SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. _____ File No. _____ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. File No. _____ [ ]
SCOUT CAPITAL PRESERVATION FUND, INC.
(Exact Name of Registrant as Specified in Charter)
BMA Tower, 700 Karnes Boulevard, Kansas City, MO 64108
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (816) 471-5200
Larry D. Armel, President, SCOUT CAPITAL PRESERVATION FUND, INC.
BMA Tower, 700 Karnes Boulevard, Kansas City, MO 64108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Upon effective date of this
registration statement
Title of Securities Being Registered: Common Stock, $1.00 par value
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective on such date as the Commission acting pursuant
to Section 8(a) of the Investment Company Act of 1940 may determine.
Please address inquiries and a carbon copy of all
and communications to: communications to:
John G. Dyer, Esq. Mark H. Plafker, Esq.
Scout Capital Preservation Fund, Inc. Stradley, Ronon, Stevens & Young, LLP
BMA Tower 2600 One Commerce Square
700 Karnes Blvd. Philadelphia, PA 19103-7098
Kansas City, MO 64108 Telephone: (215) 564-8024
Telephone: (816) 471-5200
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SCOUT CAPITAL PRESERVATION FUND, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A Item Number Location in Prospectus
<S> <C>
Item 1. Cover Page.................................................... Cover Page
Item 2. Synopsis...................................................... Not Applicable
Item 3. Condensed Financial Information............................... Per Share Capital and Income
Changes
Item 4. General Description of Registrant............................. Investment Objective and
Portfolio Management Policy
Item 5. Management of the Fund........................................ Officers and Directors;
Management and Investment
Counsel
Item 6. Capital Stock and Other Securities............................ How to Purchase Shares;
How to Redeem Shares; How
Share Price is Determined;
General Information and
History; Dividends,
Distributions and their
Taxation
Item 7. Purchase of Securities........................................ Cover Page; How to
being Offered Purchase Shares; Shareholder
Services
Item 8. Redemption or Repurchase...................................... How to Redeem Shares
Item 9. Pending Legal Proceedings..................................... Not Applicable
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SCOUT CAPITAL PRESERVATION FUND, INC.
CROSS REFERENCE SHEET (Continued)
Location in Statement of
Additional
Form N-1A Item Number Information
Item 10. Cover Page........................................... Cover Page
Item 11. Table of Contents.................................... Cover Page
Item 12. General Information and History...................... Investment Objectives and
Policies; Management and
Investment Counsel
Item 13. Investment Objectives and Policies................... Investment objectives and
Policies; Investment
Restrictions
Item 14. Management of the Fund............................... Management and Investment
Counsel
Item 15. Control Persons and Principal........................ Management and
Holders of Securities Investment Counsel; Officers
and Directors
Item 16. Investment Advisory and other........................ Management and
Services Investment Counsel
Item 17. Brokerage Allocation................................. Portfolio Transactions
Item 18. Capital Stock and Other Securities................... General Information and
History (Prospectus);
Financial Statements
Item 19. Purchase, Redemption and Pricing..................... How Share Purchases of
Securities Being Offered are
Handled; Redemption of
Shares; Financial Statements
Item 20. Tax Status........................................... Dividends, Distributions and
their Taxation (Prospectus)
Item 21. Underwriters......................................... How the Fund's Shares are
Distributed
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SCOUT CAPITAL PRESERVATION FUND, INC.
CROSS REFERENCE SHEET (Continued)
Item 22. Calculation of Yield Quotations...................... Not Applicable
of Money Market Fund
Item 23. Financial Statements................................. (To be supplied by further
Amendment)
</TABLE>
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PROSPECTUS
January ___, 1998
SCOUT CAPITAL PRESERVATION FUND, INC.
INVESTMENT OBJECTIVE
Scout Capital Preservation Fund, Inc. is a member of the Scout Fund Group. The
Scout Funds were created especially for the benefit of customers of affiliated
banks of UMB Financial Corporation and those investors who share the Fund's
investment goals. The Fund is no-load. The Scout Capital Preservation Fund seeks
long-term capital growth. Long-term capital growth is intended to be achieved
primarily by the Fund's investment in a diversified portfolio of equity
securities (common stocks and convertible securities). The shares offered by
this prospectus are not deposits or obligations of, nor guaranteed by, UMB Bank,
n.a., or any of its affiliate banks. They are not federally insured by the
Federal Deposit Insurance Corporation (FDIC) or any other agency. These shares
may involve investment risks, including the possible loss of the principal
amount invested.
PURCHASE INFORMATION
Minimum Investment
Initial Purchase $1,000
Subsequent Purchase by check $ 100
Subsequent Purchase by Wire $ 500
Shares are purchased and redeemed at net asset value. There are no sales,
redemption or Rule 12b-1 distribution charges. If you need further information,
please call the Fund at the telephone number indicated.
ADDITIONAL INFORMATION
This prospectus should be read and retained for future reference. It contains
the information that you should know before you invest. A "Statement of
Additional Information" of the same date as this prospectus has been filed with
the Securities and Exchange Commission and is incorporated by reference.
Investors desiring additional information about the Fund may obtain a copy
without charge by writing or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Fund Expenses.............................................................
Investment Objective and Portfolio Management Policy......................
Repurchase Agreements.....................................................
Risk Factors..............................................................
Investment Restrictions...................................................
Performance Measures......................................................
How to Purchase Shares....................................................
Initial Investments.......................................................
Investments Subsequent to Initial Investment..............................
Telephone Investment Service..............................................
Automatic Monthly Investment Plan.........................................
How to Redeem Shares......................................................
Systematic Redemption Plan................................................
How to Exchange Shares Between Scout Funds................................
How Share Price is Determined.............................................
Officers and Directors....................................................
Manager and Underwriter...................................................
General Information and History...........................................
Dividends, Distributions and their Taxation...............................
Shareholder Services......................................................
Shareholder Inquiries.....................................................
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SCOUT CAPITAL PRESERVATION FUND, INC.
FUND EXPENSES
The following information is provided in order to assist you in understanding
the various costs and expenses that a shareholder of the Fund will bear directly
or indirectly. The expenses set forth below are estimates for the initial fiscal
year of the Fund.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees 0.85%
12b-1 fees None
Other expenses ____%
Total Fund operating expenses ____%
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Year
$____ $____
The above examples should not be considered a representation of past or future
expenses, as actual expenses may be greater or less than those shown. The
assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual return. The actual return may be greater
or less than the assumed amount.
The purpose of the foregoing fee tables is to assist the investor in
understanding the various costs and expenses than an investor in a Fund will
bear directly or indirectly. The various costs and expenses are explained in
more detail in this prospectus. "Other Expenses" is based on estimated amounts
for the current fiscal year. Management fees are discussed in greater detail
under "Manager and Underwriter."
INVESTMENT OBJECTIVE AND
PORTFOLIO MANAGEMENT POLICY
The Scout Capital Preservation Fund's objective is to seek long term capital
growth. Long-term capital growth is intended to be achieved primarily by the
fund's investment in a diversified portfolio of equity securities (common stocks
and convertible securities). The Fund seeks to achieve its objective by
investing primarily in common stocks of companies whose earnings or tangible
assets are expected by the investment manager to outpace the rate of inflation.
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The Scout Capital Preservation Fund will normally invest in a diversified
portfolio of securities. The Fund has the flexibility to pursue its objective
through any type or quality of domestic or foreign security. In selecting
investments, the manager will consider economic and monetary conditions and
projected inflation rates over time. The manager will shift the proportions of
each type of investment based on its interpretation of economic conditions and
underlying security valuations. Normally the Fund will invest at least 65% of
its total assets in equity securities. The Fund will invest in equity securities
of companies with a significant potential for earnings growth of revaluation of
assets.
The fund will normally invest in the following equity or convertible securities:
1. Domestic companies of any size listed on an exchange or over-the-counter.
2. Foreign companies of any size with shares listed on a U.S. exchange or
over-the-counter or foreign companies with American Depository Receipts (ADRs),
which represent foreign securities and are traded on U.S. exchanges or
over-the-counter. The Fund may also invest directly in foreign securities.
The Fund will not be restricted as to market capitalization. However, under
normal circumstances, the Fund will not invest more than 25% of its equity
position in a single industry. Also, the Fund may not own more than 10% of the
outstanding voting securities of a single issuer. The Fund may not invest more
than 5% of its equity assets in any one issuer.
When, in the manager's judgment, market conditions warrant substantial temporary
investments in high quality money market securities, the Fund may do so.
Investments in money market securities shall include government securities,
government agency securities, commercial paper, banker's acceptances, bank
certificates of deposit and repurchase agreements. Investment in commercial
paper is restricted to companies rated A2P2 or higher by Moody's and Standard &
Poor's.
The Fund cannot guarantee that its objectives will be achieved because there are
inherent risks in the ownership of the investments made by the Fund. The value
of the Fund's shares will reflect changes in the market value of its
investments. Dividends paid by the Fund will vary with the income it receives
from these investments.
Through careful management and diversification, the Fund will seek to reduce
risk and enhance the opportunities for long-term growth of capital. The
flexibility to realize relative value between asset classes, markets and
individual securities offers investors the opportunity to access undervalued
securities around the globe.
The Fund may also invest in the following fixed income securities:
1. Direct obligations of the U.S. Government such as bills, notes, bonds and
other debt securities issued by the U.S. treasury.
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2. Obligations of U.S. government agencies and instrumentalities which are
secured by the full faith and credit of the U.S. treasury, such as securities of
the Government National Mortgage Association, the Export-Import Bank, or the
Student Loan Marketing Association; or which are secured by the right of the
issuer to borrow from the Treasury, such as securities issued by the Federal
Financing Bank or the U.S. Postal Service; or are supported by the credit of the
government agency or instrumentality itself, such as securities of Federal Home
Loan Banks, Federal Farm Credit Banks, or the Federal National Mortgage
Association.
3. Securities issued by corporations or other business organizations. The Fund
will generally invest in securities that, at the time of purchase, are
classified as investment grade by Moody's or by Standard & Poor's. Securities
that are subsequently downgraded to non-investment grade may continue to be held
by the Fund, and will be sold, only if the manager believes it would be
advantageous to do so.
The Fund's investments in fixed income securities issued by corporations or
other business organizations will be rated at the time of purchase Baa or higher
by Moody's Investors Service, Inc. or BBB or higher by Standard & Poor's
Corporation. Securities rated Baa or higher by Moody's or BBB by Standard &
Poor's or higher are classified as investment grade securities. Although
securities rated Baa by Moody's and BBB by Standard & Poor's have speculative
characteristics, they are considered to be investment grade. Such securities
carry a lower degree of risk than lower rated securities.
Securities that are subsequently downgraded in quality below Baa by Moody's or
BBB by Standard & Poor's may continue to be held by the Fund, and will be sold
only if the Fund's adviser believes it would be advantageous to do so. In
addition, the credit quality of unrated securities purchased by the Fund must
be, in the opinion of the Fund's adviser, at least equivalent to a Baa rating by
Moody's or a BBB rating by Standard Poor's.
Investments in foreign securities involve risks in addition to those risks
associated with investments in the United States. Since stocks of foreign
companies are normally denominated in foreign currencies, the Fund may be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations, and may incur costs in connection with conversions between
various currencies.
As non-U.S. companies are not generally subject to uniform accounting, auditing
and financial reporting standards and practices comparable to those applicable
to U.S. companies, comparable information may not be readily available about
certain foreign companies. Securities of some non-U.S. companies may be less
liquid and more volatile than securities of comparable U.S. companies. In
addition, in certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.
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
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demand or within a specified time, thereby determining the yield during the
purchaser's period of ownership. The result is a fixed rate of return insulated
from market fluctuations during such period. Under the Investment Company Act of
1940, repurchase agreements are considered loans by the Fund. The Fund will
enter into such repurchase agreements only with United States banks having
assets in excess of $1 billion which are members of the Federal Deposit
Insurance Corporation, and with certain securities dealers who meet the
qualifications set from time to time by the Board of Directors of the Fund. The
term to maturity of a repurchase agreement normally will be no longer than a few
days. Repurchase agreements, maturing in more than seven days and other illiquid
securities will not exceed 10% of the total assets of the Fund.
RISK FACTORS APPLICABLE TO 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, the Fund
may incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, disposition of the underlying securities may be
delayed pending court proceedings. Finally, it is possible that the Fund may not
be able to perfect its interest in the underlying securities. While the Fund's
management acknowledges these risks, it is expected that they can be controlled
through stringent security selection criteria and careful monitoring procedures.
INVESTMENT RESTRICTIONS
In addition to the policies set forth under the caption "Investment Objective
and Portfolio Management Policy," the Fund is subject to certain other
restrictions which may not be changed without approval of the "holders of a
majority of the outstanding shares" of the Fund. Among these restrictions, the
more important ones are that the Fund will not purchase the securities of any
issuer if more than 5% of the Fund's total assets would be invested in the
securities of such issuer, or the Fund would hold more than 10% of any class of
securities of such issuer; borrow money in excess of 10% of total assets taken
at market value, and then only from banks as a temporary measure for
extraordinary or emergency purposes; will not borrow to increase income
(leveraging) but only to facilitate redemption requests which might otherwise
require untimely dispositions of portfolio securities; will repay all borrowings
before making additional investments (interest paid on such borrowings will
reduce net income). The full text of these restrictions are set forth in the
"Statement of Additional Information."
There is no limitation with respect to investments in U.S. Treasury Bills, or
other obligations issued or guaranteed by the federal government, its agencies
and instrumentalities.
PERFORMANCE MEASURES
From time to time, the Fund may advertise its performance in various ways, as
summarized below. Further discussion of these matters also appears in the
"Statement of Additional Information." A discussion of Fund performance will be
included in the Fund's Annual Report to Shareholders will be available from the
Fund upon request at no charge.
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Total Return
The Fund 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 the
Fund's shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the period were reinvested in shares of
the Fund. Figures will be given for recent one-, five- and ten-year periods (if
applicable), and may be given for other periods as well (such as from
commencement of the Fund's operations, or on a year-by-year basis). When
considering "average" total return figures for periods longer than one year, it
is important to note that a Fund's annual total return for any one year in the
period might have been greater or less than the average for the entire period.
Performance Comparisons
In advertisements or in reports to shareholders, the 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, or the Consumer Price Index.
Performance information, rankings, ratings, published editorial comments and
listings as reported in national financial publications such as Kiplinger's
Personal Finance Magazine, Business Week, Morningstar Mutual Funds, Investor's
Business Daily, Institutional Investor, The Wall Street Journal, Mutual Fund
Forecaster, No-Load Investor, Money, Forbes, Fortune and Barron's may also be
used in comparing performance of the Fund. Performance comparisons should not be
considered as representative of the future performance of any Fund. Further
information regarding the performance of the Fund is contained in the "Statement
of Additional Information."
Performance rankings, recommendations, published editorial comments and listings
reported in Money, Barron's, Kiplinger's Personal Finance magazine, Financial
World, Forbes, U.S. News & World Report, Business Week, The Wall Street Journal,
Investors Business Daily, USA Today, Fortune and Stanger's may also be cited (if
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.
HOW TO PURCHASE SHARES
Shares are purchased from the Fund at net asset value (no sales charge) next
computed after a purchase order has become effective through its agent, Jones &
Babson, Inc., P.O. Box 410498
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Kansas City, MO 64141-0498. For information call toll free 1-800-996-2862.
Purchase orders for the Fund become effective upon receipt by the Fund.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this prospectus or to reject purchase orders when, in
the judgment of management, such withdrawal or rejection is in the best interest
of the Fund and its shareholders. The Fund also reserves the right at any time
to waive or increase the minimum requirements applicable to initial or
subsequent investments with respect to any person or class of persons, which
include shareholders of the Fund's special investment programs. The Fund
reserves the right to refuse to accept orders for shares unless accompanied by
payment, except when a responsible person has indemnified the Fund against
losses resulting from the failure of investors to make payment. In the event
that the Fund sustains a loss as the result of failure by a purchaser to make
payment, the Fund's underwriter, Jones & Babson, Inc. will cover the loss.
INITIAL INVESTMENTS
Initial investments - By mail. You may open an account and make an investment by
completing and signing the application which accompanies this prospectus. Make
your check ($1,000 minimum) payable to UMB Bank, n.a. Mail your application and
check to:
The Scout Fund Group
P.O. Box 410498
Kansas City, Missouri 64141-0498
Initial investments - By wire. You may purchase shares of the Fund by wiring
funds ($1,000 minimum) through the Federal Reserve Bank to the custodian, UMB
Bank, n.a. Prior to sending your money, you must call the Fund toll free
1-800-996-2862, and provide it with the identity of the registered account
owner, the registered address, the Social Security or Taxpayer Identification
Number of the registered owner, the amount being wired, the name and telephone
number of the wiring bank and the person to be contacted in connection with the
order. You will then be provided a Fund account number, after which you should
instruct your bank to wire the specified amount, along with the account number
and the account registration to:
UMB Bank, n.a.
