FILE NO. 333-20637
FILE NO. 811-8035
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. ____ /_/
Post Effective Amendment No. 3 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
Amendment No. 6
(Check appropriate box or boxes.)
AFBA FIVE STAR FUND, INC.
(Exact name of Registrant as Specified in Charter)
BMA Tower, 700 Karnes Blvd., Kansas City, MO 64108-3306
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 751-5900
Larry D. Armel, BMA Tower, 700 Karnes Blvd., Kansas City, MO
64108-3306
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering
It is proposed that this filing become effective (check
appropriate box)
/_/ immediately upon filing pursuant to paragraph (b)
/_/ on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on March 31, 1999 pursuant to paragraph (a)(1)
/_/ 75 days after filing pursuant to paragraph (a)(2)
/_/ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/_/ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
Prospectus
July 31, 1999
AFBA
Five Star
Funds SM
Shares of the Funds have not been approved or disapproved by the
Securities and Exchange Commission nor has the Commission passed upon
the adequacy of this Prospectus. Any representation to the
contrary is a criminal offense.
100% pure no-load
mutual funds
Prospectus July 31, 1999
AFBA Five Star Fund, Inc.
MANAGER:
AFBA INVESTMENT MANAGEMENT COMPANY
INVESTMENT COUNSEL:
KORNITZER CAPITAL MANAGEMENT, INC.
DISTRIBUTED BY:
JONES & BABSON, INC.
Table of Contents
Page
Information About the Funds
Investment Objectives and Principal Investment Strategies 2
Principal Risk Factors 3
Past Performance 4
Fees and Expenses 6
Management and Investment Counsel 7
Financial Highlights 8
Information About Investing
How to Purchase Shares 12
How to Redeem Shares 12
Shareholder Services 13
How Share Price is Determined 13
Distributions and Taxes 14
Additional Policies About Transactions 14
Conducting Business with the AFBA Five Star Fund, Inc. 16
Investment Objectives and Principal Investment Strategies
The investment objectives and the manner in which the AFBA Five Star
Funds will pursue their objectives are as follows:
AFBA Five Star Balanced Fund - seeks long-term capital growth and
high current income by investing in common stocks, convertible bonds and
convertible preferred stocks and corporate fixed income securities, many
of which can be high-yielding securities.
AFBA Five Star Equity Fund - seeks long-term capital growth by
investing in common stocks of large capitalization companies most of
which are listed on the New York Stock Exchange.
AFBA Five Star High Yield Fund - seeks high current income with
long-term capital growth as a secondary objective by investing in high
yielding fixed income securities.
AFBA Five Star USA Global Fund - seeks long-term capital growth by
investing in common stocks of companies based in the United States that
receive greater than 40% of their revenues or income from global sales
and operations.
Each Fund's principal investment strategies used are described below:
AFBA Five Star Balanced Fund invests in a combination of common
stocks, high yield corporate bonds and high yield convertible
securities. The allocation of assets invested in each type of security
is designed to balance yield income and long-term capital appreciation
with reduced volatility of returns. The Fund expects to change its
allocation mix over time based on the counsel's view of economic
conditions and underlying security values. Usually, the counsel will
invest at least 25% of the Fund's assets in equity securities and at
least 25% in fixed-income securities.
AFBA Five Star Equity Fund invests in companies that meet specific
cash flow criteria and/or are expected to benefit from long-term
industry and technological trends that
are likely to positively impact company performance. The cash flow
criteria used by
the counsel focuses on consistency and predictability of cash
generation. Separately, long-term trends are identified with the purpose
of investing in companies that should have favorable operating
environments over the next three to five years. The final stock
selection process includes: 1) ongoing fundamental analysis of
industries and the economic cycle; 2) analysis of company-specific
factors such as product cycles, management, etc.; and 3) rigorous
valuation analysis.
AFBA Five Star High Yield Fund uses extensive fundamental research
to identify potential fixed income investment opportunities among lower-
rated, high yielding securities. Emphasis is placed on relative value
and good corporate management. Specifically, the counsel may look at a
number of past, present and estimated factors such as: 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.
AFBA Five Star USA Global Fund invests in equity securities that
have above average opportunities for appreciation issued by companies in
a broad array of industries. The focus is on U.S. based companies that
receive greater than 40% of their revenues or income from international
operations measured by the preceding four completed quarters of business
or the respective company's most recently completed fiscal year.
The Funds intend to hold a small percentage of cash or high quality,
short-term debt obligations for reserves to cover redemptions and
unanticipated expenses. There may be times, however, when the Funds may
respond to adverse market, economic, political or other considerations
by investing up to 100% of its assets in bonds or other defensive
investments for temporary investment purposes. Keep in mind that a
temporary defensive strategy still has the potential to lose money. The
objectives and policies that determine how the Funds are managed as
described above can only be changed with the corresponding Funds'
shareholder's approval.
Principal Risk Factors
Equity securities are subject to market, economic and business risks
that will cause their prices to fluctuate over time. Since the Funds
(except AFBA Five Star High Yield) are normally invested in common
stocks, the value of these Funds will go up and down. As with any mutual
fund, there is a risk that you could lose money by investing in the
Funds.
Different types of investments shift in and out of favor depending on
market and economic conditions. At various times stocks will be more or
less favorable than bonds, and small company stocks will be more or less
favorable than large company stocks. Because of this, the Funds will
perform better or worse than other types of funds depending on what is
in "favor."
The yields and principle values of debt securities will also fluctuate.
Generally, values of debt securities change inversely with interest
rates. That is, as interest rates go up, the values of debt securities
tend to go down and vice versa. Furthermore, these fluctuations tend to
increase as a bond's maturity increases such that a longer term bond
will increase or decrease more for a given change in interest rates than
a shorter term bond.
AFBA Five Star Balanced and AFBA Five Star High Yield Funds invest in
lower-rated, high yielding bonds (so-called "junk bonds"). These bonds
have a greater degree of default risk than higher rated bonds. Lower-
rated securities may be issued by companies that are restructuring, are
smaller and less credit worthy or are more highly indebted than other
companies. Lower-rated securities also tend to have less liquid markets
than higher-rated securities. In addition, market prices of lower rated
bonds tend to react more negatively to adverse economic or political
changes, investor perceptions or individual corporate developments than
higher rated bonds.
International investing poses additional risks such as currency
fluctuation and political instability. However, USA Global Fund limits
these risks by investing only in U.S. companies traded in the U.S. and
denominated in U.S. dollars. While this eliminates direct foreign
investment, the companies the Fund invests in will experience these
risks in their day-to-day business dealings. These risks are inherently
passed on to the company's shareholders and in turn, to the Fund's
shareholders.
Computer systems that cannot process and calculate date-related
information as of and after January 1, 2000 are a concern for financial
and business organizations around the world. We are taking steps to
address the Year 2000 issue with respect to the computers we use, and
have asked that our major service providers take comparable steps. Also,
the Fund's Investment Counsel is using its best efforts to evaluate any
potential adverse effects from the Year 2000 issue that may affect
companies whose securities may be purchased by the Funds. However, there
is no way to be sure that these steps will completely protect the Funds
from being affected.
Past Performance
The tables below and on the following page provide an indication of the
risks of investing in the Funds. The tables on the left side show the
total returns generated by the respective Fund for each calendar year.
The tables on the right show how each Fund's average annual returns for
certain periods compare with those of a relevant, widely recognized
benchmark. Each table reflects all expenses of the respective Fund and
assumes that all dividends and capital gains distributions have been
reinvested in new shares of the Fund. Past performance is not
necessarily an indication of how a Fund will perform in the future.
Market Capitalization: How much a company is considered to be worth.
It equals the number
of outstanding shares times the share price. Large capitalization
companies are those
in excess of $1 billion while small cap companies are valued under that
figure.
Default risk: The possibility that the issuer will fail to make timely
payments of principal
or interest to the Funds.
GRAPH - AFBA Five Star Balanced Fund
Annual Total Return as of December 31 of Each Year
Year-to-Date Return (through March 31, 1999) = -0.7%
Best Quarter Ended September 30, 1997 = 9.7%
Worst Quarter Ended September 30, 1998 = -11.9%
Average Annual Total Return as of December 31, 1998
1 Year Since Inception*
AFBA Five Star Balanced Fund (0.4%) 5.7%
S&P 500 Index and Merrill Lynch Bond
Fund Weighted Average 17.0% 16.6%
*Inception Date = June 3, 1997
GRAPH - AFBA Five Star Equity Fund
Annual Total Return as of December 31 of Each Year
Year-to-Date Return (through March 31, 1999) = 0.4%
Best Quarter Ended December 31, 1998 = 16.5%
Worst Quarter Ended September 30, 1998 = -16.4%
Average Annual Total Return as of December 31, 1998
1 Year Since Inception*
AFBA Five Star Equity Fund 6.4% 10.3%
S&P 500 Index 28.6% 26.4%
*Inception Date = June 3, 1997
GRAPH - AFBA Five Star High Yield Fund
Annual Total Return as of December 31 of Each Year
Year-to-Date Return (through March 31, 1999) = -0.2%
Best Quarter Ended September 30, 1997 = 4.4%
Worst Quarter Ended September 30, 1998 = -6.3%
Average Annual Total Return as of December 31, 1998
1 Year Since Inception*
AFBA Five Star
High Yield Fund (6.0%) 0.2%
Merrill Lynch High
Yield Bond Index 3.7% 7.4%
*Inception Date = June 3, 1997
GRAPH - AFBA Five Star USA Global Fund
Annual Total Return as of December 31 of Each Year
Year-to-Date Return (through March 31, 1999) = 0.2%
Best Quarter Ended December 31, 1998 = 13.9%
Worst Quarter Ended September 30, 1998 = -10.3%
Average Annual Total Return as of December 31, 1998
1 Year Since Inception*
AFBA Five Star USA
Global Fund 8.1% 7.1%
S&P 500 Index 28.6% 26.4%
*Inception Date = June 3, 1997
Fees & Expenses
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of each AFBA Five Star Fund.
AFBA Five Star AFBA Five Star AFBA Five Star AFBA Five Star
Balanced Fund Equity Fund High Yield Fund USA Global Fund
Shareholder Fees
(fees paid
directly from
your investment)
Maximum Sales
Charge (Load)
Imposed on
Purchases None None None None
Maximum Deferred
Sales Charge
(Load) None None None None
Maximum Sales
Charge (Load)
Imposed
on Reinvested
Dividends None None None None
Redemption Fee None * None * None * None *
Exchange Fee None None None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management
Fees 1.00% 1.00% 1.00% 1.00%
Distribution
(12b-1) fees None None None None
Other Expenses .33% .23% .46% .30%
Total Annual
Fund Operating
Expenses** 1.33% 1.23% 1.46% 1.30%
**The actual expenses paid by the Funds were 1.08% due to a fee
assumption arrangement whereby Jones & Babson, Inc. voluntarily assumes
Fund expenses in excess of that amount. Generally, as Fund assets
increase expense ratios tend to decrease since fixed costs are spread
over a larger asset base.
The expense percentages set forth above are based on each
Fund's operations from April 1, 1998 through the fiscal year ended March
31, 1999.
Fee Examples
The following examples are intended to help you compare the cost of
investing in each AFBA Five Star Fund with the cost of investing in
other mutual funds. The examples assume that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your shares
at the end of those periods. The examples also assume that your
investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
AFBA Five Star Balanced Fund $135 $421 $729 $1,601
AFBA Five Star Equity Fund $125 $390 $676 $1,489
AFBA Five Star High Yield Fund $149 $462 $797 $1,746
AFBA Five Star USA Global Fund $132 $412 $713 $1,568
Management and Investment Adviser
AFBA Investment Management Company acts as manager of the Funds and is a
registered investment adviser under the Investment Advisors Act of 1940.
It organized the Funds in 1997, and it acts as the Funds' investment and
business manager. Pursuant to the current Management Agreement for each
portfolio of the AFBA 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; officers, directors and other
personnel; rent; shareholder services; and other items incidental to
corporate administration.
Operating expenses not required in the normal operation of the Funds are
payable by the Funds. These expenses include taxes, interest,
governmental charges and fees, including registration of the Funds with
the Securities and Exchange Commission and the various States, brokerage
costs, dues, and all extraordinary costs including expenses arising out
of anticipated or actual litigation or administrative proceedings.
The Manager employs at its own expense Kornitzer Capital Management,
Inc. as its investment counsel to assist in the investment advisory
function for the Funds. Kornitzer Capital Management, Inc. is an
independent investment counseling firm founded in 1989. 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, Jones & Babson, Inc. or the Fund to maintain an
extensive duplicate staff. The AFBA Five Star Funds are managed by a
team of four individuals. John Kornitzer has over 28 years of investment
experience. He managed money at several Fortune 500 companies prior to
founding Kornitzer Capital Management, Inc. Kent Gasaway is a Chartered
Financial Analyst with 17 years of research and management experience.
He holds a BS in Business Administration from Kansas State University.
Tom Laming is an experienced aerospace engineer and research analyst. He
holds a BS in Physics from the University of Kansas, an MS in
Aeronautics and Astronautics from MIT, and an MBA from Indiana
University. Bob Male is a Chartered Financial Analyst with more than 10
years of investment research experience. He holds a B.S. in Business
Administration from the University of Kansas and an MBA from Southern
Methodist University.
