UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __3___ [ X ]
Post-Effective Amendment No. ____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 3 [ X ]
THE SPORTS FUNDS TRUST
(Exact name of Registrant as specified in charter)
5-H Oak Branch Drive
Greensboro, NC 27407
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code:(910)851-0910
Mr. Jack R. Plymale
Pegasus Advisory Group, Inc.
5-H Oak Branch Drive
Greensboro, NC 27407
(Name and address of Agent for Service)
Copies to:
William J. Baltrus
First Data Investor Services Group, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Approximate Date of Proposed Public offering: As soon as practicable
after the effective date of this Registration Statement.
__________________________________________________________________
Registrant hereby amends the Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to
delay its effective date until Registrant shall file a further
amendment which specifically states that such Registration Statement
shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until such Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to Section 8(a), may determine.
Shares of Beneficial Interest
(Title of Securities Being Registered)
As filed with the U.S. Securities and Exchange Commission on May 29,
1998.<PAGE>
<PAGE> TABLE OF CONTENTS
Registration Statement of The Sports Funds Trust
Page
1. Cross Reference Sheet 3
2. Motor Sports Growth & Income Fund
Part A - Prospectus 5
3. Motor Sports Growth & Income Fund
Part B - Statement of Additional Information 36
4. Motor Sports Growth & Income Fund
Part C - Other Information 60
5. Signature Page 64
6. Index to Exhibits 65
<PAGE>
<PAGE>
CROSS REFERENCE SHEET Pursuant to Rule 481(a)
N-1A Item
Information Required in Prospectus Caption in Prospectus
Part A
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant A Brief Summary of
the Fund; Description
of Fund; Investment
Objective; Investment
Policies; Investment
Practices and Risk
Factors; General
Information
5. Management of the Fund A Brief Summary of
the Fund; General
Information;
Management of the
Fund;
5A. Management's Discussion of Fund Per- Not Applicable
formance
6. Capital Stock and Other Securities A Brief Summary of
the Fund; Dividends,
Distributions and
Taxes; General
Information
7. Purchase of Securities Being Offered A Brief Summary of
the Fund; How to
Purchase Shares;
Sales Load Table;
General Information
8. Redemption or Repurchase A Brief Summary of
the Fund; How to
Redeem Shares;
General Information
9. Legal Proceedings Not Applicable
<PAGE>
<PAGE> Location in Statement
Of Additional
Part B Information (Caption)
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objective and Policies Investment Policies
and Techniques;
Investment
Restrictions
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Other Services Investment Advisory
and Other Services;
Other Information
17. Brokerage Allocation and other
Practices Portfolio Transactions
18. Capital Stock and Other Securities The Trust and the
Fund; Other
Information
19. Purchase, Redemption, and Pricing Net Asset Value;
of Securities Being Offered
20. Tax Status Taxes
21. Underwriters Investment Advisory
and Other Services
22. Calculation of Performance Data General Information
23. Financial Statements Financial Statements;
Report of Independent
Auditors
Part C Other Information
Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration
Statement.
<PAGE>
<PAGE>
PROSPECTUS
May 29, 1998
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
5-H Oak Branch Drive
Greensboro, NC 27407
Telephone: (910) 851-0910
Toll-Free: (800)358-6215
The Motorsports Associated Growth & Income Fund (the "Fund") is
an open-end investment company commonly known as a mutual fund.
The fundamental investment objective of the Fund is to achieve the
long-term growth by investing primarily in common stocks of
companies that provide the potential for income and capital
appreciation.
The Fund invests primarily in common stocks of companies which are
involved in or associated with motorsports ("motorsports") that
provide the potential for income and capital appreciation.
Motorsports companies ("Motorspsorts") include those which design,
manufacture, produce or distribute auto racing products and
services.Motorsports Associated companies ("Motorsports
Associated") include those which host or sponsor racing events,
manage or own racing facilities or provide promotional advertising
and marketing for such events.
Motorspsorts Associated companies may not be involved in the
Motorsports industry other than as advertisers and marketers.
Also, they may only spend a small portion of their overall budgets
on such activities.
The Fund will invest principally in medium- to large-
capitalization companies using a value-oriented investment
approach. See "Investment Policies."
Pegasus Advisory Group Inc. serves as the investment Advisor
("Advisor") to the Fund. Chartwell Investment Partners serves as
investment Sub-Advisor ("Sub-Advisor") to the Fund. See
"Management of the Fund."
This Prospectus contains information you should consider before
you invest. Please read it carefully and keep it for future
reference. A Statement of Additional Information for the Fund,
dated May 29, 1998, which contains additional information about
the Fund, is incorporated by reference into this Prospectus and
has been filed with the Securities and Exchange Commission
("SEC"). A copy of the Statement of Additional Information may be
obtained without charge by writing to the Fund's distributor, FPS
Broker Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903, or by calling (800) 358-6215.
The SEC maintains a Website (http:\\www.sec.gov) that contains the
Statement of Additional Information, material incorporated by
reference and other information regarding the Fund.
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
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<PAGE> TABLE OF CONTENTS
A Brief Summary of the Fund . . . . .
Expense Summary . . . . . . . . . . .
Description of Fund . . . . . . . . .
Investment Objective. . . . . . . . .
Investment Policies . . . . . . . . .
Management of the Fund. . . . . . . .
Investment Practices and Risk Factors . . . .
How to Purchase Shares. . . . . . . .
Sales Load Table. . . . . . . . . . .
How to Redeem Shares. . . . . . . . .
Retirement Plan . . . . . . . . . . .
Net Asset Value . . . . . . . . . . .
Distribution Plan . . . . . . . . . .
Dividends, Distributions and Taxes. . . .