Kansas City, Missouri, ABA #_________
For Scout Capital Preservation Fund, Inc./
AC=
For Account No. (insert assigned Fund account
number and name in which account
is registered.)
A completed application must be sent to the Fund as soon as possible so the
necessary remaining information can be recorded in your account. Payment of
redemption proceeds will be delayed until the completed application is received
by the Fund.
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INVESTMENTS SUBSEQUENT TO INITIAL INVESTMENT
You may add to your Fund account at any time in amounts of $100 or more if
purchases are made by mail or telephone purchase (ACH), or $500 or more if
purchases are made by wire. Automatic monthly investments must be in amounts of
$50 or more.
Checks should be mailed to the Fund at its address, but made payable to UMB
Bank, n.a. Always identify your account number or include the detachable
reminder stub which accompanies each confirmation.
Wire share purchases should include your account registration, your account
number and the Scout Fund in which you are purchasing shares. It also is
advisable to notify the Fund by telephone that you have sent a wire purchase
order to the bank.
TELEPHONE INVESTMENT SERVICE
To use the Telephone Investment Service, you must first establish your Fund
account and authorize telephone orders in the application form, or,
subsequently, on a special authorization form provided upon request. If you
elect the Telephone Investment Service and your request is received prior to
3:00 P.M. (Central Time), you may purchase Fund shares ($100 minimum) by
telephone and authorize the Fund to draft your checking account for the cost of
the shares so purchased. You will receive the next available price after the
Fund has received your telephone call. Availability and continuance of this
privilege is subject to acceptance and approval by the Fund and all
participating banks. During periods of increased market activity, you may have
difficulty reaching the Fund by telephone, in which case you should contact the
Fund by mail or telegraph. The Fund will not be responsible for the consequences
of delays including delays in the banking or Federal Reserve wire systems.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are not followed,
the Fund may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to, requiring
personal identification prior to acting upon instructions received by telephone,
providing written confirmations of such transactions, and/or tape recording of
telephone instructions.
The Fund reserves the right to initiate a charge for this service and to
terminate or modify any or all of the privileges in connection with this service
at any time upon 15 days written notice to shareholders, and to terminate or
modify the privileges without prior notice in any circumstances where such
termination or modification is in the best interest of the Fund and its
investors.
AUTOMATIC MONTHLY INVESTMENT PLAN
You may elect to make monthly investments in a constant dollar-amount from your
checking account ($50 minimum). The Fund will draft your checking account on the
same day each month in the amount you authorize in your application, or,
subsequently, on a special authorization form provided upon request.
Availability and continuance of this privilege is subject to acceptance and
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approval by the Fund and all participating banks. If the date selected falls on
a day upon which the Fund shares are not priced, investment will be made on the
first date thereafter upon which Fund shares are priced. The Fund will not be
responsible for the consequences of delays including delays in the banking or
Federal Reserve wire systems.
The Fund reserves the right to initiate a charge for this service and to
terminate or modify any or all of the privileges in connection with this service
at any time upon 15 days written notice to shareholders, and to terminate or
modify the privileges without prior notice in any circumstances where such
termination or modification is in the best interest of the Fund and its
investors.
HOW TO REDEEM SHARES
Shareholders registered in the stock records of the Fund may withdraw all or
part of their investment by redeeming shares for which the Fund has received
unconditional payment in the form of federal funds or such payment has been
converted to federal funds and accepted by the Fund.
In each instance you must comply with the general requirements relating to all
redemptions as well as with specific requirements set out for the particular
redemption method you select. If you wish to expedite redemptions by using the
telephone/telegraph privilege, you should carefully note the special
requirements and limitations relating to these methods.
All redemption requests must be transmitted to the Fund, P.O. Box 410498, Kansas
City, Missouri 64141-0498. Shareholders who have authorized telephone redemption
may call toll free 1-800-996-2862. The Fund will redeem shares at the price (net
asset value per share) next effective after receipt of a redemption request in
"good order." (See "How Share Price is Determined.")
The Fund will endeavor to transmit redemption proceeds to the proper party, as
instructed, as soon as practicable after a redemption request has been received
in "good order" and accepted, but in no event later than the third business day
thereafter. Transmissions are made by mail unless an expedited method has been
authorized and specified in the redemption request. The Fund will not be
responsible for the consequences of delays including delays in the banking or
Federal Reserve wire systems.
Redemptions will not become effective until all documents in the form required
have been received. In the case of redemption requests made within 15 days of
the date of purchase, the Fund will delay transmission of proceeds until such
time as it is certain that unconditional payment in federal funds has been
collected for the purchase of shares being redeemed or 15 days from the date of
purchase. You can avoid the possibility of delay by paying for all of your
purchases with a transfer of federal funds.
Where additional documentation is normally required to support redemptions as in
the case of corporations, fiduciaries, and others who hold shares in a
representative or nominee capacity such as certified copies of corporate
resolutions, or certificates of incumbency, or such other documentation as may
be required under the Uniform Commercial Code or other applicable laws
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or regulations, it is the responsibility of the shareholder to maintain such
documentation on file and in a current status. A failure to do so will delay the
redemption. If you have questions concerning redemption requirements, please
write or telephone the Fund well ahead of an anticipated redemption in order to
avoid any possible delay.
Requests which are subject to special conditions or which specify an effective
date other than as provided herein cannot be accepted.
The right of redemption may be suspended or the date of payment postponed beyond
the normal three-day period when the New York Stock Exchange is closed or under
emergency circumstances as determined by the Securities and Exchange Commission.
Additional details are set forth in the "Statement of Additional Information."
Due to the high cost of maintaining smaller accounts, the Directors have
authorized the Fund to close shareholder accounts where their value falls below
the current minimum initial investment requirement at the time of initial
purchase as a result of redemptions and not as the result of market action, and
remains below this level for 60 days after each such shareholder account is
mailed a notice of: (1) the Fund's intention to close the account, (2) the
minimum account size requirement, and (3) the date on which the account will be
closed if the minimum size requirement is not met. Since the minimum investment
amount and the minimum account size are the same, any redemption from an account
containing only the minimum investment amount may result in redemption of that
account.
Withdrawal By Mail --Shares may be redeemed by mailing your request to the Fund.
To be in "good order" the request must include the following:
(1) A written redemption request or stock assignment (stock power)
containing the genuine signature of each registered owner exactly as
the shares are registered, with clear identification of the account by
registered name(s), account number and the number of shares or the
dollar amount to be redeemed;
(2) any outstanding stock certificates representing shares to be redeemed;
(3) signature guarantees as required (see Signature Guarantees); and
(4) any additional documentation which the Fund may deem necessary to
insure a genuine redemption such as an application if one is not on
file, or in the case of corporations, fiduciaries, and others who hold
shares in a representative or nominee capacity (See below).
Where additional documentation is normally required to support redemptions as in
the case of corporations, fiduciaries, and others who hold shares in a
representative or nominee capacity, such as certified copies of corporate
resolutions, or certificates of incumbency, or such other documentation as may
be required under the Uniform Commercial Code or other applicable laws or
regulations, it is the responsibility of the shareholder to maintain such
documentation on file and in a current status. A failure to do so will delay the
redemption. If you have questions
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concerning redemption requirements, please write or telephone the Fund well
ahead of an anticipated redemption in order to avoid any possible delay.
Signature Guarantees are required in connection with all redemptions of $50,000
or more by mail, or changes in share registration, except as hereinafter
provided. These requirements may be waived by the Fund in certain instances
where it appears reasonable to do so and will not unduly affect the interests of
other shareholders. Signature(s) must be guaranteed by an "eligible Guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include: (1) national or state banks,
savings associations, savings and loan associations, trust companies, savings
banks, industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; or (3)
securities broker/dealers which are members of a national securities exchange or
clearing agency or which have a minimum net capital of $100,000. A notarized
signature will not be sufficient for the request to be in proper form.
Signature guarantees will be waived for mail redemptions of $50,000 or less, but
they will be required if the checks are to be payable to someone other than the
registered owner(s), or are to be mailed to an address different from the
registered address of the shareholder(s), or where there appears to be a pattern
of redemptions designed to circumvent the signature guarantee requirement, or
where the Fund has other reason to believe that this requirement would be in the
best interests of the Fund and its shareholders.
Withdrawal By Telephone or Telegraph--You may withdraw any amount ($500 minimum
if wired) or more by telephone toll free 1-800-996-2862, or by telegram to the
Fund's address. Telephone/telegraph redemption authorizations signed by all
registered owners with signatures guaranteed must be on file with the Fund
before you may redeem by telephone or telegraph. Funds will be sent only to the
address of record. The signature guarantee requirement may be waived by the Fund
if the request for this redemption method is made at the same time the initial
application to purchase shares is submitted.
All communications must include the Fund's name, your account number, the exact
registration of your shares, the number of shares or dollar amount to be
redeemed, and the identity of the bank and bank account (name and number) to
which the proceeds are to be wired. This procedure may only be used for
non-certificated shares held in open account. For the protection of
shareholders, your redemption instructions can only be changed by filing with
the Fund new instructions on a form obtainable from the Fund which must be
properly signed with signature(s) guaranteed.
Telephone or telegraph redemption proceeds may be transmitted to your
pre-identified bank account either by wire or mail to a domestic commercial bank
which is a member of the Federal Reserve System, or by credit to such account
with UMB Bank, n.a. as designated by you on your pre-authorization form. If you
elect to have proceeds wired to a bank other than UMB Bank, n.a., and your
request is received prior to 3:00 P.M. (Central Time), proceeds normally will be
wired the following business day. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control. If your request
is received on any day after the cut-off time, proceeds normally will be wired
on the second business day following the day of receipt
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of your request. Normally your bank account with UMB Bank, n.a. will be credited
on the following business day for all requests. The Fund reserves the right to
change its policy or to refuse a telephone or telegraph redemption request or
require additional documentation to assure a genuine redemption, and, at their
option, may pay such redemption by wire or check and may limit the frequency or
the amount of such request. The Fund reserves the right to terminate or modify
any or all of the services in connection with this privilege at any time without
prior notice. Neither the Fund nor Jones & Babson, Inc. assumes responsibility
for the authenticity of withdrawal instructions, and there are provisions on the
authorization form limiting its liability in this respect.
SYSTEMATIC REDEMPTION PLAN
If you own shares in an open account valued at $10,000 or more, and desire to
make regular monthly or quarterly withdrawals without the necessity and
inconvenience of executing a separate redemption request to initiate each
withdrawal, you may enter into a Systematic Withdrawal Plan by completing forms
obtainable from the Fund. For this service, the manager may charge you a fee not
to exceed $1.50 for each withdrawal. Currently, the manager assumes the
additional expenses arising out of this type of plan, but it reserves the right
to initiate such a charge at any time in the future when it deems it necessary.
If such a charge is imposed, participants will be provided 30 days notice.
Subject to a $50 minimum, you may withdraw each period a specified dollar
amount. Shares also may be redeemed at a rate calculated to exhaust the account
at the end of a specified period of time.
Dividends and capital gains distributions must be reinvested in additional
shares. Under all withdrawal programs, liquidation of shares in excess of
dividends and distributions reinvested will diminish and may exhaust your
account, particularly during a period of declining share values.
You may revoke or change your plan or redeem all of your remaining shares at any
time. Withdrawal payments will be continued until the shares are exhausted or
until the Fund or you terminate the plan by written notice to the other.
HOW TO EXCHANGE SHARES WITH OTHER SCOUT FUNDS
Shareholders may exchange their Fund shares, which have been held in open
account for 15 days or more, and for which good payment has been received, for
identically registered shares of any other Fund in the Scout Fund Group, which
is legally registered for sale in the state of residence of the investor
provided that the minimum amount exchanged from a Fund or Portfolio has a value
of $1,000 or more and meets the minimum investment requirement of the Fund or
Portfolio into which it is exchanged. An exchange between two Scout Funds is
treated as a sale of the shares from which the exchange occurs and a purchase of
shares of the fund into which the exchange occurs. Exchanging shareholders will
receive the next quoted prices for their shares after the request is received in
"good order" (See "How Share Price is Determined.")
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To authorize the Telephone/Telegraph Exchange Privilege, all registered owners
must authorize this privilege on the original application, or the Fund must
receive a special authorization form, provided upon request. During periods of
increased market activity, you may have difficulty reaching the Fund by
telephone, in which case you should contact the Fund by mail or telegraph. The
Fund reserves the right to initiate a charge for this service and to terminate
or modify any or all of the privileges in connection with this service at any
time and without prior notice under any unforeseen circumstances where
continuance of these privileges would be detrimental to the Fund or its
shareholders, such as an emergency, or where the volume of such activity
threatens the ability of the Fund to conduct business, or under any other
circumstances, upon 60 days' written notice to shareholders. The Fund will not
be responsible for the consequences of delays including delays in the banking or
Federal Reserve wire systems.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if such procedures are not followed,
the Fund may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to requiring
personal identification prior to acting upon instructions received by telephone,
providing written confirmations of such transactions, and/or tape recording of
telephone instructions.
Exchanges by mail may be accomplished by a written request properly signed by
all registered owners identifying the account by name and number, the number of
shares or dollar amount to be redeemed for exchange, and the Scout Fund into
which the account is being transferred.
If you wish to exchange part or all of your shares in the Fund for shares of
another Fund or Portfolio in the Scout Fund Group, you should review the
prospectus carefully. Any such exchange will be based on the respective net
asset values of the shares involved. An exchange between Funds involves the sale
of an asset. Unless the shareholder account is tax-deferred, this is a taxable
event.
HOW SHARE PRICE IS DETERMINED
The net asset value per share of the Fund is computed once daily, Monday through
Friday, at the specific time during the day that the Board of Directors of the
Fund sets at least annually, except on days on which changes in the value of
portfolio securities will not materially affect the net asset value, or days
during which no security is tendered for redemption and no order to purchase or
sell such security is received by the Fund, or customary holidays. For a list of
the holidays during which the Fund is not open for business, see "How Share
Price is Determined" in the "Statement of Additional Information."
The per share calculation is made by subtracting from total assets any
liabilities and then dividing into this net amount the total outstanding shares
as of the date of the calculation.
The price at which new shares of the Fund will be sold and at which issued
shares presented for redemption will be liquidated is computed once daily at
3:00 P.M. (Central Time), except on those days when the Fund is not open for
business.
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Money market securities which on the date of valuation have 60 days or less to
maturity, are valued on the basis of the amortized cost valuation technique
which involves valuing a security at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument.
Each security listed on an exchange is valued at its last sale price on that
Exchange on the date as of which assets are valued. Where the security is listed
on more than one Exchange, the Fund will use the price of that Exchange which is
generally considered to be the principal Exchange on which the stock is traded.
Lacking sales, the security is valued at the mean between the current closing
bid and asked prices. An unlisted security for which over-the-counter market
quotations are readily available is valued at the mean between the last current
bid and asked prices. When market quotations are not readily available, any
security or other asset is valued at its fair value as determined in good faith
by the Board of Directors.
Debt securities (other than short-term obligations), including listed issues,
are valued on the basis of valuations furnished by a pricing service which
utilizes both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data, without exclusive
reliance upon exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities. Use of
the pricing service has been approved by the Fund's Board of Directors.
OFFICERS AND DIRECTORS
The officers of the Fund manage its day-to-day operations. The Fund's manager
and its officers are subject to the supervision and control of the Board of
Directors. A list of the officers and directors of the Fund and a brief
statement of their present positions and principal occupations during the past
five years is set forth in the "Statement of Additional Information."
MANAGER AND UNDERWRITER
Jones & Babson, Inc. was founded in 1960. It organized the Fund in 1997 and acts
as its principal underwriter at no cost to the Fund. UMB Bank, n.a. is the
Fund's manager and investment adviser and provides or pays the cost of 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 public accountants and legal counsel; remuneration
of officers, directors and other personnel; rent; shareholder services,
including the maintenance of the shareholder accounting system and transfer
agency; and such other items as are incidental to corporate administration.
Not considered normal operating expenses, and therefore payable by the Fund, are
taxes, fees and other charges of governments and their agencies, including the
cost of qualifying the Fund's shares for sale in any jurisdiction, interest,
brokerage costs, and all costs and expenses including legal and accounting fees
incurred in anticipation of or arising out of litigation or administrative
proceedings to which the Fund, its officers or directors may be subject or a
party thereto.
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<PAGE>
Jones & Babson, Inc. acts as principal underwriter for the Fund at no cost to
the Fund. UMB Bank, n.a. employs at its own expense Jones & Babson, Inc. to
provide services to the Fund, including the maintenance of the shareholder
accounting system and transfer agency; and such other items as are incidental to
corporate administration. The cost of the services of Jones & Babson, Inc. is
included in the fee of UMB Bank, n.a.
As compensation for all the foregoing services, the Fund pays UMB Bank, n.a. a
fee at the annual rate of 85/100 of one percent (.85%) of average daily net
assets from which UMB Bank pays Jones & Babson, Inc. an administrative fee of
35/100 of it (.35%). The fees are computed daily and paid semimonthly.
