<PAGE> 1
As filed with the Securities and Exchange Commission on February 24, 1997
Registration Nos. 33-59044
811-7552
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. ________ / /
Post-Effective Amendment No. 5 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 7 /X/
The Walnut Street Funds, Inc.
670 Mason Ridge Center Drive
Suite 300
St. Louis, Missouri 63141
(Exact Name of Registrant as Specified in Charter)
(314) 878-1010
(Registrant's Telephone Number, including Area Code)
Matthew P. McCauley, Esq.
700 Market Street
St. Louis, Missouri 63101
(Name and Address of Agent for Service of Process)
Copies to:
James V. Stepleton, Esq.
Husch & Eppenberger
100 N. Broadway, Suite 1300
St. Louis, Missouri 63102
Approximate date of proposed public offering: continuous
The Registrant has previously registered and hereby continues to register an
indefinite number of its shares of common stock (par value $.001) pursuant to
Rule 24f-2 under the Investment Company Act of 1940.
It is proposed that this filing will become effective (check appropriate
box):
______ immediately upon filing pursuant to paragraph (b) of Rule
485
______ on (date), pursuant to paragraph (b) of Rule 485
______ 60 days after filing pursuant to paragraph (a) of Rule 485
x on April 25, 1997 pursuant to paragraph (a) of Rule 485
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<PAGE> 2
<TABLE>
THE WALNUT STREET FUNDS, INC.
CROSS REFERENCE SHEET
(as required by Rule 495(a))
<CAPTION>
N-1A Item No.
------------
Part A Location in Prospectus
- ------ ----------------------
<S> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Not Applicable<F*>
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of Registrant Cover Page; Investment Objectives, Policies, and
Restrictions; Risk Factors; General Information; Glossary
Item 5. Management of the Fund Management of the Fund; Portfolio Transactions
Item 6. Capital Stock and Other Securities Dividends, Distributions, and Taxes; General Information;
Management of the Fund
Item 7. Purchase of Securities Being Offered Purchase of Shares; Net Asset Value; Management of the Fund
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicable
<CAPTION>
Part B Location in Statement of Additional Information
- ------ -----------------------------------------------
<S> <C>
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Not Applicable
- 2 -
<PAGE> 3
Item 13. Investment Objectives and Policies Investment Objectives, Policies, and Restrictions; Portfolio
Transactions
Item 14. Management of the Fund Directors and Officers; Management Contracts; Distribution
and Service Plan
Item 15. Control Persons and Principal
Holders of Securities Directors and Officers; Description of the Fund and
its Capital Stock
Item 16. Investment Advisory and Other Services Management Contracts
Item 17. Brokerage Allocation and Other Practices Portfolio Transactions
Item 18. Capital Stock and Other Securities Description of the Fund and its Capital Stock
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Additional Purchase and Redemption
Information; Distribution and Service Plan
Item 20. Tax Status Dividends, Distributions, and Taxes
Item 21. Underwriters Distribution and Service Plan
Item 22. Calculations of Performance Data Performance
Item 23. Financial Statements Statement of Assets and Liabilities
</TABLE>
Part C
- ------
Information required to be included is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
- 3 -
<PAGE> 4
THE WALNUT STREET FUNDS, INC.
THE WALNUT STREET PRIME RESERVE FUND
670 MASON RIDGE CENTER DRIVE
SUITE 300
ST. LOUIS, MISSOURI 63141
---------------------------
PROSPECTUS
April 25, 1997
The Walnut Street Prime Reserve Fund (the "Fund") is the first series
of The Walnut Street Funds, Inc., a Maryland corporation (the
"Company"), formed in January 1993. The Fund is an open-end,
diversified, management investment company, whose investment objective
is high current income consistent with the preservation of principal
and liquidity. The Fund seeks to achieve its investment objective by
investing primarily in money market obligations that have remaining
maturities of 397 days or less and repurchase agreements collateralized
by money market obligations. THE FUND SEEKS TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE, BUT THERE ARE NO ASSURANCES THAT IT
WILL BE ABLE TO DO SO. INVESTMENTS IN THE FUND ARE NOT INSURED OR
GUARANTEED BY THE UNITED STATES GOVERNMENT.
The minimum initial investment in the Fund is $1,000. See "Purchase
of Shares."
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Fund. The Fund has filed a
Statement of Additional Information dated April 26, 1997, containing
additional information about the Fund with the Securities and Exchange
Commission (the "Commission") that is incorporated by reference into
this Prospectus. For a free copy of the Statement of Additional
Information, call or write the Fund at the telephone number or address
set forth above.
---------------------------
This Prospectus should be retained
for future reference.
- ------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------
<PAGE> 5
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
SUMMARY OF FEES AND EXPENSES OF THE FUND 1
FINANCIAL HIGHLIGHTS 3
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS 4
PORTFOLIO TRANSACTIONS 6
RISK FACTORS 7
MANAGEMENT OF THE FUND 7
CALCULATION OF INVESTMENT PERFORMANCE 11
NET ASSET VALUE 11
DIVIDENDS, DISTRIBUTIONS, AND TAXES 11
PURCHASE OF SHARES 13
REDEMPTION OF SHARES 16
GENERAL INFORMATION 19
GLOSSARY 22
</TABLE>
- ------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MAY NOT BE RELIED UPON AS BEING AUTHORIZED BY THE FUND,
THE ADVISER, THE ADMINISTRATOR, THE DISTRIBUTOR OR ANY AFFILIATE
THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY IN ANY STATE TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
- ------------------------------------------------------------------------
<PAGE> 6
SUMMARY OF FEES AND EXPENSES OF THE FUND
The purpose of the table below is to assist investors in
understanding the various costs and expenses that an investor in the
Fund would bear directly or indirectly. Each investor should consider
this expense information along with other important information in the
Prospectus such as the Fund's investment objectives, restrictions, and
policies. There are no transaction expenses associated with purchases
or redemptions of the Fund's shares.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees <F1><F4><F5> .25%
12b-1 Fees (including Asset Based Sales Charges)<F2><F4> .35%
Other Expenses <F3><F4> .25%
Total Fund Operating Expenses <F4><F5> .85%
EXAMPLE:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
a) You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) full redemption at the
end of each time period...................................... $9.00 $27.00 $47.00 $105.00
</TABLE>
- ---------------------------
The amounts listed in the example should not be considered a
representation of future expenses. Actual expenses may be greater or
less than those indicated.
- ---------------------------
The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses that an investor in the
Fund would bear directly and indirectly. The amounts set forth in the
example are based on amounts incurred between January 1, 1996, and
December 31, 1996.
[FN]
<F1> Management fees are paid by the Fund to Conning Asset Management
Company (formerly named General American Investment Management
Company), the Fund's investment adviser (the "Adviser"), for
managing its investments and business affairs. See "Management of
the Fund-The Adviser."
<F2> The Fund has adopted a Distribution and Service Plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"). Under this Plan, the Fund will pay 12b-1 fees to
Walnut Street Securities, Inc. (the "Distributor"), an affiliate of
the Adviser, at an annual rate of .35% of the Fund's average net
assets for services and expenses in connection with the
distribution of the Fund's
1
<PAGE> 7
shares. The Distributor expects to pay approximately 65% of this
fee annually to its registered representatives as an asset based
sales charge. See "Management of the Fund-The Distributor." Long-
term shareholders may, over time, pay more in 12b-1 fees than the
economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers.
<F3> The Fund incurs Other Expenses payable to unaffiliated third
parties for administrative, custodial, stock transfer, and other
services. See "Management of the Fund-The Administrator,"
"Management of the Fund-Custodian," and "Management of the Fund-
Transfer and Dividend Disbursing Agent."
<F4> Management fees, 12b-1 fees, and Other Expenses are reflected in
the Fund's share price or dividends and are not charged directly to
individual shareholder accounts.
<F5> The Adviser will waive its Management Fee and, if necessary,
reimburse the Fund's expenses to the extent that the Fund's Total
Operating Expenses exceed .85% of the Fund's average net assets.
The Adviser may modify this policy by giving the Fund's
shareholders at least 90 days' prior written notice. Total expenses
incurred by the Fund (net the Adviser's fee waiver of $114,441) in
the year ended December 31, 1996, were $1,378,727. Without the fee
waiver total expenses would have been $1,493,168, or approximately
.92% of average net assets. See "Management of the Fund-The
Adviser."
2
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following table includes selected data (i) for a share
outstanding on January 1, 1996, through the end of the Fund's fiscal
year on December 31, 1996, (ii) for a share outstanding on January 1,
1995, through the end of the Fund's fiscal year on December 31, 1995,
(iii) for a share outstanding on January 1, 1994, through the end of
the Fund's fiscal year on December 31, 1994, and (iv) presented on an
annualized basis, for a share outstanding from July 21, 1993, the date
the Fund commenced investment operations, through December 31, 1993,
the end of the Fund's initial fiscal year, in each case together with
other information derived from the Fund's audited financial statements.
More detailed information about the Fund's performance, a complete
portfolio listing, and audited financial statements are available in
the Fund's Statement of Additional Information dated April 26, 1997,
and the Fund's Annual Report dated December 31, 1996, copies of which
may be obtained without charge by calling the Fund at 1-800-992-0444.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FOR THE YEAR JULY 21, 1993<F*>
ENDED ENDED ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value at beginning of
period........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ------- -------
Income from investment
operations
Net investment income.......... 0.048 0.053 0.036 0.011
-------- -------- ------- -------
Dividends to shareholders
Dividends from net investment
income........................ (0.048) (0.053) (0.036) (0.011)
-------- --------- -------- --------
Net asset value at end of
period........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======= =======
TOTAL RETURN................... 4.88% 5.40% 3.62% 2.46%<F**>
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(000's omitted)............... $170,055 $156,916 $89,533 $54,585
Ratio to average net assets of:
Expenses, net of waiver from
Conning Asset Management
Company<F***>................ 0.85% 0.85% 0.85% 0.85%<F**>
Expenses, prior to waiver from
Conning Asset Management
Company<F***>................ 0.92% 0.93% 1.05% 1.07%<F**>
Net investment income, net of
waiver from Conning Asset
Management Company<F***>..... 4.78% 5.25% 3.64% 2.46%<F**>
<FN>
- -----
<F*> Commencement of investment operations.
<F**> Annualized.
<F***> Formerly named General American Investment Management Company.
</TABLE>
3
<PAGE> 9
INVESTMENT OBJECTIVE, POLICIES, AND RESTRICTIONS
The investment objective of the Fund, and certain investment
restrictions that are discussed below or in the Statement of Additional
Information, may be changed only with the approval of the holders of a
majority of the shares of the Fund. The investment policies of the Fund
used to achieve the Fund's objectives may be changed by the Company's
Directors without a vote of shareholders.
For definitions of certain terms used in this section and elsewhere
in this Prospectus, see the Glossary at the end of this Prospectus.
INVESTMENT OBJECTIVE
The investment objective of the Fund is the realization of high
current income consistent with preservation of principal and liquidity.
The Fund attempts to achieve this objective by investing in high
quality money market obligations (whose issuers are rated in one of the
two highest rating categories for short term debt securities of
nationally recognized securities ratings organizations such as Standard
and Poor's or Moody's), maintaining a dollar-weighted average portfolio
of no more than 90 days, and investing in dollar denominated securities
described in this Prospectus and the Statement of Additional
Information that meet certain rating criteria, present minimum credit
risks, and have remaining maturities of 397 days or less. No more than
5% of the Fund's total assets may be invested in securities of issuers
receiving the second highest rating for short term debt securities from
such nationally recognized securities rating organizations. The
securities in which the Fund may invest may not earn the higher levels
of current income that may be realized by long term or lower quality
securities generally having less liquidity, greater market risk, and
larger fluctuations in value.
Because investment in the Fund involves both opportunities for gain
and risk of loss, no assurance can be given that the Fund will achieve
its objectives. Prospective purchasers of the Fund's shares should
carefully review the investment objectives, restrictions, and policies
of the Fund and consider their ability to assume the risks involved
before investing. An investor should invest in the Fund only as a part
of an overall investment program rather than as such investor's sole
program.
INVESTMENT POLICIES
The Fund may invest only in: (1) obligations of the U.S. Government;
(2) obligations issued by agencies or instrumentalities of the United
States Government; (3) instruments that are secured or collateralized
by obligations of the United States Government, its agencies, or its
instrumentalities; (4) short-term obligations of United States banks
and savings and loan associations and companies having assets of more
than $1,000,000,000; (5) instruments fully secured or collateralized by
such bank and savings and loan obligations; (6) dollar denominated
short-term obligations of foreign banks, foreign branches
4
<PAGE> 10
of foreign or U.S. banks (referred to as "Eurodollars"), and short-term
obligations of U.S. branches and agencies of foreign banks (referred to
as "Yankee dollars"); (7) commercial paper and short-term corporate
debt securities rated in one of the two highest categories for short
term debt securities by at least two nationally recognized securities
rating services or one such service if only one has rated the security
(see the Statement of Additional Information for a description of
commercial paper ratings); (8) corporate or other notes guaranteed by
letters of credit from banks in the United States (satisfying the
criteria described in (4), above) or collateralized by United States
Government obligations; and (9) obligations of (i) consumer and
commercial finance companies, (ii) securities brokerage companies,
(iii) leasing companies, and (iv) insurance companies. Certain of these
obligations may be variable or floating rate instruments.
The Fund will enter into repurchase agreements under which it
purchases securities, subject to agreement by the seller to repurchase
the securities at a higher price on a specified date, with the gain
establishing the yield during the Fund's holding period. The Adviser,
under general policies established by the Company's Directors, reviews
the creditworthiness of the other party to any repurchase agreement,
and will only enter into repurchase agreements with parties whose
credit is deemed satisfactory. If the seller becomes bankrupt, the Fund
may experience delays in recovering its money, fail to recover part or
all of its investment, and incur costs in disposing of the securities
used as collateral for the seller's repurchase obligation.
The Fund may also enter into reverse repurchase agreements when the
Adviser considers them to be advantageous to the Fund and only for
temporary liquidity purposes not to exceed 60 days, without renewal or
extension. Reverse repurchase agreements permit the Fund to leverage
its investment portfolio by selling securities while agreeing to
repurchase them at an agreed time and price. The bankruptcy of the
other party to a reverse repurchase agreement could cause the Fund to
experience delays in recovering its securities. If, in the meantime,
the value of the securities fluctuated, the Fund could experience a
loss.
The Fund will not invest in "firm commitments" or "when issued"
securities.
See "Investment Policies" in the Statement of Additional Information
for information about the quality of the securities in which the Fund
may invest and more complete descriptions of repurchase agreements and
other obligations that the Fund may hold.
INVESTMENT RESTRICTIONS
The Fund is subject to certain restrictions on the investments that
it may make. These restrictions, which were adopted by the Company can
be changed with respect to the Fund only by the vote of the holders of
a majority of the Fund's shares. (See "General Information-Shareholder
Approval" for the definition of a "majority of the Fund's shares.")
Under some of these restrictions the Fund will not:
5
<PAGE> 11
1. Invest more than 10% of the value of the total assets of the Fund
in securities that are not readily marketable, such as repurchase
agreements having a maturity of more than seven days, time deposits,
and securities that are secured by interests in real estate.
2. Make loans, other than by purchasing debt obligations customarily
distributed privately to institutional investors and lending through
repurchase agreements.
3. Invest more than 5% of the value of its assets in securities of
any one issuer, except that this restriction shall not apply to
securities issued or guaranteed by the United States Government, its
agencies, or instrumentalities.
4. Borrow money, except that (i) the Fund may enter into reverse
repurchase agreements for liquidity purposes, and (ii) as a temporary
measure for extraordinary or emergency purposes (such as to permit the
Fund to honor redemption requests without being required to dispose of
investments in an inopportune or untimely manner) and not for
investment purposes, the Fund may borrow from banks, provided that the
total of reverse repurchase agreements and bank borrowings may not
exceed 5% of the Fund's assets taken at cost.
5. Purchase the securities or other obligations of issuers in the
same industry if, immediately after such purchase, the value of its
investment in such industry would exceed 25% of the value of the Fund's
total assets, except that the Fund may invest more than 25% of its
assets in securities and other obligations of companies in the
financial services industry. (See "Financial Services Industry" in the
Glossary.) This restriction does not apply to securities issued or
guaranteed by the United States Government or its agencies or
instrumentalities.
6. Own more than 10% of the voting securities of any one issuer.
The Fund is subject to additional investment restrictions that are
included in the complete list of investment restrictions in the
Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Money market obligations generally are traded in the over-the-counter
market through broker-dealers. A broker-dealer is a securities firm or
bank that makes a market for securities by offering to buy at one price
and to sell at a slightly higher price. The difference between the
prices is known as the spread or markup. Since the Adviser trades a
large amount of securities, broker-dealers are willing to work with the
Fund for a more favorable spread than most individual investors could
obtain. Since the Fund's portfolio securities have short terms to
maturity, the Fund's turnover of such securities will be substantial.
The Fund has authorized the Adviser to allocate transactions in
portfolio securities among independent dealers and on an agency basis
to an affiliate, Walnut Street Securi-
6
<PAGE> 12
ties, Inc., which also acts as the Fund's Distributor. See "Management
of the Fund-The Distributor." The Adviser may allocate such
transactions to Walnut Street Securities if its spread or markups are
comparable to those charged by non-affiliated qualified broker-dealers
for similar services. Since its inception the Fund has not used Walnut
Street Securities to effect transactions, and the Fund expects that
substantially all of its securities transactions will be placed with
non-affiliated broker-dealers. Higher markups may be paid to firms that
provide research services, to the extent permitted by law. See
"Portfolio Transactions" in the Statement of Additional Information.
RISK FACTORS
The Fund is subject to certain kinds of risk, including varying
degrees of market risk, financial risk, and current income volatility.
Market risk refers to the possibility the price of a security will
decline in response to changes in conditions in the securities markets
in general and, in the case of debt securities, changes in the overall
level of interest rates and the rates for the kinds of obligations in
which the Fund invests. Financial risk refers to the ability of an
issuer of a debt security to pay principal and interest when due and to
the earnings stability and overall financial soundness of an issuer of
an equity security. Current income volatility refers to the degree and
rapidity with which changes in dividend payments and the overall level
of interest rates are reflected in the level of current income of the
Fund.
Because the Fund may concentrate more than 25% of its total assets in
the financial services industry, its performance may be affected by
conditions affecting banks and other financial services companies. See
the Glossary to this Prospectus for additional information.
Eurodollar and Yankee dollar investments involve risks that are
different from investments in securities of U.S. domestic banks. These
risks may include future unfavorable political and economic
developments and possible withholding taxes, seizure of foreign
deposits, currency controls, interest limitations or other governmental
restrictions that might affect the payment of principal and interest on
securities owned by the Fund. There may also be less public information
available about foreign banks and their branches and agencies. Although
the Adviser will carefully consider these factors when making
investments, the Fund's investment policies and restrictions do not
limit the amount of the Fund's assets that can be invested in any
single kind of Eurodollar or Yankee dollar investment or in any foreign
country.
MANAGEMENT OF THE FUND
The Directors of the Company (who, with its officers, are discussed
in the Statement of Additional Information) have overall responsibility
for the management of the Company and the Fund. The Directors decide
matters of general policy and review the actions of the Adviser,
Administrator, Custodian, Transfer and Dividend Disbursing Agent, and
Distributor.
7
<PAGE> 13
THE ADVISER
Subject to the Directors' oversight, the Adviser, Conning Asset
Management Company (formerly named General American Investment
Management Company), pursuant to an investment management agreement
with the Company (the "Management Agreement"), conducts and supervises
the daily operations of the Company and Fund, manages the investment
operations of the Fund, and administers the Company's business affairs.
The Adviser is located at 700 Market Street, St. Louis, Missouri 63101.
The Adviser's telephone number is 314-444-0754.
As compensation for its services and the related expenses borne by
the Adviser, the Company pays the Adviser a Management Fee, computed
daily and payable monthly, that is equal, on an annual basis, to .25%
of the Fund's average daily net assets on the first $250,000,000 of the
Fund's net assets, .24% of the Fund's average daily net assets in
excess of $250,000,000 up to $500,000,000, .23% of the Fund's average
daily net assets in excess of $500,000,000 up to $750,000,000, .22% of
the Fund's average daily net assets in excess of $750,000,000 up to
$1,000,000,000, and .21% of the Fund's average daily net assets in
excess of $1,000,000,000. During the year ended December 31, 1996, the
Fund's average daily net assets were less than $250,000,000.
The Adviser has agreed to waive all or a portion of its Management
Fee and to reimburse certain expenses of the Fund to the extent
necessary to maintain the total expense ratio of the Fund at not more
than .85% of average daily net assets (excluding interest, taxes,
brokerage and other portfolio transaction fees, and extraordinary
expenses). This arrangement has the effect of lowering the overall
expense ratio of the Fund and of increasing yield to investors in the
Fund. The Adviser may terminate its fee waiver and reimbursement
obligation on ninety (90) days' prior notice to the Fund's
shareholders.
The Adviser is a registered investment adviser under the 1940 Act.
The Adviser was formed in 1982 and acts as investment adviser to
General American Capital Company ("GACC"), a registered open end
diversified management investment company that is comprised of seven
investment funds that at December 31, 1996, held net assets in excess
of $625,555,000. GACC's shares are offered to separate accounts
established by General American Life Insurance Company ("General
American") of St. Louis, Missouri, which owns all of the Adviser's
capital stock. General American may thus be deemed a controlling person
of the Adviser. (General American is also the sole owner and
controlling person of the Distributor.) The Adviser also manages
General American's separate accounts. General American will not assume
or bear any responsibility or liability of the Fund, Company, or
Adviser, and the resources of General American will not be available to
support the Adviser, the Company, or the Fund and its shareholders.
During 1996, the Adviser also provided investment advice to clients
that were not affiliated with General American, GACC, or the separate
accounts of General American.
8
<PAGE> 14
THE ADMINISTRATOR
The Company has entered into an Administration Agreement with The
Bank of New York (the "Administrator"), pursuant to which the
Administrator provides certain administrative services (which do not
include the investment advisory and portfolio management services
performed by the Adviser) necessary for the Fund's operations. The
Administrator has its principal offices at 90 Washington Street, New
York, New York 10286.
Under the Administration Agreement, the Administrator maintains the
Company's corporate records; monitors the Fund's compliance with its
investment policies and restrictions; coordinates the printing, filing,
and distribution of the Company's registration statement and amendments
thereto and other filings with the Commission; prepares tax returns;
prepares statistical and other reports for the Company's Directors; and
provides certain other routine administrative services. Under a Cash
Management and Related Services Agreement, the Administrator also
receives and disburses funds in connection with purchases and
redemptions of the Fund's shares. The Administrator also serves as the
fund accounting agent for the Fund with responsibility for calculating
the net asset value of the Fund and maintaining the Fund's accounting
books and records. For its administrative services, the Administrator
receives a fee of .10% of the Funds average net assets up to
$100,000,000, .07% of the next $400,000,000 of average net assets, and
.03% of average net assets over $500,000,000.
THE DISTRIBUTOR
The exclusive distributor of the Fund's shares is Walnut Street
Securities, Inc. (the "Distributor"), a registered broker dealer that
is a wholly-owned subsidiary of General American. The Distributor's
address is 670 Mason Ridge Center Drive, Suite 300, St. Louis, Missouri
63141. The Distributor may also provide broker-dealer services in
connection with the Fund's portfolio transactions. See "Portfolio
Transactions."
The Distributor conducts a continuous offering of the Fund's shares.
The Directors have adopted a Distribution and Service Plan (the Plan)
on behalf of the Fund pursuant to Rule 12b-1 under of the 1940 Act
("12b-1"). To implement the Plan, the Company has entered into a
General Distribution Agreement with the Distributor (the "Distribution
Agreement"). 12b-1 provides in substance that an investment company may
not engage directly or indirectly in financing any activity that is
intended primarily to result in the sale of shares of the Fund except
pursuant to a plan adopted by the Fund in compliance with rules
contained in 12b-1. The Directors adopted the Plan to allow the Fund
and the Adviser to incur certain expenses that might otherwise be
considered to constitute direct or indirect payment by the Fund of
distribution expenses.
Under the Plan, the Company is authorized to pay the Distributor, an
affiliate of the Adviser, a monthly distribution fee as compensation
for its services and expenses in
9
<PAGE> 15
connection with the distribution of the Fund's shares. The distribution
fee is set at an annual rate of .35% of the Fund's average net assets.
The distribution fee is an expense of the Fund in addition to the
Management Fee and the other expenses borne by the Fund. The
distribution fee and other fees and expenses paid by the Fund reduce
the Fund's net investment income and total return.
Under the Plan and Distribution Agreement, the Distributor may
formulate and implement marketing and promotional activities for the
sale of shares, prepare and distribute sales literature and
prospectuses to persons other than existing shareholders, and provide
support, training, and compensation to its registered representatives
involved in the distribution of the Fund's shares. Such compensation,
which is an annual asset based sales charge, is expected to be
approximately 65% of the fees paid under the Plan and Distribution
Agreement each year. The Distributor also pays approximately 25% of the
12b-1 fees to National Financial Services Company, which conducts the
daily sweep of the brokerage accounts of the Distributor's customers
who wish to invest their cash balances in shares of the Fund. The Plan
and Distribution Agreement have a one year term, but it may be
continued annually by the vote of a majority of the Company's Directors
including a majority of the Directors who have no interest in the Plan,
Distribution Agreement, the Adviser, or the Distributor. Any increase
in the fees payable to the Distributor under the Plan and Distribution
Agreement must be approved by the vote of a majority of the Fund's
outstanding voting securities. Any other material amendment to the Plan
and Distribution Agreement requires the approval of a majority of the
Company's Directors including a majority of the Directors who have no
interest in the Plan, Distribution Agreement, Adviser, or
Distributor. See "Distribution and Service Plan" in the Statement of
Additional Information.
CUSTODIAN
Pursuant to a Custody Agreement, The Bank of New York, 90 Washington
Street, New York, New York 10286, serves as the Fund's custodian (the
"Custodian") and holds the Fund's portfolio securities.
TRANSFER AND DIVIDEND DISBURSING AGENT
BISYS Fund Services, Inc. ("BISYS"), 3435 Stelzer Road, Columbus,
Ohio 43219, is the Fund's transfer agent and dividend disbursing agent.
As such, BISYS maintains the records of each shareholder's account,
answers shareholder inquiries about accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent, and performs other shareholder services.
EXPENSES
Subject to the Adviser's agreement to waive its fee and reimburse
expenses of the Fund described earlier in this Prospectus, the Company
pays the expenses incurred in the operation of the Company and the
Fund, which include, among other things, the Adviser's fee, the 12b-1
fee, charges of the Custodian, Administrator, and Transfer and Divi-
10
<PAGE> 16
dend Disbursing Agent, expenses for the services of legal counsel and
independent auditors, costs of printing proxies, stock certificates (if
any), and shareholder reports, Commission fees, fees and expenses of
unaffiliated Directors, the Company's membership fees in trade
organizations, fidelity bond coverage for the Company's and Fund's
officers and employees, interest, brokerage costs, taxes, expenses of
qualifying Fund shares for sale in various states, litigation, and
other extraordinary or non-recurring expenses and other expenses
properly payable by the Company.
CALCULATION OF INVESTMENT PERFORMANCE
The Fund may advertise or quote its yield and effective yield in
advertisements or in reports or other communications with the Fund's
shareholders. The Fund's yield refers to the income generated by an
investment in the Fund's portfolio over a seven-day period expressed as
an annual percentage rate. The effective yield is calculated similarly,
but assumes that the income earned from the investment is reinvested.
The effective yield will be slightly higher than the yield because of
the compounding effect of this assumed reinvestment. The Fund may quote
yields in advertising that are based on historical seven-day periods.
NET ASSET VALUE
The net asset value of the shares of the Fund is determined at 2:00
p.m. and 4:00 p.m. (New York City time) on each day during which both
the New York Stock Exchange and the Federal Reserve Bank of New York
are open for business. The net asset value per share of the Fund is
computed by dividing the sum of the value of the securities held by the
Fund, plus any cash or other assets and minus all liabilities,
including expenses, by the total number of outstanding shares of the
Fund at such time. Any expenses borne by the Fund are accrued daily,
except for extraordinary or non-recurring expenses. The Fund will value
portfolio securities by the amortized cost method. This method attempts
to maintain a constant net asset value of $1.00 per share. No assurances
can be given that this goal can be attained. See "Valuation of
Portfolio Securities" in the Statement of Additional Information for
further information about the computation of the Fund's net asset
value.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
DIVIDENDS
The Fund ordinarily declares dividends from net investment income
daily and pays such dividends monthly on the last day of the month. The
net income is declared payable pro rata to shareholders of record as of
2:00 p.m. (New York City time). Purchases of shares by Federal Funds
Wire that are effected before and at 2:00 p.m. are paid the full
dividend for the day of purchase, and such purchases by wire effected
after 2:00 p.m. up to and including 4:00 p.m. do not begin to receive
daily dividends until the next
11
<PAGE> 17
business day. Initial purchases of shares by check do not begin to
receive dividends until the Business Day after the Transfer Agent
receives the check, which normally will be the second Business Day
after the Fund receives the check. Additional shares purchased by check
begin to earn dividends on the first Business Day after the Fund
receives the check. Redemption requests effected at 2:00 p.m. (New York
City time) of any Business Day do not earn that day's dividend but the
redemption proceeds are available that day. Redemption requests
effected at 4:00 p.m. (New York City time) earn that day's dividend but
the redemption proceeds are not available until the next Business Day.
The Fund intends to distribute substantially all of its net investment
income and capital gains (if any) to shareholders within each calendar
year as well as on a fiscal year basis.
Dividends paid by the Fund will be taxable as ordinary income whether
paid in cash or reinvested in additional Fund shares. In addition to
federal taxes, shareholders also may be subject to state and local
taxes, depending on the laws of the respective shareholder's home state
and locality.
Fund dividends will not normally qualify for the dividends-received
deduction available to corporations, since the Fund's income is
primarily derived from interest income and short-term capital gains.
The Fund's interest income derived from U.S. Government securities may
be exempt from state and local taxation. The Administrator will provide
the Fund's transfer agent with such information as may be necessary to
permit the transfer agent to provide shareholders with information on
the portion of the Fund's dividends, if any, that qualify for
these exemptions.
CAPITAL GAIN DISTRIBUTIONS
The Fund may distribute short-term capital gains, if any, once a year
or more often as necessary to maintain its net asset value at $1.00 per
share or to comply with distribution requirements under federal tax
law. The Fund does not anticipate earning long term capital gains on
securities it holds.
FEDERAL TAXES
If the Fund earns taxable income or capital gains from its
investments, these amounts will be designated as taxable distributions.
Dividends derived from taxable investment income and short-term capital
gains are taxable as ordinary income. Distributions are taxable when
paid, except that distributions declared in December and paid in
January are taxable as if paid on December 31st, whether the
shareholder receives distributions in cash or reinvests them in
additional shares. The Administrator will provide the Fund's transfer
agent with such information as may be required to permit the transfer
agent to send investors a tax statement showing the amount of taxable
or tax-exempt distributions and tax preference items includable in
alternate minimum taxable income, if any, for the past calendar year,
and to send an IRS Form 1099-DIV by January 31st if the Fund makes any
taxable distributions.
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<PAGE> 18
TAX STATUS OF THE FUND
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"), so that the
Fund will not be liable for federal income or excise taxes on net
investment income or capital gains to the extent that these are
distributed to shareholders in accordance with applicable provisions of
the Code. The Administrator will monitor the Fund's compliance with the
applicable Code provisions.
OTHER TAX INFORMATION
The information above is only a summary of some of the federal tax
consequences generally affecting the Fund and its shareholders, and no
attempt has been made to discuss individual tax consequences, including
state and local tax consequences. Investors should consult their tax
advisers to determine whether the Fund is suitable to their particular
tax situation.
When an investor signs a new account application, the investor will
be asked to certify that his or her social security or taxpayer
identification number is correct and that the investor is not subject
to backup withholding for failing to report income to the IRS. If an
investor does not comply with IRS regulations, the IRS can require the
Fund to withhold 31% of distributions from the investor's account. See
"Dividends, Distributions, and Taxes" in the Statement of Additional
Information.
PURCHASE OF SHARES
Shares of the Fund are offered continuously and may be purchased at
the net asset value per share next determined after an order is
received and accepted. The Fund may discontinue offering its shares
generally or in any particular state or states without notice to
shareholders.
INITIAL INVESTMENT AMOUNT AND MINIMUM ACCOUNT BALANCE
The minimum initial investment to establish a new account in the Fund
is $1,000. Subsequent investments must be at least $250. (The minimum
initial investment for employees of General American and its affiliated
companies is $500, and the minimum subsequent investment for such
employees is $25.) If an account balance falls below $250 due to
redemption, the Fund may close the account and mail the investor the
proceeds at the investor's address shown on the Fund's records. The
Fund will give an investor 45 days' notice that his or her account will
be closed unless the investor makes an additional investment to
increase the account balance to the $250 minimum.
Shares purchased with federal funds received by 2:00 p.m. (New York
City time) will begin to earn income on that day. Shares purchased with
federal funds received after 2:00 p.m. until and including 4:00 p.m.
(New York City time) will begin to earn income on the following
Business Day. (For the purposes of this Prospectus, "Business
13
<PAGE> 19
Day" means any day that both the New York Stock Exchange and the
Federal Reserve Bank of New York are open for business.)
INITIAL INVESTMENTS
Prospective investors may purchase Fund shares by check or wire or
through an automatic sweep of their brokerage accounts with Walnut
Street Securities.
1. By Check
An investor can open an account by completing and signing a New
Account Application and mailing it, together with a check payable to
Walnut Street Prime Reserve Fund, to The Walnut Street Funds, Inc.,
Mutual Funds Processing Center, 670 Mason Ridge Center Drive, Suite
300, St. Louis, Missouri 63141. "Walnut Street Prime Reserve Fund"
should be designated on the New Account Application. Purchases made by
check are not permitted to be redeemed until the check has cleared,
which may take up to 15 Business Days after purchase. The Fund will not
accept third-party checks. Purchases by check must be payable in United
States dollars and drawn on United States banks.
2. By Federal Funds Wire
Purchases may be made by having your bank wire federal funds to the
Fund's bank account. Your bank may charge a fee for a wire transfer.
Federal funds purchase orders will only be accepted on Business Days as
defined herein. To ensure prompt receipt by the Fund of a federal funds
wire, an investor should take the following steps:
A. Instruct your bank to wire the specified amount to the Fund's
account as follows (be sure to have your bank include the name
of the Walnut Street Prime Reserve Fund):
The Bank of New York
New York, NY 10286
ABA #021000018
DDA #8900117532
Attn: Walnut Street Prime Reserve Fund
Ref: (Your account number (if issued), complete account name,
address, and social security or taxpayer identification
number)
B. Complete the New Account Application and mail it to The Walnut
Street Funds, P.O. Box 182711, Columbus, Ohio 43218-2711.
3. Automatic Sweep Investment
Investors who maintain brokerage accounts with Walnut Street
Securities, Inc., at National Financial Services Company may elect to
have any free credit balances in such accounts in excess of $1.00 au-
14
<PAGE> 20
tomatically applied to purchase shares of the Fund. Such credit
balances can arise from the settlement of securities transactions
through the account, receipt of payments of principal, interest, or
dividends on securities held in the account, or deposits by the account
holder. Walnut Street Securities will invest the free credit balances
of electing account holders in the Fund's shares on a daily basis by
noon (New York City time), the next Business Day after the balances are
deposited in the account, and the purchased shares will begin to earn
income on that day. Walnut Street Securities will provide additional
information about this automatic investment feature (including wire
transfer instructions for account holders who wish to deposit
additional amounts in their accounts for investment in the Fund), which
should be read in conjunction with this Prospectus. To use the
automatic investment option, investors must complete the appropriate
part of their new account applications.
EMPLOYEE INVESTMENTS
Employees of General American and its affiliated companies who have
made an initial investment in the Fund may elect to make additional
investments through automatic payroll deductions by completing a new
account application plus a payroll deduction election that General
American and its affiliated companies will provide to employees. The
minimum amount of any purchase per payroll period that such employees
can make is $25, and the amount of each purchase will be deducted from
an employee's paycheck after deduction of all federal, state, and local
income and payroll taxes. Employees can change or terminate the amount
of their deduction by completing a form of notice that General American
and its affiliated companies will make available to employees.
Employees who elect the automatic payroll deduction option may redeem
their shares in the ways set forth in this Prospectus.
ADDITIONAL INVESTMENTS
Investors may add to their accounts at any time by purchasing shares
at net asset value by mailing a check to the Fund (payable to Walnut
Street Prime Reserve Fund) at The Walnut Street Funds, P.O. Box 149,
Newark, New Jersey 07101-0149, or by wiring monies to the Fund's
account at The Bank of New York in the manner described above. It is
very important that the investor's account name and number be specified
in the letter or wire to assure proper crediting to the investor's
account. Mail orders should include, when possible, the tear-off
payment stub that accompanies any Fund confirmation statement.
OTHER PURCHASE INFORMATION
An order for the purchase of shares will become effective on the
Business Day that the order is received, and the purchase will be
effected at the net asset value next com puted after receipt. (See
"Dividends, Distributions, and Taxes--Dividends" for information about
when newly purchased shares begin earning dividend income.)
15
<PAGE> 21
In the interest of economy and convenience, the Fund will not issue
certificates representing ownership of the Fund's shares. All shares
purchased will be confirmed and credited to the investor's account on
the Fund's books maintained by the Adviser or its agents. Investors
will have the same rights and ownership with respect to such shares as
if certificates had been issued.
Federal regulations require that investors provide a social security
or taxpayer identification number upon opening or re-opening an
account. Investors should refer to the New Account Application for
further information about this requirement.
REDEMPTION OF SHARES
Shareholders of record may withdraw all or any portion of the shares
in their account at any time by redeeming such shares. The Fund will
redeem shares at the net asset value next calculated after the Fund
receives and accepts a redemption request. The Fund may hold a
redemption payment until it is reasonably satisfied that investments
made by check have been collected (which can take up to 15 Business
Days). Shares redeemed after 2:00 p.m. (New York City time) and up to
and including 4:00 p.m. (New York City time) receive the dividend
declared on the day of redemption. Shares redeemed at 2:00 p.m. (New
York City time) and earlier in the day do not receive the dividend
declared on the day of redemption.
Although the Fund will attempt to maintain a stable net asset value,
the value of shares redeemed may be more or less than their original
cost, depending on the Fund's then current net asset value. Shares may
be redeemed by check, mail, or telephone, and there is no charge by the
Fund for redemption.
1. By Mail
To redeem shares by mail, investors should send a letter of
instruction to The Walnut Street Funds, P.O. Box 182711, Columbus, Ohio
43218-2711. The letter of instructions should (i) contain the account
number and taxpayer identification number(s) of the shareholder(s),
(ii) specify the number of shares or dollar amount to be redeemed and
be signed by all registered owners of the shares in the exact names in
which they are registered (as discussed below); (iii) bear any required
signature guarantees, as provided below; and (iv) be accompanied by
supporting legal documents, if required and as provided below, in the
case of estates, trusts, guardianships, custodianships, corporations,
pension and profit sharing plans and other organizations. The Fund may
adopt certain procedures to verify information provided with a
redemption request. Shareholders who are uncertain of the requirements
for redemption should consult with a Fund representative by calling
1-800-992-0444.
16
<PAGE> 22
For shares registered in any of the categories shown below, the
letter of instruction should be accompanied by the following documents
and signed by the following persons:
<TABLE>
<CAPTION>
Type of Registration Requirements
<S> <C>
Individuals, Joint Tenants, Sole Proprietorship, Custodial The letter of instruction must be signed by all persons
(including Uniform Gifts to Minors Act), General Partners required to sign for the account exactly as it is
registered.
Corporations, Associations The letter of instruction must be signed by person(s)
authorized to sign for the account and must be accompanied
by a certified resolution of the corporation or association.
Trusts The letter of instruction must be signed by the Trustee(s).
(If the Trustee's name is not registered on the account, the
letter must be accompanied by a copy of the trust document,
certified within the last 60 days.)
</TABLE>
Executors, administrators, conservators, personal representatives, or
guardians should call the Fund at 1-800-992-0444 for further
instructions about the documentation that must accompany a letter of
instruction.
Signatures on the letter of instruction must be guaranteed. A
signature guarantee is a widely accepted way to protect the investor
and the Fund by verifying the signature on the investor's redemption
request. A notary public cannot guarantee signatures. The following
institutions should be able to provide signature guarantees: a national
or state chartered bank, a trust company, a federal savings and loan
association, or a member firm of the New York, American, Boston,
Midwest, or Pacific Stock Exchange.
2. By Telephone
The ability to initiate share redemptions by telephone is available
to all shareholders, who may do so by by calling the Fund at
1-800-992-0444 and requesting that the redemption proceeds be mailed to
the address listed in the Fund's account records. In times of volatile
market conditions, the telephone redemption option may be difficult to
implement. If you experience difficulty in making a telephone
redemption, you may make your request by regular mail or express mail
and it will be implemented at the net asset value per share next
determined after the request is received and accepted.
17
<PAGE> 23
3. By Wire
Requests for redemption by wire transfer may be made by calling the
Fund at 1-800-992-0444 and requesting that the redemption proceeds be
wired to the investor's bank listed in the Fund's account records.
Although the Fund and its bank will not charge a wire service fee for
a redemption by wire, the redeeming shareholder's bank may impose such
a fee.
4. By Check
If an investor applies for the checkwriting feature in the new
account application, the investor may redeem shares by check. There is
no limit on the number of checks written, but the minimum amount of any
check is $250. Checks written for an amount greater than the value of
the investor's account will be returned to the investor, and the
investor may be subject to extra charges.
5. Systematic Withdrawal
An investor who owns shares of the Fund with a value of at least
$10,000 or more may establish a Systematic Withdrawal Plan. The record
owner of shares may request a fixed dollar or fixed percentage
withdrawal on a monthly, quarterly, semi-annual, or annual basis.
Further information about establishing a Systematic Withdrawal Plan may
be obtained by calling the Fund at 1-800-992-0444.
FURTHER REDEMPTION INFORMATION
The Fund normally will make payment for all shares redeemed on the
same Business Day, if the redemption request is received by 2:00 p.m.
(New York City time), and on the next Business Day if the redemption
request is received after such time, but in no event will payment be
made more than 7 days after receipt of a redemption request in good
order. Notwithstanding the foregoing, the Fund will not make payments
to investors redeeming shares that were purchased by check until the
check has cleared, which may take up to 15 Business Days after the date
of purchase. The Fund reserves the right to suspend redemption or
postpone the date of redemption at times when either the New York Stock
Exchange or the Federal Reserve Bank of New York is closed or when
trading on the New York Stock Exchange is restricted, under certain
emergency circumstances and during periods when such suspension is
permitted by the Commission. (See the Statement of Additional
Information: Additional Purchase and Redemption Information-
Redemptions.)
To change the address listed in the Fund's account records or the
name of the commercial bank or account designated to receive redemption
proceeds, an investor must send a written request until May 18, 1996,
to The Walnut Street Funds,
18
<PAGE> 24
P.O. Box 182711, Columbus, Ohio 43218-2711. Such requests must be
signed by each shareholder and for requests to change the bank or
account designated to receive redemption proceeds, each signature must
be guaranteed.
GENERAL INFORMATION
CHOOSING A DISTRIBUTION OPTION
When filling out a new account application, an investor can choose
from two distribution options:
A. The Reinvestment Option, which reinvests dividends and
distributions in additional shares. This option is assigned to an
investor automatically if the investor makes no choice on the
application. This option also provides for the purchase of new shares
on the day dividends are distributed.
B. The Income-Earned Option, which means an investor receives all
income dividends and distributions in cash. If an investor selects this
option and the U.S. Postal Service returns dividend checks it cannot
deliver, or if the checks remain uncashed for six months, the amounts
evidenced by the checks will remain deposited in a Fund bank account
until they are claimed by the investors or become the property of the
states of the investors' residence under their respective laws of
escheat.
MONTHLY STATEMENTS AND REPORTS
Each investor will receive a monthly statement that details every
transaction that affects the share balance of his or her account for
such month, including the exercise of checkwriting privileges. The
Administrator will also provide the Fund's transfer agent with such
information as may be required to permit the transfer agent to mail a
statement with tax information to investors by January 31 of each year
and to file the statement with the IRS.
ADDITIONAL INFORMATION
The Fund reserves the right to reject any specific purchase order if,
in the Adviser's opinion, the order is of a size or has other
characteristics that could disrupt management of the Fund.
All account transactions by telephone through the Fund's telephone
number (1-800-992-0444) will be recorded, but the recordings and any
transcripts generally will not be available for shareholder review.
Investors should therefore verify the accuracy of telephone
transactions immediately upon receipt of their confirmation statements.
The Fund intends to employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, but if it fails to
implement such procedures, it may be liable for any losses
19
<PAGE> 25
due to unauthorized or fraudulent instructions. Among the procedures
that the Fund intends to employ, in addition to recordings and
confirmations, are requirements that in each call shareholders respond
correctly to requests for specific personal identifying information.
HOLIDAY SCHEDULE
The Fund is open for business and its net asset value is calculated
every day that both the Federal Reserve Bank of New York (the "NY Fed")
and the New York Stock Exchange (the "NYSE") are open. The Fund will be
closed and no net asset value will be determined on: New Year's Day,
Dr. Martin Luther King, Jr., Day (observed), Presidents' Day, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Columbus
Day (observed), Veterans' Day (observed), Thanksgiving Day, Christmas
Day, and any other day on which either the NYSE or NY Fed is closed.
This schedule may be modified by actions of the NYSE or NY Fed. On any
day when either the NY Fed or the NYSE close early, the Fund reserves
the right to advance the time on that day by which purchase and
redemption requests must be received. To the extent that the Fund's
portfolio securities are traded in other markets on days the NY Fed or
the NYSE is closed, the Fund's net asset value may be affected during
times when investors may not purchase or redeem shares.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Company was incorporated on January 22, 1993, as a corporation
under the laws of the State of Maryland. The Fund is the initial series
of shares interest (par value $.001) of the Company. The Directors are
authorized to designate one or more additional series of shares of the
Company, each series representing a separate investment portfolio.
Shares of all series will have identical voting rights, except where by
law, certain matters must be approved by a majority of the shares of
the affected series. Each share of any series of shares when issued has
equal dividend, liquidation (see "Redemption of Shares"), and voting
rights within the series for which it was issued and each fractional
share has those rights in proportion to the percentage that the
fractional share represents of a whole share. Shares will vote in the
aggregate in all matters affecting all series equivalently and
separately in any matters affecting any series that is distinct from
the effect on other series.
There are no conversion or preemptive rights in connection with any
shares of the Fund. All Fund shares, when issued in accordance with the
terms of the offering will be fully paid and nonassessable. The
redemption price for shares of a series will be the net asset value of
such shares.
The Fund will send semi-annual and annual reports to all of its
shareholders, that will include a list of the Fund's portfolio
securities and the Fund's financial statements, which will be audited
annually. Unless it is clear that a shareholder holds as nominee for
20
<PAGE> 26
the account of an unrelated person or a shareholder otherwise
specifically requests in writing, the Fund may send a single copy of
semi-annual, annual and other reports to shareholders to all accounts
at the same address and all accounts of any person at that address.
It is the intention of the Company not to hold annual meetings of
shareholders. The Directors may call a special meeting of shareholders
for action by shareholder vote as may be required by the 1940 Act, the
Company's Articles of Incorporation, or the Company's By-Laws. If
requested by the holders of at least 10% of the shares of all series
aggregated as a class, the Fund will call a special meeting of the
shareholders for the purpose of voting upon the removal of a director
or directors, and the Company will assist shareholders in
communications with other shareholders as required by Section 16(c) of
the 1940 Act.
The shares of the Company have noncumulative voting rights which
means that the holders of more than 50% of the shares can elect 100% of
the Directors if the holders choose to do so, and in that event, the
holders of the remaining shares will not be able to elect any person or
persons as Directors.
SHAREHOLDER APPROVAL
Under the Company's By-Laws, unless otherwise required by law, the
vote of the majority of a quorum of the Company's outstanding voting
securities is required to approve actions requiring shareholder
approval. (A quorum is a majority of the Company's outstanding shares.)
Under the 1940 Act, however, certain shareholder actions require the
vote of a majority of the Company's voting securities, which is defined
as the lesser of (i) 67% of the voting securities represented at a
meeting at which more than 50% of the outstanding voting securities of
the Fund are present in person or by proxy or (ii) more than 50% of the
Fund's outstanding voting securities.
COUNSEL AND INDEPENDENT AUDITORS
The firm of Husch & Eppenberger, 100 N. Broadway, Suite 1300, St.
Louis, Missouri 63102, is counsel for the Company. KPMG Peat Marwick
LLP, 345 Park Avenue, New York, New York 10154, are the appointed
independent auditors for the Company.
INFORMATION FOR SHAREHOLDERS
All shareholder inquiries regarding administrative procedures
including the purchase and redemption of shares should be directed to
The Walnut Street Funds, P.O. Box 182711, Columbus, Ohio 43218-2711.
For assistance, call 1-800-992-0444.
21
<PAGE> 27
This Prospectus omits certain information contained in the
Registration Statement filed with the Commission. Copies of the
Registration Statement, including items omitted herein, may be obtained
from the Commission by paying the charges prescribed under its rules
and regulations. The Statement of Additional Information included in
such Registration Statement may be obtained without charge from the
Fund or its Distributor at the addresses and telephone number provided
in this Prospectus.
GLOSSARY
Banker's Acceptances: Negotiable obligations of a bank to pay a draft
which has been drawn on it by a customer. These obligations are backed
by large banks and usually backed by goods in international trade.
Certificates of Deposit: Negotiable certificates representing a
commercial bank's obligations to repay funds deposited with it, earning
specified rates of interest over given periods.
