<PAGE>
As filed with the Securities and Exchange Commission on October 28, 1998
1933 Act Registration No. 33-5435
1940 Act Registration No. 811-4658
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. 13 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 14 [ X ]
(Check appropriate box or boxes)
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
(Exact name of registrant as specified in charter)
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
(Address of principal executive offices)
Registrant's telephone number, including area code:
(901) 524-4100
ALLEN B. MORGAN, JR.
Morgan Keegan Tower
Memphis, Tennessee 38103
(Name and address of Agent for Service)
Copies to:
ARTHUR J. BROWN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D. C. 20036-1800
Telephone: (202) 778-9000
It is proposed that this filing will become effective:
Immediately upon filing pursuant to Rule 485(b)
---
X On November 1, 1998 pursuant to Rule 485(b)
---
60 days after filing pursuant to Rule 485(a)(1)
---
On ______ pursuant to Rule 485(a)(1)
---
75 days after filing pursuant to rule 485(a)(2)
---
On ____________ pursuant to Rule 485(a)(2)
---
If appropriate, check the following box:
This Post-Effective Amendment designates a new effective
--- date for a previously filed Post-Effective Amendment
<PAGE>
Morgan Keegan Southern Capital Fund, Inc.
Contents of Registration Statement
This Registration Statement consists of the following papers and documents.
Table of Contents
Cross Referenced Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
Morgan Keegan Southern Capital Fund, Inc.
Form N-1A Cross Reference Sheet
Part A Item No. Prospectus Caption
1 Cover Page
2 Questions and Answers About Morgan Keegan
Southern Capital Fund, Inc.; Summary of
Fund Expenses
3 Financial Highlights
4 The Fund's Investment Objective and
Policies; The Fund's Investment
Limitations; Description of the
Fund and its Shares
5 The Fund's Management and Investment
Adviser
The Fund's Custodian,
Transfer and Dividend-Disbursing Agent
5A The Fund's Management and Investment
Adviser; Financial Highlights;
Performance Information
6 How your Shareholder Account is
Maintained;
Dividends, Capital Gain Distributions
And Taxes;
Shareholder Services; Description of
the Fund and its Shares
7 How You Can Invest in the Fund
How Net Asset Value is Determined
Shareholder Services
The Fund's Distributor
8 How You Can Sell Your Fund Shares
9 Not Applicable
Statement of Additional Information
Part B Item No. Information Caption
10 Cover Page
11 Table of Contents
12 Included in Part A
13 Additional Information About Investment
Limitations and Policies
<PAGE>
Statement of Additional Information
Part B Item No. Information Caption
14 The Fund's Directors and Officers
15 The Fund's Principal Shareholders
16 The Fund's Investment Adviser;
The Fund's Distributor;
The Fund's Custodian, Transfer Agent,
Dividend-Disbursing Agent, and Portfolio
Accounting Service Agent;
The Fund's Certified Public Accountants
17 Portfolio Transactions and Brokerage
18 Included in Part A
19 Additional Purchase and Redemption
Information
Valuation of Shares
20 Additional Tax Information;
Tax-Deferred Retirement Plans;
Additional Purchase and Redemption
Information
21 The Fund's Distributor
22 Performance Information
23 Financial Statements
<PAGE>
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
Item 23. Exhibits:
(1) Articles of Incorporation dated May 5, 1986 (filed herewith)
(2) By-laws as amended August 24, 1987 (filed herewith)
(3) Voting trust agreement - none
(4) Instruments defining the Rights of Shareholders
(a) Articles of Incorporation (filed herewith as Exhibit 1)
(b) By-laws (filed herewith as Exhibit 2)
(5) Investment Advisory and Management Agreement (filed herewith)
(6) Underwriting Agreement (filed herewith)
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement (filed herewith)
(9) (a) Agency Agreement (filed herewith)
(b) Fund Accounting Service Agreement (filed herewith)
(10) Opinion and consent of counsel (filed herewith)
(11) Other opinions, appraisals, rulings and consents -
Accountants' Consent (filed herewith)
(12) Financial statements omitted from statement of
additional information - none
(13) Letter of investment intent (filed herewith)
(14) Prototype Retirement Plan - none
(15) Amended Distribution Plan pursuant to Rule 12b-1 (filed herewith)
(16) Fnancial Data Schedule (filed herewith)
(17) Plan pursuant to Rule 18f-3 (not applicable)
Item 24. Persons controlled by or under Common Control with Registrant
None.
Item 25. Indemnification
Section 10.1 of the Corporation's By-Laws provides that:
Section 10.1 Indemnification of Officers, Directors, Employees and Agents. the
Corporation shall indemnify its present and past Directors, officers, employees
and agents, and any persons who are serving or have served at the request of the
corporation as a Director, officer, employee or agent of another cororation,
partnership, joint venture, trust, or enterprise, to the full extent provided
and allowed by Section 2-418 of the Corporations and Associations Code of
Maryland, as amended from time to time or
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws in a manner consistent with Investment Company Act
Release No. 11330 so long as the interpretation of Section 17(h) and 17(i)
therein remains in effect.
Item 26. Business and Other Connections of Investment Adviser
Morgan Asset Management, Inc., a Tennessee corporation, is a registered
investment adviser and offers investment management services to investment
companies and other types of investors. Information as to its officers and
directors is included in its Form ADV filed on May 26, 1998 with the Securities
and Exchange Commission (registration number 801-27629) and is incorporated
herein by reference.
Principal Underwriter
(a) Bedford Money Market Fund
Morgan Keegan Southern Capital Fund, Inc.
<PAGE>
(b) Morgan Keegan & Company, Inc.
Name and Positions and Positions and
Principal Business Offices With Offices With
Address Underwriter Registrant
(Principal Business Address,
unless otherwise noted, is:
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103)
Allen B. Morgan, Jr. Chairman and Director,
Chief Executive President
Officer, Executive
Managing Director
Joseph C. Weller Chief Financial Vice President,
Officer, Executive Treasurer and
Managing Director, Assistant Secretary
Executive Vice President,
Secretary and Treasurer
John W. Stokes, Jr. Vice Chairman, None
Executive Managing
Director
Robert A. Baird Executive None
Managing Director
Randolph C. Coley Executive Managing None
Director
G. Douglas Edwards Executive Managing None
Director
James H. Ganier Executive Managing None
Director
Stephen P. Laffey Executive Managing None
Director
Mark A. Lee Executive Managing None
Director
Thomas V. Orr Executive Managing None
Director
<PAGE>
James A. Parish, Jr. Executive Managing None
Director
Allen B. Adler Managing Director None
Franklin P. Allen, III Managing Director None
George E. Arras, Jr. Managing Director None
James M. Augustine Managing Director None
Joseph K. Ayers Managing Director None
Rodney D. Baber, Jr. Managing Director None
Richard G. Backus Managing Director None
George E. Bagwell Managing Director None
Woodley H. Bagwell Managing Director None
Charles E. Bailey Managing Director None
Milton A. Barber Managing Director None
Joseph C. Barkley Managing Director None
Reginald E. Barnes Managing Director None
Glen E. Bascom Managing Director None
W. Preston Battle Managing Director None
Robert (Bob) D. Berry Managing Director None
Robert C. Berry Managing Director None
Cristan K. Blackman Managing Director None
John D. Brewer Managing Director None
Paul S. Burd Managing Director None
John B. Carr, Jr. Managing Director None
John C. Carson Managing Director None
Ted H. Cashion Managing Director None
Marshall A. Clark Managing Director None
William F. Clay Managing Director None
Robert E. L. Cope Managing Director None
Mark W. Crowl Managing Director None
Brian W. Dalton Managing Director None
Harold L. Deaton Managing Director None
William W. Deupree, Jr. Managing Director None
Ted B. Donaldson Managing Director None
Robert H. Dudley, Jr. Managing Director None
Richard H. Eckels Managing Director None
Richard S. Ferguson Managing Director None
Robert M. Fockler Managing Director None
Wilmer J. Freiberg Managing Director None
Graham D.S. Fulton Managing Director None
John H. Geary Managing Director None
Robert D. Gooch, Jr. Managing Director Director
James F. Gould Managing Director None
Terry C. Graves Managing Director None
John H. Grayson, Jr. Managing Director None
Gary W. Guinn Managing Director None
David M. Guthrie Managing Director None
Jan L. Gwin Managing Director None
Thomas M. Hahn Managing Director None
Thomas V. Harkins Managing Director None
Michael J. Harris Managing Director None
Haywood H. Henderson, Jr. Managing Director None
Roderick E. Hennek Managing Director None
Edwin L. Hoopes, III Managing Director None
R. Davis Howe Managing Director None
<PAGE>
William F. Hughes, Jr. Managing Director None
Joe R. Jennings Managing Director None
Robert Jetmundsen Managing Director None
Ramkrishna Kasargod Managing Director None
Peter R. Klyce Managing Director None
Peter S. Knoop Managing Director None
W. Larry M. Knox, Jr. Managing Director None
E. Carl Krausnick, Jr. Managing Director None
James R. Ladyman Managing Director None
Welling LaGrone Managing Director None
Benton G. Landers Managing Director None
William A. Langevin Managing Director None
William M. Lellyett, Jr. Managing Director None
Willard G. Logan, Jr. Managing Director None
Wiley H. Maiden Managing Director None
John H. Martin Managing Director None
William D. Mathis, III Managing Director None
John F. Matthews Managing Director None
Francis Maus Managing Director None
Charles D. Maxwell Managing Director None
John W. Mayer Managing Director None
W. Neal McAtee Managing Director None
Harris L. McCraw, III Managing Director None
Edward S. Michelson Managing Director None
George Rolfe Miller Managing Director None
Gary C. Mills Managing Director None
David Montague Managing Director None
Robert M. Montague Managing Director None
K. Brooks Monypeny Managing Director None
John G. Moss Managing Director None
Lewis A. Moyse Managing Director None
<PAGE>
William G. Mueller Managing Director None
Mortimer S. Neblett Managing Director None
Philip G. Nichols Managing Director None
Michael O'Keefe Managing Director None
Jack A. Paratore Managing Director None
William T. (Dale) Patterson Managing Director None
Christopher J. Perkins Managing Director None
Minor Perkins Managing Director None
Logan B. Phillips, Jr. Managing Director None
L. Jackson Powell Managing Director None
S. Mark Powell Managing Director None
Richard L. Preis Managing Director None
C. David Ramsey Managing Director None
Hedi H. Reynolds Managing Director None
Donna L. Richardson Managing Director None
R. Michael Ricketts Managing Director None
Darien M. Roche Managing Director None
Thomas E. Robinson, Sr. Managing Director None
Kenneth L. Rowland Managing Director None
W. Wendell Sanders Managing Director None
E. Elkan Scheidt Managing Director None
Ronald J. Schuberth Managing Director None
Lynn T. Shaw Managing Director None
Fred B. Smith Managing Director None
Richard J. Smith Managing Director None
Robert L. Snider Managing Director None
John B. Snowden, IV Managing Director None
Thomas A. Snyder Managing Director None
<PAGE>
Richard A. Spell Managing Director None
John W. (Jack) Stokes, III Managing Director None
John B. Strange Managing Director None
James M. Tait, III Managing Director None
Phillip C. Taylor Managing Director None
James C. Taylor, Jr. Managing Director None
John D. Threadgill Managing Director None
P. Gibbs Vestal Managing Director None
Edmund J. Wall Managing Director None
W. Charles Warner Managing Director None
Richard E. Watson Managing Director None
Patrick J. Weber Managing Director None
Craig T. Weichmann Managing Director None
John S. Wilson Managing Director None
J. William Wyker Managing Director None
John J. Zollinger, III Managing Director None
(c) None
<PAGE>
Item 28. Location of Accounts and Records
The books and other documents required by paragraphs (b)(4), (c) and (d) of Rule
31a-1 under the Investment Company Act of 1940 are maintained in the physical
possession of Registrant's adviser, Morgan Asset Management, Inc., Morgan Keegan
Tower, Fifty Front Street, Memphis, Tennessee 38103. All other accounts, books
and other documents required by Rule 31a-1 are maintained in the physical
possession of Registrant's transfer agent and portfolio accounting service
provider, Morgan Keegan & Co., Morgan Keegan
Item 29. Management Services
Not applicable
Item 32. Undertakings
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Morgan Keegan Southern Capital Fund, Inc.
certifies that it meets all the requirements for effectiveness in this Post-
Effective Amendment No. 13 to its Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Memphis and State of Tennessee
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
By: /s/ Allen B. Morgan, Jr.
Allen B. Morgan, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
/s/ Allen B. Morgan, Jr. Director and President October 23, 1998
Allen B. Morgan, Jr. (Chief Executive
Officer)
/s/ Joseph C. Weller Vice President and October 23, 1998
Joseph C. Weller Treasurer (Chief
Financial Officer)
/s/ James D. Witherington, Jr. Director October 23, 1998
James D. Witherington, Jr.
/s/ Spence L. Wilson Director October 23, 1998
Spence L. Wilson
/s/ William Hughes, Jr. Director October 23, 1998
William Hughes, Jr.
/s/ William Jefferies Mann Director October 23, 1998
William Jefferies Mann
/s/ James Stillman McFadden Director October 23, 1998
James Stillman McFadden
<PAGE>
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
Exhibit Index
(1) Articles of Incorporation dated May 5, 1986 (filed herewith)
(2) By-laws as amended August 24, 1987 (filed herewith)
(3) Voting trust agreement - none
(4) Instruments defining the Rights of Shareholders
(a) Articles of Incorporation (filed herewith as Exhibit 1)
(b) By-laws (filed herewith as Exhibit 2)
(5) Investment Advisory and Management Agreement (filed herewith)
(6) Underwriting Agreement (filed herewith)
(7) Bonus, profit sharing or pension plans - none
(8) Custodian Agreement (filed herewith)
(9) (a) Agency Agreement (filed herewith)
(b) Fund Accounting Service Agreement (filed herewith)
(10) Opinion and consent of counsel (filed herewith)
(11) Other opinions, appraisals, rulings and consents -
Accountants' Consent (filed herewith)
(12) Financial statements omitted from statement of
additional information - none
(13) Letter of investment intent (filed herewith)
(14) Prototype Retirement Plan - none
(15) Amended Distribution Plan pursuant to Rule 12b-1 (filed herewith)
(16) Financial Data Schedule (filed herewith)
(17) Plan pursuant to Rule 18f-3 (not applicable)
</PAGE>
<PAGE>
QUESTIONS AND ANSWERS ABOUT
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
HOW CAN YOU BENEFIT FROM INVESTING IN THE FUND?
FIRST: Your securities investment is professionally managed, sparing you the
burden of selecting, supervising, and handling a securities portfolio.
SECOND: Your investment is in a diversified portfolio of securities of
companies in a variety of industries, saving you the usual brokerage costs
associated with a series of small purchases.
THIRD: Your investment in the Fund through an individual retirement account
("IRA") (including "education retirement accounts" and "Roth IRAs,") simplified
employee pension plan ("SEPP"), savings incentive match plan for employees
("SIMPLE"), self-employed individual retirement plan ("Keogh Plan"), cash or
deferred arrangement under section 401(k) of the Internal Revenue Code of 1986,
as amended ("401(k) Plan"), or other qualified retirement plan allows you to
defer tax on the earnings on your investment. See "Investing Through Tax-
Deferred Retirement Plans."
FOURTH: Your investment is liquid, so that you may redeem your shares at any
time at their next determined net asset value (which may be more or less than
your purchase price). However, if you withdraw before age 59 1/2 from an IRA,
SEPP, SIMPLE, Keogh Plan, 401(k) Plan or other qualified retirement plan, a
significant penalty may result. See "Investing Through Tax-Deferred Retirement
Plans" and "How You Can Sell Your Fund Shares."
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is capital appreciation. The Fund's
investment adviser, Morgan Asset Management, Inc. ("Adviser"), will seek to
achieve this objective by investing primarily in securities, including common
stock, preferred stock, and convertible and other debt securities, of companies
which are headquartered in the southern United States. For purposes of this
Prospectus, a company is "headquartered" in the southern United States if its
principal corporate offices are located in the southern United States or if
(alone or on a consolidated basis) it derives 50% or more of its total revenues
from either goods produced, sales made or services performed in the southern
United States. For purposes of this Prospectus, the "southern United States"
consists of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana,
Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee,
Texas, Virginia, and West Virginia. The Fund's investment emphasis will make its
performance especially subject to the economic conditions in this region. Of
course, there can be no assurance that the Fund will achieve its objective. See
"The Fund's Investment Objective and Policies."
2
<PAGE>
WHO SHOULD INVEST IN THE FUND?
Morgan Keegan & Company, Inc. ("Distributor"), which sells the Fund's
shares, believes that the Fund's shares of common stock are suitable for
investors interested in long-term growth of capital. Accordingly, the Fund is
not intended for investors attempting to "time" the market, seeking short-term
price appreciation.
Investors may purchase shares of the Fund at their then current net asset
value plus any applicable sales charge. The Fund pays a management fee to the
Adviser and a distribution fee to the Distributor as set forth at pages 14-17 of
this Prospectus.
The Adviser believes that the Fund's shares also may be appropriate for
investment by IRAs (including "education retirement accounts" and "Roth IRAs"),
SEPPs, SIMPLES, Keogh Plans, 401(k) Plans and other qualified retirement plans
with principal investment objectives of capital appreciation, provided that the
risks associated with investment in common stocks and in a particular geographic
area are recognized. Contributions to these plans are tax deductible within
specified limits, and earnings on investments by these plans in Fund shares
accumulate free of current income taxes.
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses (as a percentage of public offering price)
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases..................... 3.0%
Maximum Sales Charge Imposed on Reinvested Dividends.......... None
Redemption Fees............................................... None
Exchange Fees................................................. None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets after
waiver and reimbursement)*
<TABLE>
<S> <C>
Investment Advisory Fee................................... 1.00%
12b-1 Fee................................................. 0.50%
Other Expenses............................................ 0.30%
-----
Total Fund Operating Expenses......................... 1.80%
</TABLE>
You would pay the following cumulative expenses on a $1,000 investment over
the time periods shown assuming, (1) a 5% annual return, and (2) redemption at
the end of each period. As noted, the Fund charges no redemption fee of any
kind.**
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EXAMPLE............................................ $ 48 $ 85 $ 125 $ 237
</TABLE>
The purpose of the above tables is to assist an investor in understanding
the various costs and expenses that an investor in the Fund bears directly or
indirectly.
3
<PAGE>
THE ABOVE TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; THE FUND'S ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
*Annual Fund operating expenses are based on the fiscal year ended June 30,
1998. Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc. rules regarding investment companies. The Adviser
intends to waive its fee and to reimburse the Fund for a portion of its expenses
during the current fiscal year so that total operating expenses (excluding
brokerage, interest, taxes, and extraordinary expenses) do not exceed 2.0% of
net assets annually. See "The Fund's Management and Investment Adviser" on pages
14-16 for further information.
**The Example set forth above assumes that all dividends and distributions
are reinvested and that the percentage amounts listed under Annual Fund
Operating Expenses remain the same in the years shown. The assumption in the
Example of a 5% annual return is required by regulation of the Securities and
Exchange Commission applicable to all mutual funds. The assumed 5% annual return
is not a prediction of, and does not represent, the Fund's actual or projected
performance.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides condensed audited information concerning per
share and other information for the periods shown. It has been derived from
financial statements which have been examined by KPMG Peat Marwick LLP,
independent certified public accountants, for each of the years in the
seven-year period ended June 30, 1998, and by Coopers & Lybrand L.L.P.,
independent certified public accountants, through the fiscal year ended June 30,
1991. These statements, and the reports thereon, appear in the 1998 annual
report to the shareholders and are incorporated by reference in the Statement of
Additional Information.
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
6/30/98 6/30/97 6/30/96 6/30/95 6/30/94 6/30/93 6/30/92
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period........................ $21.64 $18.06 $14.34 $12.96 $14.04 $13.56 $11.79
Income from Investment
Operations
Net Investment Income
(loss)..................... (0.16 ) (0.11 ) (0.07 ) 0.08 0.06 0.05 0.08
Net Gains on Securities...... 5.57 4.64 4.08 1.67 0.03 1.65 1.98
Total from Investment
Operations................. 5.41 4.53 4.01 1.75 0.09 1.70 2.06
Less Distributions
Dividends (from net
investment income)......... (0.08 ) (0.06 ) (0.06 ) (0.09)
Distribution (from realized
gains)..................... (0.49 ) (0.87 ) (0.03 ) (0.29 ) (1.11 ) (1.16 ) (0.20)
Distribution (return of
capital)................... (0.08 ) (0.26 )
Net Asset Value, end of
period..................... $26.56 $21.64 $18.06 $14.34 $12.96 $14.04 $13.56
Total Return*................ 25.32% 26.32% 28.30% 13.81% .42% 13.32% 17.60%
Ratios/Supplemental Data
Net Assets, end of period.... 88,207,007 53,925,763 37,505,196 27,259,499 38,696,768 45,576,519 28,614,178
Expenses to Average Net
Assets**................... 1.8% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Net Investment Income (loss)
to Average Net Assets...... (.7%) (.6%) (.5%) .6% .5% .4% .6%
Portfolio Turnover Rate...... 28% 30% 69% 54% 133% 179% 152%
Average Commission Rate
Paid+...................... $0.0578 $0.0564
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
6/30/91 6/30/90 6/30/89
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value, beginning of
period........................ $11.49 $11.52 $11.09
Income from Investment
Operations
Net Investment Income
(loss)..................... 0.09 0.10 0.57
Net Gains on Securities...... 0.27 0.30 0.31
Total from Investment
Operations................. 0.36 0.40 0.88
Less Distributions
Dividends (from net
investment income)......... (0.06 ) (0.43 ) (0.45 )
Distribution (from realized
gains).....................
Distribution (return of
capital)...................
Net Asset Value, end of
period..................... $11.79 $11.49 $11.52
Total Return*................ 3.23% 3.69% 8.05%
Ratios/Supplemental Data
Net Assets, end of period.... 13,078,456 8,793,164 9,244,702
Expenses to Average Net
Assets**................... 2.0% 2.0% 2.0%
Net Investment Income (loss)
to Average Net Assets...... .9% .9% 5.1%
Portfolio Turnover Rate...... 187% 137% 136%
Average Commission Rate
Paid+......................
</TABLE>
- ----------------------------------
* TOTAL RETURN DOES NOT INCLUDE FRONT END SALES LOAD.
** 1.8%, 2.0%, 2.2%, 2.2%, 2.0%, 2.0%, 2.3%, 3.5%, 3.8% AND 3.6% BEFORE EXCESS
REIMBURSEMENT AND FEE WAIVER FROM ADVISER IN 1998, 1997, 1996, 1995, 1994,
1993, 1992, 1991, 1990 AND 1989, RESPECTIVELY.
+ Disclosure effective for fiscal years beginning on or after September 1,
1995.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital appreciation. Absent approval of
the holders of a majority of the Fund's outstanding voting securities, this
objective cannot be changed. There is no assurance that the Fund's investment
objective can be achieved. The Fund, consistent with its objective of capital
appreciation, invests primarily in securities, including common and preferred
stock, and convertible and other debt securities, of companies headquartered in
the southern United States, and may invest in securities that pay no dividends
or interest. The timing of purchases and sales on behalf of the Fund is made on
the fundamental investment merits of the securities and generally will be
uninfluenced by whether any gain from such transactions would be classified as
short-term or long-term for tax purposes.
The Fund's Adviser selects investments primarily based on a fundamental
analysis of specific companies. Analysis includes consideration of the overall
financial health and prospects of given companies, with attention to the
following factors: return on equity; rate of growth of earnings; and price to
earnings ratios, as compared to the company's historic performance and to the
ratios of the industry at large.
Under normal circumstances, at least 65% of the Fund's assets will be
invested in equity and debt securities of companies that are headquartered in
the southern United States. Consequently the Fund may invest up to 35% of its
assets in securities of companies headquartered outside that region. The Fund's
Adviser believes that the demographic and economic characteristics of the
fifteen states in the region are such that many companies headquartered there
have greater than average potential for capital appreciation. For example,
recent statistics suggest that such companies may enjoy favorable labor
conditions, with average annual pay below the national average. The Adviser also
believes that other factors exert a positive influence on companies
headquartered in the region, including generally mild climate, lower state
taxes, labor availability, and government attitudes generally favorable to
business development.
Of course, there is no assurance that the demographic and economic
characteristics that the Adviser believes favor many southern companies will
continue in the future. Local, national, and international political events and
economic trends may adversely affect the economic climate of the southern United
States. However, the Adviser believes that by investing in carefully selected
southern companies, the Fund will be able to have a securities portfolio with
greater than average potential for capital appreciation.
While the Fund will concentrate at least 65% of its investments in companies
headquartered in the southern United States, the Fund may invest up to 35% of
its assets in companies headquartered outside that region, so as to allow the
Fund to take advantage of attractive opportunities in securities of other
companies. From time to time, the Fund may write (sell) covered call options on
certain of its portfolio securities.
Investment in a portfolio of securities of companies headquartered in a
specific geographical region may involve greater risk of possible loss than
investment in a portfolio of securities of companies which have headquarters
throughout the United States. The Fund may be more affected by a common adverse
factor than a fund with a portfolio which is not geographically
6
<PAGE>
concentrated. For example, there is a risk that those economic, demographic and
other factors that, in the opinion of the Adviser, favor the growth of companies
headquartered in the southern United States might not result in the growth of
such companies or in their stock prices, or that there will be changes in those
factors in the future. However, given these economic, demographic and other
factors, the Adviser believes that such investments may also offer greater than
average long-term capital appreciation potential.
The Fund invests primarily in common stock, preferred stock and convertible
debt securities. Normally the Fund would not expect to invest more than 35% of
its assets in non-convertible debt securities, including high quality money
market instruments (such as certificates of deposit), repurchase agreements and
cash. The Fund expects to invest only in investment grade debt securities. The
value of such securities normally is expected to increase as interest rates
decrease, and conversely to decrease as interest rates increase. For temporary
defensive purposes, the Fund may invest up to 100% of its assets in money market
instruments, repurchase agreements and cash.
As noted above, the Fund may invest in repurchase agreements. As engaged in
by the Fund, a repurchase agreement is an agreement under which U.S. government
obligations are acquired from a securities dealer or bank subject to resale at
an agreed upon price (which includes an interest factor) and date. The Fund
bears a risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations and the Fund is delayed or prevented from exercising
its rights to dispose of the collateral securities. Under procedures approved by
the Fund's Board of Directors, the Adviser enters into repurchase agreements
only with financial institutions deemed to present minimal risk of bankruptcy or
insolvency during the term of the agreement. The Fund will not enter into
repurchase agreements of more than seven days' duration if more than 10% of its
net assets would be invested in such agreements and other illiquid investments.