For its services, each Fund pays the Manager a fee at the annual rate of
one percent (1.00%) of the Fund's average daily net assets. From this
amount the Manager pays Kornitzer Capital Management a fee of one third
of one percent (0.33%) and also pays Jones & Babson a fee of one third
of one percent (0.33%). The Management Agreement limits the liability of
the Manager or its Investment Counsel, as well as their officers,
directors and personnel, to acts or omissions involving willful
malfeasance, bad faith, gross negligence or reckless disregard of their
duties.
AFBA Investment Management Company is located at 909 N. Washington
Street, Alexandria, VA 22314. Jones & Babson serves as transfer agent
and principal underwriter for the Funds and is located at BMA Tower, 700
Karnes Blvd., Kansas City, MO 64108-3306. Kornitzer Capital Management
is located at 7715 Shawnee Mission Parkway, Shawnee Mission, KS 66202.
Financial Highlights
The financial highlights tables are intended to help you understand each
Fund's financial performance since inception. Certain information
reflects financial results for a single share of a Fund. The total
returns in the tables represent the rate that an investor would have
earned on an investment in a Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Ernst
& Young LLP, whose report, along with the Fund's financial statements,
are included in the annual report, which is available upon request.
AFBA Five Star Balanced Fund
Year Ended June 3, 1997
March 31, (Inception
Date)
1999 to
March 31,1998*
Net asset value, beginning of period $ 11.39 $ 10.01
Income (loss) from investment operations:
Net investment income 0.42 0.25
Net gains or losses on securities
(both realized and unrealized) (1.17) 1.40
Total from investment operations (0.75) 1.65
Less distributions:
Dividends (from net investment income) (0.40) (0.23)
Distributions (from capital gains) (0.02) (0.04)
Total distributions (0.42) (0.27)
Net asset value, end of period $ 10.22 $ 11.39
Total return (6.53%) 16.64%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 5 $ 2
Ratio of expenses to average net assets 1.08% 1.08%
Ratio of net income to average net assets 4.76% 4.06%
Ratio of expenses to average net assets before
voluntary expense reimbursement 1.33% 1.10%
Ratio of net investment income to average net assets before
voluntary expense reimbursement 4.51% 4.04%
Portfolio turnover rate 53% 57%
*Ratios for this initial period of operations are annualized,
except total return.
The Fund was capitalized on May 16, 1997 with $100,000, representing 10,000
shares at a net asset value of $10.00 per share.
Initial public offering was made on June 3, 1997, at which time net asset
value was $10.01 per share.
AFBA Five Star Equity Fund
Year Ended June 3, 1997
March 31, (Inception
Date)
1999 to March 31,
1998*
Net asset value, beginning of period $ 11.77 $ 10.01
Income (loss) from investment operations:
Net investment income (loss) 0.05 0.06
Net gains or losses on securities
(both realized and unrealized) (0.22) 1.81
Total from investment operations (0.17) 1.87
Less distributions:
Dividends (from net investment income) (0.06) (0.05)
Distributions (from capital gains) - (0.06)
Total distributions (0.06) (0.11)
Net asset value, end of period $ 11.54 $ 11.77
Total return (1.43%) 18.81%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 7 $ 4
Ratio of expenses to average net assets 1.08% 1.04%
Ratio of net income to average net assets 0.61% 0.94%
Ratio of expenses to average net assets before
voluntary expense reimbursement 1.23% -
Ratio of net investment income to average
net assets before voluntary expense reimbursement 0.46% -
Portfolio turnover rate 64% 76%
*Ratios for this initial period of operations are annualized,
except total return.
The Fund was capitalized on May 16, 1997 with $100,000, representing
10,000 shares at a net asset value of $10.00 per share.
Initial public offering was made on June 3, 1997, at which time net
asset value was $10.01 per share.
AFBA Five Star High Yield Fund
Year Ended June 3, 1997
March 31, (Inception Date)
1999 to March 31,
1998*
Net asset value, beginning of period $ 10.62 $ 10.01
Income (loss) from investment operations:
Net investment income (loss) 0.60 0.34
Net gains or losses on securities
(both realized and unrealized) (1.49) 0.59
Total from investment operations (0.89) 0.93
Less distributions:
Dividends (from net investment income) (0.58) (0.32)
Distributions (from capital gains) (0.03) -
Total distributions (0.61) (0.32)
Net asset value, end of period $ 9.12 $ 10.62
Total return (8.45%) 9.37%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 4 $ 1
Ratio of expenses to average net assets 1.08% 1.08%
Ratio of net income to average net assets 7.47% 5.51%
Ratio of expenses to average net assets before
voluntary expense reimbursement 1.46% 1.11%
Ratio of net investment income to average net assets before
voluntary expense reimbursement 7.09% 5.48%
Portfolio turnover rate 11% 31%
*Ratios for this initial period of operations are annualized, except
total return.
The Fund was capitalized on May 16, 1997 with $100,000, representing
10,000 shares at a net asset value of $10.00 per share.
Initial public offering was made on June 3, 1997, at which time net
asset value was $10.01 per share.
AFBA Five Star USA Global Fund
Year Ended June 3, 1997
March 31, (Inception
Date)
1999 to March 31,
1998*
Net asset value, beginning of period $ 11.17 $ 10.01
Income (loss) from investment operations:
Net investment income (loss) 0.05 0.07
Net gains or losses on securities
(both realized and unrealized) (0.11) 1.14
Total from investment operations (0.06) 1.21
Less distributions:
Dividends (from net investment income) (0.05) (0.05)
Distributions (from capital gains) - -
Total distributions (0.05) (0.05)
Net asset value, end of period $ 11.06 $ 11.17
Total return (0.52%) 12.16%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 6 $ 3
Ratio of expenses to average net assets 1.08% 1.04%
Ratio of net income to average net assets 0.67% 1.07%
Ratio of expenses to average net assets before
voluntary expense reimbursement 1.30% -
Ratio of net investment income to average net
assets before voluntary expense reimbursement 0.45% -
Portfolio turnover rate 19% 42%
*Ratios for this initial period of operations are annualized, except
total return.
The Fund was capitalized on May 16, 1997 with $100,000, representing
10,000 shares at a net asset value of $10.00 per share.
Initial public offering was made on June 3, 1997, at which time net
asset value was $10.01 per share.
How to Purchase Shares
No Load Funds
There are no sales commissions or Rule 12b-1 distribution fees
How to Buy Shares (see chart on page 16 for details)
By phone, mail or wire
Through Automatic Monthly Investments
Minimum Initial Investment
$500 (unless you use our Automatic Investment Plan)
$250 for IRA and Uniform Transfer (Gift) to Minors accounts
$100 with an Automatic Monthly Investment Plan
Minimum Additional Investment
$100 by mail ($500 for wire purchases)
$100 by telephone (ACH)
$500 by wire
$50 for Automatic Monthly Investments
Minimum Account Size
You must maintain a minimum account value equal to the current minimum
initial investment (usually $500). If your account falls below this
amount due to redemptions (not market action) we may notify you and ask
you to increase the account to the minimum. We will close the account
and send your money if you do not bring the account up to the minimum
within 60 days after we mail you the notice.
How to Redeem Shares
You may withdraw from your account at any time in the following amounts:
any amount for redemptions requested by mail, phone or telegraph
$1,000 or more for redemptions wired to your account ($10 fee)
$50 or more for redemptions by a systematic redemption plan (there may
be a fee)
$100 or more for redemptions by automatic monthly exchange to another
fund
$100 or more via ACH; there is no fee but funds may take 4 days to
reach your account
Shareholder Services
The following services are also available to shareholders. Please call
1-800-243-9865 for more information:
Uniform Transfers (Gifts) to Minors accounts
Accounts for corporations or partnerships
Sub-Accounting Services for Keogh, tax qualified retirement plans, and
others
Prototype Retirement Plans for the self-employed, partnerships and
corporations
Traditional IRA accounts
Roth IRA accounts
Simplified Employee Pensions (SEPs)
How Share Price is Determined
Shares of each Fund are purchased or redeemed at its net asset value per
share next calculated after your purchase order and payment or
redemption order is received in good order. In the case of certain
institutions which have made satisfactory payment or redemption
arrangements with the Funds, orders may be processed at the net asset
value per share next effective after receipt by that institution.
The net asset value is calculated by subtracting from the Fund's total
assets any liabilities and then dividing into this amount the total
outstanding shares as of the date of the calculation. The net asset
value per share is computed once daily, Monday through Friday, at 4:00
p.m. (Eastern Time) on days when the Funds are open for business
(generally the same days that the New York Stock Exchange is open for
trading). The Funds are generally closed on weekends, national holidays
and Good Friday.
Each security owned by a Fund that is 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, the Fund
will use the price of that Exchange which it generally considers to be
the principal Exchange on which the stock is traded. Lacking sales, the
security is valued at the mean between the last 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 respective Board of Directors.
Distributions and Taxes
The AFBA Five Star Balanced Fund and the AFBA Five Star High Yield Fund
pay distributions from net investment income quarterly, usually in
March, June, September and December. The AFBA Five Star Equity Fund and
the AFBA Five Star USA Global Fund pay distributions from net investment
income semi-annually, usually in June and December. Distributions from
net capital gains realized on the sale of securities will be declared by
the AFBA Five Star Balanced Fund annually on or before December 31 and
by the AFBA Five Star Equity Fund, AFBA Five Star High Yield Fund and
AFBA Five Star USA Global Fund semi-annually, usually in June and
December. Your distributions will be reinvested automatically in
additional shares of the Fund, unless you have elected on your original
application, or by written instructions filed with the Fund, to have
them paid in cash. We automatically reinvest all dividends under $10.00
in additional shares of the Fund. There are no fees or sales charges on
reinvestments.
Tax Considerations - In general, distributions from a Fund are taxable
to you as either ordinary income or capital gains. This is true whether
you reinvest your distributions in additional shares of a Fund or
receive them in cash. Any capital gains a Fund distributes are taxable
to you as long-term capital gains no matter how long you have owned
your shares.
When you sell your shares of a Fund, you may have a capital gain or
loss. For tax purposes, an exchange of your Fund shares for shares of a
different AFBA Five Star Fund or a Babson Money Market Fund is the same
as a sale. The individual tax rate on any gain from the sale or exchange
of your shares depends on how long you have held your shares.
Fund distributions and gains from the sale or exchange of your shares
will generally be subject to state and local income tax. Non-U.S.
investors may be subject to U.S. withholding and estate tax. You should
consult your tax advisor about the federal, state, local or foreign tax
consequences of your investment in a Fund.
Backup Withholding - By law, the Funds must withhold 31% of your taxable
distributions and proceeds if you do not provide your correct taxpayer
identification number (TIN) or certify that your TIN is correct, or if
the IRS instructs the Funds to do so.
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared
in December but paid in January are taxable as if they were paid in
December.
Additional Policies About Transactions
We cannot process transaction requests that are not complete and in good
order as described in this section. We may cancel or change our
transaction policies without notice. To avoid delays, please call us if
you have any questions about these policies.
Purchases - We may reject orders when not accompanied by payment or when
in the best interest of the Funds and their shareholders.
Redemptions - We try to send proceeds as soon as practical. In any
event, we send proceeds by the third business day after we receive a
request in good order. We cannot accept requests that contain special
conditions or effective dates. We may request additional documentation
to ensure that a request is genuine. Under certain circumstances, we may
pay you proceeds in the form of portfolio securities owned by the Fund
being redeemed. If you receive securities instead of cash, you may incur
brokerage costs when converting into cash.
If you request a redemption within 15 days of purchase, we will delay
sending your proceeds until we have collected unconditional payment,
which may take up to 15 days from the date of purchase. For your
protection, if your account address has been changed within the last 30
days, your redemption request must be in writing and signed by each
account owner, with signature guarantees. The right to redeem shares may
be temporarily suspended in emergency situations only as permitted under
federal law.
Signature Guarantees - You can get a signature guarantee from most banks
or securities dealers, but not a notary public. For your protection, we
require a guaranteed signature if you request:
A redemption check sent to a different payee, bank or address than we
have on file.
A redemption check mailed to an address that has been changed within
the last 30 days.
A redemption for $10,000 or more in writing.
A change in account registration or redemption instructions.
Corporations, Trusts and Other Entities - Additional documentation is
normally required for corporations, fiduciaries and others who hold
shares in a representative or nominee capacity. We cannot process your
request until we have all documents in the form required. Please call us
first to avoid delays.
Exchanges to Another Fund - You must meet the minimum investment
requirement of the AFBA Five Star Fund you are exchanging into. The
names and registrations on the two accounts must be identical. Your
shares must have been held in an open account for 15 days or more and we
must have received good payment before we will exchange shares. You
should review the prospectus of the fund being purchased. Call us for a
free copy.
Telephone Services - During periods of increased market activity, you
may have difficulty reaching us by telephone. If this happens, contact
us by mail or telegraph. We may refuse a telephone request, including a
telephone or telegraph redemption request. We will use reasonable
procedures to confirm that telephone instructions are genuine. If such
procedures are followed, the Funds are not liable for losses due to
unauthorized or fraudulent instructions. At our option, we may limit the
frequency or the amount of telephone redemption requests. Neither the
Funds nor Jones & Babson, Inc. assumes responsibility for the
authenticity of telephone redemption requests.