Commercial Paper: Short-term obligations with maturities ranging from
two to 270 days issued by banks, corporations, and other entities. The
ratings A-1 and A-2 and Prime-1 and Prime-2 are high quality commercial
paper ratings assigned by Standard & Poor's Corporation and Moody's
Investors Service, Inc., respectively. Commercial paper that is not
rated is not necessarily of lower quality than that that is rated, but
may be less marketable and therefore provide a higher yield. See
"Investment Objectives, Policies, and Restrictions" in the Statement of
Additional Information for further information about commercial paper
ratings.
Commission: The United States Securities and Exchange Commission.
Financial Services Industry: Investments in the financial services
industry may include dollar denominated obligations of foreign and
domestic banks, savings and loan associations and companies, consumer
and commercial finance companies, securities brokerage companies,
leasing companies, and insurance companies. These obligations include
certificates of deposit, time deposits, bankers' acceptances, and
commercial paper. Since the Fund may concentrate more than 25% of its
total assets in the financial services industry, its performance may be
affected by conditions affecting banks and other financial services
companies. Companies in the financial services industry are subject to
various risks related to that industry, such as governmental
regulations, changes in interest rate, and exposure on loans, including
loans to foreign borrowers.
Money Market: The marketplace in which short-term, high grade debt
securities are traded. These securities include U.S. Government
obligations, commercial paper, certificates of deposit and bankers'
acceptances, time deposits, and short-term corporate obligations. These
securities normally carry specific rates of return.
22
<PAGE> 28
Repurchase Agreements: Transactions in which the Fund purchases a
security and simultaneously commits to resell that security to the
seller at an agreed upon price on an agreed upon date within a number
of days from the date of purchase. The resale price reflects the
purchase price plus an agreed upon incremental amount. In all cases,
the creditworthiness of the other party to a transaction is reviewed
and found satisfactory by the Fund. See "Investment Objectives,
Policies, and Restrictions" in the Statement of Additional Information.
Reverse Repurchase Agreements: Transactions in which the Fund sells a
portfolio instrument to another party, such as a bank or broker-dealer,
in return for cash. At the same time, the Fund agrees to repurchase the
instrument at a particular price and time. See "Investment Objectives,
Policies, and Restrictions" in the Statement of Additional Information.
Time Deposits: Time deposits are non-negotiable deposits in a banking
institution earning a specified interest rate over a given period of
time. Time deposits are illiquid and not readily marketable
investments. (See "Investment Objectives, Policies, and Restrictions-
Investment Restrictions.")
U.S. Government Obligations: Debt securities issued or guaranteed by
the U.S. Treasury or by an agency or instrumentality of the U.S.
Government. Not all U.S. Government obligations are backed by the full
faith and credit of the United States. For example, securities issued
by the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the agency's right to borrow money from
the U.S. Treasury under certain circumstances. Securities issued by the
Federal Home Loan Bank are supported only by the credit of the agency.
There is no guarantee that the Government will support these types of
securities, and therefore they involve more risk than other Government
obligations. See "Investment Objectives, Policies, and Restrictions" in
the Statement of Additional Information.
Variable or Floating Rate Instruments: Variable or floating rate
instruments have interest rate adjustment formulae that help stabilize
their market values. Many variable and floating rate instruments also
carry demand features that permit the Fund to sell them at par value
plus accrued interest on short notice.
23
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<PAGE> 30
THE WALNUT STREET FUNDS
PRIME RESERVE
MONEY MARKET FUND
[LOGO] WALNUT STREET FUNDS
PRIME RESERVE
Prospectus
April 25, 1997
Adviser
General American Investment
Management Company
Distributor
Walnut Street Securities
<PAGE> 31
THE WALNUT STREET FUNDS, INC.
THE WALNUT STREET PRIME RESERVE FUND
STATEMENT OF ADDITIONAL INFORMATION
THIS STATEMENT IS NOT A PROSPECTUS BUT SHOULD BE READ IN CONJUNCTION WITH THE
CURRENT PROSPECTUS OF THE WALNUT STREET FUNDS, INC., (DATED APRIL 25, 1997),
AS SUPPLEMENTED FROM TIME TO TIME. PLEASE RETAIN THIS STATEMENT OF
ADDITIONAL INFORMATION FOR FUTURE REFERENCE. TO OBTAIN ADDITIONAL COPIES OF
THIS STATEMENT OF ADDITIONAL INFORMATION OR THE FUND'S PROSPECTUS OR ANNUAL
REPORT, PLEASE CALL 800-992-0444, OR WRITE THE FUND AT WALNUT STREET PRIME
RESERVE FUND, P.O. BOX 182711, COLUMBUS, OHIO 43218-2711.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
GENERAL 1
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS 1
PORTFOLIO TRANSACTIONS 15
VALUATION OF PORTFOLIO SECURITIES 20
PERFORMANCE 21
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 23
DIVIDENDS, DISTRIBUTIONS, AND TAXES 25
DIRECTORS AND OFFICERS 28
MANAGEMENT CONTRACTS 33
DISTRIBUTION AND SERVICE PLAN 40
- 2 -
<PAGE> 32
DESCRIPTIONS OF THE FUND AND ITS CAPITAL STOCK 45
ADDITIONAL INFORMATION 48
FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS 50
</TABLE>
INVESTMENT ADVISER
Conning Asset Management Company
DISTRIBUTOR
Walnut Street Securities, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT
BISYS Fund Services, Inc.
ADMINISTRATOR AND CUSTODIAN
The Bank of New York
April 25, 1997
- 3 -
<PAGE> 33
GENERAL
The Walnut Street Funds, Inc., is an open-end investment company (the
"Company") that currently has one series: The Walnut Street Prime Reserve
Fund (the "Fund"). Conning Asset Management Company, formerly named General
American Investment Management Company (the "Adviser") serves as the Fund's
investment adviser. The Fund's offices are located at 670 Mason Ridge Center
Drive, Suite 300, St. Louis, Missouri 63141. The Adviser's offices are
located at 700 Market Street, St. Louis, Missouri 63101.
This Statement of Additional Information provides additional
information with respect to the Fund and should be read in conjunction and
retained with the Fund's current Prospectus.
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS
General
- -------
The Fund's investment objectives and policies and certain of its
investment restrictions are set forth in the Prospectus. Unless otherwise
noted, whenever an investment policy or restriction states a maximum
percentage of a Fund's assets that may be invested in any security or other
assets, or sets forth a policy about quality standards, that standard or
percentage limitation will be determined immediately after and as a result of
the Fund's acquisition of such security or other asset. Any subsequent
change in values, net assets, or other circumstances will not be
<PAGE> 34
considered when determining whether the investment complies with the Fund's
investment policies and restrictions.
The Fund's investment objectives and restrictions described below are
fundamental and cannot be changed without approval of a "majority of the
outstanding voting shares" of the Fund. (As used in the Prospectus and this
Statement of Additional Information, the term "majority of the outstanding
voting shares" means the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the Fund's outstanding shares.) Other
than these fundamental objectives and investment restrictions, the investment
policies and limitations described in the Prospectus and this Statement of
Additional Information are not fundamental, and the Company may change them
without shareholder approval.
Investment Objectives
- ---------------------
The Fund's investment objective is the realization of high current
income consistent with the preservation of principal and liquidity. For more
information about this objective, see "Investment Objective" in INVESTMENT
OBJECTIVES, POLICIES, AND RESTRICTIONS in the Prospectus.
- 2 -
<PAGE> 35
Investment Restrictions of the Fund
- -----------------------------------
Under the Fund's fundamental investment restrictions, the Fund may not:
1. Invest more than 10% of the value of the total assets of the Fund
in securities that are not readily marketable, which include repurchase
agreements having a maturity of more than 7 days, time deposits, and
securities that are secured by interests in real estate.
2. Invest in real estate, although the Fund may purchase securities
of companies that deal in real estate and securities that are secured by
interests in real estate.
3. Invest in commodities or commodity contracts.
4. Purchase or retain any securities of other open end investment
companies, or purchase securities of other investment companies, if, as a
result, the Fund would own more than 3% of the total outstanding voting stock
of any one investment company, or more than 5% of the Fund's assets would be
invested in any one investment company, or more than 10% of the Fund's assets
would be invested in investment company securities. These limitations do not
apply to securities acquired in connection with a merger, consolidation,
acquisition, or reorganization, or by purchase in
- 3 -
<PAGE> 36
the open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved, and so long as immediately thereafter not more than
10% of such Fund's total assets, taken at market value, would be invested in
such securities.
5. Make loans, other than by purchasing debt obligations customarily
distributed privately to institutional investors and lending through
repurchase agreements.
6. Invest more than 5% of the value of such assets in securities of
any one issuer. This restriction does not apply to securities issued or
guaranteed by the United States Government or its agencies or
instrumentalities.
7. Invest in more than 10% of the outstanding voting securities of
any one issuer.
8. Purchase the securities or other obligations of issuers in the
same industry if, immediately after such purchase, the value of the Fund's
investment in that industry would exceed 25% of the value of the Fund's total
assets, except that the Fund may invest more than 25% of its assets in
securities and other obligations of companies in the financial services
industry. (See "Financial Services Industry" in the Glossary to the
Prospectus.) This
- 4 -
<PAGE> 37
restriction does not apply to securities issued by the United States
Government or its agencies or instrumentalities.
9. Act as an underwriter of securities of other issuers, except to
the extent that it may be deemed to be an underwriter, within the meaning of
the Securities Act of 1933, in the disposition of restricted securities.
10. Borrow money, except that (i) the Fund may enter into reverse
repurchase agreements (as defined in the Glossary to the Prospectus) for
liquidity purposes, and (ii) as a temporary measure for extraordinary or
emergency purposes (such as to permit the Fund to honor redemption requests
without being required to dispose of investments in an inopportune or
untimely manner) and not for investment purposes, the Fund may borrow from
banks, provided that the total of reverse repurchase agreements and bank
borrowings may not exceed 5% of the Fund's assets taken at cost.
11. Issue securities senior to its common stock except to the extent
set out in paragraph 10 immediately above or otherwise permitted under the
Investment Companies Act of 1940 (the "1940 Act").
12. Sell securities short, or maintain a short position.
- 5 -
<PAGE> 38
13. Buy securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities.
14. Invest in or write puts, calls, straddles, or spreads.
15. Invest in companies for the purpose of exercising control of
management.
16. Invest in real estate limited partnerships.
Investment Policies
- -------------------
Most of the Fund's current investment policies are set forth in the
Prospectus under "INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS". In
addition, the Fund does not currently intend to purchase the securities of
any issuer or the securities of issuers primarily engaged in oil, gas, or
other mineral exploration or development programs or leases.
To limit the credit risk of its investments, the Fund will not purchase
any security (other than a U. S. Government Obligation, as defined in the
Glossary to the Prospectus) unless it is rated in one of the two highest
rating categories assigned to short-term debt securities by at least two
nationally recognized statistical rating organizations such as Moody's and
Standard & Poor's or, if
- 6 -
<PAGE> 39
not so rated, it is determined to be of comparable quality. The Adviser
makes determinations of comparable quality in accordance with procedures
established by the Directors. Securities meeting the foregoing criteria
constitute either "first tier" and "second tier" securities. First tier
securities have received the highest rating (e.g., A-1 from Standard &
----
Poor's or Prime-1 from Moody's) from at least two recognized rating
services. Second tier securities have received ratings within the two
highest categories (e.g., A-1 and A-2 from Standard and Poor's) from at
----
least two recognized rating agencies. Under the rules of the Securities and
Exchange Commission (the "Commission") applicable to money market funds, the
Fund may not invest more than 5% of the its total assets in second tier
securities and not more than 1% of the Fund's assets may be invested in
second tier securities of any one issuer. These standards must be satisfied
at the time an investment is made. If the quality of the investment later
declines, the Fund may continue to hold the investment, subject in certain
circumstances to a finding by the Company's Directors that disposing of the
investment would not be in the Fund's best interest.
The securities in which the Fund may invest are set forth in the
Prospectus' discussion of the Fund's investment policies, and the Glossary to
the Fund's Prospectus also describes certain aspects of some of these
securities. These securities include but are not limited to the following:
- 7 -
<PAGE> 40
United States Government Obligations
- ------------------------------------
The Fund may invest in U. S. Government Obligations. These securities
consist of both United States Government securities and United States
Government agency securities.
United States Government securities include bills, notes, and bonds
issued by the United States Treasury, which are direct obligations of the
United States Government and differ mainly in the length of their maturity.
Treasury bills, the most frequently issued marketable Government security,
have a maturity of up to one year and are issued on a discounted basis.
Treasury notes have maturities of more than one and up to ten years.
Treasury bonds have maturities of ten to 30 years.
Government agency securities are the kinds of instruments currently
outstanding or offered in the future that are issued by agencies and
instrumentalities of the United States Government. Agencies include, among
others, the Federal Housing Administration, Government National Mortgage
Association, Farmers Home Administration, Export-Import Bank of the United
States, Maritime Administration, General Services Administration, and
Tennessee Valley Authority. Instrumentalities include, for example, the
Central Bank for Cooperatives, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, Farm Credit Banks, and the United States Postal
Service. The Fund will purchase government agency or
- 8 -
<PAGE> 41
instrumentality securities only so long as they are either guaranteed by the
United States Treasury (e.g., Government National Mortgage Association
----
mortgage-backed securities) or supported by the issuing agency's or
instrumentality's credit or right to borrow from the United States Treasury
(e.g., Federal National Mortgage Association Discount Notes). Not all
----
securities issued by agencies or instrumentalities of the United States
Government have a guarantee representing the full faith and credit of the
U.S. Government.
Bank Obligations
- ----------------
The Fund may acquire obligations of certain depository institutions,
including certificates of deposit, time deposits, and bankers' acceptances
issued by commercial banks, savings and loan associations, and savings banks.
Certificates of deposit are generally short-term, interest-bearing,
negotiable certificates issued by banks, savings and loan associations, or
savings banks against funds deposited in the issuing institution by the
depositor.
Time deposits are funds deposited in a bank, savings and loan
association, or savings bank for a specified period of time at a fixed
interest rate for which a negotiable certificate is not received.
- 9 -
<PAGE> 42
A banker's acceptance is a time draft drawn on a bank that
unconditionally guarantees to pay the draft at its face amount on the
maturity date. A bank customer, who is also liable for the draft, typically
uses the funds represented by the draft to finance the import, export, or
storage of goods.
The Fund will not invest in any security issued by a commercial bank,
savings and loan association, or savings bank organized and operating in the
United States, unless the institution has total assets of at least
$1,000,000,000 and a net worth of at least $500,000,000, and is a member of
the Federal Deposit Insurance Corporation.
The Fund may also invest in short term dollar denominated obligations
of foreign banks, foreign branches of foreign or U.S. banks, and short-term
obligations of U.S. branches and agencies of foreign banks.
Repurchase Agreements
- ---------------------
A repurchase agreement customarily obligates the seller, at the time it
sells securities to the Fund, to repurchase the securities at a mutually
agreed-upon time and price. The total amount received on repurchase should
exceed the price paid by the Fund, reflecting an agreed interest rate to the
settlement date
- 10 -
<PAGE> 43
that would not necessarily be related to the interest rate on the underlying
securities. The differences between the total amount to be received upon
repurchase of the securities and the price that was paid by the Fund upon
the securities' acquisition are accrued as interest and included in the
Fund's net income as dividends. The term of the Fund's repurchase
agreements will usually be short, from overnight to one week, and at no time
will the Fund acquire repurchase agreements having a term of more than one
year.
During the holding period of a repurchase agreement, the seller must
provide additional collateral if the market value of the obligation falls
below the repurchase price. If the Fund acquires a repurchase agreement and
the seller later defaults at a time when the value of the underlying
securities is less than the obligation of the seller, the Fund could incur a
loss. If the seller defaults or becomes insolvent, the Fund may experience
delays in recovering its money, fail to recover part or all of its
investment, and incur costs in disposing of securities used as collateral.
The Fund will enter into repurchase agreements only with sellers that the
Adviser, applying criteria established by the Fund's Board of Directors,
believes to present minimal credit risks.
- 11 -
<PAGE> 44
Reverse Repurchase Agreements
- -----------------------------
Reverse repurchase agreements involve the sale of money market
securities held by the Fund pursuant to an agreement to repurchase the
securities at an agreed-upon price, date, and interest payment. The Fund may
use the proceeds of reverse repurchase agreements to cover net redemptions
and other needs for liquidity. When effecting reverse repurchase
transactions, the Fund will hold securities of a dollar amount equal in value
to the securities subject to the reverse repurchase agreement in a segregated
account with the Custodian. If interest rates rise during the term of a
reverse repurchase agreement, the Fund's ability to maintain a net asset
value of $1.00 per share may be impaired.
Commercial Paper
- ----------------
Commercial paper involves an unsecured promissory note issued by a
corporation. It is usually sold on a discount basis and has a maturity at
the time of issuance of one year or less. On the date of investment by the
Fund, such paper must be rated in one of the two highest categories for short
term debt securities by at least two nationally recognized securities rating
services such as Standard and Poor's or Moody's Investor's Services (or by
one such rating service, if only one such rating service has rated the
security). The Fund can invest in unrated commercial paper if Board of
Directors determines, in accordance with the procedures of
- 12 -
<PAGE> 45
Rule 2a-7, that the unrated security is of comparable quality to rated
securities.
Commercial paper rated A-1 by Standard & Poor's has the following
characteristics. The issuer's liquidity ratios are adequate to meet cash
requirements, and its long-term senior debt is rated "A" or better, although
in some cases "BBB" credits may be allowed. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow of
the issuer have an upward trend, with allowances made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is rated A-1,
A-2, or A-3.
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's Investor's Service, Inc. Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks that may be inherent in
certain areas; (3) evaluation of the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trends of earnings over a period of ten years; (7)
financial strength of any parent company and the
- 13 -
<PAGE> 46
relationships that exist with the issuer; and (8) recognition by the
management of obligations that may be presented or may arise as a result of
public interest questions and preparations to meet such obligations.
Variable or Floating Rate Instruments
- -------------------------------------
The Fund may invest in variable or floating rate instruments that
ultimately mature in more than 397 days, if the Fund acquires a right to sell
the securities that meet certain requirements set forth in Rule 2a-7.
Variable rate instruments (including investments subject to a demand feature)
that mature in 397 days or less may be deemed to have maturities equal to the
period remaining until the next readjustment of the rate. Other variable
rate instruments with demand features may be deemed to have a maturity equal
to the period remaining until the next adjustment of the interest rate or the
period remaining until the principal amount can be recovered through demand.
A floating rate instrument subject to a demand feature may be deemed to have
a maturity equal to the period remaining until the principal amount can be
recovered through demand.
- 14 -
<PAGE> 47
PORTFOLIO TRANSACTIONS
The Adviser will place all orders for the purchase or sale of portfolio
securities for the Fund pursuant to authority contained in the Fund's
Management Agreement with the Adviser. The Adviser is also responsible for
the placement of transaction orders for other investment companies and
clients for which it acts as investment adviser.
Debt securities are generally traded with dealers acting as a principal
for their own accounts without a commission. The price of the security
usually includes a profit (a "spread" or "markup") for the dealers. In
underwritten offerings, securities are purchased at a fixed price that
includes an amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts
are paid. In selecting brokers or dealers, subject to applicable limitations
of the federal securities laws, the Adviser will consider various relevant
factors, including, but not limited to, the size and kind of the transaction;
the nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial
condition of the broker-dealer firm; the broker-dealer's execution services
rendered on a continuing basis; and the reasonableness of spreads or
commissions.
- 15 -
<PAGE> 48
The Fund will execute portfolio transactions with broker-dealers who
provide research or execution services to the Fund. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Since, however, many transactions on behalf of
the Fund may be placed with dealers without regard to the receipt or
availability of such services, the Fund and its Adviser cannot estimate the
proportion of such transactions directed to such dealers solely because such
services were provided or are available.
The receipt of research from broker-dealers that execute transactions
on behalf of the Fund may be useful to the Adviser in rendering investment
management services to the Fund or its other clients, and conversely such
information provided by broker-dealers who have executed transaction orders
on behalf of other clients of the Adviser may be useful to the Adviser in
carrying out its obligations to the Fund.
Subject to applicable limitations of the federal securities
- 16 -
<PAGE> 49
laws, in recognition of their research or execution services, certain
broker-dealers may receive commissions or markups for transactions that are
in excess of the amount of markups or commissions charged by other
broker-dealers. To cause the Fund to pay such higher amounts, the Adviser
must determine in good faith that such charges are reasonable in relation to
the value of the brokerage or research services provided by such executing
broker-dealers viewed in terms of a particular transaction or the Adviser's
overall responsibilities to the Fund and its other clients. In reaching
this determination, the Adviser will not attempt to place a specific dollar
value on the brokerage or research services provided or to determine what
portion of the compensation should be related to those services.
The Adviser may use the services of the Distributor, Walnut Street
Securities, Inc. (a registered broker-dealer and an affiliate of the
Adviser), for the execution of the Fund's purchase and sale orders, if (i)
the commissions and markups charged by the Distributor are fair, reasonable,
and comparable to commissions charged by non-affiliated, qualified brokerage
firms for similar services, and (ii) the payment of such amounts complies
with the 1940 Act and the rules and regulations thereunder. The Directors,
including a majority of the Directors who are not "interested persons" have
adopted procedures that are reasonably designed to provide that any
commissions, fees, or other remuneration paid to Walnut Street Securities are
consistent with the foregoing
- 17 -
<PAGE> 50
requirements. The Adviser anticipates, however, that most of the Fund's
portfolio transactions will be executed by non-affiliated broker-dealers,
and from the date the Fund commenced its investment activities in 1993 to
the date of this Statement, the Adviser has not used the Distributor to
purchase or sell securities for the Fund.
The Fund will not purchase or sell portfolio securities from, through,
or to the Adviser or Distributor or any "affiliated person" (as defined in
the 1940 Act) of the Adviser or Distributor when such entities are acting as
principals, except to the extent permitted by law. The Fund also will not
purchase securities during the existence of an underwriting group relating
thereto of which the Adviser or Distributor or an affiliate of either is a
member, except to the extent permitted by law.
The Company's Board of Directors will periodically review the Adviser's
performance of its responsibilities in connection with the placement of
portfolio transactions and review commissions and markups paid by the Fund
over representative periods of time to determine if they are reasonable in
relation to the benefits to the Fund.
Although the officers and Directors of the Fund are substantially the
same as those of other funds managed by the Adviser, investment decisions for
the Fund will be made
- 18 -
<PAGE> 51
independently from those of other funds or accounts managed by the Adviser.
It may sometime happen that the same security is held in the portfolio of
more than one of these funds or accounts. Simultaneous transactions are
inevitable when several funds are managed by the same investment adviser,
particularly when the same security is suitable for the investment objective
of more than one fund or advisory client.
When two or more funds or accounts advised by the Adviser are
simultaneously engaged in the purchase or sale of the same security, the
prices and amounts will be allocated in a manner considered by the officers
of the funds or accounts involved to be equitable to each. In some cases
this system could have a detrimental effect on the price or value of the
security as far as the Fund is concerned. In other cases, however, the
ability of the Fund to participate in volume transactions will produce better
executions and prices for the Fund. It is the current opinion of the
Directors that the desirability of retaining the Adviser as investment
adviser to the Fund outweighs any disadvantages that may exist from exposure
to simultaneous transactions.
- 19 -
<PAGE> 52
VALUATION OF PORTFOLIO SECURITIES
The Fund values its investments on the basis of amortized cost. This
method involves valuing an instrument at its cost as adjusted for
amortization of premium or accretion of discount rather than its value based
on current market quotations or appropriate substitutes that reflect current
market conditions. The amortized cost value of an instrument may be higher
or lower than the price the Fund would receive if it sold the instrument.
Valuing the Fund's instruments on the basis of amortized cost and use
of the term "money market fund" are permitted by Rule 2a-7 of the Commission
under the 1940 Act. The Fund must adhere to certain conditions under Rule
2a-7, some of which are summarized in the Prospectus.
The Company's Board of Directors oversees the Adviser's adherence to
the Commission's rules, and has established procedures designed to stabilize
the Fund's net asset value at $1.00. At such intervals as they deem
appropriate, the Directors consider the extent to which net asset value as
calculated by using market valuations would deviate from $1.00 per share. If
the Directors believe that a deviation from the Fund's amortized cost per
share may result in material dilution or other unfair results to
shareholders, the Directors have agreed to take such corrective action, if
any, as they deem appropriate to eliminate or reduce, to
- 20 -
<PAGE> 53
the extent reasonably practicable, the dilution or unfair results. Such
corrective action could include selling portfolio instruments before
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redeeming shares in kind; establishing net
asset value by using available market quotations; and such other measures as
the Directors may deem appropriate.
During periods of declining interest rates, the Fund's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in the Fund would be able to obtain
a somewhat higher yield than would result if the Fund used market valuations
to determine its net asset value. The converse would apply in a period of
rising interest rates.
See "NET ASSET VALUE" AND "REDEMPTION OF SHARES - HOLIDAY SCHEDULE" in
the Prospectus for the times and dates upon which the Fund's net asset value
will be calculated.
PERFORMANCE
The Fund may compare its performance or the performance of securities
in which it may invest to Donoghue's Money Fund Averages, which are average
yields of various kinds of money market funds that include the effect of
compounding distributions. The
- 21 -
<PAGE> 54
Fund may also compare its performance to other mutual funds, especially to
those with similar investment objectives. These comparisons may be based on
data published by Donoghue's Money Fund Report(R) or by Lipper Analytical
Services, Inc., an independent service that monitors the performance of mutual
funds.
As required by regulations of the Commission, current yield for the
Fund will be computed by determining the net change exclusive of capital
changes in the value of a hypothetical pre-existing account having a balance
of one share at the beginning of a seven-day calendar period, dividing the
net change in account by the value of the account at the beginning of the
period, and multiplying the return over the seven-day period by 365/7. For
purposes of the calculation, net change in account value reflects the value
of additional shares purchased with dividends from the original share and
dividends declared on both the original share and any such additional shares,
but does not reflect realized gains or losses or unrealized appreciation or
depreciation. Effective yield for the Fund will be computed by annualizing
the seven-day return with all dividends reinvested in additional Fund shares.
As of December 31, 1996, the current and effective seven-day yields for the
Fund were 4.82% and 4.94%, respectively.
The Fund's performance will vary from time to time depending upon
market conditions, the composition of its portfolio, and its operating
expenses. Consequently, any given performance quotation
- 22 -
<PAGE> 55
should not be considered representative of the Fund's performance for any
specified period in the future. In addition, because performance will
fluctuate, it may not provide a basis for comparing an investment in the
Fund with certain bank deposits or other investments that pay a fixed yield
or return for a stated period of time.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchase of Shares
- ------------------
Investors may open Fund accounts and purchase shares as described in
the Prospectus under "PURCHASE OF SHARES."
Redemptions
- -----------
Investors may redeem shares as described in the Prospectus under
"REDEMPTION OF SHARES." Shareholders redeeming shares of the Fund should be
aware that while the Fund attempts to maintain a stable net asset value of
$1.00 per share, there can be no assurance that it will be able to continue
to do so and in that case the net asset value of the Fund's shares might
deviate from $1.00 per share. Accordingly, a redemption request might result
in payment of a dollar amount that differs from the number of shares
redeemed. See "NET ASSET VALUE" in the Prospectus and "Valuation" in this
---------
Statement of Additional Information.
- 23 -
<PAGE> 56
If the Fund determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay the redemption price, in lieu of cash, in
whole or in part by a distribution in kind of securities from the portfolio
of the Fund in conformity with the applicable rules of the Commission. If
shares are redeemed in kind, the redeeming shareholder might incur
transaction costs in converting the assets into cash and might also recognize
a gain or loss for tax purposes.
The Fund reserves the right to suspend the right of redemption and to
postpone the date of payment upon redemption as follows: (i) during periods
when either the Federal Reserve Bank of New York or the New York Stock
Exchange is closed for other than weekends and holidays or when trading on
such Exchange is restricted, (ii) during periods in which an emergency exists
that causes disposal of, or evaluation of the net asset value of, the
portfolio securities to be not reasonably practicable, or (iii) for such
other periods as the Commission may permit.
- 24 -
<PAGE> 57
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The Fund declares and pays dividends and distributions as described
under "DIVIDENDS, DISTRIBUTIONS, AND TAXES" in the Prospectus. Net
investment income of the Fund consists of accrued interest or discount and
amortized premium, less the accrued expenses of the Fund applicable to that
dividend period. Determination of the net investment income for the Fund
will be made immediately prior to the determination of net asset value at
2:00 p.m. (New York City time), on each day the Fund is open for business.
Net income for all other days is determined at 4:00 p.m. (New York City time)
on the last immediately preceding day on which the Fund is open for business.
The Fund may distribute short-term capital gains once a year or more
often as necessary to maintain its net asset value at $1.00 per share or to
comply with distribution requirements under federal tax law. The Fund does
not anticipate earning long-term capital gains on its portfolio securities.
The Fund is qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, payments with respect to loans of
stock and securities, gains from the sale or other disposition of stock,
securities or foreign
- 25 -
<PAGE> 58
currency and other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less
than 30% of its gross income from the sale or other disposition of stock,
securities, options, futures or forward contracts (other than options,
futures or forward contracts on foreign currencies) held less than
three months; and (c) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the value of the Fund's assets is
represented by cash, United States Government securities, and other
securities, with such other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the Fund's assets, and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer
(other than U. S. Government Obligations). (The securities described in
clauses (a) and (b) of the preceding sentence would be limited by the Fund's
investment objectives, restrictions, and policies described in the Prospectus
and this Statement of Additional Information.) As a regulated investment
company, the Fund (as opposed to its shareholders) is not subject to federal
income taxes on the net investment income and capital gains that it
distributes to its shareholders, provided that at least 90% of its net
investment income and realized net short-term capital gains in excess of net
long-term capital losses for the taxable year is distributed.
- 26 -
<PAGE> 59
Under the Code, the Fund will be subject to a 4% excise tax on a
portion of its undistributed income if it fails to meet certain distribution
requirements by the end of the calendar year. The Fund intends to make
distributions in a timely manner and accordingly does not expect to be
subject to the excise tax.
Distributions of net investment income and realized net short-term
capital gains (if any) in excess of net long-term capital losses are
generally taxable to shareholders of the Fund as ordinary income whether such
distributions are taken in cash or reinvested in additional shares.
Distributions from the Fund will not normally be eligible for the
dividends-received deduction.
A gain or loss realized by a shareholder on the redemption, sale, or
exchange of shares held as a capital asset will be capital gain or loss, and
such gain or loss will be long-term if the holding period for the shares
exceeds one year, and otherwise will be short-term. Any loss realized by a
shareholder on the disposition of shares held six months or less will be
treated as a long-term capital loss to the extent of any distributions of net
long-term capital gains received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of
shares of the Fund will be disallowed to the extent the shares disposed of
are replaced within a period of 61 days beginning 30 days before such
disposition, such as pursuant to reinvestment of a dividend in shares of the
Fund.
- 27 -
<PAGE> 60
The Fund may be subject to foreign withholding taxes with respect to
income received from sources within foreign countries.
The Fund may be subject to state or local taxes in jurisdictions in
which the Fund is deemed to be doing business. In addition, the treatment of
the Fund and its shareholders in those states that have income tax laws might
differ from treatment under the federal income tax laws. Depending upon
state law, a portion of the Fund's dividends attributable to interest income
derived from United States Government securities may be exempt from state and
local taxation. Shareholders should consult their own tax advisers with
respect to any state or local taxes.
DIRECTORS AND OFFICERS
The Company's Directors and executive officers are listed below.
Except as indicated, each individual has held the office shown or other
office in the same company for the last five years. All persons other than
Mr. Miller named as Directors and officers also serve in similar capacities
for other funds advised by the Adviser. Unless otherwise noted, the business
address of each Director and officer is 700 Market Street, St. Louis,
Missouri 63101, which is also the address of the Adviser. Those Directors
who are "interested persons" (as defined in the 1940 Act) by virtue of their
affiliation with either the Fund or the Adviser are
- 28 -
<PAGE> 61
indicated by an asterisk <F*>.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME POSITION DURING THE LAST FIVE YEARS
- ---- -------- --------------------------
<C> <C> <S>
<F*>Richard J. Miller President and Director President and a director of the Fund since January 29, 1997.
670 Mason Ridge Center Also, since January 1997, President of Walnut Street Securities,
Drive Inc., a registered broker-dealer and the Fund's distributor, and
Suite 300 Walnut Street Advisers, Inc., a registered investment adviser.
St. Louis, Mo. 63141 For more than the prior five years, Mr. Miller was a principal and
general agent in Wrenshall Miller and Associates, Inc.,
Pittsburgh, Pennsylvania, a General American Life Insurance
Company agency.
- 29 -
<PAGE> 62
<C> <C> <S>
<F*>Richard A. Liddy Director Since January 1995, President, Chief Executive Officer, and
Chairman of the Board of General American Life Insurance Company,
of St. Louis, Missouri, which controls the Adviser and
Distributor; from May 1992 to January 1995, President and Chief
Executive Officer, General American Life Insurance Company.
Theodore M. Armstrong Director Senior Vice-President-Finance and Administration and Chief
424 South Woods Mill Financial Officer, Angelica Corporation, St. Louis, Missouri.
Road (Uniform manufacture and sale and laundry business.)
St. Louis, Mo. 63017
Alan C. Henderson Director Executive Vice-President and Chief Financial Officer, RehabCare
7733 Forsyth Group, Inc., St. Louis, Missouri (Disability rehabilitation
Suite 1700 business.)
St. Louis, Mo. 63105
- 30 -
<PAGE> 63
Harry E. Rich Director Executive Vice President and Chief Financial Officer of Brown
8300 Maryland Ave. Group, Inc., a retailer and shoe importer and manufacturer.
St. Louis, Mo. 63105
E. Thomas Hughes, Jr. Treasurer Corporate Actuary and Treasurer of General American Life Insurance
Company, St. Louis, Missouri, which controls the Adviser and
Distributor. Before October 1994 he served as the Executive Vice
President-Group Pensions of General American Life Insurance
Company.
Matthew P. McCauley Secretary Associate General Counsel and Vice President, General American
Life Insurance Co., St. Louis, Missouri, which controls the
Adviser and Distributor.
</TABLE>
Mr. McCauley is a director of the Distributor and a director, Vice
President, Secretary, and General Counsel of the Adviser, and he serves as an
officer, director, or general counsel of other subsidiaries of General
American Life Insurance Company. Messrs. Armstrong, Rich, and Henderson
serve as the Audit Committee of the
- 31 -
<PAGE> 64
Company's Board of Directors. They also serve as noninterested directors
of General American Capital Company, an open end management investment
company for which the Adviser serves as the investment manager. Messrs.
Liddy and Miller serve as the Executive Committee of the Board of
Directors, which, in the absence of action by the full Board, can exercise
the powers of the Board of Directors other than those requiring the
approval of a majority of the directors who are not interested persons.
Officers of the Company are compensated by the Adviser. Interested
directors receive no remuneration from the Company. The Company pays the
noninterested directors an annual retainer of $500.00 and a fee of $500.00
for each meeting of the Board of Directors or committee thereof that they
attend or in which they participate by telephone. During 1996, each of the
noninterested directors received $2,500 in fees and retainer from the Company
as well as $5,500 in retainer and fees in their capacity as directors of
General American Capital Company.
- 32 -
<PAGE> 65
MANAGEMENT CONTRACTS
The Adviser.
- -----------
The Company has entered into an Investment Management Agreement with
the Adviser, Conning Asset Management Company (formerly named General
American Investment Management Company) with respect to the Fund. The
Adviser is wholly owned by General American Holding Company which, in turn,
is wholly owned by General American Life Insurance Company. General American
Life Insurance Company is also the ultimate parent of the Distributor, Walnut
Street Securities, Inc., and is engaged in the business of underwriting life
insurance.
The Investment Management Agreement provides that the Adviser, subject
to control and review by the Company's Directors, is responsible for the
overall management and supervision of the Fund and for managing the Fund's
investments and providing certain services to the Fund. The Adviser is
responsible for selecting and monitoring the performance of the Fund's
investments and for maintaining the Fund's compliance with its investment
objective, restrictions, and policies. The Adviser selects the
broker-dealers who execute the fund's portfolio transactions. The Adviser
compensates all officers of the Company, the Directors who are "interested
persons" of the Company and the Adviser, and all personnel of the Company or
Adviser who perform services relating
- 33 -
<PAGE> 66
to research, statistical, and investment activities of the Fund. In
addition, the Adviser consults with and reports to the Company's Board of
Directors about the Fund's investments and investment strategy. The
Adviser also provides accounting and statistical information required for
the preparation of the Company's registration statements and other
governmental filings, and it performs such other obligations as the
Company's Directors may specify.
The Adviser may provide investment advice to other clients, including,
but not limited to, investment companies, pension funds, separate accounts of
General American Life Insurance Company, and institutional investors.
Occasions may arise when combined sales or purchases of securities are made
for more than one client in order to obtain favorable execution and low
brokerage commissions.
For its services to the Fund, the Adviser charges a fee which is
accrued daily against the Fund. The fee, stated as an annual percentage of
the average daily value of the net assets, is .25% of the first $250,000,000
of net assets, .24% of net assets in excess of $250,000,000 up to
$500,000,000, .23% of net assets in excess of $500,000,000 up to
$750,000,000, .22% of net assets in excess of $750,000,000 up to
$1,000,000,000, and .21% of net assets in excess of 1,000,000,000.
For the year ended December 31, 1996, the Fund's advisory fees
- 34 -
<PAGE> 67
totaled $405,517, of which the Adviser waived $114,441. For the year ended
December 31, 1995, the fees totaled $293,625, and the Adviser waived
$97,991. For the year ended December 31, 1994, the advisory fees totaled
$175,986, of which the Adviser waived $141,986. The Adviser waives that
portion of its fee, and if necessary reimburses sufficient Fund expenses,
necessary to prevent the Fund's expenses from exceeding 0.85% of the Fund's
average net assets.
The Investment Management Agreement was approved by the unanimous vote
of the Company's Board of Directors (including all of the Directors who are
not interested persons (as defined in the 1940 Act) of the Company or the
Adviser) at a meeting called for such purpose on May 5, 1993, and by the vote
of a majority of the outstanding shares of the Fund at a special meeting held
on May 5, 1993. The Investment Management Agreement will continue in effect
from year to year if approved annually: (1) by the Board of Directors of the
Company or by a majority of the outstanding shares of the Fund, as determined
pursuant to the 1940 Act; and (2) by a majority of the Board of Directors who
are not interested persons, within the meaning of the 1940 Act, of any party
to such Agreement. On April 23, 1997, the Company's Board of Directors
(including all of the Directors who are not interested persons) unanimously
approved the continuation of the Investment Management Agreement for an
additional year. The agreement is not assignable and may be terminated
without penalty on 60 days' written notice at the option
- 35 -
<PAGE> 68
of any party or, with respect to the Fund, by the requisite vote of the
shareholders of the Fund. The Investment Management Agreement
automatically terminates on its assignment. See "Description of the Fund
-----------------------
and its Capital Stock" in this Statement of Additional Information.
- ---------------------
- 36 -
<PAGE> 69
The Administrator.
- -----------------
The Company has entered into an Administration Agreement, Company
Accounting Agreement, and Cash Management and Related Services Agreement with
The Bank of New York, 110 Washington Street, New York, New York 10286 (the
"Administrator"), for the provision of certain administrative services to the
Company and the Fund, as described in the Prospectus. For these services,
the Fund pays the Administrator an annual fee, accrued daily and paid
monthly, of .10% of the Fund's average net assets up to $100,000,000, .07% of
the next $400,000,000 of average net assets, and .03% of average net assets
in excess of $500,000,000. The Administrator has no role in the selection of
the Fund's investment securities or the implementation of its investment
objectives, restrictions, or policies. The Fund may, however, invest in
obligations of the Administrator and may purchase securities from the
Administrator. The Adviser, its officers and directors, and its affiliated
companies and personnel from time to time have transactions with various
banks, including the Administrator. In the judgment of the Adviser, the
terms and conditions of those transactions that have occurred to date were
not influenced by existing or potential relationships with the Administrator.
Transfer and Dividend Disbursing Agent.
- --------------------------------------
BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219,
- 37 -
<PAGE> 70
serves as the Fund's Transfer Agent. The Transfer Agent is responsible for
maintaining account records detailing the ownership of Fund shares and for
crediting income, capital gains, and other changes in share ownership to
investors' accounts. The Transfer Agent is also the dividend disbursing
agent for the Fund. The Transfer Agent has no role in the selection of the
Fund's investment securities or the implementation of its investment
objective, restrictions, or policies.
Custodian
- ---------
The Bank of New York, 110 Washington Street, New York, New York 10286
will serve as the custodian of the Fund's securities (the "Custodian"). The
Custodian has no role in the selection of the Fund's investment securities or
the implementation of its investment objectives, restrictions, or policies.
The Fund, however, may invest in obligations of the Custodian and may
purchase securities from the Custodian. The Adviser, its officers and
directors, and its affiliated companies and personnel from time to time have
transactions with various banks, including the Custodian. In the judgment of
the Adviser, the terms and conditions of those transactions that have
occurred to date were not influenced by existing or potential custodial or
other relationships.
- 38 -
<PAGE> 71
Payment of Expenses
- -------------------
The Adviser has paid the organization costs of the Company as well as
the cost of certain administrative expenses.
In addition to the management fees payable to the Adviser and payments
under the Fund's Distribution and Service Plan discussed below, the Company
pays all its expenses, including, without limitation, the fees of the
Administrator, Custodian, and Transfer and Dividend Disbursing Agent, the
costs of the preparing and mailing of proxy material and prospectuses to
existing shareholders, legal expenses, and the fees of the Fund's auditor.
Other expenses paid by the Company include its insurance premiums, and costs
of registering the Fund's shares under various federal and state securities
laws. The Company is also liable for such nonrecurring expenses as may
arise, including costs of litigation to which the Company or the Fund is a
party, and any obligation the Company may have to indemnify the officers and
Directors with respect to such litigation.
The Adviser has agreed to waive its management fee and reimburse the
Fund if and to the extent that the Fund's operating expenses, including
management fees but excluding extraordinary expenses, are in excess of an
annual rate of .85% of the Fund's average net assets.
- 39 -
<PAGE> 72
DISTRIBUTION AND SERVICE PLAN
To facilitate the distribution of the Fund's shares, the Directors of
the Company on behalf of the Fund have adopted a Distribution and Service
Plan (the "Plan") pursuant to Rule 12b-1 ("12b-1") under the 1940 Act, and
entered into a General Distribution Agreement ("Distribution Agreement") with
Walnut Street Securities, Inc. (the "Distributor"), 670 Mason ridge Center
Drive, Suite 300, St. Louis, Missouri 63141, an affiliate of the Adviser. The
distributor, a Missouri corporation organized in 1984, is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of securities Dealers, Inc. The Plan and Distribution
Agreement have been approved by a majority of the Directors of the Company
(including a majority of the Directors who are not interested persons of the
Company or the Adviser and have no interest in the Plan or Distribution
Agreement) and the holder of a majority of the Company's voting securities on
May 5, 1993. As required by 12b-1, the Directors carefully considered all
pertinent factors relating to the implementation of the Plan and Distribution
Agreement prior to their approval, and determined that there is a reasonable
likelihood that the Plan and Distribution Agreement will benefit the Company
and its shareholders. In particular, the Directors noted that payments under
the Plan may provide additional incentives to promote the sale of shares of
the Fund, which may result in additional sales of the Fund's shares and an
increase in
- 40 -
<PAGE> 73
the Fund's assets. The Company pays the Distributor a distribution fee as
compensation for its services and expenses in connection with the
distribution of shares of the Fund at the annual rate of .35% of its
average net assets determined as of the close of business on each day
throughout the month. This distribution fee is paid by the Company, not by
individual accounts.
If the payment by the Fund to the Adviser of management fees should be
deemed to be indirect financing of the distribution of the Fund's shares, the
Plan authorizes such payment.
The Plan may be deemed by the Staff of the Commission to be a
"compensation plan" because payments made are not tied directly to actual
expenses incurred, and the Distributor is given discretion concerning what
expenses are payable under the Plan. The fees received by the Distributor
pursuant to the Plan may exceed, or particularly in the early years of the
Fund, be less than the estimated direct and indirect costs incurred by the
Distributor in providing its services under the Plan and the Distribution
Agreement with the Company. If the fees received exceed expenses incurred,
the Distributor may be deemed to have received a "profit" to the extent of
such excess. For example, if the Distributor pays $1 for distribution
related expenses and receives $2 under the Plan, the $1 difference could be
characterized as a profit for the Distributor. If the fees received are less
than expenses incurred, the Plan does not carry over any excess costs over
fees to a
- 41 -
<PAGE> 74
subsequent annual period. Any revenue from an increase in distribution
fees may not be used against excess costs incurred in a previous period.
The Plan and Distribution Agreement do not provide for specific payment
by the Company of any of the expenses of the Distributor, nor do they
obligate the Distributor or the Adviser to perform any specific kind or level
of distribution activities or incur any specific level of expense in
connection with distribution activities. After payments by the Distributor
for advertising, marketing, and distribution, the amounts remaining, if any,
may be used as the Distributor may elect. The Distributor expects to pay
approximately 65% of this fee annually to its registered representatives as
an asset based sales charge.
The Distributor also pays approximately 25% of its 12b-1 fees to
National Financial Services Company ("NFSC"), which conducts the daily sweep
of the brokerage accountants of the Distributor's customers who wish to
invest their cash balances in the Fund. This percentage will decrease if the
Fund's average daily assets grow above $200,000,000 since NFSC, which is
located at 82 Devonshire Street, Boston, Massachusetts 02109, receives a fee
for its services of .09% of the first $100,000,000 of the Fund's average
daily assets, .08% of the next $100,000,000 of average daily assets, and .06%
of the average daily assets in excess of $200,000,000. During 1996, the
Fund's average daily assets were
- 42 -
<PAGE> 75
approximately $162,000,000.
For the year ended December 31, 1996, fees paid to the Distributor
totaled $567,719, of which $370,486 was allocated to payments to sales
representatives of the Distributor, and $139,839 was paid to NFSC. The
Distributor incurred additional expenses of approximately $73,000 for
advertising and promotional activities and incurred additional administrative
expenses related to the Plan and Distribution Agreement and the printing and
mailing of prospectuses to persons other than current shareholders. No
interested person of the Company or any director of the Company who is not an
interested person of the Company had any direct or indirect interest in the
operation of the Plan or the Distribution Agreement. The Company believes
that the Plan has supported the Fund's growth and is monitoring the Fund's
increased promotional activities to determine whether they generate
measurable additional growth.
Under their terms, the Plan and Distribution Agreement shall remain in
effect from year to year as long as the continuance is approved at least
annually by a vote of a majority of all of the Directors and a majority of
the Directors who have no interest in the Plan, Distribution Agreement,
Adviser, or the Company. The Plan and Distribution Agreement may not be
amended to increase materially the amount to be spent for distribution
without the approval of a majority of outstanding shares of the Fund, and they
- 43 -
<PAGE> 76
may not be materially amended in any case without a vote of a majority
of the outstanding shares of the Fund and the vote of a majority of the
Directors and a majority of the Directors who have no interest in the Plan,
Distribution Agreement, Adviser, or the Company. So long as the Plan and
Distribution Agreement are in effect, the selection and nomination of the
Directors who are not interested persons of the Adviser or the Company shall
be committed to the discretion of the Directors who are themselves not such
interested persons. The Plan and Distribution Agreement may be terminated at
any time by vote of a majority of the Directors who are not such interested
persons, or by vote of a majority of the outstanding shares of the Fund. The
Plan and Distribution Agreement terminate automatically in the event of their
assignment. On April 23, 1997, the Company's Board of Directors unanimously
approved the continuation of the Plan and Distribution Agreement for an
additional year.
For further information about the Plan, see "MANAGEMENT OF THE FUND -
THE DISTRIBUTOR" in the Prospectus.
- 44 -
<PAGE> 77
DESCRIPTIONS OF THE FUND AND ITS CAPITAL STOCK
ORGANIZATION. The Walnut Street Prime Reserve Fund is a series of The
Walnut Street Funds, Inc., an open-end management investment company
organized as a Maryland corporation on January 22, 1993. Currently, the Fund
is the only series of the Company. The Articles of Incorporation of the
Company permit the Company's Directors to create additional series, each of
which would be a separate fund.
On May 1, 1993, General American Life Insurance Company, 700 Market
Street, St. Louis, Missouri 63101 ("General American"), owned of record or
beneficially 101,000 issued and outstanding shares of the Fund, which were
the only issued and outstanding shares of the Company and the Fund. The Fund
commenced the public distribution of its securities in late July 1993, and as
of December 31, 1996, and the date of this Statement of Additional
Information, the Fund was not aware of any holder of five percent (5%) or
more of its securities.
If the Adviser ceases to be the investment adviser to the Company or
the Fund, the right of the Company or Fund to use the identifying name
"Walnut Street" may be withdrawn.
The assets of the Company received for the issue or sale of shares of
the Fund and all income, earnings, profits, and proceeds
- 45 -
<PAGE> 78
thereof, subject only to the rights of creditors, are especially allocated
to the Fund, and constitute the underlying assets of the Fund. The
underlying assets of the Fund are segregated on the Company's books of
account, and are to be charged with the liabilities with respect to the
Fund and with a share of the general expenses of the Company. In the event
of the dissolution or liquidation of the Company, shareholders of the Fund
as a class are entitled to receive the underlying assets of the Fund
available for distribution.
CAPITAL STOCK. The Company's Articles of Incorporation currently
permit the Company to issue 5,000,000,000 shares of common stock, par value
$.001 per share, of which 1,000,000,000 shares have been classified and
allocated to the Fund. Shares of the Company (and thus the Fund) do not have
preemptive or conversion rights and when issued are fully paid and
nonassessable. The rights of redemption are described in the Prospectus and
elsewhere in this Statement of Additional Information. If an investor's
account balance falls below $250 due to redemption, after giving the investor
45 days' notice, the Fund may close the account and mail the proceeds to the
investor at the investor's address shown on the Fund's records.
