
the Fund;
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(v) Specimen Share certificate for each or series class of Shares
in the form approved by the Board of Directors of the Fund (and in a
format compatible with the Transfer Agent's system), together with a
Certificate signed by the Secretary of the Fund as to such approval;
(vi) Copies of the Fund's registration statement, as amended to
date, and the most recently filed Post-Effective Amendment thereto,
filed by the Fund with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, together with any applications filed in
connection therewith; and
(vii) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares
are fully paid and nonassessable and the status of such Shares under
the Securities Act of 1933, as amended, and any other applicable
federal law or regulation (i.e., if subject to registration, that they
have been registered and that the registration statement has become
effective or, if exempt, the specific grounds therefor).
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ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. If requested by the Transfer Agent, the Fund shall deliver to the
Transfer Agent the following documents on or before the effective date of any
increase or decrease in the total number of Shares authorized to be issued:
(a) A certified copy of the amendment to the Articles of
Incorporation giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of the Fund and the
status of such Shares under the Securities Act of 1933, as amended, and
any other applicable federal law or regulation (i.e., if subject to
registration, that they have been registered and that the registration
statement has become effective or, if exempt, the specific grounds
therefor); and
(c) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the
authority of the Transfer Agent.
2. Prior to the issuance of any additional Shares pursuant to stock
dividends or stock splits, etc., and prior to any reduction in the number of
Shares outstanding, if requested by the Transfer Agent, the Fund shall deliver
the following documents to the Transfer Agent:
(a) A certified copy of the resolution(s) adopted by the Board of
Directors and/or the shareholders of the Fund authorizing such issuance
of additional Shares or such reduction, as the case may be; and
(b) An opinion of counsel for the Fund with respect to the
validity of the Shares and the status of such Shares under the
Securities Act of 1933, as amended,
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and any other applicable federal law or regulation (i.e., if subject to
registration, that they have been registered and that the registration
statement has become effective, or, if exempt, the specific grounds
therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(a) A Certificate authorizing the issuance of the Share
certificates in the new form;
(b) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in the
new form approved by the Board of Directors of the Fund, with a
Certificate signed by the Secretary of the Fund as to such approval;
and
(d) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares
under the Securities Act of 1933, as amended, and any other applicable
federal law or regulation (i.e., if subject to registration, that the
Shares have been registered and that the registration statement has
become effective or, if exempt, the specific grounds therefor).
2. The Fund at its expense shall furnish the Transfer Agent with a
sufficient supply of blank Share certificates in the new form and from time to
time will replenish such supply upon the request of the Transfer Agent. Such
blank Share certificates shall be compatible with the Transfer Agent's system
and shall be properly signed by facsimile or
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otherwise by Officers of the Fund authorized by law or by the By-laws to sign
Share certificates and, if required, shall bear the corporate seal or facsimile
thereof. The Fund agrees to indemnify and exonerate, save and hold the Transfer
Agent harmless from and against any and all claims or demands that may be
asserted against the Transfer Agent with respect to the genuineness of any Share
certificate supplied to the Transfer Agent pursuant to this Article.
ARTICLE V
ISSUANCE, REDEMPTION AND TRANSFER OF SHARES
1. (a) The Transfer Agent acknowledges that it has received a
copy of the Fund's Prospectus, which Prospectus describes how sales and
redemption of Shares of the Fund shall be made, and the Transfer Agent
agrees to accept purchase orders and redemption requests with respect
to Shares on each Fund Business Day in accordance with such Prospectus.
The Fund agrees to provide the Transfer Agent with sufficient advance
notice to enable the Transfer Agent to effect any changes in the
procedures set forth in the Prospectus regarding such purchase and
redemption procedure; provided, however, that in no event will such
advance notice be less than thirty (30) days.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time
by the Transfer Agent and the Fund, a computer tape or electronic data
transmission consistent in all respects with the Transfer Agent's
record format, as amended from time to time, which is believed by the
Transfer Agent to be furnished by or on behalf of any Approved
Institution. The Transfer Agent shall not be liable for any losses or
damages to the Fund or its shareholders in the event that a computer
tape or electronic data transmission from an Approved Institution is
unable to be processed
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for any reason beyond the control of the Transfer Agent, or if any of
the information on such tape or transmission is found to be incorrect.
2. On each Fund Business Day, the Transfer Agent shall, as of the time
at which the Fund computes the net asset value of the Fund, issue to and redeem
from the accounts specified in a purchase order, redemption request or computer
tape or electronic data transmission, which in accordance with the Prospectus is
effective on such Fund Business Day, the appropriate number of full and
fractional Shares based on the net asset value per Share of such Fund specified
in an advice received on such Fund Business Day from the Fund. Notwithstanding
the foregoing, if a redemption specified in a computer tape or electronic data
transmission is for a dollar value of Shares in excess of the dollar value of
uncertificated Shares in the specified account, the Transfer Agent shall not
effect such redemption in whole or in part and shall within twenty-four (24)
hours orally advise the Approved Institution which supplied such tape of the
discrepancy.