Conducting Business with the AFBA Five Star Fund
By Phone
1-888-578-2733
You must authorize each type of telephone transaction on your account
application or the appropriate form, available from us. All account
owners must sign. When you call, we may request personal identification
and tape record the call.
If you already have an account with us and you have authorized telephone
exchanges, you may call to open an account in another AFBA Five Star
Fund by exchange ($500 minimum). The names and registrations on the
accounts must be identical.
You may make investments ($100 minimum) by telephone. After we have
received your telephone call, we will deduct from your checking account
the cost of the shares.
Availability of this service is subject to approval by the Funds and
participating banks.
You may exchange shares ($1,000 minimum or the initial minimum fund
requirement) for shares in another AFBA Five Star Fund. The shares being
exchanged must have been held in open account for 15 days or more.
By Mail
Initial Purchases
and all Redemptions:
AFBA Five Star Fund, Inc.
P.O. Box 419757
Kansas City, MO 64141-6757
Subsequent Purchases:
AFBA Five Star Fund, Inc.
P.O. Box 419779
Kansas City, MO 64141-6779
Complete and sign the application which accompanies this Prospectus.
Your initial investment must meet the minimum amount. Make your check
payable to UMB Bank, c/f AFBA Five Star Fund, Inc.
Make your check ($100 minimum) payable to UMB Bank, n.a. c/f AFBA Five
Star Fund, Inc. and mail it to us. Always identify your account number
or include the detachable reminder stub (from your confirmation
statement).
In a letter, include the genuine signature of each registered owner
(exactly as registered), the name of each account owner, the account
number and the number of shares or the dollar amount to be redeemed. We
will send funds only to the address of record.
In a letter, include the genuine signature of each registered owner, the
account number, the number of shares or dollar amount to be exchanged
($1,000 minimum) and the Babson Money Market or AFBA Five Star Fund,
Inc. Fund into which the amount is being transferred.
BY WIRE
UMB Bank, n.a.,
Kansas City, Missouri, ABA #101000695
For AFBA _________________ Fund
AC=9870871061
OBI = (your account number and
account name)
Call us first to get an account number. We will require information such
as your Social Security or Taxpayer Identification Number, the amount
being wired ($500 minimum), and the name and telephone number of the
wiring bank. Then tell your bank to wire the amount. You must send us a
completed application as soon as possible or payment of your redemption
proceeds will be delayed.
Wire share purchases ($500 minimum) should include the names of each
account owner, your account number and the AFBA Five Star Fund in which
you are purchasing shares. You should notify us by telephone that you
have sent a wire purchase order to UMB Bank, n.a.
Redemption proceeds ($1,000 minimum) may be wired to your pre-identified
bank account. A $10 fee is deducted. If we receive your written request
before 4:00 P.M. (Eastern Time) we will normally wire funds the
following business day. If we receive your written request later in the
day, we will normally wire funds on the second business day. Contact
your bank about the time of receipt and availability.
THROUGH AUTOMATIC TRANSACTION PLANS
You must authorize each type of
automatic transaction on your account application or complete an
authorization form, available from us upon request. All registered
owners must sign.
Automatic Monthly Investment:
You may authorize automatic monthly investments in a constant dollar
amount ($50 minimum) from your checking account. We will draft your
checking account on the same day each month in the amount you authorize.
Systematic Redemption Plan:
You may specify a dollar amount ($50 minimum) to be withdrawn monthly or
quarterly or have your shares redeemed at a rate calculated to exhaust
the account at the end of a specified period. A fee of $1.50 or less may
be charged for each withdrawal. You must own shares in an open account
valued at $10,000 when you first authorize the systematic redemption
plan. You may cancel or change your plan or redeem all your shares at
any time. We will continue withdrawals until your shares are gone or
until the Fund or you cancel the plan.
Monthly Exchanges:
You may authorize monthly exchanges from your account ($100 minimum) to
another AFBA Five Star Fund or a Babson Money Market Fund. Exchanges
will be continued until all shares have been exchanged or until you
terminate the service.
AFBA Five Star Funds SM
AFBA Five Star Balanced Fund
AFBA Five Star Equity Fund
AFBA Five Star High Yield Fund
AFBA Five Star USA Global Fund
Additional Information
The Statement of Additional Information (SAI) contains additional
information about the Funds and is incorporated by reference into this
Prospectus. The Fund's annual and semi-annual reports to shareholders
contain additional
information about the Fund's investments. In the Fund's annual report,
you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its
last fiscal year.
You may obtain a free copy of these documents by calling, writing or e-
mailing the Fund as shown below. You also may call the toll free number
given below to request other information about the Fund and to make
shareholder inquiries.
You may review and copy the SAI and other information about the Funds by
visiting the Securities and Exchange Commission's Public Reference Room
in Washington, DC (1-800-SEC-0330) or by visiting the Commission's
Internet site at http://www.sec.gov. Copies of this information also may
be obtained, upon payment of a duplicating fee, by writing to the Public
Reference Section of the Commission, Washington, DC 20549-6009.
AFBA
Five Star
Funds SM
AFBA Investment Management Company
909 N. Washington Street
Alexandria, Virginia 22314
1-800-243-9865
www.afba.com
Shareholder Inquiries 1-888-578-2733
<PAGE>
PART B
AFBA FIVE STAR FUND, INC.
Consisting of:
AFBA FIVE STAR BALANCED FUND
AFBA FIVE STAR EQUITY FUND
AFBA FIVE STAR HIGH YIELD FUND
AFBA FIVE STAR USA GLOBAL FUND
STATEMENT OF ADDITIONAL INFORMATION
July 31, 1999
This Statement is not a Prospectus but should be
read in conjunction with the current Prospectus
of the Funds' dated July 31, 1999. To obtain the
Prospectus or any Annual or Semi-Annual Report to
shareholders, please call the Fund toll-free at
1-888-578 - 2733.
TABLE OF CONTENTS
Page
Introduction 2
Information About the Funds' Investments 2
Objectives and Principal Investment Strategies 2
Risk Factors 4
Fundamental Investment Policies and Restrictions 6
Non-Fundamental Investment Policies and Restrictions 7
Fund Transactions 7
Performance Measures 8
Total Return 9
Performance Comparisons 9
Purchasing and Selling Shares 10
Purchases 10
Sales (Redemptions) 11
Signature Guarantees 11
How Share Price Is Determined 11
Additional Purchase and Redemption Policies 12
Management of the Company and Fund 12
Directors and Officers 12
Compensation 14
Manager and Investment Counsel 14
Custodian 14
Independent Auditors 15
Underwriter, Distributor and Transfer Agent 15
Distributions and Taxes 15
Financial Statements 16
General Information and History 16
Appendix-Credit Ratings 17
INTRODUCTION
AFBA Five Star Balanced Fund, AFBA Five Star Equity Fund, AFBA Five
Star High Yield Fund, AFBA Five Star Small Cap Fund and AFBA Five Star
USA Global Fund (hereafter, the "Funds") are each an open-end
diversified management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"). This classification means
that the assets of the Funds are invested in a diversified portfolio of
securities and the Funds operate as mutual funds, allowing shareholders
to buy and sell shares at any time (as described in the Prospectus).
This Statement of Additional Information supplements the information
contained in the Prospectus of the Funds.
INFORMATION ABOUT THE FUNDS' INVESTMENTS
Objectives and Principle Investment Strategies. 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.
AFBA 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.
It is expected that the majority of common stocks purchased by 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 (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 generally these securities
may be rated below investment grade (BBB) or its equivalent by the
major rating agencies.
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. Up to 20% of
the Fund's assets may be invested in debt securities which are rated
less than B or are unrated. 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 at the Fund adviser's discretion. 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.")
AFBA Five Star Equity Fund - seeks long-term capital growth by
investing primarily in common stocks. Realization of dividend income
is a secondary consideration. Buffalo Equity 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. The Fund will invest at
least 65% of its assets in common stocks under normal circumstances.
AFBA 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 fixed income securities, without restriction, 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 may invest up to 100% of its assets in fixed income
securities, including without limitation, corporate bonds, convertible
bonds, preferred stocks and convertible preferred stocks. These
securities may be rated below investment grade by the
major rating agencies or, if unrated, are in the opinion of the manager
of similar quality. 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 (see "Risk Factors Applicable to High
Yielding Debt Securities"). Yields on such bonds will fluctuate over
time, and achievement of the Fund's investment objective may be more
dependant on the Fund's own credit analysis than is the case for higher
rated bonds. 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. The Fund will not purchase obligations that are in default,
but may hold in the portfolio securities that go into default
subsequent 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 investment
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.
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. Use of a defensive posture by
the Fund's manager may involve a reduction in the yield on the Fund's
portfolio
AFBA 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 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
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.
Cash Management. For purposes including, but not limited to, meeting
redemptions and unanticipated expenses, the Funds may invest a portion
of their assets in cash or high-quality, short term debt obligations
readily changeable into cash. In addition, the Funds may invest up to
100% of their respective assets in such securities for temporary or
emergency purposes. Such high quality, short-term obligations
include: money market securities, commercial paper, bank certificates
of deposit, and repurchase agreements collateralized by government
securities. Investments in commercial paper are restricted to
companies in the top two short-term rating categories by Moody's
Investment Service, Inc. (Moody's) and Standard & Poor's Corporation.
Repurchase Agreements. The Funds may invest in issues of the United
States Treasury or a United States government agency subject to
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 Fund's period of ownership. The result is a fixed rate
of return insulated from market fluctuations during such period. Under
the 1940 Act, repurchase agreements are considered loans by the
respective Fund.
The Funds will enter into 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 Company. 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 15% of the net assets of the Fund.
Covered Call Options. Each 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 are intended to serve as a
partial hedge against any declining price of the underlying securities.
Money Market Securities. Investments by the Funds 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.
Asset-Backed Securities. The AFBA 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.
ADRs. AFBA Five Star Equity Fund may gain international exposure
through investing in American Depository Receipts (ADRs). ADRs, which
are issued by domestic banks, are publicly traded in the United States
and represent ownership in underlying foreign securities. The Fund
does not intend to invest directly in foreign securities or foreign
currencies. (See "Risk Factors Applicable to ADRs.")
The Funds' investments are selected by Kornitzer Capital Management,
Inc.
RISK FACTORS
Risk Factors Applicable to High Yielding Securities. AFBA Five Star
Balanced Fund and AFBA Five Star High Yield Fund invest in high-
yielding, high-risk debt securities (so-called "junk bonds"). These
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 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 lower-rated securities 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 investment adviser'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.
The Funds are 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 as defined above. 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).
Risk Factors Applicable to Small Capitalization Securities.
Investments in common stocks in general are subject to market, economic
and business risks that will cause their price to fluctuate over time.
Investment in smaller company securities may involve greater price
volatility than securities of larger, more established companies. AFBA
Five Star Equity Fund and AFBA Five Star Balanced Fund may occasionally
invest in equity securities of such smaller companies, therefore
investments in these Funds may be more suitable for long-term investors
who can bear the risk of these fluctuations.
Risk Factors Applicable to ADRs. Up to 25% of AFBA Five Star Equity
Funds' total assets may be invested in ADRs. Most ADRs are traded on a
U.S. stock exchange and can be sponsored or unsponsored. 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.
ADRs do not involve the same direct currency and liquidity risks as
securities denominated in foreign currency. However, their value will
generally be affected by currency fluctuations that alter the value of
the security underlying the ADRs with respect to the U.S. dollar.
Risk Factors Applicable to Covered Call Options. Each of the AFBA 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. 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. The 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
when the securities are sold. 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.
Fundamental Investment Policies and Restrictions. The following
policies have been adopted by the Fund and are fundamental. These
policies cannot be changed without the approval of a "majority of the
outstanding voting securities" of the respective Fund. Under the 1940
Act, a "majority of the outstanding voting securities" of a Fund
means the vote of: (i) more than 50% of the outstanding voting
securities of the Fund; or (ii) 67% or more of the voting securities of
the Fund present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy,
whichever is less. In cases where the current legal or regulatory
limitations are explained, such explanations are not part of the
fundamental restriction and may be modified without shareholder
approval to reflect changes in the legal and regulatory requirements.