The shareholders of the Company are entitled to a full vote for each
full share held and to a fractional vote for each fractional share. Subject
to the 1940 Act and Maryland law, the
- 46 -
<PAGE> 79
Directors themselves have the power to alter the number and the terms of
office of the Directors, to lengthen their own terms, or to make their
terms of unlimited duration subject to certain removal procedures, and
appoint their own successors; provided, however, that immediately after
such appointment the requisite majority of the Directors have been elected
by the shareholders of the Fund. The voting rights of shareholders are not
cumulative so that holders of more than 50% of the shares voting can, if
they choose, elect all Directors being selected while the holders of the
remaining shares would be unable to elect any Directors. It is the
intention of the Company not to hold annual shareholders' meetings. The
Directors may call shareholders' meetings for action by shareholder vote
as may be required by the 1940 Act, Maryland law, or the Company's Articles
of Incorporation. See "PURCHASE OF SHARES - INITIAL INVESTMENT AMOUNT AND
MINIMUM ACCOUNT BALANCE" in the Prospectus.
The Articles of Incorporation contain a provision permitted under
Maryland Corporation Law that under certain circumstances eliminates the
personal liability of the Directors to the Company or its shareholders. The
Articles of Incorporation and the Bylaws of the Company provide that the
Company will indemnify the Directors, officers, and employees of the Fund to
the full extent permitted by the Maryland General Corporation Law, which
permits indemnification of such persons against liabilities and expenses
incurred in connection with proceedings in which they may be
- 47 -
<PAGE> 80
involved because of their offices or employment with the Company. However,
nothing in the Articles of Incorporation or the Bylaws of the Company
protects or indemnifies a Director, officer or employee against any
liability to the Company or its shareholders to which he or she would
otherwise be subject by reason of willful malfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his or her office.
ADDITIONAL INFORMATION
With respect to the securities offered hereby, this Statement of
Additional Information and the Prospectus do not contain all the information
included in the Company's Registration Statement filed with the Commission
under the Securities Act of 1933. Pursuant to the rules and regulations of
the Commission, certain portions have been omitted. The Registration
Statements including the exhibits filed therewith may be examined at the
office of the Commission in Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are
not necessarily complete, and in each instance, reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such
reference.
- 48 -
<PAGE> 81
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectus and this Statement of Additional Information, in connection with
the offer contained in the Prospectus and this Statement of Additional
Information and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Company or the
Distributor. The Prospectus and this Statement of Additional Information do
not constitute an offer by the Company or by the Distributor to sell or
solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the Company or the
Distributor to make such offer in such jurisdiction.
AUDITOR.
-------
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154,
serves as the Fund's independent accountants, providing audit services
including (1) audit of the annual financial statements, and (2) assistance
and consultation in connection with Commission filings.
- 49 -
<PAGE> 82
FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS
- 50 -
<PAGE> 83
<TABLE>
Walnut Street Prime Reserve Fund
Schedule of Investments (Continued)
December 31, 1996
<CAPTION>
Principal Value
Amount (Note 2A)
- ---------- ---------
<C> <S> <C>
Commercial Paper
--92.3% Automobiles--1.2%
$1,000,000 Cooperative Assoc. of
Tractor Dealers, 6.55%,
1/06/97 ........................ $ 999,090
1,000,000 Cooperative Assoc. of
Tractor Dealers, 5.70%,
2/04/97 ........................ 994,617
-----------
1,993,707
-----------
Banking & Finance--
91.1%
1,250,000 AGA Capital, 5.65%, 2/11/97 .... 1,241,957
2,000,000 Alloman Funding Corp,
5.70%, 2/11/97 ................. 1,987,017
1,300,000 Anchor Funding, 5.47%,
1/02/97 ........................ 1,299,802
550,000 Anchor Funding, 5.48%,
1/17/97 ........................ 548,680
2,625,000 Anchor Funding, 5.48%,
2/11/97 ........................ 2,608,617
1,000,000 Anchor Funding, 5.70%,
2/11/97 ........................ 993,508
2,000,000 Anchor Funding, 5.55%,
3/13/97 ........................ 1,978,108
1,000,000 Astro Capital Corp, 5.40%,
2/05/97 ........................ 994,750
2,000,000 Astro Capital Corp, 5.40%,
3/31/97 ........................ 1,973,300
500,000 Atlas Funding Corp, 5.45%,
1/31/97 ........................ 497,729
2,575,000 Banca CRT Financial, 5.40%,
3/31/97 ........................ 2,540,624
1,300,000 Banca CRT Financial, 5.35%,
4/11/97 ........................ 1,280,681
1,050,000 Banca CRT Financial, 5.35%,
4/25/97 ........................ 1,032,211
1,400,000 Banca CRT Financial, 5.40%,
4/25/97 ........................ 1,376,060
1,506,000 Banner Receivables, 5.65%,
3/07/97 ........................ 1,490,637
5,000,000 Banner Receivables, 5.55%,
3/21/97 ........................ 4,939,104
850,000 Bluegrass Funding, 5.43%,
2/05/97 (LOC: Bank of
Tokyo-Mitsubishi) .............. 845,513
2,000,000 Broadway Capital Corp,
5.42%, 2/10/97 ................. 1,988,111
<PAGE>84
<CAPTION>
Principal Value
Amount (Note 2A)
- ---------- ---------
<C> <S> <C>
$1,000,000 BTM Capital Corp, 5.37%,
2/07/97 ........................ $ 994,481
1,900,000 BTM Capital Corp, 5.37%,
2/07/97 ........................ 1,889,514
500,000 BTM Capital Corp, 5.48%,
2/28/97 ........................ 495,586
3,000,000 Countrywide Home, 6.50%,
1/09/97 ........................ 2,995,667
2,150,000 Creative Capital, 5.38%,
1/21/97 ........................ 2,143,574
634,000 Creative Capital, 6.25%,
1/24/97 ........................ 631,468
2,000,000 Creative Capital, 5.40%,
2/03/97 ........................ 1,990,100
1,000,000 Creative Capital, 5.50%,
2/10/97 ........................ 993,889
1,500,000 Creative Capital, 5.60%,
3/10/97 ........................ 1,484,133
2,600,000 Dealers Capital Access
Trust, 5.45%, 1/17/97 .......... 2,593,702
1,050,000 Dynamic Funding, 5.57%,
1/08/97 ........................ 1,048,863
300,000 Dynamic Funding, 5.50%,
1/08/97 ........................ 299,679
1,160,000 Dynamic Funding, 5.60%,
1/31/97 ........................ 1,154,587
2,000,000 Dynamic Funding, 5.65%,
1/31/97 ........................ 1,990,583
1,000,000 Dynamic Funding, 6.07%,
1/03/97 ........................ 999,663
496,000 Dynamic Funding, 7.00%,
1/07/97 ........................ 495,421
900,000 Dynamic Funding, 5.60%,
3/12/97 ........................ 890,200
1,500,000 Dynamic Funding, 5.50%,
5/02/97 ........................ 1,472,271
2,000,000 Embarcado Center Venture
(Three), 5.62%, 1/15/97 ........ 1,995,629
1,150,000 Finova Capital Corp, 5.40%,
1/29/97 ........................ 1,145,170
350,000 Finova Capital Corp, 6.10%,
1/31/97 ........................ 348,221
2,000,000 Finova Capital Corp, 5.60%,
2/10/97 ........................ 1,987,556
1,275,000 Finova Capital Corp, 5.42%,
2/26/97 ........................ 1,264,250
1,960,000 Frontier Corporation,
5.37%, 1/17/97 ................. 1,955,322
3,650,000 Frontier Funding Corp,
5.47%, 3/06/97 ................. 3,614,506
4,675,000 Goldman Sachs Group, 8.25%,
1/02/97 ........................ 4,673,929
1,500,000 Gotham Funding, 5.70%,
1/15/97 ........................ 1,496,675
1,000,000 Gotham Funding, 5.40%,
2/03/97 ........................ 995,050
See notes to financial statements.
- -----------------------------------------------------------
1
<PAGE> 85
Walnut Street Prime Reserve Fund
Schedule of Investments (Continued)
December 31, 1996
<CAPTION>
Principal Value
Amount (Note 2A)
- ---------- ---------
<C> <S> <C>
Commercial Paper
(Continued)
Banking & Finance
(continued)
$3,000,000 Gotham Funding, 5.40%,
2/04/97 ........................ $2,984,700
1,500,000 Gotham Funding, 5.40%,
2/12/97 ........................ 1,490,550
5,000,000 Industrial Funding, 5.70%,
1/15/97 ........................ 4,988,917
1,000,000 Industrial Funding, 5.70%,
1/31/97 ........................ 995,250
2,531,000 Iris Partners, 5.80%,
1/29/97 (LOC: Sumitomo
Bank) .......................... 2,519,582
1,850,000 Iris Partners, 5.45%,
1/30/97 (LOC: Sumitomo
Bank) .......................... 1,841,878
850,000 Iris Partners, 5.52%,
2/07/97 (LOC: Sumitomo Bank) ... 845,178
1,450,000 Iris Partners, 5.45%,
3/03/97 (LOC: Sumitomo Bank) ... 1,436,610
2,000,000 Jet Funding, 5.41%, 1/31/97 .... 1,990,983
3,000,000 Jet Funding, 5.55%, 1/31/97 .... 2,986,125
1,568,000 Jet Funding, 5.50%, 2/28/97 .... 1,554,106
3,000,000 Oak Funding, 5.41%, 1/24/97 .... 2,989,631
1,000,000 Oak Funding, 5.58%, 2/20/97 .... 992,250
1,000,000 Orix America, 5.55%,
3/17/97 (LOC: Sanwa Bank) ...... 988,438
550,000 Orix America, 5.50%, 3/18/97
(LOC: Norinchukin Bank) ........ 543,614
2,500,000 Orix America, 5.58%, 3/18/97
(LOC: Norinchukin Bank) ........ 2,470,550
1,700,000 Orix America, 5.60%, 3/18/97
LOC: Norinchukin Bank) ......... 1,679,902
2,575,000 Orix America, 5.45%, 3/25/97
(LOC: Industrial Bank of Japan) 2,542,644
3,314,000 Pacific Dunlop Asia, 5.50%,
2/03/97 ........................ 3,297,292
1,000,000 Progress Funding, 5.75%,
1/13/97 ........................ 998,083
1,000,000 Progress Funding, 6.50%,
1/13/97 ........................ 997,833
1,100,000 Progress Funding, 5.55%,
1/15/97 ........................ 1,097,626
750,000 Progress Funding, 5.50%,
1/31/97 ........................ 746,563
1,000,000 Progress Funding, 5.43%,
2/03/97 ........................ 995,022
<PAGE> 86
<CAPTION>
Principal Value
Amount (Note 2A)
- ---------- ---------
<C> <S> <C>
$1,850,000 Progress Funding, 5.53%,
2/03/97 ........................ $1,840,758
1,675,000 Sanwa Business Credit Corp,
5.36%, 2/12/97 ................. 1,664,526
1,000,000 Shimizu International
Finance, 5.48%, 3/14/97
(LOC: Dai Ichi Kangyo) ......... 989,040
2,000,000 Strait Capital Corp, 5.52%,
2.28/97 ........................ 1,982,213
2,000,000 Strait Capital Corp, 5.60%,
3/05/97 ........................ 1,980,400
2,000,000 Strait Capital Corp, 5.60%,
4/15/97 ........................ 1,967,644
2,000,000 Strategic Asset Funding,
5.47%, 2/10/97 ................. 1,987,844
1,800,000 Strategic Asset Funding,
5.42%, 2/28/97 ................. 1,784,282
1,500,000 Strategic Asset Funding,
5.55%, 3/14/97 ................. 1,483,350
700,000 Toshiba International
Finance, 5.50%, 1/30/97 ........ 696,899
2,500,000 Toshiba International
Finance, 5.37%, 2/13/97 ........ 2,483,964
1,200,000 Toshiba International
Finance, 5.40%, 2/14/97 ........ 1,192,080
1,000,000 Tri-Lateral Capital,
5.43%, 1/08/97 ................. 998,944
1,000,000 Tri-Lateral Capital,
5.45%, 1/15/97 ................. 997,881
2,500,000 Tri-Lateral Capital,
5.40%, 2/03/97 ................. 2,487,625
1,000,000 Tri-Lateral Capital,
5.42%, 2/24/97 ................. 991,870
1,500,000 Tri-Lateral Capital,
5.50%, 3/05/97 ................. 1,485,562
1,000,000 Wood Street Funding Corp,
5.75%, 1/28/97 ................. 995,687
3,000,000 Wood Street Funding Corp,
5.41%, 2/24/97 ................. 2,975,655
1,000,000 Wood Street Funding Corp,
5.65%, 2/24/97 ................. 991,525
2,050,000 Working Capital Management
Company, 5.45%, 1/22/97 ........ 2,043,483
1,800,000 Working Capital Management
Company, 5.50%, 2/21/97 ........ 1,785,975
1,500,000 Working Capital Management
Company, 5.50%, 2/24/97 ........ 1,487,625
-----------
154,924,257
-----------
Total Commercial Paper
(Cost $156,917,964) ........... 156,917,964
===========
See notes to financial statements.
- -----------------------------------------------------------
2
<PAGE> 87
Walnut Street Prime Reserve Fund
Schedule of Investments (Continued)
December 31, 1996
<CAPTION>
Principal Value
Amount (Note 2A)
- ---------- ---------
<C> <S> <C>
Floating Rate Notes
--4.7%
$5,000,000 Federal Home Loan Mortgage
Corporation Floating Rate
Note, 5.65%, payable
quarterly, resets daily,
next coupon 3/30/97 <Fa> ....... $4,998,542
2,000,000 Student Loan Marketing
Association Floating Rate
Note, 5.42%, payable
quarterly, resets
Tuesdays, next coupon
2/22/97 <Fa> ................... 2,000,000
1,000,000 Student Loan Marketing
Association Floating Rate
Note, 5.44%, payable
quarterly, resets
Tuesdays, next coupon
2/02/97 <Fa> ................... 999,354
------------
Total Floating Rate Notes
(Cost $7,997,896) .............. 7,997,896
------------
Time Deposits--2.9%
1,000,000 Banco Espirito Santo,
5.625%, 4/02/97 ................ 1,000,000
1,000,000 Banco Espirito Santo,
5.8125%, 4/09/97 ............... 1,000,000
$1,000,000 Banco Espirito, 5.8125%,
5/15/97 ........................ $1,000,000
2,000,000 Banco Espirito, 6.1875%,
7/31/97 ........................ 2,000,000
------------
Total Time Deposits
(Cost $5,000,000) .............. 5,000,000
------------
Total Investments--
(Cost $169,915,860) <Fb>--
99.9% .......................... 169,915,860
Cash, receivables, and other
assets less liabilities--0.1% .. 139,281
------------
Net Assets--100% ............... $170,055,141
------------
<FN>
LOC Letter of Credit
<Fa> The rate stated is the rate in effect on December 31, 1996.
<Fb> The cost stated also represents the aggregate cost for Federal income tax
purposes.
See notes to financial statements.
- --------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 88
<TABLE>
<CAPTION>
Statement of Assets Statements of Operations
and
Liabilities For the year ended
December 31, 1996 December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets: Investment Income:
Investments at value (Note 2A) Interest ............................... $9,123,213
(Identified cost $169,915,860) ....... $ 169,915,860 ----------
Cash ................................... 70,542 Expenses:
Capital Stock Sold ..................... 450 Advisory (Note 3) ...................... 405,517
Interest receivable .................... 197,914 Administration and accounting
Deferred organization costs and other (Note 3) ............................. 152,691
assets (Note 2E) ..................... 159,305 Custodian (Note 3) ..................... 28,609
------------- Transfer agent ......................... 31,342
Total Assets ........................... 170,344,071 Audit .................................. 15,364
------------- Cash management ........................ 14,483
Liabilities: Distribution (Note 3) .................. 567,719
Payables: Directors (Note 4) ..................... 11,080
Advisory Fee (Note 3) ................ 65,409 Reports to shareholders ................ 31,141
Distribution Fees (Note 3) ........... 93,461 Registration and filing ................ 170,429
Accrued Expenses ....................... 130,060 Organization ........................... 40,641
------------- Legal .................................. 18,837
Total Liabilities ...................... 288,930 Other .................................. 5,315
------------- ----------
Net Assets: Total Expenses ....................... 1,493,168
(applicable to 170,064,087 shares Fees waived by adviser ................. (114,441)
issued and outstanding; 1 billion ----------
shares of $.001 par value Net Expenses ......................... 1,378,727
authorized) .......................... $ 170,055,141 ----------
============= Net Investment Income ................ 7,744,486
Net asset value, offering price and Net realized gain on investments ....... 1,621
repurchase price per share ----------
($170,055,141/170,064,087 shares) .... $ 1.00 Net increase in net assets resulting
============= from operations ...................... $7,746,107
Sources of Net Assets: ==========
Capital stock at par ................... $ 170,064
Capital surplus ........................ 169,894,023
Accumulated net realized loss on
investments .......................... (8,946)
-------------
Net Assets ............................... $ 170,055,141
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 89
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year year
ended ended
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 7,744,486 $ 6,166,455
Net realized gain on investments .................................... 1,621 202
------------- -------------
Net increase in net assets resulting from operations .............. 7,746,107 6,166,657
------------- -------------
Dividends to Shareholders:
Dividends from net investment income ................................ (7,744,486) (6,166,455)
------------- -------------
Capital Stock Transactions:
Proceeds from capital stock sold .................................... 174,323,154 193,059,843
Proceeds from shares issued on reinvestment of dividends ............ 7,743,223 6,166,058
Cost of capital stock repurchased ................................... (168,929,181) (131,842,597)
------------- -------------
Increase in net assets resulting from capital stock transactions .. 13,137,196 67,383,304
------------- -------------
Increase in Net Assets .......................................... 13,138,817 67,383,506
Net Assets:
Beginning of year ................................................... 156,916,324 89,532,818
------------- -------------
End of year ......................................................... $ 170,055,141 $ 156,916,324
============= =============
Change in Capital Stock Outstanding:
Shares sold ......................................................... 174,323,154 193,059,843
Shares issued on reinvestment of dividends .......................... 7,743,223 6,166,058
Shares repurchased .................................................. (168,929,181) (131,842,597)
------------- -------------
Net increase ...................................................... 13,137,196 67,383,304
Shares outstanding, beginning of year ............................... 156,926,891 89,543,587
------------- -------------
Shares outstanding, end of year ..................................... 170,064,087 156,926,891
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 90
Financial Highlights
<TABLE>
<CAPTION>
For the
Period
For the For the For the July 21,
year year year 1993<F*>
ended ended ended through
December 31, December 31, December 31, December 31,
1996 1995 1994 1993
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share Data:
Net asset value at beginning of period ............... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ------- -------
Income from investment operations
Net investment income ................................ 0.048 0.053 0.036 0.011
-------- -------- ------- -------
Dividends to shareholders
Dividends from net investment income ................. (0.048) (0.053) (0.036) (0.011)
-------- -------- ------- -------
Net asset value at end of period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======= =======
Total Return: ........................................ 4.88% 5.40% 3.62% 2.46%<F**>
Ratios/Supplemental Data:
Net assets at end of period (000's omitted) .......... $170,055 $156,916 $89,533 $54,585
Ratio to average net assets of:
Expenses, net of waiver from adviser
(Note 3) ......................................... 0.85% 0.85% 0.85% 0.85%<F**>
Expenses, prior to waiver from adviser
(Note 3) ......................................... 0.92% 0.93% 1.05% 1.07%<F**>
Net investment income, net of waiver from adviser
(Note 3) ......................................... 4.78% 5.25% 3.64% 2.46%<F**>
<FN>
<F*> Commencement of investment operations.
<F**> Annualized.
See notes to financial statements.
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 91
Notes to Financial Statements
1. Organization and business
The Walnut Street Funds, Inc. (the "Company") was organized as a Maryland
Corporation on January 22, 1993 and is registered under the Investment Company
Act of 1940 as an open-end management investment company. The Company currently
consists of one series. The Walnut Street Prime Reserve Fund (the "Fund")
commenced investment operations on July 21, 1993.
2. Significant accounting policies
(A) Security Valuations
Securities are valued at amortized cost which approximates market value. This
method values a security at its cost at the time of purchase and thereafter
assumes a constant rate of accretion or amortization to maturity of any discount
or premium.
(B) Federal Income Taxes
The Fund is treated as a separate entity for federal income tax purposes. The
Fund's policy is to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and distribute income to
shareholders within the allowable time limits. Therefore, no federal income tax
provision is required.
At December 31, 1996, the Portfolio had a capital loss carryover of
approximately $8,900 which is available to offset future net realized gains on
securities transactions. Such capital loss carryover will expire in fiscal year
2002.
(C) Dividends to Shareholders
Net investment income is declared daily and paid monthly.
Income and capital gains distributions, if any, are determined in accordance
with income tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles.
(D) Security Transactions and Investment Income
Security transactions are recorded on the trade date and interest income is
accrued daily. Discounts and premiums on securities purchased are accreted and
amortized over the life of the respective securities.
(E) Organization Costs
Costs incurred in connection with the organization and initial registration of
the Fund are being amortized over the period not to exceed 60 months from the
date upon which the Fund commenced investment operations.
If any or all of the shares representing initial capital of the Fund are
redeemed by any holder thereof prior to the end of the amortization period, the
proceeds will be reduced by the unamortized organizational expense balance in
the same proportion as the number of such shares redeemed bears to the number of
initial shares outstanding immediately before the redemption.
(F) Financial Statements Preparation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues
7
<PAGE> 92
Notes to Financial Statements (continued)
and expenses for the period. Actual results could differ from those estimates.
3. Advisory, administration and other transactions with affiliates
Conning Asset Management Company (formerly, General American Investment
Management Company) acts as the Fund's investment adviser (the "Adviser"). The
Adviser manages the investments of the Fund and is responsible for all purchases
and sales of the Fund's portfolio securities.
As compensation for its services, the Fund pays the Adviser a Management Fee,
accrued daily and payable monthly, that is equal, on an annual basis, to .25% of
the Fund's average daily net assets on the first $250,000,000 of the Fund's net
assets, .24% of the Fund's average daily net assets in excess of $250,000,000 up
to $500,000,000, .23% of the Fund's average daily net assets in excess of
$500,000,000 up to $750,000,000, .22% of the Fund's average daily net assets in
excess of $750,000,000 up to $1,000,000,000 and .21% of the Fund's average daily
net assets in excess of $1,000,000,000.
The Adviser has voluntarily agreed to waive fees to the extent that total
expenses exceed .85% of the average daily net assets of the Fund. For the year
ended December 31, 1996, the Adviser waived $114,441 of advisory fees.
The Bank of New York acts as the Fund's administrator (the "Administrator") and
assists in supervising the operations of the Fund. The Bank of New York also
serves as the Fund's custodian and accounting agent.
The Administrator has agreed to provide facilities, equipment and personnel to
carry out administrative services for the Fund, including, among other things,
monitoring the custodian, fund accounting, and administrative services.
The Administrator's fee is accrued daily and is payable monthly at the rate of
.10% of the Fund's average daily net assets up to $100,000,000, .07% of the next
$400,000,000 of average daily net assets, and .03% of average daily net assets
in excess of $500,000,000, with a minimum fee of $6,000 per month.
The exclusive distributor of the Fund's shares is Walnut Street Securities,
Inc. (the "Distributor"), a registered broker dealer that is a wholly-owned
subsidiary of the Adviser.
The Fund has adopted a distribution plan ("12b-1 Plan") pursuant to which the
Distributor may be reimbursed for expenses incurred in connection with the
distribution of Fund shares. The aggregate annual amount payable by the Fund as
provided in the 12b-1 Plan may not exceed .35% of the Fund's average daily net
assets.
4. Directors' Fees
Unaffiliated directors are paid $500 for each board meeting attended, plus
reimbursement for travel and out-of-pocket expenses.
8
<PAGE> 93
Independent Auditors' Report
To the Shareholders and Board of Directors of
Walnut Street Prime Reserve Fund:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Walnut Street Prime Reserve Fund
as of December 31, 1996, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the three-year period then ended and for the period from July 21, 1993
(commencement of investment operations) through December 31, 1993. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above presents fairly, in all material respects, the financial position of the
Walnut Street Prime Reserve Fund as of December 31, 1996, the results of its
operations, the changes in its net assets and its financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
KPMG Peat Marwick llp
New York, New York
February 7, 1997
9
<PAGE> 94
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
(1) Financial Statements Included in Part A, the Prospectus:
Financial Highlights as of December 31, 1996.
(2) Financial Statements Included in Part B, the Statement of
Additional Information:
Schedule of Investments as of December 31, 1996 (audited).
Statement of Assets and Liabilities as of December 31, 1996
(audited).
Statement of Operations for the period January 1, 1996,
through December 31, 1996 (audited).
Statement of Changes in Net Assets for the periods January
1, 1995, through December 31, 1995, and January 1, 1996,
through December 31, 1996 (audited).
<PAGE> 95
Financial Highlights for the partial year ended December
31, 1993, and the years ended December 31, 1994, 1995,
and 1996 (unaudited)
Notes to audited Financial Statements as at December 31,
1996.
Report of KPMG Peat Marwick LLP.
(3) Financial Statements included in Part C:
None.
(b) Exhibits
(1)(a) Articles of Incorporation of Registrant.
(2) Bylaws of Registrant.
(3) Not applicable.
(4) Not applicable.
(5)(a) Investment Management Agreement between the Registrant and
General American Investment Management Company now known as Conning Asset
Management Company.
(5)(b) Administration Agreement between the Registrant and The
Bank of New York.
(5)(c) Company Accounting Agreement between the Registrant and The
Bank of New York.
(5)(d) Terms of Sweep Account Arrangements with National Financial
Services Corporation.
(5)(e) Cash Management and Related Services Agreement between the
Registrant and The Bank of New York.
(6) General Distribution Agreement between the Registrant and
Walnut Street Securities, Inc.
(7) Not applicable.
- 2 -
<PAGE> 96
(8) Custody Agreement between the Registrant and The Bank of
New York and Schedule of Remuneration.
(9) Transfer Agency Agreement between the Registrant and BISYS
Funds Services, Inc.<F*>
(10) Opinion of Counsel.
(11) Consent of Independent Auditors.
(12) Not applicable.
(13) Purchase Agreement between the Registrant and General
American Life Insurance Company.
(14) Not applicable.
(15) Registrant's Distribution and Service Plan Pursuant to Rule
12b-1.
(16) Schedule for Computation of Current Yield and Effective
Yield.
(17) Financial Data Schedule.
(18) Not applicable.
[FN]
- --------------------------
<F*> Incorporated by reference by Amendments No. 6 and 4 to the Registrant's
Registration Statement on Form N-1A as electronically filed on April
24, 1996, Registration Nos. 33-59044 and 811-7552, respectively.
Item 25. Persons Controlled by or Under Common Control with Registrant.
--------------------------------------------------------------
The Board of Directors of Registrant has members who serve on the boards of
other investment companies and accounts advised by the Adviser. The officers
of these investment companies and accounts also are substantially identical.
The Registrant, however, believes that it is not under common control with
these other investment companies and accounts since the power residing in the
respective boards and officers arises as the result of official positions
held with the respective funds.
Without limiting the foregoing, the Registrant attaches as Exhibit
17(b) an Organization Chart of General American Life Insurance Company and
its Affiliates.
- 3 -
<PAGE> 97
Item 26. Number of Holders of Securities
-------------------------------
December 31, 1996
Title of Class Number of Record Holders
- -------------- ------------------------
The Walnut Street Prime Reserve Fund 30,512
Item 27. Indemnification
---------------
The Company's Articles of Incorporation require that the Company
indemnify it officers, Directors, and agents as follows:
EIGHTH:
(a) The Corporation shall indemnify its Directors,
officers, and agents to the extent required by law and may, in
its discretion, indemnify its Directors, officers, and agents
against liabilities and expenses reasonably incurred in
connection with any proceeding to which such Director, officer,
or agent is made a party by reason of his or her actions in an
official capacity on the Corporation's behalf; provided,
however, that the Corporation shall not indemnify any Director,
officer, or agent against liability or expense arising by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties of his or her office; nor
shall any indemnity or provision of these Articles of
Incorporation be interpreted inconsistently with the
requirements of the Maryland General Corporation Law, or the
Securities Act of 1933, as amended, or the 1940 Act.
(b) No Director or officer of the Corporation
shall be liable to the Corporation or its shareholders for
monetary damages in any action or proceeding at law or in
equity for any act or omission of such Director or officer
acting in his or her capacity as such, provided that the
exculpation set forth in this paragraph (b) shall not apply (i)
to the extent that it is proved that such Director or officer
actually received an improper benefit or profit in money,
property, or services, or (ii) to the extent that a judgment or
other final adjudication adverse to such Director or officer is
entered in a proceeding that such person's action, or failure
to act, was the result of active and deliberate dishonesty of
such Director or officer and was material to the cause of
action adjudicated in the proceeding. Nothing in this
paragraph (b) shall exculpate or protect or be deemed or
construed to exculpate or protect any Director or officer of
the Corporation against any
- 4 -
<PAGE> 98
liability to the Corporation or its shareholders to which such
Director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the
performance of his or her duties, or by reason of such
Director's or officer's reckless disregard of his or her
obligations and duties as a Director or officer of the
Corporation.
The Company's Bylaws develop the Company's indemnification obligation
in the following manner:
11.01 Indemnification Rights. Every person who is
----------------------
or was a director, officer, or employee of the Corporation or
of any other corporation which he served at the request of this
Corporation and of which this Corporation owns or owned shares
of capital stock or of which it is or was a creditor shall have
a right to be indemnified by this Corporation to the full
extent permitted by applicable law, against all judgments,
fines, penalties, settlements (collectively referred to as
"liabilities") and reasonable expenses including attorney's
fees incurred by him in connection with or resulting from any
threatened, pending, or completed claim, action, suit, or
proceeding, whether criminal, civil, administrative, or
investigative, in which he may become involved as a party or
otherwise by reason of his being or having been a director,
officer or employee, except as provided in Articles 11.02 and
11.03 of these Bylaws, or if prohibited by the Maryland General
Corporation Law in effect at the time.
11.02 Disabling Conduct. No such director, officer
-----------------
or employee shall be indemnified for any liabilities or
expenses arising by reason of "disabling conduct," whether or
not there is an adjudication of liability. "Disabling conduct"
means willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of
office.
Whether any such liability arose out of disabling
conduct shall be determined: (a) by a final decision on the
merits (including, but not limited to, a dismissal for
insufficient evidence) by a court or other body, that the
person to be indemnified was not liable by reason of disabling
conduct; or (b) in the absence of such a decision, by a
reasonable determination, based upon a review of the facts.
Such a determination shall be
- 5 -
<PAGE> 99
reached: (i) by the vote of a majority of a quorum of
directors who are neither "interested persons" of the
Corporation (as such term is defined in the 1940 Act) nor
parties to the action, suit, or proceeding in question
("disinterested, non=party directors"), or (ii) by any
other reasonable and fair means not inconsistent with any of
the above.
The termination of any action, suit, or proceeding
by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create
---- ----------
a presumption that any liability or expense arose by reason of
disabling conduct.
11.03 Other Disqualifying Conduct. No such person
---------------------------
shall be indemnified under this Article 11 for any liabilities
or expenses incurred by reason of service in that capacity
(although such person shall be indemnified for reasonable
expenses if such person is successful on the merits or
otherwise in the defense of any proceeding described in Article
11.01, provided that such person did not engage in "disabling
conduct" as determined pursuant to Article 11.02), if it is
established that: (a) the act or omission of such person was
material to the matter giving rise to the proceeding and (i)
was committed in bad faith or (ii) was the result of active and
deliberate dishonesty; or (b) such person actually received an
improper personal benefit in money, property, or services; or
(c) in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was
unlawful (such conduct as described in (a), (b), and/or (c)
being hereinafter referred to as "disqualifying conduct");
provided that a court of appropriate jurisdiction may, upon
application of the person seeking indemnification, order
indemnification in accordance with the terms of the Maryland
General Corporation Law, whether or not it is established that
such person has engaged in disqualifying conduct under this
Article 11.03.
Whether a director has engaged in disqualifying
conduct shall be determined in the manner specified in the
Maryland General Corporation Law, as it may be amended from
time to time.
11.04 Expenses Prior to Determination. Any
-------------------------------
reasonable expense (including attorney's fees) may
- 6 -
<PAGE> 100
be paid by the Corporation in advance of the final disposition
of the claim, action, suit or proceeding, as authorized by the
Board of Directors in the specific case, (a) upon receipt of a
written undertaking by or on behalf of the indemnitee to repay
the advance if it shall be ultimately determined that disabling
conduct (as defined in Article 11.02), or disqualifying conduct
(as defined in Article 11.03), has occurred; and (b) receipt of
a written affirmation by the indemnitee of the indemnitee's
good faith belief that he has not engaged in disqualifying
conduct; and (c) provided that (i) the indemnitee shall provide
security for that undertaking, or (ii) the Corporation shall be
insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of disinterested,
non=party directors, or independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial=type inquiry), that
there is a reason to believe that the indemnitee ultimately
will be found entitled to indemnification.
A determination pursuant to subparagraph (c) (iii)
of this Article 11.04 shall not prevent the recovery from any
indemnitee of any amount advanced to such person as
indemnification if such person is subsequently determined not
to be entitled to indemnification; nor shall a determination
pursuant to said subparagraph prevent the payment of
indemnification if such person is subsequently found to be
entitled to indemnification. Any determination pursuant to
this Article 11.04 shall be made in conformity with the
requirements of the Maryland General Corporation Law, as then
in effect.
- 7 -
<PAGE> 101
11.05 Provision Not Exclusive. The
-----------------------
indemnification provided by this Article 11 shall not be deemed
exclusive of any rights to which those seeking indemnification
may be entitled under any law, agreement, vote of shareholders,
or otherwise.
11.06 Notice to Shareholders. Any
----------------------
indemnification of, or advances to, a director, officer, or
employee in accordance with this Article 11, if arising out of
a proceeding by or in the right of the Corporation, shall be
reported in writing to the shareholders with the notice of the
next shareholders' meeting or prior to such notice.
11.07 General. No indemnification provided
-------
by this Article shall be inconsistent with the 1940 Act, the
Securities Act of 1933, or the Maryland General Corporation
Law.
11.08 Duration. Any indemnification provided
--------
by this Article shall continue as to a person who has ceased to
be a director, officer, or employee, and shall inure to the
benefit of the heirs, executors and administrators of such
person.
- 8 -
<PAGE> 102
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to
Directors, officers, and agents of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a Director, officer, or agent of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Director,
officer, or agent, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The Registrant insures its Directors, officers, and employees against
certain liabilities, and certain costs of defending claims against such
Directors and officers. The policy provides coverage for breaches of duty,
neglect, errors, misstatements, misleading statements, omissions, and other
acts, but the policy excludes from such coverage claims
- 9 -
<PAGE> 103
alleging fraud, dishonesty, and criminal or malicious acts or omissions.
As permitted by section 17(i) of the 1940 Act, it is anticipated that
pursuant to the Investment Management Agreement, Administration Agreement,
Company Accounting Agreement, Custody Agreement, Cash Management and Related
Services Agreement, Transfer Agency Agreement, and Distribution Agreement,
the Manager, the Distributor, the Administrator, and the Transfer Agent may
be indemnified against certain liabilities which they may incur provided,
however, that nothing contained in such agreements shall protect such parties
for the willful misfeasance, bad faith or gross negligence in the performance
of their respective duties.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Articles of Incorporation, its By-Laws, the Management
Agreement, the Administration Agreement, the Company Accounting Agreement,
the Custody Agreement, the Cash Management Related Services Agreement, the
Transfer Agency Agreement, and the Distribution Agreement in a manner
consistent with Release No. 11330 of the Securities and Exchange Commission
under the 1940 Act.
- 10 -
<PAGE> 104
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Conning Asset Management Company, formerly known as General
American Investment Management Company (the "Investment Adviser"), was
incorporated in Missouri on September 13, 1982. It is registered as an
investment adviser with the Commission and the State of Missouri and is a
wholly-owned subsidiary of General American Holding Company which, in turn,
is wholly-owned by General American Life Insurance Company. For further
information see the Investment Adviser's Form ADV, as amended and filed with
the Commission.
The Adviser serves as investment adviser to other investment companies.
The Adviser also has clients that are not affiliated with General American or
its subsidiaries. All of the individuals who work for the Adviser are
employees of General American or its subsidiaries, who keep time records
establishing a cost basis for their work which is computed by General
American's cost accounting staff. The directors and officers of the Adviser
have held, during the past two fiscal years, the following positions of a
substantial nature:
- 11 -
<PAGE> 105
<TABLE>
<CAPTION>
Name of Director or Other Business Profession,
Officer of Conning Position at Conning Vocation, or Employment
Asset Management Co. Asset Management Co. during Past Two Years
- -------------------- -------------------- ---------------------
<S> <C> <C>
Douglas R. Koester Senior Vice President and Senior Portfolio Manager Vice President, General
Director American Life Insurance Company; Treasurer and
Director of Cova Corporation; Chief Investment
Officer and Director of Cova Investment Advisory
Corporation (IL); and Director of Conning Corporation
Matthew P. McCauley General Counsel Associate General Counsel and Vice President, General
American Life Insurance Company. Also, Director,
Vice President, General Counsel, and Secretary for
several other General American subsidiaries all at
700 Market Street, St. Louis, MO 63101, including
Equity Intermediary Company, Red Oak Realty Company,
and White Oak Royalty; except General American
Holding Company, 13045 Tesson Ferry Road, St. Louis,
MO 63128; Paragon Life Insurance Company, 100 S.
Brentwood, St. Louis, MO 63105. General Counsel and
Secretary, Reinsurance Group of America,
- 12 -
<PAGE> 106
<S> <C> <C>
Incorporated, 660 Mason Ridge Center Drive, St.
Louis, MO 63141. Director and Secretary, General
American Capital Company, Cova Corporation; Assistant
Secretary and Director, Cova Financial Services Life
Insurance Company, Cova Financial Life Insurance
Company, and First Cova Life Insurance Company.
General Counsel and Secretary, Conning Corporation.
Director for RGA Reinsurance Company, Walnut Street
Advisers, Inc. and Walnut Street Securities, Inc.,
Suite 220, 1801 Park 270 Drive, St. Louis, MO 63146.
Secretary to The Walnut Street Funds, Inc.
- 13 -
<PAGE> 107
<S> <C> <C>
Leonard M.Rubenstein Chief Executive Officer Executive Vice President and Director, General
and Director American Life Insurance Company. Also, Director of
several General American subsidiaries, all at 700
Market Street, St. Louis, MO 63101; except Paragon
Life and General American Holding Company, whose
addresses are given for Mr. McCauley. Treasurer,
General American Capital Company. Senior Vice
President-Investments, Treasurer, and Director,
Reinsurance Group of America, Incorporated, whose
address was previously listed under Mr. McCauley.
Chairman and Director, Cova Financial Services Life
Insurance Company, Cova Financial Services Life
Insurance Company, Cova Financial Life Insurance
Company, First Cova Life Insurance Company, Cova
Investment Advisory Corporation, and Cova Investment
Allocation Corporation. Chief Executive Officer,
Chairman, and Director for Conning Corporation.
- 14 -
<PAGE> 108
<S> <C> <C>
Director for the following: General Life Insurance
Company, Security Equity Life Insurance Company, BHIF
America de Vida Seguros S.A. (Chile), Manantial
Seguros de Vida S.A. (Argentina), Red Oak Royalty
Company, General Life Insurance Company of America,
and RGA Reinsurance Company, Secretary and Director
for RGA Sudamerica S.A.
Maurice W. Slayton President and Director Director of GAN National Insurance Company, and GAN
North American Insurance Company, 120 Wall Street,
New York, NY 10005; Director of Cox Insurance
Holdings Plc., 34 Leadenhall Street, London, EC3A
1AT, England; Director of MedSpan, Inc., 55
Farmington Avenue, Suite 601, Hartford, CT 06105;
President/CEO, Director of Conning & Company,
CityPlace II, 185 Asylum Street, Hartford, CT 06103;
Director of Tenant Risk Services, Inc., CityPlace II,
185 Asylum Street, Hartford, CT 06103; Director of
PennCorp Financial, 745 Fifth Avenue, Suite 500, New
York, NY 10151; Director of Arlberg
- 15 -
<PAGE> 109
<S> <C> <C>
Holding Company, Inc., 520 Pike Street, 20th Floor,
Seattle, WA 98104-4004; Director of Robert Plan
Corporation, 8 Freer Street, Lynbrook, NY 11563;
Director and President of Conning Corporation, 700
Market Street, St. Louis, MO 63101
Mark E. Hansen Executive Vice President Director of Western Indemnity Insurance Company, 8720
and Director Gessner, Suite 1000, Houston, TX 77279; Director of
Conning, Inc. and Conning Corporation, 700 Market
Street, St. Louis, MO 63101. Executive Vice
President and Director of Conning & Company, 185
Asylum Street, Hartford, CT 06103.
Donald L. McDonald Senior Vice President Senior Vice President of Conning & Company, 185
Asylum Street, Hartford, CT 06103.
Michael D. McLellan Senior Vice President President of Red Oak Realty and White Oak Realty, 700
and Director Market Street, St. Louis, MO 63101; and Director of
Conning Corporation, 700 Market Street, St. Louis, MO
63101.
David N. Reid Senior Vice President Senior Vice President of Conning & Company, 185
Asylum Street, Hartford, CT 06103.
- 16 -
<PAGE> 110
<S> <C> <C>
William C. Shenton Senior Vice President Senior Vice President of Conning & Company, 185
Asylum Street, Hartford, CT 06103
Joann T. Tanaka Senior Vice President Director of Conning Corporation, 700 Market Street,
and Director St. Louis, MO 63101.
Fred M. Schpero Vice President, Secretary of Conning, Inc.; Vice President of Conning
Secretary and Chief Corporation; and Vice President, Secretary and Chief
Financial Officer of Conning & Company, 185 Asylum
St., Hartford, CT 06103.
</TABLE>
Item 29. Principal underwriters
----------------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the rules promulgated thereunder are
maintained at General American Investment Management Company, 700 Market
Street, St. Louis, MO 63102, Walnut Street Securities, Inc., 670 Mason Ridge
Center Drive, Suite 300, St. Louis, Missouri 63141; The Bank of New York, 110
Washington Street,
- 17 -
<PAGE> 111
New York, New York 10286; National Financial Services Company, 82 Devonshire
Street, L4, Boston, Massachusetts 02109; and BISYS Fund Services, Inc., 3435
Stelzer Road, Columbus, Ohio 43219.
Item 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
------------
Not applicable
- 18 -
<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(a) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 5 to Registration Statement on Form N-1A to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of St. Louis, and State of Missouri, on the 20th day of February, 1997.
The Walnut Street Funds, Inc.
By: /s/ Richard J. Miller
--------------------------------------
Richard J. Miller, President
Pursuant to the requirements of the Securities of 1933, this
Registration Statement has been signed below by the following Persons in the
capacities and on the dates indicated.
(Signature) (Title) (Date)
--------- ----- ----
/s/ Richard J. Miller President and February 20, 1997
- -------------------------- Director
Richard J. Miller (Principal
executive
officer)
/s/ Richard A. Liddy Director February 21, 1997
- -------------------------
Richard A. Liddy
- 19 -
<PAGE> 113
/s/ Theodore M. Armstrong Director February 20, 1997
- -------------------------
Theodore M. Armstrong
/s/ Harry E. Rich Director February 20, 1997
- -------------------------
Harry E. Rich
/s/ Alan C. Henderson Director February 21, 1997
- -------------------------
Alan C. Henderson
/s/ E. Thomas Hughes Treasurer February 21, 1997
- ------------------------- (Principal
E. Thomas Hughes, Jr. financial
officer)
- 20 -
<PAGE> 1
EXHIBITS
Exhibit 1(a)
------------
Articles of Incorporation of Registrant
ARTICLES OF INCORPORATION
OF
THE WALNUT STREET FUNDS, INC.
FIRST: The undersigned, whose address is 100 North Broadway, Suite
1300, St. Louis, Missouri 63102, being at least eighteen years of age, does
hereby form a corporation under the general laws of the State of Maryland.
SECOND: The name of the Corporation (which is hereinafter called
the "Corporation") is The Walnut Street Funds, Inc.
THIRD: The Corporation's principal office in the State of Maryland
is located at 32 South Street, Baltimore, Maryland 21202. The name of its
resident agent, whose address is the same as the Corporation's principal
office in the State of Maryland, is The Corporation Trust, Incorporated.
Said resident agent is a Maryland corporation.
FOURTH: The Corporation is formed for the following purposes:
(a) To operate the business of an open-end management
investment company registered under the federal government's Investment
Company Act of 1940, as amended (the "1940 Act"), and to exercise all powers
necessary and appropriate to the conduct of such business.
<PAGE> 2
(b) To subscribe for, invest in, purchase or otherwise acquire,
and to own, hold, sell, exchange, pledge, or otherwise dispose of, securities
of every nature and kind, whether now in existence or hereafter created.
(c) To act as financial or fiscal agent for any person, firm,
or corporation and as such to manage, control, and deal with, in any and
every way whatsoever, the property, holdings, investments, and business
interests thereof.
(d) To purchase, retire, redeem, hold, sell, reissue, transfer,
and otherwise deal in shares of its own capital stock; and to apply to such
purchase, retirement, or acquisition any funds or property of the
Corporation, whether capital or surplus or otherwise, as may be permitted by
law.
(e) To do any and all of the acts herein set forth or implied
and such other acts as are incidental or conducive to the attainment of the
objectives and purposes of the Corporation; and to do any and all such acts
either as principal or in the capacity of agent, broker, factor, contractor,
or otherwise.
(f) To engage in any lawful act or activity for which
corporations may be organized under the general corporation laws of Maryland,
and to have all the powers of a corporation under the applicable corporation
laws, as in effect from time to time, of the State of Maryland.
FIFTH: The Board of Directors of the Corporation is empowered to
authorize the issuance from time to time of shares of common stock, whether
now or hereafter authorized and without
- 2 -
<PAGE> 3
obtaining stockholder approval, for such consideration as the Board of
Directors may deem advisable and subject to such limitations as may be set
forth in these Articles of Incorporation, Articles Supplementary, the Bylaws
of the Corporation, or the general laws of the State of Maryland.
No holder of stock of the Corporation shall have by reason of being a
stockholder any right to purchase or subscribe for any shares of the common
stock of the Corporation or any other security of the Corporation that it may
issue or sell (whether out of the number of shares authorized by these
Articles of Incorporation, or out of any shares of the common stock of the
Corporation acquired by it after the issue thereof, or otherwise) other than
such right, if any, as the Board of Directors, in its discretion, may
determine.
The total number of shares of common stock of all classes which the
Corporation is authorized to issue is Five Billion (5,000,000,000) shares of
stock. The par value of each share shall be one-tenth of one cent ($0.001),
making the par value of the authorized shares Five Million Dollars
($5,000,000.00). The stock of the Corporation may be issued in one or more
classes, referred to in these Articles as "series".
One Billion (1,000,000,000) of the authorized shares are hereby
classified into The Walnut Street Prime Reserve Fund Series, subject to the
authority of the Board of Directors to increase or decrease the number so
designated, and which shares of such Series shall have the preferences,
rights, powers, restrictions,
- 3 -
<PAGE> 4
limitations as to dividends, qualifications, and terms and conditions of
redemption as set forth in Article SIXTH.
The Board of Directors of the Corporation is authorized, from time to
time, by resolution to classify or reclassify the balance of the authorized
shares and any other unissued shares of stock of the Corporation, into one or
more series as such are or may be established from time to time, by setting
or changing the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms
and conditions of redemption of such stock, and to increase or decrease the
number of authorized shares of any series, but the number of shares of any
series shall not be reduced by the Board of Directors below the number of
shares thereof then outstanding, and the total number of authorized shares
shall not be increased above the number of shares authorized in the
Corporation's Articles of Incorporation except by amendment thereto.
Before issuing any shares affected by such a classification or
reclassification, or by such an increase or decrease in the number of
authorized shares, the Corporation shall file Articles Supplementary for
record with the Maryland Department of Assessments and Taxation. Without
limiting the generality of the foregoing, (i) 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 its discretion from time to
time, any shares of any series reacquired by the Corporation; and (ii) the
- 4 -
<PAGE> 5
dividends and distributions of investment income and capital gains with
respect to the stock of the Corporation and with respect to each series that
may hereafter be created shall be in such amount as may be declared from time
to time by the Board of Directors, and such dividends and distributions may
vary from series to series to such extent and for such purposes as the Board
of Directors may deem appropriate, including but not limited to, the purpose
of complying with the requirements of regulatory authorities.
If, in the sole determination of the Board of Directors, the
continuation of the offering of the shares of any one or more series is no
longer in the best interests of the Corporation, the Corporation may cease
offering such shares and may, by majority vote of the Board of Directors,
require the redemption of all outstanding shares of stock of such series,
upon thirty (30) days' prior written notice to the holders thereof, all
subject to the requirements of these Articles of Incorporation, applicable
securities laws and regulations, and the Maryland General Corporation Law.
SIXTH:
(1) The establishment and designation of any series of shares shall
be effective upon (i) the authorization of such series by vote of a majority
of the Board of Directors, including the establishment and designation of the
preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of such
series and (ii) the filing for record of any Articles Supplementary required
by the
- 5 -
<PAGE> 6
Maryland General Corporation Law in the case of series other than
those created by these Articles of Incorporation. At any time when there are
no shares outstanding or subscribed for a particular series previously
established and designated by the Board of Directors, the series may be
liquidated upon a similar vote and filing.
