The Shadow stock Fund, Inc.
THREE CROWN CENTER
2440 Pershing Road
Kansas City, Missouri 64108
To The Shareholders:
The attached proxy statement discusses a proposal related to the
change in ownership of David L. Babson & Co. Inc. ("D. L.
Babson"), the investment counsel for The Shadow Stock Fund, Inc.
As a shareholder in Shadow Stock Fund, Inc. (the "Fund"), we ask
you to review the statement and cast your vote in favor of the
Proposal. The Fund's Board of Directors has recommended that
shareholders approve the Proposal.
An affiliate of Massachusetts Mutual Life Insurance Company
("MassMutual") has agreed to acquire all of the outstanding stock
of D. L. Babson. Under the terms of the existing investment
counsel agreement, as required by the Investment Company Act of
1940, the agreement automatically terminates upon its assignment.
As more fully discussed in the accompanying proxy statement, D.
L. Babson's consummation of the transaction with the affiliate of
MassMutual will be considered an assignment of the Fund's
existing investment counsel agreement. In order for the Fund to
continue to receive investment counsel services from D. L. Babson
after completion of the transaction, it is necessary that new
investment management and new investment counsel agreements be
approved by shareholders of the Fund. Approval of the new
investment management agreement will also constitute approval of
the new investment counsel agreement. The proposed new investment
management and new investment counsel agreements are identical in
all substantive respects to the existing agreements, differing
only in their effective and termination dates.
We look forward to receiving your vote in favor of the Proposal.
Thank you for your support of the Fund.
Sincerely,
LARRY D. ARMEL
Larry D. Armel
President
<PAGE>
IMPORTANT...
PLEASE VOTE AND RETURN YOUR PROXY PROMPTLY
We urge you to vote on the proposal, Date, Sign and Return the
Enclosed Proxy Promptly. This will assist your Fund in obtaining
a Quorum at its Special Meeting and Avoid the Expense of an
Adjournment Until a Quorum can be obtained. Thank You.
The Shadow Stock Fund, Inc.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
June 29, 1995
TO THE SHAREHOLDERS:
A special meeting of shareholders of The Shadow Stock Fund, Inc.
(the "Fund") will be held at its office, Three Crown Center, 2440
Pershing Road, Kansas City, Missouri, 64108 on June 29, 1995, at
12:00 p.m. for the following purposes:
(1) To approve or disapprove a new Management Agreement
with Jones and Babson, Inc. which also shall constitute approval
or disapproval of a new Investment Counsel Agreements of the same
date between Jones & Babson, Inc. and David L. Babson
& Co. Inc., and Jones & Babson, Inc. and Analytic Systems, Inc.
both of which are identical in all substantive respects to the
existing agreements, differing only in their effective and
termination dates.
(2) To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 4,
1995, as the record date for determining shareholders entitled to
notice of and to vote at the meeting.
Kansas City, Missouri By order of the Board of Directors
June 2, 1995 Martin A. Cramer, Secretary
PROXY STATEMENT
Shadow Stock Fund, Inc.
SPECIAL MEETING OF SHAREHOLDERS, JUNE 29, 1995
THIS STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY THE BOARD OF DIRECTORS OF Shadow Stock Fund, Inc.
to be voted at the special meeting of shareholders of the Fund to
be held on June 29, 1995, at Three Crown Center, 2440 Pershing
Road, Kansas City, Missouri 64108 at 12:00 p.m. and at all
adjournments thereof. The date of the first mailing of this proxy
to shareholders was on or prior to June 5, 1995.
If your Proxy is properly executed and returned in time to be
voted at the meeting, the shares represented by it and which have
not been redeemed at the time will be voted as you have
instructed. IF NO CHOICE IS INDICATED, PROXIES WILL BE VOTED IN
FAVOR OF THE PROPOSAL STATED IN THE NOTICE OF THE MEETING. YOU
MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE BY
PRESENTING TO THE PROXY HOLDERS A WRITTEN REVOCATION SIGNED IN
THE SAME MANNER AS THE PROXY. Abstentions and broker non-votes
will be included for the purposes of determining whether a quorum
is present at the meeting, but will be treated as votes not cast
and, therefore will not be counted for purposes of determining
whether matters to be voted upon at the meeting have been
approved.
The costs of this meeting, including the solicitation of proxies,
will be borne by David L. Babson & Co. Inc. ("D.L. Babson") and
an affiliate of Massachusetts Mutual Life Insurance Company
("MassMutual"). The principal solicitation of proxies will be by
mail, but they may be solicited on behalf of management by
telephone, telegraph and personal contact through D.F. King &
Co., Inc. or its agents as well as through Directors, officers
and regular employees of the management. It is anticipated that
the total cost of any such solicitations, if made by D.F. King &
Co., Inc. or its agents, would be approximately $17,000 plus out
of pocket expenses, and if made by any other party would be
nominal.
The Fund has only one class of voting stock, its common stock.
Shareholders are entitled to one vote per share on all business
of the meeting. Shares entitled to be voted at the meeting or any
adjournment thereof are those full and fractional shares owned by
shareholders of record as of the close of business on May 4,
1995, and which have not been redeemed at the time they are to be
voted. There were approximately 3,814,675.912 shares of the Fund
outstanding on the record date. To the knowledge of the Fund,
there is no beneficial owner of more than 5% of the outstanding
common stock of the Fund. At May 4, 1995, the officers and
Directors of the Fund as a group beneficially owned less than 1%
of the shares of the Fund.
In the event a quorum is not present at the meeting or in the
event that a quorum is present but sufficient votes to approve
the proposed item are not received, the persons named as proxies
may propose one or more adjournments of the meeting to permit
further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares
represented at the meeting in person or by proxy. The persons
named as proxies will vote those proxies that they are entitled
to vote FOR any such proposal, in favor of such an adjournment,
and will vote those proxies required to be voted AGAINST any such
proposal, against any such adjournment.
Jones & Babson, Inc. ("Jones & Babson"), Three Crown Center, 2440
Pershing Road, Kansas City, Missouri 64108, serves as the Fund's
investment manager, principal underwriter and administrator.
D.L. Babson, One Memorial Drive, Cambridge, Massachusetts 02142,
serves as the Fund's investment counsel.
THE TRANSACTION
Under a Stock Purchase Agreement entered into as of May 4, 1995
(the "Agreement"), between DLB Acquisition Corporation ("Buyer"),
an indirect wholly owned subsidiary of MassMutual, and all of the
stockholders (the "Sellers") of D. L. Babson, Buyer has agreed to
acquire all shares of D. L. Babson common stock (the
"Transaction"). At the closing of the Transaction (the
"Closing"), the stockholders of D. L. Babson will receive cash
for their shares of D. L. Babson and D. L. Babson will become a
wholly owned subsidiary of Buyer, with D. L. Babson's current
name. Simultaneous with the Closing, certain officers and
employees of D. L. Babson will be granted shares of common stock
in the Buyer representing approximately 10% of the total
outstanding common stock of Buyer. In addition, the officers and
employees of D. L. Babson will be eligible to participate with
the officers and employees of the Buyer and any of its other
subsidiaries in a stock option plan of Buyer relating to an
additional 15% of the common stock of Buyer.
Following the consummation of the Transaction, D. L. Babson's
operations are expected to be consolidated with the operations of
MassMutual's Concert Capital Management, Inc. ("CCM") investment
management subsidiary. CCM was formed by MassMutual in 1993 to
provide asset management services to the institutional
marketplace. D. L. Babson will have combined assets under
management in excess of $10 billion.