Each portfolio within the AFBA Five Star Fund, Inc. 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 holding of the Fund in the securities of such
issuer exceeds 5% of the value of the Funds' 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 (unless acquired as a
result of ownership of securities or other instruments and provided
that this restriction does not prevent the Fund from investing in
issuers which invest, deal or otherwise engage in transactions in
real estate or interests therein, or investing in securities that
are secured by real estate or interests therein), commodities
(unless acquired as a result of ownership of securities or other
instruments and provided that this restriction does not prevent the
Fund from engaging in transactions in securities secured by physical
commodities) or futures contracts;
(3) underwrite the securities of other issuers (except that the Fund may
engage in transactions involving the acquisition, disposition or
resale of its portfolio securities, under circumstances where it may
be considered to be an underwriter under the Securities Act of
1933);
(4) make loans to any of its officers, directors or employees, or to its
manager, general distributor or officers or directors thereof;
(5) make any loan (the purchase of a security subject tot a repurchase
agreement or the purchase of a portion of and 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 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 borrowing in excess of the 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
assets of the Fund at the time of purchase to be invested in any one
industry. In applying this restriction, it is a matter of non-
fundamental policy that investment in certain categories of
companies will not be considered to be investments in a particular
industry. For example: (i) financial service companies will be
classified according to the end users of their services, for
example, automobile finance, bank finance and diversified finance
will each be considered a separate industry; (ii) technology
companies will be divided according to their products and services,
for example, hardware, software, information services and
outsourcing, or telecommunications will each be a separate industry;
(iii) asset-backed securities will be classified according to the
underlying assets securing such securities; and (iv) utility
companies will be divided according to their services, for example,
gas, gas transmission, electric and telephone will each be
considered a separate industry.
Non-Fundamental Investment Policies and Restrictions. In addition to
the fundamental policies and investment restrictions described above,
and the various general investment policies described in the
Prospectus, the Fund will be subject to the following investment
restrictions, which are considered non-fundamental and may be changed
by the Board of Trustees without shareholder approval.
Diversification. The Fund is classified as a diversified investment
company. Therefore, the Fund may not, with respect to 75% of its total
assets, invest more than 5% of its total assets in securities of any
one issuer (except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities), or purchase more than
10% of the voting securities of any one issuer. The Fund may not
change its classification from diversified to non-diversified without
shareholder approval.
Other Investment Companies. The Fund is permitted to invest in other
investment companies, including open-end, closed-end or unregistered
investment companies, either within the percentage limits set forth in
the 1940 Act, any rule or order thereunder, or SEC staff interpretation
thereof, or without regard to percentage limits in connection with a
merger, reorganization, consolidation or other similar transaction.
However, the Fund may not operate as a fund of funds which invests
primarily in the shares of other investment companies as permitted by
Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are
utilized as investments by such a fund of funds. Under current legal
and regulatory requirements, the Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own
more than 3% of any investment company or invest more than 10% of its
total assets in the securities of other investment companies.
Fund Transactions. Decisions to buy and sell securities for the Funds
are made by AFBA Investment Management Company, Inc. pursuant to
recommendations by Kornitzer Capital Management, Inc. Officers of the
Funds and AFBA Investment Management Company, Inc. are generally
responsible for implementing and supervising these decisions, including
allocation of portfolio brokerage and principal business and the
negotiation of commissions and/or price of the securities. In
instances where securities are purchased on a commission basis, 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. Following is information on
the amount of brokerage commissions by the Funds during the periods
indicated:
Name of Fund Fiscal Year Ended Fiscal Year Ended
March 31, 1998 March 31, 1999
AFBA Five Star Balanced Fund $1,304 $7,330
AFBA Five Star Equity Fund $5,507 $11,456
AFBA Five Star High Yield Fund $124 $313
AFBA Five Star USA Global Fund $3,052 $6,980
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. Portfolio turnover
ratios for time periods indicated are as follows:
Name of Fund Fiscal Year Ended Fiscal Year Ended
March 31, 1998* March 31, 1999
AFBA Five Star Balanced Fund 57% 53%
AFBA Five Star Equity Fund 76% 64%
AFBA Five Star High Yield Fund 31% 11%
AFBA Five Star USA Global Fund 42% 19%
* Percentages are annualized.
The Funds believe it is in their best interest 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. The Funds
may execute a substantial portion of the portfolio transactions through
brokerage firms which are members of the New York Stock Exchange or
through other major securities exchanges. When buying securities in
the over-the-counter market, 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 will not normally pay a higher commission rate to broker-
dealers providing benefits or services to it than it would pay to
broker-dealers who did not provide such benefits or services. However,
the Funds reserve 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 Funds and
Jones & Babson, Inc.
Since the Funds do not market their shares through intermediary brokers
and dealers, it is not the Funds' practice to allocate brokerage or
principle 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 their 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 and its investment counsel in serving other clients, as
well as the respective Funds. Conversely, the Funds may benefit from
research services obtained by the manager or its investment counsel
from the placement of portfolio brokerage of other clients.
When it appears to be in the best interest of the shareholders, the
Funds may join with other clients of the manager and its investment
counsel 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.
PERFORMANCE MEASURES
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 Fund from the beginning date of
the measuring period to the end of the measuring period. These figures
reflect changes in the price of each Fund's shares and assume that any
income dividends and/or capital gains distributions made by the Funds
during the period were reinvested in shares of the Funds. 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.
Total Return. The Funds' "average annual total return" figures
described and shown below are 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).
From time to time, AFBA Five Star Balanced Fund and AFBA 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 standardized SEC formula.
Current yield reflects the income per share earned by the Fund's
investments.
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) - 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.
Performance Comparisons. In advertisements or in reports to
shareholders, a Fund may compare its performance to that of other
mutual funds with similar investment objectives and to stock or other
relevant indices. For example, it may compare its performance to
rankings prepared by Lipper Analytical Services, Inc. (Lipper), a
widely recognized independent service which monitors the performance of
mutual funds. The Fund may compare its 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,
the Russell 2000 Index, a small company stock index, or the Consumer
Price Index.
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 the Fund is listed in any
such publication) or used for comparison, as well as performance
listings and rankings from Morningstar Mutual Funds, Personal Finance,
Income and Safety, The Mutual Fund Letter, No-Load Fund Investor,
United Mutual Fund Selector, No-Load Fund Analyst, No-Load Fund X,
Louis Rukeyser's Wall Street newsletter, Donoghue's Money Letter, CDA
Investment Technologies, Inc., Wiesenberger Investment Companies
Service and Donoghue's Mutual Fund Almanac.
The table below shows the average total return for each of the Funds
for the specified periods.
AFBA FIVE AFBA FIVE AFBA FIVE AFBA FIVE
STAR BALANCED STAR EQUITY STAR HIGH STAR USA
BALANCED FUND FUND YIELD FUND GLOBAL FUND
For the year
4/1/98 - 3/31/99 -6.53% -1.43% -8.45% -0.52%
From beginning
of operations to 4.85% 9.04% 0.07% 6.18%
3/31/99*
* The AFBA Five Star Fund inception date is June 3, 1997.
PURCHASING AND SELLING SHARES
Purchases. We will not be responsible for the consequences of delays,
including delays in the banking or Federal Reserve wire systems. We
cannot process transaction requests that are not complete and in good
order as described in the prospectus. If you use the services of any
other broker to purchase or redeem shares of the Fund, that broker may
charge you a fee. 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 the 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, Inc. at its cost, subject to a
minimum charge of $5 per account, per year requested.
Normally, the shares which you purchase are held by the 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 the 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 the Funds
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 the Funds and their shareholders.
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 Funds against losses resulting from the failure of
investors to make payment. In the event that the Funds sustain a loss
as the result of failure by a purchaser to make payment, the Funds'
underwriter, Jones & Babson, Inc., will cover the loss.
Sales (Redemptions). We will not be responsible for the consequences
of delays, including delays in the banking or Federal Reserve wire
systems. We cannot process transaction requests that are not complete
and in good order. We must receive an endorsed share certificate with
a signature guarantee, where a certificate has been issued.
The right of redemption may be suspended, or the date of payment
postponed beyond the normal three-day period by the 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 Funds of securities owned by it is
not reasonably practical, or (b) it is not reasonably practical for the
Funds 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 Funds' shareholders.
The Funds have elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Funds are
obligated to redeem shares solely in cash up to the lesser of $250,000
or 1% of the Fund's net asset value during any 90-day period for any
one shareholder. Should redemptions by any shareholder exceed such
limitation, a Fund may redeem the excess in kind. If shares are
redeemed in kind, the redeeming shareholder may incur brokerage costs
in converting the assets to cash.
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 of $10,000
or more 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 in excess of $10,000;
(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 Funds or from most banks or stock brokers); or
(3) all stock certificates tendered for redemption.
(4) Requests for redemptions checks to be sent to a different payee,
bank or address then we have on file.
How Share Price is Determined. The net asset value per share is
computed once daily, Monday through Friday, at 4:00 p.m. (Eastern Time)
except: days when the Funds are not open for business; days on which
changes in the value of portfolio securities will not materially affect
the net asset value; days during which no purchase or redemption order
is received by the Funds; and customary holidays.
The Funds do not compute their net asset value on the following
customary holidays:
New Year's Day January 1
Martin Luther King Jr. Day Third Monday in January
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
Additional Purchase and Redemption Policies. We reserve the right to:
Waive or increase the minimum investment requirements with respect to
any person or class of persons, which include shareholders of the Fund's
special investment programs.
Cancel or change the telephone investment service, the
telephone/telegraph exchange service and the automatic monthly investment
plan without prior notice to you where in the best interest of the Funds
and its investors.
Begin charging a fee for the telephone investment service or the
automatic monthly investment plan and to cancel or change these services
upon 15 days written notice to you.
Begin charging a fee for the telephone/telegraph service and to cancel
or change the service upon 60 days written notice to you.
Begin charging a fee for the systematic redemption plan upon 30 days
written notice to you.
Waive signature guarantee requirements in certain instances where it
appears reasonable to do so and will not unduly affect the interests of
other shareholders. We may waive the signature guarantee requirement if
you authorize the telephone/telegraph redemption method at the same time
you submit the initial application to purchase shares.
Require signature guarantees if there appears to be a pattern of
redemptions designed to avoid the signature guarantee requirement, or if
we have other reason to believe that this requirement would be in the best
interests of the Funds and their shareholders.
MANAGEMENT OF THE COMPANY AND FUNDS
Directors and Officers. 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 lists the officers and directors
of the Company, their age, address and principle occupation.
* John A. Johnson (62), President and Director. 909 North Washington
Street, Alexandria, Virginia 22314. President, Chief Executive
Officer, Director, Armed Forces Benefit Services, Inc.; President,
Chief Executive Officer, Director, AFBA Life Insurance Company;
President, Chief Executive Officer, Director, AFBA Investment
Management Company; AFBA Administrators, Inc.
* Larry D. Armel (56), President and Director. Director of AFBA Five Star
Fund, Inc.; President and Director, Jones & Babson, Inc., President and
Director (or Trustee) of the nine investment companies within the
Babson Mutual Fund Group; President and Director of the nine investment
companies within the UMB Scout Funds group; President and Director of
the five investment companies within the Buffalo Group of Mutual Funds;
President and Director of Investors Mark Series Fund, Inc.
* John C. Kornitzer (53). 7715 Shawnee Mission Parkway, Shawnee Mission,
Kansas 66202. President, Kornitzer Capital Management, Inc; formerly
Vice President of Investments, Employers Reinsurance Corp.
* Lieutenant General C.C. Blanton (69), USAF (Ret.), Director and
Chairman. 909 North Washington Street, Alexandria, Virginia 22314.
President, Chief Executive Officer, Armed Forces Benefit Association;
Chairman, Armed Forces Benefit Services, Inc.; Chairman, AFBA
Industrial Bank; Chairman, AFBA Life Insurance Company; Chairman, AFBA
Investment Management Company.
General Monroe W. Hatch, Jr. (65), USAF (Ret.), Director. 8210 Thomas
Ashleigh Lane, Clifton, Virginia, 20124. President, Professional
Services, Consultant to Industry; formerly Executive Director, Air
Force Association.
Brigadier General Henry J. Sechler (67), USAF (Ret.), Director. 3190
Fairview Park Drive, Falls Church, Virginia 22030. Vice President,
General Dynamics Corp.
General Louis C. Wagner, Jr. (67), USA (Ret.), Director. 6309 Chaucer
Lane, Alexandria, Virginia 22304. Private Consultant.
P. Bradley Adams (38), Vice President and Treasurer. Vice President and
Chief Financial Officer, AFBA Five Star Fund, Inc.; Vice President and
Treasurer, Jones & Babson, Inc.; Vice President and Treasurer of the
nine investment companies within the Babson Mutual Fund Group; Vice
President and Treasurer of the nine investment companies within the UMB
Scout Funds group; Vice President and Treasurer of the five investment
companies within the Buffalo Group of Mutual Funds; and Principal
Financial Officer, Investors Mark Series Fund, Inc.
W. Guy Cooke (38), Vice President and Chief Compliance Officer. Vice
President and Chief Compliance Officer, AFBA Five Star Fund, Inc.;
Chief Compliance Officer, Jones & Babson, Inc.; Vice President and
Chief Compliance Officer of the nine investment companies within the
Babson Mutual Fund Group; Vice President and Chief Compliance Officer
of the nine investment companies within the UMB Scout Funds group; Vice
President and Chief Compliance Officer of the five investment companies
within the Buffalo Group of Mutual Funds Mr. Cooke joined Jones &
Babson in March 1998 and previously was Director of Compliance at
American Century Companies.
Martin A. Cramer (49), Vice President and Secretary. Assistant Vice
President, AFBA Five Star Fund, Inc.; Vice President and Secretary,
Jones & Babson, Inc.; Vice President and Secretary of the nine
investment companies within the Babson Mutual Fund Group; Vice
President and Secretary of the nine investment companies within the UMB
Scout Funds group; Vice President and Secretary of the five investment
companies within the Buffalo Group of Mutual Funds; Secretary and
Secretary, Investors Mark Series Fund, Inc.