(2) The shares of any series established by these Articles of
Incorporation or that may from time to time be established by the Board of
Directors (unless provided otherwise by the Board of Directors with respect
to such series at the time of establishment) shall have the following
relative preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption:
(a) Assets Belonging to a 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, 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 purposes,
subject only to the rights of creditors, and shall be so recorded upon the
books and accounts of the Corporation. Such consideration, assets, income,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payment derived from
- 6 -
<PAGE> 7
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, profits, or payments which are
not readily identifiable as belonging to any particular series (collectively
"General Items"), such General Items shall be allocated by or 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.
(b) Liabilities Belonging to a Series. The assets belonging to
---------------------------------
each particular series shall be charged with the liabilities of the
Corporation in respect of that series and all expenses, costs, charges and
reserves attributable to that series, and any general liabilities, expenses,
costs, charges, or reserves of the Corporation that are not readily
identifiable as belonging to any particular series shall be allocated by or
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. The liabilities, expenses, costs, charges, and reserves
allocated to a series are herein
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<PAGE> 8
referred to as "liabilities belonging to" that series. Each such allocation
shall be conclusive and binding for all purposes.
(c) Income Belonging to a 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: (i) which items
shall be treated as income and which items as capital; and (ii) the amount of
"income belonging to" a series, which income shall include all income,
earnings and profits derived from assets belonging to that series, less any
expenses, costs, charges, or reserves belonging to that series for the
relevant time period. Each such determination and allocation shall be
conclusive and binding for all purposes.
(d) Dividends. 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 to resolutions adopted with such frequency as the Board of
Directors may determine, after providing for actual and 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
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<PAGE> 9
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 dividends or distributions,
except that the Board of Directors may determine that no dividend or
distribution shall be payable on shares as to which the shareholder's
payment has not been received by the time of record.
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 gain 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 1986, as
amended, or any successor or comparable statute and the regulations
promulgated thereunder; provided, however, nothing in the foregoing shall
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.
Dividends and distributions may be paid in cash, property, or shares,
including without limitation authorized but unissued shares or treasury
shares, or a combination of any of the foregoing, 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 valued at the current net asset value thereof as defined below.
(e) Liquidation. In the event of the liquidation of
-----------
- 9 -
<PAGE> 10
the Corporation or of a particular series, the shareholders of each series
that is being liquidated shall be entitled to receive, as a class, when and
as declared by the Board of Directors, the excess of the assets belonging to
that series over the liabilities belonging to that series. The holders of
shares of any series shall not be entitled hereby to any distribution upon
liquidation of any other series. The assets so distributable to the
shareholders of any particular series shall be distributed among such
shareholders in proportion to the number of shares of that series held by
them and recorded on the books of the Corporation. The liquidation of any
particular series in which there are shares then outstanding may be
authorized by vote of a majority of the Board of Directors then in office,
subject to the approval of a majority of the outstanding securities of that
series, as defined in the 1940 Act. If there are any general assets not
belonging to any particular series of stock and available for distribution,
such distribution shall be made to holders of stock of various series in such
proportion as the Board of Directors determines to be fair and equitable, and
such determination by the Board of Directors shall be final for all purposes.
(f) 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 standing 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 class
("Single Class Voting"); provided, however, that (i) as to any matter with
respect to which
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<PAGE> 11
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 Class 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 class; and (iii)
as to any matter which does not affect the interest of a particular series,
only the holders of shares of the one or more affected series shall be
entitled to vote.
(g) Redemption by Shareholder. Each holder of shares of a
-------------------------
particular series shall have the right at such times, and on such terms and
conditions 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 of that series next
determined as provided below, after the shares are properly tendered for
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Board of Directors determines, which determination shall
be conclusive, that conditions exist that make payment wholly in cash unwise
or undesirable, the Corporation may make payment wholly or partly in
securities or other assets belonging to the series of which the shares being
redeemed are part at the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Corporation may postpone
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<PAGE> 12
payment of the redemption price and may suspend the right of the holders of
shares of any series to require the Corporation to redeem shares of that
series at any time when, and to the extent, permissible under the 1940 Act.
(h) Net Asset Value Per Share. The net asset value per share
-------------------------
of The Walnut Street Prime Reserve Fund Series shall be determined on the
amortized cost basis (or other permissible basis) as provided in Rule 2a-7,
or any amendment or successor rule or regulation thereto, of the Securities
and Exchange Commission under the 1940 Act, as from time to time amended, or
any successor act. To facilitate the determination of the net asset value of
such series, the Board of Directors shall adopt procedures not inconsistent
with the 1940 Act for the continuing declarations of income attributable to
that series as dividends payable in additional shares of that series at the
designated constant dollar amount, and for the redemption of shares as
necessary to maintain a constant net asset value in the event of any losses
attributable to that series.
The net asset value of any other series that may from time to time be
established by the Board of Directors shall be determined as provided in
Articles Supplementary filed for record with respect to such series.
(i) 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
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<PAGE> 13
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 assets belonging to that series or
in any way affecting the rights of shares of any other series.
(j) 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 of shares in accordance with such requirements and procedures as may
be established by the Board of Directors.
(k) Fractional Shares. The Corporation may issue, sell,
-----------------
redeem, repurchase, and otherwise deal in and with shares of its capital
stock of all or any series in fractional denominations to the same extent as
its whole shares, and shares in fractional denominations shall be shares of
capital stock of all and any series having, in proportion to the respective
fractions represented thereby, all the rights of whole shares of all or any
series, including, without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the Corporation, provided that the issue of shares in
fractional denominations or certificates therefor of all or any series shall
be limited to such transactions
- 13 -
<PAGE> 14
and be made upon such terms as may be fixed by or under authority of the
Bylaws.
(l) Ownership Record. The Corporation may issue shares in book
----------------
entry form without issuance or delivery of certificates therefor, in which
case the ownership of such shares shall be reflected exclusively by entry on
the books of the Corporation.
(3) Any determination made in good faith and in accordance with
accepted accounting practice, by or pursuant to the direction of the Board of
Directors, as to the amount of assets, obligations or liabilities of the
Corporation; as to the amount of net income of the Corporation from dividends
and interest for any period or amounts at any time legally available for the
payment of dividends; as to the amount of any reserves or charges set up and
the propriety thereof; as to the time of or purpose for creating reserves or
as to the use, alteration or cancellation of any reserves or charges (whether
or not any obligation or liability for which such reserves or charges shall
have been created shall have been paid or discharged or shall be then or
thereafter required to be paid or discharged); as to the price of any
security owned by the Corporation or as to any other matters relating to the
issuance, sale, redemption or other acquisition or disposition of securities
or shares of capital stock of the Corporation; and any reasonable
determination made in good faith by the Board of Directors as to whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short," or an underwriting or selling group in connection with
the public
- 14 -
<PAGE> 15
distribution of any securities; shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its capital stock,
past, present and future, and shares of the capital stock of the Corporation
are issued and sold on the condition and understanding, evidenced by the
purchase of shares of capital stock or acceptance of share certificates, that
any and all such determinations shall be final, binding and conclusive as
aforesaid.
SEVENTH: The initial number of Directors of the Corporation shall be
five (5), which number may be increased or decreased pursuant to the Bylaws
of the Corporation, but shall never be less than three (3). The names of the
Directors who shall serve until the first annual shareholders' meeting and
until their successors are duly chosen and qualified are Timothy C.
Nicholson, Taylor S. Desloge, Theodore M. Armstrong, Richard A. Liddy, and
Alan C. Henderson.
EIGHTH:
(a) The Corporation shall indemnify its Directors, officers,
and agents to the extent required by law and may, in its discretion,
indemnify its Directors, officers, and agents against liabilities and
expenses reasonably incurred in connection with any proceeding to which such
Director, officer, or agent is made a party by reason of his or her actions
in an official capacity on the Corporation's behalf; provided, however, that
the Corporation shall not indemnify any Director, officer, or agent against
liability or expense arising by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties of his
- 15 -
<PAGE> 16
or her office; nor shall any indemnity or provision of these Articles of
Incorporation be interpreted inconsistently with the requirements of the
Maryland General Corporation Law, or the Securities Act of 1933, as amended,
or the 1940 Act.
(b) No Director or officer of the Corporation shall be liable
to the Corporation or its shareholders for monetary damages in any action or
proceeding at law or in equity for any act or omission of such Director or
officer acting in his or her capacity as such, provided that the exculpation
set forth in this paragraph (b) shall not apply (i) to the extent that it is
proved that such Director or officer actually received an improper benefit or
profit in money, property, or services, or (ii) to the extent that a judgment
or other final adjudication adverse to such Director or officer is entered in
a proceeding that such person's action, or failure to act, was the result of
active and deliberate dishonesty of such Director or officer and was material
to the cause of action adjudicated in the proceeding. Nothing in this
paragraph (b) shall exculpate or protect or be deemed or construed to
exculpate or protect any Director or officer of the Corporation against any
liability to the Corporation or its shareholders to which such Director or
officer would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of his or her duties, or by
reason of such Director's or officer's reckless disregard of his or her
obligations and duties as a Director or officer of the Corporation.
- 16 -
<PAGE> 17
NINTH: The following additional provisions not inconsistent with
law are hereby established for the management, conduct, and regulation of the
business and affairs of the Corporation, and for creating, limiting, defining
and regulating the powers of the Corporation and of its Directors and
shareholders:
(1) Custody of Assets. Subject to the requirements of the 1940
-----------------
Act, assets of this Corporation may be held by or deposited with a custodian
as prescribed from time to time by the Board of Directors or the Bylaws.
(2) Limitations on Borrowing. The Bylaws of this Corporation,
------------------------
as from time to time amended, and the Board of Directors may prescribe
limitations upon the borrowing of money and pledging of assets by the
Corporation.
TENTH: Meetings of shareholders may be held inside or outside the
State of Maryland, if the Bylaws so provide. The books of the Corporation
may be kept (subject to any provisions of law) inside or outside the State of
Maryland at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the Corporation. Elections of
Directors need not be by ballot unless the Bylaws of the Corporation shall so
provide.
ELEVENTH: The Corporation reserves the right to amend, change or
repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by law, and all rights conferred upon
shareholders herein are granted subject to this reservation.
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<PAGE> 18
TWELFTH: The original Bylaws of the Corporation shall be adopted by
the initial Directors named herein. Thereafter the Board of Directors shall
have the power to make, alter or repeal the Bylaws except as the Bylaws from
time to time in effect may require shareholder action for adoption,
alteration, or repeal of particular bylaw provisions.
THE UNDERSIGNED, being the incorporator herein for the purpose of
forming a corporation pursuant to the general corporation laws of the State
of Maryland, does make these Articles of Incorporation, hereby declaring and
certifying that the facts herein stated are true, and accordingly have
hereunto set my hand and acknowledge the same to be my act on this 21st day
of January, 1993.
-------------------------------
James V. Stepleton
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<PAGE> 1
Exhibit 2
---------
Bylaws of Registrant
BYLAWS
OF
THE WALNUT STREET FUNDS, INC.
ARTICLE 1.
SHAREHOLDERS' MEETINGS
1.01 Place of Meetings. All meetings of the shareholders of The
-----------------
Walnut Street Funds, Inc. (hereinafter called the "Corporation") shall be
held at such place, within or without the State of Maryland, as is stated in
the notice of meeting.
1.02 Annual Meeting. The annual meeting of shareholders, for the
--------------
purpose of electing directors and such other business as may come before the
meeting, shall be held at such time as the directors may determine; provided,
that the Corporation shall not be required to hold an annual meeting in any
year in which none of the following is required to be acted on by the
shareholders under the Investment Company Act of 1940, as amended (the "1940
Act"): the election of directors; approval of the investment advisory
agreement; ratification of the selection of independent public accountants;
and approval of a distribution agreement.
1.03 Special Meetings. Special meetings of the shareholders shall be
----------------
held whenever called by the Chairman of the Board, the President, or a
majority of the Board of Directors. Except as otherwise provided by law,
special meetings shall also be called by the President at the request of the
holders of not less than 25% of the outstanding shares entitled to vote at
such meeting, provided, however, that the holders of 10% or more of the
outstanding shares entitled to vote at a special meeting of the Corporation's
shareholders may request that a special meeting be held, and the President
shall call any such meeting so requested, for the purposes of acting upon any
proposal to remove from office any director or directors.
1.04 Notice of Shareholders' Meeting. Notice of each shareholders'
-------------------------------
meeting stating the place, date, and hour of the meeting and, in the case of
special meetings the purpose or purposes for which the meeting is called,
shall be given to each shareholder of record not less than ten nor more than
ninety days prior to the date of the meeting. Any meeting at which all
shareholders entitled to vote are present either in person or by proxy or
notice of which has been waived in writing by those not present shall be a
legal meeting for the transaction of business notwithstanding that notice, as
herein provided, has not been given.
1.05 Quorum. Except as otherwise expressly required by law, these
------
Bylaws or the Articles of Incorporation, at any meeting of the shareholders,
the holders of a majority of the outstanding shares entitled to vote, present
in person or represented by proxy, shall constitute a quorum, but a lesser
number may adjourn any meeting from time to time and the meeting may be held
as adjourned without further notice. When a quorum is present, a majority of
<PAGE> 2
the shares represented at any meeting shall decide any question brought
before such meeting unless the question is one upon which, by express
provision of law or of these Bylaws or the Articles of Incorporation, a
larger or different vote is required, in which case such express provision
shall govern.
1.06 Proxies. Shareholders of record may vote at any meeting either
-------
in person or by written proxy filed with the Secretary of the meeting before
being voted.
1.07 Voting. Each shareholder shall be entitled to one vote for each
------
share which such shareholder holds, and to a fraction of a vote equal to any
fractional share which such shareholder holds, provided that such shareholder
is the holder of such shares on the record date determined for such meeting
in accordance with Article 5.05. Shares of all series shall vote as a single
class except where the separate vote of a particular series is required by
the 1940 Act, the law of Maryland, the Articles of Incorporation, or Articles
Supplementary.
1.08 Unanimous Consent. Except as otherwise provided by law or the
-----------------
Articles of Incorporation, any action required or permitted to be taken at
any annual or special meeting of shareholders may be taken without a meeting,
without prior notice, and without a vote, if the following are filed with the
records of shareholders meetings: (1) a unanimous written consent that sets
forth the action so taken and that is signed by each shareholder entitled to
vote on the matter; and (2) a written waiver of any right to dissent signed
by any shareholder entitled to notice of the meetings but not entitled to
vote thereat.
ARTICLE 2.
BOARD OF DIRECTORS
2.01 Number. The Corporation shall have a Board of Directors
------
consisting of not less than three and not more than 15 members. The initial
Board of Directors shall consist of five directors. Thereafter the number of
directors to constitute the whole Board, within the limits above stated,
shall be that number that is fixed from time to time by the vote of a
majority of the entire Board of Directors.
2.02 Tenure and Qualifications. Each director shall hold office until
-------------------------
the next annual meeting of shareholders and until his successor is elected
and qualified. No director need be a shareholder of the Corporation or a
resident of the State of Maryland.
2.03 Powers. The business and affairs of the Corporation shall be
------
managed under the direction of the Board of Directors. All powers of the
Corporation are hereby vested in, and may be exercised by or under the
authority of, the Board of Directors except as conferred on or reserved to
the shareholders by the laws of the State of Maryland, the Articles of
Incorporation or these Bylaws.
2.04 Executive Committee and Other Committees. The Board of Directors
----------------------------------------
may, by a majority vote of the whole Board, appoint from its members an
Executive Committee to consist of such number of directors (not less than
two) as the Board may from time to time determine. The Chairman of the
Committee shall be elected by the Board of Directors. When the Board of
Directors is not in session, the Executive Committee may exercise all the
powers of the Board of Directors that may be delegated by the Board of
Directors, consistent with these Bylaws, the laws of the State of Maryland
and the 1940 Act. The Executive Committee may make rules for the holding and
conduct of its meetings and keeping the records thereof, and shall report its
actions to the Board of Directors.
- 2 -
<PAGE> 3
The Board of Directors, by a majority vote of the full Board, shall
appoint a Nominating Committee of not less than two members of the Board of
Directors to select and nominate persons to serve as members of the Board of
Directors, provided that during any period in which the corporation is a
party to a plan or distribution agreement adopted pursuant to Rule 12b-1
under the 1940 Act, the members of the Nominating Committee shall be
directors who are not interested persons (as defined under the 1940 Act) of
the Corporation or the Corporation's investment adviser.
The Board of Directors, by a majority vote of the full Board, may
appoint from its members such other committees as it may from time to time
desire. The number of directors comprising such committees and the powers
conferred upon them shall be determined by the Board of Directors at its own
discretion, consistent with these Bylaws, the laws of the State of Maryland
and the 1940 Act.
2.05 Meetings. Regular meetings of the Board of Directors may be
--------
held in such places within or without the State of Maryland, and at such
times as the Board may from time to time determine, and if so determined,
notices thereof need not be given, provided, however, that during any period
in which the Corporation is a party to a plan or distribution agreement
adopted pursuant to Rule 12b-1 under the 1940 Act, the Board of Directors
shall meet no less frequently than once every calendar quarter. Special
meetings of the Board of Directors may be held at any time or place whenever
called by the Chairman of the Board, the President, or a majority of the
directors, notice thereof being given by the Secretary, the Chairman of the
Board, the President, or the directors calling the meeting to each director.
Special meeting of the Board of Directors may be held upon three days' notice
or without formal notice provided all directors are present or those not
present have waived notice thereof.
2.06 Meeting via Telephone. Any member or members of the Board of
---------------------
Directors or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Participation in a meeting by these means constitutes presence in person at
the meeting. This paragraph shall not be applicable to meetings held for the
purpose of voting in respect of approval of contracts or agreements whereby a
person undertakes to serve or act as investment adviser of, or principal
underwriter for, the Corporation, or as a distributor of any shares issued by
the Corporation pursuant to a plan adopted by the Corporation under Rule
12b-1, as enacted by the Securities and Exchange Commission pursuant to
Section 12(b) of the 1940 Act, or any replacement or successor rule or
regulation.
2.07 Quorum. A majority of the members of the Board of Directors
------
shall constitute a quorum for the transaction of business, provided however,
that when the 1940 Act or any other applicable law requires a different
quorum, including a number or directors who are not interested persons as
defined in the 1940 Act, to transact business of a specific nature, the
number or classification of directors so required shall constitute a quorum
for the transaction of such business. A lesser number may adjourn a meeting
from time to time and such meeting may be held without further notice. When
a quorum is present at any meeting a majority of the members of the Board
shall decide any question brought before such meeting except as otherwise
expressly required by law, the Articles of Incorporation or these Bylaws.
2.08 Unanimous Written Consent. Except as otherwise required by
-------------------------
applicable law, any action to be taken by the Board of Directors or by a
committee thereof may be taken without a meeting if written consent to such
action is signed by all members of the Board or committee, as the case may
be,
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<PAGE> 4
and such written consent is filed with the minutes of proceedings of the
Board or committee.
2.09 Compensation. Directors may receive compensation for services to
------------
the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board.
2.1 Investment Policies. It shall be the duty of the Board of
-------------------
Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation
are at all times consistent with the investment policies and restrictions of
the Corporation, as recited in the current Prospectus of the Corporation
filed from time to time with the Securities and Exchange Commission and as
required by the 1940 Act, as amended. The Board, however, may delegate the
day-to-day management of the assets to one or more investment advisers,
pursuant to a written contract or contracts that have obtained requisite
approvals, including the requisite approvals of renewals thereof, of the
Board of Directors or the shareholders of the Corporation in accordance with
the provisions of the 1940 Act, as amended.
ARTICLE 3.
OFFICERS
3.01 Selection. The officers of the Corporation shall be a President,
---------
one or more Vice-Presidents (the number thereof to be determined by the Board
of Directors), a Secretary, and a Treasurer. All officers shall be elected
by the Board of Directors and shall serve at the pleasure of the Board. The
Board of Directors may elect a Chairman of the Board and such other officers,
assistant officers, or agents that the Board deems advisable and prescribe
their duties. The same person may hold more than one office except that the
President and the Secretary shall be different people and a Vice-President
may not serve concurrently as President.
3.02 Eligibility. The Chairman of the Board, if any, and the
-----------
President shall be directors of the Corporation. Other officers need not be
directors. No officer need be a shareholder.
3.03 Chairman of the Board of Directors. The Chairman of the Board,
----------------------------------
if any, shall preside at all meetings of the Board of Directors at which he
is present. He shall have such other authority and duties as the Board of
Directors shall from time to time determine.
3.04 The President. The President shall be the chief executive
-------------
officer of the Corporation. Subject to the control of the Board of
Directors, he shall have general and active management of the business,
affairs, and property of the Corporation, and shall see that all orders and
resolutions of the Board of Directors are put into effect. He shall preside
at meetings of stockholders and of the Board of Directors unless a Chairman
of the Board has been elected and is present. He shall be, ex officio, a
----------
member of all standing committees of the Board of Directors.
3.05 The Vice Presidents. In the absence of the President or in the
-------------------
event of his inability to act, the Vice-President shall perform the duties
and exercise the powers of the President. If there be more than one
Vice-President their authority to act in the absence of the President shall
be determined by the order of their election, unless the Board of Directors
has specified otherwise. The Vice Presidents, if one or more have been
appointed, shall respectively have such other powers and perform such other
duties as may be assigned to them by the Board of Directors or the President.
3.06 The Secretary. The Secretary shall keep accurate minutes of all
-------------
- 4 -
<PAGE> 5
meetings of the shareholders and directors; shall give proper notice of all
meetings; shall have custody of all books, records, and papers of the
Corporation, except such as shall be in the charge of the Treasurer; shall
perform all duties commonly incident to his office and as provided by law;
and shall perform such other duties and have such other powers as the Board
of Directors shall from time to time designate. In his absence an Assistant
Secretary pro tempore shall perform his duties. The offices of Secretary and
-----------
Treasurer may be held by one and the same person.
3.07 The Treasurer. The Treasurer shall, subject to the order of the
-------------
Board of Directors and Article 7.07 of these Bylaws, and in accordance with
any arrangements for performance of services by a custodian, transfer agent,
or disbursing agent approved by the Board, have the care and custody of the
money, funds, securities, valuable papers and documents of the Corporation,
and shall have and exercise under the supervision of the Board of Directors
all powers and duties commonly incident to his office and as provided by law.
He shall keep or cause to be kept accurate books of account of the
Corporation's transactions which shall be subject at all times to the
inspection and control of the Board of Directors. He shall deposit all funds
of the Corporation in such bank or banks, trust company or trust companies,
or such firm or firms doing a banking business as the Board of Directors
shall designate. In his absence, an Assistant Treasurer, if any, shall
perform his duties.
3.08 Salaries. The salaries of all officers shall be fixed from time
--------
to time by the Board of Directors.
ARTICLE 4.
VACANCIES
4.01 Removals. The shareholders may, by vote of the holders of a
--------
majority of the outstanding shares entitled to vote, remove from office any
director and, unless the number of directors constituting the whole Board is
accordingly decreased, elect a successor. To the extent consistent with the
1940 Act, the Board of Directors may, by vote of not less than a majority of
the directors then in office, remove from office any director, officer, or
agent.
4.02 Vacancies. A majority of the remaining directors, whether or not
---------
sufficient to constitute a quorum, may fill a vacancy on the Board of
Directors that results from any cause except an increase in the number of
directors, and a majority of the entire Board of Directors may fill a vacancy
that results from an increase in the number of directors. A director elected
by the Board to fill a vacancy shall hold office until the next annual
meeting of shareholders or a special meeting held for the purpose of electing
directors and until his successor is elected and qualifies. Notwithstanding
the foregoing, vacancies on the Board of Directors may be so filled only if,
after the filling of the same, at least two-thirds (b) of the directors then
holding office would be directors elected to such office by the shareholders
at a meeting or meetings called for such purpose. In the event that at any
time less than a majority of the directors were so elected by the
shareholders, a special meeting of the shareholders shall be called forthwith
and held as promptly as possible and in any event within sixty days for the
purpose of electing the necessary new members to the Board of Directors,
unless the Securities and Exchange Commission extends such period.
ARTICLE 5.
CERTIFICATES FOR SHARES
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<PAGE> 6
5.01 Certificates. If authorized by the Corporation's Board of
------------
Directors, shareholders may receive certificates representing shares of the
Corporation of the class or series of shares owned by such shareholder, in
such form as shall, in conformity to law, be prescribed from time to time by
the Board of Directors. Such certificates shall be signed by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary. The signatures of the aforementioned
officers upon such certificates may be facsimiles. In case any officer whose
signature or a facsimile thereof has been used on any such certificates shall
cease to be an officer of the Corporation, such certificates may be issued
and delivered as though the person who signed such certificates or whose
facsimile signature had been used thereon had not ceased to be such officer
of the Corporation. All certificates for shares of a series shall be
consecutively numbered or otherwise identified.
5.02 Replacement of Certificates. The Board of Directors may direct a
---------------------------
new certificate to be issued in place of any certificate heretofore issued by
the Corporation and alleged to have been lost or destroyed. When authorizing
such issue of new certificate the Board of Directors may, as a condition
precedent to issuance, require the owner of such lost or destroyed
certificate either to advertise the loss in such a manner as it shall
require, or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or destroyed, or to
advertise and give a bond.
5.03 Shareholder Open Accounts. The Corporation may maintain or cause
-------------------------
to be maintained for each shareholder an open account in which shall be
recorded such shareholder's ownership of shares and all changes therein.
Certificates need not be issued for shares so recorded in a shareholder open
account although certificates may be made available upon request by
shareholder.
5.04 Transfers. Transfers of shares for which certificates have been
---------
issued will be made only upon surrender to the Corporation or its transfer
agent of a certificate for shares of the same class duly endorsed or
accompanied by proper evidence of succession, assignment, or authority to
transfer, whereupon the Corporation will issue a new certificate, and record
the transfer on its books. Transfers of stock evidenced by open account
authorized by Article 5.03 will be made upon delivery to the Corporation or
its transfer agent of instructions for transfer or evidence of assignment or
succession of the shares of a particular class, in each case executed in such
manner and with such supporting evidence as the Corporation or transfer agent
may reasonable require.
5.05 Record Dates. The Board of Directors may fix in advance a date,
------------
not exceeding ninety days preceding the date of any meeting of shareholders,
or the date for the payment of any dividend, or for any other lawful purpose,
as a record date for the determination of the shareholders entitled to notice
of and, subject to Article 1.07, to vote at any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, and
in such case such shareholders and only such shareholders as shall be
shareholders of record on the date fixed shall be entitled to such notice to
vote at such meeting, or to receive payment of such dividend, as the case may
be, notwithstanding any transfer of any shares on the books of the
Corporation after a record date fixed as aforesaid, except as the right to
vote may be limited in Article 1.07.
5.06 Registered Ownership. The Corporation shall be entitled to
--------------------
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner and shall not
be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
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<PAGE> 7
express or other notice thereof, except as otherwise provided by the laws of
Maryland.
5.07 Ledger of Shares. The Secretary shall maintain a ledger of the
----------------
names and addresses of all holders of outstanding shares, and the number of
shares of each class held by each shareholder, at any place within or without
the State of Maryland.
ARTICLE 6.
NOTICES
6.01 Manner of Giving. Whenever, under any provisions of law or of
----------------
the Articles of Incorporation or of these Bylaws, notice is required to be
given to any director, committee member, officer, or shareholder, it shall
not be construed to mean personal notice; but such notice may be given, in
the case of shareholders, in writing, by depositing the same in the United
States mail in a postpaid sealed wrapper addressed to such shareholder at
such address as appears on the books of the corporation and, in the case of
directors, committee members, and officers, by telephone, or by mail or by
telegram to the last business address known to the Secretary of the
Corporation, and such notice shall be deemed to be given at the time when the
same shall be thus mailed or telegraphed or telephoned.
6.02 Waiver. Whenever any notice is required to be given under any
------
provision of law or of the Articles of Incorporation or of these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance at any meeting for which notice is required
shall be deemed waiver of the requirement for such notice.
ARTICLE 7.
GENERAL PROVISIONS
7.01 Disbursement of Funds. All checks, drafts, orders or
---------------------
instructions for the payment of money and all notes of the Corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
7.02 Voting Shares of Other Corporations. Unless otherwise ordered by
-----------------------------------
the Board of Directors, the President or any Vice-President or the Treasurer
or any Assistant Treasurer shall have full power and authority to attend and
act and vote at any meeting of shareholders of any other corporation in which
the Corporation may own shares, and at any such meeting may exercise any and
all the rights and powers incident to the ownership of such shares. The
President or any Vice-President, or the Treasurer or any Assistant Treasurer
of the Corporation may execute proxies to vote shares of other corporations
standing in the name of this Corporation.
7.03 Execution of Instruments. Except as otherwise provided in these
------------------------
Bylaws, all deeds, mortgages, bonds, contracts, stock powers, reports, and
other instruments may be executed on behalf of the Corporation by the
President, or any Vice-President, or by any other officer or agent authorized
to act with respect to such matters, whether by law, the Articles of
Incorporation, these Bylaws, or any general or special authorization of the
Board of Directors. If the corporate seal is required, it shall be affixed
by the Secretary or an Assistant Secretary.
7.04 Seal. The seal of the Corporation shall be in such form as the
----
Board of Directors may from time to time determine. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
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<PAGE> 8
otherwise. In the event it is inconvenient to use such seal at any time, the
signature of the person authorized to sign on behalf of the Corporation
following the word "Seal" shall be deemed the seal of the Corporation.
7.05 Fiscal Year. Except as otherwise from time to time provided by
-----------
the Board of Directors, the fiscal year of the Corporation shall begin
January 1 and end December 31.
7.06 Expenses. Each series of shares of the Corporation shall be
--------
charged with all the expenses, costs, charges, reserves or other liabilities
directly attributable to that series and with that proportion of the other
expenses of the Corporation, including general administrative expenses and
fees of the investment adviser, accountants and attorneys, which the total
net assets of each series of shares bears to the total net assets of all
classes of shares. The foregoing charges, when determined in the manner
prescribed by the Board of Directors, shall be conclusive and binding for all
purposes.
7.07 Custodians. All funds, securities and other investments of the
----------
Corporation shall be deposited in the safekeeping of such banks or other
companies as the Board of Directors of the Corporation may from time to time
determine. Every arrangement entered into with any bank or other company for
the safekeeping of the securities and investments of the Corporation shall
contain provisions complying with the 1940 Act and the general rules and
regulations thereunder.
ARTICLE 8.
PURCHASES AND REDEMPTION OF SHARES
8.01 Purchase by Agreement. The Corporation may purchase its own
---------------------
shares by agreement with the owner at a price equal to the net asset value
next computed following the time when the purchase or contract to purchase is
made.
8.02 Redemption. The Corporation shall redeem such shares of a series
----------
as are offered by any shareholder for redemption, without charge, upon the
presentation of a written request therefor, duly executed by the record
owner, to the office or agency designated by the Corporation. If the
shareholder has received certificates for shares of a series, the request
must be accompanied by such certificates, duly endorsed for transfer, in
acceptable form; and the Corporation will pay therefor the net asset value of
the shares next determined following the time at which the request, in
acceptable form, is so presented. Payment for said shares shall ordinarily
be made by the Corporation to the shareholder within seven days after the
date on which such shares are presented.
8.03 Suspension of Redemption. The obligation set out in Article 8.02
------------------------
may be suspended for any period during which the New York Stock Exchange
shall be closed (other than for customary week-end and holiday closing) or
during which trading on said Exchange is restricted or an emergency exists,
as determined by or under the authority of the Securities and Exchange
Commission or any successor or governmental authority, as a result of which
the disposal by the Corporation of securities owned by it is not reasonably
practicable, or it is not reasonably practicable for the Corporation fairly
to determine the value of its net assets.
ARTICLE 9.
SALES LOAD AND ELIGIBLE PURCHASERS
9.01 No Sales Load. The Corporation shall sell and distribute its
-------------
shares at net asset value without any sales load. The Corporation may,
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<PAGE> 9
however, act as a distributor (or engage others to act as distributors) of
its securities and in connection therewith, make payments in connection with
such distribution pursuant to a written plan that complies with the
requirements of the 1940 Act and regulations promulgated from time to time by
the Securities and Exchange Commission thereunder.
9.02 Restrictions on Purchase Orders. The Corporation reserves the
-------------------------------
right to reject purchase orders under circumstances where they would be
considered disadvantageous to the Corporation.
ARTICLE 10.
FRACTIONAL SHARES
10.01 The Board of Directors may authorize the issue from time to time
of shares of the Corporation in fractional denominations, provided that the
transactions in which and the terms upon which shares in fractional
denominations may be issued may from time to time be determined and limited
by or under authority of the Board of Directors.
ARTICLE 11.
INDEMNIFICATION
11.01 Indemnification Rights. Every person who is or was a director,
----------------------
officer, or employee of the Corporation or of any other corporation which he
served at the request of this Corporation and of which this Corporation owns
or owned shares of capital stock or of which it is or was a creditor shall
have a right to be indemnified by this Corporation to the full extent
permitted by applicable law, against all judgments, fines, penalties,
settlements (collectively referred to as "liabilities") and reasonable
expenses including attorney's fees incurred by him in connection with or
resulting from any threatened, pending, or completed claim, action, suit, or
proceeding, whether criminal, civil, administrative, or investigative, in
which he may become involved as a party or otherwise by reason of his being
or having been a director, officer or employee, except as provided in
Articles 11.02 and 11.03 of these Bylaws, or if prohibited by the Maryland
General Corporation Law in effect at the time.
11.02 Disabling Conduct. No such director, officer or employee shall
-----------------
be indemnified for any liabilities or expenses arising by reason of
"disabling conduct," whether or not there is an adjudication of liability.
"Disabling conduct" means willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of office.
Whether any such liability arose out of disabling conduct shall be
determined: (a) by a final decision on the merits (including, but not limited
to, a dismissal for insufficient evidence) by a court or other body, that the
person to be indemnified was not liable by reason of disabling conduct; or
(b) in the absence of such a decision, by a reasonable determination, based
upon a review of the facts. Such a determination shall be reached: (i) by
the vote of a majority of a quorum of directors who are neither "interested
persons" of the Corporation (as such term is defined in the 1940 Act) nor
parties to the action, suit, or proceeding in question ("disinterested,
non-party directors"), or (ii) by any other reasonable and fair means not
inconsistent with any of the above.
The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---------------
shall not, of itself, create a presumption that any liability or expense
arose by reason of disabling conduct.
- 9 -
<PAGE> 10
11.03 Other Disqualifying Conduct. No such person shall be indemnified
---------------------------
under this Article 11 for any liabilities or expenses incurred by reason of
service in that capacity (although such person shall be indemnified for
reasonable expenses if such person is successful on the merits or otherwise
in the defense of any proceeding described in Article 11.01, provided that
such person did not engage in "disabling conduct" as determined pursuant to
Article 11.02), if it is established that: (a) the act or omission of such
person was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty; or (b) such person actually received an improper personal benefit
in money, property, or services; or (c) in the case of any criminal
proceeding, the director had reasonable cause to believe that the act or
omission was unlawful (such conduct as described in (a), (b), and (c) being
hereinafter referred to as "disqualifying conduct"); provided that a court
of appropriate jurisdiction may, upon application of the person seeking
indemnification, order indemnification in accordance with the terms of the
Maryland General Corporation Law, whether or not it is established that such
person has engaged in disqualifying conduct under this Article 11.03.
Whether a director has engaged in disqualifying conduct shall be
determined in the manner specified in the Maryland General Corporation Law,
as it may be amended from time to time.
11.04 Expenses Prior to Determination. Any reasonable expense
-------------------------------
(including attorney's fees) may be paid by the Corporation in advance of the
final disposition of the claim, action, suit or proceeding, as authorized by
the Board of Directors in the specific case, (a) upon receipt of a written
undertaking by or on behalf of the indemnitee to repay the advance if it
shall be ultimately determined that disabling conduct (as defined in Article
11.02), or disqualifying conduct (as defined in Article 11.03), has occurred;
and (b) receipt of a written affirmation by the indemnitee of the
indemnitee's good faith belief that he has not engaged in disqualifying
conduct; and (c) provided that (i) the indemnitee shall provide security for
that undertaking, or (ii) the Corporation shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority of a quorum of
disinterested, non-party directors, or independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is a reason to believe that
the indemnitee ultimately will be found entitled to indemnification.
A determination pursuant to subparagraph (c) (iii) of this Article
11.04 shall not prevent the recovery from any indemnitee of any amount
advanced to such person as indemnification if such person is subsequently
determined not to be entitled to indemnification; nor shall a determination
pursuant to said subparagraph prevent the payment of indemnification if such
person is subsequently found to be entitled to indemnification. Any
determination pursuant to this Article 11.04 shall be made in conformity with
the requirements of the Maryland General Corporation Law, as then in effect.
11.05 Provision Not Exclusive. The indemnification provided by this
-----------------------
Article 11 shall not be deemed exclusive of any rights to which those seeking
indemnification may be entitled under any law, agreement, vote of
shareholders, or otherwise.
11.06 Notice to Shareholders. Any indemnification of, or advances to,
----------------------
a director, officer, or employee in accordance with this Article 11, if
arising out of a proceeding by or in the right of the Corporation, shall be
reported in writing to the shareholders with the notice of the next
shareholders' meeting or prior to such notice.
11.07 General. No indemnification provided by this Article shall be
-------
inconsistent with the 1940 Act, the Securities Act of 1933, or the Maryland
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<PAGE> 11
General Corporation Law.
11.08 Duration. Any indemnification provided by this Article shall
--------
continue as to a person who has ceased to be a director, officer, or
employee, and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE 12.
AMENDMENTS AND CONSTRUCTION
12.01 Amendments. Except as otherwise provided by law, the Board of
----------
Directors shall have the power, by a majority vote of the entire Board of
Directors at any meeting thereof, to make, alter or repeal the Bylaws of the
Corporation.
12.02 Construction. Whenever a word in the masculine gender is used in
------------
these Bylaws it shall be understood to be in or include the feminine gender
when appropriate under the circumstances. Similarly the use of the singular
or plural shall be understood to encompass the other number when appropriate
under the circumstances. These Bylaws are to be construed to be consistent
with applicable law, and if such construction is not possible then the
invalidity of a Bylaw or portion thereof shall not affect the validity of the
remaining Bylaws of the Corporation or any portion thereof, which shall
remain in full force and effect.
- 11 -
<PAGE> 1
Exhibit 5(a)
------------
Investment Management Agreement
with General American Investment Company
now known as Conning Asset Management Company
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT (the "Agreement") made and entered into as of
the 12th day of May, 1993, by and between THE WALNUT STREET FUNDS, INC.
("Company"), a Maryland corporation, and GENERAL AMERICAN INVESTMENT
MANAGEMENT COMPANY ("Adviser"), a Missouri corporation that is registered as
an investment adviser under the Investment Advisers Act of 1940.
WITNESSETH THAT:
WHEREAS, the Company is an open-end, diversified management company;
and
WHEREAS, the Company may from time to establish series of its capital
stock and issue shares in each such series, with each such series being a
fund of the Company; and
WHEREAS, the Company has established one such series, The Walnut Street
Prime Reserve Fund (the "Fund"), which will be a money market fund; and
WHEREAS, the Adviser is engaged in the business of advising investment
companies or their funds and separate accounts of insurance companies; and
WHEREAS, the Company desires to retain the Adviser to manage the
investments and certain operations of the Fund, and the Adviser desires to
manage such investments and operations, on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises, covenants, and agreements hereinafter set forth, the parties hereby
agree as follows:
ARTICLE I
Advisory Services
-----------------
The Company hereby employs the Adviser to act as the investment adviser
of the Fund and, subject to the supervision of the Board of Directors of the
Company (the "Board"), to manage the investment and reinvestment of the
assets of the Fund for the period and on the terms and conditions set forth
in this Agreement. The Adviser hereby accepts such employment and agrees
during such period, at its own expense, to render the services and to assume
the obligations herein set forth for the compensation provided herein. For
all purposes of this Agreement, the Adviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized herein, have no authority to act for or represent the Fund or the
Company in any way or otherwise be deemed an agent of the Fund or the
Company.
A. Duties of Adviser. In carrying out its obligations to manage the
-----------------
investment and reinvestment of the assets of the Fund, the Adviser shall, as
appropriate and consistent with the limitations set forth in Section D of
this Article I:
<PAGE> 2
(a) perform research and obtain and evaluate pertinent
economic, statistical, and financial data relevant to the
investment objectives, policies, and restrictions of the Fund as
set forth in the Registration Statement for the Company with
respect to the Fund, as amended from time to time (the
"Registration Statement");
(b) consult with the Board and furnish the Board with
recommendations about an overall investment strategy for the Fund
for consideration and approval, modification, or rejection by the
Board;
(c) seek specific investment opportunities and take such
steps as are necessary to implement the overall investment
strategy approved by the Board, including making and carrying out
day-to-day decisions to acquire or dispose of permissible
investments, managing investments and any other property of the
Fund, and providing or obtaining such services as may be necessary
in managing, acquiring or disposing of such investments in
accordance with the Fund's investment objectives, policies, and
restrictions;
(d) regularly report to the Board about its transactions
in the Fund's investment securities, the performance of such
investment securities, the performance of the Fund's third party
service providers, and any other activities undertaken by the
Adviser in connection with management of the assets of the Fund;
(e) exercise any voting rights, rights to consent to
corporate action, and any other rights pertaining to or deriving
from the Fund's investment securities;
(f) provide accounting and statistical information about
the Fund's investments required by the Fund or the Company for the
preparation of registration statements, reports, and other
documents required by federal and state securities laws;
(g) coordinate and monitor the activities of the Fund's
underwriter and distributor and report to the Board with respect
to such underwriter's and distributor's performance of their
obligations under their contracts with the Fund;
(h) select the broker-dealers who execute transactions in the
Fund's portfolio securities, provided that such selection shall be in
accordance with the procedures and criteria described in the Company's
Registration Statement;
(i) compensate executive officers of the Company for services
provided the Fund; and
(j) undertake and perform such other activities in connection
with the management of the Fund and its assets and investment
securities as the Board may from time to time direct.
B. Employment of Sub-Adviser(s). The Adviser shall have the
----------------------------
authority to employ, at its sole expense and with the prior approval of the
Board, one or more sub-advisers. Where applicable, reference in the
Agreement to the Adviser shall include any sub-advisers employed by the
Adviser. Any agreement between the Adviser and any sub-adviser shall be
subject to the terms and provisions of this Agreement that are applicable to
the Adviser (other than Article II hereof) and shall automatically terminate
upon the termination of this Agreement. Any sub-adviser shall at all times
be subject to the direction of the Adviser and the Board, and any duly
constituted committee thereof, or any officer of the Company acting pursuant
to the authority of the Board or such committee.
- 2 -
<PAGE> 3
C. Limitations on Advisory Services. The Adviser shall perform the
--------------------------------
services under this Agreement subject to the supervision and review of the
Board and in a manner consistent with the investment objectives, policies,
and restrictions of the Fund as stated in the Fund's Registration Statement,
the Company's Articles of Incorporation and By-Laws, as amended from time to
time, the provisions of the Investment Company Act of 1940, as amended (the
"1940 Act"), and the applicable requirements of the Internal Revenue Code of
1986, as amended.
The Company has furnished or will furnish the Adviser with copies of
the Fund's Registration Statement and the Company's Articles of Incorporation
and By-Laws as currently in effect and agrees during the continuance of the
Agreement to furnish the Adviser with copies of any amendments or supplements
to any of the foregoing before or at the time the amendments or supplements
become effective. The Adviser will be entitled to rely on all documents
furnished by the Company.
ARTICLE II
Compensation of the Adviser
---------------------------
A. Investment Advisory Fee. As compensation for its services to the
-----------------------
Company, the Adviser shall receive monthly compensation based on annual
percentages of the average daily value of the Fund's net assets as shown
below:
.25% per annum on the first $250,000,000 of the Fund's net
assets, .24% per annum on the Fund's net assets in excess
of $250,000,000 up to $500,000,000, .23% per annum on the
Fund's net assets in excess of $500,000,000 up to
$750,000,000, .22% per annum of the Fund's net assets in
excess of $750,000,000 up to $1,000,000,000, and .21% per
annum of the Fund's net assets in excess of
$1,000,000,000.
B. Allocation of Expenses. The Adviser shall be responsible for
----------------------
payment of all expenses it may incur in performing the services set forth in
Article I hereunder. Except for such Article I expenses and those expenses
that the Adviser may agree to reimburse, the Company shall be responsible for
all expenses associated with its operations and the operations of the Fund,
including without limitation:
(1) To the extent not waived by the Adviser, the fees and
expenses paid to the Adviser as provided herein;
(2) Expenses of all audits by independent public accountants;
(3) Expenses of the Fund's administrator, custodian, transfer
and dividend disbursing agent, and expenses incurred for services provided by
other third parties, including the expenses of issue, repurchase, or
redemption of the Fund's shares;
(4) Salaries and other compensations of executive officers of
the Company or Fund who are not officers, directors, stockholders, or
employees of the Adviser;
(5) Taxes levied against the Fund or its assets;
(6) Brokerage fees and commissions incurred in connection with
the purchase and sale of securities for the Fund;
(7) Costs, including the interest expense of borrowing money, to
- 3 -
<PAGE> 4
the extent borrowings are permitted by the Fund's investment restrictions
and policies;
(8) Costs incident to meetings of the Board and shareholders of
the Fund, reports to the Fund's shareholders, the filing of reports with
regulatory bodies, and the maintenance of the Fund's and the Company's legal
existence;
(9) Legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
(10) Fees and expenses of members of the Board who are not
directors, officers, employees, or stockholders of the Adviser or any of its
affiliates;
(11) Costs and expenses of registering and maintaining the
registration of the Fund and its shares under federal and any applicable
state laws, including the printing and mailing of prospectuses to current
shareholders;
(12) Trade association dues;
(13) The Fund's pro rata portion of fidelity bond, errors and
omissions, and director and officer liability insurance premiums; and
(14) The fees payable under the Fund's distribution and service
plan adopted in accordance with requirements contained in Rule 12b-1 under
the 1940 Act.
If the Company establishes one or more series of its capital stock as
funds in addition to the Fund, the Board shall determine the manner in which
expenses are allocated among the Fund, such other funds, and the Company, and
the determination of the Board shall be final and binding.
C. Reimbursement and Waiver. The Adviser agrees that it shall
------------------------
waive the Company's payment of all or part of its fee under this Agreement
and that, if required after waiving all such fees, it will reimburse the
company for expenses incurred by the Fund or the Company with respect to the
Fund (including, without limitation, the fees allocated to the company under
Section B of this Article II) to the extent necessary to assure that the
aggregate expenses incurred and paid by the Fund for payments to the Adviser,
the Fund's Distributor (as defined in the Registration Statement), the Fund's
administrator, custodian, transfer and dividend disbursement agent, and other
third party service providers do not exceed .85% of the Fund's average daily
net assets. The Adviser may terminate its waiver and reimbursement
obligation under this Section C at any time by giving all of the Fund's
shareholders at least 90 days' prior written notice of such termination.
ARTICLE III
Fund Transactions and Brokerage
-------------------------------
The Adviser agrees to determine the investment securities to be
purchased or sold by the Fund, subject to the provisions of Article I, and to
place orders pursuant to its determinations directly with the issuer, with
any broker-dealer or underwriter that specializes in the securities for which
the order is made, or with any other broker or dealer selected by the
Adviser, subject to the limitations of this Article III.
The Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Fund and
shall use its best efforts to obtain the most favorable price and efficient
execution of the Fund's orders. In selecting brokers or dealers, subject to
- 4 -
<PAGE> 5
applicable limitations of the federal securities laws, the Adviser shall
consider various relevant factors, including, but not limited to, the size
and kind of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of spreads or commissions.
The Adviser may execute portfolio transactions on behalf of the Fund
with broker-dealers who provide research or execution services to the Fund
and the Adviser, including advice concerning the value of securities; the
advisability investing in, purchasing, or selling specific securities; the
availability of securities or the purchasers or sellers of securities;
furnishing analyses and reports about issuers, industries, securities,
economic factors and trends, portfolio strategy and performance of accounts,
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Subject to applicable
limitations of the federal securities laws, broker-dealers engaged by the
Adviser to execute transaction for the Fund may receive markups or
commissions that are in excess of the amount of markups or commissions
charged by other broker-dealers in recognition of their research or execution
services. To cause the Fund to pay such higher amounts, the Adviser must
determine in good faith that such commissions are reasonable in relation to
the value of the brokerage or research services provided by such executing
broker-dealers viewed in terms of a particular transaction or the Adviser's
overall responsibilities to the Fund and its other clients. In reaching this
determination, the Adviser will not be required to place a specific dollar
value on the brokerage or research services provided or to determine what
portion of the compensation should be related to those services.
Subject to the above requirements of this Article III, nothing
contained in this Agreement shall prohibit the Adviser from selecting brokers
or dealers with which it or the Company are affiliated and from selecting
brokers or dealers by virtue of sales of insurance policies of General
American Life Insurance Company or its affiliates by such broker-dealers or
their affiliates, provided that (i) such fee is no less favorable than those
quoted by unaffiliated broker-dealers and (ii) payment of such fee complies
with Section 17(e) of the 1940 Act and the regulations thereunder.
ARTICLE IV
Activities of the Adviser
-------------------------
The services of the Adviser to the Company and the Fund under this
Agreement are not to be deemed exclusive and the Adviser may provide similar
services to other so long as its services under this Agreement are not
impaired. It is understood by the parties to this Agreement that directors,
officers, employees and shareholders of the Company are or may become
interested in the Adviser, as directors, officers, employees or shareholders
or otherwise, and that directors, officers, employees or shareholders of the
Adviser and its affiliates are or may become similarly interested in the
Company.
The Adviser may use any supplemental investment research obtained for
the benefit of the Fund in providing investment advice to its other
investment advisory accounts, and the Adviser may use such information in
managing its own accounts. Conversely, such supplemental information
obtained by the placement of business for the Adviser or other entities
advised by the Adviser will be considered by and may be used by the Adviser
in carrying out its obligations to the Company and the Fund.