Like other mutual funds, the Fund could be affected by problems relating to
the ability of computer systems to recognize the Year 2000. The Fund is taking
steps to ensure that its own computer systems are compliant with Year 2000
issues and to determine that the systems used by its major service providers are
also compliant. The Fund is making efforts to determine whether companies in the
Fund's portfolio will be affected by this issue. At the same time it is
impossible to know whether these problems, which could disrupt Fund operation
and investment, if uncorrected, have been adequately addressed until the date in
question arrives.
THE FUND'S INVESTMENT LIMITATIONS
Under the Fund's current investment limitations, which, along with its
investment objective, cannot be changed except by vote of the holders of a
majority of the Fund's outstanding voting securities, the Fund may not among
other things:
1. Invest more than 25% of its total assets in securities of issuers in
the same industry.
2. Invest more than 5% of its total assets (taken at market value) in
securities of any one issuer, other than the U.S. Government, its
agencies and instrumentalities, or buy
7
<PAGE>
more than 10% of the voting securities or more than 10% of all the
securities of any one issuer.
3. Invest more than 5% of its total assets (taken at market value) in
securities of companies that, including their predecessors, have been
in operation for less than three years.
The Fund's other investment limitations are described in the Statement of
Additional Information.
HOW YOU CAN INVEST IN THE FUND
The minimum initial investment in the Fund for each account is $500 and the
minimum investment for each purchase of additional shares is $250. However,
initial and subsequent investments in an IRA account established on behalf of a
nonworking spouse of a shareholder who has an IRA invested in the Fund require a
minimum amount of only $250. In addition, once an account is established, the
minimum amount for subsequent investments will be waived if an investment in an
IRA or similar plan is the maximum amount permitted under the Internal Revenue
Code of 1986, as amended ("Code").
There are three ways you can invest in the Fund:
1. Through your Morgan Keegan Broker.
Fund shares may be purchased through any Morgan Keegan broker who will be
pleased to open a Morgan Keegan account for you, explain to you the shareholder
services available from the Fund, and answer any questions you may have. After
you have established a Morgan Keegan account, you can order Fund shares from
Morgan Keegan brokers in person, by telephone or by mail. A regular order placed
with Morgan Keegan will be effected and shares will be purchased at the net
asset value next determined plus the applicable sales charge described below
("offering price"). Special documents available from your broker must be
completed if you invest in Fund shares through an IRA, SEPP, SIMPLE, Keogh Plan,
401(k) Plan or other qualified retirement plan. Payment for Fund shares
generally is due to Morgan Keegan on the third business day ("settlement date")
after the trade date.
2. Through Morgan Keegan & Company, Inc.
If you do not wish to purchase Fund shares through a Morgan Keegan broker,
you may purchase Fund shares directly from Morgan Keegan & Company, Inc., the
Fund's distributor, by completing the application included in this Prospectus
and sending it along with a check to Morgan Keegan at the address set forth in
the application. Additional documents required to purchase Fund shares through
an IRA, Keogh or other qualified investment plan are available from Morgan
Keegan. Shares will be purchased at the offering price next determined after
receipt of the completed application and check.
An order placed with Morgan Keegan on behalf of an IRA, SEPP, SIMPLE, Keogh
Plan, 401(k) Plan or other qualified retirement plan will not be transmitted to
the Fund until Morgan Keegan's Memphis Office receives a check for the amount of
the purchase. Orders received by Morgan Keegan's Memphis Office before the close
of business of the New York Stock Exchange, Inc. ("Exchange") (currently 4:00
p.m. Eastern Time) on any day the Exchange is open will be
8
<PAGE>
executed at the offering price of Fund shares as determined as of the close of
the Exchange on that day. Orders received by Morgan Keegan's Memphis Office
after the close of the Exchange or on days the Exchange is closed will be
executed at the offering price determined as of the close of the Exchange on its
next trading day. The Fund and Morgan Keegan reserve the right to reject any
order for Fund shares.
3. Through Pre-authorized Check Plan and Other Transfers of Funds from
Financial Institutions.
Once you are a Fund shareholder, you can make additional investments through
the Fund's pre-authorized Check Plan for convenient monthly investments. For
additional information, contact your Morgan Keegan broker.
Investors may purchase shares at the net asset value next determined after
receipt of their orders plus a sales charge equal to 3% of the public offering
price (3.09% of the net amount of the purchase price invested in shares of the
Fund). On sales of $1 million or more, investors may purchase shares at the net
asset value next determined after receipt of the order plus a sales charge equal
to 1% of the public offering price (1.01% of the net amount of the purchase
price invested in Fund shares). Investors who intend to purchase at least $1
million of Fund shares may also purchase shares at a 1% sales charge pursuant to
a letter of intention program that permits purchases within a two-year period to
be aggregated for this purpose.
The sales charge is waived on shares of the Fund purchased (1) as a result
of reinvestment of dividends and capital gain distributions and (2) by officers,
directors and full-time employees (and their immediate families, which includes
their spouse, children, mother, father and siblings) of Morgan Keegan & Company,
Inc. (or its direct or indirect subsidiaries), or by directors or officers (and
their immediate families, which includes their spouse, children, mother, father
and siblings) of the Fund. The sales charge also is waived on purchases of Fund
shares in an initial amount of not less than $250,000, and thereafter for
subsequent purchases if the purchaser's Fund account balance is at least
$250,000, by (1) common or collective trust funds maintained by a bank, (2)
stock bonus, pension or profit sharing plans qualified under section 401(a) of
the Code (including Keogh Plans and 401(k) Plans), and (3) organizations exempt
from taxation pursuant to section 501(a) of the Code. Also, shares of the Fund
may be acquired without a sales charge if the purchase is made through a Morgan
Keegan representative who formerly was employed as a broker with another firm
registered as a broker-dealer with the Securities and Exchange Commission, if
the following conditions are met: (1) the purchaser was a client of the
investment executive at the other firm for which the investment executive
previously served as a broker; (2) within 90 days of the purchase of the Fund's
shares, the purchaser redeemed shares of one or more mutual funds for which that
other firm or its affiliates served as principal underwriter, provided that
either the purchaser had paid a sales charge in connection with investment in
such funds or a contingent deferred sales charge upon redeeming shares in such
funds; and (3) the aggregate amount of the Fund's shares purchased pursuant to
this sales charge waiver does not exceed the amount of the purchaser's
redemption proceeds from the shares of the mutual fund(s) for which the other
firm or its affiliates served as principal underwriter. The sales charge is also
waived on purchases through Morgan Keegan Mutual Fund "Wrap Accounts". Investors
seeking to avail themselves of this waiver will be required to provide
satisfactory evidence that all the above-noted conditions are met and should
contact their Morgan Keegan representative for more information.
9
<PAGE>
HOW YOUR SHAREHOLDER ACCOUNT IS MAINTAINED
When you initially purchase your Fund shares, an account is automatically
established for you. Any shares that you purchase or receive as a distribution
from time to time will be credited directly to your account at the time of
purchase or receipt. No certificates are issued unless you specifically request
them in writing. Certificates will be issued in full shares only. No
certificates will be issued for shares prior to 15 business days after purchase
of such shares by check unless the Fund can be reasonably assured during that
period that payment for the purchase of such shares has been collected.
HOW YOU CAN SELL YOUR FUND SHARES
There are two ways you can sell and receive cash for your Fund shares.
First, you may give your Morgan Keegan broker an order for redemption of your
shares. Second, you may send a written request for redemption directly to Morgan
Keegan Southern Capital Fund, Inc., Fifty Front Street, Memphis, TN 38103.
A redemption request received by Morgan Keegan's Memphis Office from a
Morgan Keegan broker will be forwarded on the same day to the Fund's transfer
agent, and will be redeemed after receipt by the Fund at the net asset value per
share next determined at the close of the Exchange. Upon receipt of a request
for redemption in "good order," as described below, before the close of business
on the Exchange on any day when the Exchange is open, Morgan Keegan & Company,
Inc., as transfer agent for the Fund, will redeem Fund shares at the net asset
value per share determined at the close of the Exchange on that day. Requests
for redemption received by the transfer agent after the close of business on the
Exchange or on a day when the Exchange is not open for business, will be
executed at the net asset value determined at the close of the Exchange on its
next trading day.
The Fund normally transmits payment for credit to the shareholder's account
at Morgan Keegan for all shares redeemed three business days after receipt of a
redemption request. The proceeds of your redemption may be more or less than
your original cost. If the shares to be redeemed were paid for by check
(including certified or cashier's checks) within 15 business days of the
redemption request, the proceeds may not be disbursed unless the Fund can be
reasonably assured that the check has been collected.
A redemption request will be considered to be received in "good order" only
if:
1. You have indicated in writing the number of shares to be redeemed and
your shareholder account number.
2. The written request is signed by you and by any co-owner of the account
with exactly the same name or names used in establishing the account.
3. The written request is accompanied by any certificates representing the
shares that have been issued to you, and you have endorsed the
certificates for transfer or an accompanying stock power exactly as the
name or names appear on the certificates.
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<PAGE>
4. The signatures on the written redemption request and on any
certificates for your shares (or an accompanying stock power) have been
guaranteed by any U.S. trust company, a member firm of a U.S. stock
exchange, or any other eligible guarantor institution.
Other supporting legal documents may be required from corporations or other
organizations, fiduciaries or persons other than the stockholder of record
making the request for redemption. If you have a question concerning the sale of
Fund shares, contact Morgan Keegan or your Morgan Keegan broker.
Because of the high cost of maintaining small accounts, if your account's
current value falls below $500 due to your redemption of shares, the Fund may
elect to close your account and mail the proceeds to you. However, if the Fund
so elects, you will be notified in writing that your account is below $500 and
you will be allowed 60 days in which to make an additional investment in order
to avoid having your account closed.
HOW NET ASSET VALUE IS DETERMINED
The offering price of one share is its net asset value plus a sales charge
(currently a maximum of 3% of the offering price, or 3.09% of the net amount
invested). See "How You Can Invest in the Fund" on pages 8-9. Net asset value
per Fund share will be determined daily as of the close of the Exchange, on
every day that the Exchange is open for business, by dividing the value of the
total assets of the Fund, less liabilities, by the total number of shares
outstanding at such time. Securities owned by the Fund for which market
quotations are readily available will be valued at current market value, and
other securities and assets will be valued at fair value by or under the
direction of the Board of Directors.
PERFORMANCE INFORMATION
From time to time the Fund may quote its "total return" in advertisements or
other promotional materials. A mutual fund's total return is a measurement of
the overall change in value of an investment in a fund, including changes in
share price and assuming reinvestment of dividends and other distributions.
"Cumulative total return" shows a fund's performance over a specific period of
time. "Average annual total return" is the average annual compound return that
would have produced the same cumulative total return if the fund's performance
had been constant over the entire period Average annual returns, which differ
from actual year-to-year results, tend to even out variations in a fund's
returns.
From time to time the Fund may advertise its ranking and other assessments
of its performance by independent companies that monitor mutual fund performance
(e.g., Lipper Analytical Services, Inc., Value Line and Morningstar, Inc.) and
may advertise similar analyses that are reported periodically in national
financial publications such as BARRON'S and MONEY MAGAZINE.
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<PAGE>
The Fund may also compare its performance to the performance of Standard &
Poor's 500 Index and other relevant unmanaged indices.
Performance information and quoted rankings are indicative only of past
performance and are not intended to and do not represent future investment
results. The Fund's share price will fluctuate and your shares, when redeemed,
may be worth more or less than you originally paid for them.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Shortly after the end of each fiscal year (June 30), the Fund declares and
distributes to shareholders as dividends substantially all of its investment
company taxable income, which includes net investment income and net short-term
capital gain (gain from the sale of securities held for one year or less), if
any, but excludes the excess of net long-term capital gain over net short-term
capital loss ("net capital gain"), if any. The Fund also distributes to
shareholders substantially all net capital gain, if any, after the end of the
fiscal year in which the gain is realized. To avoid having to pay a certain
excise tax, however, the Fund may be required by the end of each calendar year
to make a second distribution of substantially all of (i) its ordinary income
earned between the end of its fiscal year and December 31 and (ii) any capital
gain net income realized between the end of its fiscal year and October 31.
Distributions to Keogh Plans, 401(k) Plans and other qualified retirement plans
generally are reinvested in Fund shares (without a sales charge). Other
shareholders may elect to:
1. Receive (reinvest) both dividends and capital gain distributions in
Fund shares;
2. Receive dividends in cash and receive (reinvest) capital gain
distributions in Fund shares;
3. Receive (reinvest) dividends in Fund shares and receive capital gain
distributions in cash; or
4. Receive both dividends and capital gain distributions in cash.
No sales charge is imposed on the reinvestment of dividends or capital gain
distributions.
If no election is made, then ordinarily by the fifth business day after the
record date for payment, both dividends and capital gain distributions are
credited to your account (without a sales charge) in additional Fund shares at
the net asset value of the shares determined at the close of business on the day
following the record date. The payment date for shareholders electing to receive
dividends and/or capital gain distributions in cash also is ordinarily the fifth
business day after the record date. You may elect to change your option by
notifying in writing the Fund's transfer and dividend-disbursing agent, Morgan
Keegan & Company, Inc., Fifty
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<PAGE>
Front Street, Memphis, TN 38103. Your election will become effective for the
succeeding dividend and/or capital gain distribution, provided your election is
made at least 15 days prior to the record date of the dividend or capital gain
distribution.
TAXES
The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Code so that it (but not its shareholders)
will be relieved of federal income tax on that part of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain) and net capital gain that it distributes to its shareholders. To
the extent, however, that the Fund does not distribute to its shareholders by
the end of any calendar year substantially all of its ordinary income for that
year and capital gain net income for the one-year period ending on October 31 of
that year, plus other certain amounts, a 4% excise tax will be imposed on the
Fund.
Dividends from the Fund's investment company taxable income are taxable as
ordinary income to its shareholders, other than tax-exempt entities (including
Keoghs, 401(k) plans, IRAs and other qualified retirement plans), whether
received in cash or reinvested in additional Fund shares, to the extent of the
Fund's earnings and profits. Distributions of the Fund's net capital gain, when
designated as such, are taxable to those shareholders as long-term capital
gains, whether received in cash or reinvested in additional Fund shares and
regardless of the length of time the shares have been held.
The Fund sends a notice to each shareholder following the end of each
calendar year specifying the amounts of all dividends and capital gain
distributions paid (or deemed paid) during that year and the portion of those
dividends that qualifies for the corporate dividends-received deduction. The
Fund is required to withhold 31% of all dividends, capital gain distributions
and redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not provide the Fund with a correct taxpayer
identification number. The Fund also is required to withhold 31% from all
dividends and capital gain distributions payable to such shareholders who
otherwise are subject to backup withholding.
A redemption of Fund shares may result in taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more or
less than the shareholder's adjusted basis for the redeemed shares (which
normally includes any initial sales charge paid). Capital gain on the redemption
of Fund shares held for more than one year will be long-term capital gain. If a
shareholder purchases Fund shares within thirty days before or after redeeming
other Fund shares at a loss, all or a part of that loss will not be deductible
and instead will increase the basis of the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. In addition to
those considerations, which are applicable to any investment in the Fund, there
may be other federal, state or local tax considerations applicable to a
particular investor. Prospective shareholders are therefore urged to consult
their tax advisers with respect to the effects of this investment on their own
tax situations.
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<PAGE>
SHAREHOLDER SERVICES
CONFIRMATIONS AND REPORTS
You will receive from the transfer agent after each purchase or sale a
confirmation showing the particular transaction and the current status of your
account. Reports will be sent to shareholders at least semiannually showing the
Fund's portfolio and other information. An annual report containing financial
statements audited by independent certified public accountants will also be sent
to shareholders each year.
Shareholder inquiries may be made in writing to Morgan Keegan Southern
Capital Fund, Inc., Morgan Keegan Tower, Fifty Front Street, Memphis Tennessee
38103, or by telephoning (901) 524-4100.
INVESTING THROUGH TAX-DEFERRED RETIREMENT PLANS
An investment in Fund shares may be appropriate for IRAs (including
"education individual retirement accounts" and "Roth IRAs", SEPPs, Keogh Plans,
SIMPLES, 401(k) Plans and other qualified retirement plans. Investors who are
considering establishing such a plan may wish to consult their attorneys or tax
advisers with respect to specific tax questions regarding such plans. Morgan
Keegan can make available to you forms of IRAs, SEPPs, SIMPLES, Keogh Plans,
401(k) Plans and other qualified retirement plans which have been approved as to
form by the Internal Revenue Service. Additional information with respect to
these plans is available upon request from any Morgan Keegan broker.
THE FUND'S MANAGEMENT AND INVESTMENT ADVISER
The Fund's Board of Directors has overall responsibility for the operation
of the Fund. Pursuant to such responsibility, it has selected Morgan Asset
Management, Inc. ("Adviser"), a wholly owned subsidiary of Morgan Keegan, Inc.,
which is also the parent of Morgan Keegan & Company, Inc., to serve as the
Fund's investment adviser and manager. Subject to the supervision of the Board
of Directors, the Adviser manages the investment and other affairs of the Fund
and directs the investments of the Fund in accordance with its investment
objective, policies and limitations pursuant to an Investment Advisory and
Management Agreement between the Fund and the Adviser, dated August 14, 1986.
The Adviser's address is Morgan Keegan Tower, Fifty Front Street, Memphis,
Tennessee 38103.
The Adviser receives for its services a management fee, calculated daily and
payable quarterly, at an annual rate of 1% of the average daily net assets of
the Fund for the first $100 million of average daily net assets and 0.75% of
average daily net assets exceeding $100 million. The
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advisory fee is higher than fees paid by most other funds to their investment
advisers. The Adviser has agreed to waive its fee and to reimburse the Fund to
the extent its annual expenses (excluding brokerage, interest, taxes, and
extraordinary expenses) exceed 2.0% of net assets. The Fund expects to use
Morgan Keegan & Company, Inc. as broker for all or a substantial portion of its
agency transactions in listed securities at commission rates and under
circumstances consistent with the policy of best execution. Morgan Keegan &
Company, Inc. also provides accounting services to the Fund and acts as its
transfer and dividend disbursing agent.
Since July 1, 1994, E. Elkan Scheidt, a managing director of Morgan Keegan &
Company, Inc. and an employee of Morgan Asset Management, Inc. has served as the
portfolio manager of the Fund. From November 1990 to July 1, 1994, Mr. Scheidt
served as assistant to the portfolio manager of the Fund. Mr. Scheidt joined
Morgan Keegan as an investment broker in 1985. He received a B.A. in Economics
from Tulane University in New Orleans, Louisiana. Morgan Keegan investment
personnel may engage in securities transactions for their own accounts pursuant
to a code of ethics that establishes procedures for personal investing and
restricts certain transactions.
The Fund's portfolio turnover rate is computed by dividing the lesser of
purchases or sales of securities for the period by the average value of
portfolio securities for that period. High portfolio turnover rates will result
in the payment by the Fund of above average transaction costs and could result
in the payment by shareholders of above average taxes as realized investment
gains. The Adviser expects that the Fund's rate of portfolio turnover generally
will not exceed 200%, but it may vary from year to year, and will not be a
limiting factor when management deems portfolio changes appropriate.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
As of June 30, 1998, the Fund's portfolio was invested in 73 stocks,
representing 18 different industries. Its largest holdings were in the
financial, energy-related and technology sectors. The outlook for the market
continues to be favorable, despite its current high valuation and recent
volatility. Relatively low interest rates, a slow-growing economy and a Federal
Reserve determined to keep inflation under control should provide an excellent
foundation for an extended market rally. The South, which continues to be one of
the most rapidly-growing regions of the United States, provides the Fund with
excellent investment opportunities in companies with strong growth prospects.
The Fund remains focused on the best opportunities in our region, regardless of
market capitalization. By maintaining a blend of large and small company stocks,
the Fund offers both the higher growth potential of small emerging companies and
the stability typically provided by larger firms.
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<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
<S> <C> <C>
SOUTHERN CAPITAL FUND AND THE S&P 500
SOUTHERN CAPITAL FUND S&P 500
1988
$9,700 $10,000
1989
$10,481 $11,526
1990
$10,867 $13,090
1991
$11,218 $13,571
1992
$13,192 $14,923
1993
$14,950 $16,473
1994
$15,013 $16,244
1995
$17,086 $19,918
1996
$21,921 $24,520
1997
$27,592 $32,363
1998
$34,704 $41,457
AVERAGE ANNUAL TOTAL RETURN
1 YEAR
5 YEAR 10 YEAR
21.56%
17.63% 13.25%
Past performance is not predictive of future performance.
The maximum sales charge imposed on purchases is 3.0%.
</TABLE>
THE FUND'S DISTRIBUTOR
Morgan Keegan & Company, Inc. acts as distributor of the Fund's shares
pursuant to a plan of distribution ("Plan") adopted by the Board of Directors
pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act") and
an Underwriting Agreement between it and the Fund. The Underwriting Agreement
obligates the Distributor to promote the Fund, to solicit and accept orders for
the purchase of the Fund's shares and to pay certain expenses in connection with
the offering of Fund shares, including the expenses of the printing and
distribution of Prospectuses, Statements of Additional Information and periodic
reports used in connection with the offering to prospective investors and for
supplementary sales literature, and advertising costs and administrative and
overhead expenses related to distribution of shares. The Distributor also pays
sales commissions and other compensation, including special additional
compensation and promotional incentives from time to time, to investment brokers
for sales of Fund shares. For its services, the Distributor receives
distribution and service fees described below and the proceeds of the sales
charges paid by investors, unless such sales charge is waived. See "How You Can
Invest In The Fund."
Under the Plan, the Fund pays the Distributor a service fee computed daily
and paid monthly at the annual rate of .25% of the Fund's average daily net
assets as compensation for its servicing of shareholder accounts, and pays the
Distributor a distribution fee as compensation for its distribution services,
computed daily and paid monthly, at the annual rate of .25% of the Fund's
average daily net assets. While the Plan is in effect, the Fund is obligated to
pay service
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and distribution fees, in the aggregate, of .50% of net assets, regardless of
whether the Distributor's service and distribution expenses equal such fee
income; however, the Fund pays no greater fees if the Distributor's distribution
and service expenses for a given year exceed the amount of the fees it receives
from the Fund. The Plan does not provide for expenses of Morgan Keegan to be
"carried over" to a succeeding year if such expenses exceed the .50% limit.
The Distributor's expenses as distributor may or may not exceed the amount
paid to it by the Fund under the Plan, depending, among other things, on the
amount of compensation paid to Morgan Keegan brokers (other than commissions
paid at the time of sale from sales charge proceeds), and its advertising and
other costs of distribution, as well as the asset size of the Fund.
THE FUND'S CUSTODIAN, TRANSFER AND DIVIDEND-DISBURSING AGENT
State Street Bank and Trust Company, National Association (108 Myrtle St.,
Quincy, MA 02171) is custodian of the Fund's assets. As indicated, Morgan Keegan
& Company, Inc., Fifty Front Street, Memphis, Tennessee 38103 serves as the
transfer and dividend-disbursing agent of the Fund.
DESCRIPTION OF THE FUND AND ITS SHARES
The Fund is a diversified open-end management investment company
incorporated in Maryland on May 5, 1986. The Fund has authorized capital of 100
million shares of common stock, par value $0.001. All shares are the same class,
and each share is entitled to one vote for the election of directors and on any
other matter submitted to a shareholder vote. The Directors may create
additional series of shares from time to time although they have no present
intention to do so. Fractional shares will have fractional voting rights. Voting
rights are not cumulative. All shares of the Fund are fully paid and
nonassessable and have no preemptive or conversion rights.
The Fund does not hold annual meetings of shareholders. There will normally
be no meetings of shareholders for the purpose of electing Directors unless and
until such time as less than a majority of the Directors holding office has been
elected by shareholders, at which time the Directors then in office will call a
shareholders' meeting for the election of Directors. The Fund's by-laws require
the Directors to call a meeting of shareholders when requested in writing to do
so by the shareholders of record of not less than 25% of the Fund's outstanding
shares.
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<PAGE>
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
APPLICATION FOR PURCHASE OF SHARES
You may purchase shares of the Morgan Keegan Southern Capital Fund, Inc. by
(1) contacting a Morgan Keegan broker, or (2) completing this application and
sending it along with a check made payable to Morgan Keegan Southern Capital
Fund, Inc. to:
Morgan Keegan & Company, Inc.
Morgan Keegan Tower - Fifty Front Street
Memphis, TN 38103 - Attn: Southern Capital Fund, Inc.
Additional documents available from a Morgan Keegan broker are required to
purchase Fund shares through an IRA, SEPP, Keogh, 401(k) Plan or other qualified
retirement plan.
<TABLE>
<S> <C>
Account Registration Amount
Name $
(First Name) (Middle) (Last ($500 minimum)
Name)
Joint owner or other
registration, if applicable
Street
City State Zip
Phone Number
Social Security Number or Taxpayer Identification Number
</TABLE>
Distributions
Shareholders may elect to:
/ / Receive both dividends and capital gain distributions in Fund shares;
/ / Receive dividends in cash and capital gains distributions in Fund shares;
/ / Receive dividends in Fund shares and capital gain distributions in cash; or
/ / Receive both dividends and capital gain distributions in cash.
If no selection is made dividends and capital gain distributions will be
reinvested in Fund shares.
Signature
I have received and read a copy of the prospectus of Morgan Keegan Southern
Capital Fund, Inc., and agree to its terms.
I am of legal age.
Under the penalties of perjury, I certify (1) that the Social Security Number or
other Taxpayer Identification Number shown above is correct, and (2) that unless
the box below is checked, I am not subject to backup withholding either because
I have not been notified that I am subject to backup withholding as a result of
a failure to report all interest and dividends, or the Internal Revenue Service
has notified me that I am no longer subject to backup withholding. The
certifications in this paragraph are required for all nonexempt persons to
prevent backup withholding of 20% of all taxable distributions and gross
redemption proceeds under the federal income tax law.
/ / Check here if you are subject to backup withholding.
<TABLE>
<S> <C> <C>
Signature Date Joint Registrant, if any
</TABLE>
DO NOT COMPLETE
Account number ______________________________________ Rep number ______________
<PAGE>
Morgan Keegan
Southern Capital Fund, Inc. Prospectus
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
---------
<S> <C>
Questions and Answers About Morgan Keegan Southern
Capital Fund, Inc.................................... 2
Summary of Fund Expenses.............................. 3
Financial Highlights.................................. 5
The Fund's Investment Objective and Policies.......... 6
The Fund's Investment Limitations..................... 7
How You Can Invest in the Fund........................ 8
How Your Shareholder Account is Maintained............ 10
How You Can Sell Your Fund Shares..................... 10
How Net Asset Value is Determined..................... 11
Performance Information............................... 11
Dividends, Capital Gain Distributions and Taxes....... 12
Shareholder Services.................................. 14
Investing Through Tax-Deferred Retirement Plans....... 14
The Fund's Management and Investment Adviser.......... 14
The Fund's Distributor................................ 16
The Fund's Custodian, Transfer and Dividend-Disbursing
Agent................................................ 17
Description of the Fund and its Shares................ 17
</TABLE>
MORGAN KEEGAN
Morgan Keegan & Company, Inc.