The annual fee charged by UMB Bank, n.a. is higher than the fees of most other
investment advisers whose charges cover only investment advisory services with
all remaining operational expenses absorbed directly by the Fund, however, it is
anticipated that they will compare favorably with these other advisers when all
expenses to Fund shareholders are taken into account.
The Bank 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 Fund to maintain an extensive duplicate staff, with the consequent increase
in the cost of investment advisory service.
The Management Agreement limits the liability of the manager, as well as its
officers, directors and personnel, to acts or omissions involving willful
malfeasance, bad faith, gross negligence, or reckless disregard of their duties.
________________ is the portfolio manager of Scout Capital Preservation Fund. He
has over ____ years of experience as a portfolio manager with UMB Bank.
Certain officers and directors of the Fund are also officers or directors or
both of other Scout Funds or Jones & Babson, Inc.
Jones & Babson, Inc. is a wholly-owned subsidiary of Business Men's Assurance
Company of America, which is considered to be a controlling person under the
Investment Company Act of 1940. Assicurazioni Generali S.p.A., an insurance
organization founded in 1831 based in Trieste, Italy, is considered to be a
controlling person and is the ultimate parent of Business Men's Assurance
Company of America. Mediobanca is a 5% owner of Generali.
The current Management Agreement between the Fund and UMB Bank, n.a. will
continue in effect until October 31, 1999, and will continue automatically for
successive annual periods ending each October 31 so long as such continuance is
specifically approved at least annually by the Board of Directors of the Fund or
by the vote of a majority of the outstanding voting securities of the Fund, and,
provided also that such continuance is approved by the vote of a majority of the
directors who are not parties to the Agreement or interested persons of any such
party at a meeting held in person and called specifically for the purpose of
evaluating and voting
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<PAGE>
on such approval. Both Agreements provide that either party may terminate by
giving the other 60 days written notice. The Agreements terminate automatically
if assigned by either party.
GENERAL INFORMATION AND HISTORY
The Fund, incorporated in Maryland on October __, 1997, has a present authorized
capitalization of 10,000,000, shares of $1 par value common stock. All shares
are of the same class with like rights and privileges. Each full and fractional
share, when issued and outstanding, has: (1) equal voting rights with respect to
matters which affect the Fund; and (2) equal dividend, distribution and
redemption rights to the assets of the Fund. Shares when issued are fully paid
and non-assessable. The Fund may create other series of stock but will not issue
any senior securities. Shareholders do not have preemptive or conversion rights.
Non-cumulative voting - These shares have non-cumulative voting rights, which
means that the holders of more than 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 Maryland General Corporation Law permits registered investment companies,
such as the Fund, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the Investment
Company Act of 1940. There are procedures whereby the shareholders may remove
directors. These procedures are described in the "Statement of Additional
Information" under the caption "Officers and Directors." The Fund has adopted
the appropriate provisions in its By-Laws so that it may choose not to hold
annual meetings of shareholders for the following purposes unless required to do
so: (1) election of directors; (2) approval of any investment advisory
agreement; (3) ratification of the selection of independent public accountants;
and (4) approval of a distribution plan. As a result, the Fund does not intend
to hold annual meetings.
Federal Banking Laws -- The Glass-Steagall Act is a federal law that prohibits
national banks from sponsoring, distributing or controlling a registered
open-end investment company. It is possible that certain activities of UMB Bank,
n.a. relating to the Fund may be claimed to be comparable to the matters covered
by such provisions. It is not expected that any conclusions regarding such
activities of UMB Bank, n.a. would have any material effect on the assets of the
Fund or its shareholders, because the Fund's distribution is under the control
of Jones & Babson, Inc., the Fund's distributor, which is not subject to the
Glass-Steagall Act. Although it is not anticipated that decisions under the
Glass-Steagall Act adverse to UMB Bank, n.a. would have any material effect on
the conduct of the Fund's operations, if any unanticipated changes affecting the
Fund's operations were deemed appropriate the Board of Directors would promptly
consider suitable adjustments.
The Fund may use the name "Scout" in its name so long as UMB Bank, n.a. is
continued as the manager. Complete details with respect to the use of the name
are set out in the Management Agreement between the Fund and UMB Bank, n.a.
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<PAGE>
This prospectus omits certain of the information contained in the registration
statement filed with the Securities and Exchange commission, Washington, D.C.
These items may be inspected at the offices of the Commission or obtained from
the Commission upon payment of the fee prescribed.
DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION
The Fund pays dividends from net investment income semiannually, usually in June
and December. Distribution from capital gains realized on the sale of
securities, if any, will be declared annually on or before December 31. Dividend
and capital gains distributions will be reinvested automatically in additional
shares at the net asset value per share computed and effective at the close of
business on the day after the record date, unless the shareholder has elected on
the original application, or by written instructions filed with the Fund, to
have them paid in cash.
On August 5, 1997, President Clinton signed into law the Taxpayer Relief Act of
1997 (the "1997 Act"). This new law makes sweeping changes to the Internal
Revenue Code. Because many of these changes are complex, and only indirectly
affect the Fund and its distributions to you, they are discussed in the
Statement of Additional Information. Changes in the treatment of capital gains,
however, are discussed in this section.
The Fund intends to qualify for taxation as a "regulated investment company"
under the Internal Revenue Code so that the Fund will not be subject to federal
income tax to the extent that it distributes its income to its shareholders. As
such, the Fund will not be subject to federal income tax, or to any excise tax,
to the extent its earnings are distributed as provided in the Internal Revenue
Code and by satisfying certain other requirements relating to the sources of its
income and diversification of its assets. Dividends, either in cash or in
reinvested shares, paid by the Fund from net investment income will be taxable
to shareholders as ordinary income, and will generally qualify in part for the
70% dividends-received deduction for corporations. The portion of the dividends
so qualified depends on the aggregate taxable qualifying dividend income
received by the Fund from domestic (U.S.) sources. The Fund will send to
shareholders a statement each year advising the amount of the dividend income
which qualifies for such treatment.
Dividends from net investment income on net short-term gains will be taxable to
those investors who are subject to income taxes as ordinary income, whether
received in cash or in additional shares. Whether paid in cash or additional
shares of the Fund, and regardless of the length of time Fund shares have been
owned by the shareholder, distributions from long-term capital gains are taxable
to shareholders as such, but are not eligible for the dividends-received
deduction for corporations. The Fund does not try to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in a Fund are made shortly before a
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
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<PAGE>
The 1997 Act creates a category of long-term capital gain for individual
taxpayers that will be taxed at new lower tax rates. For investors who are in
the 28% or higher federal income tax brackets, these gains will be taxed at a
maximum of 10%. For investors who are in the 15% federal income tax bracket,
these gains will be taxed at a maximum of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when the Fund's securities
were sold and how long they were held by the Fund before they were sold.
Investors who want more information on holding periods and other qualifying
rules relating to these new rates should review the expanded discussion in the
Statement of Additional Information, or should contact their personal tax
advisors. Shareholders are notified annually by the Fund as to federal tax
status of dividends and distributions paid by the Fund. Such dividends and
distributions may also be subject to state and local taxes.
Exchange and redemption of Fund shares are taxable events for federal income tax
purposes. Shareholders may also be subject to state and municipal taxes on such
exchanges and redemptions. Any loss incurred on a sale or exchange of Fund
shares held for six months or less will be treated as a long-term capital loss
to the extent of capital gain dividends received with respect to such shares.
You should consult your tax adviser with respect to the tax status of
distributions from the Fund in your state and locality.
The Fund intends to declare and pay dividends and capital gains distributions so
as to avoid imposition of the federal excise tax. To do so, the Fund expects to
distribute during each calendar year an amount equal to: (1) 98% of its calendar
year ordinary income; (2) 98% of its capital gains net income (the excess of
short- and long-term capital gain over short- and long-term capital loss) for
the one-year period ending each October 31; and (3) 100% of any undistributed
ordinary or capital gain net income from the prior calendar year. Dividends
declared in October, November or December and made payable to shareholders of
record in such a month are deemed to have been paid by the Fund and received by
shareholders on December 31 of such year, so long as the dividends are actually
paid before February 1 of the following year.
To comply with IRS regulations, the Fund is required by federal law to withhold
31% of reportable payments (which may include dividends, capital gains
distributions, and redemptions) paid to shareholders who have not complied with
IRS regulations. In order to avoid this withholding requirement, shareholders
must certify on their Application, or on a separate form supplied by the Fund,
that their Social Security or Taxpayer Identification Number provided is correct
and that they are not currently subject to backup withholding, or that they are
exempt from backup withholding.
The federal income tax status of all distributions will be reported to
shareholders each January as a part of the annual statement of shareholder
transactions. Shareholders not subject to tax on their income will not be
required to pay tax on amounts distributed to them.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL INFORMATION
ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE FUND.
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<PAGE>
SHAREHOLDER SERVICES
The Fund and its manager offer shareholders a broad variety of services
described throughout this prospectus. In addition, the following services are
available:
Prototype Retirement Plans - The UMB Bank, n.a. has drafted several
IRS-approved-as-to-form prototype retirement plans to assist individuals, sole
proprietors, partnerships and corporations in meeting their tax qualified
retirement plan needs.
Individual Retirement Account (IRA) - The Bank also makes available IRA accounts
for individuals.
For further information about these services, please contact UMB Bank, n.a.
SHAREHOLDER INQUIRIES
Telephone inquiries may be made toll free to the Fund, 1-800-996-2862.
Shareholders may address written inquiries to the Fund at:
Scout Capital Preservation Fund, Inc.
P.O. Box 410498
Kansas City, MO 64141-0498
For express delivery services:
Scout Capital Preservation Fund, Inc.
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
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<PAGE>
MANAGER AND INVESTMENT COUNSEL
UMB Bank, n.a., Kansas City, Missouri
INDEPENDENT AUDITORS
Arthur Andersen LLP
Kansas City, Missouri
LEGAL COUNSEL
STRADLEY, RONON, STEVENS &
YOUNG, LLP
Philadelphia, Pennsylvania
JOHN G. DYER
Kansas City, Missouri
CUSTODIAN
UMB BANK, n.a.
Kansas City, Missouri
TRANSFER AGENT
JONES & BABSON, INC.
Kansas City, Missouri
Scout Capital Preservation
Fund
Prospectus
January __, 1998
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<PAGE>
PART B
SCOUT CAPITAL PRESERVATION FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
January __, 1998
This Statement is not a prospectus but should be read in conjunction
with the Fund's current Prospectus dated January __, 1998. To obtain the
Prospectus please call the Fund toll-free 1-800-996-2862.
TABLE OF CONTENTS
Page
Investment Objective and Policies
Portfolio Transactions
Investment Restrictions
Performance Measures
How the Fund's Shares are Distributed
How Share Purchases are Handled
Redemption of Shares
Signature Guarantees
Dividends and Distributions
Manager and Underwriter
How Share Price is Determined
Officers and Directors
Custodian
Independent Certified Public Accountants
Fixed Income Securities Described and Ratings
Financial Statements
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment objective and policies
set forth in the Prospectus.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by UMB Bank, n.a.
Officers of the Fund and Jones & Babson, Inc. are generally responsible for
implementing or supervising these decisions, including allocation of portfolio
brokerage and principal business as well as the negotiation of commissions
and/or the price of the securities.
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<PAGE>
The Fund, 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 Fund does not intend to solicit competitive bids on each transaction.
The Fund believes it is in its best interest and that of its shareholders to
have a stable and continuous relationship with a diverse group of financially
strong and technically qualified broker-dealers who will provide quality
executions at competitive rates. Broker-dealers meeting these qualifications
also will be selected for their demonstrated loyalty to the Fund, when acting on
its behalf, as well as for any research or other services provided to the Fund.
The Fund normally will not pay a higher commission rate to broker-dealers
providing benefits or services to it than it would pay to broker-dealers who do
not provide such benefits or services. However, the Fund reserves the right to
do so within the principles set out in Section 28(e) of the Securities Exchange
Act of 1934 when it appears that this would be in the best interests of the
shareholders.
No commitment is made to any broker or dealer with regard to placing of orders
for the purchase or sale of Fund portfolio securities, and no specific formula
is used in placing such business. Allocation is reviewed regularly by both the
Board of Directors of the Fund and UMB Bank, n.a.
Since the Fund does not market its shares through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, it may place portfolio orders with qualified broker-dealers who
recommend the Fund to other clients, or who act as agent in the purchase of the
Fund's shares for their clients.
Research services furnished by broker-dealers may be useful to the Fund manager
in serving other clients, as well as the Fund. Conversely, the Fund may benefit
from research services obtained by the manager from the placement of portfolio
brokerage of other clients.
When it appears to be in the best interests of its shareholders, the Fund may
join with other clients of the manager in acquiring or disposing of a portfolio
holding. Securities acquired or proceeds obtained will be equitably distributed
between the Fund and other clients participating in the transaction. In some
instances, this investment procedure may affect the price paid or received by
the Fund or the size of the position obtained by the Fund.
The Fund does not intend to purchase securities solely for short-term trading;
nor will securities be sold for the sole purpose of realizing gains. However, a
security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what the Fund's manager
believes to be a disparity in the normal yield relationship between the two
securities. In addition, a security may be sold and another purchased when, in
the opinion of management, a favorable yield spread exists between specific
issues or different market sectors.
Short-term debt instruments with maturities of less than one year are excluded
from the calculation of portfolio turnover.
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<PAGE>
INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio management policies set
forth in the Prospectus under the caption "Investment Objective and Portfolio
Management Policy," the following restrictions also may not be changed without
approval of the "holders of a majority of the outstanding shares" of the Fund.
The Fund will not: (1) as to 75% of its total assets, 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 or commodities; (3) underwrite the securities of other issuers; (4)
make loans to other persons, except by the purchase of debt obligations which
are permitted under its policy (the purchase of a security subject of a
repurchase agreement or the purchase of a portion of publicly distributed debt
securities is not considered a loan); (5) purchase securities on margin, or sell
securities short; (6) 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) for temporary or emergency purposes, and not for the purpose of
leveraging its investments, and provided further that any borrowing in excess of
5% the total assets of the Fund shall have asset coverage of at least 3 to 1; or
(7) issue senior securities except for those investment procedures permissible
under the Fund's other restrictions.
The following are "non-fundamental" restrictions, which may be changed by the
Board of Directors of the Fund without shareholder approval:
The Fund will not: (1) invest in companies for the purpose of exercising control
of management; (2) purchase shares of other investment companies except as
permitted under the Investment Company Act of 1940, as amended from time to
time, or pursuant to a plan of merger or consolidation; (3) 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; (4)
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 except for transactions in the Fund's own shares or other
securities through brokerage practices which are considered normal and generally
accepted under the circumstances existing at the time; or (5) invest in
securities issued by UMB Financial Corporation or affiliate banks of UMB
Financial Corporation.
PERFORMANCE MEASURES
Total Return
"Average annual total return" figures described below are computed according to
a formula prescribed by the Securities and Exchange Commission. The formula can
be expressed as follows:
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<PAGE>
P(1+T)n = ERV
Where: P = a hypothetical initial payment
of $1,000
T = average annual
total return
n = number of years
ERV = Ending Redeemable Value of
a hypothetical $1,000
payment made at the
beginning of the 1, 5, or 10
year (or other) periods at the
end of the 1, 5, or 10 year
(or other) periods (or
fractional portions thereof).
HOW THE FUND'S SHARES ARE DISTRIBUTED
Jones & Babson, Inc., as agent of the Fund, agrees to supply its best efforts as
sole distributor of the Fund's shares and, at its own expense, pay all sales and
distribution expenses in connection with their offering other than registration
fees and other government charges.
Jones & Babson, Inc. does not receive any fee or other compensation under the
distribution agreement with the Fund which continues in effect until October 31,
1998, and which will continue automatically for successive annual periods ending
each October 31, if continued at least annually by the Fund's Board of
Directors, including a majority of those Directors who are not parties to such
Agreements or interested persons of any such party. It terminates automatically
if assigned by either party or upon 60 days written notice by either party to
the other.
HOW SHARE PURCHASES ARE HANDLED
Each order accepted will be fully invested in whole and fractional shares,
unless the purchase of a certain number of whole shares is specified, at the net
asset value per share next effective after the order is accepted by 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
-4-
<PAGE>
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 Fund arising out of
such cancellation. To recover any such loss, the Fund reserves 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 Fund reserves the right in its 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 Fund and its shareholders. The Fund also reserves the right at any time to
waive or increase the minimum requirements applicable to initial or subsequent
investments with respect to any person or class of persons, which include
shareholders of the Fund's special investment programs.
REDEMPTION OF SHARES
The right of redemption may be suspended, or the date of payment postponed
beyond the normal three-day period by the Fund's Board of Directors under the
following conditions authorized by the Investment Company Act of 1940: (1) for
any period (a) during which the New York Stock Exchange is closed, other than
customary weekend and holiday closing, or (b) during which trading on the New
York Stock Exchange is restricted; (2) for any period during which an emergency
exists as a result of which (a) disposal by the Fund of securities owned by it
is not reasonably practicable, or (b) it is not reasonably practicable for the
Fund to determine the fair value of its net assets; or (c) for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of the Fund's shareholders.