3. In connection with a reinvestment of a dividend or distribution of
Shares of the Fund, the Transfer Agent shall as of each Fund Business Day, as
specified in a Certificate or resolution described in paragraph 1 of succeeding
Article VI, issue Shares of the Fund based on the net asset value per Share of
such Fund specified in an advice received from the Fund on such Fund Business
Day.
4. On each Fund Business Day, the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of the Fund (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of the Fund sold on such day, pursuant to the preceding
paragraph 2 of this Article; the total number of Shares of the Fund redeemed
from shareholders by the Transfer Agent on such day; the total number of Shares
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of the Fund, if any, sold on such day pursuant to the preceding paragraph 3 of
this Article, and the total number of Shares of the Fund issued and outstanding.
5. In connection with each purchase and each redemption of Shares, the
Transfer Agent shall send such statements as are prescribed by the Federal
Securities laws applicable to transfer agents or as described in the Prospectus.
If the Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, the Transfer Agent will countersign (if necessary), issue and mail to
such shareholder at the address set forth in the records of the Transfer Agent a
Share certificate for any full Share requested.
6. As of each Fund Business Day, the Transfer Agent shall furnish the
Fund with an advice setting forth the number and dollar amount of Shares to be
redeemed on such Fund Business Day in accordance with paragraph 2 of this
Article.
7. Upon receipt of a proper redemption request and moneys paid to it by
the Custodian in connection with a redemption of Shares, the Transfer Agent
shall cancel the redeemed Shares and after making appropriate deduction for any
withholding of taxes required of it by applicable law: (a) in the case of a
redemption of Shares pursuant to a redemption described in the preceding
paragraph l(a) of this Article, make payment in accordance with the Fund's
redemption and payment procedures described in the Prospectus; and (b) in the
case of a redemption of Shares pursuant to a computer tape or electronic data
transmission described in the preceding paragraph l(b) of this Article, make
payment by directing a federal funds wire order to the account previously
designated by the Approved Institution specified in said computer tape or
electronic data transmission.
8. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written
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notification that the sale of Shares has been suspended or discontinued, and the
Transfer Agent shall be entitled to rely upon such written notification.
9. Upon the issuance of any Shares in accordance with this Agreement,
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
10. The Transfer Agent shall accept a computer tape or electronic data
transmission consistent with the Transfer Agent's record format, as amended from
time to time, which is reasonably believed by the Transfer Agent to be furnished
by or on behalf of any Approved Institution and is represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and shall effect the transfers
specified in said computer tape or electronic data transmission. The Transfer
Agent shall not be liable for any losses to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
11. (a) Except as otherwise provided in subparagraph (b) of this
paragraph and in paragraph 13 of this Article, Shares will be
transferred or redeemed upon presentation to the Transfer Agent of
Share certificates or instructions properly endorsed for transfer or
redemption, accompanied by such documents as the Transfer Agent deems
necessary to evidence the authority of the person making such transfer
or redemption, and bearing satisfactory evidence of the payment of
stock transfer taxes. In the case of small estates where no
administration is contemplated, the Transfer Agent may, when furnished
with an appropriate surety bond, and without further approval of the
Fund, transfer or redeem Shares registered in the name of a decedent
where the current market value of the Shares being transferred does not
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exceed such amount as may from time to time be prescribed by various
states. The Transfer Agent reserves the right to refuse to transfer or
redeem Shares until it is satisfied that the endorsement on the stock
certificate or instructions is valid and genuine, and for that purpose
it will require, unless otherwise instructed by an authorized Officer
of the Fund, a guarantee of signature by an "Eligible Guarantor
Institution" as that term is defined by SEC Rule 17Ad-15. The Transfer
Agent also reserves the right to refuse to transfer or redeem Shares
until it is satisfied that the requested transfer or redemption is
legally authorized, and it shall incur no liability for the refusal, in
good faith, to make transfers or redemptions which the Transfer Agent,
in its judgment, deems improper or unauthorized, or until it is
satisfied that there is no basis to any claims adverse to such transfer
or redemption. The Transfer Agent may, in effecting transfers and
redemptions of Shares, rely upon those provisions of the Uniform Act
for the Simplification of Fiduciary Security Transfers or the Uniform
Commercial Code, as the same may be amended from time to time,
applicable to the transfer of securities, and the Fund shall indemnify
the Transfer Agent for any act done or omitted by it in good faith in
reliance upon such laws. In no event will the Fund indemnify the
Transfer Agent for any act done by it as a result of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties. The Transfer Agent shall be entitled to accept, and shall be
fully protected by the Fund in accepting, any request from any entity
to carry out any transaction in Shares received by the Transfer Agent
through any of the various programs offered through the National
Securities Clearing Corporation ("NSCC") (including, but not limited
to, Networking and FundServ). Any such entity shall constitute an
Approved Institution as defined herein.