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
(901) 524-4100 - (800) 564-2113
This Prospectus does not constitute an offering by the Fund or by the principal
underwriter in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
Morgan Keegan Southern Capital Fund, Inc. ("Fund") is a mutual fund
seeking capital appreciation. The Fund invests principally in securities,
including common stock, preferred stock, convertible and other debt
securities, of companies which are headquartered in the southern United
States. For purposes of this Statement of Additional Information, the "southern
United States" consists of Alabama, Arkansas, Florida, Georgia,
Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Oklahoma, South
Carolina, Tennessee, Texas, Virginia and West Virginia. A company is
"headquartered" in the southern United States if either its principal
corporate offices are located in the southern United States, or if (alone or
on a consolidated basis) it derives 50% or more of its total revenues from
either goods produced, sales made or services performed in the southern
United States.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Fund's Prospectus, dated November 1, 1998,
which has been filed with the Securities and Exchange Commission. A copy of
the current Prospectus is available without charge from Morgan Keegan &
Company, Inc., the Fund's distributor.
Morgan Keegan & Company, Inc.
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
(901) 524-4100
<TABLE>
<S> <C>
TABLE OF CONTENTS PAGE
Additional Information About Investment Limitations and Policies 2
Additional Tax Information 6
Additional Purchase and Redemption Information 7
Valuation of Shares 9
Performance Information 9
Tax-Deferred Retirement Plans 11
The Fund's Directors and Officers 13
The Fund's Principal Shareholders 14
The Fund's Investment Adviser 14
Portfolio Transactions and Brokerage 16
The Fund's Distributor 17
The Fund's Custodian, Transfer Agent, Dividend Disbursing Agent, and
Portfolio Accounting Service Agent 20
The Fund's Legal Counsel 21
The Fund's Certified Public Accountants 21
Financial Statements 21
Dated: November 1, 1998
</TABLE>
<PAGE>
ADDITIONAL INFORMATION ABOUT INVESTMENT LIMITATIONS AND POLICIES
In addition to the investment objective and the three numbered
investment limitations described in the Prospectus, Morgan Keegan Southern
Capital Fund, Inc. ("Fund") has adopted certain investment limitations that
cannot be changed except by vote of the holders of a majority of the Fund's
outstanding voting securities. The Fund may not:
1. Borrow money, including entry by the Fund into reverse repurchase
agreements, except for temporary purposes in an aggregate amount not to
exceed 5% of the value of its total assets at the time of borrowing.
Although not a fundamental policy subject to shareholder approval, the Fund
intends to repay any money borrowed before any additional portfolio
securities are purchased;
2. Mortgage, pledge or hypothecate any of its assets, except to secure
permitted borrowings up to 5% of the value of its total assets at the time of
borrowing, provided that the deposit in escrow of underlying securities in
connection with the writing of call options is not deemed to be a pledge;
3. Purchase securities on "margin," make short sales of securities or
maintain a short position in any security;
4. Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization or by
purchase in the open market of securities of closed-end investment companies
where no underwriter or dealer's commission or profit, other than a customary
brokerage commission, is involved and only if immediately thereafter not more
than 10% of the Fund's total assets (taken at market value) would be
invested in such securities;
5. Purchase or sell commodities and commodity contracts;
Underwrite the securities of other issuers, except that the Fund may
invest in securities that are not readily marketable without registration
under the Securities Act of 1933, as amended, if immediately after the
making of such investment not more than 5% of the value of the Fund's total
assets (taken at cost) would be so invested;
6. Make loans, except loans of portfolio securities and except to the extent
the purchase of a portion of an issue of publicly distributed notes, bonds or
other evidences of indebtedness or deposits with banks and other financial
institutions may be considered loans;
7. Write (sell) or purchase put, call, straddle or spread options except
that the Fund may write covered call options with respect to its portfolio
securities listed on a national securities exchange and enter into closing
purchase transactions with respect to call options so listed or quoted;
<PAGE>
8. Purchase or sell real estate, except that the Fund may invest in
securities collateralized by real estate or interests therein or in
securities issued by companies that invest in real estate or interests
therein; or
9. Purchase or sell interests in oil or gas or other mineral exploration or
development programs.
As noted above, the investment limitations of the Fund described in the
preceding paragraphs, the investment limitations described in the Prospectus,
and the Fund's investment objective are fundamental and may not be changed
without the vote of the holders of a majority of the Fund's outstanding
voting securities. Under the Investment Company Act of 1940 ("1940 Act"), a
"vote of a majority of the outstanding voting securities" of the Fund means
the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund or (2) 67% or more of the shares present at a
shareholders' meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. Whenever an investment
policy or limitation states a maximum percentage of the Fund's assets which
may be invested in any security or other standard or percentage limitation,
such percentage shall be determined immediately after and as a result of the
acquisition of such security or other asset. Accordingly, any later increase
or decrease in percentage resulting from a change in values, net assets or
other circumstances will not be considered when determining whether the
investment complies with the Fund's investment policies and limitations.
Illiquid Securities
Although not a fundamental policy subject to shareholder vote, the Fund
will not invest more than 10% of its net assets in illiquid securities
(securities which, in the judgment of Morgan Asset Management, Inc.
("Adviser"), could not be sold within seven business days without substantial
adverse impact on their market prices because of such sales), including
repurchase agreements of more than seven days' duration.
Warrants
Although not a fundamental policy subject to shareholder vote, as long
as the Fund's shares are registered in certain states, the Fund may not
invest more than 5% of the value of its net assets, taken at the lower of
cost or market value, in warrants or invest more than 2% of the value of such
net assets in warrants not listed on the New York or American Stock
Exchanges. The Fund currently has no intention of purchasing any warrants in
the coming year.
<PAGE>
Options
The Fund may from time to time write (sell) covered call options on
certain of its portfolio securities. The Fund intends only to engage in
transactions in exchange-traded options. A covered call option is an option
to purchase a portfolio security owned by the Fund. In such a transaction,
the Fund obligates itself to sell the underlying security to the purchaser of
the option at a fixed price if the purchaser exercises the option during the
option period. In return, the Fund receives a premium from the purchaser.
During the option period, the Fund foregoes the opportunity to profit from
any increase in the market price of the security above the exercise price of
the option, but retains the risk that the price of the security may decline.
The Fund may seek to terminate its obligation as a writer of a call
option prior to its expiration by entering into a "closing purchase
transactions." There is no assurance that the Fund will be able to effect a
closing purchase transaction, particularly with respect to thinly traded call
options. The selling of call options could result in an increase in the
Fund's portfolio turnover rate, particularly in periods of appreciation in
the market price of the underlying securities. The Fund would use such
options only as a defensive strategy and not as a primary investment
technique. Although not a fundamental policy subject to shareholder vote,
the Fund does not intend during the coming year to write call options on
portfolio securities exceeding 5% of its total assets or to write options
that are not traded on a national securities exchange. Normally such options
will be written only on those portfolio securities which the Adviser does not
expect to have significant short-term capital appreciation.
Lending Portfolio Securities
The Fund may lend portfolio securities to broker/dealers in corporate or
government securities, banks or other recognized institutional borrowers of
securities, provided that cash or equivalent collateral, equal to at least
100% of the value of the securities loaned plus any accrued interest, "marked
to market" on a daily basis, is continuously maintained by the borrower with
the Fund, and further provided that the Adviser determines that the borrower
presents minimal credit risk. The Adviser will monitor the credit status of
the borrower during the period of the loan.
During the time portfolio securities are on loan, the borrower will pay
the Fund an amount equivalent to any dividends or interest paid on such
securities, and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed upon fee from the borrower who has
delivered equivalent collateral. These loans are subject to termination at
the option of the Fund or the borrower. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to the
borrower or placing broker. The Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote
if such vote were considered important with respect to the investment. The
Fund does not intend during the coming year to loan more than 5% of its
portfolio securities at any given time.
<PAGE>
Repurchase and Reverse Repurchase Agreements
Available cash may be invested by the Fund in repurchase agreements. A
repurchase agreement is an agreement under which U.S. Government obligations
are acquired from a securities dealer or Bank subject to resale at a
previously agreed upon price and date. The resale price reflects an agreed
upon interest rate which is unrelated to the interest rate provided by the
securities which are transferred. The securities will be held for the Fund
by its custodian as collateral until retransferred and will be supplemented
by additional collateral (without cost to the Fund) if necessary to maintain
a total value equal to or in excess of the value of the repurchase agreement.
Repurchase agreements are usually for periods of one week or less, but may be
for longer periods.
To the extent that proceeds from any sale upon a default of the
obligation to repurchase were less than the repurchase price, the Fund might
suffer a loss. If bankruptcy proceedings are commenced with respect to the
seller of the security, realization upon the collateral by the Fund would be
delayed or limited. However, the Fund has adopted standards for the parties
with whom it may enter into repurchase agreements, including monitoring by
the Adviser of the creditworthiness of such parties, which the Fund's Board
of Directors believes are reasonably designed to assure that each party
presents no serious risk of becoming involved in bankruptcy proceedings
within the time frame contemplated by the repurchase agreement.
As stated in the Fund's investment limitations, the Fund may enter into
reverse repurchase agreements for temporary purposes. Because such
agreements are considered to be borrowings, the agreements are subject to the
limitation that the Fund may not borrow in an aggregate amount that exceeds
5% of the value of the Fund's total assets at the time of borrowing. Reverse
repurchase agreements involve the sale of securities held by the Fund
pursuant to the Fund's agreement to repurchase the securities at an agreed
upon price, date and rate of interest. While reverse repurchase transactions
are outstanding, the Fund will maintain in a segregated account cash, U.S.
government securities or other liquid, high grade debt securities of an
amount at least equal to the market value of the securities, plus accrued
interests, subject to the agreement.
<PAGE>
ADDITIONAL TAX INFORMATION
The following is a general summary of certain federal income tax
considerations affecting the Fund and its shareholders. Investors are urged
to consult their own tax advisers for more detailed information and for
information regarding any state, local or foreign taxes that may be
applicable to them.
General
The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended ("Code"). In order to qualify for that treatment, the Fund
must distribute annually to its shareholders at least 90% of its investment
company taxable income (generally, net investment income plus net short-term
capital gain) and must meet several additional requirements. Among these
requirements are the following: (1) at least 90% of the Fund's gross income
each taxable year must be derived from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities, or other income (including gains from options) derived with
respect to its business of investing in securities; (2) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs and other securities, with such other
securities limited, with respect to any one issuer, to an amount that does
not exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the issuer's outstanding voting securities; and
(3) at the close of each quarter of the Fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (other
than U.S. government securities or the securities of other RICs) of any one
issuer.
Dividends and Other Distributions
A portion of the dividends from the Fund's investment company taxable
income (whether paid in cash or reinvested in additional Fund shares) is
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends received by the Fund
from domestic corporations. However, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction
are subject indirectly to the alternative minimum tax. Distributions by the
Fund of net capital gain (the excess of net long-term capital gain over net
short-term capital loss) do not qualify for the dividends-received deduction.
Dividends and other distributions declared by the Fund in December of
any year and payable to shareholders of record on a date in that month will
be deemed to have been paid by the Fund and received by the shareholders on
December 31 if they are paid by the Fund during the following January.
Accordingly, such distributions will be taxed to the shareholders for the
year in which that December 31 falls.
Any loss on a sale or exchange of Fund shares held for six months or
less will be treated as a long-term, instead of a short-term, capital loss to
the extent of any capital gain distributions received on those shares.
<PAGE>
A dividend or capital gain distribution paid shortly after shares have
been purchased, although in effect a return of investment, is subject to
federal taxation. Accordingly, an investor should not purchase Fund shares
immediately prior to a dividend or capital gain distribution record date
solely for the purpose of receiving the dividend or distribution.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Letter of Intention
The sales charge applicable to purchases is reduced to 1% pursuant to a
Letter of Intention that states that the purchaser intends to purchase shares
equal to at least $1,000,000 within a 24-month period. Investors may obtain
a form of a Letter of Intention ("Letter") from their Morgan Keegan
investment broker or the Fund's transfer agent, Morgan Keegan & Company, Inc.
("Transfer Agent"). Under a Letter, purchases of shares of the Fund which
are sold with a sales charge made within a 24-month period starting with the
first purchase pursuant to a Letter will be aggregated for purposes of
calculating the sales charges applicable to each purchase. To qualify under
a Letter, a minimum initial purchase of $50,000 must be made; purchases must
be made for a single account;
and purchases made for related accounts may not be aggregated under a single
Letter. The Letter is not a binding obligation to purchase any amount of
shares, but its execution will result in paying a reduced sales charge for
the anticipated amount of the purchase. If the total amount of shares
purchased does not equal the amount stated in the Letter (minimum of
$1,000,000), the investor will be notified and must pay, within 20 days of
the expiration of the Letter, the difference between the sales charge on the
shares purchased at the reduced rate and the sales charge applicable to the
shares actually purchased under the Letter. Shares equal to 5% of the
intended amount will be held in escrow during the 24-month period (while
remaining registered in the name of the purchaser) for this purpose.
Additional Information of Redemptions
Suspension of the right of redemption, or postponement of the date of
payment, may be made (1) for any periods when the Exchange is closed (other
than customary weekend and holiday closings); (2) when trading is restricted
in markets normally utilized by the Fund or when an emergency, as defined by
the rules and regulations of the Securities & Exchange Commission ("SEC")
exists, making disposal of the Fund's investments or determination of its net
asset value not reasonably practicable; or (3) for such other periods as the
SEC by order may permit for protection of the Fund's shareholders. In the
case of any such suspension, you may either withdraw your request for
redemption or receive payment based upon the net asset value next determined
after the suspension is lifted.
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption by making payment
in whole or in part by securities valued in the same way as they would be
valued for purposes of computing the Fund's per share net asset value.
However, the Fund has committed itself to pay in cash all requests for
redemption by any shareholder of record, limited in amount with respect to
each shareholder during any ninety-day period to the lesser of (1) $250,000,
or (2) 1% of the net asset value of the Fund at the beginning of such period.
If payment is made in securities, a shareholder will incur brokerage or
transactional expenses in converting those securities into cash, will be
subject to fluctuation in the market price of those securities until they are
sold, and may realize taxable gain or loss (depending on the value of the
securities received and the shareholder's adjusted basis of the redeemed
shares).
VALUATION OF SHARES
Net asset value of a Fund share will be determined daily as of the close
of the Exchange, on every day that the Exchange is open for business, by
dividing the value of the total assets of the Fund, less liabilities, by the
total number of shares outstanding at such time. Pricing will not be done on
days when the Exchange is closed. Currently, the Exchange is closed on
weekends and on certain days relating to the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving, and Christmas. Securities owned by the Fund for which market
quotations are readily available will be valued at current market value, or,
in their absence, at fair value as determined under procedures adopted by the
Fund's Board of Directors. Securities traded on an exchange or NASD National
Market System securities (including debt securities) will normally be valued
at their last sale price. Other over-the-counter securities (including debt
securities), and securities traded on exchanges for which there is no sale on
a particular day (including debt securities), will be valued by a method
which the Fund's Board of Directors believes accurately reflects fair value.
Premiums received on the sale of call options are included in the Fund's net
asset value, and the current market value of options sold by the Fund will be
subtracted from net assets.
<PAGE>
PERFORMANCE INFORMATION
The Fund's performance information and quoted rankings used in
advertising and other promotional materials ("Performance Advertisements")
are indicative only of past performance and are not intended to and do not
represent future investment results. The Fund's share price will fluctuate
and your shares, when redeemed, may be worth more or less than you originally
paid for them.
Total Return Calculations
Average annual total return quotes ("Standardized Return") used in the
Fund's Performance Advertisements are calculated according to the following
formula:
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 that period
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated at least
to the last day of the most recent quarter prior to submission of the
Performance Advertisements for publication. Total return, or "T" in the
formula above, is computed by finding the average annual change in the value
of an initial $1,000 investment over the period. In calculating the ending
redeemable value, all dividends and other distributions by the Fund are
assumed to have been reinvested at net asset value.
The Fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The Fund calculates Non-Standardized
Return for specified periods of time by assuming an investment of $1,000 in
Fund shares and assuming the reinvestment of all dividends and other
distributions. The rate of return is determined by subtracting the initial
value of the investment from the ending value and by dividing the remainder
by the initial value. Initial sales charges are not taken into account in
calculating Non-Standardized Return; the inclusion of those charges would
reduce the return.
<PAGE>
Other Information
From time to time the Fund may compare its performance in Performance
Advertisements to the performance of other mutual funds or various market
indices. One such market index is the S&P 500, a widely recognized unmanaged
index composed of the capitalization-weighted average of the prices of 500 of
the largest publicly traded stocks in the United States. The S&P 500
includes reinvestment of all dividends. It takes no account of the costs of
investing or the tax consequences of distributions. The Fund may invest in
securities that are not included in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500").
The Fund may also quote rankings and ratings, and compare the return of
the Fund with data published by Lipper Analytical Services, Inc.,
IBC/Donaghue's Money Market Fund Report, CDA Investment Technologies, Inc.,
Wiesenberger Investment Companies Service, Investment Company Data Inc.,
Morningstar Mututal Funds, Value Line and other services or publications that
monitor, compare, rank and/or rate the performance of mutual funds. The Fund
may refer in such materials to mutual fund performance rankings, ratings or
comparisons with funds having similar investment objectives, and other mutual
funds reported in independent periodicals, including, but not limited to, THE
WALL STREET JOURNAL, MONEY Magazine, FORBES, BUSINESS WEEK, FINANCIAL WORLD,
BARRON'S, FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON
POST and THE KIPLINGER LETTERS.
The Fund may also compare its performance with, or may otherwise
discuss, the performance of bank certificates of deposit ("CDs") and other
bank deposits, and may quote from organizations that track the rates offered
on such deposits. In comparing the Fund or its performance to CDs investors
should keep in mind that bank CDs are insured up to specified limits by an
agency of the U.S. government. Shares of the Fund are not insured or
guaranteed by the U.S. government, the value of Fund shares will fluctuate
and your shares, when redeemed, may be worth more or less than you originally
paid for them. Unlike the interest paid on many CDs, which remains as a
specified rate for a specified period of time, the return on the Fund's
shares will vary.
The Fund's Performance Advertisements may reference the history of the
Fund's distributor and its affiliates or biographical information of key
investment and managerial personnel including the portfolio manager. The
Fund may illustrate hypothetical investment plans designed to help investors
meet long-term financial goals, such as saving for a college education or for
retirement. The Fund may discuss the advantages of saving through tax-
deferred retirement plans or accounts.
From time to time the Fund may quote information including, but not
limited to, data regarding the southern region of the United States from
sources considered by Morgan Keegan to be reliable, including information
relating to economic and financial trends in the southern region. The Fund
may also quote or discuss information or other data concerning the southern
region reported in independent periodicals, including, but not limited to,
THE WALL STREET JOURNAL, MONEY Magazine, FORBES, BUSINESS WEEK, FINANCIAL
WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES, THE CHICAGO TRIBUNE, THE
WASHINGTON POST, THE KIPLINGER LETTERS and THE ECONOMIST.
<PAGE>
TAX-DEFERRED RETIREMENT PLANS
As noted in the Fund's Prospectus, an investment in Fund shares may be
appropriate for various types of tax-deferred retirement plans. In general,
income earned through the investment of assets of such a plan is not taxed to
the beneficiaries until the income is distributed to them. Investors who are
considering establishing such a plan may wish to consult their attorneys or
other tax advisers with respect to individual tax questions. Additional
information with respect to these plans is available upon request from any
Morgan Keegan broker.
Individual Retirement Accounts - IRAs
If you have earned income from employment (including self-employment),
you can contribute each year to an IRA up to the lesser of (1) $2,000 for
yourself or $4,000 for you and your spouse, regardless of whether your spouse
is employed, or (2) 100% of compensation. Some individuals may be able to
take an income tax deduction for the contribution. Regular contributions may
not be made for the year you become 70 1/2 or thereafter. You also may be
able to make a nondeductible contribution to an "education IRA" or "Roth
IRA", distributions from which are not taxable under certain circumstances.
An investment in Fund shares through IRA contributions may be
advantageous, regardless of whether the contributions are deductible by you
for tax purposes, because all dividends and capital gain distributions on
your Fund shares are not immediately taxable to you or the IRA; they become
taxable only when distributed to you except as noted above. To avoid
penalties, your interest in an IRA must be distributed, or start to be
distributed, to you not later than April 1 following the calendar year in
which you attain age 70 1/2. Distributions made before age 59 1/2, in
addition to being taxable, generally are subject to a penalty equal to 10% of
the distribution, except in the case of death or disability, where the
distribution is rolled over into another qualified plan, or in certain other
situations.
Self-Employed Individual Retirement Plans - Keogh Plans
Morgan Keegan will assist self-employed individuals to set up a
retirement plan through which Fund shares may be purchased. Morgan Keegan
generally arranges for a bank to serve as trustee for the plan and performs
custodian services for the trustee and the plan by holding and handling
securities. However, you have the right to use a bank of your choice to
provide these services at your cost. There are penalties for distributions
from a Keogh Plan prior to age 59 1/2, except in the case of death or
disability.
Simplified Employee Pension Plans - SEPPS and Savings Incentive Match Plans
for Employees - SIMPLES
Morgan Keegan also will make available in a similar manner to corporate
and other employers a SEPP or SIMPLE for investment in Fund shares.
<PAGE>
THE FUND'S DIRECTORS AND OFFICERS
The Fund's officers are responsible for the operation of the Fund under
the direction of the Board of Directors. The officers and directors of the
Fund and their principal occupations during the past five years are set forth
below. An asterisk (*) indicates officers and/or directors who are
interested persons of the Fund as defined by the 1940 Act. The address of
each officer and director is Morgan Keegan Tower, 50 Front Street, Memphis,
Tennessee 38103, unless otherwise indicated.
<TABLE>
Position with the Fund and Principal
Name Occupation During Past Five Years
<S> <C> <C>
Allen B. Morgan, Jr.* President and Director Mr. Morgan is
Age 56 Chairman and Chief
Executive Officer
and Executive Managing
Director of Morgan
Keegan & Company, Inc.
He also is a Chairman
of Morgan Keegan,Inc.,
a Director of Morgan
Asset Management,
Inc., and a Director
of Catherine's Stores,
Inc.
James D. Witherington, Jr. Director Mr. Witherington is
845 Crossover Lane President of SSM Corp.
Suite 140 (management of venture
Memphis, Tennessee 38117 capital funds).
Age 49 He also serves as a
Director for
several private
companies.
Spence L. Wilson Director Mr. Wilson is
1629 Winchester Road President of
Memphis, Tennessee 38116 Kemmons-Wilson, Inc.
Age 55 (private real estate
development). He
also is Chairman of
Orange Lake Country
Club, Inc. and is a
partner in several
Holiday Inn locations.
William F. Hughes, Jr. Director Mr. Hughes is a
Managing Director of
Morgan Keegan &
Company, Inc. He also
Is President of Morgan
Asset Management, Inc.
<PAGE>
William Jefferies Mann Director Mr. Mann is Chairman
675 Oakleaf Office Lane and President of Mann
Suite 100 Investments, Inc.
Memphis, Tennessee 38117 (hotel investments/
Age 65 consulting). He also
serves as a Director
for Heavy Machines,
Inc.
James Stillman R Director Mr. McFadden is Vice
McFadden President of Sterling
845 Crossover Lane Equities,Inc.(private
Suite 124 Equity financings).
Memphis, Tennessee 38117 He is also President
Age 41 and Director of 1703
Inc. and a Director
Of Starr Printing Co.
Joseph C. Weller* Vice President, Treasurer Mr. Weller is
Age 59 & Assistant Secretary Executive Vice
President and Chief
Financial Officer and
Executive Managing
Director of Morgan
Keegan & Company, Inc.
He also is a Director
of Morgan Asset
Management, Inc.
Charles D. Maxwell* Secretary and Assistant Mr. Maxwell is a
Age 44 Treasurer Managing Director and
Assistant Treasurer
of Morgan Keegan and
Co., Inc., and
Secretary/Treasurer
of Morgan Asset
Management, Inc.
He was formerly a
senior manager
with Ernst & Young
(accountants)
(1976-86).
</TABLE>
Officers and directors of the Fund who are interested persons of the Fund
receive no salary or fees from the Fund. Directors of the Fund who are not
interested persons of the Fund will receive a fee of $1,000 and reimbursement
for related expenses for each meeting of the Board of Directors attended by
them.
<PAGE>
THE FUND'S PRINCIPAL SHAREHOLDERS
On September 30, 1998 there were 3,515,553 shares of the Fund
outstanding of which all the officers and directors of the Fund as a group (7
persons) owned approximately 38,000 (1.1%). Management of the Fund is not
aware of any shareholder who owned of record or beneficially 5% or more of
the Fund's outstanding common stock on October 1, 1998.
THE FUND'S INVESTMENT ADVISER
Morgan Asset Management, Inc., formerly Southern Capital Advisors, Inc.,
("Adviser"), an affiliate of Morgan Keegan, serves as the Fund's investment
adviser and manager under an Investment Advisory and Management Agreement
("Advisory Agreement"). The Advisory Agreement originally became effective
as of August 14, 1986 and was most recently approved by the shareholders of
the Fund on October 20, 1987. The Advisory Agreement provides that, subject
to overall supervision by the Board of Directors of the Fund, the Adviser
manages the investment and other affairs of the Fund. The Adviser is
responsible for managing the Fund's portfolio securities and for making
purchases and sales of portfolio securities consistent with the Fund's
investment objective, policies and limitations described in the Prospectus
and this Statement of Additional Information. The Adviser is obligated to
furnish the Fund with office space as well as with executive and other
personnel necessary for the operation of the Fund. In addition, the Adviser
is obligated to supply the Board of Directors and officers of the Fund with
certain statistical information and reports, to oversee the maintenance of
various books and records and to arrange for the preservation of records in
accordance with applicable federal law and regulations. The Adviser and its
affiliates also are responsible for the compensation of directors and
officers of the Fund who are employees of the Adviser and/or its affiliates.
The Fund bears all its other expenses which are not assumed by the
Adviser. These expenses include, among others: legal and audit expense;
organizational expenses; interest; taxes; governmental fees; membership fees
for investment company organizations: the cost(including brokerage
commissions or charges, if any) of securities purchased or sold by the Fund
and any losses incurred in connection therewith; fees of custodians, transfer
agents, registrars or other agents; distribution fees; expenses of preparing
share certificates; expenses relating to the redemption of the Fund's
shares; expenses of registering and qualifying Fund shares for sale under
applicable federal and state laws and maintaining such registrations and
qualifications; expenses of preparing, setting in print, printing and
distributing prospectuses, proxy statements, reports, notices and dividends
to Fund shareholders; costs of stationery; costs of shareholders' and other
meetings of the Fund; compensation and expenses of the independent directors;
and insurance covering the Fund and its officers and directors. The Fund
also is liable for such nonrecurring expenses as may arise, including
litigation to which the Fund may be party. The Fund also may have an
obligation to indemnify its directors and officers with respect to any such
litigation.