The Fund may satisfy redemption requests by distributing securities in-kind. If
shares are redeemed in kind, the redeeming shareholder may incur brokerage costs
in converting the assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described under "How Share Price is Determined" in the Prospectus,
and such valuation will be made as of the same time the redemption price is
determined.
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<PAGE>
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 $50,000
or more by mail or changes in share registration, except as provided in the
Prospectus.
Signature guarantees must appear together with the signatures(s) of the
registered owner(s), on:
(1) a written request for redemption,
(2) a separate instrument of assignment, which should specify the total number
of shares to be redeemed (this "stock power" may be obtained from the Fund or
from most banks or stock brokers), or
(3) all stock certificates tendered for redemption.
DISTRIBUTIONS AND TAXES
Distributions of Net Investment Income--The Fund receives income generally in
the form of dividends, interest, original issue, market and acquisition
discount, and other income derived from its investments. This income, less
expenses incurred in the operation of the Fund, constitute its net investment
income from which dividends may be paid to you. Any distributions by the Fund
from such income will be taxable to you, whether you take them in cash or in
additional shares.
Distributions of Capital Gains--The Fund may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions derived from the excess of net short-term capital gains over net
long-term capital losses will be taxable to you as ordinary income.
Distributions paid from long-term capital gains realized by the Fund will be
taxable to you as long-term capital gain, regardless of how long you have held
your shares in the Fund. Any net short-term or long-term capital gains realized
by the Fund (net of any capital loss carryovers) will generally be distributed
once each year, and may be distributed more frequently, if necessary, in order
to reduce or eliminate federal excise or income taxes on the Fund.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), the Fund is required to
track its sales of portfolio securities and to report its capital gain
distributions to you according to the following categories of holding periods:
"28 percent rate gains": securities sold by the Fund after July 28, 1997 that
were held for more than one year but not more than 18 months, and under a
transitional rule securities sold by the Fund before May 7, 1997 that were held
for more than 12 months. These gains will be taxable to individual investors at
a maximum rate of 28%.
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<PAGE>
"1997 Act long-term capital gains" (or "20 percent rate gains") : securities
sold by the Fund after July 28, 1997 that were held for more than 18 months, and
under a transitional rule securities sold by the Fund between May 7, 1997 and
July 28, 1997 that were held for more than 12 months. These gains will be
taxable to individual investors at a maximum rate of 20% for investors in the
28% or higher federal income tax rate brackets, and at a maximum rate of 10% for
investors in the 15% federal income tax rate bracket.
"Qualified 5-year gains": For individuals in the 15% federal income tax rate
bracket, qualified 5-year gains are net gains on securities held for more than 5
years which are sold after December 31, 2000. For individuals who are subject to
tax at higher federal income tax rate brackets, qualified 5-year gains are net
gains on securities which are purchased after December 31, 2000 and are held for
more than 5 years. Taxpayers subject to tax at the higher federal income tax
rate brackets may also make an election for shares held on January 1, 2001 to
recognize gain on their shares in order to qualify such shares as qualified
5-year property. These gains will be taxable to individual investors at a
maximum rate of 18% for investors in the 28% or higher federal income tax
brackets, and at a maximum rate of 8% for investors in the 15% federal income
tax rate bracket.
The Fund will advise you in its annual information reporting at calendar year
end of the amount of its capital gain distributions which will qualify for these
maximum federal tax rates for each calendar year. Questions concerning each
investor's personal tax reporting should be addressed to the investor's personal
tax advisor.
Election to be Taxed as a Regulated Investment Company--The Fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code ("Code"), has qualified as such for its most recent fiscal year,
and intends to so qualify during the current fiscal year. The Directors reserve
the right not to maintain the qualification of the Fund as a regulated
investment company if they determine such course of action to be beneficial to
you. In such case, the 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 the Fund's available
earnings and profits.
In order to qualify as a regulated investment company for federal income tax
purposes, the Fund must meet certain specific requirements, including:
(i) The Fund must maintain a diversified portfolio of securities, wherein no
security (other than U.S. Government securities and securities of other
regulated investment companies) can exceed 25% of the Fund's total assets, and,
with respect to 50% of the Fund's total assets, no investment (other than cash
and cash items, U.S. Government securities and securities of other regulated
investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the sale or
disposition of stock or securities or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies;
-7-
<PAGE>
(iii) The Fund must distribute to its shareholders at least 90% of its net
investment income and net tax-exempt income for each of its fiscal years; and
(iv) The Fund must realize less than 30% of its gross income for each fiscal
year from gains from the sale of securities and certain other assets that have
been held by the Fund for less than three months ("short-short income"). The
Taxpayer Relief Act of 1997 repealed the 30% short- short income test for tax
years of regulated investment companies beginning after August 5, 1997; however,
this rule may have continuing effect in some states for purposes of classifying
the Fund as a regulated investment company.
Excise Tax Distribution Requirements--The Code requires the Fund to distribute
at least 98% of its taxable ordinary income earned during the calendar year and
98% of its capital gain net income earned during the twelve month period ending
October 31 (in addition to amounts from the prior year that were neither
distributed nor taxed to the Fund) to you by December 31 of each year in order
to avoid federal excise taxes. The Fund intends as a matter of policy to declare
and pay sufficient dividends in December or January (which are treated by you as
received in December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
Dividends-Received Deduction for Corporations--Because the Fund's income is
derived primarily from dividends, a portion of its distributions will generally
be eligible for the intercorporate dividends-received deduction. The
dividends-received deduction will be available only with respect to dividends
designated by the Fund as eligible for such treatment. Dividends so designated
by the Fund must be attributable to dividends earned by the Fund from U.S.
corporations which are not debt-financed. A holding period requirement applies
both at the Fund level and the corporate shareholder level. Under the 1997 Act,
the amount that the Fund may designate as eligible for the dividends-received
deduction will be reduced or eliminated if the shares on which the dividends
earned by the Fund are debt-financed or held by the Fund for less than a 46-day
period during a 90-day period beginning 45 days before the ex-dividend date and
ending 45 days after the ex-dividend date. Similarly, if your Fund shares are
debt-financed or held by you for less than a 46-day period during a 90-day
period beginning 45 days before the ex-dividend date and ending 45 days after
the ex-dividend date, then the dividend-received deduction for fund dividends on
your shares may also be reduced or eliminated. Even if designated as dividends
eligible for the dividend received deduction, all dividends (including any
deducted portion) must be included in your alternative minimum taxable income
calculation.
HOW SHARE PRICE IS DETERMINED
The net asset value per share of the Fund portfolio is computed once daily,
Monday through Friday, at the specific time during the day that the Board of
Directors of the Fund sets at least annually, except on days on which changes in
the value of a Fund's portfolio securities will not materially affect the net
asset value, or days during which no security is tendered for redemption and no
order to purchase or sell such security is received by the Fund, or the
following holidays:
New Year's Day January 1
Presidents' Holiday Third Monday in February
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Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
OFFICERS AND DIRECTORS
The Fund is managed by UMB Bank, n.a., subject to the supervision and control of
its Board of Directors. The following table lists the Officers and Directors of
the Funds and their ages. Unless noted otherwise, the address of each Officer
and Director is BMA Tower, 700 Karnes Boulevard, Kansas City, Missouri 64108.
Except as indicated, each has been an employee of Jones & Babson, Inc. for more
than five years.
Larry D. Armel (55), President and Director, Jones & Babson, Inc., Scout Stock
Fund, Inc., Scout Regional Fund, Inc., Scout Bond Fund, Inc., Scout Money Market
Fund, Inc., Scout Tax- Free Money Market Fund, Inc., Scout WorldWide Fund, Inc.,
Scout Balanced Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., Shadow Stock
Fund, Inc., David L. Babson Growth Fund, Inc., D. L. Babson Money Market Fund,
Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson Value Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson-Stewart Ivory
International Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo USA Global Fund, Inc.; Buffalo
Small Cap Fund; Director, AFBA Five Star Fund; Trustee and President of D. L.
Babson Bond Trust.
William E. Hoffman, D.D.S. (59), Director, Scout Stock Fund, Inc., Scout
Regional Fund, Inc., Scout Bond Fund, Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc.; Orthodontist, 3700 West
83rd Street, Suite 206, Prairie Village, Kansas 66208.
Eric T. Jager (54), Director, Scout Stock Fund, Inc., Scout Regional Fund, Inc.,
Scout Bond Fund, Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout WorldWide Fund, Inc.; Scout Balanced Fund, Inc., Scout
Kansas Tax-Exempt Bond Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo USA Global Fund, Inc.,
Buffalo Small Cap Fund; President and Director, Windcrest Investment Management,
Inc.; Director, Bartlett Futures, Inc., Nygaard Corporation, 4800 Main Street,
Suite 600, Kansas City, Missouri 64112; formerly Senior Vice President, Eppler,
Guerin & Turner, Dallas, Texas, a securities brokerage firm.
Stephen F. Rose (49), Director, Scout Stock Fund, Inc., Scout Regional Fund,
Inc., Scout Bond Fund, Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout WorldWide Fund, Inc., Scout Balanced Fund, Inc., Scout
Kansas Tax-Exempt Bond Fund, Inc.; President, Sun Publications, Inc., 7373 W.
107th Street, Overland Park, Kansas 66212.
Stuart Wien (74), Director, Scout Stock Fund, Inc., Scout Regional Fund, Inc.,
Scout Bond Fund, Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout
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WorldWide Fund, Inc., Scout Balanced Fund, Inc., Scout Kansas Tax-Exempt Bond
Fund, Inc.; Retired, 4589 West 124th Place, Leawood, Kansas 66206, formerly
Chairman of the Board, Milgram Food Stores, Inc.
* Directors who are interested persons as that term is defined in the Investment
Company Act of 1940, as amended.
P. Bradley Adams (37), Vice President and Treasurer, Jones & Babson, Inc., Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout Regional Fund, Inc., Scout WorldWide
Fund, Inc., Scout Balanced Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc.,
David L. Babson Growth Fund, Inc., D. L. Babson Money Market Fund, Inc., D. L.
Babson Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Shadow Stock Fund, Inc., Babson-
Stewart Ivory International Fund, Inc., D.L. Babson Bond Trust, Buffalo Balanced
Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo
USA Global Fund, Inc., Buffalo Small Cap Fund; Vice President and Chief
Financial Officer, AFBA Five Star Fund.
Michael A. Brummel (40), Vice President, Assistant Secretary and Assistant
Treasurer, Jones & Babson, Inc., Scout Stock Fund, Inc., Scout Bond Fund, Inc.,
Scout Money Market Fund, Inc., Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout Tax-Exempt Bond Fund,
Inc., Scout Balanced Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., David
L. Babson Growth Fund, Inc., D.L. Babson Money Market Fund, Inc., D.L. Babson
Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D.L. Babson Bond Trust, Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo USA Global
Fund, Inc., Buffalo Small Cap Fund, Inc.
Martin A. Cramer (47), Vice President and Secretary, Jones & Babson, Inc., Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout Regional Fund, Inc., Scout WorldWide
Fund, Inc., Scout Balanced Fund, Inc., Scout Kansas Tax-Exempt Bond Fund, Inc.,
David L. Babson Growth Fund, Inc., D.L. Babson Money Market Fund, Inc., D.L.
Babson Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow Stock Fund, Inc.,
Babson-Stewart Ivory International Fund, Inc., D.L. Babson Bond Trust, Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc., Buffalo Small Cap Fund, Inc., Secretary, AFBA
Five Star Fund, Inc.
John G. Dyer (52), Vice President and Legal Counsel, Scout Stock Fund, Inc.,
Scout Regional Fund, Inc., Scout Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc. Scout WorldWide Fund, Inc., Scout
Balanced Fund, Inc., Scout Kansas Tax- Exempt Bond Fund, Inc., Buffalo Balanced
Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo
USA Global Fund, Inc., Buffalo Small Cap Fund, Inc.
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Constance E. Martin (36), Vice President. Assistant Vice President, Jones &
Babson, Inc. Vice President, Scout Stock Fund, Inc., Scout Bond Fund, Inc.,
Scout Money Market Fund, Inc., Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout Balanced Fund, Inc.,
Scout Kansas Tax-Exempt Bond Fund, Inc., David L. Babson Growth Fund, Inc., D.L.
Babson Money Market Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc.,
Babson-Stewart Ivory International Fund, Inc., D.L. Babson Bond Trust, Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc., Buffalo Small Cap Fund, Inc.
None of the officers or directors will be remunerated by the Fund for their
normal duties and services. Their compensation and expenses arising out of
normal operations will be paid by Jones & Babson, Inc. under the provisions of
the Underwriting Agreement.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Aggregate Pension or Retirement Estimated Total Compensation
Compensation Benefits Accrued As Annual Benefits From All Scout Funds
Name of Director From each Fund Part of Fund Expenses Upon Retirement Paid to Directors**
- ---------------------- ------------------- ------------------------ -------------------- -------------------------
<S> <C> <C> <C> <C>
Larry D. Armel* -- -- -- --
William E. Hoffman -- --
Eric T. Jager -- --
Stephen F. Rose -- --
Stuart Wien -- --
</TABLE>
* As an "interested director," Mr. Armel receives no compensation for his
services as director.
** The amounts reported in this column reflect the total compensation expected
to be paid to each director for his services as a director of nine Scout
Funds during the fiscal year ending June 30, 1998. Directors fees are paid
by the Funds' manager and not by the Funds themselves.
Messrs. Hoffman, Jager, Rose and Wien have no financial interest in, nor are
they affiliated with, either Jones & Babson, Inc. or UMB Bank, n.a.
The Audit Committee of the Board of Directors is composed of Messrs. Hoffman,
Jager, Rose and Wien.
The Officers and Directors of the Fund as a group own less than 1% of any of the
Funds.
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 stockholders of the Fund
must be held if the Fund receives the written request
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for a meeting from the stockholders entitled to cast at least 25 percent of all
the votes entitled to be cast at the meeting. The Fund has undertaken that its
Directors will call a meeting of stockholders if such a meeting is requested in
writing by the holders of not less than 10% of the outstanding shares of the
Fund. To the extent required by the undertaking, the Fund will assist
shareholder communications in such matters.
CUSTODIAN
The Fund's portfolio assets are held for safekeeping by UMB Bank, n.a. This
means the bank, rather than the Fund, has possession of the Fund's cash and
securities. As directed by the Fund's officers, it delivers cash to those who
have sold securities to the Fund in return for such securities, and to those who
have purchased portfolio securities from the Fund, it delivers such securities
in return for their cash purchase price. It also collects income directly from
issuers of securities owned by the Fund and holds this for payment to
shareholders after deduction of the Fund's expenses. UMB Bank, n.a. also
functions as manager and investment adviser to the Funds (see "Manager and
Underwriter" in the Prospectus).
INDEPENDENT PUBLIC ACCOUNTANTS
The Fund's financial statements are examined annually by independent public
accountants approved by the directors each year, and in years in which an annual
meeting is held the directors may submit their selection of independent public
accountants to the shareholders for ratification.
Reports to shareholders will be published at least semiannually.
Arthur Anderson, LLP, is the present independent certified public accountant for
the Fund.
FIXED INCOME SECURITIES DESCRIBED AND RATINGS
In evaluating investment suitability, each investor must relate the
characteristics of a particular investment under consideration to personal
financial circumstances and goals.
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
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regarded as safe. They predominantly 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.
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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:
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"A" Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.
"A-1" This designation indicates that the degree of safety regarding timely
payment is very strong.
"A-2" Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming.
"A-3" Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
"B" Issues rated "B" are regarded as having only an adequate capacity for timely
payment. Furthermore, such capacity may be damaged by changing conditions or
short-term adversities.
"C" This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
"D" This rating indicates that the issuer is either in default or is expected to
be in default upon maturity.
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<PAGE>
FINANCIAL STATEMENTS
(TO BE SUPPLIED BY FURTHER AMENDMENT)
-16-
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements: (To be supplied by further
amendment)
(b) (1) Registrant's Articles of Incorporation
(2) Form of Registrant's By-laws
(3) Not applicable, because there is no voting trust
agreement
(4) Specimen copy of each security to be issued by
the registrant
(5) Form of Management Agreement between UMB Bank,
n.a. and the Registrant
(6) Form of principal Underwriting Agreement between
Jones & Babson, Inc. and the Registrant
(7) Not applicable, because there are no pension,
bonus or other agreements for the benefit of
directors and officers
(8) Form of Custodian Agreement between Registrant
and United Missouri Bank of Kansas City, N.A.
(9) Form of Transfer Agency Agreement between the
Registrant, UMB Bank, n.a. and Jones & Babson,
Inc.
(10) Opinion and consent of counsel as to the
legality of the registrant's securities being
registered.
(11) Not applicable. (To be supplied by further
amendment as necessary)
(12) Not applicable.