MassMutual, Springfield, Massachusetts 01111-0001, was
established in 1851. MassMutual is a leading provider of
individual life insurance, annuities, employee group life,
health, pension and investment services. As the parent company of
Oppenheimer Management Company, CCM, MML Bay State Life Insurance
Company and other affiliates, MassMutual has $65.7 billion in
assets under management. MassMutual is one of the nation's
premier life insurance companies and among the 100 largest
businesses in the United States in terms of assets. MassMutual
serves more than two million individual and group policyholders
and participants through its portfolio of life and health
insurance, asset accumulation products, health and pension
employee benefits and investment management services. At the
fiscal year ended December 31, 1994, MassMutual recorded total
adjusted capital of $2.5 billion, net gains from operations of
$229 million and dividends to policyholders of $524 million.
Through its pension management product line, MassMutual offers
four funds in its Destiny Funds asset allocation program, three
growth funds and value equity funds. The pension management
division also offers the MassMutual Institutional Funds for the
mid-sized pension plan market. Its subsidiary, Oppenheimer
Management, manages a $29.5 billion mutual fund group.
Pursuant to the terms of the Agreement, the purchase price to be
paid by the Buyer for the outstanding shares of D. L. Babson is
$78.875 million, subject to certain adjustments, based on, among
other things, changes in advisory revenues and working capital at
the Closing.
The consummation of the Transaction is subject to prior
satisfaction of several conditions, including that D. L. Babson
shall have obtained consents from, or entered into new contracts
with, clients representing advisory revenues equal to not less
than 70% of the advisory revenues of D.L. Babson as of December
31, 1994.
As required by the Investment Company Act of 1940 (the "1940
Act"), the Fund's current investment management agreement and
investment counsel agreement provide for their automatic
termination upon their "assignment". The 1940 Act defines
assignment to include any direct or indirect transfer of a
controlling block of the assignor's outstanding voting securities
by a security holder of the assignor. Assuming the Transaction is
consummated, a transfer to the Buyer of the controlling block of
D. L. Babson's outstanding voting securities will occur, thus
giving rise to an "assignment" of the Fund's current investment
counsel agreement.
At the present time it is anticipated that the Closing of the
Transaction and, thus, the assignment, will occur in June or
July, 1995. The precise date at which any assignment of the
current investment counsel agreement will occur, if at all,
cannot now be determined. The Agreement may be terminated prior
to the closing under certain circumstances.
(1) APPROVAL OR DISAPPROVAL OF THE NEW MANAGEMENT AGREEMENT
The Directors of the Fund are proposing that shareholders of the
Fund approve a new investment management agreement (the "New
Management Agreement") and a new investment counsel agreement
(the "New Investment Counsel Agreement") (collectively, the "New
Management Agreements"), effective with the consummation of the
Transaction, between the Fund and Jones & Babson, Inc. ("Jones &
Babson") and Jones & Babson and D. L. Babson, respectively. The
proposed New Management Agreement and the proposed New Investment
Counsel Agreement are identical in all substantive respects to
the existing Agreements (the "Old Management Agreements"),
differing only in their effective and termination dates.
Shareholder approval is required for the New Management
Agreements.
In connection with their approval of the proposed New Management
Agreements, the Directors considered that the terms of the New
Management Agreements do not contemplate any change in the Fund's
fees, investment objectives or policies, or the personnel
managing the Fund. In addition, the Directors considered the fact
that the Transaction does not contemplate significant changes in
the management or operation of the investment manager. D. L.
Babson and the Buyer have each informed the Directors of the Fund
that the Transaction is not expected to result in any such
change, although there can be no assurance that such a change
will not occur. The Directors also considered the steps that the
Buyer has taken to assure the retention of key individuals by D.
L. Babson. In particular, the Directors considered that (a)
certain officers and employees of D. L. Babson will be granted
shares of common stock in Buyer representing 10% of the total
outstanding common stock of Buyer, and that the rights to such
shares will vest over a five year period following the Closing
(with vesting generally contingent on the officer or employee
continuing in the employment of D.L. Babson), (b) the officers
and employees of D. L. Babson will be eligible to participate
with the officers and employees of the Buyer and any of its other
subsidiaries in a stock option plan relating to an additional 15%
of the common stock of Buyer, with vesting provisions similar to
that of the common stock referred to above, and (c) certain key
officers will be entering into a three year employment contract
with Buyer and D. L. Babson. If, after the Transaction, changes
in D. L. Babson are proposed that might materially affect its
services to the Fund, the Board of Directors will consider the
effect of those changes and take such action as it deems
advisable under the circumstances.
D. L. Babson and Buyer have undertaken to pay all costs and
expenses incurred by the Fund as a result of the Transaction,
including the costs of the shareholder meeting.
At a meeting held on April 25, 1995, the Directors of the Fund,
including a majority of independent Directors, approved the New
Management Agreements. The Directors recommend that shareholders
vote to approve the New Management Agreements.
As is the case with all Babson Funds, substantially all Fund
management and normal operating functions are provided by Jones &
Babson. It is assisted in the portfolio supervision by its
investment counsel. The management fee covers all of the Fund's
normal operating expenses exclusive of taxes, brokerage, interest
and fees and other charges of governments and their agencies
including the cost of qualifying the Fund's shares for sale in
any jurisdiction. Not considered normal operating expenses and
therefore payable by the Fund would be legal and accounting fees
incurred in anticipation of or arising out of litigation or
administrative proceedings to which the Fund, its Directors or
officers may be subject or a party thereto. Jones & Babson agrees
to provide all management, supervisory, administrative and normal
operating services required by the Fund. As a condition of this
Agreement, Jones & Babson must employ at its own expense, an
independent investment counseling firm to assist it in the
investment advisory function. As compensation for all of the
foregoing services, the Fund pays Jones & Babson fees based on
average daily net assets of the Fund at an annual rate of one
percent (1%), which will be computed daily and paid semimonthly.
D. L. Babson and Analytic Systems have broad investment analysis
and research staffs which eliminates the need for Jones & Babson
and the Fund to maintain an extensive duplicate staff, with the
consequent increase in the cost of investment advisory service.
The cost of the services of D. L. Babson and Analytic Systems is
included in the amount paid by the Fund for the services of Jones
& Babson. For its investment supervisory services and counsel,
Jones & Babson pays D. L. Babson at an annual rate of 1/4 of 1%
(.25%) and Analytic Systems at an annual rate of 1/5 of 1% (.20%)
of net assets. The duties of Investment Counsel of the Fund
consist primarily of assisting Jones & Babson in the portfolio
supervision of the Fund. In addition to the investment counsel
fee, other normal operating expenses paid by Jones & Babson
include fees of the custodian, officers and other personnel;
rent; shareholder services, including maintenance of the
shareholder accounting system and transfer agency; and such other
items as are incidental to corporate administration. Normally,
the Fund's ratio of expenses to assets will be the management
fee. In comparing the operating costs of the Fund with other
funds of similar size and circumstance, the management fee should
be compared to the operating expense ratio of those funds whose
investment advisory fee does not include such a comprehensive
list of services and whose operating expense ratio includes the
investment advisory fee plus all other operating expenses paid by
the Fund.
Management and Investment Counsel Fees Before and After the
Transaction. For the most recent fiscal year ending June 30,
1994, the Fund paid Jones & Babson $354,017 in management fees
out of which Jones & Babson paid D. L. Babson $88,018 and
Analytic Systems $70,415 for their investment counsel services
and all of the Fund's expenses, except those payable directly by
the Fund. If the proposed New Investment Counsel Agreement with
D. L. Babson and Analytic Systems had been in effect during the
most recent fiscal year of the Fund, the fees paid to D. L.