The Adviser receives for its services a management fee, calculated daily
and payable quarterly, at an annual rate of 1% of the average daily net
assets of the Fund for the first $100 million of average daily net assets and
0.75% of average daily net assets exceeding $100 million. The advisory fee
is higher than fees paid by most other funds to their investment advisers,
but is not significantly different, in the Adviser's opinion, from the fees
of advisers to mutual funds with similar specialized policies. The adviser
has agreed to reimburse the Fund for certain expenses, including waiving the
advisory fees received by it, in any fiscal year in which the Fund's annual
<PAGE>
expenses (excluding interest, taxes, brokerage fees and commissions, and
certain extraordinary charges), exceed 2.0% of the Fund's average net assets.
For the fiscal year ended June 30, 1992, the advisory fee was $219,150 and
the Adviser waived and reimbursed the Fund $66,084. For the fiscal year
ended June 30, 1993, the advisory fee was $377,058 and the Adviser waived and
reimbursed the Fund $16,023. For the fiscal year ended June 30, 1996, the
advisory fee was $309,063 and the Adviser waived and reimbursed the Fund
$55,903. For the fiscal year ended June 30, 1997, the advisory fee was
$427,360 and the Advisor waived and reimbursed the Fund $8,384. For the
fiscal year ended June 30, 1998, the advisory fee was $695,785.
The Advisory Agreement will remain in effect from year to year, provided
such continuance is approved by a majority of the Board of Directors or by
vote of the holders of a majority of the outstanding voting securities of the
Fund. Additionally, the Advisory Agreement must be approved annually by vote
of a majority of the directors of the Fund who are not parties to the
Agreement or "interested persons" of such parties as that term is defined in
the 1940 Act. The Advisory Agreement may be terminated by the Adviser or the
Fund, without penalty, on 60 days' written notice to the other, and will
terminate automatically in the event of its assignment.
Under the Advisory Agreement, the Fund will have the non-exclusive right
to use the name "Morgan Keegan" until the Agreement is terminated, or until
the right is withdrawn in writing by the Adviser.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser is responsible for the
execution of the Fund's portfolio transactions and must seek the most
favorable price and execution for such transactions, subject to the possible
payment, as described below, of higher commissions to brokers who provide
research and analysis. The Fund may not always pay the lowest commission or
spread available. Rather, the Fund also will take into account such factors
as size of the order, difficulty of execution, efficiency of the executing
brokers facilities (including the services described below) and any risk
assumed by the executing broker.
<PAGE>
The Adviser may give consideration to research, statistical and other
services furnished by broker/dealers to the Adviser for its use, may place
orders with broker/dealers who provide supplemental investment and market
research and securities and economic analysis, and may pay to those brokers a
higher brokerage commission or spread than may be charged by other brokers.
Such research and analysis may be useful to the Adviser in connection with
services to clients other than the Fund. The Adviser's fee is not reduced by
reason of its receipt of such brokerage and research services. During the
fiscal year ended June 30, 1998, the Fund paid brokerage commissions of
$42,824 to brokers who provided research services.
From time to time the Fund may use Morgan Keegan & Company, Inc.
("Morgan Keegan") as broker for agency transactions in listed and over-the-
counter securities at commission rates and under circumstances consistent
with the policy of best execution. The Adviser will not cause the Fund to
pay Morgan Keegan any commission for effecting a securities transaction for
the Fund in excess of the usual and customary amount other broker/dealers
would have charged for the transaction. Rule 17e-1 under the 1940 Act
defines "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time."
The Adviser may also select other brokers to execute portfolio
transactions. In the over-the-counter market, the Fund generally deals with
responsible primary market-makers unless a more favorable execution can
otherwise be obtained through brokers. For the fiscal year ended June 30,
1998, brokerage commissions paid to Morgan Keegan constituted approximately
18% of all brokerage commissions paid by the Fund in connection with 19% of
the aggregate dollar amount of transactions involving the payment of
commissions effected by the Fund in that year. Brokerage commissions paid to
Morgan Keegan & Company, Inc. were $8,100, $9,200, $17,500, $85,000, $123,000
and $78,000, for the fiscal years ended June 30, 1998, 1997, 1996, 1995,
1994, and 1993, respectively.
The Fund may not buy securities from, or sell securities to, Morgan
Keegan as principal. The Fund's Board of Directors has adopted procedures in
conformity with Rule 10f-3 under the 1940 Act whereby the Fund may purchase
securities that are offered in underwritings in which Morgan Keegan is a
participant.
Section 11(a) of the Securities Exchange Act of 1934 prohibits Morgan
Keegan from executing transactions on an exchange for the Fund except
pursuant to the provisions of Rule 11a2-2(T) thereunder. That rule permits
Morgan Keegan, as a member of a national securities exchange, to perform
functions other than execution in connection with a securities transaction
for the Fund on that exchange only if the Fund expressly consents by written
contract. The Advisory Agreement expressly provides such consent in
accordance with Rule 11a2-2(T).
Investment decisions for the Fund are made independently from those of
other accounts advised by the Adviser. However, the same security may be
held in the portfolios of more that one account. When two or more accounts
simultaneously engage in the purchase or sale of the same security, the
prices and amounts will be equitably allocated among the accounts. In some
cases, this procedure may adversely affect the price or quantity of the
security available to a particular account. In other cases, however, an
account's ability to participate in large volume transactions may produce
better executions and prices.
<PAGE>
Morgan Keegan personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders by all Morgan Keegan directors, officers and employees,
establishes procedures for personal investing and restricts certain
transactions. For example, personal trading in most securities requires pre-
clearance. In addition, the code of ethics places restrictions on the timing
of personal investing in relation to trades by the Fund.
THE FUND'S DISTRIBUTOR
Morgan Keegan acts as distributor of the Fund's shares pursuant to an
Underwriting Agreement between the Fund and Morgan Keegan dated August 14,
1986 and amended on February 12, 1987 and July 7, 1993 ("Underwriting
Agreement"). The shares of the Fund are offered continuously. The
Underwriting Agreement obligates Morgan Keegan to provide certain services
and to bear certain expenses in connection with the offering of Fund shares,
including, but not limited to: printing and distribution of prospectuses and
reports to prospective shareholders; preparation and distribution of sales
literature, and advertising; administrative and overhead cost of distribution
such as the allocable costs of executive office time expended on developing,
managing and operating the distribution program; operating expenses of
branch offices, sales training expenses, and telephone and other
communication expenses. Morgan Keegan also compensates investment brokers of
Morgan Keegan and other persons who engage in or support distribution of
shares and shareholder service based on the sales for which they are
responsible and the average daily net asset value of Fund shares in accounts
of their clients.
Pursuant to the Underwriting Agreement, as currently in effect, Morgan
Keegan will receive as compensation for its services a 3% sales charge on
purchased shares. The sales charge is reduced to 1% on sales of $1 million
or more, and is waived on certain purchases of Fund shares, as described in
the Prospectus.
In addition, Morgan Keegan will receive an annual distribution fee
equivalent up to .25% of the Fund's average daily net assets and an annual
service fee equivalent to up to .25% of the Fund's average net assets, in
accordance with the Distribution Plan described below. The distribution fee
is computed daily and paid monthly.
The Fund has adopted a Distribution Plan ("Plan") which, among other
things, permits it to pay Morgan Keegan a service fee and a distribution fee
out of its net assets. The Plan was approved by the initial shareholder of
the Fund on August 14, 1986, and, as required by Rule 12b-1 under the 1940
Act, by the Board of Directors on the same date, including a majority of the
directors who are not "interested persons" of the Fund as that term is
defined in the 1940 Act and who have no direct or indirect financial interest
in the operation of the Plan or the Underwriting Agreement ("Qualified
Directors"). The Plan was amended on February 12, 1987, to reduce the annual
distribution fee from an equivalent of 1.0% of the Fund's average daily net
assets to an equivalent of .50% of the Fund's average daily net assets. The
Plan also was amended on July 7, 1993 to reflect compliance with National
Association of Securities Dealers, Inc. rule regarding "asset-based" sales
charges. The continuation of the Plan was approved by a majority of the
Board of Directors, including a majority of the Qualified Directors on August
18, 1998.
<PAGE>
Service fees and distribution fees paid by the Fund to Morgan Keegan under
the Plan may exceed or be less than Morgan Keegan's expenses thereunder. For
the fiscal year ended June 30, 1998, the Fund paid service fees and
distribution fees to Morgan Keegan pursuant to the Plan of $347,892. For the
fiscal year ended June 30, 1998, expenses paid for by Morgan Keegan included
$156,550 for commissions and other compensation to employees, $71,695 for
printing and mailing, and $16,468 for promotional materials. No interested
person of the Fund or non-interested director had a direct or indirect
interest in the Plan or related agreements. The Fund benefits from the Plan
by virtue of the ongoing broker's involvement with individual customers as
well as the benefit from continued promotion. For the fiscal year ended June
30, 1992, Morgan Keegan retained sales charges for $95,000 received on sales
of the Fund's shares; and for the fiscal year ended June 30, 1993, Morgan
Keegan retained sales charges for $384,000 received on sales of the Fund's
shares; for the fiscal year ended June 30, 1994, Morgan Keegan retained sales
charges for $40,000 received on sales of the Fund's shares; for the fiscal
year ended June 30, 1995, Morgan Keegan retained sales charges for $13,000
received on sales of the Fund's shares; for the fiscal year ended June 30,
1996, Morgan Keegan retained sales charges for $185,000 received on sales of
the Fund's shares; for the fiscal year ended June 30, 1997, Morgan Keegan
retained sales charges for $250,000 received on sales of the Fund's shares;
and for the fiscal year ended June 30, 1998, Morgan Keegan retained sales
charges for $624,000 received on sales of the Fund's shares.
In approving the Plan and the amendments to the Plan, in accordance with the
requirements of Rule 12b-1, the Directors considered various factors,
including the amount of the service and distribution fees. In connection
with its consideration of this factor, the Board considered at the time of
the amendment the effect of the institution of a 3% sales charge by the
distributor. The Board determined that the service and distribution fees
were reasonable in view of the compensation Morgan Keegan investment brokers
can receive relative to the compensation offered by competing equity funds
sold with front-end sales loads, with or without distribution fees. The Plan
permits the Fund's shares to be sold to investors with a front-end sales load
of 3%, while some competing equity funds traditionally have been sold with
front-end sales loads in an amount up to 8 1/2% of the purchase price (9.29%
of the net amount invested). The Board also determined that the fees are
reasonable in light of the service and distribution fees paid by other
similar funds. Finally, the Directors determined that there was a reasonable
likelihood that the Plan, and the amendments to the Plan, would benefit the
Fund and its shareholders. This determination was based, in part, on the
belief that the Plan enables the Fund to have Morgan Keegan investment
brokers available to promote and sell the Fund, thereby assisting the Fund to
attract assets. Growth of assets is expected to benefit both the Fund and
the Adviser. The Fund is expected to benefit from the potential for
economies of scale in its operations that can arise from growth in assets, as
well as from the increased potential for flexibility in portfolio management
resulting from a net inflow of assets, as opposed to net redemptions.
Shareholders of the Fund are expected to benefit from continuing services
provided by investment brokers and other staff members of Morgan Keegan as
distributor. The Adviser and Morgan Keegan are expected to benefit from the
fact that their advisory, service and distribution fees, which are based on a
percentage of assets, increase as Fund assets grow and that their brokerage
commissions and transfer fees will also increase as assets grow. The
Directors acknowledged, however, that there is no assurance that benefits to
the Fund will be realized as a result to the Plan. In considering whether to
continue the Plan, the Directors, among other things, also reviewed the
expenses of the Plan, alternative methods of distributing Fund shares and the
overall expected costs and benefits to the Fund.
<PAGE>
The Plan may be terminated by vote of a majority of the Qualified
Directors or by vote of a majority of the outstanding voting securities of
the Fund. Termination of the Plan terminates any obligation of the Fund to
pay service and distribution fees to Morgan Keegan, other than service and
distribution fees that may have accrued but that have not been paid as of the
date of termination. Any change in the Plan that would materially increase
the service and distribution costs to the Fund requires shareholder approval;
otherwise the Plan may be amended by the Directors, including a majority of
the Qualified Directors, as described above.
The Plan, as currently in effect, will continue for successive one-year
periods, provided that each such continuance specifically is approved by (1)
the vote of a majority of the Qualified Directors and (2) the vote of a
majority of the entire Board of Directors.
Rule 12b-1 requires that any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to the Plan or any related
agreement shall provide to the Fund's Board of Directors, and the Directors
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which expenditures were made. Rule 12b-1 also provides
that the Fund may rely on that rule only if the selection and nomination of
the Fund's independent directors are committed to the discretion of such
independent directors.
The current Underwriting Agreement was approved initially by vote of the
Board and the Qualified Directors on February 9, 1987, and its continuance
was most recently approved by vote of the Board and the Qualified Directors
on August 17, 1998. The Underwriting Agreement is subject to the same
provisions for annual renewal as the Plan. In addition, the Underwriting
Agreement will terminate upon assignment or upon 60 days' notice from Morgan
Keegan. The Fund may terminate the Underwriting Agreement, without penalty,
upon 60 days' notice, by a majority vote of either its Board of Directors,
the Qualified Directors, or the outstanding voting securities of the Fund.
<PAGE>
THE FUND'S CUSTODIAN, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT
AND
PORTFOLIO ACCOUNTING SERVICE AGENT
Morgan Keegan & Company, Inc., Morgan Keegan Tower, Fifty Front Street,
Memphis, Tennessee 38103, serves as the transfer and dividend disbursing
agent of the Fund. For these services, Morgan Keegan, the Fund's
distributor, receives from the Fund a fee of $5,000 per month, or $60,000 per
year.
Morgan Keegan also provides accounting services to the Fund. For these
services, which include portfolio accounting, expense accrual and payment,
fund valuation and financial reporting, tax accounting, and compliance
control services, Morgan Keegan receives from the Fund a fee of $2,500 per
month, or $30,000 per year.
Shareholders who request an historical transcript of their account will
be charged a fee based on the number of years researched. The Fund reserves
the right, upon 60 days' written notice, to make other charges to investors
to cover administrative costs.
State Street Bank and Trust Company, National Association, 108 Myrtle
Street, Quincy, Massachusetts, 02171, serves as the Fund's custodian.
<PAGE>
THE FUND'S LEGAL COUNSEL
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington,
D.C. 20036-1800, serves as counsel to the Fund and has passed upon certain
matters in connection with this offering.
THE FUND'S CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP, Fifty North Front Street, Memphis, Tennessee
38103, are the Fund's independent certified public accountants. The
financial information under the caption "Financial Highlights" in the
Prospectus has been derived from the Fund's financial statements contained in
the Fund's Annual Report to shareholders for the period ended June 30, 1998
("Annual Report"). Those financial statements have been examined by KPMG
Peat Marwick LLP, whose report thereon also appears in the Annual Report and
have been incorporated by reference in this Statement of Additional
Information. KPMG Peat Marwick LLP, performs an audit of the Fund's
financial statements and reviews the Fund's federal and state income tax
returns.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the fiscal year ended June
30, 1998 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes, and the report
of independent certified public accountants appearing therein are
incorporated by reference in this Statement of Additional Information.
</PAGE>
<PAGE>
Exhibit 1
ARTICLES OF INCORPORATION
OF
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
FIRST: I, ARTHUR J. BROWN, whose post office address is 1900 M Street, N.W.,
Washington, D.C. 20036, being at least eighteen 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.
SECOND: The name of the corporation is MORGAN KEEGAN SOUTHERN CAPITAL FUND,
INC. (the "Corporation").
THIRD: The duration of the Corporation shall be perpetual.
FOURTH: (a) The purposes for which the Corporation is formed are to act as an
open-end management investment company as defined in the Investment Company Act
of 1940, as amended ("1940 Act"), 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, including, but not limited to, the following:
<PAGE>
(1) To hold, invest and reinvest the funds of the Corporation, and to purchase,
subscribe for or otherwise acquire, to hold for investment or otherwise, and in
connection therewith to hold part or all of its funds in cash, to trade and deal
in, write, sell, assign, negotiate, transfer, exchange, lend, pledge or
otherwise dispose of or turn to account or realize upon, securities (which term
"securities" shall, for the purposes of these Articles of Incorporation, without
limiting the generality thereof, be de
ubscribe for or sell the same, or evidencing or representing any other rights or
interest, including all rights of equitable ownership therein, or in any
property or assets; and any negotiable or nonnegotiable instruments and money
market instruments, including bank certificates of deposit, finance paper,
commercial paper, bankers' acceptances and all kinds of repurchase and reverse
repurchase agreements) created or issued by any United States or foreign issuer
(which term "issuer" shall, for the purpose of
xercise, as owner or holder of any securities, all rights, powers and privileges
of ownership or interest in all securities held by the Corporation including the
right to vote thereon and otherwise act with respect thereto; to aid by further
investment any issuer, any obligation of or interest in which is held by the
Corporation or in the affairs of which the Corporation has any direct or
indirect interest; to guarantee or become surety on any or all of the contracts,
stocks, bonds, notes, debentures and ot
<PAGE>
(2) To acquire all or any part of the goodwill, rights, property and business of
any person, firm, association or corporation heretofore or hereafter engaged in
any business similar to any business which the Corporation has the power to
conduct, and to hold, utilize, enjoy and in any manner dispose of the whole or
any part of the rights, property and business so acquired, and to assume in
connection therewith any liabilities of any such person, firm, association or
corporation.
(3) To apply for, obtain, purchase or otherwise acquire, any patents,
copyrights, licenses, trademarks, trade names and the like, which may be capable
of being used for any of the purposes of the Corporation; and to use, exercise,
develop, grant licenses in respect of, sell and otherwise turn to account,
the same.
(4) To issue and sell shares of its own capital stock and securities convertible
or exchangeable, with or without the payment of additional consideration, into
such capital stock in such amounts and on such terms and conditions, for such
purposes and for such amount or kind of consideration (including, without
limitation thereto, securities) now or hereafter permitted by the laws of the
State of Maryland, by the 1940 Act and by these Articles of Incorporation, as
its Board of Directors may, and which is her
(5) To purchase, repurchase, or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its capital stock, in any manner and to the extent
now or hereafter permitted by the laws of the State of Maryland, by the 1940 Act
and by these Articles of Incorporation.
<PAGE>
(6) To conduct and carry on its business, or any part thereof, to have one or
more offices, and to exercise and enjoy any or all of its corporate powers,
rights, and privileges as granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, in the State of
Maryland and in any other states, territories, districts, and dependencies of
the United States, and in any foreign countries.
(7) In general, to carry on any other business in connection with or incidental
to its corporate purposes, to do everything necessary, suitable or proper for
the accomplishment of such purposes or for the attainment of any object or the
furtherance of any power hereinbefore set forth, either alone or in association
with others; to do every other act or thing incidental or appurtenant to or
growing out of or connected with its business or purposes, objects or powers,
and, subject to the foregoing, to have an
ts and privileges conferred upon corporations by the laws of the State of
Maryland as in force from time to time.
(b) The foregoing clauses (1) - (7) inclusive shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of this or any other Article of
these Articles of Incorporation, and shall each be regarded as independent and
construed as a power as well as an object and a purpose, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or
oration now or hereafter conferred by the laws of Maryland, nor shall the
expression of one thing be deemed to exclude another though it be of like
nature, not expressed; provided however, that the Corporation shall not have
<PAGE>
power to carry on within the State of Maryland any business whatsoever the
carrying on of which would preclude it from being classified as an ordinary
business corporation under the laws of said State; nor shall it carry on any
business, or exercise any powers, in any other state, territory, district or
country except to the extent that the same may lawfully be carried on or
exercised under the laws thereof.
(c) Incident to meeting the purposes specified above, the Corporation also shall
have the power:
(1) To acquire (by purchase, lease or otherwise) and to hold, use, maintain,
develop and dispose of (by sale or otherwise) any property, real or personal,
and any interest therein.
(2) To borrow money and, in this connection, issue notes or other evidences of
indebtedness.
(3) Subject to any applicable provisions of law, to buy, hold, sell, and
otherwise deal in and with foreign exchange, including the purchase and sale of
futures contracts.
FIFTH: The post office address of the principal office of the Corporation in
the State of Maryland is The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202-3242. The name of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Incorporated and
the post office address of the resident agent is 32 South Street, Baltimore,
Maryland 21202-3242. Said resident agent is a citizen of the State of Maryland
and actually resides therein.
<PAGE>
SIXTH: Section 6.1. Capital Stock.
(a) The total number of shares of capital stock which the Corporation shall have
authority to issue is 100,000,000 Shares, par value $.001 per share, having an
aggregate par value of $100,000. The Board of Directors of the Corporation is
authorized, from time to time, to classify or to reclassify or to designate or
to redesignate, as the case may be, any unissued Shares of stock of the
Corporation in separate series.
(b) The Shares of said series of stock shall have the following relative
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption:
(1) Assets Belonging to Series. All consideration received by the Corporation
for the issue or sale of Shares of a particular series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all pur
ts of creditors, and shall be so recorded upon the books and accounts of the
Corporation. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General Items
allocated to that series as provided in the following sentence, are herein
referred to as "assets belonging to" that series. In the event that there are
any assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to
ively "General Items"), such General Items shall be allocated by or
<PAGE>
under the supervision of the Board of Directors to and among any one or more of
the series established and designated from time to time in such manner and on
such basis as the Board of Directors, in its sole discretion, deems fair and
equitable, and any General Items so allocated to a particular series shall
belong to that series. Each such allocation by the Board of Directors shall be
conclusive and binding for all purposes.
(2) Liabilities Belonging to Series. The assets belonging to each particular
series shall be charged with all liabilities, expenses, costs, charges and
reserves of the Corporation attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Corporation which are
not readily identifiable as belonging to any particular series shall be
allocated and charged by or under the supervision of the Board of Directors to
and among any one or more of the series established and
such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable. The liabilities, expenses, costs, charges
and reserves allocated and so charged to a series are herein referred to as
"liabilities belonging to" that series. Each allocation of liabilities,
expenses, costs, charges and reserves by the Board of Directors shall be
conclusive and binding for all purposes.
(3) Income Belonging to Series. The Board of Directors shall have full
discretion, to the extent not inconsistent with the Maryland General Corporation
Law and the 1940 Act, to determine which items shall be treated as income and
which items as capital; and each such determination and allocation shall be
conclusive and binding. "Income belonging to" a series includes all income,
earnings and profits derived from assets belonging to that series, less any
expenses, costs, charges or reserves belonging to the period.
<PAGE>
(4) Dividends and Distributions. Dividends and distributions on Shares of a
particular series may be declared and paid with such frequency, in such form and
in such amount as the Board of Directors may from time to time determine.
Dividends may be declared daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Board of
Directors may determine, after providing for actual or accrued liabilities
belonging to that series.
All dividends on Shares of a particular series shall be paid only out of the
income belonging to that series and capital gains distributions on Shares of a
particular series shall be paid only out of the capital gains belonging to that
series. All dividends and distributions on Shares of a particular series shall
be distributed pro rata to the holders of that series in proportion to the
number of shares of that series held by such holders at the date and time of
record established for the payment of such d
pt that in connection with any dividend or distributions program or procedure
the Board of Directors may determine that no dividend or distribution shall be
payable on Shares as to which the Shareholder's purchase order and/or payment
have not been received by the time or times established by the Board of
Directors under such program or procedure.
The Board of Directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends, including dividends designated in
whole or in part as capital gains distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company under the Internal Revenue Code of 1954, as
amended, or any successor or comparable statute thereto, and regulations
promulgated thereunder, and to avoid liability of the Corporati
spect of that year. However, nothing in the foregoing shall
<PAGE>
limit the authority of the Board of Directors to make distributions greater than
or less than the amount necessary to qualify as a regulated investment company
and to avoid liability of the Corporation for such tax.
Dividends and distributions may be paid in cash, property or Shares, or a
combination thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time. Any such
dividend or distribution paid in Shares will be paid at the current per Share
net asset value thereof as defined in Section 6.3.
(5) Liquidation. In the event of the liquidation of the Corporation or of a
particular series, the Shareholders of each series that has been established and
designated and is being liquidated shall be entitled to receive, as a series,
when and as declared by the Board of Directors, the excess of the assets
belonging to that series. The holders of Shares of any series shall not be
entitled thereby to any distribution upon liquidation of any other series. The
assets so distributable to the Shareholders of a
(6) Voting. On each matter submitted to a vote of the Shareholders, each holder
of a Share shall be entitled to one vote for each Share outstanding in his name
on the books of the Corporation, irrespective of the series thereof, and all
Shares of all series shall vote as a single series ("Single Series Voting");
<PAGE>
provided, however, that: (i) as to any matter with respect to which a separate
vote of any series is required by the 1940 Act, or by the Maryland General
Corporation Law, such requirement as to a separate vote by that series shall
apply in lieu of Single Series Voting as described above; (ii) in the event that
the separate vote requirements referred to in (i) above apply with respect to
one or more series, then, subject to (iii) below, the Shares of all other series
shall vote as a single series; and (iii)
(7) Equality. All Shares of each particular series shall represent an equal
proportionate interest in the assets belonging to that series (subject to the
liabilities belonging to that series), and each Share of any particular series
shall be equal to each other Share of that series. The Board of Directors may
from time to time divide or combine the Shares of any particular series into a
greater or lesser number of Shares of that series without thereby changing the
proportionate beneficial interest in the
in any way affecting the rights of Shares of any other series.
of Shares of that series without thereby changing the proportionate beneficial
interest in the asin any way affecting the rights of Shares of any other series.
(8) Conversion or Exchange Rights. Subject to compliance with the requirements
of the 1940 Act, the Board of Directors shall have the authority to provide that
holders of Shares of any series shall have the right to convert or exchange said
Shares into Shares of one or more other series in accordance with such
requirements and procedures as may be established by the Board of Directors.
(c) The Corporation may hold as treasury Shares, reissue for such consideration
and on such terms as the Board of Directors may determine, or cancel, at their
discretion from time to time, any Shares reacquired by the Corporation. No
holder of any of the Shares shall be entitled as of right to subscribe for,
purchase, or otherwise acquire any Shares of the Corporation which the
Corporation proposes to issue or reissue.
<PAGE>
The Corporation shall have authority to issue any additional Shares hereafter
authorized and any Shares redeemed or repurchased by the Corporation. All
Shares when properly issued in accordance with these Articles of Incorporation
shall be fully paid and nonassessable.
Section 6.2. Redemption by Shareholder.