(13) Form of letter from contributors of initial
capital to the Registrant that purchase was made
for investment purposes without any present
intention of redeeming or selling. (To be
supplied by amendment.)
(14) Not applicable.
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<PAGE>
(15) Not applicable.
(16) Schedule for computation of performance
quotations. (To be supplied by further
amendment)
(19) Powers of Attorney
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE
REGISTRANT.
NONE
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The number of record holders of each class of securities of
the Registrant as of November 20, 1997, is as follows:
(1) (2)
Title of class Number of Record Holders
Common Stock No securities have been
$1.00 par value issued
Item 27. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law and
the company's By-laws, the company shall indemnify any person
who was or is a director, officer, or employee of the company
to the maximum extent permitted by the Maryland General
Corporation Law; provided however, that any such
indemnification (unless ordered by a court) shall be made by
the company only as authorized in the specific case upon a
determination that indemnification of such persons is proper
in the circumstances. Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum
which consists of the directors who are neither "interested
persons" of the company as defined in Section 2(a)(19) of the
1940 Act, nor parties to the proceedings, or
(ii) if the required quorum is not obtainable or if a quorum
of such directors so directs, by independent legal counsel in
a written opinion. No indemnification will be provided by the
company to any director or officer of the company for any
liability to the company or shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duty.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
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<PAGE>
UMB Bank, n.a. is a commercial bank
Item 29. PRINCIPAL UNDERWRITERS.
(a) Jones & Babson, Inc., the only principal underwriter of
the Registrant, also acts as principal underwriter for
the David L. Babson Growth Fund, Inc., D.L. Babson
Money Market Fund, Inc., D.L. Babson Tax-Free Income
Fund, Inc., D.L. Babson Bond Trust, Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund, Inc. Scout
Tax-Free Money Market Fund, Inc., Scout Regional Fund,
Inc., Scout WorldWide Fund, Inc., Scout Balanced Funds,
Inc., Scout Kansas Tax-Exempt Bond Fund, Inc., Buffalo
Balanced Fund, Inc. Buffalo Equity Fund, Inc. Buffalo
USA Global Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo Small Cap Fund, Inc. and AFBA Five Star 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 Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
Stephen S. Soden Chairman and Director Director
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
Larry D. Armel President and Director President and
BMA Tower Director
700 Karnes Boulevard
Kansas City, MO 64108
Giorgio Balzer Director None
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
Robert T. Rakich Director None
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
Edward S. Ritter Director None
BMA Tower
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<PAGE>
700 Kansas Boulevard
Kansas City, MO 64141
Robert N. Sawyer Director None
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
Vernon W. Voorhees Director None
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
P. Bradley Adams Vice President Vice President and
BMA Tower and Treasurer Chief Financial Officer
700 Karnes Boulevard
Kansas City, MO 64108
Michael A. Brummel Vice President Vice President
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
Martin A. Cramer Vice President Secretary
Three Crown Center and Secretary
2440 Pershing Road, G-15
Kansas City, MO 64108
(c) The principal underwriter does not receive any
remuneration or compensation for the duties or
services rendered to the Registrant pursuant to the
principal underwriting Agreement.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be maintained
by Section 31(a) of the 1940 Act and the Rules (17 CFR
270.3la-1 to 3la-3) promulgated thereunder is in the physical
possession of Jones & Babson, Inc., at BMA Tower, 700 Karnes
Boulevard, Kansas City, Missouri 64108.
Item 31. MANAGEMENT SERVICES.
All management services are covered in the management
agreement between the Registrant and UMB Bank, n.a., which are
discussed in Parts A and B.
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<PAGE>
Item 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment using
uncertified financial statements within four to six months
from the commencement of investment operations after the
effective date of Registrant's 1933 Act Registration
Statement.
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<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
its registration statement to be signed on its behalf by the undersigned,
thereunto authorized, in the City of Kansas City, and State of Missouri on the
19th day of November, 1997.
SCOUT CAPITAL PRESERVATION FUND, INC.
(Registrant)
By/s/ Larry D. Armel
(Larry D. Armel, President)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Larry D. Armel President, November 19, 1997
Larry D. Armel Principal Executive
Officer, and Director
/s/William E. Hoffman Director November 19, 1997
William E. Hoffman*
/s/Eric T. Jager Director November 19, 1997
Eric T. Jager*
/s/Stephen F. Rose Director November 19, 1997
Stephen F. Rose*
/s/Stuart Wien Director November 19, 1997
Stuart Wien*
/s/P. Bradley Adams Treasurer and November 19, 1997
P. Bradley Adams Principal Financial
and Accounting Officer
</TABLE>
* By Larry D. Armel, pursuant to Power of Attorney filed herewith.
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<PAGE>
EXHIBIT INDEX
Item 24 (b).
Exhibit Page No.
(1) Registrant's Articles of Incorporation
(2) Form of Registrant's By-laws
(4) Specimen copy of each security to be issued
by the Registrant
(5) Form of Management Agreement between UMB Bank,
n.a. and the Registrant
(6) Form of principal Underwriting Agreement between
Jones & Babson, Inc. and the Registrant
(8) Form of Custodian Agreement between Registrant and
United Missouri Bank of Kansas City, N.A.
(9) Form of Transfer Agency Agreement between Registrant,
UMB Bank, n.a. and Jones & Babson, Inc.
(10) Opinion and consent of counsel as to the legality of
the registrant's securities being registered
(19) Powers of Attorney
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ARTICLES OF INCORPORATION
OF
SCOUT CAPITAL PRESERVATION FUND, INC.
FIRST: I, the undersigned, John G. Dyer, whose Post-office address is
L-36 Route 1, Lake Lotawana, Missouri, 64086, 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 SCOUT CAPITAL
PRESERVATION FUND, INC.
THIRD: The purpose for which the Corporation is formed is to act as an
open-end, diversified management investment company under the Investment Company
Act of 1940, as amended, and to exercise and enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations of a similar character by
the general laws of the state of Maryland now or hereafter in force.
FOURTH: The Post-Office address of the principal office of the
Corporation in this state is C/O the Corporation Trust incorporated, 32 South
Street, Baltimore, Maryland, 21202. The name of the Resident Agent of the
Corporation in this state is the Corporation Trust Incorporated, a corporation
of this state, and the Post-office address of the Resident Agent is 32 South
Street, Baltimore, Maryland, 21202.
FIFTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 10,000,000 shares of a par value of
one dollar ($1.00) per share and an aggregate par value of $10,000,000. The
number of the shares of stock of each class is such number, if any, of shares of
unissued stock as is classified or reclassified into such class by the
Corporation's Board of Directors pursuant to the authority contained in Section
2-105 of the Maryland General Corporation Law as filed by the Corporation as
Articles Supplementary under Section 2-208 of the Maryland General Corporation
Law (or any successor provisions). The Board of Directors of the Corporation
shall have the power to classify or reclassify unissued shares into one or more
classes which together with the issued shares of stock of the corporation shall
have such designations as the board may determine and (subject to any applicable
rule, regulation or order of the Securities and Exchange Commission or other
applicable law or regulation) shall have such preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine (or in the absence of contrary determination, such as
set forth herein) . At any time when there are no shares outstanding or
subscribed for a particular
<PAGE>
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 shareholders, all shares of the Corporation then issued and outstanding and
entitled to vote, irrespective of the class, shall be voted in the aggregate and
not by class, except (1) when otherwise expressly provided by the Maryland
General Corporation Law or (2) when required by the Investment Company Act of
1940, as amended, shares shall be voted by individual class; and (3) when the
matter does not affect any interest of a particular class, then only
shareholders of the affected class or classes shall be entitled to vote thereon.
(B) Each class of stock of the Corporation shall have the
following powers, preferences and participating, voting, or other special rights
and the qualifications, restrictions, and limitations thereof shall be as
follows:
(1) All consideration received by the Corporation f or
the issue or sale of stock of each class, together with all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the class of shares of stock with respect to which such
assets, payments or funds were received by the Corporation for all purposes,
subject only to the rights of creditors, and shall be so handled upon the books
of account of the Corporation. Such assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof and
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<PAGE>
any assets derived from any reinvestment of such proceeds, in whatever form the
same may be, are herein referred to as "assets belonging to" such class.
(2) The Board of Directors may from time to time declare and
pay dividends or distributions, in stock or in cash, on any or all classes of
stock, the amount of such dividends and the payment of them being wholly in the
discretion of the Board of Directors.
(I) Dividends or distributions on shares of any class
of stock shall be paid only out of earnings, surplus, or other lawfully
available assets belonging to such class.
(II) Inasmuch as one goal of the corporation is to
qualify as a "regulated investment company" under the Internal Revenue code of
1986, as amended, or any successor or Comparable statute thereto and regulations
promulgated thereunder; and inasmuch as the computation of not income and gains
for federal income tax purposes may vary from the computation thereof on the
books of the corporation, the Board of Directors shall have the power in its
discretion to distribute in any fiscal year as dividends, including designated
in whole or in part as capital gain distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company and to avoid liability for the Corporation for
federal income tax in respect of that year.
(3) In the event of the liquidation or dissolution of the
corporation, shareholders of each class shall be entitled to receive, as a
class, out of the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
class of stock, the assets belonging to such class; and the assets so
distributable to the shareholders of any class shall be distributed among such
shareholders in proportion to the number of shares of such class held by them
and recorded on the books of the Corporation. In the event that there are any
general asset,% not belonging to any particular class of stock and available for
distribution, such distribution shall be made to the holders of stock of all
classes in proportion to the asset value of the respective classes determined as
hereinafter provided.
(4) The assets belonging to any class of stock shall be
charged with the liabilities in respect to such class, and shall also be charged
with its share of the general liabilities of the Corporation, in proportion to
the asset value of the respective classes determined as hereinafter set out. The
determination of the Board of Directors shall be conclusive as to the amount of
liabilities, including accrued expenses and reserves, as to the allocation of
the same as to a given class, and as to whether the
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<PAGE>
same or-general assets of the Corporation are allocable to one or more classes.
(C) Each holder of any class of stock of the Corporation, who
shall surrender his certificate in good delivery form to the Corporation or who,
if the shares in question are not represented by certificates, shall deliver to
the Corporation a written request in good order signed by the shareholder, shall
be entitled to require the Corporation, to the extent that the class of stock in
question has assets lawfully available therefor and out of such assets, but not
otherwise, to redeem all or any part of the shares of such stock standing in the
name of such holder on the books of the Corporation, at the net asset value of
such shares, determined in the manner and as of the time, and payable as
provided in the Investment Company Act of 1940, as amended. The Corporation
shall make payment for any such shares to be redeemed as aforesaid, in cash, or
if in the opinion of the Board of Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable, the
Corporation may make payment wholly or partly in securities belonging to the
class to provide for such redemption by it of the shares of such class.
(1) The Board of Directors of the Corporation may, in
accordance with the Investment Company Act of 1940, as amended, suspend the
right of the holders of any class of stock of the Corporation to require the
Corporation to redeem shares of such class.
(2) The Board of Directors, in the economic best
interest of the Corporation and in order to reduce the disproportionately
burdensome expenses in servicing shareholder accounts, may from time to time,
establish uniform standards with respect to the minimum value of a stockholder
account or a minimum investment which may be made by a stockholder. The Board of
Directors, by resolution and without the vote or consent of stockholders, may
require that the aggregate net asset value of a stockholder account shall not be
less than the minimum initial investment requirement of the Corporation at the
time of the resolution. The resolution may authorize the Corporation to close
those stockholder accounts not meeting the specified minimum standards of value
by redeeming all of the shares in such accounts, provided there is mailed to
each affected stockholder account, at least sixty (60) days prior to the planned
redemption date, a notice setting forth the minimum account size requirement and
the date on which the account will be closed if the minimum size requirement is
not met prior to said closing date.
(D) Each holder of any class of stock of the Corporation, who
surrenders his certificate in good delivery form to the Corporation or, if the
shares in question are not represented by certificates, who delivers to the
Corporation a written request in good order signed by the shareholder, shall be
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<PAGE>
entitled to convert the shares in question on the basis hereinafter set forth,
into shares of stock of any other class of the Corporation. The Corporation
shall determine the net asset value, as hereinafter defined, of the shares to be
converted and shall deduct therefrom such conversion cost, hereinafter described
and within five (5) business days after such surrender and payment, shall issue
to the shareholder such number of shares of stock of the class desired taken at
the net asset value thereof determined in the same manner and at the same time
as that of the shares surrendered, which shall equal the net asset value of the
shares surrendered less conversion cost as aforesaid. Any amount representing a
fraction of a share may be paid in cash at the option of the Corporation. The
conversion cost above mentioned shall be determined by adding a transaction
charge as determined by the Board of Directors. The transaction charge may be
paid and/or assigned by the Corporation to the underwriter and/or any other
agency, as it may elect. Upon any conversion taking place, proper transfer shall
be made between the assets belonging to the respective classes of stock. The
Board of Directors may limit this conversion privilege to shares which have been
held for such reasonable period of time as the Directors may determine.
(E) The aggregate net asset value per share of a class of the
Corporation's capital stock shall be determined in accordance with the
Investment Company Act of 1940, as amended, and with generally accepted
accounting principles, by adding the market or appraised value of all
securities, cash and other assets of the Corporation pertaining to that class,
subtracting the liabilities determined by the Board of Directors to be
applicable to that class, and dividing the net result by the number of shares of
the class outstanding. Securities and other investments and assets will be
valued at fair value as determined in good faith by the Board of Directors.
SIXTH: The shares of stock of the Corporation may be issued to such
persons and at such prices from time to time as the Board of Directors may
determine. Such issuance shall be on a non-assessable basis. No holder of shares
of stock shall have pre-emptive rights and the Corporation shall have the right
to issue and sell to any person or persons and shares of its stock or any option
rights exercisable for, or securities convertible into shares of its stock
without first offering such shares, rights or securities to the holders of any
shares.
SEVENTH: The number of Directors of the Corporation and their terms of
office shall be determined from time to time by the Directors pursuant to the
by-laws of the corporation. Such number initially shall be seven and shall never
be less than three. The names of the initial Directors are:
Larry D. Armel
William E. Hoffman
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<PAGE>
Eric T. Jager
Stephen F. Rose
Stuart Wien
who shall serve until their respective successors are elected and
qualified.
(A) If a vacancy occurs on the Board of Directors by reason of
death, resignation, or otherwise, the Board of Directors may fill such vacancy
for the remainder of the unexpired term by majority vote of the remaining
directors; provided that after filling any such vacancy, at least two thirds of
the Directors shall have been elected by the stockholders, and provided further
that if at any time less than a majority of the Directors then holding office
were elected by the stockholders, a stockholders' meeting shall be called as
promptly as possible and, in any event, within sixty days, for the purpose of
electing Directors to fill existing vacancies.
EIGHTH: The Corporation is expressly empowered as follows:
(A) The Corporation may enter into a written contract or
contracts with any person, including any firm, corporation, trust, or
association in which any officer, other employee, director or stockholder of
this corporation may be interested, providing for a delegation of the management
of all or part of this corporation's securities portfolio (or portfolios) and
also for the delegation of the performance of administrative corporate
functions, subject always to the direction of the Board of Directors of this
corporation. The compensation payable by this corporation under such contracts
shall be such as is deemed fair and equitable to both parties by the said Board
of Directors. Each such contract shall in all respects be consistent with and
subject to the requirements of the Investment Company Act of 1940, as amended,
as then in effect and regulations of the securities and exchange commission or
any succeeding governmental authority promulgated thereunder.
(B) The Corporation may appoint one or more distributors or
agents or both for the sale of the shares of the Corporation, may allow such
person or persons a commission on the sale of such shares, and may enter into
such contract or contracts with such person or persons as the Board of Directors
of this Corporation in its discretion may deem reasonable and proper. Any such
contract or contracts for the sale of the shares of this corporation may be made
with any person even though such person may be an officer, other employee,
director or stockholder of this corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
stockholder nay be interested, or such person-may be the same as that person
retained pursuant to the powers granted in Section (A) of this Article EIGHTH.
Each such contract shall in all respects be consistent with and subject
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<PAGE>
to the requirements of the Investment Company Act of 1940, as amended, as then
in effect and regulations of the Securities and Exchange Commission or any
succeeding governmental authority promulgated thereunder.
(C) The Corporation may employ such custodian or custodians
for the safekeeping of the property of the corporation and of its shares, such
dividend disbursing agent or agents, and such transfer agent or agents and
registrar or registrars for its shares, and may make and perform such contracts
for the aforesaid purposes as in the opinion of the Board of Directors of this
Corporation may be reasonable, necessary or proper for the conduct of the
affairs of the Corporation, and may pay the fees and disbursements of such
custodian, dividend disbursing agents, transfer agents, and registrars out of
the income and/or any other property of the Corporation. Notwithstanding any
other provisions of these articles of incorporation or the by-laws of the
Corporation, the Board of Directors may cause any or all of the property of the
Corporation to be transferred to, or be acquired and held in the name of, a
custodian so appointed or any nominees of this Corporation or nominee or
nominees of such custodian satisfactory to the Board of Directors of this
Corporation.