Babson would have been identical and the fees paid to Jones &
Babson would have been the same if the New Management Agreement
had been in effect.
Annual Fund Operating Expenses. As described in more detail
above, Jones & Babson pays the Investment Counsel fee from the
fee it receives as Investment Manager to the Fund. The proposed
New Investment Counsel Agreement provides for payment of a fee
identical to the fee payable under the existing Investment
Counsel Agreement. The proposed New Management Agreement provides
for payment of a fee identical to the fee payable under the
existing Management Agreement. Total Fund operating expenses at
the end of the most recent fiscal year were 1.28% of average net
assets. If the proposed new Investment Counsel Agreement and the
New Management Agreement had been in effect during the most
recent fiscal year, total Fund operating expenses would have been
identical.
Section 15(f) of the 1940 Act provides that an investment adviser
of a registered investment company or an affiliated person may
receive any amount or benefit in connection with a sale of any
interest in such investment adviser which results in an
assignment of an investment advisory contract with such company,
provided two conditions are satisfied. First, an "unfair burden"
must not be imposed on the investment company as a result of such
sale or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is
defined to include any arrangement during the two-year period
after the sale whereby the investment adviser (or predecessor or
successor advisers), or any interested person of any such
adviser, receives or is entitled to receive any compensation,
directly or indirectly, (i) from any person in connection with
the purchase or sale of securities or other property to, from, or
on behalf of such company, other than bona fide ordinary
compensation as principal underwriter for such company, or (ii)
from the investment company or its security holders (other than
fees for bona fide investment advisory or other services). No
such arrangements are in effect or contemplated insofar as the
Fund is concerned. The second condition is that during the
three-year period immediately following consummation of the
transaction at least 75% of the investment company's board of
directors must not be "interested persons" of the investment
adviser of such company or predecessor investment adviser within
the meaning of the 1940 Act. D. L. Babson, Jones & Babson and the
Buyer believe that this condition is satisfied if at least 75% of
the Fund's directors are not "interested persons" of D.L. Babson
and the Buyer. At present, none of the Fund's Directors are
"interested persons" of D. L. Babson or the Buyer. One of the
Fund's Directors, out of four Directors, is an interested person
of the Investment Manager. The President of the Fund, who is also
a Director, is an "interested person" of Jones & Babson.
The Old and the New Management Agreements, respectively, provide
that the Investment Manager, the Investment Counsel, and the
officers, Directors, employees and other personnel of each, shall
not be liable to the Fund or any shareholder for anything done or
omitted, except acts or omissions involving misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
imposed on the manager by the Old and the New Management
Agreements, respectively, or for any losses that may be sustained
in the purchase, holding or sale of any security.
The Old Management Agreements between Jones & Babson and D. L.
Babson, respectively, which became effective on September 30,
1993, were last approved by shareholders on September 24, 1993
and last approved for annual renewal before their expiration, by
the Board of Directors on October 19, 1994. The proposed New
Management Agreement between the Fund and Jones & Babson and the
New Investment Counsel Agreement between Jones & Babson and D. L.
Babson will become effective upon consummation of the
Transaction, if approved by shareholders at this Special Meeting.
The New Management Agreements were approved by the Board of
Directors on April 25, 1995. The terms of the Old and New
Management Agreements, respectively, provide that the agreements
will continue automatically for successive annual periods so long
as such continuance is specifically approved at least annually by
the Board of Directors of the Fund or by the vote of a majority
of the outstanding voting securities of the Fund (for the purpose
of an initial approval or a continuance, approval by the lesser
of either 50% of the total voting shares of the Fund or 67% of
the shares present at a shareholder meeting, if the holders of
more than 50% of the outstanding shares entitled to vote at the
meeting are present in person or by proxy, shall constitute
shareholder approval) and provided also that such continuance is
approved by a vote of the majority of the Directors who are not
parties to the Agreement or interested persons of any such party
at a meeting held in person and called specifically for the
purpose of evaluating and voting on such approval.
If the Board's approval is ratified by either more than 50% of
the Fund's outstanding shares entitled to vote at the meeting or
by a two-thirds majority of the shares present at such meeting if
the holders of more than 50% of the outstanding shares entitled
to vote at the meeting are present in person or by proxy, the New
Management Agreement and the New Investment Counsel Agreement
will be approved. No arrangements have been made in connection
with the New Management Agreement and the New Investment Counsel
Agreement with respect to the composition of the Board of
Directors of the Fund or D. L. Babson. If the New Management
Agreement and the New Investment Counsel Agreement are not
approved, the Board will meet and consider what further action
must be taken.
The proposed New Management Agreement between the Fund and Jones
& Babson, which includes the New Investment Counsel Agreement
between Jones & Babson and
D. L. Babson, is set out under Exhibit A.
Approval or disapproval of the New Management Agreement
constitutes approval or disapproval of the New Investment Counsel
Agreement.
The Board of Directors recommends that shareholders vote to
approve the New Management Agreement.
MUTUAL FUNDS MANAGED
Jones & Babson acts as investment manager for the Babson Fund
Group. D. L. Babson acts as investment counsel for the Babson
Fund Group. The Agreements with these Funds are substantially the
same. The investment counsel fee for each Fund is based on an
annual rate applied to daily net assets.
<TABLE>
<CAPTION>
Net Assets Management Investment Investment
BABSON FUNDS 4/30/95 Fee1 Counsel Fee2 Counsel
<S> <C> <C> <C> <C>
D. L. Babson Money Market Fund,
Inc. - Prime Portfolio 40,862,714 0.85% 0.20% D. L. Babson
D. L. Babson Money Market Fund,
Inc. - Federal Portfolio 9,709,157 0.85% 0.20% D. L. Babson
D. L. Babson Tax-Free Income Fund,
Inc. - Money Market 12,737,769 0.50% 0.10% D. L. Babson
D. L. Babson Tax-Free Income Fund,
Inc. - Long Portfolio 27,748,107 0.95% 0.25% D. L. Babson
D. L. Babson Tax-Free Income Fund,
Inc. - Short Portfolio 27,991,590 0.95% 0.25% D. L. Babson
David L. Babson Growth Fund, Inc. 237,743,116 0.85% 0.30% D. L. Babson
0.70% (>250 mil. in assets)
0.25% (100-250 mil. in assets)
0.20% (>250 mil. in assets)
Babson Enterprise Fund, Inc. 199,992,507 1.50% 0.70% D. L. Babson
1.00% (>30 mil. in assets)
0.50% (>30 mil. in assets)
Babson Enterprise Fund II, Inc. 37,923,487 1.50% 0.70%
1.00% (>30 mil. in assets)
0.50% (>30 mil. in assets)
Babson Value Fund, Inc. 184,709,968 0.95% 0.35% D. L. Babson
D. L. Babson Bond Trust
- - Portfolio L 148,220,909 0.95% 0.25% D. L. Babson
D. L. Babson Bond Trust
- - Portfolio S 29,733,960 0.95% 0.25% D. L. Babson
(By waiver, the management fee and the investment counsel fee for
Portfolio S have been reduced to .65% and .15%, respectively,
thru 3/31/96.)