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(b) Notwithstanding the foregoing or any other provision
contained in this Agreement to the contrary, the Transfer Agent shall
be fully protected by the Fund in not requiring any instruments,
documents, assurances, endorsements or guarantees, including, without
limitation, any signature guarantees, in connection with a redemption
or transfer of Shares whenever the Transfer Agent reasonably believes
that requiring the same would be inconsistent with the transfer and
redemption procedures as described in the Prospectus.
12. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 11 of this Article
or any redemption of any Shares pursuant to a computer tape or electronic data
transmission described in this Agreement, any documents, including, without
limitation, any documents of the kind described in subparagraph (a) of paragraph
11 of this Article, to evidence the authority of the person requesting the
transfer or redemption and/or the payment of any stock transfer taxes, and shall
be fully protected in acting in accordance with the applicable provisions of
this Article.
13. (a) As used in this Agreement, the terms "computer tape or
electronic data transmission" and "computer tape believed by the
Transfer Agent to be furnished by an Approved Institution", shall
include any tapes generated by the Transfer Agent to reflect
information believed by the Transfer Agent to have been input by an
Approved Institution, via a remote terminal or other similar link, into
a data processing, storage or collection system, or similar system (the
"System"), located on the Transfer Agent's premises. For purposes of
paragraph 1 of this Article, such a computer tape or electronic data
transmission shall be deemed to have been furnished at such times as
are agreed upon from time to time by the Transfer Agent and Fund only
if the
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information reflected thereon was input to the System at such times as
are agreed upon from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent to permit, or to
agree to permit, any Approved Institution to input information into a
System.
(c) The Transfer Agent reserves the right to approve, in
advance, any Approved Institution; such approval not to be unreasonably
withheld. The Transfer Agent also reserves the right to terminate any
and all automated data communications, at its discretion, upon a
reasonable attempt to notify the Fund when in the opinion of the
Transfer Agent continuation of such communications would jeopardize the
accuracy and/or integrity of the Fund's records on the System.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a resolution
of its Board of Directors, certified by the Secretary or any Assistant
Secretary, either: (i) setting forth the date of the declaration of a dividend
or distribution, the date of accrual or payment, as the case may be, thereof,
the record date as of which shareholders entitled to payment, or accrual, as the
case may be, shall be determined, the amount per Share of such dividend or
distribution, the payment date on which all previously accrued and unpaid
dividends are to be paid and the total amount, if any, payable to the Transfer
Agent on such payment date; or (ii) authorizing the declaration of dividends and
distributions on a daily or other periodic basis and authorizing the Transfer
Agent to rely on a Certificate setting forth the information described in
subsection (i) of this paragraph.
2. Upon the mail date specified in such Certificate or resolution, as
the case may be, the Fund shall, in the case of a cash dividend or distribution,
cause the Custodian to
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deposit in an account in the name of the Transfer Agent on behalf of the Fund an
amount of cash, if any, sufficient for the Transfer Agent to make the payment,
as of the mail date, specified in such Certificate or resolution, as the case
may be, to the shareholders who were of record on the record date. The Transfer
Agent will, upon receipt of any such cash, make payment of such cash dividends
or distributions to the shareholders of record as of the record date by: (i)
mailing a check, payable to the registered shareholder, to the address of record
or dividend mailing address; or (ii) wiring such amounts to the accounts
previously designated by an Approved Institution, as the case may be. The
Transfer Agent shall not be liable for any improper payments made in good faith
and without negligence, in accordance with a Certificate or resolution described
in the preceding paragraph. If the Transfer Agent shall not receive from the
Custodian sufficient cash to make payments of any cash dividend or distribution
to all shareholders of the Fund as of the record date, the Transfer Agent shall,
upon notifying the Fund, withhold payment to all shareholders of record as of
the record date until sufficient cash is provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders. It is expressly agreed and
understood that the Transfer Agent is not liable for any loss as a result of
processing a distribution based on information provided in the Certificate that
is incorrect. The Fund agrees to pay the Transfer Agent for any and all costs,
both direct and Out-of-Pocket Expenses, incurred in such corrective work as
necessary to remedy such error.