(a) Each holder of Shares of a particular series shall have the right at such
times as may be permitted by the Corporation to require the Corporation to
redeem all or any part of his Shares of that series at a redemption price per
Share equal to the net asset value per Share as of such time as the Board of
Directors shall have prescribed by resolution. In the absence of such
resolution, the redemption price per Share shall be the net asset value next
determined (in accordance with Section 6.3) after receip
st for redemption in proper form less such charges as are determined by the
Board of Directors and described in the Corporation's registration statement
under the Securities Act of 1933. The Board of Directors may specify
conditions, prices, and places of redemption, and may specify binding
requirements for the proper form or forms of requests for redemption. Payment
of the redemption price may be wholly or partly in securities or other assets at
the value of such securities or assets used in such determi
ay be in cash. Notwithstanding the foregoing, the Board of Directors may
postpone payment of the redemption price and may suspend the right of the
holders of Shares to require the Corporation to redeem Shares during any period
or at any time when and to the extent permissible under the 1940 Act.
<PAGE>
Section 6.3. Net Asset Value per Share.
(a) The net asset value of each Share of any series as of any particular time
shall be the quotient obtained by dividing the value of the net assets of that
series (being the value of the assets belonging to that series less the
liabilities belonging to that series) by the total number of Shares of that
series outstanding. The Board of Directors shall have the power and duty to
determine from time to time the net asset value per Share of each series of the
outstanding Shares of capital stock of the Corpora
methods as it shall determine subject to any restrictions or requirements under
the 1940 Act and the rules, regulations and interpretations thereof promulgated
or issued by the Securities and Exchange Commission or insofar as permitted by
any order of the Securities and Exchange Commission applicable to the
Corporation. The Board of Directors may delegate such power and duty to any one
or more of the directors and officers of the Corporation, to the Corporation's
investment adviser, to the custodian or dep
sets, or to another agent of the Corporation.
Section 6.4. Redemption by the Corporation.
(a) The Board of Directors may cause the Corporation to redeem at current net
asset value all Shares owned or held by any one Shareholder having an aggregate
current net asset value of less than $500. No such redemption shall be effected
unless the Corporation has given the Shareholder at least sixty (60) days'
notice of its intention to redeem the Shares and an opportunity to purchase a
sufficient number of additional Shares to bring the aggregate current net asset
value of his Shares to five hundred doll
of Shares pursuant to this Section, the Corporation shall promptly cause payment
of the full redemption price to be made to the holder of Shares so redeemed.
<PAGE>
SEVENTH: Section 7.1. Issuance of New Stock.
(a) The Board of Directors is authorized to issue and sell or cause to be issued
and sold from time to time (without the necessity of offering the same or any
part thereof to existing Shareholders) all or any portion or portions of the
entire authorized but unissued Shares of the Corporation, and all or any portion
or portions of the Shares of the Corporation from time to time in its treasury,
for cash or for any other lawful consideration or considerations and on or for
any terms, conditions, or prices con
law and of the Articles of Incorporation at the time in force; provided,
however, that in no event shall Shares of the Corporation having a par value be
issued or sold for a consideration or considerations less in amount or value
than the par value of the Shares so issued or sold, and provided further that in
no event shall any Shares of the Corporation be issued or sold, except as a
stock dividend distributed to Shareholders, for a consideration (which shall be
net to the Corporation after underwriting dis
amount or value than the net asset value of the Shares so issued or sold
determined as of such time as the Board of Directors shall have by resolution
prescribed. In the absence of such a resolution, such net asset value shall be
that next determined after an unconditional order in proper form to purchase
such Shares is accepted, except that Shares may be sold to an underwriter at (a)
the net asset value determined next after such orders are received by a dealer
with whom such underwriter has a sales agree
at a later time.
Section 7.2 Fractional Shares.
(a) The Corporation may issue or sell fractions of Shares having pro rata all
the rights of full Shares, including, without limitation, the right to vote and
to receive dividends, and wherever the words "Share" or "Shares" are used in
these Articles or in the Bylaws they shall be deemed to include fractions of
Shares, unless specifically noted to the contrary.
<PAGE>
EIGHTH:
(a) All corporate powers and authority of the Corporation (except as otherwise
provided by statute, these Articles of Incorporation, or the By-Laws) shall be
vested in and exercised by the Board of Directors. The number of directors
constituting the Board of Directors shall be such number as may from time to
time be fixed in or in accordance with the By-Laws of the Corporation, provided
that after stock is issued to more than one stockholder, such number shall never
be less than three. Except as provided
directors may be conducted in any way approved at the meeting (whether of
stockholders or directors) at which the election is held, provided that such
election shall be by ballot whenever requested by any person entitled to vote.
The name of the persons who shall act as initial directors until stock is issued
to more than one Shareholder, or until their successors have been duly chosen
and qualified are Allen B. Morgan, Jr., Richard A. McStay, and David M. Guthrie.
(b) The Board of Directors shall have power from time to time to determine
whether and to what extent, and at what times and places and under what
conditions and regulations, the accounts and books of the Corporation (other
than the stock ledger) or any of them shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account,
book or document of the Corporation except to the extent permitted by statute or
the By-Laws.
<PAGE>
(c) The Board of Directors shall have the power to determine, as provided
herein, or if provision is not made herein, in accordance with generally
accepted accounting principles, what constitutes net income, total assets and
the net asset value of the shares of the Corporation. It may delegate such
power and duty to any one or more of the directors and officers of the
Corporation, to the investment adviser, administrator, custodian or depositary
of the Corporation's assets, or to another agent of the Corpo
se.
NINTH: Notwithstanding any provision of law requiring a greater proportion
than a majority of the votes of all classes (or of any class entitled to vote
thereon as a separate class) to take or authorize any action, in accordance with
the authority granted by Section 2-104(b)(5) of the Maryland General Corporation
Law, the Corporation is hereby authorized to take such action upon the
concurrence of a majority of the aggregate number of Shares entitled to vote
thereon (or of a majority of the aggregate numb
to vote thereon as a separate class or series). The right to cumulate votes in
the election of directors is expressly prohibited.
TENTH: Except as may otherwise be provided in the ByLaws, the Board of
Directors of the Corporation is expressly authorized to make, alter, amend and
repeal ByLaws or to adopt new ByLaws of the Corporation, without any action on
the part of the Shareholders; but the ByLaws made by the Board of Directors and
the power so conferred may be altered or repealed by the Shareholders.
<PAGE>
ELEVENTH:
(a) The Board of Directors may in its discretion from time to time enter into an
exclusive or nonexclusive distribution contract or contracts providing for the
sale of Shares whereby the Corporation may either agree to sell Shares to the
other party to the contract or appoint such other party its sales agent for such
Shares (such other party being herein sometimes called the "underwriter"), and
in either case on such terms and conditions as may be prescribed in the ByLaws,
if any, and such further terms and
n its discretion determine not inconsistent with the provisions of these
Articles of Incorporation and such contract may also provide for the repurchase
of Shares of the Corporation by such other party as agent of the Corporation.
The Board of Directors may also in its discretion from time to time enter into
an investment advisory or management contract or contracts whereby the other
party to such contract shall undertake to furnish to the Board of Directors such
management, investment advisory, statistica
such other facilities and services, if any, and all upon such terms and
conditions, as the Board of Directors may in its discretion determine.
(b) Any contract of the character described in paragraph (a) of this Article or
for services as administrator, custodian, transfer agent or disbursing agent or
related services may be entered into with any corporation, firm, trust or
association, although any one or more of the directors or officers of the
Corporation may be an officer, director, trustee, Shareholder or member of such
other party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of an
<PAGE>
any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Corporation under or by reason of
said contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was reasonable and fair
and not inconsistent with the provisions of this Article ELEVENTH. The same
person (including a firm, corporation, trust, or association) may be the other
party to contracts entered into pursuant to paragr
al may be financially interested or otherwise affiliated with persons who are
parties to any or all of the contracts mentioned in this paragraph (b).
(c) Any contract entered into pursuant to paragraph (a) above shall be
consistent with and subject to the requirements of Section 15 of the 1940 Act
(including any amendment thereof or other applicable Act of Congress hereafter
enacted) with respect to its continuance in effect, its termination and the
method of authorization and approval of such contract or renewal thereof.
TWELFTH: The Corporation shall indemnify its present and past directors,
officers, employees, and agents, and persons who are serving or have served at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or enterprise, to the
maximum extent permitted by applicable law, in such manner as may be provided in
the By-Laws; provided, that no director, officer, investment adviser or
principal underwriter of the Corporation shall be in
(i) of the 1940 Act. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have th
t such liability.
<PAGE>
THIRTEENTH: Neither the stockholders personally nor their property shall be
liable to any extent for the payment of the corporate debts.
FOURTEENTH: The Corporation reserves the right from time to time to make any
amendment of these Articles of Incorporation, now or hereafter authorized by
law, including any amendment which alters contract rights, as expressly set
forth in these Articles of Incorporation, of any outstanding Shares. Any
amendment to these Articles of Incorporation may be adopted at either an annual
or special meeting of the Shareholders upon receiving an affirmative majority
vote of all outstanding Shares.
IN WITNESS WHEREOF, the undersigned incorporator of Morgan Keegan Southern
Capital Fund, Inc. has executed the foregoing Articles of Incorporation and
hereby acknowledges the same to be his act and further acknowledges that, to the
best of his knowledge, the matters and facts set forth therein are true in all
material respects under the penalties of perjury.
Dated the 5th day of May, 1986.
/s/ Arthur Brown
--------------------
Arthur J. Brown
</PAGE>
<PAGE>
EXHIBIT 2
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
A Maryland Corporation
BY-LAWS
AS AMENDED
AUGUST 24, 1987
</PAGE>
<PAGE>
Table of Contents
ARTICLE I NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL. . . . . . . 4
Section 1.01. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.02. Principal Offices . . . . . . . . . . . . . . . . . . . . . 4
Section 1.03. Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.01. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.02. Special Meetings. . . . . . . . . . . . . . . . . . . . . . 4
Section 2.03. Place of Meetings . . . . . . . . . . . . . . . . . . . . . 5
Section 2.04. Notice of Meetings. . . . . . . . . . . . . . . . . . . . . 5
Section 2.05. Voting - In General . . . . . . . . . . . . . . . . . . . . 5
Section 2.06. Stockholders Entitled to Vote . . . . . . . . . . . . . . . 5
Section 2.07. Voting - Proxies. . . . . . . . . . . . . . . . . . . . . . 6
Section 2.08. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.09. Absence of Quorum . . . . . . . . . . . . . . . . . . . . . 6
Section 2.10. Stock Ledger and List of Stockholders . . . . . . . . . . . 6
Section 2.11. Action Without Meeting. . . . . . . . . . . . . . . . . . . 7
ARTICLE III BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . 7
Section 3.01. Number and Term of Office . . . . . . . . . . . . . . . . . 7
Section 3.02. Qualification of Directors. . . . . . . . . . . . . . . . . 7
Section 3.03. Election of Directors . . . . . . . . . . . . . . . . . . . 7
Section 3.04. Removal of Directors. . . . . . . . . . . . . . . . . . . . 8
Section 3.05. Vacancies and Newly Created Directorships . . . . . . . . . 8
Section 3.06. General Powers. . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.07. Power to Issue and Sell Stock . . . . . . . . . . . . . . . 8
Section 3.08. Power to Declare Dividends. . . . . . . . . . . . . . . . . 9
Section 3.09. Annual and Regular Meetings . . . . . . . . . . . . . . . . 9
Section 3.10. Special Meetings. . . . . . . . . . . . . . . . . . . . . . 9
Section 3.11. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.12. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . 9
Section 3.13. Quorum and Voting . . . . . . . . . . . . . . . . . . . . . 9
Section 3.14. Compensation. . . . . . . . . . . . . . . . . . . . . . . .10
Section 3.15. Action Without a Meeting. . . . . . . . . . . . . . . . . .10
ARTICLE IV EXECUTIVE COMMITTEE AND OTHER COMMITTEES . . . . . . . . . . .10
Section 4.01. How Constituted . . . . . . . . . . . . . . . . . . . . . .10
Section 4.02. Powers of the Executive Committee . . . . . . . . . . . . .10
Section 4.03. Proceedings, Quorum and Manner of Acting. . . . . . . . . .10
Section 4.04. Other Committees. . . . . . . . . . . . . . . . . . . . . .11
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5.01. General . . . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
Section 5.02. Election, Term of Office and Qualifications . . . . . . . .11
Section 5.03. Resignation . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5.04. Removal . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 5.05. Vacancies and Newly Created Offices . . . . . . . . . . . .12
Section 5.06. Chairman of the Board . . . . . . . . . . . . . . . . . . .12
Section 5.07. President . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 5.08. Vice President. . . . . . . . . . . . . . . . . . . . . . .12
Section 5.09. Treasurer and Assistant Treasurers. . . . . . . . . . . . .12
Section 5.10. Secretary and Assistant Secretaries . . . . . . . . . . . .13
Section 5.11. Subordinate Officers. . . . . . . . . . . . . . . . . . . .13
Section 5.12. Remuneration. . . . . . . . . . . . . . . . . . . . . . . .13
Section 5.13. Surety Bonds. . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE VI CUSTODY OF SECURITIES. . . . . . . . . . . . . . . . . . . . .14
Section 6.01. Employment of a Custodian . . . . . . . . . . . . . . . . .14
Section 6.02. Action Upon Termination of Custodian Agreement. . . . . . .14
Section 6.03. Provisions of Custodian Contract. . . . . . . . . . . . . .14
Section 6.04. Other Arrangements . . . . . . . . . . . . . . . . . . . .15
ARTICLE VII EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES. . . . . . . .15
Section 7.01. General . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 7.02. Check, Notes, Drafts, etc. . . . . . . . . . . . . . . . .15
Section 7.03. Voting of Securities. . . . . . . . . . . . . . . . . . . .15
ARTICLE VIII CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . .16
Section 8.01. Certificates of Stock . . . . . . . . . . . . . . . . . . .16
Section 8.02. Transfer of Capital Stock . . . . . . . . . . . . . . . . .16
Section 8.03. Transfer Agents and Registrars. . . . . . . . . . . . . . .17
Section 8.04. Transfer Regulations. . . . . . . . . . . . . . . . . . . .17
Section 8.05. Fixing of Record Date . . . . . . . . . . . . . . . . . . .17
Section 8.06. Lost, Stolen or Destroyed Certificates. . . . . . . . . . .17
ARTICLE IX FISCAL YEAR, ACCOUNTANT . . . . . . . . . . . . . . . . . . .17
Section 9.01. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . .18
Section 9.02. Accountant . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE X INDEMNIFICATION AND INSURANCE . . . . . . . . . . . . . . . . .18
Section 10.01. Indemnification of Officers, Directors,
Employees and Agents . . . . . . . . . . . . . . . . . . .18
Section 10.02. Insurance of Officers, Directors, Employees and Agents . .19
Section 10.03. Advancing of Expenses . . . . . . . . . . . . . . . . . .19
ARTICLE XI AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 11.01. General. . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 11.02. By Stockholders Only . . . . . . . . . . . . . . . . . . .19
<PAGE>
ARTICLE I
NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL
Section 1.01. Name: The name of the Corporation is Morgan Keegan Southern
Capital Fund, Inc.
Section 1.02. Principal Offices: The principal office of the Corporation in
the State of Maryland shall be located in the City of Baltimore. The
Corporation may, in addition, establish and maintain such other offices and
places of business as the Board of Directors may, from time to time, determine.
Section 1.03. Seal: The corporate seal of the Corporation shall be circular
in form and shall bear the name of the Corporation, the year of its
incorporation, and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. Any officer or Director of the Corporation shall have
authority to affix the corporate seal of the Corporation
ame.
ARTICLE II
STOCKHOLDERS
Section 2.01. Annual Meetings: The Corporation need not hold an annual
meeting in any year in which one of the following is not required to be acted
upon by the stockholders under the Investment Company Act of 1940:
a. Election of directors;
b. Approval of an investment advisory agreement;
c. Ratification of the selection of independent certified public
accountants; and
d. Approval of a distribution contract.
Section 2.02. Special Meetings: Special meetings of the stockholders may be
called at any time by the chairman of the Board, the President or by any Vice
President, or by a majority of the Board of Directors.
Special meetings of the stockholders shall be called by the Secretary upon the
written request of the holders of shares entitled to vote not less than 25% of
all the shares entitled to be voted at such meeting, provided that (a) such
request shall state the purposes of such meeting and the matters proposed to be
acted on, and (b) the stockholders requesting such meeting shall have paid to
the Corporation the reasonably estimated cost of preparing and mailing the
<PAGE>
notice thereof, which the Secretary shall determine and specify to such
stockholders. No special meeting need be called upon the request of the holders
of shares entitled to vote less than a majority of all the shares entitled to be
voted at such meeting to consider any matter which is substantially the same as
a matter voted upon at any special meeting of the stockholders held during the
preceding 12 months.
Section 2.03. Place of Meetings: All stockholders' meetings shall be held at
the principal office of the Corporation, except that the Board of Directors may
fix a different place of meeting, have one or more offices, and keep the books
of the Corporation at any other place within the United States as they may from
time to time determine, or, in the case of meetings as shall be specified in
each notice or waiver of notice of the meeting.
Section 2.04. Notice of Meetings: The Secretary or an Assistant Secretary
shall cause notice of the place, date and hour, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, to be mailed,
not less than 10 nor more than 90 days before the date of the meeting, to each
stockholder entitled to vote at such meeting, at his address as it appears on
the records of the Corporation at the time of such mailing. Notice of any
stockholders' meeting need not be given to an
to another time or place need not be given, if such time and place are
announced at the meeting.
Section 2.05. Voting - In General: At every stockholders' meeting each
stockholder entitled to vote shall be entitled to one vote for each share and a
proportionate vote for each fraction of a share of stock of the Corporation
validly issued and outstanding and held by such stockholder, except that no
shares held by the Corporation shall be entitled to a vote. Except as otherwise
specifically provided in the Articles of Incorporation or these By-Laws or as
required by provisions of the Investment Compan
time to time, all matters shall be decided by a vote of the majority of the
votes validly cast. The vote upon any question shall be by ballot whenever
requested by any person entitled to vote, but, unless such a request is made,
voting may be conducted in any way approved by the meeting.
Section 2.06. Stockholders Entitled to Vote: If, pursuant to Section 8.05
hereof, a record date has been fixed for the determination of stockholders
entitled to notice of or to vote at any stockholders' meeting, each stockholder
of the Corporation shall be entitled to vote, in person or by proxy, each share
of stock and fraction of a share of stock standing in his name on the books of
the Corporation on such record date and outstanding at the time of the meeting.
If no record date has been fixed for the
and the stock transfer books are not closed, the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting; or, (b)
if notice is waived by all stockholders, at the close of business on the tenth
day next preceding the day on which the meeting is held.
<PAGE>
Section 2.07. Voting - Proxies: The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been executed in
writing by the stockholder himself or by his attorney thereunto duly authorized
in writing. No proxy shall be voted after eleven months from its date unless it
provides for a longer period. Each proxy shall be in writing subscribed by the
stockholder or his duly authorized attorney and shall be dated, but not be
sealed, witnessed or acknowledged. Proxi
cretary of the Corporation or to the person acting as Secretary of the meeting
before being voted. A proxy with respect to stock held in the name of two or
more persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Corporation receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a stockholder shall be deemed valid unless challenged at or prior to
its exercise.
Section 2.08. Quorum: The presence at any stockholders' meeting, in person or
by proxy, of stockholders entitled to cast one-third of the votes thereat shall
be necessary and sufficient to constitute a quorum for the transaction of
business.
Section 2.09. Absence of Quorum: In the absence of a quorum, the holders of
one-quarter of the shares entitled to vote at the meeting and present thereat in
person or by proxy, or, if no stockholder entitled to vote is present thereat in
person or by proxy, any officer present thereat entitled to preside or act as
Secretary of such meeting, may adjourn the meeting sine die or from time to time
without further notice to a date not more than 120 days after the original
record date. Any business that might
ally called may be transacted at any such adjourned meeting at which a quorum is
present.
Section 2.10. Stock Ledger and List of Stockholders: The stock ledgers of the
Corporation, containing the names and addresses of the stockholders and the
number of shares held by them respectively, shall be kept at the principal
offices of the Corporation or at the office of the Corporation's transfer agent.
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. Any
one or more persons, each of whom has bee
n for more than six months next preceding such request, who owns and has owned
for at least six months in the aggregate 5% or more of the outstanding capital
stock of any class of the Corporation, may submit (unless the Corporation at the
time of the request maintains a duplicate stock ledger at its principal office
in Maryland) a written request to any officer of the Corporation or its resident
agent in Maryland for a list of the stockholders of the Corporation. Within 20
days after such a request, there
ion's principal office in Maryland a list containing the names and addresses of
all stockholders of the Corporation and the number of shares of each class held
by each stockholder, certified as correct by an officer of the Corporation, by
its stock transfer agent, or by its registrar.
Section 2.11. Action Without Meeting: Any action required or permitted to be
taken by stockholders at a meeting of stockholders may be taken without a
meeting if (1) all stockholders entitled to vote on the matter consent to the
action in writing, (2) all stockholders entitled to notice of the meeting but
not entitled to vote at it sign a written waiver of any right to consent, and
(3) the written consents are filed with the records of the meetings of
stockholders. Such consent shall be treated for all
.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Number and Term of Office: Except for the initial Board of
Directors, the Board of Directors shall consist of five Directors, which number
may be increased or decreased by a resolution of a majority of the entire Board
of Directors; provided that the number of Directors shall not be less than three
nor more than seven. Each Director (whenever selected) shall hold office until
his successor is elected and qualified or until his earlier death, resignation
or removal.
Section 3.02. Qualification of Directors: Except for the initial Board of
Directors, the Board of Directors shall include a sufficient number of persons
who are not interested persons of the Corporation, as defined in the Investment
Company Act of 1940, as amended, to comply with the provisions of the Investment
Company Act of 1940, as amended.
Section 3.03. Election of Directors: Initially the Director or Directors of
the Corporation shall be that person or those persons named as such in the
Articles of Incorporation. Thereafter, except as otherwise provided in Section
3.04 and 3.05 hereof, the Directors shall be elected at the annual stockholders'
meeting. In the event that Directors are not elected at an annual stockholders'
meeting, then Directors may be elected at a special stockholders' meeting.
Directors shall be elected by vote of th
nt in person or by proxy and entitled to vote thereon.
Section 3.04. Removal of Directors: At any stockholders' meeting duly called,
provided a quorum is present, any Director or Directors may be removed (either
with or without cause) by the affirmative vote of the holders of a majority of
the shares entitled to be cast for the election of Directors; and at the same
meeting a duly qualified person or persons may be elected to fill any resulting
vacancy or vacancies for the unexpired term or terms of the removed Director or
Directors.
Section 3.05. Vacancies and Newly Created Directorships: If any vacancies
shall occur in the Board of Directors by reason of death, resignation, removal
or otherwise, or if the authorized number of Directors shall be increased, the
Directors then in office shall continue to act, and such vacancies (if not
previously filled by the stockholders) may be filled by a majority of the
Directors then in office, although less than a quorum, except that a newly
created directorship may be filled only by a majority
vided that in either case immediately after filling such vacancy, at least
two-thirds of the Directors then holding office shall have been elected to such
office by the stockholders of the Corporation. In the event that at any time,
other than the time preceding the first annual stockholders' meeting, less than
a majority of the Directors of the Corporation holding office at that time were
so elected by the stockholders, a meeting of the stockholders shall be held
promptly and in any event within 60 days f
ctors to fill any existing vacancies in the Board of Directors unless the
Securities and Exchange Commission shall by order extend such period.
<PAGE>
Section 3.06. General Powers
(a) Except as otherwise provided by law, by the Articles of Incorporation, or
by these By-Laws, the property, affairs and business of the Corporation shall be
managed by or under the direction of the Board of Directors, and all the powers
of the Corporation shall be exercised by or under authority of its Board of
Directors.
(b) All acts done by any meeting of the Directors or by any person acting as a
Director, so long as his successor shall not have been duly elected or
appointed, shall, notwithstanding that it be afterwards discovered that there
was some defect in the election of the Directors or of such person acting as
aforesaid or that they or any of them were disqualified, be as valid as if the
Directors or such other person, as the case may be, had been duly elected and
were or was qualified to be Directors or a Direct
Section 3.07. Power to Issue and Sell Stock: The Board of Directors may from
time to time issue and sell or cause to be issued and sold any of the
Corporation's authorized shares to such person and for such consideration as the
Board of Directors shall deem advisable, subject to the provisions of Article
SEVENTH of the Articles of Incorporation.
Section 3.08. Power to Declare Dividends: The Board of Directors, from time
to time as they may deem advisable, may declare and pay dividends in stock, cash
or other property of the Corporation, out of any source available for dividends,
to the stockholders according to their respective rights and interests in
accordance with the provisions of the Articles of Incorporation.
Section 3.09. Annual and Regular Meetings: The annual meeting of the Board of
Directors for choosing officers and transacting other proper business shall be
that meeting next held after the close of the fiscal year of the Corporation in
years in which no annual stockholders' meeting is held and otherwise shall be
that meeting next held after the annual stockholders' meeting. The Board of
Directors from time to time may provide by resolution for the holding of regular
meetings and fix their time and plac
rovided that regular meetings of the Board, including the annual meeting, shall
be held approximately four times per year. Notice of such annual and regular
meetings need not be in writing, provided that notice of any change in the time
or place of such meetings shall be sent promptly to each Director not present at
the meeting at which such change was made in the manner provided for notice of
special meetings. Members of the Board of Directors or any committee designated
thereby may participate in a meet
oard) of such Board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time; and participation by such means
shall constitute presence in person at a meeting.
Section 3.10. Special Meetings: Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, the President (or,
in the absence or disability of the President, by any Vice President), or two or
more Directors, at the time and place within or outside the State of Maryland
specified in the respective notices or waivers of notice of such meetings.
<PAGE>
Section 3.11. Notice: Notice of special meetings, stating the time and place,
shall be mailed to each Director at his residence or regular place of business
at least five days before the day on which a special meeting is to be held or
caused to be delivered to him personally or to be transmitted to him by
telegraph, cable or wireless at least one day before the meeting.
Section 3.12. Waiver of Notice: No notice of any meeting need be given to any
Director who attends such meeting in person or to any Director who waives
notice of such meeting in writing (which waiver shall be filed with the records
of such meeting), whether before or after the time of the meeting.
Section 3.13. Quorum and Voting: At all meetings of the Board of Directors
the presence of one-half or more of the number of Directors then in office shall
constitute a quorum for the transaction of business, provided that there shall
be present no less than two Directors. In the absence of a quorum, a majority
of the Directors present may adjourn the meeting, from time to time, until a
quorum shall be present. The action of a majority of the Directors present at a
meeting at which a quorum is present
ors unless the concurrence of a greater proportion is required for such action
by law, by the Articles of Incorporation or by these By-Laws.
Section 3.14. Compensation: Each Director may receive such remuneration for
his services as shall be fixed from time to time by resolution of the Board of
Directors.