(D) The same person, partnership (general or limited),
association, trust or corporation may be employed in any multiple capacity under
subsections (A), (B) and (C) of this article EIGHTH and may receive compensation
from the corporation in as many capacities in which such person, partnership
(general or limited), association, trust or corporation shall serve the
Corporation.
NINTH: (A) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(B) The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Board of Directors may by Bylaw, resolution or agreement make further
provisions for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation Law.
(C) No provision of this Article shall be effective to protect
or purport to protect any director or officer of the
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<PAGE>
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.
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.
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<PAGE>
(D) In addition to the powers and authorities granted herein
an(f by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the provisions
of Maryland law, these Articles of Incorporation, and the by-laws of the
corporation.
TWELFTH: The books of the Corporation may be kept (subject to any
provisions of Maryland law) outside the state of Maryland at such place or
places as may be designated from time to time by the Board of Directors or in
the by-laws of the Corporation. Elections of directors need not be by ballot
unless the by-laws of the Corporation so provide.
THIRTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein @e granted subject to this reservation.
FOURTEENTH: Notwithstanding any provision of Maryland law requiring
more than a majority vote of the common stock in connection with any corporate
action including, but not limited to, amendment of these Articles of
Incorporation, unless otherwise provided in these Articles of Incorporation the
Corporation 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 SCOUT CAPITAL
PRESERVATION 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 3rd day of October, 1997.
/s/ John G. Dyer
John G. Dyer
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BY-LAWS
OF
SCOUT CAPITAL PRESERVATION 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 Maryland, 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;
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(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.
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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
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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.
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Section 7. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 8. Special Meetings. Special meetings of the Board of Directors
may be called by the president on one day's notice to each director; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two directors.
Section 9. Telephonic Meetings. Regular or special meetings, except for
meetings to approve an investment advisory agreement or a distribution plan, of
the Board of Directors or any committee thereof, may be held by means of a
conference telephone or similar communications equipment so that all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means constitutes presence in person at the meeting.
Section 10. Informal Actions. Any action, except approval of an
investment advisory agreement, or a distribution plan, required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting, if written consent to such action is signed in one
or more counterparts by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board or committee.
Section 11. Committees. The Board of Directors may by resolution passed
by a majority of the whole Board appoint from among its members an executive
committee and other committees composed of two or more directors, and may
delegate to such committees, in the intervals between meetings of the Board of
Directors, any or all of the power of the Board of Directors in the management
of the business and affairs of the corporation, except the power to declare
dividends, to issue stock or to recommend to stockholders any action requiring
stockholders' approval. In the absence of any member of such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a member of the Board of Directors to act in the place of such
absent member.
Section 12. Action of Committees. The committees shall keep minutes of
their proceedings and shall report the same to the Board of Directors at the
meeting next succeeding, and any action by committees shall be subject to
revision and alteration by the Board of Directors, provided that no rights of
third persons shall be affected by any such revision or alteration.
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Section 13. Compensation. Any director, whether or not he is a salaried
officer or employee of the corporation, may be compensated for his services as a
director or as a member of a committee of directors, or as chairman of the Board
or chairman of a committee by fixed or periodic payments or by fees for
attendance at meetings or by both, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the Board
of Directors may from time to time determine.
Section 14. Removal. The stockholders of this corporation may remove
any director with or without cause by the affirmative vote of a majority of all
the votes entitled to be cast for the election of directors.
ARTICLE IV
NOTICES
Section 1. Form. Notices to stockholders shall be in writing and
delivered personally or mailed to the stockholders at their addresses appearing
on the books of the corporation. Notice by mail shall be deemed to be given at
the time when the same shall be mailed. Notice to directors need not state the
purpose of a regular or special meeting.
Section 2. Waiver. Whenever any notice of the time, place or purpose of
any meeting of stockholders, directors or committee is required to be given
under the provisions of Maryland law or under the provisions of the Articles of
Incorporation or these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of stockholders in person or by proxy, or at the meeting of
directors or committee in person, shall be deemed equivalent to the giving of
such notice to such persons.
ARTICLE V
OFFICERS
Section 1. Officers of the Corporation. The officers of the corporation
shall be elected by the Board of Directors and shall include a president, who
shall be a director, a secretary and a treasurer. The Board of Directors may,
from time to time, elect or appoint a controller, one or more vice-presidents,
assistant secretaries and assistant treasurers. The president shall preside at
meetings of the Board of Directors, unless the Board of Directors, at its
discretion, elects a chairman of the Board to preside at such meetings. In
addition, such chairman
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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 their successors are chosen and qualify. Any officer or agent may
be removed by the affirmative vote of a majority of the Board of Directors
whenever, in its judgment, the best interests of the corporation will be served
thereby. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors.
Section 5. President. The president, unless the chairman has been so
designated, shall be the chief executive officer of the corporation. He shall
preside at all meetings of the stockholders and directors and shall see that all
orders and resolutions of the Board are carried into effect. The president shall
also be the chief administrative officer of the corporation and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 6. Vice-Presidents. The vice-presidents, in the order of their
seniority, shall in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties as the Board of Directors may from time to time prescribe.
Section 7. Secretary. The secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings thereof and shall perform like duties for any committee when
required. In the absence of the secretary or an assistant secretary, proceedings
of such meetings shall be recorded by a person selected by the chairman of the
meeting. He shall give, or
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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
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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
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
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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 VIII
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.
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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 IX
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):
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(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
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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
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otherwise become payable, provided that this provision shall not prevent:
(i) Delivery of securities for examination to the broker
selling the same, in accordance with the "street delivery" custom,
whereby such securities are delivered to such broker in exchange for a
delivery receipt exchanged on the same day for an uncertified check of
such broker to be presented on the same day for certification.
(ii) Delivery of securities of an issuer in exchange for or
for conversion into, other securities alone, or cash and other
securities, pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment of the securities of
such issuer or for deposit with a reorganization committee or
protective committee, pursuant to a deposit agreement.
(iii) The conversion by the custodian of securities owned by
the corporation, pursuant to the provisions of such securities into
other securities.
(iv) The surrender by the custodian of warrants, rights or
similar securities owned by the corporation in the exercise of such
warrants, rights or similar securities, or the surrender of interim
receipts or temporary securities for definitive securities.
(v) The delivery of securities as collateral on borrowing
affected by the corporation, subject to the limitations of Article VII
of these By-laws.
(vi) The delivery of securities owned by the corporation, as a
complete or partial redemption in kind of securities issued by the
corporation.
(B) Deliver funds of the corporation only upon the purchase of
securities for the portfolio of the corporation, and the delivery of such
securities to the custodian; provided always, that such limitation shall not
prevent the release of funds by the custodian for redemption of shares issued by
the corporation, for payment of interest, dividend disbursements, taxes,
management fees, custodian fees, other operating expenses properly authorized by
an officer or officers as required by the custodian agreement, payments in
connection with conversion, exchange or surrender of securities owned by the
corporation (as set forth in Subsection A of this Section) and for
organizational and such other obligations as approved by the Board of Directors
certified in writing.
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(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
-15-
<PAGE>
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or otherwise reproduced.
ARTICLE X
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.
-16-
A MARYLAND CORPORATION
SCOUT CAPITAL PRESERVATION FUND, INC.
Common Stock Par Value One Dollar Per Share
CUSIP
COM
THIS CERTIFIES THAT ____________________________________________________ is the
registered holder of __________________________________________________ Shares
SCOUT CAPITAL PRESERVATION FUND, INC.
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.
MANAGEMENT AGREEMENT
between
UMB BANK, n.a.
and
SCOUT CAPITAL PRESERVATION FUND, INC.
THIS AGREEMENT, made and entered into this ___ day of __________, 1997, by and
between SCOUT CAPITAL PRESERVATION FUND, INC., a Maryland corporation, with its
principal place of business at BMA Tower, 700 Karnes Boulevard, Kansas City,
Missouri (hereinafter referred to as the "Fund") and UMB BANK, n.a., a national
bank (hereinafter referred to as the "Manager"), and which shall be deemed to be
an original, but all of which together shall constitute but one instrument.
WHEREAS, the Fund was founded 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 is engaged in the business of supplying investment advice
and management service to the Fund, as an independent contractor, and
WHEREAS, the Fund Manager desires to enter into a contractual arrangement
whereby the Manager provides investment advice and management service to the
Fund for a fee,
NOW THEREFORE, in consideration of the mutual promises herein contained, and
other good and valuable consideration, receipt of which is hereby acknowledged,
it is mutually agreed and contracted by and between the parties hereto that:
1. The Fund hereby employs the Manager, for the period set forth in
Paragraph 5 hereof, and on the terms set forth herein, to render investment
advice and management service to the Fund, subject to the supervision and
direction of the Board of Directors of the Fund. The Manager hereby accepts such
employment and agrees, during such period, to render the services and assume the
obligations herein set forth, for the compensation herein provided. The
Management shall, for all purposes herein, be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized, have
no authority to act for or represent the Fund in any way, or in any other way be
deemed an agent of the Fund.
Page 1
<PAGE>
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 Articles of Incorporation and
By-Laws as follows:
a. 0.85% 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.
Page 2
<PAGE>
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, 1999, and thereafter may be renewed for successive
periods not exceeding one year only so long as such renewal and continuance is
specifically approved at least annually by the Board of Directors or by vote of
a majority of the outstanding shares of the Fund as prescribed by the Act, and
only if the terms and the renewal of this Agreement have been approved by a vote
of a majority of the Directors of the Fund including a majority of the Directors
who are not parties to the Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
No amendment to this Agreement shall be effective unless the terms thereof have
been approved by the vote of a majority of outstanding shares of the Fund as
prescribed by the Act and by vote of a majority of the Directors of the Fund who
are not parties to the Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval. It
shall be the duty of the Directors of the Fund to request and evaluate, and the
duty of the Manager to furnish, such information as may reasonably be necessary
to evaluate the terms of this Agreement and any amendment thereto. This
Agreement may be terminated at any time, without the payment of any penalty, by
the Directors of the Fund, or by the vote of a majority of the outstanding
voting shares of the Fund as prescribed by the Act on not more than sixty days
written notice to the Manager, and it may be terminated by the Manager upon not
less than sixty days written notice to the Fund. It shall terminate
automatically in the event of its assignment by either party unless the parties
hereby, by agreement, obtain an exemption from the Securities and Exchange
Commission from the provisions of the Act pertaining to the subject matter of
this paragraph. Any notice, request or instruction provided for herein, or for
the giving of which, the occasion may
Page 3
<PAGE>
arise hereunder, shall be deemed duly given, if in writing and mailed by
registered mail, postage prepaid, addressed to the regular executive office of
the Fund or the Manager as the case may be. As used in this Agreement, the terms
"assignment", "a majority of the outstanding voting shares", and "interested
persons" shall have the same meaning as similar terms contained in the Act.
6. 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.
7. 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.
SCOUT CAPITAL PRESERVATION FUND, INC.
By
ATTEST:
UMB BANK, n.a.
By
ATTEST:
Page 4
UNDERWRITING AGREEMENT
between
SCOUT CAPITAL PRESERVATION FUND, INC.
and
JONES & BABSON, INC.
THIS AGREEMENT, made and entered into this ____ day of _____________,
1997, by and between SCOUT CAPITAL PRESERVATION FUND, INC., a Maryland
corporation with its principal place of business at BMA Tower, 700 Karnes
Boulevard, Kansas City, Missouri (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 Articles 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.
Page 1
<PAGE>
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. The Principal Underwriter 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 Articles of Incorporation, By-Laws,
Registration Statement and
Prospectus of the Fund.
Page 2
<PAGE>
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.
SCOUT CAPITAL PRESERVATION FUND, INC.
By
ATTEST:
JONES & BABSON, INC.
By
ATTEST:
Page 3
CUSTODY AGREEMENT
Dated ___________, 1997
Between
UMB BANK, n.a.
and
SCOUT CAPITAL PRESERVATION FUND, INC.
Registered Investment Company
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
SECTION PAGE
1. Appointment of Custodian 1
2. Definitions
Securities 1
Assets 1
Instructions and Special Instructions 1
3. Delivery of Corporate Documents 2
Powers and Duties of Custodian and Domestic
Subcustodian 3
Safekeeping 3
Manner of Holding Securities 3
Free Delivery of Assets 5
Exchange of Securities 5
Purchases of Assets 5
Sales of Assets 6
Options 6
Futures Contracts 7
Segregated Accounts 7
Depositary Receipts 8
Corporate Actions, Put Bonds, Called
Bonds, Etc. 8
Interest Bearing Deposits 9
Foreign Exchange Transactions Other
than as Principal 9
Pledges or Loans of Securities 9
Stock Dividends, Rights, Etc. 10
Routine Dealings 10
Collections 10
Bank Accounts 11
Dividends, Distributions and Redemptions 11
Proceeds from Shares Sold 11
Proxies and Notices; Compliance with
the Shareholders Communication Act
of 1985 11
Books and Records 12
Opinion of Fund's Independent Certified
Public Accountants 12
Reports by Independent Certified Public
Accountants 12
Bills and Others Disbursements 12
5. Subcustodians 12
(a) Domestic Subcustodians 13
(b) Foreign Subcustodians 13
(c) Interim Subcustodians 13
(d) Special Subcustodians 14
(e) Termination of a Subcustodian 14
(f) Certification Regarding Foreign
Subcustodians 14
<PAGE>
Standard of Care 14
General Standard of Care 14
Actions Prohibited by Applicable Law,
Events Beyond Custodian's Control, Armed
Conflict, Sovereign Risk, Etc. 15
Liability for Past Records 15
Advice of Counsel 15
Advice of the Fund and Others 15
Instructions Appearing to be Genuine 16
Exceptions from Liability 16
7. Liability of the Custodian for Actions
of Others 16
(a) Domestic Subcustodians 16
Liability for Acts and Omissions of Foreign
Subcustodians 16
Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities
Depositories and Clearing Agencies 17
(d) Defaults or Insolvencies of Brokers,
Banks, Etc. 17
(e) Reimbursement of Expenses 17
8. Indemnification 17
(a) Indemnification by Fund 17
(b) Indemnification by Custodian 17
9. Advances 18
10. Liens 18
11. Compensation 19
12. Powers of Attorney 19
13. Termination and Assignment 19
14. Notices 19
15. Miscellaneous 19
</TABLE>
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this ____ day of ___________, 1997 between
Scout Capital Preservation Fund, Inc. with its principal place of business
located at BMA Tower, 700 Karnes Boulevard, Kansas City, Missouri, (hereinafter
"Fund"), and UMB Bank, n.a., a national banking association with its principal
place of business located at Kansas City, Missouri (hereinafter "Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, the Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by the Fund which Assets are to
be held in such accounts as the Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms
and conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN.
The Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to the Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
scrip, warrants, interim certificates and all negotiable or nonnegotiable paper
commonly known as Securities and other instruments or obligations.
(b) "Assets" shall mean Securities, monies and other property held by
the Custodian for the benefit of the Fund.
1
<PAGE>
(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
the Fund by an Authorized Person; (ii) a telephonic or other oral communication
from a person the Custodian reasonably believes to be an Authorized Person; or
(iii) a communication effected directly between an electro-mechanical or
electronic device or system (including, without limitation, computers) on behalf
of the Fund. Instructions in the form of oral communications shall be confirmed
by the Fund by tested telex or in writing in the manner set forth in clause (i)
above, but the lack of such confirmation shall in no way affect any action taken
by the Custodian in reliance upon such oral Instructions prior to the
Custodian's receipt of such confirmation. The Fund authorizes the Custodian to
record any and all telephonic or other oral Instructions communicated to the
Custodian.
(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of the Fund or any other person designated by the Treasurer of the
Fund in writing, which countersignature or confirmation shall be included on the
same instrument containing the Instructions or on a separate instrument relating
thereto.
(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and the Fund.