Shadow Stock Fund, Inc. 39,344,580 1.00% 0.25% D. L. Babson
0.20% and Analytic Systems, Inc.3
Babson-Stewart Ivory International
Fund, Inc. 65,282,884 0.95% 0.475% Babson-Stewart
Ivory International4
</TABLE>
1 Payable to Jones & Babson.
2 Payable by Jones & Babson to the Investment Counsel.
3 Shadow Stock Fund has investment counsel agreements
with each of D. L. Babson and Analytic Systems, Inc., which are
independently owned and operated firms,
with no corporate affiliation.
4 Babson-Stewart Ivory International is a partnership
formed in 1987 by D. L. Babson and Stewart Ivory & Company
(International) Ltd.
<PAGE>
OTHER MUTUAL FUNDS MANAGED BY D. L. BABSON
<TABLE>
<CAPTION>
MUTUAL NET ASSETS INVESTMENT INVESTMENT
FUNDS 4/30/95 COUNSEL FEE COUNSEL
<S> <C> <C> <C>
Touchstone Select Advisors
Emerging Growth Portfolio 1,463,463 0.5% D. L. Babson
Touchstone Select Advisors
Variable Insurance Trust 1,048,930 0.5% D. L. Babson
The Valiant Fund General
Money Market Portfolio 385,537,569 See Note* D. L. Babson
The Valiant Fund Government
Money Market Portfolio 0 See Note* D. L. Babson
The Valiant Fund Treasury
Money Market Portfolio 97,277,112 See Note* D. L. Babson
The Valiant Fund Tax Exempt
Money Market Portfolio 263,812,979 See Note* D. L. Babson
Total (Valiant Funds) 746,627,660 0.10% of first
$500,000,000;
0.05% on amount
over $500,000,00
Allmerica Investment Small 51,872,558 0.5% D. L. Babson
Cap Value Fund
</TABLE>
* Fee computed on average daily assets of total of all funds.
OTHER MUTUAL FUNDS MANAGED BY JONES & BABSON
<TABLE>
<CAPTION>
MUTUAL NET ASSETS MANAGEMENT INVESTMENT
FUNDS 4/30/95 FEE** MANAGER
<S> <C> <C> <C>
Scout Tax-Free
Money Market Fund, Inc. 130,585,262 0.50% Jones & Babson
Scout Money Market
Fund, Inc. - Prime Portfolio 227,102,475 0.50% Jones & Babson
Scout Money Market
Fund, Inc. - Federal Portfolio 192,953,578 0.50% Jones & Babson
Scout Stock Fund, Inc. 133,596,370 0.85% Jones & Babson
Scout Bond Fund, Inc. 74,375,977 0.85% Jones & Babson
Scout Regional Fund, Inc. 30,797,172 0.85% Jones & Babson
Scout WorldWide Fund, Inc. 18,614,624 0.85% Jones & Babson
Buffalo Balanced Fund, Inc. 39,963,966 1.00% Jones & Babson
</TABLE>
** Each of the Scout Funds have investment counsel
agreements with UMB Bank, n.a., which is not affiliated with
Jones & Babson or D. L. Babson. The Buffalo Balanced Fund has an
investment counsel agreement with Kornitzer Capital Management,
Inc., which is not affiliated with Jones & Babson or D. L.
Babson. Jones & Babson employs each of the investment counsel for
these funds at its own expense.
THE PRINCIPAL OFFICERS AND DIRECTORS OF
JONES & BABSON
<TABLE>
<CAPTION>
Name and Address Principal Occupation
<S> <C>
Larry D. Armel1 President and Director of Jones & Babson, the
Fund and other funds managed by Jones & Babson.
Stephen S. Soden2 Chairman; also President, BMA Financial Services, Inc.
Giorgio Balzer2 Director; also, Chairman and Chief Executive
Officer Business Men's Assurance Company of America; Director of
Commerce Bancshares, Inc. and Home Office Reference Laboratory, Inc.
J. William Sayler2 Director; also, President, Business Men's
Assurance Company of America; Director of American Royal
Association, Life Insurance Marketing Research Association and
St. Luke's Hospital - Kansas City, MO.
Edward S. Ritter2 Director; also, Vice President, Business
Men's Assurance Company of America; Director of Preferred
Physicians Mutual Risk Retention Group and U.S. Physicians Mutual
Risk Retention Group.
Robert N. Sawyer2 Director; Senior Vice President, Business
Men's Assurance Company of America.
Vernon W. Voorhees2 Director; Senior Vice President, Business
Men's Assurance Company of America.
Richard S. Graber1 Senior Vice President - Marketing, Jones & Babson.
P. Bradley Adams1 Vice President, Chief Financial Officer and
Treasurer, Jones & Babson; Vice President and Treasurer of the
Fund and other funds managed by Jones & Babson.
Michael A. Brummel1 Vice President, Chief Administrative Officer,
Assistant Secretary and Assistant Treasurer, Jones & Babson; Vice
President, Assistant Secretary and Assistant Treasurer of the
Fund and other funds managed by Jones & Babson.
Martin A. Cramer1 Vice President and Secretary, Jones & Babson,
the Fund and other funds managed by Jones & Babson.
Ruth Evans1 Vice President, Jones & Babson, the Fund and other
funds managed by Jones & Babson.
Elizabeth L. Allwood1 Assistant Vice President and Assistant
Secretary, Jones & Babson; Assistant Secretary of the Fund and
other funds managed by Jones & Babson.
John G. Dyer1 Assistant Secretary and Legal Counsel, Jones &
Babson, the Fund and other funds managed by Jones & Babson.
Constance E. Martin1 Assistant Vice President, Jones &
Babson, the Fund and other funds managed by Jones & Babson.
</TABLE>
Each officer or director of the Fund who is also an officer,
employee, or director of Jones & Babson, is listed above. No
officer or director of the Fund is an officer, employee or
director of MassMutual or the Buyer. Jones & Babson is a wholly
owned subsidiary of Business Men's Assurance Company of America
("BMA"). BMA is a subsidiary of Assicurazioni Generali S.p.A.
("Generali"), Trieste, Italy, an Italy-based insurance
organization. Generali has 135 subsidiaries, of which 85 are
insurance companies operating in some 40 countries around the
world. Generali is a publicly held company.
1 The address of the principal executive officers and
directors of Jones & Babson is Three Crown Center, 2440 Pershing
Road, Suite G-15, Kansas City, Missouri 64108.
2 The address of the principal executive officers and
directors of BMA is BMA Tower, One Penn Valley Park, Kansas City,
Missouri 64141.
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS OF D. L. BABSON
<TABLE>
<CAPTION>
Principal Occupation
Name and Address3 (all positions are with David L. Babson)
<S> <C>
David L. Babson Director and Consultant.
H. Bradlee Perry Director.
Peter C. Thompson President and Director.
David G. Kirk Executive Vice President and Director; also, Vice
President, David L. Babson Growth Fund, Babson Enterprise Fund,
Babson Enterprise Fund II, and Babson Value Fund.
Peter C. Schliemann Executive Vice President and Director; also,
Vice President, Babson Enterprise Fund and Babson Enterprise Fund II.
Edson B. Olds, IV Senior Vice President, Treasurer, Clerk and Director.
Edward L. Martin Executive Vice President and Director; Vice President,
D. L. Babson Money Market Fund, D. L. Babson Tax-Free Income Fund
and D. L. Babson Bond Trust.
Roland W. Whitridge Senior Vice President and Director; also,
Vice President, Babson Value Fund and Shadow Stock Fund.
Kathleen M. Elliott Senior Vice President and Director.