Dionne D. McNamee (42), Treasurer. 909 North Washington Street,
Alexandria, Virginia 22314. Chief Financial Officer, AFBA Life
Insurance Company; AFBA Investment Management Company. Formerly,
Director, Price Waterhouse, LLP; Senior Technical Manager, American
Institute of CPAs.
_______________________________________
* Directors who are interested persons as that term is defined in the
Investment Company Act of 1940, as amended.
Compensation. 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 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 any of the
funds.
Manager and Investment Counsel. AFBA Investment Management Company acts
as manager of the Fund and is a registered investment advisor under the
Investment Advisors Act of 1940. It organized the Fund in 1997 and
employs at its own expense Kornitzer Capital Management, Inc. to serve as
its investment counsel and Jones & Babson, Inc. to serve as Underwriter,
Distributor and Transfer Agent..
For its services as manager, the Funds pay AFBA Investment Management
Company a fee at the annual rate of one percent (1%) of average daily net
assets. From these management fees AFBA Investment Management Company
pays all the Funds' expenses except those directly payable by the Funds.
For instance, from these management fees AFBA Investment Management
Company pays Kornitzer Capital Management, Inc. a fee of 33/100 of 1%
(.33%) and Jones & Babson, Inc. a fee of 33/100 of 1% (.33%) of average
net daily assets. AFBA Investment Management, Inc. received the following
management fees from the respective Funds for the time periods indicated:
Name of Fund Fiscal Year Ended Fiscal Year Ended
March 31, 1998 March 31, 1999
AFBA Five Star Balanced Fund $6,582 $39,898
AFBA Five Star Equity Fund $17,203 $56,951
AFBA Five Star High Yield Fund $5,759 $29,129
AFBA Five Star USA Global Fund $15,266 $43,597
Kornitzer Capital Management, Inc. was founded in 1989. It is a private
investment research and counseling organization serving individual,
corporate and other institutional clients. Kornitzer Capital Management,
Inc. also serves as investment adviser to the Buffalo Group of Mutual
Funds. The following amounts were paid to Kornitzer Capital Management,
Inc. for its services from AFBA Investment Management, Inc.:
Name of Fund Fiscal Year Ended Fiscal Year Ended
March 31, 1998 March 31, 1999
AFBA Five Star Balanced Fund $2,172 $13,166
AFBA Five Star Equity Fund $5,677 $18,794
AFBA Five Star High Yield Fund $1,900 $9,613
AFBA Five Star USA Global Fund $5,038 $14,387
Custodian. The Funds' assets are held for safe-keeping by an independent
custodian, UMB Bank, n.a. This means UMB Bank, n.a., rather than Funds,
has possession of the Funds' cash and securities. UMB Bank, n.a. is not
responsible for the Funds' investment management or administration. But,
as directed by the Funds' officers, it delivers cash to those who have
securities to a Fund in return for such securities, and to those who have
purchased securities from a Fund, it delivers such securities in return
for their cash purchase price. It also collects income directly from
issuers of securities owned by a Fund and holds this for payment to
shareholders after deduction of a Fund's expenses. The custodian is
compensated by the manager. There is no charge to the Funds.
Independent Auditors. The Funds' financial statements are audited 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 present auditor for the Funds.
Underwriter, Distributor and Transfer Agent. The manager employs at its
own expense, Jones & Babson, Inc. as the Funds' underwriter, distributor
and transfer agent. The following amounts were paid to Jones & Babson,
Inc. for its services from AFBA Investment Management, Inc.:
Fiscal Year Ended Fiscal Year Ended
Name of Fund March 31, 1998 March 31, 1999
AFBA Five Star Balanced Fund $2,172 $13,166
AFBA Five Star Equity Fund $5,677 $18,794
AFBA Five Star High Yield Fund $1,900 $9,613
AFBA Five Star USA Global Fund $5,038 $14,387
Jones and Babson, Inc. also sponsors and manages, in association with its
investment counsel, David L. Babson & Co. Inc., nine no-load funds
comprising the Babson Mutual Fund Group.
Jones & Babson, Inc. also sponsors eleven mutual funds which especially
seek to provide services to customers of affiliate banks of UMB Financial
Corporation which are known as the UMB Scout Funds.
Jones & Babson, Inc. also manages and sponsors the Buffalo Group of Mutual
Funds.
DISTRIBUTIONS AND TAXES
Distributions of net investment income. A Fund receives income generally
in the form of dividends and interest on its investments. This income,
less expenses incurred in the operation of a Fund, constitutes a Fund's
net investment income from which dividends may be paid to you. Any
distributions by a Fund from such income will be taxable to you as
ordinary income, whether you take them in cash or in additional shares.
Distributions of capital gains. A Fund may derive capital gains and
losses in connection with sales or other dispositions of its portfolio
securities. Distributions from net short-term capital gains will be
taxable to you as ordinary income. Distributions from net long-term
capital gains will be taxable to you as long-term gain, regardless of how
long you have held your shares in a Fund. Any net capital gains realized
by a Fund generally will be distributed once each year, and may be
distributed more frequently, if necessary, in order to reduce or eliminate
excise or income taxes on a Fund.
Information on the tax character of distributions. A Fund will inform
you of the amount of your ordinary income dividends and capital gains
distributions at the time they are paid, and will advise you of their tax
status for federal income tax purposes shortly after the close of each
calendar year. If you have not held Fund shares for a full year, a Fund
may designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in a Fund.
Election to be taxed as a regulated investment company. Each Fund
intends to elect to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code. As a regulated investment
company, a Fund generally pays no income tax on the income and gains it
distributes to you. The Board reserves the right not to maintain the
qualification of a Fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, a
Fund will be subject to federal, and possibly state, corporate taxes on
its taxable income and gains, and distributions to you will be taxed as
ordinary dividend income to the extent of a Fund's earnings and profits.
Excise tax distribution requirements. To avoid federal excise taxes, the
Internal Revenue Code requires a Fund to distribute to you by December 31
of each year, at a minimum, the following amounts: 98% of its taxable
ordinary income earned during the calendar year; 98% of its capital gain
net income earned during the twelve month period ending October 31; and
100% of any undistributed amounts from the prior year. Each Fund intends
to declare and pay these amounts in December (or in January that are
treated by you as received in December) to avoid these excise taxes, but
can give no assurances that its distributions will be sufficient to
eliminate all taxes.
Redemption of Fund shares. Redemptions and exchanges of Fund shares are
taxable transactions for federal and state income tax purposes. If you
redeem your Fund shares, or exchange your Fund shares for shares of a
different AFBA Five Star Fund, the IRS will require that you report a
gain or loss on your redemption or exchange. If you hold your shares as a
capital asset, the gain or loss that you realize will be capital gain or
loss and will be long-term or short-term, generally depending on how long
you hold your shares. Any loss incurred on the redemption or exchange of
shares held for six months or less will be treated as a long-term capital
loss to the extent of any long-term capital gains distributed to you by a
Fund on those shares.
All or a portion of any loss that you realize upon the redemption of your
Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days
before or after your share redemption. Any loss disallowed under these
rules will be added to your tax basis in the new shares you buy.
U.S. government obligations. Many states grant tax-free status to
dividends paid to you from interest earned on direct obligations of the
U.S. government, subject in some states to minimum investment requirements
that must be met by the Fund. Investments in Government National Mortgage
Association or Federal National Mortgage Association securities, bankers
acceptances, commercial paper and repurchase agreements collateralized by
U.S. government securities do not generally qualify for tax-free
treatment. The rules on exclusion of this income are different for
corporations.
Dividends-received deduction for corporations. If you are a corporate
shareholder, you should note that the Funds anticipate that some
percentage of the dividends they pay will qualify for the dividends-
received deduction. In some circumstances, you will be allowed to deduct
these qualified dividends, thereby reducing the tax that you would
otherwise be required to pay on these dividends. The dividends-received
deduction will be available only with respect to dividends designated by a
Fund as eligible for such treatment. All dividends (including the
deducted portion) must be included in your alternative minimum taxable
income calculation.
FINANCIAL STATEMENTS
The audited financial statements of the Fund which are contained in the
March 31, 1999 Annual Report to Shareholders are incorporated herein by
reference.
Unaudited reports to shareholders will be published at least semiannually.
GENERAL INFORMATION AND HISTORY
The AFBA Five Star Fund, Inc. is incorporated in the State of Maryland and
registered as an investment company under the Investment Company Act of
1940. All shares issued by each portfolio within the Fund are of same
class with like rights and privileges as other shares issued by the same
portfolio. Each full and fractional share, issued and outstanding, has
(1) equal voting rights with respect to matters that affect the Funds, and
(2) equal dividend, distribution and redemption rights to the assets of
the Fund. Shares when issued are fully paid and non-assessable. The
Funds may create other series of stock but will not issue senior
securities. Shareholders do not have pre-emptive or conversion rights.
Non-cumulative voting - Shares of the Fund have non-cumulative voting
rights, which means that the holders of 50% of the 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 Fund will not hold annual meetings except as required by the Investment
Company Act of 1940 and other applicable laws. The Fund is a Maryland
corporation. Under Maryland law, a special meeting of shareholders of the
Fund must be held if the Fund receives the written request for a meeting
from the shareholders entitled to cast at least 25% of all the votes
entitled to be cast at the meeting.
The Fund has undertaken that its Directors will call a meeting of
shareholders if such a meeting is requested in writing by the holders of not
less than 10% of the outstanding shares of the Fund.
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.
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.
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 issuer; 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 over-
whelming.
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.
<PAGE>
AFBA FIVE STAR FUND, INC.
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS:
PART C
OTHER INFORMATION
AFBA FIVE STAR FUND, INC.
AFBA Five Star Balanced Fund
AFBA Five Star Equity Fund
AFBA Five Star High Yield Fund
AFBA Five Star USA Global Fund
ITEM 23. EXHIBITS
(a)(1) Articles of Incorporation
filed and effective in
Maryland on January 9, 1997
are filed herewith as
Exhibit No. EX99.23(a)(1).
(a)(2) Articles Supplementary
filed and effective in
Maryland on April 4, 1997
are filed herewith as
Exhibit No. EX99.23(a)(2).
(b) By-Laws
of the registrant
are filed herewith as
Exhibit No. EX99.23(b).
(c) Specimen copy of security
of the registrant
are filed herewith as
Exhibit No. EX99.23(c).
(d)(1) Management Agreement
between AFBA Investment Managment Company
and AFBA Five Star Fund, Inc.
dated June 2, 1997
is filed herewith as
Exhibit No. EX99.23(d)(1).
(d)(2) Management Agreement
between AFBA Investment Managment Company
and Kornitzer Capital Management, Inc.
[sub-advisor]
dated June 2, 1997
is filed herewith as
Exhibit No. EX99.23(d)(2)
(e) Underwriting Agreement
between Jones & Babson, Inc. and
AFBA Five Star Fund, Inc.
dated June 2, 1997
is filed herewith as
Exhibit No. EX99.23(e).
(f) Not Applicable.
(g) Custodian Agreement
between UMB Bank, n.a. and
the Registrant is filed herewith as
Exhibit No. EX99.23(g).
(h) Transfer Agency Agreement
between Jones & Babson, Inc. and
the Registrant is filed herewith as
Exhibit No. EX99.23(h).
(i) Opinion and Consent of Counsel as to the
Legality of the Securities to be offered.*
(j)(1) Auditor's Consent
is filed herewith as
Exhibit No. EX99.23(j)(1)
(j)(2) Powers of Attorney for
is filed herewith as
Exhibit No. EX99.23(j)(2).
(k) Not Applicable.
(l) Not Applicable.
(m) Not Applicable.
(n) Not Applicable.
(o) Not Applicable.
*Previously filed and incorporated herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
REGISTRANT:
None.
ITEM 25. INDEMNIFICATION:
Under the terms of the Maryland General Corporation Law and
the Registrant's By-Laws, the Registrant shall indemnify any person who
was or is a director, officer, or employee of the Registrant to the
maximum extent permitted by the Maryland General Corporation Law;
provided however, that any such indemnification (unless ordered by a
court) shall be made by the Registrant only as authorized in the
specific case upon a determination that indemnification of such person
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 Registrant 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 Registrant to any
director or officer of the Registrant for any liability to the
Registrant or shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duty.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER:
ITEM 27. PRINCIPAL UNDERWRITER:
(a) Jones & Babson, Inc., the only principal underwriter of
the Registrant, also acts as principal underwriter for the:
UMB Scout Stock Fund, Inc.
UMB Scout WorldWide Fund, Inc.
UMB Scout Regional Fund, Inc.
UMB Scout Balanced Fund, Inc.
UMB Scout Bond Fund, Inc.
UMB Scout Capital Preservation Fund, Inc.
UMB Scout Kansas Tax-Exempt Bond Fund, Inc.
UMB Scout Money Market Fund, Inc.
UMB Scout Tax-Free Money Market Fund, Inc.
David L. Babson Growth Fund, Inc.
Babson Enterprise Fund, Inc.
Babson Enterprise Fund II, 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.