4. It is understood that the Transfer Agent shall file such appropriate
information returns concerning the payment of dividend and capital gain
distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund, but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or
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distributions due to shareholders, except and only to the extent required by
applicable law. Anything in this Agreement to the contrary notwithstanding, the
Fund shall be solely responsible for the accurate, complete and timely filing
with the proper federal, state and local authorities of all tax information with
respect to any Fund account maintained under Matrix Level 3 through any of the
various programs offered through the NSCC (including, but not limited to,
Networking and FundServ).
ARTICLE VII
CONCERNING THE FUND
1. The Fund represents to the Transfer Agent that:
(a) It is a corporation duly organized and existing under the
laws of the State of Maryland.
(b) It is empowered under applicable laws and by its Articles of
Incorporation and By-laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is an investment company registered under the Investment
Company Act of 1940, as amended.
(e) A registration statement under the Securities Act of 1933, as
amended, with respect to the Shares is effective. The Fund shall notify
the Transfer Agent if such registration statement or any state
securities registrations have been terminated or a stop order has been
entered with respect to the Shares.
2. Each copy of the Articles of Incorporation of the Fund and copies of
all amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of organization, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate
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of such filing shall be filed with a certified copy submitted to the Transfer
Agent. Each copy of the By-laws and copies of all amendments thereto, and copies
of resolutions of the Board of Directors of the Fund shall be certified by the
Secretary of the Fund under seal.
3. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign Share certificates,
notifications or requests, together with a specimen signature of each new
Officer. In the event any Officer who shall have signed manually or whose
facsimile signature shall have been affixed to blank Share certificates shall
die, resign or be removed prior to issuance of such Share certificates, the
Transfer Agent may issue such Share certificates of the Fund notwithstanding
such death, resignation or removal, and the Fund shall promptly deliver to the
Transfer Agent such approval, adoption or ratification as may be required by
law.
4. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus and, for purposes of
this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus until a reasonable time after it is
actually received by the Transfer Agent.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent represents and warrants to the Fund that:
(a) It is a corporation duly organized and existing under the
laws of the State of Missouri.
(b) It is empowered under applicable law and by its Articles of
Incorporation and By-laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
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(d) It is duly registered as a transfer agent under Section 17A
of the Securities Exchange Act of 1934, as amended.
2. The Transfer Agent shall not be liable and shall be indemnified in
acting upon any computer tape or electronic data transmission, writing or
document reasonably believed by it to be genuine and to have been signed or made
by an Officer of the Fund or person designated by the Fund and shall not be held
to have any notice of any change of authority of any person until receipt of
written notice thereof from the Fund or such person. It shall also be protected
in processing Share certificates which bear the proper countersignature of the
Transfer Agent and which it reasonably believes to bear the proper manual or
facsimile signature of the Officers of the Fund.
3. The Transfer Agent upon notice to the Fund may establish such
additional procedures, rules and regulations governing the transfer or
registration of Share certificates as it may deem advisable and consistent with
such rules and regulations generally adopted by mutual fund transfer agents.
4. The Transfer Agent shall keep such records as it may deem advisable
and is agreeable to the Fund, but not inconsistent with the rules and
regulations of appropriate government authorities, in particular Rules 31a-2 and
31a-3 under the Investment Company Act of 1940, as amended. The Transfer Agent
acknowledges that such records are the property of the Fund. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, documents
accumulated in the execution of its duties as such Transfer Agent, as the
Transfer Agent may deem expedient, other than those which the Transfer Agent is
itself required to maintain pursuant to applicable laws and regulations. The
Fund shall assume all responsibility for any failure thereafter to produce any
record, paper, cancelled Share certificate or other document so returned, if and
when required. Such records maintained by
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the Transfer Agent pursuant to this paragraph 4, which have not been previously
delivered to the Fund pursuant to the foregoing provisions of this paragraph 4,
shall be considered to be the property of the Fund, shall be made available upon
request for inspection by the Officers, employees and auditors of the Fund, and
records shall be delivered to the Fund upon request and in any event upon the
date of termination of this Agreement, as specified in Article IX of this
Agreement, in the form and manner kept by the Transfer Agent on such date of
termination or such earlier date as may be requested by the Fund.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its bad faith, willful
misfeasance, gross negligence or reckless disregard of its duties under this
Agreement.