(c)(4) Where appropriate, Instructions and Special
Instructions shall be continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution
does not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
The Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document)
of the Fund as in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
2
<PAGE>
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
The Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, the Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of the Fund who will have continuing
authority to certify to the Custodian: (a) the names, titles, signatures and
scope of authority of all persons authorized to give Instructions or any other
notice, request, direction, instruction, certificate or instrument on behalf of
the Fund, and (b) the names, titles and signatures of those persons authorized
to countersign or confirm Special Instructions on behalf of the Fund (in both
cases collectively, the "Authorized Persons" and individually, an "Authorized
Person"). Such Resolutions and certificates may be accepted and relied upon by
the Custodian as conclusive evidence of the facts set forth therein and shall be
considered to be in full force and effect until delivery to the Custodian of a
similar Resolution or certificate to the contrary. Upon delivery of a
certificate which deletes or does not include the name(s) of a person previously
authorized to give Instructions or to countersign or confirm Special
Instructions, such persons shall no longer be considered an Authorized Person
authorized to give Instructions or to countersign or confirm Special
Instructions. Unless the certificate specifically requires that the approval of
anyone else will first have been obtained, the Custodian will be under no
obligation to inquire into the right of the person giving such Instructions or
Special Instructions to do so. Notwithstanding any of the foregoing, no
Instructions or Special Instructions received by the Custodian from the Fund
will be deemed to authorize or permit any director, trustee, officer, employee,
or agent of the Fund to withdraw any of the Assets of the Fund upon the mere
receipt of such authorization, Special Instructions or Instructions from such
director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC
SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed pursuant to
Sections 5(b), (c), or (d) of this Agreement, the Custodian shall have and
perform the powers and duties hereinafter set forth in this Section 4. For
purposes of this Section 4 all references to powers and duties of the
"Custodian"
3
<PAGE>
shall also refer to any Domestic Subcustodian appointed pursuant to Section
5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of the Fund which are
delivered to it from time to time. The Custodian shall not be responsible for
any property of the Fund held or received by the Fund and not delivered to the
Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of the Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities which have
been delivered to it in physical form, by registering the same in the name of
the Fund or its nominee, or in the name of the Custodian or its nominee, for
whose actions the Fund and Custodian, respectively, shall be fully responsible.
Upon the receipt of Instructions, the Custodian shall hold such Securities in
street certificate form, so called, with or without any indication of fiduciary
capacity. However, unless it receives Instructions to the contrary, the
Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the Fund or only assets held by the
Custodian as a fiduciary, provided that the records of the Custodian shall
indicate at all times the Fund or other customer for which such Securities are
held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities owned
by the Fund in, and the Fund hereby approves use of: (a) The Depository Trust
Company; (b) The Participants Trust Company; and (c) any book-entry system as
provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by the Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred
4
<PAGE>
to in this Agreement as a "Securities system", and all such Securities Systems
shall be listed on the attached Appendix A. Use of a Securities System shall be
in accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or
through one or more agents or Subcustodians which are also qualified to
act as custodians for investment companies.
(ii) The Custodian shall deposit and/or maintain the
Securities in a Securities System, provided that such Securities are
represented in an account ("Account") of the Custodian in the
Securities System that includes only assets held by the Custodian as a
fiduciary, custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all
times identify those Securities belonging to the Fund which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of the Fund only upon (a) receipt of advice from the Securities
System that such Securities have been transferred to the Account of the
Custodian in accordance with the rules of the Securities System, and
(b) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The Custodian
shall transfer Securities sold for the account of the Fund only upon
(a) receipt of advice from the Securities System that payment for such
Securities has been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making
of an entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all advices from the
Securities System relating to transfers of Securities for the account
of the Fund shall be maintained for the Fund by the Custodian. The
Custodian shall deliver to the Fund on the next succeeding business day
daily transaction reports which shall include each day's transactions
in the Securities System for the account of the Fund. Such transaction
reports shall be delivered to the Fund or any agent designated by the
Fund pursuant to Instructions, by computer or in such other manner as
the Fund and Custodian may agree.
(v) The Custodian shall, if requested by the Fund pursuant to
Instructions, provide the Fund with reports obtained by the Custodian
or any Subcustodian with respect to a Securities System's accounting
system, internal
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accounting control and procedures for safeguarding
Securities deposited in the Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of the Fund as
promptly as practicable and shall take all actions reasonably
practicable to safeguard the Securities of the Fund maintained with
such Securities System.
(c) Free Delivers of Assets.
Notwithstanding any other provision of this Agreement and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with the Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for the Fund for other Securities or cash paid in
connection with any reorganization, recapitalization, merger, consolidation, or
conversion of convertible Securities, and will deposit any such Securities in
accordance with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for the Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has received
Special Instructions to the contrary, such payment will be made only upon
receipt of Securities by the Custodian, a clearing corporation of a national
Securities exchange of which the Custodian is a member, or a Securities System
in accordance with
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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(1), and 4(m) hereof,
the Custodian may make payment therefor before receipt of an advice of
transaction; and (iii) in the case of Securities as to which payment for the
Security and receipt of the instrument evidencing the Security are under
generally accepted trade practice or the terms of the instrument representing
the Security expected to take place in different locations or through separate
parties, such as commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar Securities, the Custodian may make payment for
such Securities prior to delivery thereof in accordance with such generally
accepted trade practice or the terms of the instrument representing such
Security.
(2) Other Assets Purchased. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of the Fund as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the Custodian
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, Securities held in physical form may be delivered
and paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for,
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or return of, such Securities by the broker or its clearing agent, and provided
further that the Custodian shall not be responsible for the selection of or the
failure or inability to perform of such broker or its clearing agent or for any
related loss arising from delivery or custody of such Securities prior to
receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of the Fund as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of an option
or sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by the Fund; (b) if the transaction involves the sale of a covered
call option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of the Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"j, the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked option
including stock index and commodity options), the Custodian, the Fund and the
broker-dealer shall enter into an agreement to comply with the rules of the OCC
or of any registered national securities exchange or similar organizations(s).
Pursuant to that agreement and the Fund's Instructions, the Custodian shall: (a)
receive and retain confirmations or other documents, if any, evidencing the
writing of the option; (b) deposit and maintain in a segregated account,
Securities (either physically or by book-entry in a Securities System), cash
and/or other Assets; and (c) pay, release and/or transfer such Securities, cash
or other Assets in accordance with any such agreement and with any notices or
other communications evidencing the expiration, termination or exercise of such
option which are furnished to the Custodian by the OCC, the securities or
options exchanges on which such options were traded, or such other organization
as may be responsible for handling such option transactions. The Fund and the
broker-dealer shall be responsible for determining the quality and quantity of
assets held in any segregated account established in compliance with applicable
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margin maintenance requirements and the performance of other
terms of any option contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the Fund, the Custodian and the designated
futures commission merchant (a "Procedural Agreement"). Under the Procedural
Agreement the Custodian shall: (a) receive and retain confirmations, if any,
evidencing the purchase or sale of a futures contract or an option on a futures
contract by the Fund; (b) deposit and maintain in a segregated account cash,
Securities and/or other Assets designated as initial, maintenance or variation
"margin" deposits intended to secure the Fund's performance of its obligations
under any futures contracts purchased or sold, or any options on futures
contracts written by the Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements. The
Fund and such futures commission merchant shall be responsible for determining
the type and amount of Assets held in the segregated account or paid to the
broker-dealer in compliance with applicable margin maintenance requirements and
the performance of any futures contract or option on a futures contract in
accordance with its terms.
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish and
maintain on its books a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred Assets of the Fund,
including Securities maintained by the Custodian in a Securities System pursuant
to Paragraph (b)(3) of this Section 4, said account or accounts to be maintained
(i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and (ii) for the
purpose of compliance by the Fund with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
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(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to
be surrendered Securities to the depositary used for such Securities by an
issuer of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to
be surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar Securities to the issuer or trustee
thereof (or to the agent of such issuer or trustee) for the purpose of exercise
or sale, provided that the new Securities, cash or other Assets, if any,
acquired as a result of such actions are to be delivered to the Custodian; and
(b) deposit Securities upon invitations for tenders thereof, provided that the
consideration for such Securities is to be paid or delivered to the Custodian,
or the tendered Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the Fund of such action in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing.
The Fund agrees that if it gives an Instruction for the performance of
an act on the last permissible date of a period established by any optional
offer or on the last permissible date for the performance of such act, the Fund
shall hold the Bank harmless from any adverse consequences in connection with
acting upon or failing to act upon such Instructions.
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(1) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to,
collectively, as "Interest Bearing Deposits") for the account of the Fund, the
Custodian shall purchase such Interest Bearing Deposits in the name of the Fund
with such banks or trust companies, including the Custodian, any Subcustodian or
any subsidiary or affiliate of the Custodian (hereinafter referred to as
"Banking Institutions"), and in such amounts as the Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in US Dollars or
other currencies, as the Fund may determine and direct pursuant to Instructions.
The responsibilities of the Custodian to the Fund for Interest Bearing Deposits
issued by the Custodian shall be that of a US bank for a similar deposit. With
respect to Interest Bearing Deposits other than those issued by the Custodian,
(a) the Custodian shall be responsible for the collection of income and the
transmission of cash to and from such accounts; and (b) the Custodian shall have
no duty with respect to the selection of the Banking Institution or for the
failure of such Banking Institution to pay upon demand.
(m) Foreign Exchange Transactions Other than as Principal.
(1) Upon receipt of Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies for spot
and future delivery on behalf of and for the account of the Fund with such
currency brokers or Banking Institutions as the Fund may determine and direct
pursuant to Instructions. The Fund accepts full responsibility for its use of
third party foreign exchange brokers and for execution of said foreign exchange
contracts and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred as a result of the failure or
delay of its third party broker to deliver foreign exchange. The Custodian shall
have no responsibility with respect to the selection of the currency brokers or
Banking Institutions with which the Fund deals or, so long as the Custodian acts
in accordance with Instructions, for the failure of such brokers or Banking
Institutions to comply with the terms of any contract or option.
(2) Notwithstanding anything to the contrary contained herein, upon
receipt of Instructions the Custodian may, in connection with a foreign exchange
contract, make free outgoing payments of cash in the form of U.S. Dollars or
foreign currency prior to receipt of confirmation of such foreign exchange
contract or confirmation that the countervalue currency completing such contract
has been delivered or received.
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(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from the Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by the Fund with various lenders including but not limited to UMB
Bank, n.a.; provided, however, that the Securities shall be released only upon
payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions, the
Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu of
delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the Fund to the borrower thereof
only upon receipt of the collateral for such borrowing. The Custodian shall have
no responsibility or liability for any loss arising from the delivery of
Securities prior to the receipt of collateral. Upon receipt of Instructions and
the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights Etc.
The Custodian shall receive and collect all stock dividends, rights,
and other items of like nature and, upon receipt of Instructions, take action
with respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and
mechanical matters in accordance with industry standards in
connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with Securities or other property of
the Fund except as may be otherwise provided in this Agreement or
directed from time to time by Instructions from the Fund. The
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Custodian may also make payments to itself or others from the Assets for
disbursements and out-of-pocket expenses incidental to handling Securities or
other similar items relating to its duties under this Agreement, provided that
all such payments shall be accounted for to the Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to the Fund
with respect to portfolio Securities and other Assets; (b) promptly credit to
the account of the Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and the Fund; (c) promptly endorse and deliver any instruments
required to effect such collection; and (d) promptly execute ownership and other
certificates and affidavits for all federal, state, local and foreign tax
purposes in connection with receipt of income or other payments with respect to
portfolio Securities and other Assets, or in connection with the transfer of
such Securities or other Assets; provided, however, that with respect to
portfolio Securities registered in so-called street name, or physical Securities
with variable interest rates, the Custodian shall use its best efforts to
collect amounts due and payable to the Fund. The Custodian shall notify the Fund
in writing by facsimile transmission or in such other manner as the Fund and
Custodian may agree in writing if any amount payable with respect to portfolio
Securities or other Assets is not received by the Custodian when due. The
Custodian shall not be responsible for the collection of amounts due and payable
with respect to portfolio Securities or other Assets that are in default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank account
or accounts on the books of the Custodian; provided that such bank account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
the Fund, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit.
(s) Dividends, Distributions and Redemptions.
To enable the Fund to pay dividends or other distributions to
shareholders of the Fund and to make payment to shareholders who have requested
repurchase or redemption of their shares of the Fund (collectively, the
"Shares"), the Custodian shall release cash or Securities insofar as available.
In the case of cash, the Custodian shall, upon the receipt of Instructions,
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<PAGE>
transfer such funds by check or wire transfer to any account at any bank or
trust company designated by the Fund in such Instructions. In the case of
Securities, the Custodian shall, upon the receipt of Special Instructions, make
such transfer to any entity or account designated by the Fund in such Special
Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments received
for shares issued or sold from time to time by the Fund, and shall credit such
funds to the account of the Fund. The Custodian shall notify the Fund of
Custodian's receipt of cash in payment for shares issued by the Fund by
facsimile transmission or in such other manner as the Fund and the Custodian
shall agree. Upon receipt of Instructions, the Custodian shall: (a) deliver all
federal funds received by the Custodian in payment for shares as may be set
forth in such Instructions and at a time agreed upon between the Custodian and
the Fund; and (b) make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian, in the amount of
checks received in payment for shares which are deposited to the accounts of the
Fund.
(u) Proxies and Notices: Compliance with the Shareholders Communication
Act of 1985.
The Custodian shall deliver or cause to be delivered to the Fund all
forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by the Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt c Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of the Fund to an issuer
which requests such information pursuant to the Shareholder Communications Act
of 1985 for the specific purpose of direct communications between such issuer
and the Fund unless the Fund directs the Custodian otherwise in writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its activities
under this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule
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31a-2 under the 1940 Act. These records shall be open for inspection by duly
authorized officers, employees or agents (including independent public
accountants) of the Fund during normal business hours of the Custodian.
The Custodian shall provide accountings relating to its activities
under this Agreement as shall be agreed upon by the Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public
Accountants.
The Custodian shall take all reasonable action as the Fund may request
to obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of the Fund's periodic reports
to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of the Fund, the Custodian shall deliver to the Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
the Fund and as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of the Fund.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of the Fund. A Domestic Subcustodian, in
accordance with the provisions of this Agreement, may also appoint a Foreign
Subcustodian, Special Subcustodian, or Interim Subcustodian to act on behalf of
the Fund. For purposes of this Agreement, all Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians and Interim Subcustodians shall be referred
to collectively as "Subcustodians".
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(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time, appoint any bank
as defined in Section 2(a)(5) of the 1940 Act or any trust company or other
entity, any of which meet the requirements of a custodian under Section 17(f) of
the 1940 Act and the rules and regulations thereunder, to act for the Custodian
on behalf of the Fund as a subcustodian for purposes of holding Assets of the
Fund and performing other functions of the Custodian within the United States (a
"Domestic Subcustodian"). The Fund shall approve in writing the appointment of
the proposed Domestic Subcustodian; and the Custodian's appointment of any such
Domestic Subcustodian shall not be effective without such prior written approval
of the Fund. Each such duly approved Domestic Subcustodian shall be listed on
Appendix A attached hereto, as it may be amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic Subcustodian
to appoint, any bank, trust company or other entity meeting the requirements of
an "eligible foreign custodian" under Section 17(f) of the 1940 Act and the
rules and regulations thereunder to act for the Custodian on behalf of the Fund
as a subcustodian or sub-subcustodian (if appointed by a Domestic Subcustodian)
for purposes of holding Assets of the Fund and performing other functions of the
Custodian in countries other than the United States of America (hereinafter
referred to as a "Foreign Subcustodian" in the context of either a subcustodian
or a sub-subcustodian); provided that the Custodian shall have obtained written
confirmation from the Fund of the approval of the Board of Directors or other
governing body of the Fund (which approval may be withheld in the sole
discretion of such Board of Directors or other governing body or entity) with
respect to (i) the identity of any proposed Foreign Subcustodian (including
branch designation), (ii) the country or countries in which, and the securities
depositories or clearing agencies (hereinafter "Securities Depositories and
Clearing Agencies"), if any, through which, the Custodian or any proposed
Foreign Subcustodian is authorized to hold Securities and other Assets of the
Fund, and (iii) the form and terms of the subcustodian agreement to be entered
into with such proposed Foreign Subcustodian. Each such duly approved Foreign
Subcustodian and the countries where and the Securities Depositories and
Clearing Agencies through which they may hold Securities and other Assets of the
Fund shall be listed on Appendix A attached hereto, as it may be amended, from
time to time. The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held in a
country in which no Foreign Subcustodian is authorized to act, in order that
there shall be sufficient time for the Custodian, or any Domestic Subcustodian,
to effect the appropriate arrangements with a proposed Foreign Subcustodian,
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including obtaining approval as provided in this Section 5(b). In connection
with the appointment of any Foreign Subcustodian, the Custodian shall, or shall
cause the Domestic Subcustodian to, enter into a subcustodian agreement with the
Foreign Subcustodian in form and substance approved by the Fund. The Custodian
shall not consent to the amendment of, and shall cause any Domestic Subcustodian
not to consent to the amendment of, any agreement entered into with a Foreign
Subcustodian, which materially affects the Fund's rights under such agreement,
except upon prior written approval of the Fund pursuant to Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that the Fund shall invest
in an Asset to be held in a country in which no Foreign Subcustodian is
authorized to act, the Custodian shall notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian shall agree in
writing of the unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from the Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an n Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on behalf of
the Fund, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act for the Custodian on behalf of
the Fund as a subcustodian for purposes of: (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities through the use of a
common custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
the Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the Fund in Special Instructions. The Custodian shall not
amend any subcustodian agreement entered into with a Special Subcustodian, or
waive any rights under such agreement, except upon prior approval pursuant to
Special Instructions.