</TABLE>
Each of H. Bradlee Perry, Peter C. Thompson, David G. Kirk and
Peter C. Schliemann own 10% or more of the outstanding voting
securities of D. L. Babson.
3 The address of the principal executive officers and
directors of D. L. Babson is One Memorial Drive, Cambridge,
Massachusetts 02142.
(2) OTHER BUSINESS
The Board of Directors knows of no other business to be brought
before the meeting. If other matters properly come before the
meeting, it is intended that the persons named in the
accompanying proxy will vote all proxies not containing specific
instructions to the contrary in accordance with their best
judgment on such other matters.
PORTFOLIO TRANSACTIONS
Although Jones & Babson is registered as a securities broker and
dealer it does not conduct a general brokerage business. It does
not execute any of the Fund's portfolio transactions nor receive
any commissions therefrom. The Fund does not allocate its
portfolio brokerage on the basis of the sale of its shares,
although brokerage firms whose customers purchase shares may
participate in brokerage commissions. Brokerage is not given to
any person affiliated with the Fund, the investment manager or
the investment counsel.
FINANCIAL STATEMENTS
Financial statements of the Fund are on file with the Securities
and Exchange Commission, Washington, D.C. 20549. These statements
appear in the annual report of the Fund which preceded this Proxy
Statement. The Fund will furnish, without charge, a copy of the
annual report and the most recent semi-annual report succeeding
the annual report, to a shareholder upon request. A shareholder
may obtain the Fund's annual and semi-annual reports by
contacting: Jones & Babson, Inc., Three Crown Center, 2440
Pershing Road, Kansas City, Missouri 64108, 1-800-422-2766.
SHAREHOLDER PROPOSALS
The Fund does not hold annual shareholder meetings. To be
considered for presentation at a shareholders' meeting, rules
promulgated by the Commission require that, among other things, a
shareholder proposal be received at the office of the Fund at
least 120 calendar days in advance of the anniversary of the
release date of the proxy statement relating to the annual
meeting held by such Fund in the previous year, or if no annual
meeting was held by the Fund in the previous year, such
shareholder proposal must be received by the Fund a reasonable
time before a solicitation is made.
Kansas City, Missouri Shadow Stock Fund, Inc.
June 2, 1995 Martin A. Cramer, Secretary
<PAGE>
Exhibit A
MANAGEMENT AGREEMENT
Between
JONES & BABSON, INC.
and
SHADOW STOCK FUND, INC.
THIS AGREEMENT, made and entered into this ______ day of
____________, 1995, by and between SHADOW STOCK FUND, INC., a
Maryland corporation, (hereinafter referred to as the "Fund") and
JONES & BABSON, INC., a corporation organized under the laws of
the State of Missouri (hereinafter referred to as the "Manager"),
and which Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute but one instrument.
WHEREAS the Fund was founded and incorporated by the Manager for
the purpose of engaging in the business of investing and
reinvesting its property and assets and to operate as an
open-end, diversified, management investment company, as defined
in the Investment Company Act of 1940 as amended (Act), under
which it is registered with the Securities and Exchange
Commission, and
WHEREAS the Manager is engaged in the business of supplying
investment advice and management service to registered investment
companies as an independent contractor and,
WHEREAS the Manager desires to enter into a contractual
arrangement whereby the Manager provides investment advice and
management service to the Fund for a fee,
NOW THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, receipt of
which is hereby acknowledged, it is mutually agreed and
contracted by and between the parties hereto that:
1. The Fund hereby employs the Manager, for the period set
forth in Paragraph 5 hereof, and on the terms set forth herein,
to render investment advice and management service to the Fund,
subject to the supervision and direction of the Board of
Directors of the Fund. The Manager hereby accepts such employment
and agrees, during such period, to render the services and assume
the obligations herein set forth, for the compensation herein
provided. The Manager shall, for all purposes herein, be deemed
to be an independent contractor, and shall, except as provided in
the Underwriting Agreement between the Manager and the Fund or
unless otherwise expressly provided and authorized, have no
authority to act for or represent the Fund in any way, or in any
other way be deemed an agent of the Fund.
The Manager shall furnish the Fund investment management and
administrative services. Investment management shall include
analysis, research and portfolio recommendations consistent with
the Fund's objectives and policies. Administrative services shall
include the services and compensation of such members of the
Manager's organization as shall be duly elected officers and/or
directors of the Fund and such other personnel as shall be
necessary to carry out its normal operations; fees of the
independent directors, the independent public accountant and
legal counsel (but not legal and audit fees and other costs in
contemplation of or arising out of litigation or administrative
actions to which the Fund, its officers or directors are a party
or incurred in anticipation of becoming a party); rent; the cost
of a transfer and dividend disbursing agent or similar in-house
services; bookkeeping; accounting; and all other clerical and
administrative functions as may be reasonable and necessary to
maintain the Fund's records and for it to operate as an open-end
management investment company. The foregoing notwithstanding,
exclusive of the management fee, the Fund shall bear the cost of
any interest, taxes, dues, fees and other charges of governments
and their agencies including the cost of qualifying the Fund's
shares for sale in any jurisdiction, brokerage commissions, fees
for pricing services, custodian fees or any other expenses
incurred by it which are not assumed herein by the Manager.
All property, equipment and information used by the Manager in
the management and administration of the Fund shall belong to the
Manager. Should the management and administrative relationship
between the Fund and the Manager terminate, the Fund shall be
entitled to, and the Manager shall provide the Fund, a copy of
all information and records in the Manager's file necessary for
the Fund to continue its functions, which shall include computer
systems and programs in use as of the date of such termination;
but nothing herein shall prohibit thereafter the use of such
information, systems or programs by the Manager, so long as such
does not unfairly interfere with the continued operation of the
Fund.
2. As compensation for the services to be rendered to the Fund
by the Manager under the provisions of this agreement, the Fund
agrees to pay semimonthly to the Manager an annual fee based on
the average total net assets of the Fund computed daily in
accordance with its Certificate of Incorporation and By-Laws as
follows:
a. One percent (1%) of the average total net assets of the
Fund.
b. Should the Fund's normal operating expenses except for
taxes, fees and other charges of governments and their agencies
including the cost of qualifying the Fund's shares for sale in
any jurisdiction, interest, brokerage commission and costs
arising out of litigation or administrative actions, all as
described in paragraph 1, exceed the limits set out in
sub-paragraph a of this paragraph 2, the Investment Manager shall
reimburse the Fund in the amount of the excess.
3. It is understood and agreed that the services to be rendered
by the Manager to the Fund under the provisions of the Agreement
are not to be deemed exclusive, and the Manager shall be free to
render similar or different services to others so long as its
ability to render the services provided for in this Agreement
shall not be impaired thereby.
4. It is understood and agreed that the directors, officers,
agents, employees, and shareholders of the Fund may be interested
in the Manager as owners, employees, agents or otherwise, and
that owners, employees and agents of the Manager may be
interested in the Fund as shareholders or otherwise. It is
understood and agreed that shareholders, officers, directors, and
other personnel of the Manager are and may continue to be
officers and directors of the Fund, but that they receive no
remuneration from the Fund solely for acting in those capacities.