6. (a) The Fund shall indemnify and exonerate, save and hold harmless
the Transfer Agent from and against any and all claims (whether with or
without basis in fact or law), demands, expenses (including reasonable
attorneys' fees) and liabilities of any and every nature which the
Transfer Agent may sustain or incur or which may be asserted against
the Transfer Agent by any person by reason of or as a result of any
action taken or omitted to be taken by any prior transfer agent of the
Fund or as a result of any action taken or omitted to be taken by the
Transfer Agent in good faith and without gross negligence or willful
misfeasance or in reliance upon: (i) any provision of this Agreement;
(ii) the Prospectus; (iii) any instruction or order including, without
limitation, any computer tape or electronic data transmission
reasonably believed by the Transfer Agent to have been received from an
Approved Institution; (iv) any instrument, order or Share certificate
reasonably believed by it to be genuine and to be signed, countersigned
or executed by any duly authorized Officer of the Fund; (v) any
Certificate or other instructions of an Officer; (vi) any
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opinion of legal counsel for the Fund or the Transfer Agent; or (vii)
any request by any entity to carry out any transaction in Shares
received by the Transfer Agent through any of the various programs
offered through the NSCC (including, but not limited to, Networking and
FundServ). The Fund shall indemnify and exonerate, save and hold the
Transfer Agent harmless from and against any and all claims (whether
with or without basis in fact or law), demands, expenses (including
reasonable attorneys' fees) and liabilities of any and every nature
which the Transfer Agent may sustain or incur or which may be asserted
against the Transfer Agent by any person by reason of or as a result of
any action taken or omitted to be taken by the Transfer Agent in good
faith in connection with its appointment or in reliance upon any law,
act, regulation or any interpretation of the same even though such law,
act or regulation may thereafter have been altered, changed, amended or
repealed.
(b) The Transfer Agent shall not settle any claim, demand,
expense or liability to which it may seek indemnity pursuant to
paragraph 6(a) above (each, an "Indemnifiable Claim") without the
express written consent of an Officer of the Fund. The Transfer Agent
shall notify the Fund within fifteen (15) days of receipt of
notification of an Indemnifiable Claim, provided that the failure by
the Transfer Agent to furnish such notification shall not impair its
right to seek indemnification from the Fund unless the Fund is unable
to adequately defend the Indemnifiable Claim as a result of such
failure, and further provided, that if as a result of the Transfer
Agent's failure to provide the Fund with timely notice of the
institution of litigation a judgment by default is entered, prior to
seeking indemnification from the Fund the Transfer Agent, at its own
cost and expense, shall open such judgment. The Fund shall have the
right to defend any Indemnifiable Claim at its own expense, provided
that such defense shall be conducted by counsel selected by the Fund
and reasonably
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acceptable to the Transfer Agent. The Transfer Agent may join in such
defense at its own expense, but to the extent that it shall so desire
the Fund shall direct such defense. The Fund shall not settle any
Indemnifiable Claim without the express written consent of the Transfer
Agent if the Transfer Agent determines that such settlement would have
an adverse effect on the Transfer Agent beyond the scope of this
Agreement. In such event, the Fund and the Transfer Agent shall each be
responsible for their own defense at their own cost and expense, and
such claim shall not be deemed an Indemnifiable Claim hereunder. If the
Fund shall fail or refuse to defend an Indemnifiable Claim, the
Transfer Agent may provide its own defense at the cost and expense of
the Fund. Anything in this Agreement to the contrary notwithstanding,
the Fund shall not indemnify the Transfer Agent against any liability
or expense arising out of the Transfer Agent's willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement. The Transfer Agent shall indemnify
and hold the Fund harmless from and against any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability
arising out of or attributable to any action or failure or omission to
act by the Transfer Agent as a result of the Transfer Agent's lack of
good faith, gross negligence or willful misfeasance.
7. The Transfer Agent shall not be liable to the Fund with respect to
any redemption draft on which the signature of the drawer is forged and which
the Fund's Custodian has advised the Transfer Agent to honor the redemption (but
nothing herein is meant to impose any duties upon the Fund's Custodian); nor
shall the Transfer Agent be liable for any material alteration or absence or
forgery of any endorsement, it being understood that the Transfer Agent's sole
responsibility with respect to inspecting redemption drafts is to use reasonable
care to verify the drawer's signature against signatures on file.
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8. There shall be excluded from the consideration of whether the
Transfer Agent has breached this Agreement in any way, any period of time, and
only such period of time during which the Transfer Agent's performance is
materially affected, by reason of circumstances beyond its control
(collectively, "Causes"), including, without limitation, mechanical breakdowns
of equipment (including any alternative power supply and operating systems
software), flood or catastrophe, acts of God, failures of transportation,
communication or power supply, strikes, lockouts, work stoppages or other
similar circumstances.
9. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may set
forth in writing any action proposed to be taken or omitted by the Transfer
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken. The Transfer Agent shall
not be liable for any action taken or omitted in accordance with a proposal
included in any such application on or after the date specified therein unless,
prior to taking or omitting any such action, the Transfer Agent has received
written instructions in response to such application specifying the action to be
taken or omitted. The Transfer Agent may consult counsel of the Fund, or upon
notice to the Fund, its own counsel, at the expense of the Fund and shall be
fully protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Fund or its own counsel.