Securities held by the Fund may also be held by separate investment
accounts or other investment companies for which the Adviser may act as an
- 5 -
<PAGE> 6
investment adviser or by the Adviser or its affiliates. Due to different
investment objectives or other factors, a particular security may be bought
by the Adviser or its affiliates or for one or more clients when one or more
other clients are selling such security. If purchases or sales of securities
for the Fund and for other entities or clients for which the Adviser or its
affiliates act as investment adviser arise for consideration at or about the
same time, the Company agrees that the Adviser may make transactions in such
securities, insofar as feasible, for the Fund and the other entities and
clients in a manner deemed by officers of each to be equitable to all. To
the extent that transactions on behalf of more than one client of the Adviser
during the same period may increase the demand for securities being purchased
or the supply of securities being sold, the Company recognizes that there may
be an adverse effect on the price paid or received by the Fund for such
securities.
The parties hereto agree that, on occasions when the Adviser deems the
purchase or sale of a security to be in the best interests of the Fund as
well as other accounts or companies it advises, the Adviser may, to the
extent permitted by applicable laws and regulations, but will not be
obligated to, aggregate the securities to be so sold or purchased for the
Fund with those to be sold or purchased for other accounts or companies to
obtain favorable execution and lower brokerage commissions. In that event,
allocation of the securities purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Adviser in the manner it
considers to be most equitable and consistent with its fiduciary obligations
to the Fund and to such other accounts or companies. The Company recognizes
that in some cases this procedure may adversely affect the size of the
position in any such security obtainable for the Fund.
ARTICLE V
Effectiveness of this Agreement
-------------------------------
This Agreement shall not become effective unless and until it is
approved by the Board (including a majority of members who are not parties to
this Agreement or interested persons (as defined in the 1940 Act) of any such
party to this Agreement) and by the holders of a majority of the Fund's
shares (as defined in the 1940 Act), and this Agreement shall come into full
force and effect on the date on which all such approvals shall have been
obtained.
ARTICLE VI
Term of this Agreement
----------------------
This Agreement shall continue in effect from year to year so long as
its continuance is approved annually by the holders of a majority of the
Fund's shares (as defined in the 1940 Act) or by a vote by a majority of the
members of the Board, but in either event by the vote of a majority of the
Board who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval.
This Agreement (i) may be terminated without the payment of any penalty
upon 60 days' written notice to the Adviser either by the Board or as a
result of the vote of the holders of a majority of the Fund's shares (as
defined in the 1940 Act); (ii) shall automatically terminate if it is
assigned (within the meaning of the 1940 Act) by the Adviser; (iii) may be
terminated by the Adviser without payment of any penalty upon 60 days'
written notice to the Secretary of the Board; and (iv) may be otherwise
terminated or amended, changed, waived, or discharged only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge, or termination is sought. An amendment of this Agreement
shall not be effective until such amendment is approved by (a) vote of the
holders of a majority of the outstanding voting securities of the Fund (as
defined in the 1940 Act);
- 6 -
<PAGE> 7
and (b) a majority of the Board members who are not parties to this Agreement or
interested persons of such a party, cast in person at a meeting called for the
purpose of voting on such approval.
ARTICLE VII
Recordkeeping
-------------
The Adviser agrees to preserve for the period or periods prescribed by
the rules and regulations of the Securities and Exchange Commission all
records that the Adviser maintains for the Company with respect to the Fund.
The Adviser agrees that all such records shall be the property of the Company
and shall be made available, within five (5) business days of the request, to
the Company's counsel, accountants, auditors, or other representatives during
regular business hours at the Adviser's offices upon such prior written
request. Upon termination of this Agreement for any reason, the Adviser
shall return all such records promptly to the Company, free from any claim or
retention of rights by the Adviser. The Adviser will also provide any
materials reasonably related to the investment advisory services provided
hereunder, as may be requested in writing by the Board or officers of the
Company or as may be required by any governmental agency having jurisdiction
over the Company, Fund, or Adviser. The Adviser will keep any information
obtained in the course of its performance of this Agreement in confidence,
and will not use such information for its own benefit or disclose such
information except as provided herein or authorized by Company or as required
by regulatory authorities having jurisdiction over the Company, Fund, or
Adviser.
ARTICLE VIII
Liability of the Adviser
------------------------
In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties on the part of the Adviser (or on
the part of its officers, directors, agents, employees, controlling persons,
shareholders, and any other person or entity affiliated with the Adviser or
retained by it to perform or assist in the performance of its obligations
under this Agreement), neither the Adviser nor any of its officers,
directors, employees, or agents shall be subject to liability to the Company
or to any shareholder of the Fund or to any other person with a beneficial
interest in the Company or the Fund for any act or omission in the course of,
or connected with, rendering advisory services hereunder, including without
limitation any error or judgment or mistake of law or for any loss suffered
by the Company, the Fund, or any shareholder or other person in connection
with the matters to which this Agreement relates, except to the extent
specified in Section 36(b) of the 1940 Act. The provisions of this Article
VIII shall not apply to services other than those relating solely to the
provision of investment advice rendered by the Adviser pursuant to this
Agreement.
ARTICLE IX
Miscellaneous
-------------
A. Governing Law. While this Agreement is intended by the parties
-------------
to be governed by Missouri law with respect to matters of state law, this
Agreement is also subject to the provisions of the Investment Company Act, as
amended, and the rules and regulations of the Securities and Exchange
Commission thereunder, including such exemptions therefrom as the Securities
and Exchange Commission may grant. Words and phrases used herein shall be
interpreted in accordance with the 1940 Act and such rules and regulations.
B. Severability. If in any judicial or administrative proceedings a
------------
court or administrative authority shall determine that any provision of this
Agreement is void or otherwise unenforceable, such provision shall be deemed
eliminated from this Agreement to the extent necessary in such proceedings or
- 7 -
<PAGE> 8
otherwise to the extent necessary to permit the enforcement of the remaining
provisions of this Agreement, and to the extent permitted by the 1940 Act
such remaining provisions of this Agreement shall continue in force and
effect.
C. Amendment. This Agreement may be modified only in writing
---------
executed by the parties hereto and in accordance with the requirements of the
1940 Act.
D. Registration. The Adviser shall at all times during the term of
------------
this Agreement maintain its registration as an investment adviser with the
Securities and Exchange Commission, the State of Missouri, and all other
states and jurisdictions in which such registration is required for the
conduct of business by the Adviser or the Company or the offer or sale of
shares by the Fund.
IN WITNESS WHEREOF, the parties have caused this Investment Advisory
Agreement to be signed by their respective officials duly authorized, as of
the day and year first above written.
THE WALNUT STREET FUNDS, INC.
By: /S/ Timothy C. Nicholson
-------------------------------------
Timothy C. Nicholson, President
GENERAL AMERICAN INVESTMENT MANAGEMENT COMPANY
By: /S/ Douglas R. Koester
-------------------------------------
Douglas R. Koester, Vice President
- 8 -
<PAGE> 1
Exhibit 5(b)
------------
Administration Agreement with
The Bank of New York
<PAGE> 2
ADMINISTRATION AGREEMENT
------------------------
AGREEMENT made this 12th day of May, 1993, by and between Walnut Street
Funds, Inc., a Maryland corporation (the "Company"), and The Bank of New
York, a New York trust company (the "Administrator").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company is a registered open-end, investment company under
the Investment Company Act of 1940, as amended (the "1940 Act") consisting of
the portfolios described from time to time in the current and effective
prospectus for the Company (each, a "Series"); and
WHEREAS, the Company desires to retain the Administrator to provide
administration services for the Company and the Administrator is willing to
provide such services, all as more fully set forth below:
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereby agree as follows:
1. Appointment.
-----------
The company hereby appoints the Administrator as administrator of the
Company for the term of this Agreement. The Administrator hereby accepts
such appointment and agrees to perform the duties hereinafter set forth.
2. Representations and Warranties.
------------------------------
(a) The Company hereby represents and warrants to the Administrator,
which representations and warranties shall be deemed to be continuing, that:
(i) The Company is duly organized and existing under the laws of the
jurisdiction of its organization, with full power to carry on its business
as now conducted, to enter into this Agreement and to perform its
obligations hereunder;
(ii) This Agreement has been duly authorized, executed and delivered by
the Company in accordance with all requisite action and constitutes a
valid and legally binding obligation of the Company, enforceable in
accordance with its terms; and
(iii) The Company is conducting its business in compliance in all
material respects with all applicable laws and regulations, both state and
federal, and has obtained all regulatory licenses, approvals and consents
necessary to carry on its business as now conducted; there is no statute,
<PAGE> 3
- 2 -
regulation, rule, order or judgment binding on the Company and no provision
of the Company's charter or by-laws, nor of any mortgage, indenture, credit
agreement or other contract binding on the Company or affecting its
property which would prohibit the execution or performance of this
Agreement by the Company.
(b) The Administrator hereby represents and warrants to the Company,
which representations and warranties shall be deemed to be continuing, that:
(i) The Administrator is duly organized and existing under the laws of
the jurisdiction of its organization, with full power to carry on its
business as now conducted, to enter into this Agreement and to perform its
obligations hereunder;
(ii) This Agreement has been duly authorized, executed and delivered by
the Administrator in accordance with all requisite action and constitutes a
valid and legally binding obligation of the Administrator, enforceable in
accordance with its terms; and
(iii) The Administrator is conducting its business in compliance in all
material respects with all applicable laws and regulations, both state and
federal, and has obtained all regulatory licenses, approvals and consents
necessary to carry on its business as now conducted; there is no statute,
regulation, rule, order or judgment binding on the Administrator and no
provision of the Administrator's charter or by-laws, nor of any mortgage,
indenture, credit agreement or other contract binding on the Administrator
or affecting its property which would prohibit the execution or performance
of this Agreement by the Administrator.
3. Delivery of Documents.
---------------------
(a) The Company has delivered or will deliver to the Administrator true
and correct copies of each of the following documents as currently in effect
and will promptly deliver to it all future amendments and supplements
thereto, if any:
(i) The Company's articles of incorporation or other organizational
document and all amendments thereto (the "Charter");
(ii) The Company's bylaws (the "Bylaws");
(iii) Resolutions of the Company's board of directors or other governing
body authorizing the execution, delivery and performance of this
Agreement by the Company;
(iv) The Company's Registration Statement under the Securities Act of
of 1933, as amended, and Form N-1A under the 1940 Act, most recently
filed with the Securities and Exchange Commission (the "SEC")
relating to the
<PAGE> 4
- 3 -
shares of the Company (collectively, the "Registration Statement");
(v) The Company's Notification of Registration under the 1940 Act on
Form N-8A filed with the Commission; and
(vi) The Company's Prospectus and Statement of Additional Information
pertaining to the Series (collectively, the "Prospectus").
(b) Each copy of the Charter shall be certified by the Secretary of
State (or other appropriate official) of the state of organization, and if
such Charter is required by law also to be filed with a county or other
officer or official body, a certificate of such filing shall be filed with
a certified copy submitted to the Administrator. Each copy of the Bylaws,
Registration Statement and Prospectus of the Company, and all amendments
thereto, and copies of resolutions of the Board of Directors of the Company,
shall be certified by the Secretary or an Assistant Secretary of the Company.
(c) It shall be the sole responsibility of the Company to deliver to
the Administrator the Company's currently effective Prospectus and the
Administrator shall not be deemed to have notice of any information
contained in such Prospectus until it is actually received by the
Administrator.
4. Duties and Obligations of the Administrator.
-------------------------------------------
(a) Subject to the direction and control of the Company's Board of
Directors and the provisions of this Agreement, the Administrator shall
provide to the Company the administrative services set forth on Schedule I
attached hereto.
(b) In performing its services hereunder, the Administrator shall
provide, at its expense, office space, facilities, equipment and personnel.
(c) The Administrator, in its capacity as such, shall not provide
administrative services relating to the management, investment advisory or
sub-advisory functions of the Company, distribution of shares of the
Company, maintenance of the Company's financial records or other services
normally performed by the Company's counsel and independent auditors.
(d) With the prior consent of the Company, the Administrator may
delegate any of its duties and obligations hereunder to any delegee or
agent whenever and on such terms and conditions as it deems necessary or
appropriate; provided however, that the Administrator may delegate any of
----------------
its duties and obligations hereunder to any subsidiary or affiliate of
the Administrator without such prior consent. The Administrator shall not
be liable to the Company for any loss or damage arising out of, or in
connection with, the actions or omissions to act of
<PAGE> 5
- 4 -
any delegee or agent whose appointment was consented to by the Company.
(e) The Company shall cause its officers, advisors, distributor,
legal counsel, independent accountants and transfer and dividend
disbursment agent to cooperate with the Administrator and to provide the
Administrator, upon request, with such information, documents and advice
relating to the Company as is within the possession or knowledge of such
persons, as is necessary to permit the Administrator to perform its duties
hereunder; provided, that in the case of the Company's counsel, the Company
--------
may withhold any information, documents or advice held or given by such
counsel that is subject to the attorney-client or work product privileges,
and provided further, that in the case of the Company's independent
-------- -------
accountants, the Company may withhold any information, documents, or advice
held or given by such accountants that is subject to any accountant-client
privilege under the laws of the State of Missouri. The Administrator
shall not be liable for any loss, damage or expense resulting from or
arising out of the failure of the Company to cause any information,
documents or advice, whether or not subject to the attorney-client privilege
or accountant-client privilege, to be provided to the Administrator as
provided herein. In connection with its duties hereunder, the Administrator
shall be entitled to rely, and shall be held harmless by the Company when
acting in reliance, upon the instructions, advice or any documents relating
to the Company provided to the Administrator by any of the aforementioned
persons. All fees or costs charged by such persons shall be borne by the
Company.
(f) Nothing in this Agreement shall limit or restrict the Administrator,
any affiliate of the Administrator or any officer or employee thereof from
acting as administrator for or with any third parties.
(g) The Administrator may apply to an officer of the Company for
written instructions with respect to any matter arising in connection with
the Administrator's performance hereunder, and the Administrator shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with such instructions. Such application for instructions may,
at the option of the Administrator, set forth in writing any action proposed
to be taken or omitted to be taken by the Administrator with respect to its
duties or obligations under this Agreement and the date on and/or after
which such action shall be taken (which date shall afford the Company
reasonable time to consider the matter in question), and the Administrator
shall not be liable for any action taken or omitted to be taken in
accordance with a proposal included in any such application on or after
the date specified therein unless, prior to taking or omitting to take any
such action, the Administrator has received written instructions in response
to such application specifying the action to be taken or omitted. The
Administrator
<PAGE> 6
- 5 -
may consult with counsel to the Company, at the expense of the Company, or
its own counsel, at the expense of the Administrator, and shall be fully
protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Company.
(h) The Administrator, in its capacity as such, shall have no duties
or responsibilities whatsoever except such duties and responsibilities as
are specifically set forth in this Agreement and Schedule I hereto or are
incidental to such duties or responsibilities, and no covenant or obligation
shall be implied against the Administrator in connection with this Agreement.
(i) The Company shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in
this Agreement or are incidental to such duties or responsibilities, and no
covenant or obligation shall be implied against the Company in connection
with this Agreement.
5. Allocation of Expenses.
----------------------
Except as otherwise provided herein, all of the Company's costs and
expenses arising or incurred in connection with this Agreement shall be paid by
the Company, including but not limited to, organizational costs and costs
of maintaining corporate existence, taxes, interest, brokerage fees and
commissions, insurance premiums, compensation and expenses of the Company's
directors, officers or employees, legal, accounting and audit expenses,
management, advisory, sub-advisory, administration and shareholder servicing
fees, charges of custodians, transfer and dividend disbursing agents, expenses
(including clerical expenses) incident to the issuance, redemption or
repurchase of Company shares, fees and expenses incident to the registration
or qualification under federal or state securities laws of the Company or
its shares, costs of preparing and distributing reports, notices and proxy
material to shareholders of the Company (including printing and mailing costs),
all expenses incidental to holding meetings of the Company's, directors and
shareholders, and extraordinary expenses as may arise, including litigation
affecting the Company and legal obligations which the Company may have to
indemnify its directors and officers with respect thereto. The Administrator
shall not be responsible for any costs or expenses arising or incurred in
connection with printing and distributing the Company's Prospectus or
Statement of Additional Information.
6. Standard of Care; Indemnification.
---------------------------------
(a) Except as otherwise provided herein, the Administrator shall not
be liable for any costs, expenses, damages, liabilities or claims (including
attorneys' and accountants' fees) incurred by the Company, except those
costs, expenses, damages, liabilities or claims arising out of the bad
faith, negligence or
<PAGE> 7
- 6 -
wilful misconduct of the Administrator in the performance of its obligations
and duties under this Agreement. In no event shall the Administrator be
liable to the Company or any third party for special, indirect or
consequential damages, or lost profits or loss of business, arising under
or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action.
(b) The Company shall indemnify and hold harmless the Administrator
from and against any and all costs, expenses, damages, liabilities and
claims (including claims asserted by the Company), and reasonable attorneys'
and accountants' fees relating thereto, which are sustained or incurred or
which may be asserted against the Administrator, by reason of or as a
result of any action taken or omitted to be taken by the Administrator in
good faith hereunder or in reliance upon (i) any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed, (ii) the Registration Statement or
Prospectus, (iii) any instructions of any officer of the Company, (iv) any
opinion of legal counsel for the Company or the Administrator, or (v) arising
out of transactions or other activities of the Company which occurred prior
to the commencement of this Agreement; provided, that the Company shall not
indemnify the Administrator for those costs, expenses, damages, liabilities or
claims arising out of the Administrator's own negligence, bad faith or
wilful misconduct. This indemnity shall be a continuing obligation of the
Company, its successors and assigns, notwithstanding the termination of this
Agreement.
(c) Actions taken or omitted in reliance on oral or written instructions,
or upon any information, order, indenture, stock certificate, power of
attorney, assignment, affidavit or other instrument believed by the
Administrator to be genuine or bearing the signature of a person or persons
believed to be authorized to sign, countersign or execute the same, or upon
the opinion of legal counsel for the Company or its own counsel, shall be
conclusively presumed to have been taken or omitted in good faith.
7. Compensation.
------------
For the services provided hereunder, the Company agrees to pay the
Administrator such compensation as is mutually agreed from time to time and
such reasonable out-of-pocket expenses (e.g., telecommunication charges,
----
postage and delivery charges, record retention costs, reproduction charges
and transportation and lodging costs) as are incurred by the Administrator in
performing its duties hereunder. Except as hereinafter set forth,
compensation shall be calculated and accrued daily and paid monthly. The
Company authorizes the Administrator to debit the Company's custody
account for all amounts due and payable hereunder 10 days after the Company's
receipt of invoices describing such amounts. The Administrator shall deliver
to the
<PAGE> 8
- 7 -
Company invoices for services rendered after debiting the Company's custody
account with an indication that payment has been made. Upon termination of
this Agreement before the end of any month, the compensation for such part
of a month shall be prorated according to the proportion which such period
bears to the full monthly period and shall be payable upon the effective date
of termination of this Agreement. For the purpose of determining compensation
payable to the Administrator, the Company's net asset value shall be computed
at the times and in the manner specified in the Company's Prospectus.
8. Term of Agreement.
-----------------
(a) This Agreement shall continue until terminated by the Company upon
60 days prior written notice to the Administrator or by the Administrator
upon 90 days prior written notice to the Company. Upon termination hereof,
the Company shall pay to the Administrator such compensation as may be due
as of the date of such termination, and shall reimburse the Administrator for
any disbursements and expenses made or incurred by the Administrator and
payable or reimbursable hereunder.
9. Amendment
---------
This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties.
10. Assignment
----------
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by either party without the written
consent of the other party.
11. Governing Law; Consent to Jurisdiction.
--------------------------------------
This Agreement shall be construed in accordance with the laws of the State
of New York, without regard to conflict of laws principles thereof. The
Company hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder. To the extent that in any jurisdiction the Company may now or
hereafter be entitled to claim, for itself or its assets, immunity from suit,
execution, attachment (before or after judgment) or other legal process, the
Company irrevocably agrees not to claim, and it hereby waives, such immunity.
12. Severability.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations shall
not in any way be affected or impaired thereby, and if any provision is
inapplicable to any
<PAGE> 9
- 8 -
person or circumstances, it shall nevertheless remain applicable to all
other persons and circumstances.
13. No Waiver.
---------
Each and every right granted to the parties hereunder or under any other
document delivered hereunder or in connection herewith, or allowed them by
law or equity, shall be cumulative and may be exercised from time to time.
No failure on the part of either party to exercise, and no delay in
exercising, any right will operate as a waiver thereof, nor will any single
or partial exercise by either party of any right preclude any other or
future exercise thereof or the exercise of any other right.
14. Notices
-------
All notices, requests, consents and other communications pursuant to this
Agreement in writing shall be sent as follows (which shall include via
facsimile transmission where mutually agreed):
if to the Company, at
The Walnut Street Funds, Inc.
1801 Park 270 Drive - Suite 220
St. Louis, Missouri 63146
Attention: President
---------
if to the Administrator, at
The Bank of New York
110 Washington Street
New York, New York 10286
Attn: Mr. Al Ratcliffe
Vice President
or at such other place as may from time to time be designated in writing.
Notices hereunder shall be effective upon receipt.
15. Counterparts
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts together shall
constitute only one instrument.
<PAGE> 10
- 9 -
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals
to be hereunto affixed, all as of the day and year first above written.
WALNUT STREET FUNDS, INC.
By: /s/ TIMOTHY C. NICHOLSON
-----------------------------------
Title:
THE BANK OF NEW YORK
By: /s/ AL RATCLIFFE
-----------------------------------
Title: VP
<PAGE> 11
SCHEDULE I
----------
Administrative Services
- -----------------------
1. Monitor and document compliance by the Company with its policies and
restrictions as delineated in its Prospectus.
2. Participate in the periodic updating of the Company's Registration
Statement and Prospectus and, subject to approval by the Company's
Treasurer and legal counsel, coordinate the preparation, filing,
printing and dissemination of periodic reports and other information
to the SEC and the Company's shareholders, including annual and
semi-annual reports to shareholders, annual and semi-annual
Form N-SAR, notices pursuant to Rule 24(f)-2 and proxy materials.
3. Subject to approval by the Company's Treasurer and legal counsel,
coordinate the preparation and filing of periodic reports and other
information pursuant to the Blue Sky laws of such states where the
Company has advised the Administrator its shares have been registered
and such registrations should be maintained.
4. Prepare federal, state and local income tax returns for the Company
and each Series and file such returns upon the approval of the
Company's independent accountants; monitor and report on Sub-Chapter
M qualifications; prepare and file all Form 1099s with respect to
directors or trustees; monitor compliance with Section 4982 of the
Internal Revenue Code; calculate and maintain records pertaining to
Original Issue Discount and premium amortization as required; perform
ongoing wash sales review (i.e., purchases and sales of Company
----
investments within 30 days of each other).
5. Prepare and, subject to approval of the Company's Treasurer,
disseminate to the Company's Board, executive officers and legal
counsel quarterly unaudited financial statements and schedules of
Company investments and make presentations to the Board, as
appropriate.
6. Subject to approval of the Company's Board, assist the Company in
obtaining fidelity bond and E&O/D&O insurance coverage.
7. Prepare statistical reports for outside information services (e.g.,
----
IBC/Donoghue, ICI and Lipper Analytical).
8. Attend shareholder and Board meetings as requested from time to time.
<PAGE> 12
9. Maintain expense files and coordinate the payment of invoices.
<PAGE> 1
Exhibit 5(c)
------------
Company Accounting Agreement with
The Bank of New York
<PAGE> 2
COMPANY ACCOUNTING AGREEMENT
----------------------------
AGREEMENT made as of this day of January, 1993 by and between
The Walnut Street Funds, Inc., a Maryland corporation having its principal
place of business at 1801 Park Drive, Suite 220, St. Louis, Missouri 63146
(hereinafter called the "Company") and The Bank of New York, a New York
corporation authorized to do a banking business, having its principal place
of business at 48 Wall Street, New York, New York 10286 (hereinafter called
the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the mutual agreements herein contained, the Company
and the Bank hereby agree as follows:
1. The Company hereby appoints the Bank its agent to perform the duties
hereinafter set forth.
2. The Bank hereby accepts appointment as such agent and agrees to
perform the duties hereinafter set forth.
3. The Bank shall compute the net asset value per share of each Series
of shares (the "Series") of the Company at such times and dates and in the
manner specified in the then currently effective Prospectus of the Company.
Securities of the Company shall be valued as set forth in the then currently
effective Prospectus of the Company and the Company shall have sole
responsibility for determining the method of valuation of Company securities.
To the extent valuation of Company securities on such basis is at any time
inconsistent with any applicable laws and/or regulations, the Company shall
immediately so notify the Bank in writing and thereafter shall either furnish
the Bank at all appropriate times with the values of the Company's securities
or, subject to the prior approval of the Bank, instruct the Bank in writing
to value Company securities in a manner which the Company then represents
in writing to be consistent with all applicable laws and regulations.
4. The Bank shall also compute the net income of each Series for
dividend purposes and the net income per share at such times and dates and in
the manner specified in the then currently effective Prospectus of the Company.
5. The Company or the then acting investment adviser specified by the
Company to the Bank (the "Adviser") may from time to time instruct the Bank
in writing to compute the value
<PAGE> 3
of the securities of a Series, a Series' net asset value per share, the net
income of a Series, or the net income per share of a Series in a manner other
than as specified in paragraphs 3 and 4 of this Agreement; provided, however,
that any such other methods of computation shall not be inconsistent with any
applicable laws and regulations.
6. The Company shall furnish or cause the Adviser to furnish the Bank
with any and all instructions, explanations, information, specifications and
documentation deemed necessary by the Bank in the performance of its duties
hereunder, including, without limitation, the amounts, and/or written formula
for calculating the amounts, and times of accrual of Company liabilities and
expenses. The Company shall also at any time and from time to time furnish or
cause the Adviser to furnish the Bank with bid, offer, and/or market values of
Company securities if the same are not available to the Bank from a security
pricing or similar service utilized, or subscribed to, by the Bank at the time
such information is required for calculations hereunder. The Bank shall at no
time or from time to time be required or obligated to commence or maintain
any utilization of, or subscriptions to, any securities pricing or similar
service not listed on Schedule I hereto. Any specifications of the assets of
the Company given to the Bank by the Company, and any changes in such
specifications, including, without limitation, any additions thereto or
deletions therefrom, shall be signed by two (2) officers of the Company, or
shall be sent by an electronic date transmission system, containing such codes
and passwords as the parties may agree upon.
7. The Bank shall advise the Company, the Company's custodian and the
Company's transfer agent of the net asset value per share, the net income and
the net income per share of each Series upon completion of the computations
required to be made by the Bank pursuant to this Agreement. A summary
specifying NAV shall be provided the same day, and a detailed report shall be
electronically provided or electronically available by the next business day,
all in accordance with electronic transmission protocols agreed to by the Bank
and the Company. In addition, for so long as net income and net income per
share is determined by the Company as of 2:00 p.m. New York time, the Bank
shall provide to National Financial Services Corporation ("NFSC") on each
business day by 4:45 p.m. New York time the net income per share on such
business day, such provision to be accomplished by the Bank's sending a
facsimile transmission to NFSC at the address last provided by NFSC to the Bank
for such purpose.
8. The Bank shall, as agent for the Company, maintain and keep current
the books, accounts and other documents, if any, listed in Appendix A hereto
and made a part hereof, as such Appendix A may be amended from time to time,
and preserve any such books, accounts and other documents in accordance
- 2 -
<PAGE> 4
with the applicable provisions of Rule 31a-2 of the General Rules and
Regulations under the Investment Company Act of 1940, as amended (the "Rules").
Such books, accounts and other documents shall be made available upon
reasonable request for inspection by officers, employees and auditors of the
Company during the Bank's normal business hours.
9. All records maintained and preserved by the Bank pursuant to this
Agreement which the Company is required to maintain and preserve in
accordance with the above-mentioned Rules shall be and remain the property of
the Company and shall be surrendered to the Company or the Adviser,
respectively promptly upon the respective request of either in the form in
which such records have been maintained and preserved. Upon reasonable
request of the Company or the Adviser, the Bank shall provide in hard copy
or on micro-film, whichever the Bank shall elect, any records included in
any such delivery which are maintained by the Bank on a computer disc, or
are similarly maintained, and the Company shall reimburse the Bank for its
reasonable expenses of providing such hard copy or micro-film.
10. The Bank, in performing the services required of it under the terms
of this Agreement, shall be entitled to rely fully on the accuracy and validity
of any and all instructions, explanations, information, specifications and
documentation furnished to it by the Company or the Adviser and shall have no
duty or obligation to review the accuracy, validity or propriety of such
instructions, explanations, information, specifications or documentation,
including without limitation, valuations of securities held as part of the
portfolios of the Series; the amounts and/or formula for calculating the
amounts and times of accrual of Series' liabilities and expenses; the amounts
receivable and the amounts payable on the sale or purchase of the portfolio
securities of the Series; and amounts receivable or amounts payable for the
sale or redemption of Company shares effected by or on behalf of the Series.
In the event the Bank's computations hereunder require, in whole or in part,
information, including, without limitation, bid, offer and/or market values
of securities or other assets, or accruals of interest or earnings thereon,
which is not furnished by the Company because the same is available to the
Bank from a pricing or similar service listed on Schedule I hereto utilized, or
subscribed to, by the Bank which the Bank in its judgment deems reliable, the
Bank shall not be responsible for, under any duty to inquire into, nor
deemed to make any assurances with respect to, the accuracy or completeness of
such information. From time to time Schedule I may be amended by the parties
hereto to add or delete a service, provided that the costs of any service
added are borne by the Company, and provided further that the Bank shall in
no event be required to utilize any service unless such service is available
to the Bank by a means compatible with the Bank's then existing electronic
data facilities.
- 3 -
<PAGE> 5
11. The Bank shall not be required to inquire into any valuation of
securities or other assets by the Company or any third party described in
preceding paragraph 10 hereof, even though the Bank in performing services
similar to the services provided pursuant to this Agreement for others may
receive different valuations of the same or different securities of the same
issuers.
12. The Bank, in performing the services required of it under the terms
of this Agreement, shall not be responsible for determining whether any
interest accruable to the Company is or will be actually paid, but will accrue
such interest until otherwise instructed by the Company.
13. The Bank shall not be responsible for delays or errors which occur
by reason of circumstances beyond its control in the performance of its duties
under this Agreement, including, without limitation, labor difficulties within
and without the Bank, mechanical breakdowns, flood or catastrophe, acts of
God, or failures of transportation, communication or power supply, or other
similar circumstances. Nor shall the Bank be responsible for delays or
failures to supply the information or services specified in this Agreement
where such delays or failures are caused by the failure of any person(s) other
than the Bank to supply any instructions, explanations, information,
specifications or documentation deemed necessary by the Bank in the performance
of its duties under this Agreement.
14. No provision of this Agreement shall prevent the Bank from offering
services similar or identical to those covered by this Agreement to any other
corporations, associations or entities of any kind. Any and all operational
procedures, techniques and devices developed by the Bank in connection with
the performance of its duties and obligations under this Agreement, including
those developed in conjunction with the Company, shall be and remain the
property of the Bank, and the Bank shall be free to employ such procedures,
techniques and devices in connection with the performance of any other contract
with any other person whether or not such contract is similar or identical
to this Agreement.
15. The Bank may, with respect to questions of law, apply to and obtain
the advice and opinion of counsel to the Company or, at its own expense, its
own counsel and shall be entitled to rely on the advice or opinion of such
counsel. The costs of any such advice or opinion of counsel to the Company
shall be borne by the Company.
16. The Bank shall not be liable for any loss, damage or expense,
including counsel fees and other costs and expenses of a defense against any
claim or liability, resulting from, arising out of, or in connection with its
performance hereunder, including its actions or omissions, the
- 4 -
<PAGE> 6
incompleteness or inaccuracy of any specifications or other information
furnished by the Company, or for delays caused by circumstances beyond the
Bank's control, unless such loss, damage or expense arises out of the bad
faith, negligence, or willful misconduct of the Bank. In no event shall the
Bank be liable to the Company or any third party for special, indirect, or
consequential damages, or for loss profits or loss of business, arising under
or in connection with this Agreement, even if previously informed of
possibility of such damages and regardless of the form of action.
17. Without limiting the generality of the foregoing, the Company shall
indemnify the Bank against and save the Bank harmless from any loss, damage
or expense, including counsel fees and other costs and expenses of a defense
against any claim or liability, arising from the following:
(a) Errors in records, information, specifications or documentation
of any kind, as the case may be, supplied to the Bank by any third party
described in preceding paragraph 10 hereof or by or on behalf of the Company;
(b) Action or inaction taken or omitted to be taken by the Bank
without bad faith, negligence or willful misconduct including actions pursuant
to written instructions or explanations of an officer or employee of the
Company or the Adviser; and
(c) Any action taken or omitted to be taken by the Bank in good
faith in accordance with the advice or opinion of counsel for the Company or
its own counsel.
18. In consideration for all of the services to be performed by the Bank
as set forth herein the Bank shall be entitled to receive reimbursement for
all reasonable out-of-pocket expenses and such compensation as may be agreed
upon in writing from time to time between the Bank and the Company.
19. This Agreement shall not be assignable by the Company without the
prior written consent of the Bank, or by the Bank without the prior written
consent of the Company.
20. Either of the parties hereto may terminate this Agreement by giving
the other party a notice in writing specifying the date of such termination,
which shall not be less than sixty (60) days in case of a notice given by the
Company, or 120 days in the case of a notice given by the Bank, after the date
of giving of such notice. Upon the date set forth in such notice, the Bank
shall deliver to the Company all records then the property of the Company and,
upon such delivery, the Bank shall be relieved of all duties and
responsibilities under this Agreement.
- 5 -
<PAGE> 7
21. This Agreement may not be amended or modified in any manner except
by written agreement executed on behalf of both parties hereto.
22. This Agreement is executed in the State of New York and all laws or
rules of construction of the State of New York shall govern the rights, duties
and obligations of the parties hereto.
23. The performance and provisions of this Agreement are intended to
benefit only the Bank and the Company, and no rights shall be granted to any
other person by virtue of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
By: /s/ Timothy C. Nicholson
-------------------------------------
Attest:
- -----------------------------
THE BANK OF NEW YORK
By: /s/ Al Ratcliffe
-------------------------------------
Attest:
- -----------------------------
- 6 -
<PAGE> 8
APPENDIX A TO COMPANY ACCOUNTING AGREEMENT
BETWEEN
THE BANK OF NEW YORK
AND
--------------------
I. The Bank of New York (the "Bank"), as agent for
(the "Company"), shall maintain the following records on a daily basis for each
Series.
1. Report of priced portfolio securities
2. Statement of net asset value per share
3. New income of the Company for dividend proposes
4. Net income per share
5. Yield of the Company
II. The Bank shall maintain the following records on a monthly basis
for each Series:
1. General Ledger
2. General Journal
3. Cash Receipts Journal
4. Cash Disbursements Journal
5. Subscriptions Journal
6. Redemptions Journal
7. Accounts Receivable Reports
8. Accounts Payable Reports
9. Open Subscriptions/Redemption Reports
10. Transaction (Securities) Journal
11. Broker Net Trades Reports
III. The Bank shall prepare a Holdings Ledger on a quarterly basis, and
a Buy-Sell Ledger (Broker's Ledger) on a semiannual basis for each Series.
Schedule D shall be produced on an annual basis for each Series.
The above reports may be printed according to any other required frequency
to meet the requirements of the Internal Revenue Service, The Securities and
Exchange Commission and the Company's Auditors.
IV. For internal control purposes, the Bank uses the Account Journals
produced by The Bank of New York Custody System to record daily settlements
of the following for each Series:
1. Securities bought
2. Securities sold
3. Interest received
4. Dividends received
5. Capital stock sold
6. Capital stock redeemed
7. Other income and expenses
<PAGE> 9
All portfolio purchases for the Company are recorded to reflect expected
maturity value and total cost including any prepaid interest.
- 2 -
<PAGE> 1
Exhibit 5(d)
------------
Terms of Sweep Account Arrangements
with National Financial Services Corporation.
<PAGE> 2
[Letterhead of National Financial]
March 23, 1993
Mr. Tim Nicholson
President
Walnut Street Securities
1801 Park 270 Drive, Suite 220
P.O. Box 46902
St. Louis, MO 63146
Dear Tim:
As we have discussed in recent conversations, National Financial has developed
the capability to permit Walnut Street customers to select one of the Walnut
Street Money Market funds as a core sweep investment vehicle. This added
feature can be offered to any of your customers with a regular brokerage
account, and the National Financial IRA prototype as well. This letter
documents the pricing associated with supporting the Walnut Street funds on
National Financial's brokerage system.
It is our understanding that you would like us to support the following
additional money market funds on the brokerage system:
Fund Name Cusip
--------- -----
* Walnut Street Prime Reserves N/A
National Financial's services will include complete core fund processing and
daily sweep functionality for these funds. All cash credits and debits will
settle against a customer's balance in the Walnut Street money market fund
account held on our system. All of the guidelines and limitations that
currently apply to the existing Fidelity core funds (e.g. concerning additional
purchases, exchanges, etc.), will apply to the Walnut Street funds held on the
system.
National Financial's charges for these services will be based on the following
fee schedule. Note that our fees will be charged on a "stepped up" basis, not
aggregate assets.
Average Daily Assets Processing Fee
-------------------- --------------
First $100 million 9 Basis points
Additional Assets between
$101-$200 million 8 Basis points
Additional Assets greater
than $200 million 6 Basis points
<PAGE> 3
Page 2
March 23, 1993
For example, if the total assets in all Walnut Street money market funds
linked to National Financial brokerage accounts was $300 million, our
annual fee would be:
$100 million @ 9 Basis Points = $90,000
$100 million @ 8 Basis Points = $80,000
$100 million @ 6 Basis Points = $60,000
Total $300 million = $230,000
The minimum annual fee for the service is $30,000. Accordingly, as long as
the total Walnut Street money fund assets held on our system are less than
$33.3 million, the $30,000 annual fee will be applicable.
Since National Financial's services should streamline the recordkeeping,
administration and customer reporting processes performed by your Transfer
Agent, you may pursue having all or a portion of our fees paid from the
fund's operating expenses.
We are pleased to be able to offer Walnut Street Securities the unique
opportunity to fully integrate the Walnut Street money market funds onto the
brokerage system. I am available to discuss any of the aspects of our program
with you. For your convenience, a duplicate copy of this letter is attached
for you to confirm acceptance of the services provided in this letter.
Sincerely,
/s/ Jim Dario
Jim Dario
Relationship Manager
(617) 570-2379
<PAGE> 4
May --, 1993
Joseph N. Barra
Vice President, Mutual Fund Operations
National Financial Service Corporation
82 Devonshire
Boston, Massachusetts 02019
Dear Mr. Barra:
The undersigned Walnut Street Funds, Inc. (the "Fund"), understands
that National Financial Service Company ("NFSC") will be providing certain
sub-accounting and related services to certain shareholders of the Fund's
Walnut Street Prime Reserve Fund series (the "Series") after the registration
statement for the Series becomes effective. In connection with the provision
of such services, NFSC must receive a quotation of the Series' daily dividend
factor per share (the "Mil Rate") by 4:45 p.m. Eastern Standard Time on each
Business Day (as defined in the Series' prospectus). NFSC must also receive
the Mil Rate by such time on Friday for each weekend and on the last Business
Day preceding each holiday for such holiday. If the Mil Rate is not received
by the required time, NFSC will apply the prior Business Day's Mil Rate, and
the application subsequently can be reversed and the correct rate applied
only if NFSC receives an additional fee from the Fund.
The Fund has retained The Bank of New York ("BONY") to calculate and
disseminate the Mil Rate, and the Fund has instructed BONY to provide NFSC
with the Mil Rate by the required time. The failure of BONY to provide the
Mil Rate and related operational support to NFSC may result in claims,
losses, or damages incurred by NFSC directly, or by the beneficial owners of
shares of the Series for whom NFSC provides sub-accounting services.
Accordingly, in consideration of NFSC's services to the Fund and certain of
the Series' shareholders, the Fund agrees to indemnify and hold harmless NFSC
for any such claims, losses, or damages, including reasonable attorney's
fees, relating to or arising out of any failure of BONY to provide the Mil
Rate to NFSC by 4:45 EST as set forth above.
Very truly yours,
The Walnut Street Funds, Inc.
By:-------------------------------
Timothy C. Nicholson, President
<PAGE> 1
Exhibit 5(e)
------------
Cash Management and Related Services Agreement
with The Bank of New York
<PAGE> 2
CASH MANAGEMENT AND RELATED SERVICES AGREEMENT, dated as of May 12th, 1993
between each entity listed on Schedule A hereto (each a "Fund", collectively
the "Funds"), and The Bank of New York (the "Bank").
W I T N E S S E T H :
That in consideration of the mutual agreements and covenants herein
contained, the Bank and each Fund hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever used in this Agreement, unless the context otherwise requires, the
following words shall have the meanings set forth below:
1. "ACCOUNT AVAILABLE BALANCE" shall mean with respect to an Account
for any given day during a calendar month a positive or negative dollar amount
equal to (A) if such day is a Business Day, the Account Available Balance as of
the close of the last preceding Business Day plus a positive or negative dollar
amount equal to the difference, if any, between the Chargeable Credits with
respect to such day and such Account and the Chargeable Debits with respects
to such day and such Account, and (B) if such day is not a Business Day, the
Account Available Balance as of close of the last preceding Business Day,
except that both (A) and (B) shall be reduced by the United States Federal
Reserve reserve requirements then applicable to the Bank with respect to such
Account. The Account Available Balance of an Account shall be zero on the date
immediately preceding the first date on which an entry, consisting of either
a Chargeable Credit or Chargeable Debit, is first made to such Account
hereunder.
2. "ACCESS" shall mean any on-line communication system provided by
the Bank hereunder whereby either the receiver of such communication is able to
verify by codes or otherwise with a reasonable degree of certainty the
identity of the sender of such communication, or the sender is required to
provide a password or other identification code.
3. "AUTHORIZED PERSON" shall mean either (A) any person duly authorized
by corporate resolutions of the board of directors of a Fund to give Oral and/or
Written Instructions on behalf of such Fund, such persons to be designated in a
certificate, substantially in the form of Exhibit A, which contains a specimen
signature of such person, or (B) any person sending or transmitting any
instruction or direction through ACCESS, except as otherwise provided in
Article V, Section 5 hereof.
4. "BUSINESS DAY" shall mean any day on which the Federal Reserve Bank
of New York is open for business, except for any such day on which the Bank is
required by law or regulation to be closed, or elects to be closed.
5. "CALENDAR MONTH EARNINGS CREDIT" shall mean with respect to an
Account for any calendar month the dollar amount, whether positive or negative,
equal to the sum of the Gross Calendar Month Earnings Credit with respect to
such Account for such calendar month and the Monthly Overdraft Charges with
respect to such Account for such calendar month.
6. "CHARGEABLE CREDITS" shall mean with respect to an Account for
any given day during a calendar month a positive amount of dollars equal to
the sum, if any, of (A) the aggregate dollar amount of Federal Funds credited
to such Account by the Bank in accordance with the then applicable availability
schedule of the Federal Reserve Bank of New York, and (B) the aggregate dollar
amount of Bank internal transfers of Federal Funds to such Account.
7. "CHARGEABLE DEBITS" shall mean with respect to an Account for any
given day during a calendar month a negative dollar amount equal to the sum,
if any, of (A) the aggregate dollar amount of Federal Funds relating to such
Account charged against the Bank by the Federal Reserve Bank of New York on
or as of such day, and (B) the aggregate dollar amount of drafts drawn on
such Account which are deposited in the Bank by customers of the Bank on
such day, or Bank internal transfers from, or charges to, such Account.
8. "DAILY EARNINGS" shall mean with respect to an Account for any day
during a calendar month a positive dollar amount equal to the product of (A)
the positive Account Available Balance, if any, of such Account for such
day, multiplied by (B) the Daily Earnings Rate for such day. The Daily
Earnings with respect to an Account for any day during a calendar month on
which the Account Available Balance of such Account is negative shall be zero.
9. "DAILY EARNINGS RATE" shall mean for any day during a calendar
month one three hundred and sixty-fifth of the 91 day U.S. Treasury Bill
discount rate of the Monday auction first preceding such day (whether or not
such day is a Monday,
<PAGE> 3
- 2 -
and whether or not such Monday auction was in the immediately prior month), as
such Monday auction 91 day U.S. Treasury Bill discount rate is reported in
The Wall Street Journal.
10. "DAILY OVERDRAFT CHARGES" shall mean with respect to an Account for
any day during any calendar month a negative dollar amount equal to the
product, if any, of (A) the negative Account Available Balances, if any,
with respect to such Account for such day during such calendar month,
multiplied by (B) the Overdraft Rate.
11. "FEDERAL FUNDS" shall mean immediately available same day funds.
12. "GROSS CALENDAR MONTH EARNINGS CREDIT" shall mean with respect
to an Account for any calendar month a positive dollar amount equal to the
aggregate sum of the Daily Earnings of such Account for such calendar month.
13. "MONTHLY OVERDRAFT CHARGES" shall mean with respect to an Account
for any calendar month a negative dollar amount equal to the aggregate sum
of the Daily Overdraft Charges with respect to such Account for such calendar
month which have not been previously paid to the Bank by the Fund to which such
Account relates.
14. "ORAL INSTRUCTIONS" shall mean verbal instructions actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person.
15. "OVERDRAFT RATE" shall mean with respect to an Account for any
calendar day during any calendar month a rate equal to one three hundred and
sixtieth of the sum of (A) one-half percent, and (B) the greater of (i) the
prime commercial lending rate of The Bank of New York, as publicly announced
to be in effect from time to time, in effect on such calendar day, and (ii) 6%.
16. "SHARES" shall mean all or any part of each class of the shares of
capital stock, beneficial interest, or limited partnership interest of a Fund,
as the case may be, which are authorized and/or issued from time to time.
17. "SHAREHOLDER" shall mean any record holder of any Shares, as
identified to the Bank from time to time pursuant to this Agreement.
18. "WRITTEN INSTRUCTIONS" shall mean written instructions actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person by letter, memorandum,
telegram, cable, telex, telecopy facsimile or through ACCESS.
ARTICLE II
APPOINTMENT OF BANK; REPRESENTATIONS AND WARRANTIES
---------------------------------------------------
1. Appointment; Establishment of Accounts. Each Fund hereby appoints
--------------------------------------
the Bank as its agent for the term of this Agreement to perform the cash
management services set forth herein and in Schedules I and II attached hereto
and made a part hereof (as such Schedules may be amended or supplemented from
time to time by mutual agreement). The Bank hereby accepts appointment as such
agent for each appointing Fund and agrees to establish and maintain one or more
separate accounts with respect to each Fund (each, an "Account"; collectively,
the "Accounts") in order to receive and disburse money for the purposes set
forth in this Agreement.
2. Representations and Warranties. Each Fund hereby represents and
------------------------------
warrants only as to itself, and not jointly, to the Bank, which representations
and warranties shall be deemed to be continuing and to be reaffirmed upon
delivery to the Bank of any Oral or Written Instructions, that:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power to carry on its business
as now conducted, to enter into this Agreement and to perform its
obligations hereunder;
(b) This Agreement has been duly authorized, executed and delivered
by the Fund in accordance with all requisite corporate action and constitutes a
valid and legally binding obligation of the Fund enforceable in accordance
with its terms, except to the extent such enforcement may be limited by
general equity principles or bankruptcy principles; and
(c) It is conducting its business in compliance with all applicable
laws and regulations, both state and federal, and has obtained all regulatory
licenses, approvals and consents necessary to carry on its business as now
conducted; there is no statute, regulation, rule, order or judgment binding
on it and no provision of its charter or by-laws, nor of any mortgage,
<PAGE> 4
- 3 -
indenture, credit agreement or other contract binding on it or affecting its
property which would prohibit its execution or performance of this Agreement.
3. Board Resolutions. Each Fund shall provide the Bank with a
-----------------
certified copy of a resolution of the board of directors of such Fund
appointing the Bank as its agent to act hereunder and providing for the
creation of such Fund's Account and the execution by such Fund of this
Agreement, it being understood that receipt of the same by the Bank shall
be a condition precedent to the Bank's establishing an Account for such Fund.
ARTICLE III
CASH MANAGEMENT SERVICES
------------------------
1. Receipt of Money. The Bank shall receive money for credit to an
----------------
Account only:
(i) by presentment of drafts by a Fund, but not by a Shareholder of
such Fund, at the branch or branches in Manhattan identified from
time to time by the Bank to such Fund, provided such presentment
is in accordance with the time frames specified by the Bank to
such Fund;
(ii) by mailing of drafts to a post office box designated by the Bank
for such purpose, provided such drafts are accompanied by a properly
completed investment stub;
(iii) by wire transfer to an account maintained at the Federal Reserve
Bank of New York as identified in writing by the Bank to a Fund;
(iv) by transfer to an account identified in writing by the Bank to a
Fund through the New York Automated Clearing House;
(v) by transfer from another Account maintained by such Fund with the
Bank under this Agreement;
(vi) by transfer from another account maintained by such Fund with the
Bank, including such Fund's custodian account under its Custody
Agreement with the Bank as Custodian; and
(vii) by transfer from any other account maintained with the Bank.
All money received by the Bank shall be credited upon receipt, but subject
to final payment and receipt by the Bank of immediately available funds, and
receipt by the Bank of such forms, documents and information as are required
by the Bank from time to time and received in the appropriate time frames.
The Bank shall be entitled to reverse any credits previously made to a
Fund's Account where money is not finally collected or where a credit to
such Fund's Account was in error.