Section 3.15. Action Without a Meeting: Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a meeting
if written consents thereto are signed by all members of the Board and such
written consents are filed with the records of the meetings of the Board.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.01. How Constituted: By resolution adopted by the Board of
Directors, the Board may designate one or more committees, including an
executive committee, each consisting of at least two Directors. Each member of
a committee shall be a Director and shall hold office during the pleasure of the
Board. The Board of Directors shall have the power at any time to change the
members of such committees and to fill vacancies in the committees. The Board
may delegate to these committees any of its powers
o authorize the issuance of stock, to recommend to stockholders any matter
requiring stockholders' approval, to amend the By-Laws, or to approve any merger
or share exchange which does not require shareholder approval. The Chairman of
the Board, if any, and the President shall be members of the executive
committee.
Section 4.02. Powers of the Executive Committee: Unless otherwise provided by
resolution of the Board of Directors, when the Board of Directors is not in
session the executive committee shall have and may exercise all powers of the
<PAGE>
Board of Directors in the management of the business and affairs of the
Corporation that may lawfully be exercised by an executive committee.
Section 4.03. Proceedings, Quorum and Manner of Acting: In the absence of an
appropriate resolution of the Board of Directors, each committee may adopt such
rules and regulations governing its proceedings, quorum and manner of acting as
it shall deem proper and desirable, provided that the quorum shall not be less
than two Directors. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a member of the Board o
of such absent member.
Section 4.04. Other Committees: The Board of Directors may appoint other
committees, each consisting of one or more persons, who need not be Directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Board of Directors, but shall not
exercise any power which may lawfully be exercised only by the Board of
Directors or a committee thereof.
ARTICLE V
OFFICERS
Section 5.01. General: The officers of the Corporation shall be a President,
a Secretary and a Treasurer, and may include one or more Vice Presidents,
Assistant Secretaries or Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 5.11 hereof. The Board
of Directors may elect, but shall not be required to elect, a Chairman of the
Board.
Section 5.02. Election, Term of Office and Qualifications: The officers of
the Corporation (except those appointed pursuant to Section 5.11 hereof) shall
be chosen by the Board of Directors at its first meeting or such subsequent
meetings as shall be held prior to its first annual meeting, and thereafter
annually at its annual meeting. If any officers are not chosen at any annual
meeting, such officers may be chosen at any subsequent regular or special
meeting of the Board. Except as provided in Secti
r chosen by the Board of Directors shall hold office until the next annual
meeting of the Board of Directors and until his successor shall have been chosen
and qualified. Any person may hold one or more offices of the Corporation
except that no one person may serve concurrently as both President and
Vice-President. A person who holds more than one office may not act in more
than one capacity to execute, acknowledge or verify an instrument required by
law to be executed, verified or acknowledged by more th
f the Board shall be chosen from among the Directors of the Corporation and may
hold such office only so long as he continues to be a Director. No other
officer need be a Director.
<PAGE>
Section 5.03. Resignation: Any officer may resign his office at any time by
delivering a written resignation to the Board of Directors, the President, the
Secretary, or any Assistant Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 5.04. Removal: Any officer may be removed from office whenever in the
Board's judgment the best interest of the Corporation will be served thereby,
by the vote of a majority of the Board of Directors given at the regular meeting
or any special meeting called for such purpose. In addition, any officer or
agent appointed in accordance with the provisions of Section 5.11 hereof may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by
Section 5.05. Vacancies and Newly Created Offices: If any vacancy shall occur
in any office by reason of death, resignation, removal, disqualification or
other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Board of Directors at any regular or
special meeting or, in the case of any office created pursuant to Section 5.11
hereof, by any officer upon whom such power shall have been conferred by the
Board of Directors.
Section 5.06. Chairman of the Board: The Chairman of the Board, if there be
such an officer, shall preside at all stockholders' meetings and at all meetings
of the Board of Directors and may be ex officio a member of all committees of
the Board of Directors. He shall have such other powers and perform such other
duties as may be assigned to him from time to time by the Board of Directors.
Section 5.07. President: The President shall be the chief executive officer
of the Corporation and, in the absence of the Chairman of the Board or if no
Chairman of the Board has been chosen, he shall preside at all stockholders'
meetings and at all meetings of the Board of Directors and shall in general
exercise the powers and perform the duties of the Chairman of the Board.
Subject to the supervision of the Board of Directors, he shall have general
charge of the business, affairs and property of the
s officers, employees and agents. Except as the Board of Directors may
otherwise order, he may sign in the name and on behalf of the Corporation all
deeds, bonds, contracts or agreements. He shall exercise such other powers and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
Section 5.08. Vice President: The Board of Directors may from time to time
designate and elect one or more Vice Presidents who shall have such powers and
perform such duties as from time to time may be assigned to them by the Board of
Directors or the President. At the request or in the absence or disability of
the President, the Vice President (or, if there are two or more Vice Presidents,
then the senior of the Vice Presidents present and able to act) may perform all
the duties of the President and, w
he powers of and be subject to all the restrictions upon the President.
Section 5.09. Treasurer and Assistant Treasurers: The Treasurer shall be the
principal financial and accounting officer of the corporation and shall have
<PAGE>
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He shall render to the
Board of Directors, whenever directed by the Board, an account of the financial
condition of the Corporation and of all his transactions as Treasurer; and as
soon as possible after the close of each finan
oard of Directors a like report for such financial year. He shall perform all
the acts incidental to the office of Treasurer, subject to the control of the
Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
Section 5.10. Secretary and Assistant Secretaries: The Secretary shall attend
to the giving and serving of all notices of the Corporation and shall record
all proceedings of the meetings of the stockholders and Directors in the books
to be kept for that purpose. He shall keep in safe custody the seal of the
Corporation, and shall have responsibility for the records of the Corporation,
including the stock books and such other books and papers as the Board of
Directors may direct and such books, reports,
y law to be kept, all of which shall at all reasonable times be open to
inspection by any Director. At every meeting of the stockholders, he shall
receive and take charge of and/or canvass all proxies and/or ballots, and shall
decide all questions touching the qualification of voters, the validity of
proxies and the acceptance or rejection of votes. He shall perform such other
duties as appertain to his office or as may be required by the Board of
Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary of the Board of Directors may assign, and, in the absence of the
Secretary, may perform all the duties of the Secretary.
Section 5.11. Subordinate Officers: The Board of Directors from time to time
may appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. 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 and to prescribe their
respective rights, terms of office, autho
Section 5.12. Remuneration: The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors, except that the Board of Directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents appointed in accordance
with the provisions of Section 5.11 hereof.
Section 5.13. Surety Bonds: The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
<PAGE>
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission) to the Corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his
hands.
ARTICLE VI
CUSTODY OF SECURITIES
Section 6.01. Employment of a Custodian: The Corporation shall place and at
all times maintain in the custody of a Custodian (including any sub-custodian
for the Custodian) all funds, securities and similar investments owned by the
Corporation. The Custodian (and any sub-custodian) shall be a bank having not
less than $2,000,000 aggregate capital, surplus and undivided profits, or such
other financial institution as shall be permitted by rule or order of the United
States Securities and Exchange Commiss
m time to time by the Board of Directors, which shall fix its remuneration.
Section 6.02. Action Upon Termination of Custodian Agreement: Upon
termination of a Custodian Agreement or inability of the Custodian to continue
to serve, the Board of Directors shall promptly appoint a successor Custodian,
but in the event that no successor Custodian can be found who has the required
qualifications and is willing to serve, the Board of Directors shall call as
promptly as possible a special meeting of the stockholders to determine whether
the Corporation shall function without a Custodi
by vote of the holders of a majority of the outstanding shares of stock of the
Corporation, the Custodian shall deliver and pay over all property of the
Corporation held by it as specified in such vote.
Section 6.03. Provisions of Custodian Contract: The following provisions
shall apply to the employment of a Custodian and to any contract entered into
with the Custodian so employed:
The Board of Directors shall cause to be delivered to the Custodian
all securities owned by the Corporation or to which it may become
entitled, and shall order the same to be delivered by the Custodian
only in completion of a sale, exchange, transfer, pledge, or other
disposition thereof, all as the Board of Directors may generally or
from time to time require or approve or to a successor Custodian;
and the Board of Directors shall cause all funds owned by the
Corporation or to which it may become entitled to be paid to the
Custodian, and shall order the same disbursed only for investment
against delivery of the securities acquired, or in payment of expenses,
including management compensation, and liabilities of the Corporation,
including distributions to stockholders, or to a successor Custodian.
<PAGE>
Section 6.04. Other Arrangements: The Corporation may make such other
arrangements for the custody of its assets (including deposit arrangements) as
may be required by any applicable law, rule or regulation.
ARTICLE VII
EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 7.01. General: Subject to the provisions of Sections 5.07, 6.02 and
8.03 hereof, all deeds, documents, transfers, contracts, agreements and other
instruments requiring execution by the Corporation shall be signed by the
President or a Vice President and by the Treasurer or Secretary or an Assistant
Treasurer or an Assistant Secretary, or as the Board of Directors may otherwise,
from time to time, authorize. Any such authorization may be general or
confined to specific instances.
Section 7.02. Check, Notes, Drafts, etc.: So long as the Corporation shall
employ a Custodian to keep custody of the cash and securities of the
Corporation, all checks and drafts for the payment of money by the Corporation
may be signed in the name of the Corporation by the Custodian. Except as
otherwise authorized by the Board of Directors, all requisitions or orders for
the assignment of securities standing in the name of the Custodian or its
nominee, or for the execution of powers to transfer the sam
of the Corporation by the President or a Vice President and by the Treasurer or
an Assistant Treasurer. Promissory notes, checks or drafts payable to the
Corporation may be endorsed only to the order of the Custodian or its nominee
and only by the Treasurer or President or a Vice President or by such other
person or persons as shall be authorized by the Board of Directors.
Section 7.03. Voting of Securities: Unless otherwise ordered by the Board of
Directors, the President or any Vice President shall have full power and
authority on behalf of the Corporation to attend and to act and to vote, or in
the name of the Corporation to execute proxies to vote, at any meeting of
stockholders of any company in which the Corporation may hold stock. At any
such meeting such officer shall possess and may exercise (in person or by proxy)
any and all rights, powers and privileges incide
rd of Directors may by resolution from time to time confer like powers upon any
other person or persons.
ARTICLE VIII
CAPITAL STOCK
Section 8.01. Certificates of Stock:
(a) Certificates of stock of the Corporation shall be in the form approved by
the Board of Directors, signed in the name of the Corporation by the President
or any Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary, sealed with the seal of the Corporation
<PAGE>
and certifying the number and kind of shares owned by him in the Corporation.
Such signatures and seal may be a facsimile and may be mechanically reproduced
thereon. The certificates containing such facsimiles shall be valid for all
intents and purposes.
(b) In case any officer who shall have signed any such certificate, or whose
facsimile signature has been placed thereon, shall cease to be such an officer
(because of death, resignation or otherwise) before such certificate is issued,
such certificate may be issued and delivered by the Corporation with the same
effect as if he were such officer at the date of issue.
(c) The number of each certificate issued, the name of the person owning the
shares represented thereby, the number of such shares and the date of issuance
shall be entered upon the stock books of the Corporation at the time of
issuance.
(d) Every certificate exchanged, surrendered for redemption or otherwise
returned to the Corporation shall be marked "Cancelled" with the date of
cancellation.
Section 8.02. Transfer of Capital Stock:
(a) Transfers of shares of the stock of the Corporation shall be made on the
books of the Corporation by the holder of record thereof (in person or by his
attorney thereunto duly authorized by a power of attorney duly executed in
writing and filed with the Secretary of the Corporation) (i) if a certificate or
certificates have been issued, upon the surrender of the certificate or
certificates, properly endorsed or accompanied by proper instruments of
transfer, representing such shares, with such proof of
re as the Corporation or its agents may reasonably require, or (ii) as otherwise
prescribed by the Board of Directors.
(b) The Corporation shall be entitled to treat the holder of record of any
share of stock as the absolute owner thereof for all purposes, and accordingly
shall not be bound to recognize any legal, equitable or other claim or interest
in such share on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by the
statutes of the State of Maryland.
Section 8.03. Transfer Agents and Registrars: The Board of Directors may,
from time to time, appoint or remove transfer agents and/or registrars of
transfers of shares 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 capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid
he same person shall be both transfer agent and registrar, only one
countersignature by such person shall be required.
Section 8.04. Transfer Regulations: Except as provided in the Articles of
Incorporation, the shares of stock of the Corporation may be freely transferred,
subject to the charging of customary transfer fees, and the Board of Directors
may, from time to time, adopt rules and regulations with reference to the method
of transfer of the shares of stock of the Corporation.
Section 8.05. Fixing of Record Date: The Board of Directors may fix in
advance a date as a record date for the determination of the stockholders
<PAGE>
entitled to notice of or to vote at any stockholders' meeting or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action;
provided that (1) such record date shall be within 60 days prior to the date on
which the action requiring such determination will
ks shall not be closed for a period longer than 20 days; and (3) in the case of
a meeting of stockholders, the record date or any closing of the transfer books
shall be at least 10 days before the date of the meeting.
Section 8.06. Lost, Stolen or Destroyed Certificates: Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen or
destroyed, the Board of Directors or any officer authorized by the Board may, in
its discretion, require the owner of the lost, stolen or destroyed certificate
(or his legal representative) to give the Corporation a bond or other indemnity,
in such form and in such amount as the Board or any such officer may direct and
with such surety or sureties as may
r any such officer, sufficient to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of such new certificate.
ARTICLE IX
FISCAL YEAR, ACCOUNTANT
Section 9.01. Fiscal Year: The fiscal year of the Corporation shall, unless
otherwise ordered by the Board of Directors, be twelve calendar months ending
on the 30th day of June.
Section 9.02. Accountant:
(a) The Corporation shall employ an independent public accountant or firm of
independent public accountants as its Accountant to examine the accounts of the
Corporation and to sign and certify financial statements filed by the
Corporation. The Accountant's certificates and reports shall be addressed both
to the Board of Directors and to the stockholders. The employment of the
Accountant shall be conditioned upon the right of the Corporation to terminate
the employment forthwith without any penalty by vot
ing voting securities at any stockholders' meeting called for that purpose.
Nothing herein shall limit the Corporation's ability to discharge its Accountant
in any other manner consonant with applicable statute and/or with the remainder
of these By-Laws.
(b) A majority of the members of the Board of Directors who are not interested
persons (as such term is defined in the Investment Company Act of 1940, as
amended) of the Corporation shall select the Accountant at any meeting held
within 30 days before or after the beginning of the fiscal year of the
Corporation or before the annual stockholders' meeting in that year. Such
selection shall be submitted for ratification or rejection at the next
succeeding annual stockholders' meeting. If such meeting shall
untant shall be selected by majority vote of the Corporation's outstanding
voting securities, either at the meeting at which the rejection occurred or at a
subsequent meeting of stockholders called for the purpose.
<PAGE>
(c) Any vacancy occurring between annual meetings, due to the death or
resignation of the Accountant, may be filled by the vote of a majority of the
members of the Board of Directors who are not such interested persons.
ARTICLE X
INDEMNIFICATION AND INSURANCE
Section 10.01. Indemnification of Officers, Directors, Employees and Agents:
The Corporation shall indemnify its present and past Directors, officers,
employees and agents, and any persons who are serving or have served at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or enterprise, to the full
extent provided and allowed by Section 2-418 of the Corporations and
Associations Code of Maryland, as amended from time to time
ions of laws, against any judgments, penalties, fines, settlements, or
reasonable expenses (including attorneys' fees) actually incurred by any such
persons in connection with any threatened, pending, or completed actions, suits,
or proceedings. Notwithstanding anything herein to the contrary, no Director,
officer, investment adviser or principal underwriter of the Corporation shall be
indemnified in violation of Sections 17(h) and (i) of the Investment Company
Act of 1940, as amended.
Section 10.02. Insurance of Officers, Directors, Employees and Agents: The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity or arising out of his status as
ration would have the power to indemnify him against such liability.
Section 10.03. Advancing of Expenses: Notwithstanding anything herein to the
contrary, no expenses (including attorneys' fees) incurred by the Corporation's
Directors and officers in any pending proceeding shall be paid by the
Corporation in advance except in conformance with the applicable provisions of
Section 2-418(f) of the Maryland Corporations and Associations Code, as amended
from time to time.
ARTICLE XI
AMENDMENTS
Section 11.01. General: Except as provided in Section 11.02 hereof, all
By-Laws of the Corporation, whether adopted by the Board of Directors or the
stockholders, shall be subject to amendment, alteration or repeal, and new
By-Laws may be made, by the affirmative vote of a majority of either:
<PAGE>
(a) the holders of record of the outstanding shares of stock of the Corporation
entitled to vote, at any annual or special meeting, the notice or waiver of
notice of which shall have specified or summarized the proposed amendment,
alteration, repeal or new by-Law; or
(b) the Directors, at any regular or special meeting the notice or waiver of
notice of which shall have specified or summarized the proposed amendment,
alteration, repeal or new By-Law.
Section 11.02. By Stockholders Only:
(a) No amendment of any section of these By-Laws shall be made except by the
stockholders of the Corporation if the By-Laws provide that such section may not
be amended, altered or repealed except by the stockholders.
(b) From and after the issue of any shares of the capital stock of the
Corporation, no amendment, alteration or repeal of this Article XI shall be made
except by the affirmative vote of the holders of either: (a) more than
two-thirds of the Corporation's outstanding shares present at a meeting at which
the holders of more than 50% of the outstanding shares are present in person or
by proxy, or (b) more than 50% of the Corporation's outstanding shares.
END OF BY-LAWS
</PAGE>
<PAGE>
Exhibit 5
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT ("Agreement"), made this 14th
day of August, 1986, by and between MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
(the "Fund"), a Maryland corporation, having its principal place of business at
Fifty Front Street, Memphis, Tennessee 38103, and MORGAN KEEGAN INVESTMENT
MANAGEMENT COMPANY, INC. (the "Adviser"), a Tennessee corporation with the same
address.
WHEREAS, the Fund, an open-end, diversified investment company registered under
the Investment Company Act of 1940 (the "1940 Act"), wishes to retain the
Adviser to provide investment advisory, management, and administrative services
to the Fund; and
WHEREAS, the Adviser is willing to furnish such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual convenants herein
contained, it is agreed as follows:
1. The Fund hereby appoints the Adviser as investment adviser and administrator
of the Fund for the period and on the terms set forth in this Agreement. The
Adviser accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided.
2. The Fund shall at all times keep the Adviser fully informed with regard to
the securities owned by it, its funds available, or to become available, for
investment, and generally as to the condition of its affairs. It shall furnish
the Adviser with such other documents and information with regard to its affairs
as the Adviser may from time to time reasonably request.
3. (a) Subject to the direction and control of the Fund's Board of Directors,
the Adviser shall regularly provide the Fund with investment research, advice,
management and supervision and shall furnish a continuous investment program for
the Fund's portfolio of securities consistent with the Fund's investment
objective, policies, and limitations as stated in the Fund's current Prospectus
and Statement of Additional Information. The Adviser shall determine from time
to time what securities will be purchase
implement those decisions, all subject to the provisions of the Fund's Articles
of Incorporation and By-laws, the 1940 Act, the applicable rules and regulations
of the Securities and Exchange Commission, and other applicable federal and
state laws, as well as the investment objective, policies, and limitations of
the Fund. The Adviser will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer. In placing orders with brokers and dea
best net results; however, the Adviser may, in its discretion, purchase and
sell portfolio securities from and to brokers and dealers who provide the Fund
with research, analysis, advice and similar services, and the Adviser may pay
to those brokers, in return for research and
<PAGE>
analysis, a higher commission than may be charged by other brokers. In no
instance will portfolio securities be purchased from or sold to the Adviser, or
any affiliated person thereof except in accordance with the rules and
regulations promulgated by the Securities and Exchange Commission pursuant to
the 1940 Act. The Adviser shall also provide advice and recommendations with
respect to other aspects of the business and affairs of the Fund, and shall
perform such other functions of management and supervis
ctors of the Fund.
(b) The Fund authorizes any entity or person associated with the Adviser which
is a member of a national securities exchange to effect any transaction on the
exchange for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Fund
hereby consents to the retention of compensation by such entity or person for
such transaction in accordance with Rule 11a2-2(T)(a)(2)(iv).
4. (a) The Adviser, at its expense, shall supply the Board of Directors and
officers of the Fund with all statistical information and reports reasonably
required by them and reasonably available to the Adviser and shall furnish the
Fund with office facilities, including space, furniture and equipment and all
personnel reasonably necessary for the operation of the Fund. The Adviser shall
oversee the maintenance of all books and records with respect to the Fund's
securities transactions and the Fund's books
ll applicable federal and state laws and regulations. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Adviser hereby agrees that
any records which it maintains for the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records upon the
Fund's request. The Adviser further agrees to arrange for the preservation of
the records required to be maintained by Rule 31a-1 under the 1940 Act for the
periods prescribed by Rule 31a-2 under the
thorize and permit any of its directors, officers and employees, who may be
elected as directors or officers of the Fund, to serve in the capacities in
which they are elected.
(b) Other than as herein specifically indicated, the Adviser shall not be
responsible for the Fund's expenses. Specifically, the Adviser will not be
responsible, except to the extent of the reasonable compensation of employees of
the Fund whose services may be used by the Adviser hereunder, for any of the
following expenses of the Fund, which expenses shall be borne by the Fund:
legal and audit expenses, organizational expenses; interest; taxes; governmental
fees; fees, voluntary assessments and other exp
th membership in investment company organizations; the cost (including brokerage
commissions or charges, if any) of securities purchased or sold by the Fund and
any losses incurred in connection therewith; fees of custodians, transfer
agents, registrars or other agents; distribution fee; expenses of preparing
share certificates; expenses relating to the redemption or repurchase of the
Fund's shares; expenses of registering and qualifying Fund shares for sale under
applicable federal and state law and mainta
alifications; expenses of preparing, setting in print, printing and distributing
prospectuses, proxy statements, reports, notices and dividends to Fund
shareholders; cost of stationery; costs of stockholders and other meetings of
the Fund; compensation and expenses of the independent directors of the Fund;
and the Fund's pro rata portion of premiums of any fidelity bond and other
insurance covering the Fund and its officers and directors.
<PAGE>
5. No director, officer or employee of the Fund shall receive from the Fund any
salary or other compensation as such director, officer or employee while he is
at the same time a director, officer or employee of the Adviser or any
affiliated company of the Adviser. This paragraph shall not apply to directors,
executive committee members, consultants and other persons who are not regular
members of the Adviser's or any affiliated company's staff.
6. As compensation for the services performed and the facilities furnished and
expenses assumed by the Adviser, including the services of any consultants
retained by the Adviser, the Fund shall pay the Adviser, as promptly as possible
after the last day of each month, a fee, calculated daily, of 1.0% annually of
the average daily net assets of the Fund for the first $100 million of average
daily net assets and 0.75% annually of the average daily net assets exceeding
$100 million. The first payment of the f
possible at the end of the month next succeeding the effective date of this
Agreement, and shall constitute a full payment of the fee due the Adviser for
all services prior to that date. In the event that the Adviser's right to such
fee commences on a date other than the last day of the month, the fee for such
month shall be based on the average daily assets of the Fund in that period from
the date of commencement to the last day of the month. If this Agreement is
terminated as of any date not the last d
e paid as promptly as possible after such date of termination, shall be based on
the average daily net assets of the Fund in that period from the beginning of
such month to such date of termination, and shall be that proportion of such
average daily net assets as the number of business days in such period bears to
the number of business days in such month. The average daily net assets of the
Fund shall in all cases be based only on business days and be computed as of the
time of the regular close of busine
ge, or such other time as may be determined by the Board of Directors of the
Fund. Each such payment shall be accompanied by a report of the Fund prepared
either by the Fund or by a reputable firm of independent accountants which shall
show the amount properly payable to the Adviser under this Agreement and the
detailed computation thereof.
7. The Adviser assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and shall not be
responsible for any action of the Board of Directors of the Fund in following or
declining to follow any advice or recommendations of the Adviser; provided that
nothing in this Agreement shall protect the Adviser against any liability to
the Fund or its stockholders to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negl
ance of its duties or by reason of its reckless disregard of its obligations and
duties hereunder.
8. Nothing in this Agreement shall limit or restrict the right of any director,
officer, or employee of the Adviser who may also be a director, officer, or
employee of the Fund, to engage in any other business or to devote his time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature, nor to limit or restrict the
right of the Adviser to engage in any other business or to render services of
any kind, including investment advisory a
, to any other corporation, firm, individual or association.
<PAGE>
9. As used in this Agreement, the terms "securities" and "net assets" shall have
the meanings ascribed to them in the Articles of Incorporation of the Fund; and
the terms "assignment", "interested person", and "majority of the outstanding
voting securities" shall have the meanings given to them by Section 2(a) of the
1940 Act, subject to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order.
10. This Agreement shall terminate automatically in the event of its assignment
by the Adviser and shall not be assignable by the Fund without the consent of
the Adviser. This Agreement may also be terminated at any time, without the
payment of any penalty, by the Fund or by the Adviser on sixty (60) days'
written notice addressed to the other at its principal place of business.
11. In the event this Agreement is terminated by either party or upon written
notice from the Adviser at any time, the Fund hereby agrees that it will
eliminate from its corporate name any reference to the name of "Morgan Keegan".
The Fund shall have the non-exclusive use of the name "Morgan Keegan" in whole
or in part so long as this Agreement is effective or until such notice is given.
12. This Agreement shall continue in effect for one year and from year to year
thereafter only so long as specifically approved annually by vote of a majority
of the directors of the Fund who are not parties to this Agreement or interested
persons of such parties, cast in person at a meeting called for that purpose,
and either by vote of the holders of a majority of the outstanding voting
securities of the Fund or by majority vote of the Fund's Board of Directors.
13. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no material amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the Fund's outstanding voting
securities.
14. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
<PAGE>
IT WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their officers thereunto duly authorized.
Attest: MORGAN KEEGAN SOUTHERN CAPITAL
FUND, INC.
By: /s/ Charles D. Maxwell By: /s/ Allen B. Morgan, Jr.
---------------------- -------------------------
Attest: MORGAN KEEGAN INVESTMENT
MANAGEMENT COMPANY, INC.