10. The Transfer Agent may issue new Share certificates in place of
certificates represented to have been lost, stolen or destroyed upon receiving
written instructions from
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the shareholder accompanied by proof of an indemnity or surety bond issued by a
recognized insurance institution specified by the Fund or the Transfer Agent. If
the Transfer Agent receives written notification from the shareholder or broker
dealer that the certificate issued was never received, and such notification is
made within thirty (30) days of the date of issuance, the Transfer Agent may
reissue the certificate without requiring a surety bond. The Transfer Agent may
also reissue certificates which are represented as lost, stolen or destroyed
without requiring a surety bond provided that the notification is in writing and
accompanied by an indemnification signed on behalf of a member firm of the New
York Stock Exchange and signed by an officer of said firm with the signature
guaranteed. Notwithstanding the foregoing, the Transfer Agent will reissue a
certificate upon written authorization from an Officer of the Fund.
11. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund promptly and to secure instructions from an Officer as to such inspection.
The Transfer Agent reserves the right, however, to exhibit the shareholder
records to any person whenever it receives an opinion from its counsel that
there is a reasonable likelihood that the Transfer Agent will be held liable for
the failure to exhibit the shareholder records to such person; provided,
however, that in connection with any such disclosure the Transfer Agent shall
promptly notify the Fund that such disclosure has been made or is to be made.
12. At the request of an Officer of the Fund, the Transfer Agent will
address and mail such appropriate notices to shareholders as the Fund may
direct.
13. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
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(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of
the Approved Institution or of the Fund, as the case may be, to request
such sale or issuance;
(b) The legality of a transfer of Shares, or of a redemption of
any Shares, the propriety of the amount to be paid therefor, or the
authority of the Approved Institution or of the Fund, as the case may
be, to request such transfer or redemption;
(c) The legality of the declaration of any dividend by the Fund,
or the legality of the issue of any Shares in payment of any stock
dividend; or
(d) The legality of any recapitalization or readjustment of
Shares.
14. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
15. Purchase and Prices of Services:
(a) The Manager will compensate the Transfer Agent for, and
Transfer Agent will provide, beginning on the execution date of this
Agreement and continuing until the termination of this Agreement as
provided hereinafter, the services set forth in Schedule I.
(b) The current unit prices for the services are set forth in
Schedule II (the "Schedule II Fees"). Effective as of January 1, 1997,
once in each calendar year, the Transfer Agent may elect to raise the
Schedule II Fees upon ninety (90) days prior notice to the Fund, all
subject to the mutual agreement of the parties hereto. Notwithstanding
the annual right to raise the Schedule II Fees, the Transfer Agent may
increase prices due to changes in legal or regulatory requirements
subject to the approval of the Fund, which approval shall not be
unreasonably withheld.
16. Billing and Payment:
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<PAGE>
(a) The Transfer Agent shall bill the Manager monthly in arrears
for accounts maintained and Out-of-Pocket Expenses. The Transfer Agent
may from time to time request that the Fund advance estimated
expenditures of an unusual nature subject to reconciliation of actual
expenses as soon as practicable thereafter.
(b) The Manager shall pay the Transfer Agent in immediately
available funds at UMB Bank, n.a. in Kansas City, Missouri within
thirty (30) days of the date of the bill. Any amounts due under this
Agreement which are not paid within said thirty (30) day period shall
bear interest at the rate of one and one-half percent (l 1/2%) per
month from such date until paid in full.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than sixty (60) days after the date of receipt of such
notice. In the event such notice is given by the Manager, it shall be
accompanied by a copy of a resolution of the Board of Directors of the Manager,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating the successor transfer agent or transfer agents.
In the event such notice is given by the Transfer Agent, the Manager shall on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors, certified by the Secretary or any
Assistant Secretary, designating a successor transfer agent or transfer agents.
In the absence of such designation by the Manager, the Fund shall upon the date
specified in the notice of termination of this Agreement and delivery of the
records maintained hereunder, be deemed to be its own transfer agent and the
Transfer Agent shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement.
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<PAGE>
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of the Manager or the Fund, shall
deliver the records of the Fund on electromagnetic media to the Fund or its
successor transfer agent. The Fund shall be responsible to the Transfer Agent
for the reasonable costs and expenses associated with the preparation and
delivery of such media.