2. Disbursement of Money. The Bank shall disburse money credited to
---------------------
an Account only:
(i) pursuant to Written Instructions of such Fund transmitted through
ACCESS (except as otherwise provided in Article V, Section 7
hereof), to transfer funds as directed by such Fund (including
transfers through the Federal Reserve Bank of New York transfer
wire and the New York Automated Clearing House);
(ii) in payment of drafts drawn by any Authorized Person or Shareholder
(as appropriate for the particular Account), subject to the terms
hereof; and
(iii) in payment of charges to such Account representing amounts payable
to the Bank, and chargeable against such Account, as provided in
this Agreement.
The Bank shall be required to disburse money in accordance with the foregoing
only insofar as such moneys is immediately available and on deposit with the
Bank. All instructions directing the disbursement of money credited to an
Account under this Agreement (whether through ACCESS or by Oral Instructions
pursuant to Article V hereof) must identify an account to which such money
shall be transferred, and include all other information reasonably required
by the Bank from time to time. It is understood and agreed that with respect
to any such instructions, when instructed to credit or pay a party by both
name and a unique numeric or alpha-numeric identifier (e.g., ABA number or
----
account number), the Bank and any other financial institution participating
in the funds transfer may rely solely on the unique identifier, even if it
identifies a party different than the party
<PAGE> 5
- 4 -
named. Such reliance on a unique identifier shall apply to beneficiaries
named in such instructions as well as any financial institution which is
designated in such instruction to act as an intermediary in a funds transfer.
3. Redemption Drafts; Shareholder Information. (a) Each Fund shall be
------------------------------------------
entitled to supply its Shareholders with redemption drafts, but only in a
form and substance agreed to by the Bank. The Bank agrees to give each Fund
sixty (60) days prior notice of any changes to the form or substance of
redemption drafts required by the Bank, provided that if such change is
required by applicable rules or procedures of the Federal Reserve or any
clearinghouse through which such drafts may be presented, the Bank may as
promptly as practicable give such notice which may be less than sixty (60)
days.
(b) Each Fund will promptly furnish to the Bank (i) the name, mailing
address and telephone number of each Shareholder of such Fund, and (ii)
specimen signatures for all individuals authorized to draw redemption drafts
(whether on their own behalf or on behalf of third parties). Each Fund will
promptly advise the Bank of individuals no longer authorized to draw
redemption drafts.
4. Redemption Draft Signature Verification; Returns. (a) Before the
------------------------------------------------
close of business on each Business Day the Bank shall (i) compare the
signature of the drawer thereof to the authorized signatures on the most
recent list of specimen signatures held by the Bank pursuant to Section 3(b)
of this Article, and (ii) transmit to each Fund's transfer agent (as
identified to the Bank from time to time) a report containing all MICR
information for each redemption draft presented for payment. The Bank shall
pay all such redemption drafts where the signature of the drawer reasonably
appears to be genuine unless either an Authorized Person instructs it not
to do so prior to 12:00 p.m. New York time on the next Business Day or a
Shareholder instructs it not to do so under the verification procedure set
forth in Section 4(c) below.
(b) An Authorized Person may give the Bank Oral or Written Instructions
after 12:00 p.m. on the Business Day after the date of presentment of redemption
drafts to return such drafts unpaid to the presenting financial institution for
any reason, and the Bank shall use reasonable efforts to comply with such Oral
or Written Instructions provided that any such compliance would not prejudice
or impair any rights or privileges of the Bank under prevailing draft return
procedures and would not be contrary to prevailing industry rules, procedures,
customs or practices. Notwithstanding the foregoing, or any other provision
in this Agreement or the Schedules hereto, the Bank (i) may return redemption
drafts with unauthorized or missing signatures to the presenting financial
institution in accordance with prevailing banking industry draft return
procedures, and (ii) shall have no obligation to request Oral or Written
Instructions with respect to any redemption drafts.
(c) In the case of redemption drafts in an amount of $100,000 or more,
the Bank shall, prior to payment thereof, make at least one attempt by phone
to verify the authenticity and amount of such draft with the Shareholder
purportedly drawing such draft. The Bank may rely upon the most recent list
of Shareholder telephone numbers provided to the Bank by the Fund for this
purpose. Each Fund acknowledges that the Bank's obligations under this Section
4(c) are undertaken as an accommodation to each Fund without any prior
evaluation by the Bank of such Fund's frequency of paying redemption drafts of
$100,000 or more and that consequently such obligations may place an
unreasonable administrative or operational burden on the Bank in light of the
Bank's processing volume and capabilities. If the Bank in good faith
determines that performance of its obligations hereunder has become
unreasonably burdensome, it shall so notify each Fund and shall thereafter
perform such obligations to the extent practicable. The parties shall
thereafter negotiate in good faith to establish a new redemption draft amount
above which the Bank shall perform the obligations described herein.
ARTICLE IV
OVERDRAFTS OR INDEBTEDNESS
--------------------------
If the Bank in its sole discretion advances funds, or if there shall
arise for whatever reason an overdraft or other indebtedness in connection
with any Account, such advancement of funds or overdraft with respect to
such Account shall be deemed a loan made by the Bank to the Fund to which
the Account relates payable on demand, and bearing interest from the date
incurred at the Overdraft Rate, such Overdraft Rate to be adjusted on the
effective date of any change in the prime commercial lending rate constituting
a part thereof. Each Fund hereby agrees with respect to its Account(s) and
any such advancement of funds or overdraft that the Bank shall have a
continuing lien and security interest in and to any property at any time held
by it for the benefit of the Fund either hereunder or under such Fund's
Custody Agreement with the Bank, or in which the Fund may have an interest
which is then in the Bank's possession or control or in possession or control
of any third party acting in the Bank's behalf, including in its behalf as
Custodian under the Fund's Custody Agreement with the Bank. Each Fund
authorizes the Bank, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon at the Overdraft
Rate against any balance of accounts standing to the fund's credit on the
books of the Bank, including those books maintained by the Bank in its
capacity as Custodian for the Fund under its Custody Agreement with the
Fund. In addition, each Fund hereby covenants that on each Business Day on
which either it intends to enter a reverse repurchase
<PAGE> 6
- 5 -
agreement and/or otherwise borrow from a third party, or which next succeeds
a Business Day on which at the close of business the Fund had outstanding a
reverse repurchase agreement or such a borrowing, it shall prior to 9:00 a.m.
(New York City time) advise the Bank, in writing, of each such borrowing,
shall specify the portfolio or series to which the same relates, and shall
not incur any indebtedness not so specified other than from the Bank.
ARTICLE V
ACCESS; CALL-BACK SECURITY PROCEDURE
------------------------------------
1. Services Generally. Each Fund shall be permitted to utilize ACCESS
------------------
to obtain direct on-line access to its Accounts. ACCESS shall permit each Fund
at the times mutually agreed upon by the Bank and such Fund to receive reports,
make inquiries, instruct the Bank to disburse money in accordance with Article
III, and perform such other functions as are more fully set forth in Schedule I
hereto.
2. Permitted Use; Proprietary Information. (a) Each Fund shall use
--------------------------------------
ACCESS and the services available thereby only for its own internal and proper
business purposes and shall not sell, lease or otherwise provide, directly or
indirectly, ACCESS or any of such services or any portion thereof to any other
person or entity. Each Fund shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to communications
services, necessary for it to utilize ACCESS and receive the services thereby,
and the Bank shall not be responsible for the reliability or availability of
any such equipment or any services used in connection with ACCESS.
(b) Each Fund acknowledges that all data bases made available as part
of, or through ACCESS, and any proprietary data, processes, information and
documentation (other than any such which are or become part of the public
domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential
property of the Bank. Each Fund shall keep the Information confidential
by using the same care and discretion that each Fund uses with respect to
its own confidential property and trade secrets, and shall neither make nor
permit any disclosure without the express prior written consent of the Bank.
(c) Upon termination of this Agreement for any reason, each Fund shall
return to the Bank any and all copies of the Information which are in such
Fund's possession or under its control, or distributed to third parties. The
provisions of this Article shall not affect the copyright status of any of the
Information which may be copyrighted and shall apply to all Information whether
or not copyrighted.
3. Modifications. The Bank reserves the right to modify ACCESS from
-------------
time to time without notice to any Fund. Each Fund agrees not to modify or
attempt to modify ACCESS without the Bank's prior written consent. Each Fund
acknowledges that ACCESS is the property of the Bank and, accordingly, each
Fund agrees that any modifications to ACCESS, whether by such Fund or the Bank
and whether with or without the Bank's consent, shall become the property of
the Bank.
4. No Representations or Warranties. Neither the Bank nor any
--------------------------------
manufacturers or suppliers it utilizes or any Fund utilized in obtaining
ACCESS makes any warranties or representations, express or implied, in fact
or in law, including but not limited to warranties of merchantability and
fitness for a particular purpose.
5. Security; Reliance; Unauthorized Use. Each Fund will, and will
------------------------------------
cause all persons utilizing ACCESS to, treat the user and authorization codes,
passwords and authentication keys applicable to ACCESS with extreme care. The
Bank is hereby irrevocably authorized to act in accordance with and rely on
Written Instructions received by it through ACCESS, provided such Written
Instructions are given by or through the Fund. Each Fund acknowledges that it
is its sole responsibility to assure that only authorized persons use ACCESS
and that the Bank shall not be responsible nor liable for any unauthorized
use thereof by or through the Fund.
6. Limitations of Liability. (a) Except as otherwise specifically
------------------------
provided in Section 6(b) below, the Bank shall have no liability for any
losses, damages, injuries, claims, costs or expenses of a Fund arising out of
or in connection with any failure, malfunction or other problem relating to
any Fund's use of ACCESS, except for money damages suffered as the direct
result of the negligence of the Bank in an amount not exceeding for any
incident $75,000; provided however, that the Bank shall have no liability
under this Section 6(a) if a Fund fails to comply with the provisions of
Section 6(d), unless the failure to so comply does not adversely affect
the Bank.
(b) The Bank's liability for its negligence in executing or failing to
execute a Fund's Written Instructions received through ACCESS shall be only
with respect to a transfer or failure to transfer funds that is not in
accordance with such Written Instructions after such instructions have been
duly acknowledged by the Bank, and shall be contingent upon the Fund complying
<PAGE> 7
- 6 -
with the provisions of Section 6(d) below, and shall be limited to (i)
restoration of the principal amount mistransferred, if and to the extent
that the Bank would be required to make such restoration under applicable
law, and (ii) the lesser of (A) a Fund's actual pecuniary loss incurred by
reason of its loss of use of the mistransferred funds or the funds which
were not transferred, as the case may be, or (B) compensation for the loss of
the use of the mistransferred funds or the funds which were not transferred,
as the case may be, at a rate per annum equal to the average federal funds
rate as computed from the Federal Reserve Bank of New York's daily
determination of the effective rate for federal funds, for the period during
which a Fund has lost use of such funds. In no event shall the Bank have
any liability for failing to execute Written Instructions for the transfer
of funds which are received by it through ACCESS other than through the
applicable transfer module for the particular instructions.
(c) Without limiting the generality of the foregoing, it is hereby
agreed that in no event shall the Bank or any manufacturer or supplier of its
computer equipment, software or services be responsible for any special,
indirect, incidental or consequential damages which a Fund may incur arising
out of or in connection with ACCESS or the services provided thereby, even
if the Bank or such manufacturer or supplier has been advised of the
possibility of such damages and regardless of the form of action.
(d) Each Fund shall notify the Bank of any errors, omissions or
interruptions in, or delay or unavailability of, ACCESS as promptly as
practicable, and in any event within one Business Day after the earliest of
(i) discovery thereof, (ii) the date discovery should have occurred through
the exercise of reasonable care, and (iii) in the case of any error, the date
of the earliest notice to such Fund which reflects such error.
7. Funds Transfer Back-Up Procedure. (a) In the event ACCESS is
--------------------------------
inoperable and a Fund is unable to utilize ACCESS for the transmission of
Written Instructions to the Bank to transfer funds, the Fund may give Oral
Instructions regarding funds transfers, it being expressly understood and
agreed that the Bank's acting pursuant to such Oral Instructions shall be
contingent upon the Bank's verification of the authenticity thereof pursuant
to the Call-Back Security Procedure set forth on Schedule III hereto (the
"Procedure"). In this regard, each Fund shall deliver to the Bank a Funds
Transfer Telephone Instruction Authorization in the form of Schedule III-A
hereto, identifying the individuals authorized to deliver and/or confirm
all such Oral Instructions. Each Fund understands and agrees that the
Procedure is intended to determine whether Oral Instructions received
pursuant to this Section are authorized but is not intended to detect any
errors contained in such instructions. Each Fund hereby accepts the Procedure
and confirms its belief that the Procedure is commercially reasonable.
(b) The Bank shall have no liability whatsoever for any funds transfer
executed in accordance with Oral Instructions delivered and confirmed
pursuant to this Section 7 and Schedule III hereto. The Bank's liability
for its negligence in executing or failing to execute any such Oral
Instructions shall be determined by reference to Section 6(b) of this
Article.
(c) The Bank reserves the right to suspend acceptance of Oral
Instructions pursuant to this Section 7 if conditions exist which the Bank,
in its sole discretion, believes have created an unacceptable security risk.
ARTICLE VI
CONCERNING THE BANK
-------------------
1. Standard of Care; Presentment of Claims. Except as otherwise
---------------------------------------
provided herein, the Bank shall not be liable for any costs, expenses, damages,
liabilities or claims (including attorney's fees) incurred by a Fund, except
those costs, expenses, damages, liabilities or claims arising out of
negligence, bad faith or willful misconduct of the Bank or any of its
employees. In connection with the foregoing, it is expressly acknowledged
and agreed that in processing and paying drafts drawn on an Account the
Bank has no particular expertise in determining the genuineness of drawer
signatures, and the Bank shall be deemed to have acted without negligence,
and shall not be liable, for the payment of any draft containing a forged
drawer signature where such signature reasonably appears to be genuine. All
claims against the Bank hereunder shall be made by the respective Fund as
promptly as practicable, and in any event within 6 months from the date of
the action or inaction on which such claim is based, and shall include
documentation evidencing such claim and loss.
2. No Liability. The Bank shall have no obligation hereunder for
------------
costs, expenses, damages, liabilities or claims, including attorney's fees,
which are sustained or incurred by reason of any action or inaction by the
Federal Reserve wire transfer system or the New York Automated Clearing
House. In no event shall the Bank be liable to any Fund or any third party
for special, indirect or consequential damages, or lost profits or loss of
business, arising under or in connection with this Agreement, even if
previously informed of the possibility of such damages and regardless of
the form of action.
3. Indemnification. Each Fund shall indemnify and exonerate, save and
---------------
hold harmless the Bank from and against any and all costs, expenses, damages,
liabilities or claims, including reasonable attorney's fees and expenses,
which the Bank may
<PAGE> 8
- 7 -
sustain or incur or which may be asserted against the Bank by reason of or
as a result of any action taken or omitted by the Bank in connection with
its performance under this Agreement, except those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of the Bank or any of its employees. This indemnity shall be a
continuing obligation of each Fund notwithstanding the termination of this
Agreement, or any Account, with respect to a Fund.
4. No Obligation to Inquire. Without limiting the generality of the
------------------------
foregoing, the Bank shall in no event be under any obligation to inquire into,
and shall not be liable for:
(a) the authority of any Authorized Person acting on behalf of a Fund
in connection with this Agreement;
(b) The genuineness of any drawer signature on any draft deposited in
any Account, or whether such signature is a forgery, other than the signature
of the drawer of any draft drawn on the Bank;
(c) the existence or genuineness of any endorsement or any marking
purporting to be an endorsement on any draft deposited in any Account, or
whether such endorsement or marking is a forgery, it being expressly understood
that all risks associated with the acceptance by the Bank of any draft payable
to a payee other than a Fund for deposit in any Account pursuant to Oral or
Written Instructions by the Fund shall be borne by such Fund.
(d) any discrepancy between the pre-printed investment stub (other
than a substitute stub created by the Bank) and the payee either named on a
draft or written on the face thereof, provided the Bank has acted in accordance
with the investment stub;
(e) any disbursement directed by any Fund, regardless of the purpose
therefor;
(f) any determination of the Share balance of any Shareholder whose
name is signed on any redemption draft;
(g) any determination of length of time any Shares have been owned by
any Shareholder or the method of payment utilized to purchase such Shares by
such Shareholder;
(h) any claims, liens, attachments, stays or stop orders with respect
to any Shares, proceeds, or money, other than a stop payment placed by a Fund
on a draft drawn by such Fund on its Account;
(i) the propriety and/or legality of any transaction in any Account
pursuant to this Agreement;
(j) the lack of authority of any person signing as a drawer of a
draft, provided such person and his specimen signature is specified in the
certificate of authorized signatures last received by the Bank; or
(k) whether any redemption draft equals or exceeds any minimum amount.
5. Reliance Upon Instructions. The Bank shall be entitled to rely
--------------------------
upon any Written or Oral Instructions received by the Bank. Each Fund agrees
to forward to the Bank Written Instructions confirming Oral Instructions in
such manner so that such Written Instructions are received by the Bank by the
close of business of the same day that such Oral Instructions are given to the
Bank. Each Fund agrees that the fact that such confirming Written Instructions
are not timely received or that contrary Written Instructions are received by
the Bank shall in no way affect the validity or enforceability of the
transactions previously authorized.
6. Force Majeure. The Bank shall not be responsible or liable for
-------------
any failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
control, including acts of God; earthquakes; fires; floods; wars; civil or
military disturbances; sabotage; epidemics; riots; interruptions, loss or
malfunctions of utilities, computers (hardware or software), transportation,
or communications service; mechanical breakdowns; interruption or loss of
ACCESS (except as otherwise provided in Section 7 of Article V); accidents;
acts of civil or military authority; governmental actions; labor disputes;
or inability to obtain labor, material, equipment or transportation.
7. No Implied Duties; Performance According To Applicable Law. The
----------------------------------------------------------
Bank shall have no duties or responsibilities except such duties and
responsibilities as are specifically set forth in this Agreement and
Schedules I and II hereto or are incidental to such duties or responsibilities,
and no covenant or obligation shall be implied in this Agreement against the
Bank. Except as otherwise provided herein, the Bank's duties and
responsibilities hereunder shall be performed in accordance with applicable
laws, regulations and rules, including but not limited to the New York
Uniform Commercial Code,
<PAGE> 9
- 8 -
Federal Reserve Regulation CC and the Operating Rules of the New York
Automated Clearing House, and the Bank shall have no obligation to take
actions which in the reasonable opinion of the Bank are either inconsistent
with, or prejudice or impair the Bank's rights under, any such laws,
regulations and rules.
8. Requests for Instructions. At any time the Bank may apply to
-------------------------
an officer of a Fund for Oral or Written Instructions with respect to any
matter arising in connection with the Bank's duties and obligations with
respect to an Account of such Fund, and the Bank shall not be liable for
any action taken or permitted by it in good faith in accordance with such
Oral or Written Instructions. Such application for Oral or Written Instructions
may, at the option of the Bank, set forth in writing any action proposed to
be taken or omitted by the Bank with respect to its duties or obligations under
this Agreement and the date on and/or after which such action shall be taken,
and the Bank shall not be liable for any action taken or omitted in
accordance with a proposal included in any such application on or after the
date specified therein (which shall be at least 5 days after the date of
such Fund's receipt of such application) unless, prior to taking or
omitting any such action, the Bank has received Oral or Written Instructions
in response to such application specifying the action to be taken or omitted.
The Bank may apply for an obtain the advice and opinion of counsel to each
Fund or of its own counsel and shall be fully protected with respect to
anything done or omitted by it in good faith in conformity with such advice
or opinion.
9. Delegation of Duties. The Bank may delegate any of its duties and
--------------------
obligations hereunder to any delegee and may employ agents or
attorneys-in-fact; provided however, that no such delegation or employment by
the Bank shall discharge the Bank from its obligations hereunder. The Bank
shall have no liability or responsibility whatsoever if any delegee, agent
or attorney-in-fact shall have been selected or approved by a Fund.
Notwithstanding the foregoing, nothing contained in this paragraph shall
obligate the Bank to effect any delegation or to employ any agent or
attorney-in-fact.
10. Fees; Invoices. (a) For its services hereunder, each Fund agrees to
--------------
pay the Bank (i) its out-of-pocket expenses, (ii) the monthly fees and
compensation set forth on Schedules I and II attached hereto, and (iii) any
negative Calendar Month Earnings Credits, and such other amounts as may be
mutually agreed upon from time to time. The Bank shall provide each Fund with
a monthly activity analysis detailing service volumes, and including average
Account Available Balances and average ledger balances, and all fees owing for
such month.
(b) The Bank shall submit periodic invoices specifying the amount of
all out-of-pocket expenses, fees, compensation and negative Calendar Month
Earnings Credits then due hereunder. The Bank may, and is hereby authorized
by each Fund, to charge such amounts to the appropriate Fund's Account(s),
but only if such amounts remain unpaid for fifteen (15) days after the end
of the period to which such amounts relate.
11. Application of Calendar Month Earnings Credits. (a) Any positive
----------------------------------------------
Calendar Month Earnings Credit for a calendar month shall be applied only as
follows and only in the specified order:
(i) First, applied against such compensation, fees, but not
out-of-pocket expenses, payable by such Fund to the Bank under
this Agreement for such month; and
(ii) Second, applied against such compensation, fees, and negative
Calendar Month Earnings Credits, but not out-of-pocket expenses,
payable by such Fund to the Bank under this Agreement for any
subsequent month in the same calendar year.
(b) Except as provided above, in no event may any Calendar Month
Earnings Credit be applied to any month other than the month in which it was
earned. Calendar Month Earnings Credits may not be transferred to, or utilized
by, any other Fund, person or entity. The portion, if any, of any Calendar
Month Earnings Credit not used by a Fund may be carried, but only forward;
provided, however, that in no event may any Calendar Month Earnings Credit,
including those earned during the fourth calendar quarter, be carried beyond
the end of the calendar year in which earned.
ARTICLE VII
TERMINATION
-----------
1. Prior Notice. This Agreement may be terminated by either the Bank
------------
giving to any Fund, or any Fund giving to the Bank, a notice in writing
specifying the date of such termination, which date shall be not less than 90
days after the date of the giving of such notice. Notwithstanding the
foregoing, the Bank reserves the right to terminate this Agreement at any time
upon 30 days prior written notice if any of the conditions precedent set
forth in Article II, paragraph 3 are unfulfilled.
<PAGE> 10
- 9 -
2. Obligations Upon Termination. Upon any termination, the Bank's
----------------------------
sole obligations, which shall arise only after, and not before, each Fund
which is the subject of such termination has paid to the Bank all
out-of-pocket expenses, fees, compensation, negative Calendar Month Earnings
Credits and other amounts owed by such Fund to the Bank, shall be (i) to
deliver to such Fund such records, if any, as may be owned by such Fund, in
the form and manner kept by the Bank on such date of termination, and
(ii) to pay any funds held hereunder for such Fund to such Fund.
ARTICLE VIII
MISCELLANEOUS
-------------
1. Certificates of Authorized Persons. Each Fund agrees to furnish
----------------------------------
to the Bank a new certificate of Authorized Persons in the event that any
present Authorized Person of such Fund ceases to be an Authorized Person or
in the event that any other Authorized Persons are appointed and authorized.
Until such new certificate is received, the Bank shall be fully protected
in acting under the provisions of this Agreement upon Oral or Written
Instructions or signatures of the present Authorized Persons as set forth
in the last delivered certificate.
2. Notices. (a) Any notice or other instrument in writing, authorized
-------
or required by this Agreement to be given to the Bank, shall be sufficiently
given if addressed to the Bank and received by it at its offices at
110 Washington Street, 15th Floor, New York, New york 10286, Attention:
---------
Division Manager - Mutual Funds, or at such other place as the Bank may from
time to time designate in writing.
(b) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to a Fund shall be sufficiently given if
addressed to a Fund and received by it at 1801 Park 270 Drive - Suite 220,
St. Louis, Missouri 63146, Attention: ----------------, or at such other place
---------
as such Fund may from time to time designate in writing.
3. Cumulative Rights and No Waiver. Each and every right granted to
-------------------------------
the Bank hereunder or under any other document delivered hereunder or in
connection herewith, or allowed it by law or equity, shall be cumulative and
may be exercised from time to time. No failure on the part of the Bank to
exercise, and no delay in exercising, any right will operate as a waiver
thereof, nor will any single or partial exercise by the Bank of any right
preclude any other or future exercise thereof or the exercise of any
other right.
4. Severability. In case any provision in or obligation under this
------------
Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations shall not in any way be affected or impaired thereby, and if
any provision is inapplicable to any person or circumstances, it shall
nevertheless remain applicable to all other persons and circumstances.
5. Amendments. This Agreement may not be amended or modified in
----------
any manner except by a written agreement executed by the Bank and each Fund
to be bound thereby, and, except in the case of an amendment to Schedules I
and II hereto, authorized or approved by a resolution of each Fund's
board of directors.
6. Headings. The headings in this Agreement are inserted for
--------
convenience and identification only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement
or any provisions hereof.
7. Applicable Law; Consent to Jurisdiction; Jury Trial Waiver. This
----------------------------------------------------------
Agreement shall be construed in accordance with the laws of the State of
New York without giving effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. No Third Party Beneficiaries. The provisions of this Agreement
----------------------------
are intended to benefit only the Bank and each Fund and their respective
permitted successors and assigns, and no right shall be granted to any
other person by virtue of this Agreement.
9. Successors and Assigns. This Agreement shall extend to and shall
----------------------
be binding upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
any Fund without the written consent of the Bank and authorized or approved
by a resolution of such Fund's board of directors, or by the Bank without the
prior written consent of the affected Fund(s).
10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
<PAGE> 11
- 10 -
11. Several Obligations. The parties acknowledge that the obligations
-------------------
of the Funds are several and not joint, that no Fund shall be liable for any
amount owing by another Fund and that the Funds have executed one instrument
for convenience only.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers, thereunto duly authorized,
as of the day and year first above written.
By: /s/ Timothy C. Nicholson
------------------------------------
on behalf of each Fund identified
on Schedule A attached hereto
THE BANK OF NEW YORK
By: /s/ Al Ratcliffe
------------------------------------
Title: VP
<PAGE> 12
SCHEDULE A
Name of Fund
------------
Walnut Street Funds, Inc.
<PAGE> 13
EXHIBIT A
I, of (the "Fund"), a corporation do
hereby certify that:
The following individuals have been duly authorized by the Board of
Directors of the Fund in conformity with the Fund's Articles of Incorporation
and By-Laws to give Oral Instructions and Written Instructions on behalf
of the Fund, for purposes of the Fund's Cash Management and Related Services
Agreement, and the signatures set forth opposite their respective names are
their true and correct signatures.
Name Signature
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
------------------------------
[Title of Officer]
<PAGE> 14
Schedule I
Cash Management Services
------------------------
I. DRAFT DEPOSITS
--------------
a) Lock Box
--------
* Mail pick-ups will be made several times a day from designated P.O. boxes.
* Upon receipt by the OCR Processing Department, all payments will be
processed by reading optical character recognition (OCR) information
printed on the remittance document. The payment amount will be based on
the draft(s) accompanying the document.
* The Bank will microfilm investment drafts daily and forward original
remittance stubs grouped by batch as instructed by the Fund.
* Film research on payment drafts will be handled by the Bank. The Bank
will respond in two business days.
* The Bank will endorse and microfilm drafts received through a mutually
agreed upon cut off time and transmit a daily file of the items processed
at a mutually agreed upon time via Access. Each transmission will include
for each transaction, the Fund code, account number, batch control
number and investment amount. The Bank will allow up to two blocking
sorts to be defined by the Fund and agreed on by the Bank. (The
transmitted file will be retained by the Bank for 5 business days.)
b) OCR Special Handling Items
--------------------------
* In the absence of a machine readable remittance stub, the Bank will create
a substitute document if the investor's Fund code and account number is
written on the face of the draft.
* Multiple drafts with one remittance stub will be processed provided the
amount stated on the remittance document proves to the sum of the drafts.
If an amount is not indicated, the payment will be processed based on the
total of the drafts. The longest hold period will govern the blocking
indicator.
One draft with multiple remittance stubs will be processed provided
amounts are stated on the stubs and they prove in the aggregate.
<PAGE> 15
Schedule I
Cash Management Services
Multiple drafts and/or multiple stubs not in proof will be forwarded no
later than the end of the next business day by overnight courier as
directed by the Fund for disposition.
* Any drafts received below the minimum acceptance amount will be forwarded
no later than close of business on the next business day by overnight
courier as directed by the Fund for disposition.
* Any drafts received by the Bank for investment which cannot reasonably be
processed will be forwarded no later than close of business on the next
business day by overnight courier as directed by the Fund for disposition.
* Except for drafts drawn on Canadian banks in U.S. Dollars (which shall be
processed), drafts drawn on other foreign banks in U.S. Dollars will be
forwarded to the Bank's foreign collection department for remittance.
Drafts not drawn in U.S. Dollars, including Canadian banks, will be
forwarded no later than the end of the next business day as directed by
the Fund by overnight courier for disposition.
* Correspondence accompanying any investment will be forwarded unread as
directed by the Fund with an indication "Payment in Process". The
payment will be processed according to the accompanying stub. If no stub
is included, the Bank will use reasonable efforts to invest the draft.
c) Deposits
--------
* The Bank will accept deposits of encoded and unencoded items (batched
separately) at mutually agreed upon intervals.
* The Bank will notify the Fund of any discrepancies between the deposit
total and the amount written on the deposit slip. The deposit will be
posted for the amount equal to the drafts.
d) Return on Deposits
------------------
* The Bank will forward return items as directed by the Fund by overnight
courier no later than the close of business on the next business day.
-2-
<PAGE> 16
Schedule I
Cash Management Services
II. REDEMPTION DRAFTS
-----------------
* The Bank will provide, interim notifications by Fund, of the aggregate
dollar amount of drafts received by the Bank up to the time of
notification with a final notification by approximately 2:00 p.m.
New York time via Access.
* The Bank will send as directed by the Fund an electronic transmission(s)
via Access containing the Fund code, account number, amount, draft number
and microfilm reference number for drafts presented that day by
approximately 3:00 p.m. on each business day. The Bank will also send no
later than the end of the next business day by overnight courier a hard
copy report reflecting the data previously sent by electronic transmission
as directed by the Fund.
* The Bank will provide a microfilmed copy of all paid redemption drafts.
* The Bank will verify signatures to a file maintained and updated and made
available on-line by the Fund to the Bank or a file maintained by the
Bank and updated by the Fund. At its discretion, the Bank will return
unpaid any draft if it believes the signature of the drawer is invalid,
as well as, unsigned drafts. Any person authorized by the Fund may review
these items and override the Bank's decision by providing an authorization
to pay a draft at a mutually agreed upon cut off time.
* The Bank will return redemption drafts provided written instructions are
received from an authorized person at a mutually agreed upon cut off time.
The reason for the return must be included with such instruction.
* The Bank will either warehouse or forward paid redemption drafts sorted
upon request as directed by the Fund for disposition.
-3-
<PAGE> 17
Schedule I
Cash Management Services
III. INCOMING FED WIRES
------------------
* The Bank will post all incoming Funds Transfer transactions when the
complete Demand Deposit Account is provided on the wire.
* The Bank will use reasonable efforts to apply incoming Funds Transfer
transactions when only the name of the Fund is provided on the wire.
IV. OUTGOING FED WIRES
------------------
* The Bank will send all wires with respect to which instructions are
received via Access by 4:00 p.m. each Bank business day by the close
of business that day.
* The Bank will send all wires with respect to which instructions are
received and confirmed via the Funds Transfer Call Back Security
Procedure by 4:00 p.m. each Bank business day, by the close of
business that day.
V. DRAFTS DRAWN BY THE FUND
------------------------
a) ARP
---
* The Bank will provide the Transfer Agent with full or with partial
reconciliation and, if requested, on-line inquiry capability via Access.
* The Fund will arrange for a transmission via Access of an automated drafts
issued file to the Bank daily, weekly or monthly in the Bank's format, if
the Fund selects the Bank's full reconciliation package.
* The Bank will provide daily/monthly transmissions via Access for updates
on paid items.
b) STOP PAYMENTS (Excluding Redemption Drafts)
-------------------------------------------
* The Bank will accept written stop payment requests on drafts issued by the
Fund, and maintain appropriate stop payment files in accordance with
applicable regulations and banking practices.
c) Warehousing
-----------
* The Bank will warehouse paid drafts up to seven years as directed by the
Fund.
-4-
<PAGE> 18
Schedule I
Cash Management Services
VII. ACH PROCESSING
--------------
a) Pre-Notification
----------------
* The Bank will accept pre-notifications via Access in ACH format to be
forwarded pursuant to ACH processing guidelines.
b) ACH Receives
------------
* The Bank will post ACH items received via Access in good order to the
account for each Fund on settlement day. Details will be transmitted or
displayed via Access.
c) ACH Originated
--------------
* Upon receipt via Access of properly formatted ACH files by 5:30 p.m., the
Bank will process ACH items by applicable NYACH deadlines for next day
settlement and post the appropriate Fund account on settlement day.
d) ACH Reversals
-------------
* ACH reversal items will be transmitted via Access and the Bank will
debit/credit the appropriate Fund account on settlement day.
e) ACH Returns And Notification of Changes
---------------------------------------
* The Bank will forward ACH Returns and notification of changes as directed
by the Fund no later than the end of the next business day after
settlement.
IX. REPORTING SERVICES VIA ACCESS
-----------------------------
The Bank will make available information reporting and transaction
services as follows:
a) Balance Reporting
-----------------
The Bank will provide Access to reports of prior business day balances
and information on total credits and total debits by type of transaction.
The service will be available on each business day and is currently
available at 8:00 a.m., however, such time may be amended from time-to-time
by the Bank.
The detail report will provide information on the individual debits and
credits.
-5-
<PAGE> 19
Schedule I
Cash Management Services
b) Dynamic Information Reporting
-----------------------------
The Bank will provide Access to an on-line, real time database containing
intra-day balance information. The detail report can provide selected
key information or full text, about each wire transfer, debit and credit,
as they are processed. The service will be available on each business
day and is currently available from 7:00 a.m. to 10:00 p.m., New York
time, however, such time may be amended from time-to-time by the Bank.
c) Automatic Advice
----------------
* The Bank will provide via Access the full text on all incoming and
outgoing transfers, through a dedicated and self-activating high-speed
terminal printer located at any site requested by the Fund.
d) Item Status Report
------------------
* The Bank will provide via Access a report which reflects the current
status of wire transfer payments sent through the Bank's
micro/CA$H-Register system. Three business days of history can also
be provided.
e) Direct Customer Inquiry
-----------------------
* The Bank will provide direct on-line Access to a history file to
retrieve the detail of incoming and outgoing wire transfers that
occurred during the most recent three month period. Different search
criteria may be used, e.g. transaction reference number, account/amount
date.
f) Account Reconciliation Plan ("ARP") Inquiry
-------------------------------------------
* The Bank will provide ARP Inquiry which will allow the Fund to Access
the Bank's reconciliation data files (current/history) to determine the
status of a draft and to place stop payment instructions directly on-line.
When a stop payment has been accepted, the system will respond with a
confirmation number.
The following business day, the system may be Accessed for a consolidated
report of the prior business day's stop payments.
-6-
<PAGE> 20
<TABLE>
3/29/93
SCHEDULE II
CASH MANAGEMENT SERVICES
<CAPTION>
DEPOSIT SERVICES
----------------
FEE COMMENTS
--- --------
<S> <C> <C>
MONTHLY MAINTENANCE $ 50.00 CHECKING ACCOUNT
DEPOSIT TICKET 1.10 CASH LETTER/DEPOSIT
DEPOSIT ITEM .17 UNCODED CASH LETTER ITEM
E.G. CASH LETTER; OCR
DEPOSITED ITEM RETURNED 15.00
RE-DEPOSIT OF RETURN ITEMS 1.00
DUP. ADVICE FOR RETURN ITEMS 2.00
PAID CHECK .17
RETURNED CHECK 20.00 DRAWN ON BNY
CERTIFIED CHECK 10.00
STOP PAYMENT/MANUAL 20.00 WRITTEN/ORAL
STOP PAYMENT-AUTOMATED 6.00
INTERNAL DEBIT .60
INTERNAL CREDIT .60
SPECIAL STATEMENT HANDLING - DUPS 7.50 SPECIAL CUTOFF E.G.
- SPECIAL CUTOFF 20.00 WEEKLY AND/OR DUPLICATE
EXCESSIVE ENCODED REJECTS .25
MAKERS NAME/CHECK COPY 7.50
RETURN ITEM PHOTOCOPY 7.50
<S> <C> <C>
FDIC INSURANCE PER FDIC SCHEDULE BASED ON CLOSING LEDGER BALANCE ON LAST
BUSINESS DAY OF EACH QUARTER (CURRENT
RATE IS .26% LESS 16.67% FLOAT ALLOWANCE)
<S> <C> <C>
CHECK MICROFILM COPY (EACH) 7.50
FOREIGN COLLECTION ITEM (DEBIT FROM PRINCIPAL) 50.00 E.G. DRAWN ON FOREIGN BANK; DOMESTIC NOTE
FOREIGN RETURN CHECK 25.00 OVER AND ABOVE COLLECTION ITEM CHARGE
MICROFILM (REEL OR CASSETTE) 25.00 PAID CHECKS; REPORTS, ETC.
MICROFICHE 5.00 LOCK BOX/REPORTS, ETC.
DETAIL VIA TAPE 25.00 REDEMPTION CHECKS; PAID
DETAIL VIA TRANSMISSION 10.00 CHECKS; OCR DETAIL; ACH FILES, ETC.
AUDIT CONFIRMATIONS 50.00 PER ACCOUNT
<CAPTION>
SHAREHOLDER CHECK CLEARING SERVICES
-----------------------------------
<S> <C> <C>
OCR LOCK BOX PROCESSING
- -----------------------
- - MONTHLY MAINTENANCE 125.00 EACH POST OFFICE BOX
- - LOCKBOX ITEM .50
- - SPECIAL HANDLING .25 SUBSTITUTE REMITTANCE
DOCUMENT AND/OR MULTIPLE ITEMS
- - HARDCOPY REPORTS 420.00 MONTHLY CHARGE
<PAGE> 21
<CAPTION>
3/29/93
SCHEDULE II
CASH MANAGEMENT SERVICES
(2)
SHAREHOLDER CHECK CLEARING SERVICES (CONT'D)
- --------------------------------------------
FEE COMMENTS
--- --------
<S> <C> <C>
ACH PROCESSING
- --------------
Monthly Maintenance 125.00 Per Family of Funds
File Input $30.00
Combined File Input $10.00
Input - Late File $50.00
Input - Special Handling Required $50.00
Notification of Change $2.50 1 - 21 per item, per month
.12 22 - up per item per month
Credit Received .25 (Fed charges are
Debit Received .28 out-of-pocket expenses)
Originating .08
Returned Debit/Credit 15.00 1 - 15
8.00 16 - 30
4.00 31 and over
REDEMPTION CHECK PROCESSING
- ---------------------------
- - Check Item .18 Without Signature Verification
.50 <F*>Includes Signature
Verification, Pulls on Customer
Instruction and File Maintenance
- - Tel Notification of Paid Check 250.00/mo
Totals
- - Microfilm (Reel or Cassette) 25.00
- - Fine Sort .03 Each Check
- - Return Check 15.00
- - Return Check Under Min. 15.00
<FN>
<F*> Assumes signatures and changes are provided in an automated medium,
and check orders are a direct purchase of the Fund.
<PAGE> 22
<CAPTION>
3/29/93
SCHEDULE II
CASH MANAGEMENT SERVICES
(3)
FUNDS TRANSFER
--------------
FEE COMMENTS
--- --------
<S> <C> <C>
OUTGOING FED FUNDS/CHIPS/BOOK TO BOOK
- -------------------------------------
- - FAST Process 6.50
- - Operator Intervention - Repair 1.50 Additional
INCOMING FED FUNDS/CHIPS
- ------------------------
- - FAST Process 5.50 Current Fed Charges are
MANUAL INQUIRIES 50.00
- ----------------
TELEPHONE ADVICE 5.00 Notify recipient for outgoing wire.
- ---------------- Notify sender for incoming wire. Upon
request only.
OFFICIAL CHECK ISSUANCE
- -----------------------
- - FAST Process 6.50
- - Operator Intervention - Repair 1.50 Additional
<CAPTION>
ACCOUNT RECONCILIATION SERVICES
-------------------------------
<S> <C> <C>
CONTROLLED DISBURSEMENT SERVICES 95.00/month Per Account
- --------------------------------
FULL ACCOUNT RECONCILIATION
- ---------------------------
Monthly Maintenance 175.00/Acct. Assumes Mo. Cycle
Full ARP Paid Item with Controlled
Disbursement Includes Paid Check and History
under 50,000 = .185
over 50,000 = .155
Full ARP Paid Item without Controlled
Disbursement Includes Paid Check and History
under 50,000 = .205
over 50,000 = .175
Fine Sort .05
PARTIAL ACCOUNT RECONCILIATION
- ------------------------------
Monthly Maintenance 90.00/Acct. Assumes Mo. Cycle
Partial ARP Paid Item with Controlled
Disbursement Includes Paid Check and History
under 50,000 = .175
over 50,000 = .145
<PAGE> 23
<CAPTION>
3/29/93
SCHEDULE II
CASH MANAGEMENT SERVICES
(4)
ACCOUNT RECONCILIATION SERVICES (CONT'D)
- ----------------------------------------
FEES COMMENTS
---- --------
<S> <C> <C>
Partial ARP Paid Item without Controlled Includes Paid Check and History
Disbursement
under 50,000 = .195
over 50,000 = .165
Fine Sort .05
ADDITIONAL TAPE INPUT 30.00 Optional
- ---------------------
CHECK WAREHOUSING .01/check Maximum Three Years
- -----------------
DDA ZERO BALANCE SERVICE
- ------------------------
Monthly Maintenance 65.00
Internal Transfer .60
Paid Check .17 Without Full or Partial ARP
<CAPTION>
ELECTRONIC BANKING SERVICES
---------------------------
<S> <C> <C>
BALANCE REPORTING Prior Day Information
- -----------------
Per Access 4.50
Per Summary/Detail Fields Loaded .20
Per summary/Detail Fields Reported .10
TIME CRITICAL REPORTS
---------------------
DYNAMIC REPORT Intra-Day Balance/Detail
- --------------
Per Access 3.00 Per Account
Per Item - Abbreviated Text .25
Per Item - Full Text 1.00
AUTOMATIC ADVICE Same Day Wire Status
- ----------------
Per Month 167.00 Per Account
Per Item N.Y C. = .75
Metropolitan N.Y. = .80
Eastern U.S.A. = 1.15
Western U.S.A. = 1.35
Mail Advice .50
micro/CA$H-Register SOFTWARE MAINTENANCE
- ----------------------------------------
micro/CA$H-Register 400.00 Per Installation
Installation 50.00 Per Month
Per Customer ID
ITEM STATUS REPORT Same Day Wire Status
- ------------------
Per Month 50.00 Per Family of Funds
<PAGE> 24
<CAPTION>
3/29/93
SCHEDULE II
CASH MANAGEMENT SERVICES
(5)
ELECTRONIC BANKING SERVICES (CONT'D)
- ------------------------------------
FEE COMMENTS
--- --------
<S> <C> <C>
DIRECT FINANCIAL LINK No Charge
- ---------------------
DIRECT CUSTOMER INQUIRY No Charge
- -----------------------
ARP INQUIRY 80.00/month Per Family of Funds
- -----------
Stop payment 6.00 On-line stops
ACH INQUIRY (TOTALS ONLY) 80.00/month Per Family of Funds
- -------------------------
ACH SPECIAL RECEIPTS (DETAIL & TOTALS) 80.00/month Per Family of Funds
- --------------------------------------
ACH DEBIT CONTROL 25.00/month Auto Bounce of Incoming Debits
- -----------------
DRAFT CHECK INQUIRY (TOTALS) 75.00/month Per Family of Funds
- ----------------------------
ZERO BALANCE INQUIRY 75.00/month Per Family of Funds
- --------------------
ZERO BALANCE DETAIL 75.00/month Per Family of Funds
- -------------------
Note: Out-of-pocket expenses resulting from the delivery of services,
including but not limited to, courier, stationary and supplies,
research, Federal Reserve surcharges, postage expenses, etc.
will be charged in addition to the above fees.
</TABLE>
<PAGE> 25
SCHEDULE III
FUNDS TRANSFER CALL BACK SECURITY PROCEDURE
-------------------------------------------
I. Initiating and Confirming Funds Transfers Instructions
- -----------------------------------------------------------
* The Fund caller will state his or her name and confidential
identification number.
* BNY will determine whether the Fund caller is authorized to give
Funds Transfer instructions, by reference to Schedule III - A hereto.
* If the Fund caller is authorized, BNY will telephone a Fund
individual, who is listed on Schedule III - A as a person authorized,
to confirm instructions.
* BNY will ask for the person's code. If correct, BNY will confirm the
instructions.
* Once confirmed, instructions cannot be revoked or amended unless
received in a subsequent confirmed instruction. BNY will attempt to
execute subsequent confirmed instructions, if practical under the
circumstances, but with no obligation to do so.
II. Instructions
- -----------------
* To avoid duplication, the Fund should not send written confirmations
of telephone instructions to BNY. If written instructions are
received, BNY will not be responsible for losses incurred as a result
of duplication.
* Changes or additions to Schedule III - A can only be made by written
instructions from a person believed by BNY to be an authorized officer
of the Fund
* Deletions of any persons identified on Schedule III - A can be
telephoned into the manager of Funds Transfer. BNY will tape record
the conversation. The telephone call must be promptly confirmed in
writing by the Fund.
III. Responsibility
- -------------------
* BNY will change the authenticating codes periodically.
* New codes cannot be used until an Acknowledgment Form, signed by
an authorized Officer of the Fund, is returned and received by BNY.
* The Fund is responsible to safeguard the confidentiality of the
assigned numbers and codes provided by BNY, and BNY shall not be
liable for any loss arising from any unauthorized use.
* BNY will request the assigned number, code and name. BNY will
verify the information given, however, BNY cannot verify the
identity of the caller, nor can BNY detect any errors contained in
the instructions.
6/22/92
<PAGE> 26
SCHEDULE III - A
FUNDS TRANSFER TELEPHONE INSTRUCTION
AUTHORIZATION - CALL BACK SERVICE
TO: The Bank of New York
Funds Transfer Division
Route #2, Box 245
Airport Road
Oriskany, N.Y. 13424
Attention: Manager Domestic Department
FROM: Customer Mailing
Address:
I. Names of persons authorized to initiate funds transfer instructions
on behalf of the Funds by telephone:
Name Telephone
---- ---------
------------------------------- ------------------------------
------------------------------- ------------------------------
------------------------------- ------------------------------
------------------------------- ------------------------------
NOTE:
Strike through lines not used. Please type names.
II. Names of persons authorized to confirm funds transfer instructions on
behalf of the Funds:
(If desired, the same names may be listed to initiate and confirm.)
Name Telephone
---- ---------
------------------------------- ------------------------------
------------------------------- ------------------------------
------------------------------- ------------------------------
------------------------------- ------------------------------
NOTE:
Strike through lines not used. Please type names.
We hereby authorize The Bank of New York to accept, confirm, and execute
funds transfer instructions from the person(s) listed on this
authorization form pursuant to and in accordance with the Cash Management
and Related Services Agreement between the Funds and the Bank and
Schedule III thereto. This authorization replaces and supersedes all prior
authorizations and will remain in effect until revoked or amended in
writing.
Dated: Corporate/Customer Name:
Effective when accepted and Name of Signer:
implemented by
The Bank of New York
Funds Transfer Division By----------------------------
Route #2, Box 245 Authorized Officer Signature
Airport Road
Oriskany, N.Y. 13424
<PAGE> 1
Exhibit 6
---------
General Distribution Agreement with
Walnut Street Securities, Inc.
GENERAL DISTRIBUTION AGREEMENT
BETWEEN
THE WALNUT STREET FUNDS, INC.:
THE WALNUT STREET PRIME RESERVE FUND SERIES
AND
WALNUT STREET SECURITIES, INC.
THIS AGREEMENT is made and entered into this -- day of -----------,
1993, by and between THE WALNUT STREET FUNDS, INC., a Maryland corporation
which may issue shares in one or more series (the "Issuer"), with respect to
shares of The Walnut Street Prime Reserve Fund, a series of the Issuer (the
"Series"), and WALNUT STREET SECURITIES, INC., a Missouri corporation
("Distributor").
In consideration of the mutual promises and undertakings herein
contained, the parties agree as follows:
1. Sale of Shares. The Issuer grants to the Distributor the right to sell
--------------
shares on behalf of the Issuer during the term of this Agreement and subject
to the registration requirements of the Securities Act of 1933, as amended
("1933 Act"), and of the laws governing the sale of securities in the various
states ("Blue Sky Laws") on the following terms and conditions: the
Distributor (i) shall have the right to sell, as agent on behalf of the
Issuer, common shares of the Series, par value $.001 per share (the "Series
Shares"), authorized for issue and registered under the 1933 Act, and (ii)
may sell Series Shares under offers of exchange, if available, between and
among the funds advised by General American Investment Management Company
(the "Adviser").
2. Sale of Shares by the Issuer. The rights granted to the Distributor
----------------------------
shall be nonexclusive. The Issuer reserves the right to sell its Series
Shares to investors on applications received and accepted by the Issuer. The
Issuer also reserves the right to issue Series Shares in connection with the
merger or consolidation, or acquisition by the Issuer through purchase or
otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement. This Agreement shall apply to
--------------------------------
unissued Series Shares, Series Shares held in the Issuer's treasury in the
event that in the discretion of the Issuer treasury shares shall be sold, and
Series Shares that the Issuer has purchased for resale.
4. Public Offering Price. Except as otherwise noted in the Issuer's
---------------------
current Prospectus and/or Statement of Additional Information, all Series
Shares sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information.