Buffalo Balanced Fund, Inc.
Buffalo Equity Fund, Inc.
Buffalo USA Global Fund, Inc.
Buffalo Balanced Fund, Inc.
Buffalo Small Cap Fund, Inc.
AFBA Five Star Fund, Inc.
Investors Mark Series Fund, Inc.
(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 Position and Positions and
Principal Offices with Offices with
Business Address Underwriter Registrant
Stephen S. Soden Chairman and Director
700 Karnes Blvd. Director
Kansas City, MO 64108-3306
Larry D. Armel President and President and
700 Karnes Blvd. Director Director
Kansas City, MO 64108-3306
Giorgio Balzer Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306
Robert T. Rakich Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306
Edward S. Ritter Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306
Robert N. Sawyer Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306
Vernon W. Voorhees Director None
700 Karnes Blvd.
Kansas City, MO 64108-3306
P. Bradley Adams Vice President Vice President
700 Karnes Blvd. and Treasurer and Treasurer
Kansas City, MO 64108-3306
Martin A. Cramer Vice President Vice President
700 Karnes Blvd. and Secretary and Secretary
Kansas City, MO 64108-3306
Rui M. Moura Vice President None
700 Karnes Blvd.
Kansas City, MO 64108-3306
(c) The principal underwriter does not receive any
remuneration or compensation for the duties or services
rendered to the Registrants pursuant to the principal
underwriting Agreement.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:
Each account, book or other document required to be
maintained by Section 31(a) of the Investment Company Act of 1940, as
amended and Rules (17 CFR 270-31a-1 to 31a-3) promulgated thereunder, is
in the physical possession of Jones and Babson, Inc., at BMA Tower, 700
Karnes Blvd., Kansas City, Missouri 64108-3306.
ITEM 29. MANAGEMENT SERVICES:
There are no management related service contracts not
discussed in Part A or Part B.
ITEM 30. UNDERTAKINGS:
Registrant undertakes that, if requested to do so by the
holders of at least 10% of the registrant's outstanding shares, to call
a meeting of shareholders for the purpose of voting upon the question of
removal of a director or directors and to assist in communications with
other shareholders as required by Section 16(c) of the Investment
Company Act of 1940, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment
to the registration statement to be signed on its behalf by the undersigned,
thereunto authorized, in the City of Alexandria, and State of Virginia, on
the 1st day of June, 1999.
AFBA FIVE STAR FUND, INC.
By: /s/John A. Johnson
John A. Johnson, President
Pursuant to the requirement of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
/s/ John A. Johnson President, Principal Executive June 1, 1999
John A. Johnson Officer and Director
/s/ C.C. Blanton Director June 1, 1999
C.C. Blanton
/s/ Monroe W. Hatch, Jr.* Director June 1, 1999
Monroe W. Hatch, Jr.
/s/ Louis C. Wagner, Jr.* Director June 1, 1999
Louis C. Wagner, Jr.
/s/ Henry J. Sechler* Director June 1, 1999
Henry J. Sechler
/s/ John C. Kornitzer* Director June 1, 1999
John C. Kornitzer
/s/ Larry D. Armel* Director June 1, 1999
Larry D. Armel
/s/ P. Bradley Adams Vice President and Principal June 1, 1999
P. Bradley Adams Financial and Accounting Officer
*Pursuant to Power of Attorney
By: /s/ C.C. Blanton
C.C. Blanton
Attorney-in-Fact
<PAGE>
AFBA FIVE STAR FUND, INC.
EXHIBIT INDEX
EXHIBIT ITEM EXHIBIT NO.
Articles of Incorporation EX99.23(a)(1)
Articles Supplementary EX99.23(a)(2)
Bylaws EX99.23(b)
Specimen Security EX99.23(c)
Management Agreement EX99.23(d)(1)
Management Agreement [Subadviser] EX99.23(d)(2)
Underwriting Agreement EX99.23(e)
Custodian Agreement EX99.23(g)
Transfer Agency Agreement EX99.23(h)
Auditor Consent EX99.23(j)(1)
Power of Attorney EX99.23(j)(2)
Financial Data Schedule
AFBA Fvie Star Balanced Fund EX27.1
AFBA Five Star Equity Fund EX27.2
AFBA Five Star High Yield Fund EX27.3
AFBA Five Star USA Global Fund EX27.4
EX99.23(a)(1)
ARTICLES OF INCORPORATION
OF
AFBA FIVE STAR FUND, INC.
FIRST: I, the undersigned, Larry D. Armel, whose past
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 CIO 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
1
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.
(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
stockholders, 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 stockholders 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
for 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
(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 net 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, stockholders of each class shall
be entitled to receive, as a class, out of the assets of the
Corporation available for distribution to stockholders, 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 stockholders of any class shall be
distributed among such stockholders 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 assets
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.
(4) The assets belonging to any class of stock
shall be charged with the liabilities in respect to such class,
and such class 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 stockholder, shall be
3
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 stockholder
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 stockholder, 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 stockholder 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
4
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 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 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.
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
5
shall have been elected by the stockholders, and provided further
that if at any time less than a majority of the director. then
holding office were elected by the stockholders, a stockholders'
meeting shall be called as promptly as possible and, in any
event, within sixty (60) 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 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 may 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, 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 custodians, dividend disbursing agents,
transfer agents and registrars out of the income and/or any other
property of the Corporation. Notwithstanding any other
6
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
nominee or 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 by-law, 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.
(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.
7
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 and 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.
8
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 are
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 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
EX99.23(a)(2)
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 January 27, 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.
Page 1 of 2 Pages
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
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, AFBA FIVE STAR FUND INC. has caused
these presents to be signed in its name and on its behalf by its
Vice President and attested by its Secretary on February 27,
1997.
AFBA FIVE STAR FUND, INC.
By: /s/P. Bradley Adams
Attest:
/s/Martin A. Cramer
THE UNDERSIGNED, Vice 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.
/s/P. Bradley Adams
Page 2 of 2 pages
EX99.23(b)
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;
(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.
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 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.
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.
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 the 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 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 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) purchase or retain securities of any
company in which any Fund officers or directors, or Fund manager,
its partner, officer, or director beneficially owns more than 1/2
of 1% of said company's securities, if all such persons owning
more than 1/2 of 1% of such company's securities, own in the
aggregate more than 5% of the outstanding securities of such
company; (12) 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; (13) make itself or its assets
liable for the indebtedness of others; (14) invest in securities
which are assessable or involve unlimited liability; or (15)
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.
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 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;
(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:
(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 on 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.
(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.
EX99.23(c)
A MARYLAND CORPORATION
AFBA FIVE STAR FUND, INC.
AFBA FIVE BALANCED FUND
Common Stock Par Value, $1.00 Per Share
THIS CERTIFIES THAT ________________________________________________ is
the registered holder of ______________________________________________ Shares
of
AFBA FIVE STAR FUND, INC.
AFBA FIVE BALANCED 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
<PAGE>
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.
CUSIP 001043-10-8
COM
<PAGE>
A MARYLAND CORPORATION
AFBA FIVE STAR FUND, INC.
AFBA FIVE EQUITY FUND
Common Stock Par Value, $1.00 Per Share
THIS CERTIFIES THAT ________________________________________________ is
the registered holder of ______________________________________________ Shares
of
AFBA FIVE STAR FUND, INC.
AFBA FIVE EQUITY 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
<PAGE>
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.
CUSIP 001043-20-7
COM
<PAGE>
A MARYLAND CORPORATION
AFBA FIVE STAR FUND, INC.
AFBA FIVE HIGH YIELD FUND
Common Stock Par Value, $1.00 Per Share
THIS CERTIFIES THAT ________________________________________________ is
the registered holder of ______________________________________________ Shares
of
AFBA FIVE STAR FUND, INC.
AFBA FIVE 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
<PAGE>
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.
CUSIP 001043-30-6
COM
<PAGE>
A MARYLAND CORPORATION
AFBA FIVE STAR FUND, INC.
AFBA USA GLOBAL FUND
Common Stock Par Value, $1.00 Per Share
THIS CERTIFIES THAT ________________________________________________ is
the registered holder of ______________________________________________ Shares
of
AFBA FIVE STAR FUND, INC.
AFBA USA GLOBAL 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
<PAGE>
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.
CUSIP 001043-40-5
COM
EX99.23(d)(1)
MANAGEMENT AGREEMENT
between
AFBA INVESTMENT MANAGEMENT COMPANY
and
AFBA FIVE STAR FUND, INC.
This AGREEMENT, made and entered into this 2nd day of June,
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 Virginia (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, w render the services and assume
the obligations herein set forth, for the compensation herein
provided. The Manager shall, for all purposes herein, be deemed
to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority 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 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, 1998 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 thereunder, 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
recommendations with respect to the purchase and sale of
securities and the -ting 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., KORNIIZER 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.
AFBA INVESTMENT MANAGEMENT COMPANY
By /s/C.C. Blanton
C.C. Blanton
Lt. General, USAF (Ret.)
Chairman of the Board
Attest:
/s/Martin A. Cramer
Martin A. Cramer
Secretary
AFBA INVESTMENT MANAGEMENT COMPANY
By /s/C.C. Blanton
C.C. Blanton
Lt. General, USAF (Ret.)
Chairman of the Board
Attest:
/s/Jeffrey C. Sandefur
Jeffrey C. Sandefur
Secretary
EX99.23(d)(2)
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-O918 (11ereinatter
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.
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, 1998 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
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 1IAFBAN 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 2nd day
of June 1997, pursuant to the authority granted by its Board of
Directors.
KORNITZER CAPITAL MANAGEMENT, INC.
By /s/Kent W. Gasaway
Attest:
AFBA INVESTMENT COMPNAY
By /s/John A. Johnson
John A. Johnson
President
Attest:
/s/Jeffrey C. Sandefur
Jeffrey C. Sandefur
Secretary
EX99.23(e)
UNDERWRITING AGREEMENT
between
AFBA FIVE STAR FUND, INC.
and
JONES & BABSON, INC.
THIS AGREEMENT, made and entered into this 2nd day of
June, 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.
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 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 /s/C.C. Blanton
C.C. Blanton
Lt. General, USAF (Ret.)
Chairman of the Board
ATTEST:
/s/Martin A. Cramer
Secretary
Jones & Babson, Inc.
By /s/Larry D. Armel
Larry D. Armel
President
ATTEST:
/s/P. Bradley Adams
P. Bradley Adams
Vice President
EX99.23(g)
CUSTODY AGREEMENT
Dated May 5, 1997
Between
UMB BANK, N.A.
and
JONES & BABSON FUNDS
TABLE OF CONTENTS
SECTION PAGE
1. Appointment of Custodian 1
2. Definitions 1
(a) Securities 1
(b) Assets 2
(c) Instructions and Special Instructions 2
3. Delivery of Corporate Documents 2
4. Powers and Duties of Custodian and Domestic Subcustodian 3
(a) Safekeeping 4
(b) Manner of Holding Securities 4
(c) Free Delivery of Assets 5
(d) Exchange of Securities 6
(e) Purchases of Assets 6
(f) Sales of Assets 7
(g) Options 7
(h) Futures Contracts 8
(i) Segregated Accounts 9
(j) Depository Receipts 9
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 9
(l) Interest Bearing Deposits 10
(m) Foreign Exchange Transactions 10
(n) Pledges or Loans of Securities 11
(o) Stock Dividends, Rights, Etc. 12
(p) Routine Dealings 12
(q) Collections 12
(r) Bank Accounts 13
(s) Dividends, Distributions and Redemptions 13
(t) Proceeds from Shares Sold 13
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985 13
(v) Books and Records 14
(w) Opinion of Fund's Independent Certified Public Accountants 14
(x) Reports by Independent Certified Public Accountants 14
(y) Bills and Others Disbursements 14
5. Subcustodians 15
(a) Domestic Subcustodians 15
(b) Foreign Subcustodians 15
(c) Interim Subcustodians 16
(d) Special Subcustodians 16
(e) Termination of a Subcustodian 17
(f) Certification Regarding Foreign Subcustodians 17
6. Standard of Care 17
(a) General Standard of Care 17
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed 17
Conflict, Sovereign Risk, etc.
(c) Liability for Past Records 18
(d) Advice of Counsel 18
(e) Advice of the Fund and Others 18
(f) Instructions Appearing to be Genuine 18
(g) Exceptions from Liability 19
7. Liability of the Custodian for Actions of Others 19
(a) Domestic Subcustodians 19
(b) Liability for Acts and Omissions of Foreign Subcustodians 19
(c) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities 20
Depositories and Clearing Agencies
(d) Defaults or Insolvencies of Brokers, Banks, Etc. 20
(e) Reimbursement of Expenses 20
8. Indemnification 20
(a) Indemnification by Fund 20
(b) Indemnification by Custodian 21
9. Advances 21
10. Liens 21
11. Compensation 22
12. Powers of Attorney 22
13. Termination and Assignment 22
14. Additional Funds 23
15. Notices 23
16. Miscellaneous 23
CUSTODY AGREEMENT
This agreement made as of this 5th day of May, 1997, between UMB Bank,
n.a., a national banking association with its principal place of business
located at Kansas City, Missouri (hereinafter "Custodian"), and each of the
Funds which have executed the signature page hereof together with such
additional Funds which shall be made parties to this Agreement by the
execution of a separate signature page hereto (individually, a "Fund" and
collectively, the "Funds").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, each Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by such Fund which Assets are
to be held in such accounts as such 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.