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<PAGE>
ARTICLE X
MISCELLANEOUS
1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
thirty (30) days prior to the intended date of the same, and shall proceed with
such change only if it shall have received the written consent of the Transfer
Agent thereto, which shall not be unreasonably withheld.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at:
2440 Pershing Road
Kansas City, MO 64108
or at such other place as the Fund may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent and mailed or delivered to:
2440 Pershing Road
Kansas City, MO 64108
or at such other place as the Transfer Agent may from time to time designate in
writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Manager shall be sufficiently given if
addressed to the Manager and mailed or delivered to:
909 N. Washington Street
Alexandria, Virginia 22314
5. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the formality of this
Agreement and agreed to by the Fund.
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<PAGE>
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns.
7. This Agreement shall be governed by and construed in accordance with
the laws of the State of Missouri.
8. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
9. The provisions of this Agreement are intended to benefit only the
Manager, the Transfer Agent and the Fund, and no rights shall be granted to any
other person by virtue of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate officer, thereunto duly
authorized and their respective corporate seals to be hereunto affixed, as of
the day and year first above written.
AFBA Investment Management Company
By: _____________________
Name:
Title: President
[SEAL]
JONES & BABSON, INC.
By: _____________________
Name: Larry D. Armel
Title: President
[SEAL]
-142-
<PAGE>
Agreed:
AFBA Five Star Fund, Inc.
By: _____________________
Name:
Title:
-143-
Exhibit 11
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star Mutual Funds, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the AFBA Five Star Mutual Funds, Inc. intends to register its shares
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940 and with the Securities Departments of the
various states and the District of Columbia. Now, therefore,
KNOW ALL MEN BY THESE PRESENTS,
THAT I, Larry D. Armel, do hereby appoint C. C. Blanton, Lt. General, USAF(Ret.)
as my true and lawful attorney in fact, for me, with the power to act in my name
and to execute on my behalf all forms and documents required by the Securities
and Exchange Commission, or any state of the United States of America, or the
District of Columbia, in connection with the initial registration of the
securities of AFBA Five Star Mutual Funds, Inc. and in the maintenance of such
registrations.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of January, 1997.
/s/Larry D. Armel
Sworn to before me this 22nd day of January, 1997.
/s/Elizabeth L. Allwood
Notary Public
Kansas City, State of Missouri
My commission expires 11/19/99.
-144-
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star Mutual Funds, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the AFBA Five Star Mutual Funds, Inc. intends to register its shares
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940 and with the Securities Departments of the
various states and the District of Columbia. Now, therefore,
KNOW ALL MEN BY THESE PRESENTS,
THAT I, John C. Kornitzer, do hereby appoint C. C. Blanton, Lt. General,
USAF(Ret.) as my true and lawful attorney in fact, for me, with the power to act
in my name and to execute on my behalf all forms and documents required by the
Securities and Exchange Commission, or any state of the United States of
America, or the District of Columbia, in connection with the initial
registration of the securities of AFBA Five Star Mutual Funds, Inc. and in the
maintenance of such registrations.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of January, 1997.
/s/John C. Kornitzer
Sworn to before me this 22nd day of January, 1997.
/s/Elizabeth L. Allwood
Notary Public
Kansas City, State of Missouri
My commission expires 11/19/99.
-145-
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star Mutual Funds, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the AFBA Five Star Mutual Funds, Inc. intends to register its shares
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940 and with the Securities Departments of the
various states and the District of Columbia. Now, therefore,
KNOW ALL MEN BY THESE PRESENTS,
THAT I, Henry J. Sechler, Brigadier General, USAF(Ret.), do hereby appoint C. C.
Blanton, Lt. General, USAF(Ret.) as my true and lawful attorney in fact, for me,
with the power to act in my name and to execute on my behalf all forms and
documents required by the Securities and Exchange Commission, or any state of
the United States of America, or the District of Columbia, in connection with
the initial registration of the securities of AFBA Five Star Mutual Funds, Inc.
and in the maintenance of such registrations.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of January, 1997.
/s/Henry J. Sechler, Brigadier General, USAF(Ret.)
Sworn to before me this 22nd day of January, 1997.
/s/Mark A. Centanni
Notary Public
City of Alexandria, Commonwealth of Virginia
My commission expires 7/31/00.
-146-
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star Mutual Funds, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the AFBA Five Star Mutual Funds, Inc. intends to register its shares
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940 and with the Securities Departments of the
various states and the District of Columbia. Now, therefore,
KNOW ALL MEN BY THESE PRESENTS,
THAT I, Monroe W. Hatch, Jr., General, USAF(Ret.), do hereby appoint C. C.
Blanton, Lt. General, USAF(Ret.) as my true and lawful attorney in fact, for me,
with the power to act in my name and to execute on my behalf all forms and
documents required by the Securities and Exchange Commission, or any state of
the United States of America, or the District of Columbia, in connection with
the initial registration of the securities of AFBA Five Star Mutual Funds, Inc.
and in the maintenance of such registrations.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of January, 1997.