5. Suspension of Sales. If and whenever the determination of net asset
-------------------
value is suspended and until such suspension is terminated, no further orders
for Series Shares shall be processed by the Distributor except such
<PAGE> 2
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the right
to suspend sales and the Distributor's authority to process orders for Series
Shares on behalf of the Issuer if, in the judgment of the Issuer, it is in
the best interests of the Issuer to do so. Any such suspension will continue
for as long as the Issuer may determine in its sole discretion.
6. Solicitation of Sales.
---------------------
a. In consideration of the rights granted to the Distributor under
this Agreement, the Distributor shall use all reasonable efforts, consistent
with its other business, to secure purchasers for Series Shares. Such
efforts by the Distributor may include, but are neither required to include
nor limited to, the following:
1) the formulation and implementation of marketing and
promotional activities for such shares, including mail
promotions and television, radio, newspaper, magazine, and
other mass media advertising;
2) the preparation, printing, and distribution of sales
literature relating to such shares;
3) the preparation, printing, and distribution of prospectuses
and statements of additional information of the Series and
reports to recipients other than existing shareholders of
the Series;
4) obtaining such information, analyses, and reports about
marketing and promotional activities as the Distributor
may, from time to time, deem advisable;
5) making payments to securities dealers, registered
representatives of such dealers, and others engaged in the
sale of Series Shares or who engage in shareholder support
services (excluding, however, payments for personal
services to shareholders or the maintenance of shareholder
accounts); and
6) providing training, marketing, and support to such dealers
and registered representatives and others with respect to
the sale of such shares.
b. This Agreement shall not prevent the Distributor from entering
into comparable arrangements (including arrangements involving the payment of
underwriting commissions) with other issuers. This Agreement does not
obligate the Distributor to register as a broker or dealer under the Blue Sky
laws of any jurisdiction in which it is not now registered or to maintain its
registration in any jurisdiction in which it is now registered.
7. Authorized Representations. The Distributor is not authorized by the
--------------------------
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended or
supplemented from time to time), or contained in shareholder reports or other
materials that may be prepared by or on behalf of the Issuer for the
Distributor's use. This paragraph shall not be construed to prevent the
Distributor from preparing and distributing sales literature or other
materials as it may deem appropriate,
- 2 -
<PAGE> 3
subject, however, to the requirements of the 1940 Act.
8. Portfolio Securities. The Issuer may (but is under no obligation to)
--------------------
purchase Portfolio securities of the Issuer through the Distributor, and the
Distributor may participate directly or indirectly in brokerage commissions
or "spreads" for transactions in portfolio securities of the Issuer. All
such transactions shall be conducted in full compliance with the 1940 Act and
all applicable rules and regulations that may from time to time be adopted
thereunder, including without limitation the requirements of Section 17(e) of
the 1940 Act.
9. Registration of Shares. The Issuer agrees that it will take all
----------------------
actions necessary to register Series Shares under the 1933 Act (subject to
the necessary approval of its shareholders) so that there will be available
for sale the number of such shares the Distributor reasonably expects to
sell. The Issuer shall make available to the Distributor the number of
copies of its currently effective Prospectus and Statement of Additional
Information that the Distributor reasonably requests. The Issuer shall
furnish the Distributor with copies of all information, financial statements,
and other documents that the Distributor may reasonably request for use in
connection with the distribution of Series Shares.
10. Expenses. The Issuer shall pay the following fees and expenses:
--------
a. all fees and expenses in connection with the preparation and
filing of any registration statement, Prospectus, and Statement of Additional
Information under the 1933 Act and amendments for the issue of the Series
Shares;
b. all fees and expenses in connection with the registration and
qualification of Series Shares for sale in the various states in which the
Board of Directors of the Issuer shall determine it advisable to qualify such
shares for sale (including registering the Issuer as a broker or dealer or
any officer of the Issuer as agent or salesman in any state);
c. all fees and expenses in connection with preparing, setting in
type, printing, and mailing any report or other communication to shareholders
of the Issuer in their capacity as such; and
d. all fees and expenses of preparing, setting in type, printing and
mailing Prospectuses, Statements of Additional Information, and any
supplements and amendments thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer,
the Issuer recognizes that the Adviser may reimburse the Distributor for any
direct expenses incurred in the distribution of shares of the Issuer from any
source available to it, including advisory and management fees paid to it by
the Issuer.
11. Distributor's Fee. In consideration for the services provided and the
-----------------
expenses incurred by the Distributor under this Agreement, the Issuer shall
pay to the Distributor a monthly fee (the "12b-1 fee") at the annual rate of
.35% of the Series' average daily net assets throughout the month. The daily
net assets of the Series shall be based upon the 4:00 p.m. (New York City
time) determination of such amount on each day that the Fund is open for
business throughout the month. (On days that the Fund is not open for
business, as set forth in the Issuer's Prospectus for the Series, the net
assets for such date shall be the amount determined as of the most recent
preceding day upon which the Fund was open for business.) Such net assets
shall be computed in the manner provided in the Prospectus of the Series for
the determination of the net asset value of the Series Shares. The
Distributor may use all or any portion of the 12b-1 fee to compensate
- 3 -
<PAGE> 4
securities dealers, registered representatives, or other persons who have
engaged in the sale of Series Shares or in shareholder support services
pursuant to agreements with the Distributor, or to pay any of the expenses
associated with other activities authorized under paragraph 6 of this
Agreement.
12. Indemnification.
---------------
a. The Issuer shall indemnify and hold harmless the Distributor and
each of its directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages, or
expense and reasonable counsel fees incurred in connection therewith) arising
by reason of any person acquiring any shares, based upon the ground that the
registration statement, Prospectus, Statement of Additional Information,
shareholder reports or other information filed or made public by the Issuer
(as from time to time amended or supplemented) included an untrue statement
of a material fact or omitted to state a material fact required to be stated
or necessary in order to make the statements not misleading under the 1933
Act, or any other statute or the common law. The Issuer shall not, however,
indemnify the Distributor or hold it harmless to the extent that the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Issuer by or on behalf of the Distributor. In
no case (i) is the indemnity of the Issuer in favor of the Distributor or any
person indemnified to be deemed to protect the Distributor or any person
against any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made against
the Distributor or any person indemnified unless the Distributor or person,
as the case may be, shall have notified the Issuer in writing of the claim
within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
The failure to notify the Issuer of any claim shall not, however, relieve the
Issuer from any liability that it may have to the Distributor or any person
against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims, but
if the Issuer elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or person or
persons, defendant or defendants in the suit. If the Issuer elects to assume
the defense of any suit and retain counsel, the Distributor, officers or
directors or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them. If the Issuer does not elect to assume the defense of any suit, it
will reimburse the Distributor, officers or directors or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Issuer shall notify the
Distributor promptly of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with the
issuance or sale of any of the shares.
b. The Distributor shall indemnify and hold harmless the Issuer and
each of its Board members and officers and each person, if any, who controls
- 4 -
<PAGE> 5
the Issuer within the meaning of Section 15 of the 1933 Act, against any
loss, liability, damages, claim or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, damages, claim or
expense and reasonable counsel fees incurred in connection therewith) arising
by reason of any person acquiring any shares, based upon the 1933 Act or any
other statute or common law, alleging any wrongful act of the Distributor or
any of its employees or alleging that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other information
filed or made public by the Issuer (as from time to time amended or
supplemented) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make the
statements not misleading, insofar as the statement or omission was made in
reliance upon, and in conformity with information furnished to the Issuer by
or on behalf of the Distributor. In no case (i) is the indemnity of the
Distributor in favor of the Issuer or any person indemnified to be deemed to
protect the Issuer or any person against any liability to which the Issuer or
such person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations or duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement contained
in this paragraph with respect to any claim made against the Issuer or any
person indemnified unless the Issuer or person, as the case may be, shall
have notified the Distributor in writing of the claim within a reasonable
time after the summons or other first written notification giving information
of the nature of the claim shall have been served upon the Issuer or any such
person (or after the Issuer or such person shall have received notice of
service on any designated agent). The failure to notify the Distributor of
any claim shall not, however, relieve the Distributor from any liability that
it may have to the Issuer or any person against whom the action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. In the case of any notice to the Distributor, it shall be
entitled to participate, at its own expense, in the defense or, if it so
elects, to assume the defense of any suit brought to enforce the claim, but
if the Distributor elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Issuer, to its
officers and Board and to any controlling person or persons, defendant or
defendants in the suit. If the Distributor elects to assume the defense of
any suit and retain counsel, the Issuer or controlling persons, defendant or
defendants in the suit, shall bear the fees and expense of any additional
counsel retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Issuer, officers and Board or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees or expenses of any counsel retained by them. The Distributor
shall notify the Issuer promptly of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
shares.
13. Effective Date. This Agreement (i) has been approved by the
--------------
affirmative vote of a majority of the Board members of the Issuer including a
majority of the Board members who are not "interested persons" of the Issuer
and who are not parties to the Plan or this Agreement and have no financial
interest in the operation of the Distribution and Service Plan, or in any
agreements related to the Distribution and Service Plan, cast in person at a
meeting called for the purpose of voting on the approval, and (ii) shall
become effective upon its execution. Unless this Agreement is terminated as
herein provided, shall continue in force for a period of one (1) year and
thereafter from year to year; provided, that continuance is approved annually
by the vote of a majority of the Board members of the Issuer, and by the vote
of those Board members of the Issuer who are not "interested persons" of the
Issuer and by the vote of those Board members of the Issuer who are not
"interested persons" of the Issuer and who are not parties to the
Distribution and Service Plan or this Agreement and have no financial
interest in the operation of the Distribution and Service Plan, or in any
agreements related to the
- 5 -
<PAGE> 6
Distribution and Service Plan, cast in person at a meeting called for the
purpose of voting on the approval. This Agreement shall automatically terminate
in the event of its assignment. As used in this paragraph, the terms
"assignment" and "interested persons" shall have the respective meanings
specified in the 1940 Act as now in effect or as hereafter amended. In addition
to termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than sixty
(60) days' prior written notice to the other party.
14. Notice. Any notice required or permitted to be given by either party
------
to the other under this Agreement shall be deemed sufficient if sent by
registered or certified mail, postage prepaid, addressed by the party giving
notice to the other party at the last address furnished by the other party to
the party giving notice: if to the Issuer, at 1801 Park 270 Drive, Suite
220, St. Louis, Missouri 63146, and if to the Distributor, at 1801 Park 270
Drive, Suite 220, St. Louis, Missouri 63146.
15. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Missouri.
16. Final Integration. This Agreement constitutes the entire agreement of
-----------------
the parties as a complete and final integration thereof with respect to its
subject matter.
17. Severability. All of the terms, provisions, and conditions of this
------------
Agreement shall be deemed severable in nature. If for any reason any one or
more provisions hereof are held to be invalid or unenforceable to any extent,
to the extent that such provisions are valid and enforceable this Agreement
shall be construed and interpreted to provide for maximum validity and
enforceability.
18. Captions. The captions in this Agreement are for convenience of
--------
reference only, are not a part of this Agreement, and in no way define,
describe, extend, or limit the scope or intent of this Agreement.
IN WITNESS WHEREOF, the Issuer and the Distributor have executed this
Agreement as of the day and year first above written.
THE WALNUT STREET FUNDS, INC.
on behalf of The Walnut Street Prime
Reserve Fund Series
By: /S/ Timothy C. Nicholson
-------------------------
WALNUT STREET SECURITIES, INC.
By: /S/ Timothy C. Nicholson
-------------------------
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<PAGE> 1
Exhibit 8
---------
Custody Agreement with
The Bank of New York and
Schedule of Remuneration
<PAGE> 2
CUSTODY AGREEMENT
-----------------
Agreement made as of this 12th day of May, 1993, between The Walnut Street
Funds, Inc., a corporation organized and existing under the laws of the State of
Maryland having its principal office and place of business at
(hereinafter called the "Company"), and THE
BANK OF NEW YORK, a New York corporation authorized to do a banking business,
having its principal office and place of business at 48 Wall Street, New York,
New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
"WHEREAS, the Company is an investment company registered under the
Investment Company Act of 1940, as amended, that invests and reinvests, on
behalf of its Series, in Securities,
WHEREAS, the Custodian is, and has represented to the Company that the
Custodian is, a "bank" as that term is defined in Section 2(a)(5) of the
Investment Company Act of 1940, as amended, and is eligible to receive and
maintain custody of investment company assets pursuant to Section 17(f)
thereunder,
WHEREAS, the Company and the Custodian desire to provide for the
retention of the Custodian as a custodian of the assets of the Company's
initial Series, THE WALNUT STREET PRIME RESERVE FUND, and all other Series
subsequently established by the Company, on the terms and subject to the
provisions set forth herein."
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Company and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Bank Officer" shall mean those officers or employees of the
Custodian listed from time to time on Schedule II, or the last revision
thereto received by the Company, who are authorized to sign hereunder for
and on behalf of the Custodian.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
<PAGE> 3
3. "Call Option" shall mean an exchange traded option with respect
to Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the writer thereof
the specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, including without limitation any letter, memorandum
or telecopy facsimile of any of the foregoing, authorized or required by this
Agreement to be given to the Custodian which is actually received by the
Custodian and signed on behalf of the Company by any two Officers, and the
term Certificate shall also include instructions by the Company to the
Custodian communicated by a Terminal Link.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian for an investment company,
or any broker-dealer reasonably believed by the Custodian to be such a
clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any
Put Option guarantee letter or similar document described in paragraph 8 of
Article V herein, or (b) any receipt described in Article V or VIII herein.
7. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified
underlying Securities (excluding Futures Contracts) which are owned by the
writer thereof and subject to appropriate restrictions.
8. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identified in a certified
copy of a resolution of the Company's Board of Directors specifically
approving deposits therein by the Custodian.
9. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S.
Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank
certificates of deposit, and Eurodollar certificates of deposit, during a
specified month at an agreed upon price.
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<PAGE> 4
10. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
11. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
12. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Company for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Company, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money
of the Company shall be deposited and withdrawn from time to time in
connection with such transactions as the Company may from time to time
determine. Securities held in the Book-Entry System or the Depository shall
be deemed to have been deposited in, or withdrawn from, a Margin Account
upon the Custodian's effecting an appropriate entry in its books and records.
13. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued
or guaranteed as to interest and principal by the government of the United
States or agencies or instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bankers' acceptances,
repurchase agreements with respect to the same and bank time deposits, where
the purchase and sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale.
14. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934,
its successor or successors, and its nominee or nominees.
15. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer, and any other person or persons, whether
or not any such other person is an officer of the Company, duly authorized
by the Board of Directors of the Company to execute any Certificate,
instruction, notice or other instrument on behalf of the Company and listed
in the Certificate annexed hereto as Appendix A or such other Certificate
as may be received by the Custodian from time to time.
16. "Option" shall mean a Call Option, Covered Call Option, Stock
Index Option and/or a Put Option.
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<PAGE> 5
17. "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from an Officer or from a person reasonably believed by
the Custodian to be an Officer.
18. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer
thereof for the exercise price.
19. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Company sells Securities and agrees to repurchase such Securities
at a described or specified date and price.
20. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock
Index Futures Contracts, Stock Index Futures Contract Options, Financial
Futures Contracts, Financial Futures Contract Options, Reverse Repurchase
Agreements, common stocks and other securities having characteristics similar
to common stocks, preferred stocks, debt obligations issued by state or
municipal governments and by public authorities, (including, without
limitation, general obligation bonds, revenue bonds, industrial bonds and
industrial development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe for the same,
or evidencing or representing any other rights or interest therein, or any
property or assets.
21. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account
in which certain Securities and/or other assets of the Company specifically
allocated to such Series shall be deposited and withdrawn from time to time
in accordance with Certificates received by the Custodian in connection with
such transactions as the Company may from time to time determine.
22. "Series" shall mean the various portfolios, if any, of the Company
as described from time to time in the current and effective prospectus for the
Company.
23. "Shares" shall mean the shares of capital stock of the Company, each
of which is, in the case of a Company having Series, allocated to a particular
Series.
24. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular
- 4 -
<PAGE> 6
stock index at the close of the last business day of the contract and the
price at which the futures contract is originally struck.
25. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
26. "Terminal Link" shall mean an electronic data transmission link
between the Company and the Custodian requiring in connection with each use
of the Terminal Link by or on behalf of the Company use of an authorization
code provided by the Custodian and at least two access codes established by
the Company.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Company hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned by the Company
during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Company will deliver or cause to be delivered to the
Custodian all Securities and all moneys owned by it, at any time during the
period of this Agreement, and shall specify with respect to such Securities
and money the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the Series separate
and apart. The Custodian will not be responsible for any Securities and
moneys not actually received by it. The Custodian will be entitled to reverse
any credits made on the Company's behalf where such credits have been
previously made and moneys are not finally collected. The Company shall deliver
to the Custodian a certified resolution of the Board of Directors of the
Company, substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and on-going basis
to deposit in the Book-Entry System all Securities eligible for deposit
therein, regardless of the Series to which the same are specifically allocated
and
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<PAGE> 7
to utilize the Book-Entry System to the extent possible in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities and
deliveries and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in the Depository, the Company
shall deliver to the Custodian a certified resolution of the Board of Directors
of the Company, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated
to such Series eligible for deposit therein, and to utilize the Depository
to the extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and moneys
deposited in either the Book-Entry System or the Depository will be
represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the applicable
Series. Prior to the Custodian's accepting, utilizing and acting with respect
to Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Company's Board of Directors, substantially in the
form of Exhibit C hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis, until instructed to the contrary by a
Certificate actually received by the Custodian, to accept, utilize and act
in accordance with such confirmations as provided in this Agreement with
respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Company with respect to such
Series. Money credited to a separate account for a Series shall be disbursed
by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of the
person to whom the payment is to be made, the Series account from which payment
is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series, provided the
Custodian has sent an invoice to the Company at least ten calendar days prior
thereto.
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<PAGE> 8
3. Promptly after the close of business on each day, the Custodian
shall furnish the Company with confirmations and a summary, on a per Series
basis, of all transfers to or from the account of the Company for a Series,
either hereunder or with any co-custodian or sub-custodian appointed in
accordance with this Agreement during said day. Where Securities are
transferred to the account of the Company for a Series, the Custodian shall
also by book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the Custodian's account
on the books of the Book-Entry System or the Depository. At least monthly
and from time to time, the Custodian shall furnish the Company with a
detailed statement, on a per Series basis, of the Securities and moneys held
by the Custodian for the Company.
4. Except as otherwise provided in paragraph 7 of this Article and
in Article VIII, all Securities held by the Custodian hereunder, which are
issued or issuable only in bearer form, except such Securities as are held
in the Book-Entry System, shall be held by the Custodian in that form; all
other Securities held hereunder may be registered in the name of the Company,
in the name of any duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or their nominee or
nominees. The Company agrees to furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee or in the
name of the Book-Entry System or the Depository any Securities which it may
hold hereunder and which may from time to time be registered in the name of
the Company. The Custodian shall hold all such Securities specifically
allocated to a Series which are not held in the Book-Entry System or in the
Depository in a separate account in the name of such Series physically
segregated at all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or
through the use of the Book-Entry System or the Depository with respect to
Securities held hereunder and therein deposited, shall with respect to all
Securities held for the Company hereunder in accordance with preceding
paragraph 4:
(a) Collect on a timely basis all income due or payable:
(b) Present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives
a written notice of such call, or (ii) notice of such call appears in one or
more of the publications listed in Appendix B annexed hereto, which may be
amended at any time by the Custodian without the prior notification or
consent of the Company;
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<PAGE> 9
(c) Present for payment and collect the amount payable upon all
Securities which mature;
(d) Surrender Securities in temporary form for definitive Securities;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax Laws or the laws or regulations
of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series,
all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder;
(g) endorse and deposit for collection checks or other orders for
payment of money on behalf of the Company; and
(h) subject to paragraph 6 of Article XVII, do all other things
necessary or proper in connection with the receipt and collection of any
such items.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Company as owner of any Securities held by the
Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received
in exchange;
(c) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold hereunder specifically
allocated to such Series such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to evidence such
delivery;
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<PAGE> 10
(d) Make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated
in such Certificate to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or recapitalization
of the Company; and
(e) Present for payment and collect the amount payable upon Securities
not described in preceding paragraph 5(b) of this Article which may be called
as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received
a Certificate from the Company stating, that any such instruments or
certificates are available. The Company shall deliver to the Custodian such
a Certificate no later than the business day preceding the availability of
any such instrument or certificate. Prior to such availability, the Custodian
shall comply with Section 17(f) of the Investment Company Act of 1940, as
amended, in connection with the purchase, sale, settlement, closing out or
writing of Futures Contracts, Options, or Futures Contract Options by making
payments or deliveries specified in Certificates received by the Custodian in
connection with any such purchase, sale, writing, settlement or closing out
upon its receipt from a broker, dealer, or futures commission merchant of a
statement or confirmation reasonably believed by the Custodian to be in the
form customarily used by brokers, dealers, or future commission merchants
with respect to such Futures Contracts, Options, or Futures Contract Options,
as the case may be, confirming that such Security is held by such broker,
dealer or futures commission merchant, in book-entry form or otherwise, in
the name of the Custodian (or any nominee of the Custodian) as custodian for
the Company, provided, however, that notwithstanding the foregoing, payments
to or deliveries from the Margin Account, and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance
with the terms and conditions of the Margin Account Agreement. Whenever any
such instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary, make payment
for any Futures Contract, Option, or Futures Contract Option for which such
instruments or such certificates are available only against the delivery to
the Custodian of such instrument or such certificate, and deliver any Futures
Contract, Option or Futures Contract Option for which such instruments or
such certificates are available only against receipt by the Custodian of
payment therefor. Any such instrument or certificate delivered to the
Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
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<PAGE> 11
8. The Custodian shall forward to the Company copies of all information
or documents the Custodian may receive with respect to Securities held by it
under this Agreement or which, in the opinion of the Custodian, are intended
for the beneficial owner of the Securities including, without limitation, all
proxies and other authorizations properly executed in blank and all proxy
statements, offering circulars, notices, and reports. Neither the Custodian
nor its nominees or agents shall vote or authorize the voting of, any
Securities or give any consent, approval or waiver with respect to proxies,
offering circulars and reports, except as directed by Certificates. Where
warrants, options, tenders or other Securities have fixed expiration dates,
the Company understands that, in order for the Custodian to act, the Custodian
must receive the Company's instructions by no later than noon at least two (2)
business days prior to the last scheduled date to act (or such earlier time or
date as the Custodian may notify the Company). Absent the Custodian's timely
receipt of such instructions, the Custodian shall not be liable if such
instruments expire, nor shall the Custodian have any liability arising out of
or related to any failure by any Depository, the Book-Entry Systems or any
issuer to provide such information to the Custodian, either on a timely basis
or otherwise.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE COMPANY
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Company, other
than a purchase of an Option, a Futures Contract, or a Futures Contract
Option, the Company shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a Certificate,
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if
any; and (h) the name of the broker to whom payment is to be made. The
Custodian shall, upon receipt of Securities purchased by or for the Company,
pay to the broker specified in the Certificate out of the moneys held for the
account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
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2. Promptly after each sale of Securities by the Company, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any
Reverse Repurchase Agreement, the Company shall deliver to the Custodian (i)
with respect to each sale of Securities which are not Money Market Securities,
a Certificate, and (ii) with respect to each sale of Money Market Securities,
a Certificate or Oral Instructions, specifying with respect to each such
sale: (a) the Series to which such Securities were specifically allocated;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or principal amount sold, and accrued interest, if any; (d) the date of
sale; (e) the sale price per unit; (f) the total amount payable to the Company
upon such sale; (g) the name of the broker through whom or the person to whom
the sale was made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom the Securities are to be delivered. The Custodian
shall deliver the Securities specifically allocated to such Series to the
broker specified in the Certificate against payment of the total amount payable
to the Company upon such sale, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Company, the Company
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such Option is specifically
allocated; (b) the type of Option (put or call); (c) the name of the issuer
and the title and number of shares subject to such Option or, in the case of
a Stock Index Option, the stock index to which such Option relates and the
number of Stock Index Options purchased; (d) the expiration date; (e) the
exercise price; (f) the dates of purchase and settlement; (g) the total amount
payable by the Company in connection with such purchase; (h) the name of the
Clearing Member through whom such Option was purchased; and (i) the name of
the broker to whom payment is to be made. The Custodian shall pay, upon
receipt of a Clearing Member's statement confirming the purchase of such Option
held by such Clearing Member for the account of the Custodian (or any duly
appointed and registered nominee of the Custodian) as custodian for the
Company, out of moneys held for the account of the Series to which such Option
is to be specifically allocated, the total amount payable upon such purchase
to the Clearing Member through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Company
pursuant to paragraph 1 hereof, the Company shall deliver to the Custodian
a Certificate specifying with respect to each such sale: (a) the Series to
which such Option was specifically allocated; (b) the type of Option (put or
call); (c)
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the name of the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options sold; (d) the date of
sale; (e) the sale price; (f) the date of settlement; (g) the total amount
payable to the Company upon such sale; and (h) the name of the Clearing Member
through whom the sale was made. The Custodian shall consent to the delivery
of the Option sold by the Clearing Member which previously supplied the
confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Company, provided that the same conforms to the total amount payable as
set forth in such Certificate.
3. Promptly after the exercise by the Company of any Call Option
purchased by the Company pursuant to paragraph 1 hereof, the Company shall
deliver to the Custodian a Certificate specifying with respect to such Call
Option: (a) the Series to which such Call Option was specifically allocated;
(b) the name of the issuer and the title and number of shares subject to the
Call Option; (c) the expiration date; (d) the date of exercise and settlement;
(e) the exercise price per share; (f) the total amount to be paid by the
Company upon such exercise; and (g) the name of the Clearing Member through
whom such Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of the
moneys held for the account of the Series to which such Call Option was
specifically allocated the total amount payable to the Clearing Member through
whom the Call Option was exercised, provided that the same conforms to the
total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Company of any Put Option
purchased by the Company pursuant to paragraph 1 hereof, the Company shall
deliver to the Custodian a Certificate specifying with respect to such
Put Option: (a) the Series to which such Put Option was specifically allocated;
(b) the name of the issuer and the title and number of shares subject to the
Put Option; (c) the expiration date; (d) the date of exercise and settlement;
(e) the exercise price per share; (f) the total amount to be paid to the
Company upon such exercise; and (g) the name of the Clearing Member through
whom such Put Option was exercised. The Custodian shall, upon receipt of the
amount payable upon the exercise of the Put Option, deliver or direct the
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Company as set forth
in such Certificate.
5. Promptly after the exercise by the Company of any Stock Index Option
purchased by the Company pursuant to paragraph 1 hereof, the Company shall
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c) the number
of Options being exercised; (d) the stock index to
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<PAGE> 14
which such Option relates; (e) the expiration date; (f) the exercise price;
(g) the total amount to be received by the Company in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
Upon receipt of the amount specified therein the Custodian shall credit such
amount to the appropriate Series account of the Company hereunder.
6. Whenever the Company writes a Covered Call Option, the Company shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Covered Call Option: (a) the Series for which such Covered Call Option
was written; (b) the name of the issuer and the title and number of shares for
which the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Company; (f) the date such Covered Call Option was written; and (g) the name
of the Clearing Member through whom the premium is to be received. The
Custodian shall deliver or cause to be delivered, in exchange for receipt of
the premium specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Options and shall
impose, or direct the Depository to impose, upon the underlying Securities
specified in the Certificate specifically allocated to such Series such
restrictions as may be required by such receipts. Notwithstanding the
foregoing, the Custodian has the right, upon prior written notification to
the Company, at any time to refuse to issue any receipts for Securities in
the possession of the Custodian and not deposited with the Depository
underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Company and described
in the preceding paragraph of this Article is exercised, the Company shall
promptly deliver to the Custodian a Certificate instructing the Custodian to
deliver, or to direct the Depository to deliver, the Securities subject to
such Covered Call Option and specifying: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title and number
of shares subject to the Covered Call Option; (c) the Clearing Member to whom
the underlying Securities are to be delivered; and (d) the total amount payable
to the Company upon such delivery. Upon the return and/or cancellation of any
receipts delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the underlying Securities
as specified in the Certificate against payment of the amount to be received
as set forth in such Certificate.
8. Whenever the Company writes a Put Option, the Company shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name
of the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Company; (f) the date
such Put Option is written; (g) the name
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of the Clearing Member through whom the premium is to be received and to whom
a Put Option guarantee letter is to be delivered; (h) the amount of cash,
and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities
specifically allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the deposits
into the Collateral Account specified in the Certificate, issue a Put Option
guarantee letter substantially in the form utilized by the Custodian on the
date hereof, and deliver the same to the Clearing Member specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter or similar document if it
is unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Company and described in the
preceding paragraph is exercised, the Company shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option
was written; (b) the name of the issuer and title and number of shares subject
to the Put Option; (c) the Clearing Member from whom the underlying Securities
are to be received; (d) the total amount payable by the Company upon such
delivery; (e) the amount of cash and/or the amount and kind of Securities
specifically allocated to such Series to be withdrawn from the Collateral
Account for such Series and (f) the amount of cash and/or the amount and kind
of Securities, specifically allocated to such Series, if any, to be withdrawn
from the Senior Security Account. Upon the return and/or cancellation of any
Put Option guarantee letter or similar document issued by the Custodian in
connection with such Put Option, the Custodian shall pay out of the moneys
held for the account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate against delivery of such
Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Company writes a Stock Index Option, the Company shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the
number of options written; (d) the stock index to which such Option relates;
(e) the expiration date; (f) the exercise price; (g) the Clearing Member
through whom such Option was written; (h) the premium to be received by the
Company; (i) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in the Senior
Security Account for such Series; (j) the amount of cash and/or the amount
and kind of Securities, if any, specifically allocated to such Series to be
deposited in the Collateral Account for such Series; and (k) the amount of
cash and/or the amount
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<PAGE> 16
and kind of Securities, if any, specifically allocated to such Series to be
deposited in a Margin Account, and the name in which such account is to be or
has been established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the Senior
Security Account specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed to issue, which
are in accordance with the customs prevailing among Clearing Members in
Stock Index Options and make the deposits into the Collateral Account specified
in the Certificate, or (2) make the deposits into the Margin Account specified
in the Certificate.
11. Whenever a Stock Index Option written by the Company and described in
the preceding paragraph of this Article is exercised, the Company shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) such information as may be necessary to identify the Stock Index
Option being exercised; (c) the Clearing Member through whom such Stock Index
Option is being exercised; (d) the total amount payable upon such exercise;
(e) the amount of cash and/or amount and kind of Securities, if any, to be
withdrawn from the Margin Account; and (f) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Collateral Account for such
Series. Upon the return and/or cancellation of the receipt, if any, delivered
pursuant to the preceding paragraph of this Article, the Custodian shall pay
out of the moneys held for the account of the Series to which such Stock
Index Option was specifically allocated to the Clearing Member specified in
the Certificate the total amount payable, if any, as specified therein.
12. Whenever the Company purchases any Option identical to a previously
written Option described in paragraphs 6, 8 or 10 of this Article in a
transaction expressly designated a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Company shall promptly
deliver to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase Transaction;
(b) the Series for which the Option was written; (c) the name of the issuer and
the title and number of shares subject to the Option, or, in the case of a
Stock Index Option, the stock index to which such Option relates and the
number of Options held; (d) the exercise price; (e) the premium to be paid by
the Company; (f) the expiration date; (g) the type of Option (put or call);
(h) the date of such purchase; (i) the name of the Clearing Member to whom
the premium is to be paid; and (j) the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the Collateral Account, a
specified Margin Account, or the Senior Security Account for such Series.
Upon the Custodian's payment of the premium and the return and/or cancellation
of any receipt issued pursuant to
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paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall
remove, or direct the Depository to remove, the previously imposed
restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Company
and described in this Article, the Custodian shall delete such Option from
the statements delivered to the Company pursuant to paragraph 3 Article III
herein, and upon the return and/or cancellation of any receipts issued by
the Custodian, shall make such withdrawals from the Collateral Account, and
the Margin Account and/or the Senior Security Account as may be specified in
a Certificate received in connection with such expiration, exercise, or
consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Company shall enter into a Futures Contract, the
Company shall deliver to the Custodian a Certificate specifying with respect
to such Futures Contract, (or with respect to any number of identical
Futures Contract(s)): (a) the Series for which the Futures Contract is being
entered; (b) the category of Futures Contract (the name of the underlying
stock index or financial instrument); (c) the number of identical Futures
Contracts entered into; (d) the delivery or settlement date of the Futures
Contract(s); (e) the date the Futures Contract(s) was (were) entered into
and the maturity date; (f) whether the Company is buying (going long) or
selling (going short) on such Futures Contract(s); (g) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer,
or futures commission merchant through whom the Futures Contract was entered
into; and (i) the amount of fee or commission, if any, to be paid and the name
of the broker, dealer, or futures commission merchant to whom such amount is
to be paid. The Custodian shall make the deposits, if any, to the Margin
Account in accordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the moneys specifically
allocated to such Series of the fee or commission, if any, specified in the
Certificate and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Company to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
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(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Company with respect to an
outstanding Futures Contract, shall be received and dealt with by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Company until delivery or settlement is made on such Futures
Contract, the Company shall deliver to the Custodian a Certificate specifying:
(a) the Futures Contract and the Series to which the same relates; (b) with
respect to a Stock Index Futures Contract, the total cash settlement amount
to be paid or received, and with respect to a Financial Futures Contract,
the Securities and/or amount of cash to be delivered or received; (c) the
broker, dealer, or futures commission merchant to or from whom payment or
delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such Series.
The Custodian shall make the payment or delivery specified in the Certificate,
and delete such Futures Contract from the statements delivered to the Company
pursuant to paragraph 3 of Article III herein.
4. Whenever the Company shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Company shall deliver to
the Custodian a Certificate specifying: (a) the items of information required
in a Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Company pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to
be made from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Company, the Company shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to
which such Option is specifically allocated; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying
the Futures Contract Option purchased; (d) the expiration date; (e) the
exercise price; (f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Company
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upon such purchase; (h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series, the total
amount to be paid upon such purchase to the broker or futures commission
merchant through whom the purchase was made, provided that the same conforms
to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Company pursuant to paragraph 1 hereof, the Company shall promptly deliver
to the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b)
the type of Futures Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d) the date of sale;
(e) the sale price; (f) the date of settlement; (g) the total amount payable
to the Company upon such sale; and (h) the name of the broker or futures
commission merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being closed
against payment to the Custodian of the total amount payable to the Company,
provided the same conforms to the total amount payable as set forth in such
Certificate.
3. Whenever a Futures Contract Option purchased by the Company pursuant
to paragraph 1 is exercised by the Company, the Company shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Company;
(g) the amount, if any, to be received by the Company; and (h) the amount of
cash and/or the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall make, out of the moneys
and Securities specifically allocated to such Series, the payments, if any, and
the deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
4. Whenever the Company writes a Futures Contract Option, the Company
shall promptly deliver to the Custodian a Certificate specifying with respect
to such Futures Contract Option: (a) the Series for which such Futures Contract
Option was written; (b) the type of Futures Contract Option (put or call); (c)
the type of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the
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<PAGE> 20
Futures Contract Option; (d) the expiration date; (e) the exercise price; (f)
the premium to be received by the Company; (g) the name of the broker or
futures commission merchant through whom the premium is to be received; and
(h) the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series. The Custodian shall,
upon receipt of the premium specified in the Certificate, make out of the
moneys and Securities specifically allocated to such Series the deposits into
the Senior Security Account, if any, as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the Company which is a
call is exercised, the Company shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option
was specifically allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying the Futures Contract
Option; (d) the name of the broker or futures commission merchant through
whom such Futures Contract Option was exercised; (e) the net total amount, if
any, payable to the Company upon such exercise; (f) the net total amount, if
any, payable by the Company upon such exercise; and (g) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall, upon its receipt of the net
total amount payable to the Company, if any, specified in such Certificate
make the payments, if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any, to be made to
the Margin Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Company
and which is a put is exercised, the Company shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures Contract Option; (d)
the name of the broker or futures commission merchant through whom such
Futures Contract Option is exercised; (e) the net total amount, if any,
payable to the Company upon such exercise; (f) the net total amount, if any,
payable by the Company upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in, the Senior Security
Account for such Series, if any. The Custodian shall, upon its receipt of the
net total amount payable to the Company, if any, specified in the Certificate,
make out of the moneys and Securities specifically allocated to such Series,
the payments, if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits to and/or withdrawals
from the Margin Account, if any, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
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<PAGE> 21
7. Whenever the Company purchases any Futures Contract Option
identical to a previously written Futures Contract Option described in this
Article in order to liquidate its position as a writer of such Futures
Contract Option, the Company shall promptly deliver to the Custodian a
Certificate specifying with respect to the Futures Contract Option being
purchased: (a) the Series to which such Option is specifically allocated; (b)
that the transaction is a closing transaction; (c) the type of Future
Contract and such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d) the exercise
price; (e) the premium to be paid by the Company; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium
is to be paid; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account for such
Series. The Custodian shall effect the withdrawals from the Senior Security
Account specified in the Certificate. The withdrawals, if any, to be made
from the Margin Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased
by the Company and described in this Article, the Custodian shall (a) delete
such Futures Contract Option from the statements delivered to the Company
pursuant to paragraph 3 of Article III herein and, (b) make such withdrawals
from and/or in the case of an exercise such deposits into the Senior Security
Account as may be specified in a Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Company through the exercise of
a Futures Contract Option described in this Article shall be subject to
Article VI hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Company, the
Company shall promptly deliver to the Custodian a Certificate specifying: (a)
the Series for which such short sale was made; (b) the name of the issuer and
the title of the Security; (c) the number of shares or principal amount sold,
and accrued interest or dividends, if any; (d) the dates of the sale and
settlement; (e) the sale price per unit; (f) the total amount credited to the
Company upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h)
the amount of cash and/or the amount and kind of Securities, if
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any, to be deposited in a Senior Security Account, and (i) the name of the
broker through whom such short sale was made. The Custodian shall upon its
receipt of a statement from such broker confirming such sale and that the
total amount credited to the Company upon such sale, if any, as specified
in the Certificate is held by such broker for the account of the Custodian
(or any nominee of the Custodian) as custodian of the Company, issue a
receipt or make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Company
shall promptly deliver to the Custodian a Certificate specifying with respect
to each such closing out: (a) the Series for which such transaction is being
made; (b) the name of the issuer and the title of the Security; (c) the
number of shares or the principal amount, and accrued interest or dividends,
if any, required to effect such closing-out to be delivered to the broker;
(d) the dates of closing-out and settlement; (e) the purchase price per unit;
(f) the net total amount payable to the Company upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the
amount of cash and the amount and kind of Securities to be withdrawn, if any,
from the Margin Account, (i) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account; and (j)
the name of the broker through whom the Company is effecting such
closing-out. The Custodian shall, upon receipt of the net total amount
payable to the Company upon such closing-out, and the return and/or
cancellation of the receipts, if any, issued by the Custodian with respect
to the short sale being closed-out, pay out of the moneys held for the
account of the Company to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Company enters a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder, the
Company shall deliver to the Custodian a Certicficate, or in the event such
Reverse Repurchase Agreement is a Money Market Security, a Certificate or
Oral Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Company in
connection with such Reverse Repurchase Agreement and specifically allocated
to such Series; (c) the broker or dealer through or with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of Securities to be
delivered by the Company to such broker or dealer; (e) the date of such
Reverse Repurchase Agreement; and (f) the amount of cash and/or
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the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian shall,
upon receipt of the total amount payable to the Company specified in the
Certificate or Oral Instructions make the delivery to the broker or dealer,
and the deposits, if any, to the Senior Security Account, specified in such
Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described
in preceding paragraph 1 of this Article, the Company shall promptly deliver
a Certificate or, in the event such Reverse Repurchase Agreement is a Money
Market Security, a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable by the
Company in connection with such termination; (c) the amount and kind of
Securities to be received by the Company and specifically allocated to such
Series in connection with such termination; (d) the date of termination; (e)
the name of the broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or the amount
and kind of Securities to be withdrawn from the Senior Securities Account for
such Series. The Custodian shall, upon receipt of the amount and kind of
Securities to be received by the Company specified in the Certificate or Oral
Instructions, make the payment to the broker or dealer, and the withdrawals,
if any, from the Senior Security Account, specified in such Certificate or
Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE COMPANY
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Company shall
deliver or cause to be delivered to the Custodian a Certificate specifying
with respect to each such loan: (a) the Series to which the loaned Securities
are specifically allocated; (b) the name of the issuer and the title of the
Securities, (c) the number of shares or the principal amount loaned, (d) the
date of loan and delivery, (e) the total amount to be delivered to the
Custodian against the loan of the Securities, including the amount of cash
collateral and the premium, if any, separately identified, and (f) the name
of the broker, dealer, or financial institution to which the loan was made.
The Custodian shall deliver the Securities thus designated to the broker,
dealer or financial institution to which the loan was made upon receipt of
the total amount designated as to be delivered against the loan of
Securities. The Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or Depository in accordance with
the customs prevailing among dealers in securities.
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<PAGE> 24
2. Promptly after each termination of the loan of Securities by the
Company, the Company shall deliver or cause to be delivered to the Custodian
a Certificate specifying with respect to each such loan termination and
return of Securities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities to be returned, (c) the number of shares or the principal amount
to be returned, (d) the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash collateral for such Securities
minus any offsetting credits as described in said Certificate, and (f) the
name of the broker, dealer, or financial institution from which the
Securities will be returned. The Custodian shall receive all Securities
returned from the broker, dealer, or financial institution to which such
Securities were loaned and upon receipt thereof shall pay, out of the moneys
held for the account of the Company, the total amount payable upon such
return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for
which such deposit or withdrawal is to be made and the amount of cash and/or
the amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such
Series. In the event that the Company fails to specify in a Certificate the
Series, the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities to be deposited by the
Custodian into, or withdrawn from, a Senior Securities Account, the Custodian
shall be under no obligation to make any such deposit or withdrawal and shall
so notify the Company.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member
in whose name, or for whose benefit, the account was established as specified
in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions
with respect to Securities deposited in any Margin Account shall be dealt
with in accordance with the terms and conditions of the Margin Account
Agreement.
4. The Custodian shall have a continuing lien and security interest
in and to any property at any time held by the Custodian in any Collateral
Account described herein. In accordance with applicable law the Custodian may
enforce its lien
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<PAGE> 25
and realize on any such property whenever the Custodian has made payment or
delivery pursuant to any Put Option guarantee letter or similar document or
any receipt issued hereunder by the Custodian. In the event the Custodian
should realize on any such property net proceeds which are less than the
Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian
by the Company within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Company with
a statement with respect to each Margin Account in which money or Securities
are held specifying as of the close of business on the previous business day:
(a) the name of the Margin Account; (b) the amount and kind of Securities
held therein; and (c) the amount of money held therein. The Custodian shall
make available upon request to any broker, dealer, or futures commission
merchant specified in the name of a Margin Account a copy of the statement
furnished the Company with respect to such Margin Account.
6. Promptly after the close of business on each business day in
which cash and/or Securities are maintained in a Collateral Account for any
Series, the Custodian shall furnish the Company with a statement with respect
to such Collateral Account specifying the amount of cash and/or the amount
and kind of Securities held therein. No later than the close of business next
succeeding the delivery to the Company of such statement, the Company shall
furnish to the Custodian a Certificate specifying the then market value of
the Securities described in such statement. In the event such then market
value is indicated to be less than the Custodian's obligation with respect to
any outstanding Put Option guarantee letter or similar document, the Company
shall promptly specify in a Certificate the additional cash and/or Securities
to be deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Company shall furnish to the Custodian a copy of the
resolution of the Board of Directors of the Company, certified by the
Secretary or any Assistant Secretary, either (i) setting forth with respect
to the Series specified therein the date of the declaration of a dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Company on the payment date, or (ii) authorizing
with respect to the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely on Oral
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<PAGE> 26
Instructions or a Certificate setting forth the date of the declaration of
such dividend or distribution, the date of payment thereof, the record date
as of which shareholders entitled to payment shall be determined, the amount
payable per Share of such Series to the shareholders of record as of that
date and the total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out
of the moneys held for the account of each Series the total amount payable to
the Dividend Agent and any sub-dividend agent or co-dividend agent of the
Company with respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Company shall sell any Shares, it shall deliver to
the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name
of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the
money held for the account of such Series, all original issue or other taxes
required to be paid by the Company in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Company desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian
a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth
the Series and number of Shares received by the Transfer Agent for redemption
and that such Shares are in good form for redemption, the Custodian shall
make payment to the
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<PAGE> 27
Transfer Agent out of the moneys held in the separate account in the name
of the Series the total amount specified in the Certificate issued pursuant
to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of
any Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Company, the
Custodian, unless otherwise instructed by a Certificate, shall, upon receipt
of an advice from the Company or its agent setting forth that the redemption
is in good form for redemption in accordance with the check redemption
procedure, honor the check presented as part of such check redemption
privilege out of the moneys held in the separate account of the Series of the
Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient
to pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate or Oral Instructions,
or which results in an overdraft in the separate account of such Series for
some other reason, or if the Company is for any other reason indebted to the
Custodian with respect to a Series, including any indebtedness to The Bank of
New York under the Company's Cash Management and Related Services Agreement,
(except a borrowing for investment or for temporary or emergency purposes
using Securities as collateral pursuant to a separate agreement and subject
to the provisions of paragraph 2 of this Article), such overdraft or
indebtedness shall be deemed to be a loan made by the Custodian to the
Company for such Series payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day year for the actual
number of days involved) equal to 1/2% over Custodian's prime commercial
lending rate in effect from time to time, such rate to be adjusted on the
effective date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum. In addition, the Company hereby agrees
that the Custodian shall have a continuing lien and security interest in and
to any property specifically allocated to such Series at any time held by it
for the benefit of such Series or in which the Company may have an interest
which is then in the Custodian's possession or control or in possession or
control of any third party acting in the Custodian's behalf. The Company
authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the Custodian's books.
In addition, the Company hereby covenants that on each Business Day on which
either it
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<PAGE> 28
intends to enter a Reverse Repurchase Agreement and/or otherwise
borrow from a third party, or which next succeeds a Business Day on which at
the close of business the Company had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York City time,
advise the Custodian, in writing, of each such borrowing, shall specify the
Series to which the same relates, and shall not incur any indebtedness not so
specified other than from the Custodian.
2. The Company will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Custodian hereunder as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such bank will loan
to the Company against delivery of a stated amount of collateral. The Company
shall promptly deliver to the Custodian a Certificate specifying with respect
to each such borrowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrowing, which may be
set forth by incorporating by reference an attached promissory note, duly
endorsed by the Company, or other loan agreement, (d) the time and date, if
known, on which the loan is to be entered into, (e) the date on which the
loan becomes due and payable, (f) the total amount payable to the Company on
the borrowing date, (g) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular Securities, and
(h) a statement specifying whether such loan is for investment purposes or
for temporary or emergency purposes and that such loan is in conformance with
the Investment Company Act of 1940 and the Company's prospectus. The
Custodian shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in
the Certificate. The Custodian may, at the option of the lending bank, keep
such collateral in its possession, but such collateral shall be subject to
all rights therein given the lending bank by virtue of any promissory note or
loan agreement. The Custodian shall deliver such Securities as additional
collateral as may be specified in a Certificate to collateralize further any
transaction described in this paragraph. The Company shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Company fails to
specify in a Certificate the Series, the name of the issuer, the title and
number of shares or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, the Custodian shall not be under
any obligation to deliver any Securities.
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<PAGE> 29
ARTICLE XV.
TERMINAL LINK
1. At no time and under no circumstances shall the Company be
obligated to have or utilize the Terminal Link, and the provisions of this
Article shall apply if, but only if, the Company in its sole and absolute
discretion elects to utilize the Terminal Link to transmit Certificates to
the Custodian.
2. The Terminal Link shall be utilized by the Company only for the
purpose of the Company providing Certificates to the Custodian with respect
to transactions involving Securities or for the transfer of money to be
applied to the payment of dividends, distributions or redemptions of Company
Shares, and shall be utilized by the Custodian only for the purpose of
providing notices to the Company. Such use shall commence only after the
Company shall have delivered to the Custodian a Certificate substantially in
the form of Exhibit D and shall have established access codes. Each use of
the Terminal Link by the Company shall constitute a representation and
warranty that the Terminal Link is being used only for the purposes permitted
hereby, that at least two Officers have each utilized an access code, that
such safekeeping procedures have been established by the Company, and that
such use does not contravene the Investment Company Act of 1940, as amended,
or the rules or regulations thereunder.
3. The Company shall obtain and maintain at its own cost and expense
all equipment and services, including, but not limited to communications
services, necessary for it to utilize the Terminal Link, and the Custodian
shall not be responsible for the reliability or availability of any such
equipment or services.
4. The Company acknowledges that any data bases made available as
part of, or through the Terminal Link and any proprietary data, software,
processes, information and documentation (other than any such which are or
become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Company shall, and shall cause
others to which it discloses the Information, to keep the Information
confidential by using the same care and discretion it uses with respect to
its own confidential property and trade secrets, and shall neither make nor
permit any disclosure without the express prior written consent of the
Custodian.
5. Upon termination of this Agreement for any reason, the Company
shall return to the Custodian any and all copies of the Information which are
in the Company's possession or under its control, or which the Company
distributed to third parties. The provisions of this Article shall not affect
the copyright status of any of the Information which may be copyrighted and
shall apply to all Information whether or not copyrighted.
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<PAGE> 30
6. The Custodian reserves the right to modify the Terminal Link from
time to time without notice to the Company except that the Custodian shall
give the Company notice not less than 75 days in advance of any modification
which would materially adversely affect the Company's operation, and the
Company agrees that the Company shall not modify or attempt to modify the
Terminal Link without the Custodian's prior written consent. The Company
acknowledges that any software or procedures provided the Company as part of
the Terminal Link are the property of the Custodian and, accordingly, the
Company agrees that any modifications to the Terminal Link, whether by the
Company, or by the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it
utilizes or the Company utilizes in connection with the Terminal Link makes
any warranties or representations, express or implied, in fact or in law,
including but not limited to warranties of merchantability and fitness for a
particular purpose.