Each Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to each such 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,
script, 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 a Fund.
(c)(1) "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
a 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 (including, without limitation, computers) on
behalf of a Fund. Instructions in the form of oral communications shall be
confirmed by the appropriate 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. Each 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 a Fund or any other person designated by the Treasurer of such
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 each 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.
Each 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.
Each Fund shall promptly furnish the Custodian with copies of any
updates, amendments or supplements to the foregoing documents.
In addition, each 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 each such 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 each Fund, and (b) the names, titles and signatures
of those persons authorized to countersign or confirm Special Instructions on
behalf of each 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 a Fund will be deemed to authorize or permit
any director, trustee, officer, employee, or agent of such Fund to withdraw
any of the Assets of such 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 each Fund which are
delivered to it from time to time. The Custodian shall not be responsible for
any property of a Fund held or received by such Fund and not delivered to the
Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of each
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 appropriate Fund or its nominee, or in the name of the Custodian
or its nominee, for whose actions such 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 appropriate Fund or only assets held by the Custodian as a fiduciary,
provided that the records of the 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 a Fund in, and each 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 a 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 any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased
for the
account of a 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 such Fund. The Custodian shall transfer Securities sold for
the account of a 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 such Fund. Copies of all advices from
the Securities System relating to transfers of Securities for the account of a
Fund shall be maintained for such Fund by the Custodian. The Custodian shall
deliver to a 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 such Fund. Such transaction reports shall be delivered to
such Fund or any agent designated by such Fund pursuant to Instructions, by
computer or in such other manner as such Fund and Custodian may agree.
(v) The Custodian shall, if requested by a Fund
pursuant to
Instructions, provide such 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 a Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Fund maintained with such Securities System.
(c) Free Delivery 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 a 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 a 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 a 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 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(l), 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 a 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 a 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 a 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 such 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 Custodian by the Options
Clearing Corporation (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.
(2) Upon receipt of Instructions relating to the sale of a
naked option
(including stock index and commodity options), the Custodian, the appropriate
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 such 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 appropriate 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 appropriate 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 such 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 such Fund's
performance of its obligations under any futures contracts purchased or sold,
or any options on futures contracts written by such 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 appropriate 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 a Fund,
into which account or accounts may be transferred Assets of such 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 purpose of compliance by such 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) Depository Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to
be
surrendered Securities to the depository used for such Securities by an issuer
of American Depository Receipts or International Depository 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 depository 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 appropriate Fund of such action in
writing by facsimile transmission or in such other manner as such 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.
(l) 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 a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such 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 such Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S.
dollars or other currencies, as such Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to a Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. 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.
(l) Each Fund hereby appoints the Custodian as its agent in the
execution of all currency exchange transactions. The Custodian agrees to
provide exchange rate and U.S. Dollar information, in writing, to the Funds.
Such information shall be supplied by the Custodian at least by the business
day prior to the value date of the foreign exchange transaction, provided that
the Custodian receives the request for such information at least two business
days prior to the value date of the transaction.
(2) 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 a Fund with such
currency brokers or Banking Institutions as such Fund may determine and direct
pursuant to Instructions. If, in its Instructions, a Fund does not direct the
Custodian to utilize a particular currency broker or Banking Institution, the
Custodian is authorized to select such currency broker or Banking Institution
as it deems appropriate to execute the Fund's foreign currency transaction.
(3) Each 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 or liability with respect to the selection of the currency
brokers or Banking Institutions with which a Fund deals or the performance of
such brokers or Banking Institutions.
(4) 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.
(5) The Custodian shall not be obligated to enter into foreign
exchange
transactions as principal. However, if the Custodian has made available to a
Fund its services as a principal in foreign exchange transactions
and subject to any separate agreement between the parties relating to such
transactions, the Custodian shall enter into 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 the Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from a 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 such 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 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 appropriate 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 each Fund except as may be otherwise provided in this
Agreement or directed from time to time by Instructions from any particular
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 appropriate
Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to each Fund
with
respect to portfolio Securities and other Assets; (b) promptly credit to the
account of each 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 any particular 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 any
such Fund. The Custodian shall notify a Fund in writing by facsimile
transmission or in such other manner as such 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 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
one or more Funds, and shall be subject only to draft or order of the
Custodian. The responsibilities of the Custodian to any one or more such
Funds 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 each Fund to pay dividends or other distributions to
shareholders of each such Fund and to make payment to shareholders who have
requested repurchase or redemption of their shares of each such 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 each such 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 each such 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 each Fund, and shall credit such
funds to the account of the appropriate Fund. The Custodian shall notify the
appropriate Fund of Custodian's receipt of cash in payment for shares issued
by such Fund by facsimile transmission or in such other manner as such 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 such Fund; and (b) make federal funds available to a
Fund as of specified times agreed upon from time to time by such Fund and the
Custodian, in the amount of checks received in payment for shares which are
deposited to the accounts of such Fund.
(u) Proxies and Notices; Compliance with the Shareholders Communication
Act of 1985.
The Custodian shall deliver or cause to be delivered to the appropriate
Fund all forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by such Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt of Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian or 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 any Fund to an issuer
which
requests such information pursuant to the Shareholder Communications Act of
1985 for the specific purpose of direct communications between such issuer and
any such Fund unless a particular 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 appropriate 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 each Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as each Fund may request
to
obtain from year to year favorable opinions from each such Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of each such 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 a Fund, the Custodian shall deliver to such 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 such 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 a 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 any one or more Funds. 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 any one or more Funds. For purposes of this
Agreement, all Domestic Subcustodians, Foreign Subcustodians, Special
Subcustodians and Interim Subcustodians shall be referred to collectively as
"Subcustodians".
(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 any one or more Funds as a subcustodian for purposes of
holding Assets of such Fund(s) and performing other functions of the Custodian
within the United States (a "Domestic Subcustodian"). Each 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(s). 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 any one
or more Funds as a subcustodian or sub-subcustodian (if appointed by a
Domestic Subcustodian) for purposes of holding Assets of the Fund(s) 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 each Fund of the
approval of the Board of Directors or other governing body of each such 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 each such 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(s) shall
be listed on Appendix A attached hereto, as it may be amended, from time to
time. Each 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 each such 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 any Fund's rights under
such agreement, except upon prior written approval of such Fund pursuant to
Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a 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 such Fund in writing by facsimile
transmission or in such other manner as such Fund and the Custodian shall
agree in writing of the unavailability of an approved Foreign Subcustodian in
such country; and upon the receipt of Special Instructions from such Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or
approve an entity (referred to herein as an "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
a
Fund, appoint one or more banks, trust companies or other entities designated
in such Special Instructions to act for the Custodian on behalf of such 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 such 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 appropriate 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
appropriate Fund(s), terminate any Subcustodian of such Fund(s) 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 a Fund, the Custodian shall deliver to such 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 such Fund;
and (iii) such other information as may be requested by such Fund, and as the
Custodian shall be reasonably able to obtain, to evidence compliance with
rules and regulations under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to a Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by such 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 (i) 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: (a) 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 (b) 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 (ii) for any loss, damage, cost or expense resulting from
"Sovereign Risk." A "Sovereign Risk" shall mean nationalization,
expropriation, currency devaluation, revaluation or fluctuation, 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 a 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 a 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 such Fund by entities other than the Custodian or any Domestic
Subcustodian prior to the Custodian's employment hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled to
receive
and act upon advice of counsel of its own choosing 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.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice of
any Fund and upon statements of such 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 any Fund hereunder a
certificate signed by any officer of such Fund authorized to countersign or
confirm Special Instructions.
(g) Exceptions from Liability.
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
any Fund, the legality of the purchase thereof or evidence of ownership
required to be received by any such 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
any 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 any 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 any such 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 any such
Fund, or any such Fund's currently effective Registration Statement on file
with the SEC.
7. LIABILITY OF 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.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
The Custodian shall be liable to a Fund for any loss or damage to such
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 any Fund for any loss, damage or
expense suffered or incurred by such 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 Insolvencies of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense
suffered
or incurred by any 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 negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
Each Fund agrees to reimburse the Custodian for all 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, each 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.
If any 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
such Fund being liable for the payment of money or incurring liability of some
other form, such 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 each Fund from all losses, damages and expenses
suffered or incurred by each such Fund caused by 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 any 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 any such Fund, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such 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 any Fund as
to which it is subsequently determined that such 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 behalf of which the Advance was made on demand
by Custodian, unless otherwise agreed by such Fund and the Custodian, and
shall accrue interest from the date of the Advance to the date of payment by
such Fund to the Custodian at a rate agreed upon in writing from time to time
by the Custodian and such 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 on behalf of which the Advance was made, 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 each of the Funds which are parties
to this Agreement 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 a Fund. The Custodian shall promptly
notify the appropriate Fund of any Advance. Such notification shall be sent
by facsimile transmission or in such other manner as such 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
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 a 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.
Each Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and each such 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 each such Fund
and paid in cash to the Custodian.
12. POWERS OF ATTORNEY.
Upon request, each 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.
Any 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
appropriate 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 appropriate Fund or as otherwise designated by such 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 any Fund without
the respective consent of the other, duly authorized by a resolution by its
Board of Directors or Trustees.
14. ADDITIONAL FUNDS.
An additional Fund or Funds may become a party to this Agreement after
the
date hereof by an instrument in writing to such effect signed by such Fund or
Funds and the Custodian. If this Agreement is terminated as to one or more of
the Funds (but less than all of the Funds) or if an additional Fund or Funds
shall become a party to this Agreement, there shall be delivered to each party
an Appendix #1 or an amended Appendix #1, signed by each of the additional
Funds (if any) and each of the remaining Funds as well as the Custodian,
deleting or adding such Fund or Funds, as the case may be. The termination of
this Agreement as to less than all of the Funds shall not affect the
obligations of the Custodian and the remaining Funds hereunder as set forth on
the signature page hereto and in Appendix #1 as revised from time to time.
15. NOTICES.
As to each Fund, notices, requests, instructions and other writings
delivered to Jones & Babson, Inc, 700 Karnes Blvd., Kansas City, Missouri
64108, postage prepaid, or to such other address as any particular Fund may
have designated to the Custodian in writing, shall be deemed to have been
properly delivered or given to a Fund.
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 each 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.
16. 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
hereof.
(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 Section
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2(b)
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2(c)(1)
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Term Section
Liability 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2(a)
Securities Depositories and
Clearing Agencies 5(b)
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2(c)(2)
Special Subcustodian 5(c)
Subcustodian 5
1940 Act 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
of 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 to be executed by their respective duly authorized officers.
JONES & BABSON FUNDS
By: P. Bradley Adams
Name: P. Bradley Adams
Title: Treasurer
Date: May 5, 1997
UMB BANK, N.A.
By: Ralph R. Santoro
Name: Ralph R. Santoro
Title: Vice President
Date: April 22, 1997
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri 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 CLEARING AGENCIES
Euroclear
JONES & BABSON FUNDS
By: P. Bradley Adams
Name: P. Bradley Adams
Title: Treasurer
Date: May 5, 1997
UMB BANK, N.A.
By: Ralph R. Santoro
Name: Ralph R. Santoro
Title: Vice President
Date: April 22, 1997
APPENDIX #1
UMB Bank, n.a.
AND
UNITED MISSOURI TRUST COMPANY OF NEW YORK
DOMESTIC CUSTODY FEE AGREEMENT
FOR THE
JONES AND BABSON FAMILY OF FUNDS
JONES AND BABSON FUNDS
David L. Babson Growth Fund, Inc.
Babson Enterprise Fund, Inc.
Babson Enterprise II, Fund, Inc.
Babson Value Fund, Inc.
Shadow Stock Fund, Inc.
D. L. Babson Tax-Free Income Fund, Inc. - Portfolio S
D. L. Babson Tax-Free Income Fund, Inc. - Portfolio L
D. L. Babson Tax-Free Income Fund, Inc. - Portfolio M
D. L. Babson Money Market Fund, Inc. - Prime Portfolio
D. L. Babson Money Market Fund, Inc. - Federal Portfolio
D. L. Babson Bond Trust - Short Portfolio
D. L. Babson Bond Trust - Long Portfolio
Buffalo Balanced Fund, Inc.
Buffalo Equity Fund, Inc.
Buffalo Global Fund, Inc.
Buffalo High Yield Fund, Inc.
Buffalo Small Cap Fund, Inc.
AFBA Five Star Fund, Inc. - Balanced Portfolio
AFBA Five Star Fund, Inc. - Equity Portfolio
AFBA Five Star Fund, Inc. - USA Global Portfolio
AFBA Five Star Fund, Inc. - High Yield Portfolio
Jones & Babson UMB Bank, n.a.
By: /s/P. Bradley Adams By: /s/Ralph R. Santoro
Name: P/ Bradley Adams Name: Ralph R. Santoro
Title: Treasurer Title: Vice President
Date: 5/5/97 Date: 04/22/97
19
EX99.23(h)
TRANSFER AGENCY AGREEMENT
This Agreement made as of the 2nd day of June, 1997 between
AFBA Investment Mangement 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.