By: /s/ Gail Strickland By: /s/ Richard A. McStay
---------------------- --------------------------
</PAGE>
<PAGE>
Exhibit 6
UNDERWRITING AGREEMENT
This UNDERWRITING AGREEMENT, made this 7th day of July, 1993, by and between
Morgan Keegan Southern Capital Fund, Inc., a Maryland corporation (the "Fund")
and Morgan Keegan & Company, Inc., a Tennessee corporation (the "Distributor"):
WHEREAS, the Fund is registered with the Securities and Exchange Commission as
an open-end, diversified investment company under the Investment Company Act of
1940, as amended (the "1940 Act") and has registered its shares of common stock
(the "Shares") for sale to the public under the Securities Act of 1933, as
amended (the "1933 Act"), and has registered its shares in accordance with the
provisions of various state securities laws; and
WHEREAS, the Fund has adopted a Distribution Plan pursuant to Rule 12b-1
("Distribution Plan"), dated August 14, 1986 and has amended that Plan as of
February 12, 1987 and July 7, 1993; and
WHEREAS, the Fund wishes to retain the Distributor as the principal underwriter
in connection with the offering and sale of the Shares and to furnish certain
other services to the Fund as specified in this Agreement; and
WHEREAS, this Agreement has been approved by a vote of the Fund's Board of
Directors and certain disinterested directors in conformity with paragraph
(b)(2) of Rule 12b-1 under the 1940 Act; and
WHEREAS, the Distributor is willing to act as principal underwriter and to
furnish such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed as follows:
1. The Fund hereby appoints the Distributor as principal underwriter in
connection with the offering and sale of the Shares. The Fund authorizes the
Distributor, as exclusive agent for the Fund, subject to applicable federal and
state law and the Articles of Incorporation and By-laws of the Fund: (a) to
promote the Fund; (b) to solicit orders for the purchase of the Shares subject
to such terms and conditions as the Fund may specify; and (c) to accept orders
for the purchase of the Shares on behalf of the
omply with all applicable federal and state laws and offer the Shares on an
agency or "best efforts" basis under which the Fund shall only issue such Shares
as are actually sold.
2. The public offering price of the Shares shall be the net asset value per
share (as determined by the Fund) of the outstanding Shares of the Fund, plus
the applicable sales charge, if any, determined as set forth in the Registration
Statement. The Fund shall furnish the Distributor with a statement of each
computation of net asset value and of the details entering into such
computation.
<PAGE>
3. The sales charge, if any, set forth in the Fund's Registration Statement
shall constitute compensation of the Distributor. As additional compensation
for the services performed and the expenses assumed by the Distributor under
this Agreement, including, but not limited to, any commissions paid for sales of
Shares, the Fund shall pay the Distributor, as promptly as possible after the
last day of each month, a service fee and a distribution fee, as applicable,
each calculated daily, pursuant to the Distri
of the service and distribution fees shall be made as promptly as possible at
the end of the month next succeeding the effective date of this Agreement, and
shall constitute a full payment of the fees due the Distributor for all
shareholder and distribution services prior to that date. If this Agreement is
terminated as of any date not the last day of a month, such fees shall be paid
as promptly as possible after such date of termination, shall be based on the
average daily net assets of the Fund in that
such date of termination, and shall be that proportion of such average daily net
assets as the number of business days in such period bears to the number of
business days in such month. The average daily net assets of the Fund shall in
all cases be based only on business days and be computed as of the time of the
regular close of business of the New York Stock Exchange, or such other time as
may be determined by the Board of Directors of the Fund. Each such payment
shall be accompanied by a report of the
d or by a reputable firm of independent accountants which shall show the amount
properly payable to the Distributor under this Agreement and the detailed
computation thereof.
4. As used in this Agreement, the term "Registration Statement" shall mean the
registration statement most recently filed by the Fund with the Securities and
Exchange Commission and effective under the 1933 Act, as such Registration
Statement is amended at the time in effect, and the terms "Prospectus" and
"Statement of Additional Information" shall mean the forms of prospectus and
statement of additional information, respectively, filed by the Fund as part of
the Registration Statement.
5. The Distributor, at no expense to the Fund, shall print and distribute to
prospective investors Prospectuses and Statements of Additional Information, and
may print and distribute such other sales literature, reports, forms and
advertisements in connection with the sale of the Shares as comply with the
applicable provisions of federal and state law. In connection with such sales
and offers of sale, the Distributor shall only give such information and make
only such statements or representations as are c
tatement of Additional Information or in information furnished in writing to the
Distributor by the Fund, and the Fund shall not be responsible in any way for
any other information, statements or representations given or made by the
Distributor or its representatives or agents. Except as specifically provided
in this Agreement, the Fund shall bear none of the expenses of the Distributor
in connection with its offer and sale of the Shares.
<PAGE>
6. The Fund agrees at its own expense to register the Shares under the 1933 Act,
as amended, and under the securities laws of such states and jurisdictions as
the Distributor of the Fund shall agree, and to prepare and file from time to
time such Prospectuses and Statements of Additional Information, amendments,
reports and other documents as may be necessary to maintain the Registration
Statement. The Fund shall bear all expenses related to preparing and
typesetting such Prospectuses and other materials r
xpenses, including printing and mailing expenses, related to the Fund's
communications with persons who are shareholders of the Fund.
7. The Fund agrees to indemnify, defend and hold the Distributor, its several
officers and directors, and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers or
directors, or any such controlling person may i
er common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
provided, however, that this indemnification provision shall not inure to the
benefit of any person who is an officer or director of the Fund or who controls
the Fund within the meaning of Section 15
t of competent jurisdiction shall determine, or it shall have been determined by
controlling precedent, that such result would not be against public policy as
expressed in the 1933 Act, as amended, and further provided that in no event
shall anything contained in this Agreement be construed so as to protect the
Distributor against any liability to the Fund or its shareholders to which the
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performan
of its reckless disregard of its obligations and duties under this Agreement.
8. The Distributor agrees to indemnify, defend and hold the Fund, its several
officers and directors, and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Fund, its officers or directors, or any such
controlling person may incur, under th
, arising out of or based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to the Fund for
use in the Registration Statement or arising out of or based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or necessary to make such information
not misleading.
9. The Fund reserves the right at any time to withdraw all offerings of the
Shares by written notice to the Distributor at its principal office.
10. The Fund shall not issue certificates representing Shares unless requested
by a shareholder. If such request is transmitted through the Distributor, the
Fund will cause certificates evidencing the Shares owned to be issued in such
names and denominations as the Distributor shall from time to time direct,
provided that no certificates shall be issued for fractional Shares.
<PAGE>
11. The Distributor may at its sole discretion repurchase Shares offered for
sale by the shareholders. Repurchase of Shares by the Distributor shall be at
the net asset value next determined after a repurchase order has been received.
The Distributor will receive no commission or other remuneration for
repurchasing Shares other than the fees set forth in paragraph 3 hereof. At the
end of each business day, the Distributor shall notify by telex or in writing
the Fund and State Street Bank and Trust Compan
f the orders for repurchase of Shares received by the Distributor since the last
such report, the amount to be paid for such Shares, and the identity of the
shareholders offering Shares for repurchase. Upon such notice, the Fund shall
pay the Distributor such amounts as are required by the Distributor for the
repurchase of such Shares in cash or in the form of a credit against moneys due
the Fund from the Distributor as proceeds from the sale of Shares. The Fund
reserves the right to suspend such repurcha
utor. The Distributor further agrees to act as agent for the Fund to receive
and transmit promptly to the Fund's transfer agent shareholder requests for
redemption of Shares.
12. The Distributor is an independent contractor and shall be an agent for the
Fund only in respect to the sale and redemption of the Shares.
13. The services of the Distributor to the Fund under this Agreement are not to
be deemed exclusive, and the Distributor shall be free to render similar
services or other services to others so long as its services hereunder are not
impaired thereby.
14. The Distributor shall prepare reports for the Board of Directors of the Fund
on a quarterly basis showing such information concerning expenditures related
to this Agreement as from time to time shall be reasonably requested by the
Board of Directors.
15. As used in this Agreement, the terms "securities" and "net assets" shall
have the meanings ascribed to them in the Articles of Incorporation of the Fund.
16. This Agreement will remain in effect for one year from the date of its
execution and from year to year thereafter, provided that such continuance is
specifically approved, at least annually: (i) by the Fund's Board of Directors
or by vote of a majority of the outstanding voting securities of the Fund, (ii)
by a vote of a majority of those members of the Fund's Board of Directors who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the pur
by vote of a majority of those members of the Fund's Board of Directors who are
not interested persons of the Fund and who have no direct or indirect financial
interest in this Agreement or in the Plan (the "Independent Directors").
Notwithstanding the foregoing, this Agreement may be terminated at any time by
the Fund without penalty by vote of the Fund's Board of Directors, by vote of a
majority of the Independent Directors, or by a vote of a majority of the
outstanding voting securities of the Fund, on
e to the Distributor. This Agreement may be terminated by the Distributor at
any time, without the payment of any penalty, upon 60 days' written notice to
the Fund. This Agreement will automatically and immediately terminate in the
event of its assignment. As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meaning as such terms have in the 1940 Act.
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be executed by
their officers thereunto duly authorized.
Attest: MORGAN KEEGAN SOUTHERN
CAPITAL FUND, INC.
By: /s/ Terri Davis By: /s/ Charles D. Maxwell
------------------ ------------------------
Secretary
Attest: MORGAN KEEGAN & COMPANY, INC.
By: /s/ Terri Davis By: /s/ Charles D. Maxwell
------------------- ------------------------
Vice President
</PAGE>
<PAGE>
Exhibit 8
CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of June, 1989, between MORGAN KEEGAN SOUTHERN
CAPITAL FUND, INC., a corporation having its principal place of business at 50
Front Street, Memphis, Tennessee 38103 (hereinafter called the "Fund") and STATE
STREET BANK AND TRUST COMPANY, NATIONAL ASSOCIATION, a national trust company
having its principal place of business in New York, New York (hereinafter called
"State Street").
WITNESSETH THAT:
In consideration of the mutual agreements herein contained the Fund and State
Street hereby agree as follows:
I. APPOINTMENT
1.1 The Fund hereby appoints State Street its Custodian for the safekeeping of
securities and agrees that State Street shall hold all securities received from
the Fund at State Street Bank and Trust Company, National Association, 61
Broadway, New York, New York, except as otherwise provided in Section 3.1.
II. DELIVERY OF SECURITIES
2.1 All securities delivered to State Street (other than bearer securities)
shall be properly endorsed and in proper form for transfer.
<PAGE>
III. DUTIES
3.1 State Street shall in accordance with the Operating Procedures annexed
hereto as Exhibit A:
(a) Receive delivery of certificates for safekeeping at its premises in a
separate account physically segregated at all times from those of any other
person, firm or corporation or upon receipt of proper transactions from the Fund
and a representation that no rule or regulation applicable to the Fund
prohibits the safekeeping of the Fund's securities in a foreign depository or in
a book-entry system, at a domestic or foreign subcustodian ("Subcustodian") or
in a domestic or foreign book-entry system for the
("Securities System").
(b) Maintain records of all receipts, deliveries and locations of securities,
together with a current inventory thereof.
(c) Provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities, futures contracts
and options on futures contracts, including domestic securities deposited and/
or maintained in a securities depository, relating to the services provided by
State Street under this Agreement; such reports, which shall be of sufficient
scope and in sufficient detail, as may rea
, to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, shall so
state.
<PAGE>
3.2 The Custodian shall release and delivery securities owned by the Fund held
by the Custodian or in a Securities System account of the Custodian only upon
receipt of proper instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(a) Upon sale of such securities for the account of the Fund and receipt of
payment therefor. In acting upon instructions to deliver securities against
payment, State Street is authorized, in accordance with street delivery
practices, to delivery such securities against a receipt, before receiving
payment. All collection and receipt of funds or securities and all payment and
delivery of funds or securities under this Agreement shall be made by State
Street, at the Fund's risk, including without limitation
street delivery practices of delivering securities against a receipt, before
receiving payment.
(b) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Fund.
(c) In the case of a sale effected through a Securities System, in accordance
with the rules and regulations of the Securities System.
(d) To the depository agent in connection with tender or other similar offers
for securities owned by the Fund.
(e) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the Custodian.
<PAGE>
(f) To the issuer thereof, or its agent, for transfer into the name of the Fund
or into the name or nominee name of any Subcustodian or Securities System
appointed pursuant to Section 3.1(a); or for exchange for a different number of
bonds, certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new securities
are to be delivered to the Custodian.
(g) For exchange or conversion pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the securities of the issuer
of such securities, or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to the Custodian.
(h) In the case of warrants, rights or similar securities, the surrender thereof
in the exercise of such warrants, rights or similar securities or the surrender
of interim receipts or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if any, are to be
delivered to the Custodian.
(i) For delivery in connection with any loans of securities made by the Fund
against receipt of adequate collateral as agreed upon from time to time by the
Fund, which may be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities, except that in connection
with any loans for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of Treasury, the
Custodian will not be held liable or respons
ties owned by the Fund prior to the receipt of such collateral.
(j) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund against receipt of amounts borrowed.
<PAGE>
(k) For delivery in accordance with the provisions of any agreement among the
Fund, the Custodian and a broker-dealer registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities exchange,
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transact
(l) Upon receipt of instructions from the transfer agent ("Transfer Agent") for
the Fund, for delivery to such Transfer Agent or to the holders of shares in
connection with distributions in kind in satisfaction of requests by holders of
Shares for repurchase or redemption; and
(m) For any other proper corporate purpose upon receipt of, in addition to
proper instructions, a certified copy of a resolution of the Directors Committee
or of the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying the securities to be
delivered, setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities s
3.3 Securities held by the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of the nominee of the Fund
unless the Fund has authorized in writing the appointment of a nominee to be
used in common with other registered investment companies having the same
investment advisor as the Fund, or in the name or nominee name of Subcustodian
or Securities System appointed pursuant to Section 3.1(a).
<PAGE>
3.4 Upon receipt of proper instructions, which may be continuing instructions
when deemed appropriate by the parties and insofar as cash is available for
the purpose, the Custodian shall pay out moneys of the Fund:
(a) Upon the purchase of securities for the account of the Fund (i) against the
delivery of such securities, to the Custodian (or any bank, banking firm or
trust company doing business in the United States or abroad which has been
designated by the Custodian as a Subcustodian for this purpose) registered in
the name of the Fund or in proper form for transfer; (ii) in the case of a
purchase effected through a Securities System, in accordance with the rules and
regulations of the Securities System; or (iii) i
into between the Fund and a bank or a broker-dealer which is a member of NASD,
against delivery of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve Bank with such
securities.
(b) In connection with conversion, exchange or surrender of securities owned by
the Fund as set forth in Section 3.2 hereof.
(c) For the redemption or repurchase of shares issued by the Fund.
(d) For the payment of any expense or liability incurred by the Fund, including
but not limited to the following payments for the account of the Fund: interest,
taxes, management, accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses.
<PAGE>
(e) For the payment of any dividends declared pursuant to the governing
documents of the Fund.
(f) For payment of the amount of dividends received in respect of securities
sold short.
(g) For any proper purpose, upon receipt of, in addition to proper instructions,
a certified copy of a resolution of the Directors Committee or of the Executive
Committee of the Fund signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to whom such
payment is to be made.
IV. BANK ACCOUNT
4.1 State Street shall:
(a) Retain cash of the Fund in the banking department of State Street or an
agent bank in a separate account or accounts in the name of State Street for the
account of the Fund, subject only to draft or order by State Street acting
pursuant to the terms of this Agreement.
(b) Collect, receive and deposit in the bank account maintained pursuant to
Section 4.1(a) all income and other payments with respect to the securities held
hereunder.
(c) Render reports as agreed upon from time to time between both parties.
<PAGE>
4.2 State Street reserves the right to reverse erroneous entries to the Fund's
account and to charge the account for the amount of securities for which payment
has not been made and for any other amount due from the Fund, by way of
indemnity, reimbursement of expenses, compensation or otherwise, notwithstanding
the provisions of Section 13.4.
V. INSTRUCTIONS
5.1 State Street shall receive a list of one or more persons which the Board of
Trustees of the Fund shall from time to time authorize to give instructions.
Different persons may be authorized to give instructions for different purposes.
State Street is authorized to rely on any instructions believed by it in good
faith to have been given or sent by an authorized person.
5.2. A certified copy of a resolution or action of the Board of Trustees of the
Fund may be received and accepted by State Street as conclusive evidence of the
authority of any such person or persons to act and may be considered as in full
force and effect until receipt of written notice to the contrary.
5.3 Instructions may be general or specific in terms, and unless specified to
the contrary, State Street is authorized to act upon such instructions whether
given orally, by telephone, telex, facsimile or other means of electronic
transmission. State Street may electronically record any instructions given by
telephone, and any other telephone discussions with respect to the securities,
the account and performance of this Agreement.
<PAGE>
VI. INDEMNITY
6.1 State Street shall be held to the exercise of reasonable care in carrying
out the provisions of this Agreement. State Street shall not be responsible for
the title, validity or genuineness of any security received by it or delivered
by it pursuant to this Agreement and shall be kept indemnified by the Fund and
be without liability for any action taken or thing done by it in carrying out
the terms and provisions of this Agreement, including reasonable attorney's
fees, provided that State Street has acte
n guilty of negligence. In no event shall State Street be liable for indirect,
special or consequential damages even if advised of the possibility of such
damages.
6.2 State Street shall have no more or less responsibility or liability to the
Fund on account of any action or omission of any Subcustodian or Securities
System employed by State Street than any such Subcustodian or Securities System
has to State Street, except (i) to the extent attributable to a failure by State
Street in exercising due care in the selection or retention of the Subcustodian
or Securities System, or (ii) to the extent that such act or omission of the
Subcustodian or Securities System was c
ligence or bad faith.
6.3 Except as otherwise agreed to in writing, any securities or other property
of the Fund at any time in the possession of State Street may at all times be
held and treated as collateral for the payment of securities for which payment
has not been made, notwithstanding the provisions of Section 13.4.
<PAGE>
VII. COMPENSATION
7.1 The Fund shall pay to State Street the compensation set forth in Exhibit B
hereto until a different compensation shall be agreed upon in writing between
the parties and any other includable expenses incurred in connection herewith.
VIII. SECURITY
8.1 Except as provided in Sections 4.2 and 6.3, State Street may not pledge,
assign, hypothecate or otherwise encumber securities or cash of the Fund without
the prior written consent of the Fund.
IX. TAXES
9.1 The Fund agrees that it shall assume any and all obligations imposed now or
hereafter by any applicable tax law with respect to any sale, transfer, delivery
or receipt of securities under this Agreement, and it further agrees to
indemnify and hold State Street harmless from and against any taxes, additions
for late payment, interest, penalties and other expenses, that may be assessed
against State Street on any such sales, transfer, deliveries or receipt or other
activities under this Agreement.
9.2 The Fund undertakes to instruct State Street in writing with respect to
State Street's responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental reporting in
connection with its acting as Custodian under this Agreement. The Fund agrees
to indemnify and hold State Street harmless from any liability on account of
taxes, assessments or other governmental charges, including without limitation
<PAGE>
the withholding or deduction or the failure to withhold or deduct same, and any
liability for failure to obtain proper certifications or to properly report to
governmental authorities, to which State Street may be or become subject in
connection with or which arises out of this Agreement, including costs and
expenses (including reasonable legal fees), interest and penalties.
X. COMPLIANCE WITH LEGAL PROCESS AND JUDICIAL ORDERS
10.1 If any securities subject to this Agreement are at any time attached or
levied upon, or in case the transfer or delivery of any such securities shall be
stayed or enjoined, or in the case of any other legal process or judicial order
affecting such securities, State Street is authorized to comply with any such
order in any matter as State Street or its legal counsel reasonably deems
appropriate. If State Street complies with any process, order, writ, judgment
or decree relating to the securities subjec
Street shall not be liable to the Fund or to any other person or entity even if
such order or process is subsequently modified, vacated or otherwise determined
to have been without legal force or effect.
XI. FORCE MAJEURE
11.1 Neither party shall be responsible for delays or failures in performance
resulting from acts beyond its control. Such acts shall include but not be
limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, power failures, earthquakes or other disasters.
<PAGE>
XII. REPRESENTATIONS
12.1 The Fund and State Street each represents and warrants that (i) duly
incorporated or organized and is validly existing in good standing in its
jurisdiction of incorporation or organization, (ii) the execution, delivery and
performance of this Agreement and all documents and instruments to be delivered
hereunder or thereunder have been duly authorized, (iii) the person executing
this Agreement on its behalf has been duly authorized to act on its behalf, (iv)
this Agreement constitutes a legal, valid, bi
and (vi) its entry into this Agreement will not violate any agreement, law,
rule or regulation by which it is bound or by which any of its assets are
affected.
XIII. MISCELLANEOUS
13.1 These provisions may not be altered or changed in any manner except by
written agreement between the Fund and State Street.
13.2 This Agreement may not be assigned without the prior written consent of the
other party.
13.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
13.4 Either party may terminate this Agreement by notice in writing delivered or
mailed to the other party hereto not less than sixty (60) days prior to the
date on which such termination shall take place. Upon any termination of this
Agreement, pending appointment of a successor to State Street or a vote of the
shareholders of the Fund to dissolve or to function without a custodian of its
cash, securities and other property, State Street shall not deliver cash,
<PAGE>
securities or other property of the Fund to the Fund, but may deliver them to a
bank or banks having the qualifications to act as custodian for a registered
management investment company under the Investment Company Act of 1940, acting
as a custodian for the Fund to be held under terms similar to those of this
Agreement; provided, however, that State Street shall not be required to make
any such delivery or payment until full payment shall have been made by the Fund
of all liabilities constituting a charge
en held by State Street or on or against State Street, and until full payment
shall have been made to State Street of all its fees, compensation, costs and
expenses, subject to the provisions of Section 6.3 of this Agreement. The
provisions of Articles VI and IX shall survive the termination of this
Agreement.
13.5 Any and all notices, requests, demands or other communications required or
permitted to be given hereunder shall be deemed to have been duly given when
personally delivered or mailed by first class certified or registered mail,
return receipt requested, addressed to the parties at the addresses set forth
below:
(a) If to State Street, to:
State Street Bank and Trust Company,
National Association
61 Broadway
New York, New York 10006
Attention: Henry F. Grant
(b) If to the Fund, to:
Morgan Keegan Southern Capital Fund, Inc.
50 Front Street
Memphis, Tennessee 38103
Attention: _______________
<PAGE>
13.6 All computer programs, software specifications, formats, manuals and like
materials written and used in connection with this Agreement are made available
"as is" without warranty.
13.7 Any waiver of any rights hereunder, of any failure to perform hereunder, or
of any breach hereof shall not constitute or be deemed a waiver of any other
right or failure to perform hereunder or breach hereof, whether of a similar or
dissimilar nature.
13.8 This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof, and no waiver, alteration or modification
of any of the provisions hereof or rights to act hereunder shall be binding
unless in writing.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name on its behalf by a duly authorized officer as of the day
and year first above written.
STATE STREET BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
By /s/ Henry F. Grant Vice President
(TITLE)
MORGAN KEEGAN SOUTHERN CAPITAL
FUND, INC.
By /s/ Charles D. Maxwell Secretary
(TITLE)
<PAGE>
AMENDMENT TO CUSTODIAN AGREEMENT
Reference is hereby made to the Custodian Agreement dated as of the 1st day of
June, 1989 (the "Custodian Agreement"), between MORGAN KEEGAN SOUTHERN CAPITAL
FUND, INC. (the "Fund") and STATE STREET BANK AND TRUST COMPANY, N.A. (the
"Custodian");
Whereas, the Company and the Custodian have entered into the Custodian
Agreement;
Whereas, the Company and the Custodian desire to amend the Custodian Agreement;
Now therefore, the Company and the Custodian hereby agree as follows:
1. Section 1.1 of the Custodian Agreement is hereby amended to read in its
entirety as follows:
"The Fund hereby appoints State Street as its Custodian for the safekeeping of
securities and agrees that, except as otherwise provided in Section 3.1, State
Street shall hold all securities received from the Fund at State Street Bank and
Trust Company, National Association, 61 Broadway, New York, New York or at
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts.
State Street Bank and Trust Company shall be an agent of the Custodian for
purposes of Section 3.1 (d) of this Agree
2. Section 3.1(b) of the Custodian Agreement is hereby amended to read in its
entirety as flows:
<PAGE>
"(b) Maintain records of all receipts, deliveries and
locations of securities, together with a current inventory
thereof. Specifically, the Custodian shall create and
maintain all records relating to its activities and
obligations under this Agreement in such manner as will
meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees
or agents of the Fund and employees and agents of the
Securities and Exchange Commission."
</PAGE>
<PAGE>
Exhibit 9(a)
AGENCY AGREEMENT
AGENCY AGREEMENT, made this 1st day of June, 1989, by and between MORGAN KEEGAN
& COMPANY, INC. ("MK"), a Tennessee corporation having its principal place of
business in Memphis, Tennessee, and MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
(the "Fund"), a Maryland corporation created pursuant to Articles of
Incorporation filed with the Secretary of State of the State of Maryland.
1. Appointments. The Fund hereby appoints MK as transfer agent, dividend
disbursing agent and shareholder servicing agent for the Fund, and MK hereby
accepts such appointment and agrees to perform the duties thereof in accordance
with the terms and conditions set forth herein.
2. Documentation. The Fund will furnish MK with all documents, certificates,
contracts, forms, and opinions which MK, in its discretion, deems necessary or
appropriate in connection with the proper performance of its duties hereunder.
3. Authorized Shares. The Fund represents to MK that its Articles permit it to
issue 100,000,000 full and fractional shares of beneficial interest with par
value of $.001, which may be issued in series.
4. Services to be Performed.
a) In accordance with the Fund's then current Prospectus and Statement of
Additional Information and procedures established from time to time by agreement
between the Fund and MK, MK shall:
i. Receive for acceptance, orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation therefor to the Custodian of the
Fund (the "Custodian");
ii. Pursuant to purchase orders, issue the appropriate number of shares and hold
such shares in the appropriate shareholder account;
iii. Receive for acceptance, redemption requests and redemption directions and
deliver the appropriate documentation therefor to the Custodian;
iv. At the appropriate time as and when the Fund receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be paid over
in the appropriate manner such monies as instructed by the redeeming
Shareholders;
v. Effect transfers of Shares by the Shareholders thereof upon receipt of
appropriate instructions;
<PAGE>
vi. Prepare and transmit payments for dividends and distributions declared by
the Fund;
vii. Maintain records of account for and advise the Fund and its shareholders as
to the foregoing; and
viii. Record the issuance of shares of the Fund and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of shares of the Fund which are
authorized, based upon and provided to it by the Fund, and issued and
outstanding. MK shall also provide the Fund on a regular basis with the total
number of shares which are authorized and issued and outstanding and shall have
no obligation, when recording the issuance of shares, to monitor the issuance of
such shares or to take cognizance of any laws re
such shares, which functions shall be the sole responsibility of the Fund.
b) In addition to and not in lieu of the services set forth in the above
paragraph (a), MK shall: (i) perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program); including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating
rospectuses to current Shareholders, withholding taxes on non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmations
and statements of account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholders accounts, preparing
and mailing activity statements of Shareholders,
nt information and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State. The Fund shall (i) identify to
MK in writing those transactions and assets to be treated as exempt from the
blue sky reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and thereafter
monitor the daily activity for each State. The responsibility of MK for the
Fund's blue sky State registration status is solely
hment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
Procedures applicable to certain of these services described in paragraphs
(a) and (b) may be established from time to time by agreement between the Fund
and MK and shall be subject to the review and approval of the Fund. The failure
of the Fund to establish such procedures with respect to any service shall not
in any way diminish the duty and obligation of MK to perform such services
hereunder.