5. This Agreement shall become effective pursuant to its
approval by the Fund's Board of Directors and by the vote of a
majority of the outstanding shares of the Fund as prescribed by
the Act. It shall remain in force through the 31st day of
October, 1996, and thereafter may be renewed for successive
periods not exceeding one year only so long as such renewal and
continuance is specifically approved at least annually by the
Board of Directors or by vote of a majority of the outstanding
shares of the Fund as prescribed by the Act, and only if the
terms and the renewal of this Agreement have been approved by a
vote of a majority of the directors of the Fund including a
majority of the directors who are not parties to the Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. No amendment
to this Agreement shall be effective unless the terms thereof
have been approved by the vote of a majority of outstanding
shares of the Fund as prescribed by the Act and by vote of a
majority of the directors of the Fund who are not parties to the
Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval.
It shall be the duty of the directors of the Fund to request and
evaluate, and the duty of the Manager to furnish, such
information as may reasonably be necessary to evaluate the terms
of this Agreement and any amendment thereto. This Agreement may
be terminated at any time, without the payment of any penalty, by
the directors of the Fund, or by the vote of a majority of the
outstanding voting shares of the Fund as prescribed by the Act on
not more than sixty days written notice to the Manager, and it
may be terminated by the Manager upon not less than sixty days
written notice to the Fund. It shall terminate automatically in
the event of its assignment by either party unless the parties
hereby, by agreement, obtain an exemption from the Securities and
Exchange Commission from the provisions of the Act pertaining to
the subject matter of this paragraph. Any notice, request or
instruction provided for herein, or for the giving of which, the
occasion may arise hereunder, shall be deemed duly given, if in
writing and mailed by registered mail, postage prepaid, addressed
to the regular executive office of the Fund or the Manager as the
case may be. As used in this Agreement, the terms "assignment",
"a majority of the outstanding voting shares", and "interested
persons" shall have the same meaning as similar terms contained
in the Act.
6. It is specifically provided in this Agreement that the
Manager is to secure the services of David L. Babson & Co. Inc.
of Cambridge, Massachusetts and Analytic Systems, Inc. of
Chicago, Illinois (at the sole expense of the Manager), as
Investment Counsels to furnish advice and recommendations with
respect to the purchase and sale of securities and the making of
portfolio commitments; to place at the disposal of the Manager
such statistical information as may reasonably be required and in
general to superintend the investments of the Fund, subject to
the control and approval of the Board of Directors of the Manager
and the Board of Directors of the Fund.
7. As a condition of this agreement, the Manager will provide
in its investment counsel agreement with Analytic Systems, Inc.
for the exclusive right of the Fund to use the name "Shadow
Stock" as part of its name, so long as Jones & Babson, Inc., or
any successor in interest, continues as its Manager and Analytic
Systems, Inc., or any successor in interest, continues as an
Investment Counsel to the Manager. The term "exclusive right of
the Fund" appearing in the preceding sentence means that no other
investment company, whether or not registered under the
Investment Company Act of 1940, as amended, will be entitled to
use the precise name "Shadow Stock" so long as the Fund has the
right to use it as a part of its name. Should the Fund terminate
either Jones & Babson, Inc. or its successor as Manager for the
Fund, or Analytic Systems, Inc., or its successor, as an
Investment Counsel, either Jones & Babson, Inc. or Analytic
Systems, Inc., or their respective successors in interest, may
elect to notify the Fund in writing that permission to use the
name "Shadow Stock" has been withdrawn, whereupon the Fund, its
officers, directors and shareholders, expressly agree to take all
necessary corporate action and to proceed expeditiously to change
the name of the Fund and not use any other name or take any other
action which would indicate the Fund's continued association with
Analytic Systems, Inc., Jones & Babson, Inc., or David L. Babson
& Co. Inc. If the use of the name "Shadow Stock" is so withdrawn
as aforesaid, the Fund, its officers, directors and shareholders,
understand and agree that there shall be no limitation with
respect to the future use of the name "Shadow Stock" by Analytic
Systems, Inc., or its successor in interest, or with the
permission of Analytic Systems, Inc., by Jones & Babson, Inc. or
David L. Babson & Co. Inc. or their respective successors.
8. The agreement between Jones & Babson, Inc. and Analytic
Systems, Inc. also shall provide that, although it is not
anticipated, there may occur some unforeseen reason which would
prohibit Analytic Systems, Inc., as a matter of reasonable
business necessity, continuing as an Investment Counsel to Jones
& Babson, Inc. Should such circumstances occur, Analytic Systems,
Inc., or its successor may elect to terminate its services, even
though the Fund would want to continue to use the name "Shadow
Stock" and continue Jones & Babson, Inc., or its successor, as
Manager. Upon receipt of such a written notice, the Fund, its
officers, directors and shareholders, agree to take all necessary
corporate action and proceed expeditiously to change the name of
the Fund not later than one year after the effective date of the
termination notice, and not use any other name or take any other
action which would indicate the Fund's continued association with
Analytic Systems, Inc. In consideration for this right, Analytic
Systems, Inc. and Jones & Babson, Inc. agree that should the name
"Shadow Stock" be withdrawn, neither of them will permit another
investment company, whether or not registered under the
Investment Company Act of 1940, to use the name "Shadow Stock" as
part of its name for a period of five years subsequent to the
effective date of the written withdrawal request, unless this
prohibition is waived or modified by a majority vote of the
Fund's shareholders entitled to vote at the next annual meeting
of the Fund's shareholders following receipt of the request, and
if any such action is also approved by the majority of shares
entitled to vote at a duly constituted meeting of the
shareholders of Jones & Babson, Inc. For this right to withdraw
the name "Shadow Stock" from the use of the Fund, Analytic
Systems, Inc. will agree in its contract with Jones & Babson,
Inc. that it will not compete with Jones & Babson, Inc. for the
management of the
Fund during said five-year period, unless this no-compete
provision is waived by a majority of the shares entitled to vote
at a duly constituted meeting of the shareholders of Jones &
Babson, Inc.
9. It is further agreed that the provisions of Paragraphs 7 and
8 shall inure to the benefit of Analytic Systems, Inc. and may be
imposed by it or any successor in interest as if it or such
successor in interest were parties to this Agreement.
10. The Manager shall not be liable for any error in
judgment or mistake of law, or for any loss suffered by the Fund
in connection with any matters to which this Agreement relates,
except that nothing herein contained shall be construed to
protect the Manager against any liability by reason of willful
misfeasance, bad faith or gross negligence in the performance of
duties or by reckless disregard of its obligations or duties
under this Agreement.
11. This Agreement may not be amended, transferred, assigned,
sold or in any manner hypothecated or pledged nor may any new
Agreement become effective without affirmative vote or written
consent of the holders of a majority of the shares of the Fund.
Shadow Stock Fund, Inc.
By_________________________________
ATTEST:
______________________________
JONES & BABSON, INC.
By_________________________________
ATTEST:
______________________________
<PAGE>
INVESTMENT COUNSEL AGREEMENT
Between
JONES & BABSON, INC.
and
DAVID L. BABSON & CO. INC.
THIS AGREEMENT made this ____ day of _______________, 1995
by and between JONES & BABSON, INC. (hereinafter referred to as
the "Manager"), and DAVID L. BABSON & CO. INC., (hereinafter
referred to as the "Investment Counsel"), and which Agreement may
be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall
constitute but one instrument.
WITNESSETH:
WHEREAS, the Directors of the Manager want to enter into a
contract with the Investment Counsel to render the Manager the
following services:
To furnish research, analysis, advice and recommendations with
respect to the purchase and sale of securities and the making of
investment commitments; to place at the disposal of the Manager
such statistical information and reports as may reasonably be
required, and in general to superintend the investments of the
Shadow Stock Fund, Inc. ("Fund"), subject to the control of the
Directors of the Fund and JONES & BABSON, INC.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. During the term of this Agreement, or any extension or
extensions thereof, the Investment Counsel will, to the best of
its ability, furnish the foregoing services.