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.
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 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;
(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).
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, 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
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 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 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 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 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.
(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 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 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 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 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.
(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 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 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
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.
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 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:
(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 Fund 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:
(a) The Transfer Agent shall bill the Fund 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 Fund 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
Fund, it shall be accompanied by a copy of a resolution of the Board of
Directors of the Fund, 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 Fund 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 Fund, 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.
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of 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.
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.
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 /s/John A. Johnson
Name: John A. Johnson
Title: 1President
[SEAL]
JONES & BABSON, INC.
By: /s/Larry D. Armel
Name: Larry D. Armel
Title: President
[SEAL]
Agreed:
AFBA Five Star Fund, Inc.
By: C.C. Blanton
Name: Lt. General C. C. Blanton, USAF (Ret.)
Title: Chairman of the Board
<PAGE>
SCHEDULE I
DESCRIPTION OF SERVICES
In consideration of the fees to be paid in such manner and at such
times as Fund and Transfer Agent may agree, Transfer Agent will provide the
services set forth below:
Examine and Process New Accounts, Subsequent Payments, Liquidations,
Exchanges, Telephone Transactions, Check Redemptions, Automatic Withdrawals,
Certificate Issuance, Wire Order Trades, Dividends, Dividend Statements,
Dealer Statements.
This Agreement does not apply to services with respect to qualified
plans. Such services, including, but not limited to fiduciary accounting
services and the preparation and mailing of Forms 5498 and 1099R, are
available subject to separate agreement for an additional charge.
DAILY ACTIVITY
Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
Name and Address, including Zip Code
Balance of Uncertificated Shares
Balance of Certificated Shares
Certificate number, number of shares, issuance date of each certificate
outstanding and cancellation date for each certificate date for each
certificate no longer outstanding, if issued
Balance of dollars available for redemption
Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash)
Type of account code
Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available
Original establishment date for accounts opened by exchange W-9
withholding status and periodic reporting
State of residence code
Social Security or taxpayer identification number, and indication of
certification
Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time-to-time
Indication as to whether phone transactions can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
An alternate or "secondary" account number issued by a dealer (or bank,
etc.) to a customer for use, inquiry and transaction input by "remote
accessors"
FUNCTIONS
Answer investor and dealer telephone and/or written inquiries, except
those concerning Fund policy, or requests for investment advice which
will be referred to the Fund, or those which the Fund chooses to answer
Deposit Fund share certificates into accounts upon receipt of
instructions from the investor or other authorized person, if issued
Examine and process transfers of shares insuring that all transfer
requirements and legal documents have been supplied
Process and confirm address changes
Process standard account record changes as required, i.e. Dividend
Codes, etc.
Microfilm source documents for transactions, such as account
applications and correspondence
Perform backup withholding for those accounts which federal government
regulations indicate is necessary
Solicit missing taxpayer identification numbers
Provide remote access inquiry to Fund records via Fund supplied
hardware (Fund responsible for connection line and monthly fee)
REPORTS PROVIDED
Daily Journals Reflecting all shares and
dollar activity for the
previous day
Blue Sky Report Supply information monthly
for Fund's Preparation of
Blue Sky Reporting
N-SAR Report Supply monthly correspondence,
redemption and liquidation
information for use in fund's
N-SAR Report
Additionally, monthly average daily balance reports will be provided at
the Fund's request to the Fund at no charge.
Prepare and mail copies of summary statements to dealers and investment
advisers
Generate and mail confirmation statements for financial transactions
DIVIDEND ACTIVITY
Reinvest or pay in cash including reinvesting in other funds within the
fund group serviced by the Transfer Agent as described in each Fund
Prospectus
Distribute capital gains simultaneously with income dividends
DEALER SERVICES
Prepare and mail confirmation statements to dealers and
Prepare and mail copies of statements to dealers, same frequency as
investor statements
ANNUAL MEETINGS
Assist Fund in obtaining a qualified service to: address and mail
proxies and related material, tabulate returned proxies and supply
daily reports when sufficient proxies have been received
Prepare certified list of stockholders, hard copy or microform
PERIODIC ACTIVITIES
Mail transaction confirmation statements daily to investors
Address and mail four (4) periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent)
Mail periodic statement to investors
Compute, prepare and furnish all necessary reports to Governmental
authorities: Forms 1099DIV, 1099B, 1042 and 1042S
Enclose various marketing material as designated by the Fund in statement
mailings, i.e. monthly and quarterly statements (material must be adaptable
to mechanical equipment as reasonably specified by the Transfer Agent)
<PAGE>
SCHEDULE II
TRANSFER AGENT FEE SCHEDULE
Annual Base Fee Account $7.20
Annual Additional Fees Per Account
Daily Dividend Fund $1.80
Front-end Load fund $.90
12b-1 $.90
Closed/Zero Balance Accounts (per account/year) $3.24
Annual Minimum Charges (per fund/portfolio/class)
Existing Funds/Portfolios/Classes:
Less than 150 accounts (per month) $1,125.00
150 or More Accounts (per month) $1,575.00
New Funds/Portfolios/Classes:
Months 1-3 (per month) $450.00
Months 4-6 (per month) $900.00
Thereafter:
Less than 150 Accounts (per month) $1,125.00
150 or more Accounts (per month) $1,575.00
Transaction Fees
Dividend/Capital Gain $0.36
Share/Dollar/Maintenance $1.12
S/H Telephone Inquiry $1.12
S/H Correspondence $1.12
Retirement Plan $1.12
ACH $1.12
Omnibus/House Account Transactions $2.25
New Account Set-up $4.50
Outgoing Wire $7.00
Page 2
TIN Transactions
Certification $0.13
Maintenance $0.22
Ad Hoc Reports
Development Charge (per hour/report) $50.00
Handling Charge (per hour/report) $22.50
Redemption Draft Processing
Signature Verification $.90
Signature Capture $.90
Establishment of Privilege after Set-up $4.50
Page 3
Out-of-Pocket Expenses
Out-of-pocket expenses shall include but not be limited to, postage,
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 and microfiche, computer tapes used for
permanent record storage and any other expenses incurred at the
specific direction of the Fund. Postage for all mass mailings is
payable in advance and is due seven days prior to the anticipated
mail date.
Account maintenance fees are billable on a monthly basis at the rate
of 1/12 of the annual fee. All other fees are billable in the month
in which they are incurred.
Mail Services Fees
Statements:
Daily
Quarterly
Dividend
On Request
Interested Party
Year End
Dealer
Processing Charges:
1 - 3,500 pieces (per piece) $0.25
Greater than 3,500 pieces (per piece) $0.15
Minimum Charge (per job) $10.00
Special Handling Labor (per hour): $13.00
Inserting Surcharge (per insert):
1 additional insert $0.002
2 additional inserts $0.004
3 additional inserts $0.006
4 additional inserts $0.008
5 additional inserts $0.010
Postage Rate: First Class
Page 4
Checks:
Daily
Dividend
Systematic Withdrawal Plan
Processing Charges:
1 - 3,500 pieces (per piece) $0.28
Greater than 3,500 pieces (per piece) $0.20
Minimum Charge (per job) $20.00
Special Handling Labor (per hour): $13.00
Inserting Surcharge (per insert):
1 additional insert $0.002
2 additional inserts $0.004
3 additional inserts $0.006
4 additional inserts $0.008
5 additional inserts $0.010
Postage Rate: First Class
Page 5
Tax Statements:
1099 DIV 1099B
1099 INT 5498
Processing Charges:
1 - 3,500 pieces (per piece) $0.15
Greater than 3,500 pieces (per piece) $0.10
Minimum Charge (per job) $20.00
Special Handling Labor (per hour): $13.00
Inserting Surcharge (per insert): $0.01
Postage Rate: First Class
TIN Solicitations - Daily/Bulk
W-8's
W-9's
Processing Charges (per piece): $0.55
Minimum Charge (per job) $20.00
Special Handling Labor (per hour): $13.00
Inserting Surcharge (per insert):
1 additional insert $0.002
2 additional inserts $0.004
3 additional inserts $0.006
4 additional inserts $0.008
5 additional inserts $0.010
Postage Rate: First Class
Page 6
Bulk Mailings
Labeling:
1 - 3,500 pieces (per piece) $.015
Greater than 3,500 pieces (per piece) $0.012
Folding (if necessary):
1 - 3,500 pieces (per piece) $.010
Greater than 3,500 pieces (per piece) $0.007
Processing Charges:
1 - 3,500 pieces (per piece) $0.017
Greater than 3,500 pieces (per piece) $0.010
Minimum Charge (per job) $20.00
Special Handling Labor (per hour): $13.00
Inserting Surcharge (per insert):
1 additional insert $0.002
2 additional inserts $0.004
3 additional inserts $0.006
4 additional inserts $0.008
5 additional inserts $0.010
Postage Rate: As Directed
EX99.23(j)(2)
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star
Fund, Inc., a Maryland Corporation which intends to do
business as an open-end diversified investment company
(mutual fund), and
WHEREAS the AFBA Five Star Fund, 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, 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 Fund, 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
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
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star
Fund, Inc., a Maryland Corporation which intends to do
business as an open-end diversified investment company
(mutual fund), and
WHEREAS the AFBA Five Star Fund, 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, 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
Fund, Inc. and in the maintenance of such registrations.
IN WITNESS WHEREOF, I have hereunto set my hand this
22nd day of January, 1997.
/s/Louis C. Wagner, Jr.
Louis C. Wagner, 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
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star
Fund, Inc., a Maryland Corporation which intends to do
business as an open-end diversified investment company
(mutual fund), and
WHEREAS the AFBA Five Star Fund, 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, 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 Fund, 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.
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 7/31/99
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star
Fund, Inc., a Maryland Corporation which intends to do
business as an open-end diversified investment company
(mutual fund), and
WHEREAS the AFBA Five Star Fund, 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, 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 Fund, 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
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
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of AFBA Five Star
Fund, Inc., a Maryland Corporation which intends to do
business as an open-end diversified investment company
(mutual fund), and
WHEREAS the AFBA Five Star Fund, 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, 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 Fund, 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
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
EX99.23(j)(1)
Consent of Independent Auditors
We consent to the references to our firm under the captions
"Financial Highlights" and "Independent Auditors" and to the
incorporation by reference of our report dated April 30, 1999,
in the Post-Effective Amendment No. 3 to the Registration Statement
(Form N-1A) and related Prospectus and Statemnet of Additional Information of
AFBA Five Star Fund, Inc. filed with the Securities and Exchange
Commission under the Securities Act of 1933 (Registration No. 333-20637)
and Amendment No. 6 under the Investment Company Act of 1940
(Registration No. 811-8035).
Ernst & Young LLP
Kansas City, Missouri
May 27, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001030802
<NAME> AFBA FIVE STAR FUND INC
<SERIES>
<NUMBER> 1
<NAME> AFBA FIVE STAR BALANCED FUND
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
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<INTEREST-INCOME> 178987
<OTHER-INCOME> 0
<EXPENSES-NET> 43243
<NET-INVESTMENT-INCOME> 190516
<REALIZED-GAINS-CURRENT> (7993)
<APPREC-INCREASE-CURRENT> (409071)
<NET-CHANGE-FROM-OPS> (226548)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 171597
<DISTRIBUTIONS-OF-GAINS> 9146
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 427995
<NUMBER-OF-SHARES-REDEEMED> 72592
<SHARES-REINVESTED> 17250
<NET-CHANGE-IN-ASSETS> 3632085
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40019
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53462
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.39
<PER-SHARE-NII> .42
<PER-SHARE-GAIN-APPREC> (1.17)
<PER-SHARE-DIVIDEND> .40
<PER-SHARE-DISTRIBUTIONS> .02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.22
<EXPENSE-RATIO> 1.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001030802
<NAME> AFBA FIVE STAR FUND INC
<SERIES>
<NUMBER> 2
<NAME> AFBA FIVE STAR EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 6545521
<INVESTMENTS-AT-VALUE> 7299414
<RECEIVABLES> 25026
<ASSETS-OTHER> 1750
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7326190
<PAYABLE-FOR-SECURITIES> 878
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3131
<TOTAL-LIABILITIES> 4009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7022808
<SHARES-COMMON-STOCK> 634392
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7226
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (461746)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 753893
<NET-ASSETS> 7322181
<DIVIDEND-INCOME> 57745
<INTEREST-INCOME> 38372
<OTHER-INCOME> 0
<EXPENSES-NET> 61545
<NET-INVESTMENT-INCOME> 34572
<REALIZED-GAINS-CURRENT> (460819)
<APPREC-INCREASE-CURRENT> 497523
<NET-CHANGE-FROM-OPS> 71276
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32370
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 449255
<NUMBER-OF-SHARES-REDEEMED> 122896
<SHARES-REINVESTED> 2890
<NET-CHANGE-IN-ASSETS> 3730365
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 56947
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 70286
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.77
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> (.22)
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.54
<EXPENSE-RATIO> 1.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001030802
<NAME> AFBA FIVE STAR FUND INC
<SERIES>
<NUMBER> 3
<NAME> AFBA FIVE STAR HIGH YIELD FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
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