8. The Company will cause its Officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the Custodian to act in accordance
with and rely on Certificates received by it through the Terminal Link. The
Company acknowledges that it is its responsibility to assure that only its
Officers use the Terminal Link on its behalf, and that a Custodian shall not
be responsible nor liable for use of the Terminal Link on the Company's
behalf by persons other than such persons or Officers, or by only a single
Officer, nor for any alteration, omission, or failure to promptly forward.
9(a). Except as otherwise specifically provided in Section 9(b) of this
Article, the Custodian shall have no liability for any losses, damages,
injuries, claims, costs or expenses arising out of or in connection with any
failure, malfunction or other problem relating to the Terminal Link except
for money damages suffered as the direct result of the negligence of the
Custodian in an amount not exceeding for any incident $25,000 provided,
however, that the Custodian shall have no liability under this Section 9 if
the Company fails to comply with the provisions of Section 11.
9(b). The Custodian's liability for its negligence in executing or
failing to execute a transfer of funds in accordance with a Certificate
received through Terminal Link shall arise only if such Certificate shall
have been duly acknowledged by the Custodian, and shall be contingent upon
the Company complying with the provisions of Section 12 of this Article, and
shall be limited to (i) restoration of the principal amount mistransferred,
if and to the extent that the Custodian would be required to make such
restoration under applicable law, and (ii) the lesser of (A) a Fund's actual
pecuniary loss incurred by
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<PAGE> 31
reason of its loss of use of the mistransferred funds or the funds which
were not transferred, as the case may be, or (B) compensation for the loss
of the use of the mistransferred funds or the funds which were not
transferred, as the case may be, at a rate per annum equal to the average
federal funds rate as computed from the Federal Reserve Bank of New York's
daily determination of the effective rate for federal funds, for
the period during which a Company has lost use of such funds. In no event
shall the Custodian have any liability for failing to execute in accordance
with a Certificate a transfer of funds where the Certificate is received by
the Custodian through Terminal Link other than through the applicable
transfer module for the particular instructions contained in such
Certificate.
10. Without limiting the generality of the foregoing, in no event
shall the Custodian or any manufacturer or supplier of its computer
equipment, software or services relating to the Terminal Link be responsible
for any special, indirect, incidental or consequential damages which the
Company may incur or experience by reason of its use of the Terminal Link
even if the Custodian or any manufacturer or supplier has been advised of the
possibility of such damages, nor with respect to the use of the Terminal Link
shall the Custodian or any such manufacturer or supplier be liable for acts
of God, or with respect to the following to the extent beyond such person's
reasonable control: machine or computer breakdown or malfunction,
interruption or malfunction of communication facilities, labor difficulties
or any other similar or dissimilar cause.
11. The Company shall notify the Custodian of any errors, omissions
or interruptions in, or delay or unavailability of, the Terminal Link as
promptly as practicable, and in any event within 24 hours after the earliest
of (i) discovery thereof, (ii) the Business Day on which discovery should
have occurred through the exercise of reasonable care and (iii) in the case
of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Company
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Terminal Link.
12. The Custodian shall verify to the Company, by use of the Terminal
Link, receipt of each Certificate the Custodian receives through the Terminal
Link, and in the absence of such verification the Custodian shall not be
liable for any failure to act in accordance with such Certificate and the
Company may not claim that such Certificate was received by the Custodian.
Such verification, which may occur after the Custodian has acted upon such
Certificate, shall be accomplished on the same day on which such Certificate
is received.
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ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Foreign Securities (as such term is defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as
amended) and other assets, the foreign banking institutions and foreign
securities depositories and clearing agencies designated on Schedule I hereto
("Foreign Sub-Custodians") to carry out their respective responsibilities in
accordance with the terms of the sub-custodian agreement between each such
Foreign Sub-Custodian and the Custodian, copies of which have been previously
delivered to the Company and receipt of which is hereby acknowledged (each
such agreement, a "Foreign Sub-Custodian Agreement"). The Custodian shall be
liable for the acts and omissions of each Foreign Sub-Custodian constituting
negligence or willful misconduct in the conduct of its responsibilities under
the terms of the Foreign Sub-Custodian Agreement. Upon receipt of a
Certificate, together with a certified resolution substantially in the form
attached as Exhibit E of the Company's Board of Directors, the Company may
designate any additional foreign sub-custodian with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as its
sub-custodian and any such additional foreign sub-custodian shall be deemed
added to Schedule I. Upon receipt of a Certificate from the Company, the
Custodian shall cease the employment of any one or more Foreign Sub-Custodians
for maintaining custody of the Company's assets and such Foreign Sub-Custodian
shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in
the form previously delivered to the Company and will not be amended in a way
that materially adversely affects the Company without the Company's prior
written consent.
3. The Custodian shall identify on its books as belonging to each
Series of the Company the Foreign Securities of such Series held by each
Foreign Sub-Custodian. At the election of the Company, it shall be
entitled to be subrogated to the rights of the Custodian with respect to any
claims by the Company or any Series against a Foreign Sub-Custodian as a
consequence of any loss, damage, cost, expense, liability or claim sustained
or incurred by the Company or any Series if and to the extent that the
Company or such Series has not been made whole for any such loss, damage,
cost, expense, liability or claim.
4. Upon request of the Company, the Custodian will, consistent with
the terms of the applicable Foreign Sub-Custodian Agreement, use reasonable
efforts to arrange for the independent accountants of the Company to be
afforded access to
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<PAGE> 33
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Company.
5. The Custodian will supply to the Company from time to time, as
mutually agreed upon, statements in respect of the securities and other
assets of each Series held by Foreign Sub-Custodians, including but not
limited to, an identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or notifications of any
transfers of Foreign Securities to or from each custodial account maintained
by a Foreign Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Company, as mutually
agreed upon, information concerning the Foreign Sub-Custodians employed by
the Custodian. Such information shall be similar in kind and scope to that
furnished to the Company in connection with the Company's initial approval of
such Foreign Sub-Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength, general
reputation and standing in the countries in which they are located and their
ability to provide the custodial services required, and (ii) whether the
Foreign Sub-Custodians would provide a level of safeguards for safekeeping
and custody of securities not materially different from those prevailing in
the United States. The Custodian shall monitor the general operating
performance of each Foreign Sub-Custodian, and at least annually obtain and
review the annual financial report published by such Foreign Sub-Custodian to
determine that it meets the financial criteria of an "Eligible Foreign
Custodian" under Rule 17f-5(c) (2) (i) or (ii). The Custodian will promptly
inform the Company in the event that the Custodian learns that a Foreign
Sub-Custodian no longer satisfies the financial criteria of an "Eligible
Foreign Custodian" under such Rule. The Custodian agrees that it will use
reasonable care in monitoring compliance by each Foreign Sub-Custodian
Agreement with the terms of the relevant Foreign Sub-Custodian Agreement and
that if it learns of any breach of such Foreign Sub-Custodian agreement
believed by the Custodian to have a material adverse effect on the Company or
any Series it will promptly notify the Company of such breach. The Custodian
also agrees to use reasonable and diligent efforts to enforce its rights
under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Company all notices,
reports or other written information received pertaining to the Company's
Foreign Securities, including without limitation, notices of corporate
action, proxies and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series
and delivery of securities maintained
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<PAGE> 34
for the account of such Series may be effected in accordance with the
customary or established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to
the purchaser thereof or to a dealer therefor (or agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment
for such securities from such purchaser or dealer.
ARTICLE XVII.
CONCERNING THE CUSTODIAN AND ITS RESPONSIBILITES
1. Except as hereinafter provided, or as provided in Article XVI
neither the Custodian nor its nomiee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful
misconduct. In no event shall the Custodian be liable to the Company or any
third party for special, indirect or consequential damages or lost profits or
loss of business, arising under or in connection with this Agreement, even if
previously informed or the possibility of such damages and regardless of the
form of action. The Custodian may, with respect to questions of law arising
hereunder or under any Margin Account Agreement, apply for and obtain the
advice and opinion of counsel to the Company, at the expense of the Company,
or of its own counsel, at its own expense, and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Company for any
loss or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or
written by or for the Company, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by the
Company;
(d) The legality of any borrowing by the Company using Securities as
collateral;
- 33 -
<PAGE> 35
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or
held by it at any time as a result of such loan of portfolio Securities of
the Company is adequate collateral for the Company against any loss it might
sustain as a result of such loan. The Custodian specifically, but not by way
of limitation, shall not be under any duty or obligation periodically to
check or notify the Company that the amount of such cash collateral held by
it for the Company is sufficient collateral for the Company, but such duty or
obligation shall be the sole responsibility of the Company. In addition, the
Custodian shall be under no duty or obligation to see that any broker, dealer
or financial institution to which portfolio Securities of the Company are
lent pursuant to Article XIV of this Agreement makes payment to it of any
dividends or interest which are payable to or for the account of the Company
during the period of such loan or at the termination of such loan, provided,
however, that the Custodian shall promptly notify the Company in the event
that such dividends or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Company. In addition, the
Custodian shall be under no duty or obligation to see that any broker,
dealer, futures commission merchant or Clearing Member makes payment to the
Company of any variation margin payment or similar payment which the
Company may be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment to the
Company of any variation margin payment or similar payment received by
the Custodian from any broker, dealer, futures commission merchant or
Clearing Member is the amount the Company is entitled to receive, or to
notify the Company of the Custodian's receipt or non-receipt of any such
payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the
Company until the Custodian actually receives and collects such money
directly or by the final crediting of the account representing the Company's
interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters relating to
Securities held in the Depository, unless the Custodian shall have actually
received timely notice from the Depository. In no event shall the Custodian
have any responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the Depository of
any amount payable upon Securities deposited in the Depository which may
mature or be redeemed, retired, called
- 34 -
<PAGE> 36
or otherwise become payable. However, upon receipt of a Certificate from the
Company of an overdue amount on Securities held in the Depository the
Custodian shall make a claim against the Depository on behalf of the Company,
except that the Custodian shall not be under any obligation to appear in,
prosecute or defend any action suit or proceeding in respect to any
Securities held by the Depository which in its opinion may involve it in
expense or liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Company from the
Transfer Agent of the Company nor to take any action to effect payment or
distribution by the Transfer Agent of the Company of any amount paid by the
Custodian to the Transfer Agent of the Company in accordance with this
Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand
or presentation, unless and until (i) it shall be directed to take such
action by a Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such action,
provided, however, that the Custodian shall promptly notify the Company of
any such default or refusal.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any
time owned by the Company, upon such terms and conditions as may be approved
in a Certificate or contained in an agreement executed by the Custodian, the
Company and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or
by any Foreign Sub-Custodian, for the account of the Company and specifically
allocated to a Series are such as properly may be held by the Company or such
Series under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Company, whether or not involving
the Custodian, are such transactions as may properly be engaged in by the
Company.
9. The Custodian shall be entitled to receive and the Company agrees
to pay the Custodian all out-of-pocket expenses and such compensation as may
be agreed upon from time to time between the Custodian and the Company. The
Custodian may charge such compensation and any expenses with respect to a
Series incurred by the Custodian in the performance of its duties
- 35 -
<PAGE> 37
pursuant to such agreement against any money specifically allocated to such
Series. Unless and until the Company instructs the Custodian by a Certificate
to apportion any loss, damage, liability or expense among the Series in a
specified manner, the Custodian shall also be entitled to charge against any
money held by it for the account of a Series such Series' pro rata share
(based on such Series net asset value at the time of the charge to the
aggregate net asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees, for which it
shall be entitled to reimbursement under the provisions of this Agreement.
The expenses for which the Custodian shall be entitled to reimbursement
hereunder shall include, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling outside of New York
City transactions involving the purchase and sale of securities of the Company.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and
reasonably believed by the Custodian to be a Certificate. The Custodian shall
be entitled to rely upon any Oral Instructions actually received by the
Custodian hereinabove provided for. The Company agrees to forward to the
Custodian a Certificate confirming such Oral Instructions in such manner so
that such Certificate is received by the Custodian, whether by hand delivery,
telecopier or other similar device, or otherwise, by the close of business of
the same day that such Oral Instructions are given to the Custodian. The
Comapny agrees that the fact that such confirming instructions are not
received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized by the
Company. The Company agrees that the Custodian shall incur no liability to
the Company in acting upon Oral Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by
the Custodian to be given in accordance with the terms and conditions of any
Margin Account Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification
of any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Company which are in the
possession of the Custodian shall be the property of the Company. Such books
and records shall be prepared and maintained as required by the Investment
Company Act of 1940, as amended, and other applicable securities laws and
rules and regulations. The Company, or the Company's authorized
representatives, shall have access to such books and records during
- 36 -
<PAGE> 38
the Custodian's normal business hours. Upon the reasonable request of the
Company, copies of any such books and records shall be provided by the
Custodian to the Company or the Company's authorized representative, and the
Company shall reimburse the Custodian its expenses of providing such copies.
Upon reasonable request of the Company, the Custodian shall provide in hard
copy or on micro-film, whichever the Custodian elects, any records included
in any such delivery which are maintained by the Custodian on a computer disc,
or are similarly maintained, and the Company shall reimburse the Custodian for
its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Company with any report obtained
by the Custodian on the system of internal accounting control of the
Book-Entry System, the Depository or O.C.C., and with such reports on its own
systems of internal accounting control as the Company may reasonably request
from time to time.
14. The Company agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred because
of or in connection with this Agreement, including the Custodian's payment or
nonpayment of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Company, except for any such
liability, claim, loss and demand arising out of the Custodian's own
negligence, bad faith or willful misconduct. Whenever any claim arises for
indemnification under this Agreement, Custodian shall give prompt notice of
the claim (the "Notice of Claim") to the Company, and, when known, the facts
forming the basis for such claim. If the facts giving rise to a claim for
indemnification shall involve any claim or demand by any third party against
Custodian, the Company shall be entitled (without prejudice to the right of
Custodian to participate at its expense through counsel of its own choosing)
to defend or prosecute such claim at its expense and through counsel of its
own choosing. The Custodian shall cooperate in the defense of the claim, and
Custodian shall not settle or compromise any claim without the prior written
consent of the Company, which consent shall not be unreasonably withheld,
unless suit shall have been instituted against Custodian and the Company has
not, within twenty (20) days after having been given Notice of Claim, assumed
control of such suit as provided in this Section 14.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI the Custodian may deliver
and receive Securities, and receipts with respect to such Securities, and
arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in
such Securities. When the Custodian is instucted to deliver Securities
against payment, delivery of such Securities and receipt of payment therefor
may not be completed simultaneously.
- 37 -
<PAGE> 39
The Company assumes all responsibility and liability for all credit risks
involved in connection with the Custodian's delivery of Securities pursuant
to instructions of the Company, which responsibility and liability shall
continue until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in
this Agreement or incidental to such duties and responsibilities, and no
covenant or obligation shall be implied in this Agreement against the
Custodian.
ARTICLE XVIII.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date
of giving of such notice. In the event such notice is given by the
Company, it shall be accompanied by a copy of a resolution of the Board
of Directors of the Company, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and undivided
profits. In the event such notice is given by the Custodian, the Company
shall, on or before the termination date, deliver to the Custodian a
copy of a resolution of the Board of Directors of the Company, certified
by the Secretary or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such designation by the Company,
the Custodian may designate a successor custodian which shall be a bank or
trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian shall upon receipt of a
notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and moneys then owned by
the Company and held by it as Custodian, after deducting all fees, expenses
and other amounts for the payment or reimbursement of which it shall then
be entitled.
2. If a successor custodian is not designated by the Company or
the Custodian in accordance with the preceding paragraph, the Company
shall upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all Securities (other
than Securities held in the Book-Entry System which cannot be delivered to
the Company) and moneys then owned by the Company be deemed to be its own
custodian and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty with
respect to Securities held in the Book Entry System
- 38 -
<PAGE> 40
which cannot be delivered to the Company to hold such Securities hereunder
in accordance with this Agreement.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of
the present Officers of the Company under its corporate seal, setting forth
the names and the signatures of the present Officers of the Company. The
Company agrees to furnish to the Custodian a new Certificate in similar form
in the event any such present Officer ceases to be an Officer of the Company,
or in the event that other or additional Officers are elected or appointed.
Until such new Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon the signatures
of the Officers as set forth in the last delivered Certificate.
2. The Company shall have no duties or responsibilities to the
Custodian except such duties or responsibilities as are specifically set
forth in this Agreement or incidental to such duties and responsibilities,
and no covenant or obligation of the Company to the Custodian shall be
implied in this Agreement.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at
90 Washington Street, New York, New York 10286, or at such other place as
the Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Company shall be sufficiently given
if addressed to the Company and mailed or delivered to it at its office at
the address for the Company first above written, or at such other place as the
Company may from time to time designate in writing.
5. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the
Company.
6. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Company without
the written consent of the Custodian, or by the Custodian without the
written consent of the Company, authorized or approved by a resolution of
the Company's Board of Directors.
- 39 -
<PAGE> 41
7. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the jurisdiction of
a state or federal court situated in New York City, New York in connection
with any dispute arising hereunder and hereby waives its right to trial by
jury.
8. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate Officers, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and
year first above written.
THE WALNUT STREET FUNDS, INC.
[SEAL] By: /s/ Timothy C. Nicholson
------------------------------
Attest:
- -----------------------------------
THE BANK OF NEW YORK
[SEAL] By:
------------------------------
Attest:
/s/ Marjorie A. McLaughlin
- -----------------------------------
- 40 -
<PAGE> 42
APPENDIX A
I, , and I, , of
The Walnut Street Funds, Inc., a Maryland corporation (the "Fund"), do
hereby certify that:
The following individuals serve in the following positions with the
Company and each has been duly elected or appointed by the Board of Directors
of the Company to each such position and qualified therefor in conformity with
the Company's Articles of Incorporation and By-Laws, and the signatures set
forth opposite their respective names are their true and correct signatures:
Name Position Signature
- --------------------- -------------------- ---------------------
<PAGE> 43
APPENDIX B
I, Marjorie McLaughlin, an Assistant Vice President, with THE BANK
OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE> 44
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that
he is the duly elected and acting of The Walnut Street Funds,
Inc., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Company at a
meeting duly held on , 1993, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Company dated as of ,
1993, (the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis to deposit in the Book-Entry System, as defined in the
Custody Agreement, all securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated, and to utilize the
Book-Entry System to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and deliveries and
returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Walnut Street Funds, Inc. as of the day of , 1993.
-----------------------------
[SEAL]
<PAGE> 45
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he
is the duly elected and acting of The Walnut Street Funds, Inc.,
a Maryland corporation (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Directors of the Company at a meeting
duly held on , 1993, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Company dated as of ,
1993, (the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis until such time as it receives a Certificate, as defined in
the Custody Agreement, to the contrary to deposit in the Depository, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Depository to the extent possible in connection
with its performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Walnut Street Funds, Inc. as of the day of , 1993.
-----------------------------
[SEAL]
<PAGE> 46
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he
or she is the duly elected and acting of The Walnut Street Funds,
Inc., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Company at a
meeting duly held on , 1993, at which a quorum was at all
times present and that such resolution has not been modified or rescinded and
is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Company dated as of
, 1993, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as Depository, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the extent
possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Walnut Street Funds, Inc. as of the day of , 1993.
-----------------------------
[SEAL]
<PAGE> 47
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he
is the duly elected and acting of The Walnut Street Funds, Inc.,
a Maryland corporation (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Directors of the Company at a meeting
duly held on , 1993, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Company dated as of ,
1993, (the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis until such time as it receives a Certificate, as defined in
the Custody Agreement, to the contrary, to accept, utilize and act with respect
to Clearing Member confirmations for Options and transaction in Options,
regardless of the Series to which the same are specifically allocated, as such
terms are defined in the Custody Agreement, as provided in the Custody
Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Walnut Street Funds, Inc. as of the day of , 1993.
-----------------------------
[SEAL]
<PAGE> 48
EXHIBIT D
The undersigned, , hereby certifies that he
or she is the duly elected and acting of The Walnut Street Funds,
Inc., a Maryland corporation (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Directors of the Company at
a meeting duly held on , 1993, at which a quorum was at all
times present and that such resolutions have not been modified or rescinded
and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Company dated as of ,
1993, (the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis to act in accordance with, and to rely on Certificates (as
defined in the Custody Agreement) given by the Company to the Custodian by a
Terminal Link (as defined in the Custody Agreement).
RESOLVED, that the Company shall establish access codes and grant use
of such access codes only to Officers of the Company as defined in the
Custody Agreement, shall establish internal safekeeping procedures to
safeguard and protect the confidentiality and availability of such access
codes, shall limit its use of the Terminal Link to those purposes permitted
by the Custody Agreement, shall require at least two such Officers to utilize
their respective access codes in connection with each such Certificate, and
shall use the Terminal Link only in a manner that does not contravene the
Investment Company Act of 1940, as amended, or the rules and regulations
thereunder.
RESOLVED, that Officers of the Company shall, following the establishment
of such access codes and such internal safekeeping procedures, advise the
Custodian that the same have been established by delivering a Certificate,
as defined in the Custody Agreement, and the Custodian shall be entitled to
rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of The
Walnut Street Funds, Inc. as of the day of , 1993.
-----------------------------
[SEAL]
<PAGE> 49
EXHIBIT E
The undersigned, , hereby certifies that he
or she is the duly elected and acting of The Walnut Street Funds,
Inc., a Maryland corporation (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Directors of the Fund at
a meeting duly held on , 1993, at which a quorum was at all
times present and that such resolutions have not been modified or rescinded
and are in full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country
listed in Schedule I hereto be, and hereby is, approved by the Board of
Directors as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located
in the countries specified therein, and with the foreign subcustodians and
despositories listed in Schedule I located in the countries specified therein
be, and hereby is, approved by the Board of Directors as consistent with the
best interests of the Fund and its shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to this meeting
between the Bank and each of the foreign subcustodians and depositories listed
in Schedule I providing for the maintenance of the Fund's assets with the
applicable entity, be and hereby are, approved by the Board of Directors as
consistent with the best interests of the Fund and its shareholders;
and further
RESOLVED, that the appropriate officers of the Fund are hereby
authorized to place assets of the Fund with the aforementioned foreign
branches and foreign subcustodians and depositories as hereinabove
provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them,
are authorized to do any and all other acts, in the name of the Fund and on
its behalf, as they, or any of them, may determine to be necessary or
desirable and proper in connection with or in furtherance of the foregoing
resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of The
Walnut Street Funds, Inc., as of the day of , 1993.
-----------------------------
[SEAL]
<PAGE> 50
<TABLE>
SCHEDULE I
Bank of New York Branches
and
Eligible Foreign Custodians
<CAPTION>
Country Bank Name and Address Status
- ------- --------------------- -------------
<C> <S> <C>
Argentina The First National Bank of Boston Correspondent
Florida 99, 1005 Buenos Aires,
Argentina
Australia Australia and New Zealand Banking Correspondent
Group, Limited
55 Colins Street,
Melbourne, Australia
Austria GiroCredit Bank Aktiengesellschaft Correspondent
der Sparkassen
A-1010 Wien, Schubertring 5,
Vienna, Austria
Belgium Banque Bruxelles Lambert, S.A. Correspondent
24 Avenue Marnix,
Brussels 1050
Belgium
Brazil The First National Bank of Boston Correspondent
Rua Libero Badaro, 487,
01009 - Sao - SP (Alt 226)
Brazil
Canada Royal Trust Corporation of Canada Correspondent
55 King Street West
Royal Trust Tower, Toronto,
Ontario M5H 1P9, Canada
Denmark Den Danske Bank Correspondent
2-12 Holmens Kanal
DK - 1092 Copenhagen K.
Denmark
Finland Union Bank of Finland Ltd. Correspondent
Aleksanterinkatu 30,
Helsinki, Finland
France Banque Paribas Correspondent
3 Rue D'Antin
75002 Paris, France
Germany Dresdner Bank A.G. Correspondent
<PAGE> 51
Jurgen-Ponto-Platz 1 (Alt 207)
6000 Frankfurt 11,
Federal Republic of Germany
Hong Kong The Hongkong & Shanghai Banking Correspondent
Corporation
1 Queen's Road Central,
Hong Kong
Indonesia The Hongkong & Shanghai Banking Correspondent
Corporation
P.O. Box 2307, Jakarta 1001,
Indonesia
Ireland Allied Irish Bank Correspondent
Bankcentre, Ballsbridge,
Dublin 4, Ireland
Italy Citibank, N.A. Correspondent
Foro Buonaparte, 16
1-20121 Milano
Italy
Japan The Yasuda Trust & Banking Correspondent
Company, Limited
2-1 Yaesu, 1-chome
Chuo-ku, Tokyo 103,
Japan
Korea Bank of Seoul Correspondent
10-1, Namdaeman-Ro 2-Ka
Chung-ku, Seoul, 100-092,
Korea
Luxembourg Cedel, S.A. Depository
67 Boulevard Grande-Duchesse
Charlotte
L-1010, Luxembourg
Malaysia The Hongkong & Shanghai Banking Correspondent
Corporation Ltd.
Kuala Lumpur, Malaysia
Mexico Citibank, N.A. Correspondent
Pasee de la Reforma 390,
Mexico City, 06695
Mexico
Netherlands Amsterdam-Rotterdam Bank, N.V. Correspondent
Kemelstede 2, 4817 ST Breda
The Netherlands
<PAGE> 52
New Zealand Australia and New Zealand Banking Correspondent
Group Ltd.
215-229 Lambton Quay
P.O. Box 1492
Wellington, 1
New Zealand
Norway Den norske Bank AS Correspondent
Kirkengaten 21, 0153 Oslo 1,
Norway
Philippines The Hongkong and Shanghai Correspondent
Corporation Ltd.
Makti, Metro Manila,
Philippines
Portugal Banco Comercial Portugues (Alt 136) Correspondent
Rua Augusta, 41, 1100 Lison,
Portugal
Singapore United Overseas Bank Limited Correspondent
1 Bonham Street, #01-00,
Singapore
Spain Banco Bilbao Vizcaya, S.A. Correspondent
Plaza de San Nicholas 4,
Bilbao, Spain
Sweden Skandinaviska Enskilda Banken Correspondent
Kungstradgardsgatan 8, (Alt 132)
Stockholm, Sweden
Switzerland Union Bank of Switzerland Correspondent
45 Bahnhofstrasse,
Zurich, Switzerland
Thailand The Siam Commercial Bank, Ltd. Correspondent
1060 Phetchaburi Road,
Bangkok 10400, Thailand
United The Bank of New York Branch
Kingdom 46 Berkeley Street
London W1X 6AA, England
Venezuela Citibank, N.A. Correspondent
Carmelitas a Altagracia,
Edificio Citibank,
Caracas, 1010, Venezuela
</TABLE>
<PAGE> 53
[letterhead of The Bank of New York]
CUSTODIAN FEE
PER ACCOUNT
FOR
WALNUT STREET FUNDS, INC.
Domestic Custody Fees
- ---------------------
Safekeeping Fees/Income Collection/Capital Change/Reporting
- -----------------------------------------------------------
via LASER
- ---------
1 basis point per annum on the first $250 million of market value of
portfolio securities.
1/2 basis point per annum on the next $750 million.
1/4 basis point per annum on the excess over $1 billion.
The per annum holding fees are based on the daily net asset value of each
portfolio and will be billed monthly.
No minimum holding fee will apply for the Fund's first year of operation.
Earnings Credit on Balances/Interest Charge for Overdrafts
- ----------------------------------------------------------
We will pay compensation to the Fund on 85% of the daily available balance
in the domestic custodian account computed at 1/2% below the Federal Funds
rate on the day of the balance.
Overdrafts resulting from a management company error, not bank errors,
will cause a reduction of the earnings credit computed at 1% above the
Federal Funds rate on the day of the overdraft.
Credits and debits will be accumulated daily and the net applied against
the Custodian safekeeping fees. To the extent a net debit is accumulated the
Fund will be charged for the expense in addition to the safekeeping fees.
To the extent a net earnings credit is generated which exceeds the
safekeeping fees, such excess earnings credit can be carried forward to
the next succeeding month, however, no earnings credit will be carried
forward after the end of the calendar year.
Custodian Transaction Charges/Paydowns
- --------------------------------------
$12.00 -- Book-entry transactions - DTC/FRB/PTC
$25.00 -- Physical settlements
<PAGE> 54
[letterhead of The Bank of New York]
GLOBAL CUSTODY FEE SCHEDULE PER ACCOUNT FOR
WALNUT STREET FUNDS, INC.
TIER I MARKETS
--------------
Australia Mexico (Bonds)
Austria Netherlands
Belgium New Zealand
Canada Norway
France Spain
Germany Sweden
Ireland Switzerland
Japan United Kingdom
Safekeeping Charges
- -------------------
12 basis points per annum on the market value of portfolio securities
held in the above countries.
Transaction Charges
- -------------------
$60 for each transaction.
<TABLE>
TIER II MARKETS
<CAPTION>
Fees
----
Safekeeping Transactions
----------- ------------
<S> <C> <C>
Argentina 35 b.p. $125
Denmark 15 b.p. $100
Finland 15 b.p. $ 75
Hong Kong 15 b.p. $150
Indonesia 15 b.p. $150
Italy 18 b.p. $ 75
Malaysia 15 b.p. $100
Mexico (Equities) 25 b.p. $ 60
Portugal 25 b.p. $150
Singapore 15 b.p. $150
Thailand 15 b.p. $100
Venezuela 45 b.p. $ 75
</TABLE>
<PAGE> 55
[letterhead of The Bank of New York]
Miscellaneous Transaction Charges
- ---------------------------------
$8.50 Federal Reserve Wires in/out not related to securities transactions, and
official check requests.
Out-of-Pocket Expenses
- ----------------------
Out-of-Pocket expenses traditionally include, but are not limited to Federal
Reserve charges for security transactions, postage and insurance on physical
transfer items, etc. These expenses will be billed to the respective custody
account on a monthly basis.
Walnut Street Funds, Inc. The Bank of New York
Approved by /s/ Timothy C. Nicholson Submitted by /s/ Marjorie A. McLaughlin
------------------------ --------------------------
Marjorie A. McLaughlin
Assistant Vice President
Date 5/14/93 Date April 29, 1993
-------------------------------- -----------------------------------
<PAGE> 56
[letterhead of The Bank of New York]
<TABLE>
TIER III MARKETS
----------------
<S> <C> <C>
Cedel/Euroclear 6 b.p. $ 30
</TABLE>
Out-of-Pocket Charges
- ---------------------
Charges incurred by The Bank of New York for local taxes, stamp duties or other
local duties and assessments, stock exchange fees, postage and insurance for
shipping, extraordinary telecommunications fees or other unusual expenses
which are unique to a country in which our client is investing (such as
exceptional transactions costs in Thailand or safekeeping charges on Spanish
utility stocks) will be passed along at cost.
Walnut Street Funds, Inc. The Bank of New York
Approved by /s/ Timothy C. Nicholson Submitted by /s/ Marjorie A. McLaughlin
------------------------ --------------------------
Marjorie A. McLaughlin
Assistant Vice President
Date 5/14/93 Date April 29, 1993
-------------------------------- -----------------------------------
<PAGE> 57
[letterhead of The Bank of New York]
PORTFOLIO PRICING, FUND ACCOUNTING,
FUND ADMINISTRATION AND BLUE SKY SERVICES FEE SCHEDULE
PER PORTFOLIO
FOR
WALNUT STREET FUNDS, INC.
10 basis points per annum on the first $100mm of each portfolio's daily
net assets
7 basis points on the next $400mm
3 basis points on the excess over $500mm
Minimum per month is $6,000 for one portfolio and $4,000 for each
additional domestic portfolio and $7,000 for each additional international
portfolio. All Fees will be billed monthly.
Out-of-Pocket Expenses
- ----------------------
These expenses are billed as they are incurred with no mark-up. Expenses
traditionally include, but are not limited to, the costs of obtaining prices
for security valuations and mark to market, costs associated with
attendance at Board presentations, postage, express mail charges, printing
of shareholder reports, etc.
Blue Sky
- --------
$10,000.00 -- per annum per fund.
$150.00 -- for the initial filing in each state or jurisdiction.
$100.00 -- for each subsequent renewal, or report filing in any state or
jurisdiction.
Out-of-Pocket Expenses
- ----------------------
Blue Sky expenses include, but are not limited to, the costs of reproducing
fund and filing documents, postage, express mail charges, Commscan Inc.
directed or collect charges, etc.
Walnut Street Funds, Inc. The Bank of New York
Approved by /s/ Timothy C. Nicholson Submitted by /s/ Marjorie A. McLaughlin
------------------------ --------------------------
Marjorie A. McLaughlin
Assistant Vice President
Date 5/14/93 Date April 29, 1993
-------------------------------- -----------------------------------
<PAGE> 1
Exhibit 9
---------
Transfer Agency Agreement with
BISYS Fund Services, Inc.
Incorporated by reference to Amendments 6 and 4 to the registrant's
Registration Statement on Form N-1A as electronically filed on April 24,
1996, registration Nos. 33-59044 and 811-7552, respectively.
<PAGE> 1
Exhibit 10
----------
Opinion of Counsel
May 18, 1993
Mr. Timothy C. Nicholson, President
The Walnut Street Funds, Inc.
1801 Park 270 Drive
Suite 220
St. Louis, Missouri 63146
Re: The Walnut Street Funds, Inc. (the "Fund") - The Walnut
Street Prime Reserve Fund (the "Series"); Registration
Statement on Form N-1A Registering an Indefinite Number
of Shares
Dear Mr. Nicholson:
The Fund is registering on behalf of the Series an indefinite number of
shares of the Fund's common stock, par value $.001 per share (the "Shares"),
pursuant to Sec. 8 and Rule 24f-2 of the Investment Company Act of 1940 (the
"1940 Act"). On or about March 3, 1993, the Fund filed its Registration
Statement on Form N-1A (File Nos. 33-59044 and 811-7552) with the Securities
and Exchange Commission (the "Commission"), and on or about the date of this
letter the Fund will file Pre-Effective Amendment No.1 to such registration
statement with the Commission. (Such registration statement and pre-effective
amendment and all other pre-effective amendments subsequently filed by the
Fund with the Commission to obtain the effectiveness of such registration
statement shall be collectively referred to herein as the "Registration
Statement.")
In connection with the preparation and filing of the Registration
Statement and pursuant to Item 24(b)(10) of Form N-1A, you have requested our
opinion about the legality of the Shares to be registered and sold by the
Fund.
In preparing our opinion, we have reviewed the following: certified
copies of the Fund's Articles of Incorporation; a certificate issued by the
Secretary of State of Maryland confirming that the Fund is in good standing
in the State of Maryland; copies of the Fund's Bylaws, as adopted January 27,
1993; minutes of certain meetings or actions of the Fund's board of directors
on January 27, 1993, and May 5, 1993; the audited statement of assets and
liabilities of the Fund as of March 29, 1993; the Maryland General
Corporation Law; and such other documents and materials as we have deemed
necessary for purposes of this opinion.
In rendering the opinion set forth below, we have assumed, with your
permission, that each purchaser of Shares will pay in cash at the time of
purchase the amount of consideration for the Shares established by the Fund's
board of directors and that in no event will the amount paid for any Shares
be less than the par value thereof. We have further assumed that at all
times the Fund's Articles of Incorporation authorize the issuance of at least
as many Shares as are actually issued.
<PAGE> 2
Based upon the foregoing and subject to the qualifications contained
herein, it is our opinion that under the Maryland General Corporation Law,
the indefinite number of Shares to be registered will, when sold, be legally
issued, fully paid, and non-assessable.
The foregoing opinion is subject to the qualification that it is based
solely upon laws, facts and circumstances existing as of the date hereof;
accordingly, we have assumed for purposes of our opinion that no change in
any of such laws (or the interpretation thereof), facts or circumstances will
have occurred at the time of any issuance of the Shares.
We consent to the filing of this opinion as an exhibit to the
Registration Statement filed with the Securities and Exchange Commission and
to the use of this opinion in connection with any filing with any state
securities agency or commission in any state in which shares are to be
offered.
Very truly yours,
/S/ HUSCH & EPPENBERGER
HUSCH & EPPENBERGER
- 2 -
<PAGE> 3
February 24, 1997
The Walnut Street Funds, Inc.
670 Mason Ridge Center Drive
Suite 300
St. Louis, Missouri 63141
Re: The Walnut Street Fund, Inc. (the "Fund")
-----------------------------------------
Gentlemen:
In connection with the preparation of the Fund's 24f-2 Notice for the
Fund's fiscal year ended December 31, 1996, which will be filed with the
Securities and Exchange Commission, you have asked that we provide you with
certain legal opinions. To give these opinions, we have examined such
documents and records of the Fund and made such inquiries of officers and
managers of the Fund as we have deemed necessary.
Based upon the foregoing and in reliance upon factual information that
we have received from the Fund's officers and managers, which information
we have not independently verified, it is our opinion that the 182,066,377
shares of the Fund's common stock, par value $1.00 per share, issued between
January 1, 1996, and December 31, 1996, were legally issued, fully paid,
and non-assessable.
Very truly yours,
/s/ Husch & Eppenberger
Husch & Eppenberger
- 3 -
<PAGE> 1
Exhibit 11
----------
Consent of Independent Certified Public Accountants
To The Shareholders and Board of Directors of
The Walnut Street Funds, Inc.:
We consent to the use of our report, dated February 7, 1997 with respect to
the Walnut Street Prime Reserve Fund, included herein in the Post Effective
Amendment No. 5 to this Registration Statement on Form N-1A of The Walnut
Street Funds, Inc. and to the reference to our firm under the heading
"Counsel and Independent Auditors" in the Prospectus and under the heading
"Auditor" in the Statement of Additional Information.
KPMG Peat Marwick LLP
New York, New York
February 21, 1997
<PAGE> 1
Exhibit 13
----------
Purchase Agreement with
General American Life Insurance Company
PURCHASE AGREEMENT
This PURCHASE AGREEMENT is made and entered into this 16th day of
February, 1993, by and between The Walnut Street Funds, Inc., a Maryland
corporation (the "Seller") and General American Life Insurance Company, a
Missouri mutual company ("Purchaser").
WITNESSETH THAT:
WHEREAS, the Seller is organized as an open end diversified management
investment company authorized to issue shares in series; and
WHEREAS, the Seller's initial series of shares is The Walnut Street
Prime Reserve Fund, par value $.001 per share (the "Shares"); and
WHEREAS, the Purchaser has previously purchased 1000 Shares, which
constitute all of the issued and outstanding shares of the Seller; and
WHEREAS, the Seller intends to file a Registration Statement on Form
N-1A (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") to register an indefinite number of Shares for
offer and sale to the public; and
WHEREAS, the Seller and Purchaser desire to provide for additional
purchases of Shares by the Purchaser on the terms and conditions hereinafter
set forth;
NOW THEREFORE, in consideration of the premises and the mutual
promises, covenants, and agreements hereinafter set forth, the parties hereby
agree a follows:
1. Within thirty days after the Seller files the Registration
Statement with the Commission and before the Registration Statement is
declared effective by the Commission, upon receipt of notice from the Seller,
the Purchaser shall purchase an additional 100,000 Shares from the Seller,
and the Seller shall sell such Shares to the Purchaser, at a purchase price
of $1.00 per Share. The closing for such purchase shall occur on the first
business day after the Purchaser's receipt of the Seller's notice, and at the
closing, the Purchaser shall deliver $100,000 to the Seller, and the Seller
shall deliver a certificate for 100,000 to the Purchaser.
2. The Purchaser represents and warrants to the Seller that it shall
purchase the Shares as provided in paragraph 1 of this Agreement solely for
investment purposes and not with the view to any resale or other distribution
of such Shares and that the Purchaser has no present intention of disposing
of any such Shares.
3. The Purchaser hereby agrees that if it presents any of the Shares
it purchased hereunder or prior hereto for redemption by the Seller during
the sixty months after the Seller commences its public offering of Shares
pursuant to the Registration Statement, the Purchaser will reimburse the
Seller for any unamortized amortization or initial offering expenses actually
incurred by the
<PAGE> 2
Seller and not otherwise reimbursed in the same proportion that the number of
Shares purchased under this Agreement or prior hereto being redeemed bears to
the number of Shares purchased under this Agreement and prior hereto outstanding
at the time of redemption.
4. This Agreement shall be binding on the parties hereto and their
successors and assigns and shall be governed by and construed in accordance
with the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties have executed this Agreement on the ---
day of February 1993.
THE WALNUT STREET FUNDS, INC.
By:/S/ Timothy C. Nicholson
------------------------------
Title:
GENERAL AMERICAN LIFE INSURANCE COMPANY
By:/S/ Leonard M. Rubenstein
------------------------------
Title:
- 2 -
<PAGE> 1
Exhibit 15
----------
Distribution and Service Plan
DISTRIBUTION AND SERVICE PLAN
PURSUANT TO RULE 12b-1
1. This Distribution and Service Plan (the "Plan"), when effective
in accordance with its terms, shall constitute the written plan contemplated
by Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "1940 Act"), for The Walnut Street Prime Reserve
Fund series (the "Series"), a portfolio of The Walnut Street Funds, Inc., a
Maryland corporation (the "Company").
2. The Company has entered into a Distribution and Services
Agreement on behalf of the Series with Walnut Street Securities, Inc. (the
Distributor"), under which the Distributor has agreed to use all reasonable
efforts, consistent with its other business activities, to secure purchasers
of the Series' shares of common stock (the "Shares"). Such efforts by the
Distributor may include, but are neither required to include nor limited to,
the following:
(a) the formulation and implementation of marketing and
promotional activities for the Shares, including mail
promotions and television, radio, newspaper, magazine, and
other mass media advertising;
(b) the preparation, printing, and distribution of sales
literature relating to the Shares;
(c) the preparation, printing, and distribution of prospectuses
and statements of additional information of the Series and
reports to recipients other than existing shareholders of
the Series;
(d) obtaining such information, analyses, and reports about
marketing and promotional activities as the Distributor
may, from time to time, deem advisable;
(e) making payments to securities dealers, registered
representatives of such dealers, and others engaged in the
sale of Shares or who engage in shareholder support
services (excluding, however, payments for personal
services for shareholders or the maintenance of shareholder
accounts); and
(f) providing training, marketing, and support to such dealers
and registered representatives and others with respect to
the sale of Shares.
3. In consideration for the services provided and the expenses
incurred by the Distributor pursuant to the Distribution and Services
Agreement, the Series shall pay to the Distributor a monthly fee (the "12b-1
fee") at the annual rate of .35% of the Series' average daily net assets
throughout the month. The daily net assets of the Series shall be determined
as of 4:00 p.m. (New York City time) each day that the Company is open for
<PAGE> 2
business throughout the month. (On days that the fund is not open for
business, as set forth in the Series' prospectus, the net assets for such
date shall be the amount determined on the most recent preceding day upon
which the Company was open for business.) Such net assets shall be computed
in the manner provided in the then current prospectus of the Series for the
determination of the net asset value of the Shares. The Distributor may use
all or any portion of the 12b-1 fee to compensate securities dealers or other
persons who have engaged in the sale of Shares or in shareholder support
services pursuant to agreements with the Distributor, or to pay any of the
expenses associated with other activities authorized under paragraph 2 of
this Plan.
4. The Series currently pays, and will continue to pay, an
investment advisory and management fee to General American Investment
Management Company (the "Adviser"), pursuant to an Investment Management
Agreement between the Company (on behalf of the Series) and the Adviser (the
"Management Agreement"). The Adviser may use its management fee or its other
resources (regardless of source) to reimburse the Distributor for expenses
incurred in connection with the distribution of Shares, including the
activities referred to in paragraphs 2 and 3 hereof. To the extent that the
payment of investment advisory and management fees by the Series to the
Adviser should be deemed to be indirect financing of any activity primarily
intended to result in the sale of Shares within the meaning of Rule 12b-1,
such fee payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective immediately upon its approval by
the vote of a majority of the outstanding voting securities of the Series.
This Plan has been approved by the affirmative vote of a majority of the
Directors of the Company, including a majority of the Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have
no direct or indirect financial interest in the operation of this Plan or in
any agreement related to this Plan (the ("Disinterested Directors"), cast in
person at a meeting called for the purpose of voting on this Plan.
6. This Plan, unless sooner terminated as hereinafter provided,
shall remain in effect for a period of one (1) year from and after the
effective date hereof, and from year to year thereafter; provided, however,
that such continuation shall be subject to approval annually by a vote of a
majority of the Directors of the Company, including a majority of the
Disinterested Directors, cast in person at a meeting called for such purpose.
(If after the date of adoption of this Plan the Securities and Exchange
Commission adopts any rule or regulation that requires shareholder approval
for the continuation of this Plan, continuation of this Plan shall thereafter
also be contingent upon the receipt of such approval in the manner required
by such rule or regulation.) This Plan may be amended at any time by the
Board of Directors; provided, that:
(a) any amendment to increase materially the 12b-1 fee payable
hereunder or any amendment of the Investment Management
Agreement to increase materially the amount payable by the
Series thereunder shall be effective only upon the approval
by vote of a majority of the outstanding voting securities
of the Series; and
(b) any material amendment of the Plan shall be effective only
upon approval of such amendment by a vote of a majority of
the Directors of the Company, including a majority of the
Disinterested Directors, cast in person at a meeting called
for the purpose of voting thereon.
7. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Disinterested Directors or by a
vote
- 2 -
<PAGE> 3
of a majority of the outstanding voting securities of the Series.
8. During the term of this Plan, the Company shall require the
Distributor to provide the Company, for review by the Company's Board of
Directors, and the Board of Directors shall review, at least quarterly, a
written report of the amounts expended in connection with financing any
activity primarily intended to result in the sale of Shares (estimating such
amounts when necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Distributor to perform any
specific type or level of distribution activities primarily intended to
result in the sale of Shares.
10. While this Plan is in effect, the selection and nomination of the
Disinterested Directors of the Company shall be committed to the discretion
of the Company's Disinterested Directors.
11. The Company shall preserve copies of this Plan and any related
agreement and all reports made pursuant to paragraph 8 hereof, for a period
of not less than six (6) years from the date of this Plan, the agreements, or
such reports, as the case may be, the first two (2) years in an easily
accessible place.
12. If any provision of this Plan shall be held or made invalid by
court decision, statute, rule, regulation, or otherwise, the remainder of
this Plan shall not be effected thereby.
13. As used in this Plan, the phrase "vote of a majority of the
outstanding voting securities" shall have the meaning set forth in Section
2(a)(42) of the 1940 Act.
Dated: May 5, 1993.
- 3 -
<PAGE> 1
Exhibit 16
----------
Schedule for Computation of Current Yield and Effective Yield
<PAGE> 2
<TABLE>
WALNUT STREET PRIME RESERVE FUND
YIELD CALCULATIONS
<CAPTION>
7 DAY 7 DAY
DAILY CURRENT EFFECTIVE
DATE FACTOR YIELD YIELD
- -----------------------------------------------------------
- -----------------------------------------------------------
<S> <C> <C> <C>
12/01/96 0.000129649 4.73% 4.84%
12/02/96 0.000129074 4.73% 4.84%
12/03/96 0.000129176 4.73% 4.84%
12/04/96 0.000129099 4.72% 4.83%
12/05/96 0.000129177 4.72% 4.83%
12/06/96 0.000129182 4.72% 4.83%
12/07/96 0.000129182 4.72% 4.83%
12/08/96 0.000129182 4.71% 4.82%
12/09/96 0.000129224 4.71% 4.83%
12/10/96 0.000129242 4.72% 4.83%
12/11/96 0.000129308 4.72% 4.83%
12/12/96 0.000129440 4.72% 4.83%
12/13/96 0.000129676 4.72% 4.83%
12/14/96 0.000129676 4.72% 4.83%
12/15/96 0.000129676 4.73% 4.84%
12/16/96 0.000130469 4.73% 4.84%
12/17/96 0.000130268 4.74% 4.85%
12/18/96 0.000130312 4.74% 4.85%
12/19/96 0.000130433 4.75% 4.86%
12/20/96 0.000130850 4.75% 4.87%
12/21/96 0.000130850 4.76% 4.87%
12/22/96 0.000130850 4.77% 4.88%
12/23/96 0.000130803 4.77% 4.88%
12/24/96 0.000131411 4.77% 4.89%
12/25/96 0.000131411 4.78% 4.89%
12/26/96 0.000131433 4.78% 4.90%
12/27/96 0.000131445 4.79% 4.90%
12/28/96 0.000131445 4.79% 4.91%
12/29/96 0.000131445 4.79% 4.91%
12/30/96 0.000132448 4.80% 4.92%
12/31/96 0.000134754 4.82% 4.94%
</TABLE>
<PAGE> 1
Exhibit 17
----------
Financial Data Schedule
<PAGE> 2
[ARTICLE] 6
[CIK] 0000898469
[NAME] THE WALNUT STREET FUNDS, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 169,915,860
[INVESTMENTS-AT-VALUE] 169,915,860
[RECEIVABLES] 197,914
[ASSETS-OTHER] 230,297
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 170,344,071
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 288,930
[TOTAL-LIABILITIES] 288,930
[SENIOR-EQUITY] 170,064
[PAID-IN-CAPITAL-COMMON] 169,894,023
[SHARES-COMMON-STOCK] 170,064,087
[SHARES-COMMON-PRIOR] 156,926,891
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (8,946)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 170,055,141
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 9,123,213
[OTHER-INCOME] 0
[EXPENSES-NET] 1,378,727
[NET-INVESTMENT-INCOME] 7,744,486
[REALIZED-GAINS-CURRENT] 1,621
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 7,746,107
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 7,744,486
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 174,323,154
[NUMBER-OF-SHARES-REDEEMED] (168,929,181)
[SHARES-REINVESTED] 7,743,223
[NET-CHANGE-IN-ASSETS] 13,138,817
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 202
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 405,517
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,493,168
[AVERAGE-NET-ASSETS] 162,203,978
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.048
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.048
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .85
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