2. As compensation, JONES & BABSON, INC. will pay Investment
Counsel for its services the following annual fee computed daily
as determined by the Fund's price make-up sheet and which shall
be payable monthly or at such other intervals as agreed by the
parties:
a. Twenty-five one-hundredths of one percent (.25/100 of
1%) of the average daily total net assets of the Fund.
3. This Agreement shall become effective concurrently with the
Management Agreement between JONES & BABSON, INC. and the Shadow
Stock Fund, Inc. pursuant to the approval of the shareholders of
the Fund according to the provisions of the Investment Company
Act of 1940 (Act).
4. This Agreement shall continue for a period ending October
31, 1996. It may be renewed thereafter for successive periods not
exceeding one year only so long as such renewal and continuance
is specifically approved at least annually by the Board of
Directors of the Fund or by a vote of the majority of the
outstanding voting securities of the Fund as prescribed by the
Act and provided further that such continuance is approved at
least annually thereafter by a vote of a majority of the
Directors who are not parties to such Agreement or interested
persons of such party, cast in person at a meeting called for the
purpose of voting on such approval. The Investment Counsel shall
provide the Manager such information as may be reasonably
necessary to assist the Directors of the Fund to evaluate the
terms of the Management Agreement. This Agreement automatically
will terminate with the Management Agreement without the payment
of any penalty, upon sixty days written notice by the Fund to the
Manager that the Board of Directors or the shareholders by vote
of a majority of the outstanding voting securities of the Fund,
as provided by the Act, has terminated the Management Agreement.
This Agreement shall automatically terminate in the event of its
assignment or assignment of the Management Agreement unless such
assignment is approved by the Directors and the shareholders of
the Fund as herein before provided or unless an exemption is
obtained from the Securities and Exchange Commission from the
provisions of the Act pertaining to the subject matter of this
paragraph.
5. It is expressly understood and agreed that the services to
be rendered by the Investment Counsel to the Manager under the
provisions of this Agreement are not to be deemed to be
exclusive, and the Investment Counsel shall be free to render
similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be
impaired thereby, and provided further that the services to be
rendered by the Investment Counsel to the Manager under this
Agreement and the compensation provided for in Paragraph 2 hereof
shall be limited solely to services with reference to the Fund.
6. The Manager agrees that it will furnish currently to
Investment Counsel all information reasonably necessary to permit
Investment Counsel to give the advice called for under this
Agreement and such information with reference to the Fund that is
reasonably necessary to permit Investment Counsel to carry out
its responsibilities under this Agreement, and the parties agree
that they will from time to time consult and make appropriate
arrangements as to specific information that is required under
this paragraph and the frequency and manner with which it shall
be supplied.
7. The Investment Counsel shall not be liable for any error of
judgment or mistake at law or for any loss suffered by Manager of
the Fund in connection with any matters to which this Agreement
relates except that nothing herein contained shall be construed
to protect the Investment Counsel against any liability by reason
of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reckless disregard of its
obligations or duties under this agreement.
8. In compliance with the provisions of the Management
Agreement between the Fund and JONES & BABSON, INC., Investment
Counsel agrees with the Manager that subject to the terms and
conditions of this Paragraph 8, the Fund may use the name of
"David L. Babson" (or any part thereof) as part of its name so
long as JONES & BABSON, INC., or any successor in interest,
continues as Manager and DAVID L. BABSON & CO. INC., or any
successor in interest, continues as Investment Counsel. Should
the Fund terminate either JONES & BABSON, Inc., or its successor
as Manager, or DAVID L. BABSON & CO. INC., or its successor as
Investment Counsel, either JONES & BABSON, INC., or DAVID L.
BABSON & CO. INC., or their respective successors in interest,
may elect to notify the Fund in writing that permission to use
the name "David L. Babson" (or any part thereof) has been
withdrawn. It is understood that the Fund has, in its Management
Agreement with JONES & BABSON, INC., expressly agreed that it,
its officers, directors and shareholders will take all necessary
corporate action and proceed expeditiously to change the name of
the Fund and not use any other name or take any action which
would indicate the Fund's continued association with DAVID L.
BABSON & CO. INC. If the use of the name "David L. Babson" (or
any part thereof) is so withdrawn as aforesaid, it is understood
and agreed that there shall be no limitation with respect to the
future use of the name "David L. Babson" (or any part thereof) by
DAVID L. BABSON & CO. INC., or its successors in interest, or by
JONES & BABSON, INC. or its successors in interest.
9. Although it is not anticipated, there may occur some
unforeseen reason which would prohibit DAVID L. BABSON & CO.
INC., as a matter of reasonable business necessity, continuing as
Investment Counsel. Should such circumstances occur, DAVID L.
BABSON & CO. INC., or its successors may elect to terminate its
services, even though the Fund would want to continue to use the
name "David L. Babson" (or a part thereof) and continue JONES &
BABSON, INC., or its successor, as Manager with DAVID L. BABSON &
CO. INC., or its successor, as Investment Counsel. Upon receipt
of such written notice, the Fund, its officers, directors and
shareholders, have agreed in the Management Agreement between the
Fund and JONES & BABSON, INC., for the benefit of DAVID L. BABSON
& CO. INC. to take all necessary corporate action and proceed
expeditiously to change the name of the Fund (but if necessary,
take up to one year from the effective date of the termination of
the Management Agreement) and not use any other name or take any
other action which would indicate the Fund's continued
association with DAVID L. BABSON & CO. INC. In consideration for
this right, DAVID L. BABSON & CO. INC. agrees that should it so
request the withdrawal of the name "David L. Babson" (or any part
thereof) it will not permit another investment company, whether
or not registered under the Investment Company Act of 1940, to
use the name "David L. Babson" (or any part thereof) as part of
its name for a period of five years subsequent to the effective
date of the written withdrawal request, unless this prohibition
is waived or modified by a majority vote of the Fund's
shareholders entitled to vote at a duly constituted meeting of
the Fund's shareholders following receipt of the request, and if
any such action is also approved by the majority of shares
entitled to vote at a duly constituted meeting of the
shareholders of JONES & BABSON, INC. For this right to withdraw
the name "David L. Babson" (or any part thereof) from the use of
the Fund, DAVID L. BABSON & CO. INC. agrees that it will not
compete with JONES & BABSON, INC. for the management of the Fund
during said five-year period, unless this no-compete provision is
waived by a majority of the shares entitled to vote at a duly
constituted meeting of the shareholders of JONES & BABSON, INC.
David L. Babson & CO Inc.
By_________________________________
ATTEST:
______________________________
JONES & BABSON, INC.
By_________________________________
ATTEST:
______________________________
<PAGE>
INVESTMENT COUNSEL AGREEMENT
Between
JONES & BABSON, INC.
and
ANALYTIC SYSTEMS, INC.
THIS AGREEMENT by and between JONES & BABSON, INC., a Missouri
corporation with its principal office at Three Crown Center, 2440
Pershing Road, Kansas City, Missouri 64108 (hereinafter referred
to as "Manager") and ANALYTIC SYSTEMS, INC. an Illinois
corporation with its principal office at 612 North Michigan
Avenue, Chicago, Illinois 60611 (hereinafter referred to as
"Investment Counsel"), is made pursuant to the approval and
direction of the parties' respective Board of Directors and may
be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall
constitute but one instrument.