/s/Monroe W. Hatch, Jr., General, USAF(Ret.)
Sworn to before me this 22nd day of January, 1997.
/s/Mark A. Centanni
Notary Public
City of Alexandria, Commonwealth of Virginia
My commission expires 7/31/00.
-147-
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star Mutual Funds, Inc., a
Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the AFBA Five Star Mutual Funds, Inc. intends to register its shares
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940 and with the Securities Departments of the
various states and the District of Columbia. Now, therefore,
KNOW ALL MEN BY THESE PRESENTS,
THAT I, Louis C. Wagner, Jr., General, USAF(Ret.), do hereby appoint C. C.
Blanton, Lt. General, USAF(Ret.) as my true and lawful attorney in fact, for me,
with the power to act in my name and to execute on my behalf all forms and
documents required by the Securities and Exchange Commission, or any state of
the United States of America, or the District of Columbia, in connection with
the initial registration of the securities of AFBA Five Star Mutual Funds, Inc.
and in the maintenance of such registrations.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of January, 1997.
/s/Louis C. Wagner, Jr., General, USAF(Ret.)
Sworn to before me this 17th day of January, 1997.
/s/Mark A. Centanni
Notary Public
City of Alexandria, Commonwealth of Virginia
My commission expires 7/31/00.
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<PAGE>
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PENNSYLVANIA 19103-7098
(215) 564-8000
January 28, 1997
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: AFBA FIVE STAR FUND, INC.
Notification of Registration on Form N-8A
Registration Statement on Form N-1A
Gentlemen:
Enclosed for filing with the Commission is the initial
Registration Statement on Form N-1A and the Notification of Registration on Form
N-8A for the AFBA Five Star Fund, Inc. (the "Fund"), an open-end investment
company offering multiple series of shares.
The objectives and policies of the series of the Fund and the
prospectus and statement of additional information of the Fund are substantially
similar to the following mutual funds, for which Kornitzer Capital Management,
Inc. also serves as investment adviser: Buffalo Equity Fund, Inc. (file nos.
33-87346; 811-8900); Buffalo Balanced Fund, Inc. (file nos. 33-75476; 811-8364);
Buffalo USA Global Fund, Inc. (file nos. 33-87146; 811-8896) and Buffalo High
Yield Fund, Inc. (file nos. 33-87148) (the "Buffalo Funds"). You should note,
however, that Jones & Babson, Inc., the Manager and Underwriter for the Buffalo
Funds, is the Transfer Agent and Underwriter for the Fund. AFBA Investment
Management Company, a recently organized entity, will serve as the Fund's
Manager and has not previously served in that capacity for a registered
investment company.
The attached table lists the section captions in the combined
prospectus and SAI for the Buffalo Funds and cross-references them to the Fund's
Prospectus and SAI as appropriate. Captions are the same for both funds unless
noted otherwise.
Questions related to this filing should be directed to me at
(215) 564-8101.
Very truly yours,
/s/ Audrey C. Talley
ACT/pj
Enclosure
cc: Larry D. Armel (w/encl.)
John G. Dyer (w/encl.)
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<PAGE>
AFBA FIVE STAR FUND, INC. Unique Combined Buffalo
Funds
Prospectus Section
Investment Objective (cover page) X
Fund Expenses X
Per Share Capital and Income Changes
(To be supplied by further amendment)
Investment Objective and Portfolio Management Policy X
Restricted Securities X
Repurchase Agreements X
Asset-Backed Securities X
Risk Factors X
Investment Restrictions X
Performance Measures X
How to Purchase Shares X
Initial Investments X
Investments Subsequent to Initial Investment X
Telephone Investment Service X
Automatic Monthly Investment Plan X
How to Redeem Shares X
Systematic Redemption Plan X
How to Exchange Shares Between Funds X
How Share Price is Determined X
Officers and Directors X
Management and Investment Counsel X
General Information and History X
Dividends, Distributions and Their Taxation X
Shareholder Services X
<PAGE>
AFBA FIVE STAR FUND, INC. Unique Combined Buffalo
Funds
Shareholder Inquiries X
Statement of Additional Information Section
Investment Objective and Policies X
Portfolio Transactions X
Investment Restrictions X
Performance Measures X
How the Fund's Shares are Distributed X
How Share Purchases and Handled X
Redemption of Shares X
Signature Guarantees X
Management and Investment Counsel X
How Share Price is Determined X
Officers and Directors X
Custodian X
Independent Auditors X
Other Jones & Babson Funds X
Shareholder Services X
Description of Securities Ratings X
Financial Statements (to be supplied by further amendment)