<PAGE>
5. Record Keeping and Other Information. MK shall, commencing on the effective
date of this agreement, create and maintain all necessary shareholder accounting
records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the Rules thereunder, as
amended from time to time. All such records shall be the property of the Fund
and shall be available for inspection and
able, such records shall be maintained by MK for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
6. Audit, Inspection and Visitation. MK shall make available during regular
business hours all records and other data created and maintained pursuant to
this agreement for reasonable audit and inspection by the SEC, the Fund or any
person retained by the Fund.
7. Compensation. MK shall be compensated by the Fund on a monthly basis for the
services performed hereunder, the rate of compensation being set forth in
Schedule A hereto. Expenses incurred by MK and not included within Schedule A
hereto shall be reimbursed to MK by the Fund, as appropriate; such expenses may
include, but are not limited to, special forms and postage for mailing of said
forms.
Such charges shall be payable in full upon receipt of billing invoice; in
lieu of reimbursing MK for such expenses, the Fund may, in its discretion,
directly pay such expenses.
8. Use of Names. The Fund shall not use the name of MK in any prospectus, sales
literature or other material relating to the Fund in any manner not approved
prior thereto by MK; provided, however, that MK shall approve all uses of its
name which merely refer in accurate terms to its appointment hereunder or which
are required by the SEC or a State Securities Commission; and, provided,
further, that in no event shall such approval be unreasonably withheld.
9. Security. MK represents and warrants that, to the best of its knowledge, the
various procedures and systems which MK proposes to implement with regard to
safeguarding from loss or damage attributable to fire, theft or any other cause
(including provision for twenty-four hour a day restricted access) the Fund's
blank checks, records and other data and MK's records, data, equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will implement t
make such changes therein from time to time as in its judgment are required for
the secure performance of obligations hereunder.
10. Responsibility of Morgan, Keegan & Company, Inc.; Limitation of Liability.
MK shall be held to the exercise of reasonable care in carrying out the
provisions of this agreement, but the Fund shall indemnify and hold MK harmless
against any losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action
or suit brought by any person (including a shareholder naming the Fund as a
party) other than the Fund arising out of, or in conn
its obligations hereunder, provided, that MK does not act in bad faith, willful
misfeasance, reckless disregard of its obligations and duties, or gross
negligence.
<PAGE>
The Fund shall also indemnify and hold MK harmless against any losses,
claims, damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit (except to the extent
contributed to by MK's bad faith, willful misfeasance, reckless disregard of
its obligations and duties, or gross negligence) resulting from the negligence
of the Fund, or MK's acting upon any instructions reasonably believed by it to
have been executed or communicated by an
Fund, or as a result of MK's acting in reliance upon advice reasonably believed
by MK to have been given by counsel for the Fund, or as a result of MK's acting
in reliance upon any instrument reasonably believed by it to have been genuine
and signed, countersigned or executed by the proper person.
In no event shall MK be liable for indirect, special, or consequential damages
(even if MK has been advised of the possibility of such damages) arising from
the obligations assumed hereunder and the services provided for by this
agreement, including but not limited to lost profits, loss of use of the
shareholder accounting system, cost of capital, cost of substitute facilities,
programs or services, downtime costs, or claims of the Fund's shareholders for
such damage.
11. Force Majeure. MK shall not be liable for delays or errors occurring by
reason of circumstances beyond its control, including but not limited to acts of
civil or military authority, national emergencies, work stoppages, fire, flood,
catastrophe, acts of God, insurrection, war, riot, or failure of communication
or power supply. In the event of equipment breakdowns beyond its control, MK
shall take reasonable steps to minimize service interruptions but shall have no
liability with respect thereto.
12. Amendments. MK and the Fund shall regularly consult with each other
regarding MK's performance of its obligations hereunder. Any change in the
Fund's registration statements under the Securities Act of 1933, as amended, or
the 1940 Act or in the forms relating to any plan, program or service offered by
the current prospectus of the Fund which would require a change in MK's
obligations hereunder shall be subject to MK's approval, which shall not be
unreasonably withheld. Neither this agreement nor any
ed, waived, discharged, or terminated orally, but only by written instrument
which shall make specific reference to this agreement and which shall be signed
by the party against which enforcement of such change, waiver, discharge or
termination is sought.
13. Term of Agreement. This agreement shall become effective as of its
execution. Thereafter, the Agreement will be renewed automatically on an annual
basis; provided, however, that this agreement may be terminated at any time by
either party upon at least sixty days' prior written notice to the other party
and provided further that this agreement may be terminated immediately at any
time for cause either by the Fund or MK in the event that such cause remains
unremedied for no less than ninety days after
n of such cause. Any such termination shall not affect the rights and
obligations of the parties under Paragraphs 10 and 11 hereof. In the event that
the Fund designates a successor to any of MK's obligations hereunder, MK shall,
at the expense and direction of the Fund, transfer to such successor all
relevant books, records and other data of the Fund established or maintained by
MK hereunder and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from M
establishment of books, records and other data by such successor. Historical
records will be transferred in accordance with all then current laws and
industry regulations.
<PAGE>
14. Miscellaneous. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof. This
agreement shall be construed and enforced in accordance with and governed by
the laws of the State of Maryland. The captions in this agreement are included
for convenience only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this agreement as of the
day and year first above written.
MORGAN KEEGAN & COMPANY, INC.
By /s/ Joseph C. Weller
---------------------
(Title)
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
By /s/ Charles D. Maxwell
----------------------
<PAGE>
AGENCY AGREEMENT
SCHEDULE A
For its services under this Agency Agreement, Morgan Keegan & Company,
Inc., is entitled to receive from Morgan Keegan Southern Capital Fund, Inc. (the
"Fund"), an annual fee of $4,000 per month, or $48,000 per year until such time
as the Fund's net assets reach $18,000,000, at which time the fee will become
$4,500 per month, or $54,000 per year.
Addendum as of July 31, 1993:
When net assets reach $36,000,000, the fee should be adjusted to $5,000 per
month.
</PAGE>
<PAGE>
Exhibit 9 (b)
FUND ACCOUNTING SERVICE AGREEMENT
BETWEEN
MORGAN KEEGAN & COMPANY, INC.
AND
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
This Agreement is made as of this lst day of June, 1989, between Morgan Keegan
Southern Capital Fund, Inc., a Maryland corporation (the "Fund"), and Morgan
Keegan & Company, Inc. ("MK"), a brokerage firm.
WHEREAS, the Fund is an open-end, diversified management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, MK is a brokerage firm, and is capable of providing, among other
things, recordkeeping, fund accounting and custodial services in accordance with
the 1940 Act, and the Securities Exchange Act of 1934 (the "1934 Act"), and the
current prospectuses of the Fund are filed with the Securities and Exchange
Commission under the Securities Act of 1933; and
WHEREAS, the Fund desires to retain MK to provide fund accounting services for
each existing and future portfolio of the Fund;
NOW, THEREFORE, MK and the Fund in consideration of the mutual agreements
contained herein agree as follows:
1. Services. MK agrees to provide all mutual fund accounting services to the
Fund and to each Portfolio required to conduct the business of the Fund or
otherwise required under the 1940 Act, except such services as are normally
performed by the investment adviser, the Fund's independent accountant, and the
officers of the Fund. Such services shall include, without limitation, the
following:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date basis using security trade
information communicated on a timely basis from the Fund's investment adviser.
(2) Update portfolio records, including share or face positions, with the effect
of capital changes and corporate action announcements known to the general
investing public. Obtain information as to these announcements by performing
the following:
(a) Subscribe to announcement information services that MK deems sufficient to
remain current with industry standards. MK will regularly review and update
such subscriptions and notify its fund customers of the changes in the
<PAGE>
information services it is using. MK will subscribe to additional information
services that are requested in writing by the Fund, with information from that
service used specifically and solely for the Fund's portfolio accounting and
with the expense of that service charged directly to the Fund.
(b) Receive information regarding such announcements from the Fund's investment
adviser.
(3) For each security identified by the Fund for pricing, obtain a price for
each valuation date from a pricing source approved by the Fund's Board of
Directors. Apply the price to the security's portfolio position to determine
its market value as of valuation day. In the event that a price for a given
security identified for pricing is not available from the normal pricing sources
for a given valuation date, obtain a price from alternative source or sources
identified by the Fund's investment adviser.
(4) For each security not identified for pricing, determine its market value as
of each valuation date using a method identified by the Fund from among the
following:
(a) Market value equals book value;
(b) Market value equals face value;
(c) Market value equals book value less any amortization balance or plus any
accretion balance (amortized cost method).
(5) Identify interest and dividend accrual balances as of each valuation date
and identify gross earnings on investments for each accounting period.
Determine these amounts using:
(a) The security characteristics communicated from the Fund's investment adviser
at the time of purchase;
(b) Corrections to security characteristics subsequently provided in writing by
the Fund's investment adviser or subsequently identified by the Fund's custodian
as a result of collection activity and approved in writing by the Fund's
investment adviser;
(c) Published corporate action announcements available to the public;
(d) For variable and floating rate notes, rate information from sources
identified and approved by the Fund's investment adviser.
<PAGE>
(6) Determine accretion and amortization balances of each valuation date for
securities which are purchased at a premium or discount (original issue and
secondary market) and which are identified in the Fund's accounting policy
established by the Fund as requiring that accounting treatment. Determine these
amounts using purchase price and security characteristics communicated from the
Fund's investment adviser at the time of purchase or using corrections to the
information subsequently provided in writing
r. For those securities identified for this accounting treatment, include the
daily amortization or accretion amount as a component of gross earnings on
investments.
(7) For original issue discount (OID) debt instruments to which the Internal
Revenue Service OID rules apply, calculate adjusted issue price as of each
valuation date. For OID bonds also calculate the ratable position of the
original issue discount for the accounting period and include that amount as
part of gross income on investments for that period. Coordinate the accounting
for original issue discount with the accounting for market premium or discount
(Section 5 above) for those OID debit instruments
et at a price other than OID adjusted issue price. Perform this calculation
using the following information communicated from the Fund's investment adviser
at the time of purchase.
(a) Whether the debt security is one to which the Internal Revenue Service OID
rules apply;
(b) the original issue date;
(c) the original issue price;
(d) the redemption value;
(e) the maturity date;
(f) payment dates, if on irregular intervals or payment start date and payment
cycle, if on regular intervals; and
(g) the original issue yield to maturity.
(8) Determine gain/loss on security sales and identify them as to short-short,
short or long term status under the Internal Revenue Code, using the tax lot
relief policy elected by the Fund or recognizing sales from lots that may be
specifically identified by the Fund's investment adviser at the time trade
details are communicated. Account for periodic distributions of gain to
shareholders and maintain undistributed gain or loss balances as of each
valuation date.
(9) Provide the portfolio-based reports requested in writing by the Fund or the
Fund's investment adviser in a format as agreed to from time to time. Issue
requested reports to the recipient and with the frequency identified in the
request.
<PAGE>
(10) Compare portfolio information in the Fund accounting system with
corresponding information in the Fund's custody records. Report to the Fund any
outstanding receivables of the Funds aged more than 30 days beyond contractual
payment date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual amounts as directed
by the Fund as to methodology, rate, or dollar amount.
(2) Upon receipt of written authorization from the Fund's Administrator,
initiate payment of Fund expenses by the Fund's custodian.
(3) Account for Fund expenditures and maintain expense accrual balances at the
level of accounting detail specified by the Fund.
(4) Provide accounting information to the Fund's Administrator or designated
expense control agent from the Fund's accounting records as to actual expense
activity versus expense accrual amounts for specified time periods.
(5) Maintain accounting control over payment checks issued and outstanding.
C. Fund Valuation and Financial Reporting Services:
(1) Account for share purchases, sales, exchanges, transfers, dividend
reinvestment, and other share activity as reported on a timely basis by the
Fund's transfer agent.
(2) Determine net investment income (earnings) as of each valuation date.
Account for periodic distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each valuation date.
(3) Maintain a general ledger in the form defined by the Fund and as of each
valuation date produce the set of financial statements in the format agreed to
from time to time. Issue the statements to the recipients identified in writing
by the Fund and with the specified frequency.
(4) For each day the Fund is open as defined in the Fund's prospectus, determine
net asset value according to the accounting policies and procedures set forth
in the Fund's prospectus.
(5) Calculate per share net asset value, per share net earnings, and other per
share amounts reflective of Fund and Portfolio operation at such time as
required by the nature and characteristics of the Fund and Portfolio. Perform
the calculations using the number of shares outstanding reported by the Fund's
transfer agent to be applicable at the time of calculation.
<PAGE>
(6) Communicate per share price for each valuation date to newspapers, the
Fund's transfer agent, the Fund's investment adviser, and other parties as
specified by the Fund's Administrator.
(7) Prepare a monthly proof package of reports in the format agreed to from time
to time which documents the adequacy of accounting detail to support month-end
ledger balances and reports. Distribute this package to the recipients
identified in writing by the Fund.
D. Tax Accounting Services:
(1) Maintain tax accounting records for each investment portfolio, for expense
activity and for shareholder distribution activity sufficient to support federal
and state tax reporting required for IRS-defined regulated investment
companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using the tax lot relief
method defined by the Fund and recognizing sales from lots that are specifically
identified.
(4) Calculate and report the taxable components of income and capital gains
distributions to the Fund's transfer agent to support tax reporting to the
shareholders.
(5) Prepare all Federal and State tax returns.
E. Compliance Control Services:
(1) Make the Fund's accounting records and the requested portfolio-based
reporting identified above available to the Investment Adviser upon request in a
timely fashion so as to support their compliance-monitoring review. Provide
the compliance reporting in the format requested by the Fund. Issue the
requested reports to the recipients and with the frequency identified in this
request.
(2) Make the Fund's accounting records and the requested portfolio-based and
compliance reporting identified above available upon request in a timely
fashion, to the Fund's financial accountant, so as to support the Fund's
compliance with all applicable regulatory filings including N-1A filings, N-SAR
filing and any applicable IRS filings, and preparation of the Fund's financial
statements.
<PAGE>
(3) Make the Fund's accounting records identified above available upon request
to Security and Exchange Commission representatives, to the Fund's auditors and
to designated Fund agents for their review as to the propriety of the Fund's
accounting records and the Fund's operations.
(4) Maintain at MK's expense, and preserve at the Fund's expense in accordance
with the 1940 Act and the rules thereunder, all such accounting records, which
shall at all times be the property of the Fund.
2. Compensation. MK shall be compensated for providing the above-referenced
services in accordance with the Fee Schedule attached hereto as Exhibit A.
3. Responsibility of Morgan Keegan & Company, Inc. MK shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence or willful
misconduct. MK shall be entitled to rely on and may act upon the reasonable
advice of the Fund's auditors or of counsel (who may be counsel of the Fund) on
all matters, and shall not be liable for any act
pursuant to such advice.
In addition, MK shall not be liable for any loss of data or any delay in
its performance under this Agreement to the extent such loss or delay is due to
causes beyond its control, including but not limited to: acts of God,
interruption in, loss of or malfunction in power, significant computer hardware
or systems software or telephone communication service; acts of civil or
military authority; sabotage; war or civil commotion; fire; explosion; or strike
beyond delivery of minimum critical services. MK
minimize any such loss or delay by all practical means and to replace any lost
data promptly. MK agrees not to discriminate against the Fund in favor of any
other customer of MK in making computer time and its personnel available to
input and process the transactions hereunder when a loss or delay occurs.
4. Amendments. MK and the Fund shall regularly consult with each other
regarding MK's performance of its obligations hereunder. Any change in the
Fund's registration statements under the Securities Act of 1933, as amended, or
the 1940 Act or in the forms relating to any plan, program or service offered by
the current prospectus of the Fund which would require a change in MK's
obligations hereunder shall be subject to MK's approval, which shall not be
unreasonably withheld. Neither this agreement nor any
d, waived, discharged, or terminated orally, but only by written instrument
which shall make specific reference to this agreement and which shall be signed
by the party against which enforcement of such change, waiver, discharge or
termination is sought.
5. Term of Agreement. This agreement shall become effective as of its
execution. Thereafter, the Agreement will be renewed automatically on an annual
basis; provided, however, that this agreement may be terminated at any time by
either party upon at least sixty days' prior written notice to the other party
and provided further that this agreement may be terminated immediately at any
time for cause either by the Fund or MK in the event that such cause remains
unremedied for no less than ninety days after r
of such cause. Any such termination shall not affect the rights and
obligations of the parties under paragraph 3 hereof. In the event that the Fund
designates a successor to any of MK's obligations hereunder, MK shall, at the
expense and
<PAGE>
direction of the Fund, transfer to such successor all relevant books, records
and other data of the Fund established or maintained by MK hereunder and shall
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from MK's cognizant personnel in the establishment of
books, records and other data by such successor. Historical records will be
transferred in accordance with all then current laws and industry regulations.
6. Miscellaneous. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof. This
agreement shall be construed and enforced in accordance with and governed by
the laws of the State of Maryland. The captions in this agreement are included
for convenience only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this agreement as of the day
and year first above written.
MORGAN KEEGAN & COMPANY, INC.
By /s/ Joseph C. Weller
-----------------------
(Title)
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
By: /s/ Charles D. Maxwell
-----------------------
<PAGE>
APPENDIX A
Fund Accounting - $2,5000 per month, $30,000 per year
Fund Accounting Fees include Daily Valuation and Financial Statement Preparation
</PAGE>
<PAGE>
KIRKPATRICK & LOCKHART
1900 M STREET, N.W.
WASHINGTON, D.C. 20036
TELEPHONE (202) 452-7000
TELECOPIER (202) 452-7052
August 25, 1986
Morgan Keegan Southern Capital Fund, Inc.
50 Front Street
Memphis, Tennessee 38103
Gentleman:
You have requested our opinion regarding certain matters in connection with
the issuance of shares by Morgan Keegan Southern Capital Fund, Inc. ("Fund").
We have examined the Fund's Articles of Incorporation and other corporate
documents relating to the authorization and issuance of the capital stock of the
Fund. Based upon this examination, we are of the opinion that:
1. All legal requirements have been complied with in the organization of the
Fund and that it is now a validly existing corporation in good standing under
the laws of the State of Maryland;
2. The authorized capital stock of the Fund consists of 100,000,000 shares, of a
par value of $.001 each;
3. The unlimited number of unissued shares which are currently being registered
under the Securities Act of 1933 may be legally and validly issued from time to
time in accordance with the corporation's Articles of Incorporation and By-Laws,
and subject to compliance with the Securities Act of 1933; the Investment
Company Act of 1940, and applicable state laws regulating the sale of
securities; and
4. When so issued, the Fund's shares will be fully paid and nonassessable.
We hereby consent to the filing of this opinion in connection with the
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A (File
No. 33-5435) which you are about to file with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption "The
Fund's Legal Counsel" in the Registration Statement.
Very truly yours,
/s/ Arthur Brown
Arthur J. Brown
KIRKPATRICK & LOCKHART
</PAGE>
<PAGE>
KPMG Peat Marwick LLP
Morgan Keegan Tower, Suite 900
Fifty North Front Street
Memphis, TN 38103
Independent Auditors' Consent
The Board of Directors and Shareholders of
Morgan Keegan Southern Capital Fund, Inc.:
We consent to the use of our report dated July 30, 1998 incorporated by
reference herein and to the reference to our firm under the captions
"Financial Highlights" in the Prospectus and "The Fund's Certified Public
Accountants" in the Statement of Additional Information.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Memphis, Tennessee
October 26, 1998
</PAGE>
<PAGE>
August 18, 1986
Morgan Keegan Southern Capital Fund, Inc.
50 Front Street
Memphis, Tennessee 38103
Gentlemen:
Please be advised that the 10,000 shares of Morgan Keegan Southern Capital
Fund, Inc. which we have today purchased from you were purchased as an
investment with no present intention of redeeming or selling such shares, nor do
we have any intention of redeeming or selling such shares.
Sincerely,
MORGAN KEEGAN & COMPANY, INC.
/s/ Joseph C. Weller
Joseph C. Weller
</PAGE>
<PAGE>
Exhibit 15
AMENDED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
OF
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
WHEREAS, Morgan Keegan Southern Capital Fund, Inc. ("Fund") is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended ("1940 Act"); and
WHEREAS, the existing shares of the Fund are subject to a Plan of Distribution
("Plan") in effect since August 14, 1986, and amended on February 12, 1987, the
substance of which is substantially similar to that contained in this amended
Plan; and
WHEREAS, the Fund desires to adopt an amended Plan pursuant to Rule 12b-1 under
the 1940 Act, and the Board of Directors ("Board") of the Fund has determined
that there is a reasonable likelihood that adoption of this amended Plan will
benefit the Fund and its shareholders; and
WHEREAS, the Fund has employed Morgan Keegan & Company, Inc. ("Morgan Keegan")
as distributor of the securities of which it is the issuer pursuant to an
Underwriting Agreement ("Underwriting Agreement");
NOW, THEREFORE, the Fund hereby adopts this amended Plan in accordance with Rule
12b-1 under the 1940 Act.
1. A. The Fund is authorized to pay to Morgan Keegan, a service fee at the
annualized rate of 0.25% of the average daily net assets of the Fund shares for
its expenditures incurred in servicing and maintaining shareholder accounts.
Such fee shall be calculated and accrued daily and paid monthly or at such
intervals as the Board shall determine.
B. The Fund is further authorized to pay Morgan Keegan for its expenditures
incurred in providing services as distributor of the Fund's shares at the
annualized rate of 0.25% of the average daily net assets of the Fund shares.
Such fee shall be calculated and accrued daily and paid monthly or at such
intervals as the Board shall determine.
2. Morgan Keegan may spend the fees it receives pursuant to paragraph 1 of this
Plan and/or its other resources on any activities or expenses primarily
intended to result in the sale of the Fund's shares or the servicing and
maintenance of shareholder accounts, including but not limited to, compensation
to investment executives or other employees of Morgan Keegan, and independent
dealers; compensation to and expenses, including overhead and telephone
expenses, of employees who engage in or support distribu
hareholder accounts; printing of prospectuses, statements of additional
information and reports for other than existing shareholders; and preparation,
<PAGE>
printing and distribution of sales literature and advertising materials. The
amount of the fees payable by the Fund to Morgan Keegan under paragraph 1 hereof
is not related directly to expenses incurred by Morgan Keegan in serving as
distributor, and this paragraph 2 neither obligates the Fund to reimburse Morgan
Keegan for such expenses nor obligates Morgan Keegan to incur distribution or
shareholder servicing expenses equal to or in excess of the fees it receives.
3. This amended Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Board and
(b) those directors of the Fund who are not "interested persons" of the Fund, as
defined in the 1940 Act, and have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting or meetings called for the purpose of
voting on this Plan and such related ag
rs who approve the Plan have reached the conclusion required by Rule 12b-1(e)
under the 1940 Act.
4. This amended Plan shall continue in effect for a period of one year from the
date of execution of this Plan and shall continue in full force and effect
thereafter for successive periods of up to one year, for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in paragraph 3.
5. Morgan Keegan shall provide to the Fund's Board and the Board shall review,
at least quarterly, a written report of the amounts expended by Morgan Keegan in
providing services under this amended Plan and the Underwriting Agreement and
the purposes for which such expenditures were made.
6. For purposes of this amended Plan, "distribution fees" shall mean any fees
for activities in connection with Morgan Keegan's performance of its obligations
under this Plan or the Underwriting Agreement that are not deemed "service
fees." "Service fees" shall mean any fees for activities covered by the
definition of "service fee" contained in amendments to Section 26(b) of the
National Association of Securities Dealers, Inc.'s Rules of Fair Practice that
are effective at July 7, 1993.
7. This amended Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors or by vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act). The fees set forth in
paragraph 1 hereof will be paid by the Fund to Morgan Keegan unless and until
either the Plan or Underwriting Agreement is terminated or not renewed. If
either the Plan or Underwriting Agreement is terminated or not renewed, expenses
incurred by Morgan Keegan in connection with pro
xcess of the fees specified in paragraph 1 hereof which Morgan Keegan has
received or accrued through the termination date are the sole responsibility and
liability of Morgan Keegan, and are not obligations of the Fund.
8. This amended Plan may not be amended to increase materially the amount of
distribution and service fees provided for in paragraph 1 hereof unless such
amendment is approved by a vote of a majority of the outstanding voting
securities of the Fund, and no material amendment to the Plan shall be made
unless such amendment is approved in the manner provided for approval and annual
renewal in paragraph 3 hereof.
<PAGE>
9. While this amended Plan is in effect, the selection and nomination of
directors of the Fund who are not interested persons of the Fund, as defined in
the 1940 Act, shall be committed to the discretion of the directors who are
themselves not interested persons of the Fund, as defined in the 1940 Act.
10. The Fund shall preserve copies of this amended Plan and any related
agreements and all reports made pursuant to paragraph 5 hereof for a period of
not less than six years from the date of this amended Plan, the first two years
in an easily accessible place.
IN WITNESS WHEREOF, the Fund has executed this amended Plan as of the date and
year set forth below:
Date: July 7, 1993 MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
By: /s/ Charles D. Maxwell
------------------------
Secretary
Attest:
By: /s/ Terri Davis
-------------------
</PAGE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] JUN-30-1998
[PERIOD-END] JUN-30-1998
[INVESTMENTS-AT-COST] 58250981
[INVESTMENTS-AT-VALUE] 88446604
[RECEIVABLES] 734721
[ASSETS-OTHER] 17537
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 89198862
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 991855
[TOTAL-LIABILITIES] 991855
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 55662361
[SHARES-COMMON-STOCK] 3320580
<SHARES-COMMON-PRION> 2691738
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2345702
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 30195623
[NET-ASSETS] 88207007
[DIVIDEND-INCOME] 568312
[INTEREST-INCOME] 227363
[OTHER-INCOME] 0
[EXPENSES-NET] 1253553
[NET-INVESTMENT-INCOME] (457878)
[REALIZED-GAINS-CURRENT] 4464314
[APPREC-INCREASE-CURRENT] 10822439
<NET-CHANGE-FROM-0PS> 14828875
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 1283727
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1001560
[NUMBER-OF-SHARES-REDEEMED] (227495)
[SHARES-REINVESTED] 54569
[NET-CHANGE-IN-ASSETS] 34281244
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 695785
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1253553
[AVERAGE-NET-ASSETS] 69873336
[PER-SHARE-NAV-BEGIN] 21.64
[PER-SHARE-NII] (.16)
[PER-SHARE-GAIN-APPREC] 5.57
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] .49
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 26.56
[EXPENSE-RATIO] 1.8
[AVG-DEBT-OUTSTANDING] 0
</TABLE>