WITNESSETH:
WHEREAS, the Manager has entered into a Management Agreement with
the SHADOW STOCK FUND, INC. ("Fund") of concurrent date to
provide management services, including investment advisory
services, and the Manager desires the assistance of the
Investment Counsel which can supply the following services:
Research, analysis, advice and recommendations with respect to
the purchase and sale of securities and the making of investment
commitments; statistical information and reports as may
reasonably be required, and general assistance in the supervision
of the investments of the Fund, subject to the control of the
directors of the Fund and the directors of Jones & Babson, Inc.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. During the term of this Agreement, or any extension or
extensions thereof, the Investment Counsel will, to the best of
its ability, furnish the foregoing services.
2. As compensation, the Manager will pay Investment Counsel for
its services the following annual fee computed daily as
determined by the Fund's price make-up sheet and which shall be
payable monthly or at such other intervals as agreed by the
parties:
a. Twenty one-hundredths of one percent (.20 of 1%) of the
average daily total net assets of the Fund.
3. This Agreement shall become effective and run concurrently
with the Management Agreement of the same date between the
Manager and the Fund, an executed copy of which shall be supplied
the Investment Counsel.
4. The last day of the initial period of this Agreement shall
coincide with the last day of the Management Agreement which
shall be the 31st day of October, 1996. Thereafter this Agreement
may be renewed in conjunction with the Management Agreement for
successive periods not exceeding one year only so long as such
renewal and continuance is specifically approved at least
annually by the Board of Directors of the Fund or by a vote of
the majority of the outstanding voting securities of the Fund as
prescribed by the Investment Company Act of 1940 (Act) and
provided further that such continuance is approved at least
annually thereafter by a vote of a majority of the directors who
are not parties to such Agreement or interested persons (as
defined by the Act) of such party, cast in person at a meeting
called for the purpose of voting on such approval. The Investment
Counsel shall provide the Manager such information as may be
reasonably necessary to assist the directors of the Fund to
evaluate the terms of the Management Agreement. This Agreement
automatically will terminate with the Management Agreement
without the payment of any penalty, upon sixty days written
notice by the Fund to the Manager that the Board of Directors or
the shareholders by vote of a majority of the outstanding voting
securities of the Fund, as provided by the Act, has terminated
the Management Agreement.
This Agreement shall automatically terminate in the event of its
assignment or assignment of the Management Agreement unless such
assignment is approved by the directors and the shareholders of
the Fund as hereinbefore provided or unless an exemption is
obtained from the Securities and Exchange Commission from the
provisions of the Act pertaining to the subject matter of this
paragraph. The Manager shall promptly notify the Investment
Counsel of any notice of termination or of any circumstances
which are likely to result in a termination of the Management
Agreement.
5. It is understood and agreed that the services to be rendered
by the Investment Counsel to the Manager under the provisions of
this Agreement are not to be deemed to be exclusive, and the
Investment Counsel shall be free to render similar or different
services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby, and
provided further that the services to be rendered by the
Investment Counsel to the Manager under this Agreement and the
compensation provided for in Paragraph 2 hereof shall be limited
solely to services with reference to the Fund.
6. The Manager agrees that it will furnish currently to
Investment Counsel all information reasonably necessary to permit
Investment Counsel to give the advice called for under this
Agreement and such information with reference to the Fund that is
reasonably necessary to permit Investment Counsel to carry out
its responsibilities under this Agreement, and the parties agree
that they will from time to time consult and make appropriate
arrangements as to specific information that is required under
this paragraph and the frequency and manner with which it shall
be supplied.
7. The Investment Counsel shall not be liable for any error of
judgment or mistake of law or for any loss suffered by Manager of
the Fund in connection with any matters to which this Agreement
relates except that nothing herein contained shall be construed
to protect the Investment Counsel against any liability by reason
of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reckless disregard of its
obligations or duties under this Agreement.
8. In compliance with the provisions of the Management
Agreement between Shadow Stock Fund, Inc. and Jones & Babson,
Inc., Investment Counsel agrees with Manager that subject to the
terms and conditions of this paragraph 8, the Fund may use the
name "Shadow Stock " as part of its name, so long as Jones &
Babson, Inc., or any successor in interest, continues as its
Manager and Analytic Systems, Inc., or any successor in interest,
continues as an Investment Counsel to the Manager. Should the
Fund terminate either Jones & Babson, Inc. or its successor as
Manager for the Fund, or Analytic Systems, Inc., or its
successor, as an Investment Counsel, either Jones & Babson, Inc.
or Analytic Systems, Inc., or their respective successors in
interest, may elect to notify the Fund in writing that permission
to use the name "Shadow Stock" has been withdrawn. It is
understood that the Fund has, in its Management Agreement with
Jones & Babson, Inc., expressly agreed that it, its officers,
directors and shareholders, will take all necessary corporate
action and proceed expeditiously to change the name of the Fund
and not use any other name or take any other action which would
indicate the Fund's continued association with Analytic Systems,
Inc., Jones & Babson, Inc., or David L. Babson & Co. Inc. If the
use of the name "Shadow Stock" is so withdrawn as aforesaid, the
Fund, its officers, directors and shareholders, understand and
agree that there shall be no limitation with respect to the
future use of the name "Shadow Stock" by Analytic Systems, Inc.,
or its successor in interest, or with the permission of Analytic
Systems, Inc., by Jones & Babson, Inc. or David L. Babson & Co.
Inc. or their respective successors.
9. Although it is not anticipated, there may occur some
unforeseen reason which would prohibit Analytic Systems, Inc., as
a matter of reasonable business necessity, continuing as an
Investment Counsel to Jones & Babson, Inc. Should such
circumstances occur, Analytic Systems, Inc., or its successor may
elect to terminate its services, even though the Fund would want
to continue the use the name "Shadow Stock" and continue Jones &
Babson, Inc., or its successor, as Manager. Upon receipt of such
a written notice, the Fund, its officers, directors and
shareholders, have agreed in the Management Agreement between the
Fund and Jones & Babson, Inc., to take all necessary corporate
action and proceed expeditiously to change the name of the Fund
(but, if necessary, to take up to one year from the effective
date of the termination of this Investment Counsel Agreement) and
not use any other name or take any other act ion which would
indicate the Fund's continued association with Analytic Systems,
Inc. In consideration for this right, Analytic Systems, Inc.
agrees that should the name "Shadow Stock" be withdrawn, it will
not permit another investment company, whether or not registered
under the Investment Company Act of 1940, as amended, to use the
name "Shadow Stock" as part of its name for a period of five
years subsequent to the effective date of the written withdrawal
request, unless this prohibition is waived or modified by a
majority vote of the Fund's shareholders entitled to vote at the
next annual meeting of the Fund's shareholders following receipt
of the request, and if any such action is also approved by the
majority of shares entitled to vote at a duly constituted meeting
of the shareholders of Jones & Babson, Inc. For this right to
withdraw the name "Shadow Stock" from the use of the Fund,
Analytic Systems, Inc. agrees with Jones & Babson, Inc. that it
will not compete with Jones & Babson, Inc. for the management of
the Fund during said five-year period, unless this no-compete
provision is waived by a majority of the shares entitled to vote
at a duly constituted meeting of the shareholders of Jones &
Babson, Inc.
Each party hereby executes this Agreement as of the _____ day of
_________, 1995, pursuant to the authority granted by its Board
of Directors.
ANALYTIC SYSTEMS, INC.
By_________________________________
ATTEST:
______________________________
JONES & BABSON, INC.
By_________________________________
ATTEST:
______________________________