17
<PAGE>
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon notification to
the Fund, terminate any Subcustodian of the Fund in accordance with the
termination provisions under the applicable subcustodian agreement, and upon the
receipt of Special Instructions, the Custodian will terminate any Subcustodian
in accordance with the termination provisions under the applicable subcustodian
agreement.
(f) Certification Regarding Foreign Subcustodians.
Upon request of the Fund, the Custodian shall deliver to the Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of the Fund; and (iii) such
other information as may be requested by the Fund, and as the Custodian shall be
reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to the Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by the Fund resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder if the Custodian or any Subcustodian or Securities System,
or any subcustodian, Securities System, Securities Depository or Clearing Agency
utilized by the Custodian or any such Subcustodian, or any nominee of the
Custodian or any Subcustodian (individually, a "Person") is prevented, forbidden
or delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason of:
(i) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or of any foreign country, or
political subdivision thereof or of any court of competent jurisdiction (and
neither the Custodian nor any other Person shall be obligated to take any action
contrary thereto); or (ii) any event beyond the control of the Custodian or
other Person such as armed conflict, riots, strikes, lockouts,
18
<PAGE>
labor disputes, equipment or transmission failures, natural disasters, or
failure of the mails, transportation, communications or power supply; or (iii)
any "Sovereign Risk." A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting the Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by the Fund,
insofar as such loss, damage or expense arises from the performance of the
Custodian or any * Domestic Subcustodian in reliance upon records that were
maintained for the Fund by entities other than the Custodian or any Domestic
Subcustodian prior to the Custodian's employment hereunder.
(d) Advice of Counsel.
On a mutually agreeable basis, the Custodian and all Domestic
Subcustodians shall be entitled to receive and act upon advice of counsel on all
matters. The Custodian and all Domestic Subcustodians shall be without liability
for any actions taken or omitted in good faith pursuant to the advice of
counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice of
the Fund and upon statements of the Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully protected
and indemnified in acting as a custodian hereunder upon any Resolutions of the
Board of Directors or Trustees, Instructions, Special Instructions, advice,
notice, request, consent, certificate, instrument or paper appearing to it to be
genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from the Fund hereunder a certificate
signed by any officer of
19
<PAGE>
the Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liabilities.
Without limiting the generality of any other provisions hereof, neither
the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by
or for the Fund, the legality of the purchase thereof or evidence of
ownership required to be received by the Fund, or the propriety of the
decision to purchase or amount paid therefor;
(ii) the legality of the sale of any Securities by or for the
Fund, or the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities,
borrowings or similar actions with respect to the Fund's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of the Fund's Declaration of Trust, Partnership
Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of the Fund, or the Fund's
currently effective Registration Statement on file with the SEC.
7. LIABILITY OP THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign
Subcustodians.
The Custodian shall be liable to the Fund for any loss or damage to the
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian
20
<PAGE>
recovers from the Foreign Subcustodian under the applicable
subcustodian agreement.
(c) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities Depositories and clearing Agencies.
The Custodian shall not be liable to the Fund for any loss, damage or
expense suffered or incurred by the Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the negligence or willful
misfeasance of the Custodian.
(d) Defaults or Insolvency's of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense
suffered or incurred by the Fund resulting from or occasioned by the actions,
omissions, neglects, defaults or insolvency of any broker, bank, trust company
or any other person with whom the Custodian may deal (other than any of such
entities acting as a Subcustodian, Securities System or Securities Depository
and Clearing Agency, for whose actions the liability of the Custodian is set out
elsewhere in this Agreement) unless such loss, damage or expense is caused by,
or results from, the gross negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
The Fund agrees to reimburse the Custodian for all reasonable
out-of-pocket expenses incurred by the Custodian in connection with this
Agreement, but excluding salaries and usual overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by Fund.
Subject to the limitations set forth in this Agreement, the Fund agrees
to indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If the Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money
21
<PAGE>
or which may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in addition
to the obligations provided in Sections 6 and 7, the Custodian agrees to
indemnify and hold harmless the Fund from all losses, damages and expenses
suffered or incurred by the Fund caused by or resulting from the negligence or
willful misfeasance of the Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of the Fund as to which there would
be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of the Fund, the Custodian
may, in its discretion without further Instructions, provide an advance
("Advance") to the Fund in an amount sufficient to allow the completion of the
transaction by reason of which such payment or transfer of funds is to be made.
In addition, in the event the Custodian is directed by Instructions to make any
payment or transfer of funds on behalf of the Fund as to which it is
subsequently determined that the Fund has overdrawn its cash account with the
Custodian as of the close of business on the date of such payment or transfer,
said overdraft shall constitute an Advance. Any Advance shall be payable by the
Fund on demand by Custodian, unless otherwise agreed by the Fund and the
Custodian, and shall accrue interest from the date of the Advance to the date of
payment by the Fund to the Custodian at a rate agreed upon in writing from time
to time by the Custodian and the Fund. It is understood that any transaction in
respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund, and not, by reason of such Advance, deemed to be a transaction
undertaken by the Custodian for its own account and risk. The Custodian and the
Fund acknowledge that the purpose of Advances is to finance temporarily the
purchase or sale of Securities for prompt delivery in accordance with the
settlement terms of such transactions or to meet emergency expenses not
reasonably foreseeable by the Fund. The Custodian shall promptly notify the
22
<PAGE>
Fund of any Advance. Such notification shall be sent by facsimile transmission
or in such other manner as the Fund and the Custodian may agree.
10. LIENS.
The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of its duties hereunder, except such as may arise from its or
its nominee's negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the Custody Account shall be security therefor
and the Fund hereby grants security interest therein to the Bank. The Fund shall
promptly reimburse the Bank for any such advance of cash or securities or any
such taxes, charges, expenses, assessments, claims or liabilities upon request
for payment, but should the Fund fail to so reimburse the Bank, the Bank shall
be entitled to dispose of such Property to the extent necessary to obtain
reimbursement. The Bank shall be entitled to debit any account of the Fund with
the Bank including, without limitation, the Custody Account, in connection with
any such advance and any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
The Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and the Fund from time to time. Such compensation,
together with all amounts for which the Custodian is to be reimbursed in
accordance with Section 7(e), shall be billed to the Fund and paid in cash to
the Custodian.
12. POWERS OF ATTORNEY.
Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
13. TERMINATION AND ASSIGNMENT.
The Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the Fund
shall pay to the Custodian such fees as may be due the Custodian
23
<PAGE>
hereunder as well as its reimbursable disbursements, costs and expenses paid or
incurred. Upon termination of this Agreement, the Custodian shall deliver, at
the terminating party's expense, all Assets held by it hereunder to the Fund or
as otherwise designated by the Fund by Special Instructions Upon such delivery,
the Custodian shall have no further obligations or liabilities under this
Agreement except as to the final resolution of matters relating to activity
occurring prior to the effective date of termination.
This Agreement may not be assigned by the Custodian or the Fund without
the respective consent of the other, duly authorized by a resolution by its
Board of Directors or Trustees.
14. NOTICES.
Notices, requests, instructions and other writings delivered to the
Fund at BMA Tower, 700 Karnes Boulevard, Kansas City, Missouri 64108, postage
prepaid, or to such other address as the Fund may have designated to the
Custodian in writing, shall be deemed to have been properly delivered or given
to the Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration Department of the Custodian at its office at 928 Grand
Avenue, Kansas City, Missouri, or mailed postage prepaid, to the Custodian's
Securities Administration Department, Post Office Box 226, Kansas City, Missouri
64141, or to such other addresses as the Custodian may have designated to the
Fund in writing, shall be deemed to have been properly delivered or given to the
Custodian hereunder; provided, however, that procedures for the delivery of
Instructions and Special Instructions shall be governed by Section 2(c) hereof.
15. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State of Missouri
and shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be binding
upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or waived,
in any manner except in writing, properly executed by both parties hereto;
provided, however, Appendix A may be amended from time to time as Domestic
Subcustodians, Foreign Subcustodians, Special Subcustodians, and Securities
Depositories and Clearing Agencies are approved or terminated according to the
terms of this Agreement.
(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit
24
<PAGE>
any of the provisions hereof or otherwise affect their
construction or effect.
(e) This Agreement shall be effective as of the date of
execution
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term 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)
Liens 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2(a)
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2(c)(2)
Special Subcustodian 5(d)
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.
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<PAGE>
(i) This Agreement constitutes the entire understanding and agreement
the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody
Agreement be executed by their duly respective authorized officers.
SCOUT CAPITAL PRESERVATION FUND, INC.
By:
ATTEST:
UMB Bank, n.a.
By:
ATTEST:
26
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APPENDIX A
DOMESTIC SUBCUSTODIANS:
United Missouri Bank Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS AND CLEARING AGENCIES
Euroclear
SCOUT CAPITAL PRESERVATION FUND, INC.
By:
Title:
Date:
UMB Bank, n.a.
By:
Title:
27
TRANSFER AGENCY AGREEMENT
This Agreement made as of the ____ day of __________, 1997 between UMB
Bank, n.a. (the "Manager"), a national banking association with its principal
place of business located at Kansas City, Missouri, Scout Capital Preservation
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
<PAGE>
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
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<PAGE>
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 Manager, acting for
the benefit of the Fund, hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform duties thereof as hereinafter
set forth.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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;
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<PAGE>
(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.
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
-10-
<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
-15-
<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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,
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<PAGE>
and no covenant or obligation shall be implied in this Agreement
against the Transfer Agent.
15. Purchase and Prices of Services:
(a) The Manager will compensate the Transfer Agent for, and Transfer
Agent will provide, beginning on the execution date of this Agreement and
continuing until the termination of this Agreement as provided hereinafter, the
services set forth in Schedule I.
(b) The current unit prices for the services are set forth in Schedule
II (the "Schedule II Fees"). Effective as of January 1, 1997, once in each
calendar year, the Transfer Agent may elect to raise the Schedule II Fees upon
ninety (90) days prior notice to the Fund, all subject to the mutual agreement
of the parties hereto. Notwithstanding the annual right to raise the Schedule II
Fees, the Transfer Agent may increase prices due to changes in legal or
regulatory requirements subject to the approval of the Fund, which approval
shall not be unreasonably withheld.
16. Billing and Payment:
(a) The Transfer Agent shall bill the Manager monthly in arrears for
accounts maintained and Out-of-Pocket Expenses. The Transfer Agent may from time
to time request that the Fund advance estimated expenditures of an unusual
nature subject to reconciliation of actual expenses as soon as practicable
thereafter.
(b) The Manager shall pay the Transfer Agent in immediately
available funds at UMB Bank, n.a. in Kansas City, Missouri within
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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 (1 1/2%) per month from such date until paid in
full.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than sixty (60) days after the date of receipt of such
notice. In the event such notice is given by the Manager, it shall be
accompanied by a copy of a resolution of the Board of Directors of the Manager,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating the successor transfer agent or transfer agents.
In the event such notice is given by the Transfer Agent, the Manager shall on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors, certified by the Secretary or any
Assistant Secretary, designating a successor transfer agent or transfer agents.
In the absence of such designation by the Manager, the Fund shall upon the date
specified in the notice of termination of this Agreement and delivery of the
records maintained hereunder, be deemed to be its own transfer agent and the
Transfer Agent shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement.
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of the
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<PAGE>
Manager or the Fund, shall deliver the records of the Fund on electromagnetic
media to the Fund or its successor transfer agent. The Fund shall be responsible
to the Transfer Agent for the reasonable costs and expenses associated with the
preparation and delivery of such media.
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:
BMA Tower
700 Karnes Boulevard
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
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shall be sufficiently given if addressed to the Transfer Agent
and mailed or delivered to:
BMA Tower
700 Karnes Boulevard
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:
UMB Bank, n.a.
Kansas City, MO 64108
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
-32-
<PAGE>
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.
UMB BANK, n.a.
By:
Name:
Title: President
[SEAL]
JONES & BABSON, INC.
By:
Name: Larry D. Armel
Title: President
[SEAL]
Agreed:
SCOUT CAPITAL PRESERVATION FUND, INC.
By:
Name:
Title:
-33-
<PAGE>
Law Offices
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8024
November 21, 1997
Scout Capital Preservation Fund, Inc.
c/o Jones & Babson, Inc.
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
Re: Scout Capital Preservation Fund, Inc.
Ladies and Gentlemen:
We have examined the Articles of Incorporation and Bylaws of
Scout Capital Preservation Fund, Inc. (the "Company"), a Maryland corporation
formed on October 16, 1997 and other proceedings of the Company that we deem
material. We have also examined the Notification of Registration and the
Registration Statement to be filed under the Investment Company Act of 1940
("Investment Company Act") and the Securities Act of 1933 ("Securities Act"), as
well as other items we deem material to this opinion.
The Company is authorized by its Articles of Incorporation to
issue 10,000,000 shares of common stock, par value $1.00 per share. The Articles
of Incorporation authorize the Board of Directors to divide the shares into
separate series and to divide the series into separate classes.
<PAGE>
Scout Capital Preservation Fund, Inc.
November 21, 1997
Page 2
The Company's filing with the U.S. Securities and Exchange
Commission of its Registration Statement under the Securities Act will register
an indefinite number of shares of its common stock pursuant to the provisions of
Rule 24f-2 under the Investment Company Act. You have further advised us that
each year hereafter the Company will timely file a Notice pursuant to Rule 24f-2
perfecting the registration of the shares of common stock sold by the Company
during each fiscal year.
You have also informed us that the shares of common stock of
the Company will be sold in accordance with the Company's usual method of
distributing its registered shares of common stock, under which prospectuses are
made available for delivery to offerees and purchasers of such shares in
accordance with Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, it is
our opinion that the Company is a valid and subsisting corporation under the
laws of the State of Maryland, and that the shares of the Company's common stock
when issued for the consideration set by the Board of Directors pursuant to the
Articles of Incorporation, and subject to compliance with Rule 24f-2, will be
legally outstanding, fully-paid, and non-assessable shares of common stock of
the Company and the holders of such shares will have all the rights provided for
with respect to such holding by the Articles of Incorporation and the laws of
the State of Maryland.
We hereby consent to the filing of this opinion with the U.S.
Securities and Exchange Commission as an exhibit to the Company's Registration
Statement under the Securities Act, and to any reference to us in such
Registration Statement as legal counsel who have passed upon the legality of the
offering of the Company's shares of common stock. We also consent to the filing
of this opinion with the securities regulatory agencies of any states or other
jurisdictions in which shares of the Company are offered for sale.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /s/ Mark H. Plafker
Mark H. Plafker, a partner
MPO/cdj
233038.1
cc: Larry D. Armel, Esq.
John G. Dyer, Esq.
Michael P. O'Hare, Esq.
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of Scout Capital Preservation Fund, Inc.,
a Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the Scout Capital Preservation 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 the undersigned does hereby appoint each of the persons hereinafter set out
as his attorney each with the power to act severally in the name of the
undersigned and to execute on his 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 the Scout Capital Preservation Fund, Inc. and
in the maintenance of such registrations.
Larry D. Armel
Martin A. Cramer
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.
/s/William E. Hoffman
William E. Hoffman
Sworn to before me this 19th day of November, 1997.
/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri
My commission expires April 20, 2001.
SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of Scout Capital Preservation Fund, Inc.,
a Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the Scout Capital Preservation 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 the undersigned does hereby appoint each of the persons hereinafter set out
as his attorney each with the power to act severally in the name of the
undersigned and to execute on his 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 the Scout Capital Preservation Fund, Inc. and
in the maintenance of such registrations.
Larry D. Armel
Martin A. Cramer
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.
/s/Eric T. Jager
Eric T. Jager
Sworn to before me this 19th day of November, 1997.
/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri
My commission expires April 20, 2001.
SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of Scout Capital Preservation Fund, Inc.,
a Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the Scout Capital Preservation 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 the undersigned does hereby appoint each of the persons hereinafter set out
as his attorney each with the power to act severally in the name of the
undersigned and to execute on his 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 the Scout Capital Preservation Fund, Inc. and
in the maintenance of such registrations.
Larry D. Armel
Martin A. Cramer
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.
/s/Stephen F. Rose
Stephen F. Rose
Sworn to before me this 19th day of November, 1997.
/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri
My commission expires April 20, 2001.
SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001
<PAGE>
POWER OF ATTORNEY
WHEREAS the undersigned is a Director of Scout Capital Preservation Fund, Inc.,
a Maryland Corporation which intends to do business as an open-end diversified
investment company (mutual fund), and
WHEREAS the Scout Capital Preservation 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 the undersigned does hereby appoint each of the persons hereinafter set out
as his attorney each with the power to act severally in the name of the
undersigned and to execute on his 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 the Scout Capital Preservation Fund, Inc. and
in the maintenance of such registrations.
Larry D. Armel
Martin A. Cramer
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of November, 1997.
/s/Stuart Wien
Stuart Wien
Sworn to before me this 19th day of November, 1997.
/s/Sandra A. Vinzant
Sandra A. Vinzant, Notary Public
County of Jackson, State of Missouri
My commission expires April 20, 2001.
SANDRA A. VINZANT
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
My Commission Expires: April 20, 2001