Performance Information . . . . . . .
General Information . . . . . . . . .
Application Forms . . . . . . . . . .
Distributor: Investment Advisor:
FPS Broker Services, Inc. Pegasus Advisory Group, Inc.
3200 Horizon Drive 5-H Oak Branch Drive
P.O. Box 61503 Greensboro NC 27407
King of Prussia, PA 19406-0903
(800)358-6215
No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus
and the Statement of Additional Information, and if given or made,
such information or representations may not be relied upon as
having been authorized by the Fund. This Prospectus does not
constitute an offer to sell securities to any person in any state
jurisdiction in which such offering may not lawfully be made.
<PAGE>
A BRIEF SUMMARY OF THE FUND
What is the Fund's Investment Objective?
The Fund seeks to achieve long-term growth by investing primarily
in common stocks of Motorsports or Motorsports Associated
companies that provide the potential for income and capital
appreciation. The Fund will invest principally in medium- to
large- capitalization companies using a value-oriented investment
approach. The Advisor feels that Motorsports and Motorsports
Associated companies offer a wide range of potential investments
for the Fund which fit the Funds objective of long-term growth and
capital appreciation and allow an investor to support those
companies which support or are involved in the motorsports
industry. There can be no assurance that the Fund will be able to
achieve its investment objective. See "Investment Objective" and
"Investment Policies."
Who is the Investment Advisor?
The Fund's investment Advisor is Pegasus Advisory Group, Inc.(the
"Advisor"), a recently organized investment manager. Chartwell
Investment Partners (the "Sub-Advisor") acts as Sub-Advisor and
manages the day-to-day investment program of the Fund. See
"Management of the Fund", "Investment Policies" and "Investment
Practices and Risk Factors."
Who may want to Invest in the Fund?
The Fund is designed for those looking for growth through an
investment that focuses on a wide range of equity securities
related to Motorsports. An investment in the Fund may be suitable
for long-term investors who may wish to consider investing a
portion of their overall equity portfolio in securities related to
Motorsports.
What risks are associated with an investment in the Fund?
The price of shares of the Fund will fluctuate as the daily price
of the equity securities in which the Fund invests fluctuate, so
that your shares, when redeemed, may be worth more or less than
their original cost. Some of the companies which the Fund invests
in may involve significantly greater risks and therefore the Fund
may experience greater volatility than a mutual fund that does not
concentrate its investments. These companies are defined as
Motorsports companies. The Fund's performance will be closely tied
to and affected by, the Motorsports industry, to the extent that
the Fund invests in such companies. By itself, the Fund does not
constitute a balanced investment program. See "Investment
Practices and Risk Factors."
Does the Fund pay dividends?
Dividends from net investment income will normally be declared
quarterly and capital gains, if any, are distributed at least
annually. All dividends and distributions are automatically
reinvested in shares of the Fund (without sales charge) unless
payment in cash is requested. See "Dividends, Distributions and
Taxes."
How do I make an investment in the Fund?
Shares of the Fund may be purchased through broker-dealers or
directly through FPS Broker Services, Inc., the Fund's principal
distributor. The minimum initial investment is $1,000 or $250 for
IRA, Roth IRA, SEP IRA, Uniform Gift to Minor Accounts ("UGMA"),
Uniform Transfer to Minor Accounts ("UTMA") and Automatic
Investment Plan accounts. Subsequent investments can be made for
as little as $50. See "How to Purchase Shares."
The Fund is offered at net asset value per share plus a maximum
initial sales charge of 5.75% of the offering price (6.10% of the
net amount invested), reduced on investments of $50,000 or more.
The Fund is subject to annual 12b-1 Plan expenses of 0.25% of its
average daily net assets. In addition, the Fund offers several
time and money saving services to investors. Be sure to read about
the Automatic Investment Plan, Retirement Plans and the Systematic
Withdrawal Plan.
How do I sell my shares?
Shares of the Fund may be redeemed at the current net asset value
per share next determined after receipt by the transfer agent of a
redemption request in proper form. Signature guarantees may be
required for certain redemption requests. See "How to Redeem
Shares."
<PAGE>
<PAGE> EXPENSE SUMMARY
The following information is provided in order to help you
understand the various costs and expenses that you, as an investor
in the Fund, will bear directly or indirectly.
Shareholder Transaction Expenses
Class A
Maximum sales charge imposed on purchases
(as a percentage of offering price). . . . 5.75% /1/
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price). . . . . . None
Deferred sales charge (as a percentage of the
lesser of original purchase price or
redemption proceeds) . . . . None/2/
Redemption Fees (as a percentage of amount
redeemed)(3). . . . . . . . . . . . . None
Exchange Fee. . . . . . . . . . . . . None
/1/ Reduced for purchases of $50,000 and over, decreasing to zero
for purchases of $1 million and over. See "Sales Load Table."
/2/ Investments of $1 million or more are not subject to any sales
charge at the time of purchase, but a CDSC of 1.00% may be imposed
on certain redemptions made within one year of the date of
purchase. See "Sales Load Table."
/3/ The Fund's transfer agent charges $9.00 per redemption for
redemptions remitted by wire.
Annual Fund Operating Expenses:
(as a percentage of average daily net assets after expense
reimbursement)
Class A
Management fees /1/ . . . . . . . . . . . . . 0.71%
12b-1 fees /2/. . . . . . . . . . . . . . . . 0.25%
Other Expenses. . . . . . . . . . . . . . . . 1.04%
Total Fund operating expenses
(after fee waiver and reduction
of expenses)/1/. . . . . . . . . . . . . . . 2.0%
/1/ The above table reflects the Advisor's voluntary undertaking
to waive all or a portion of its fees and to reimburse certain
expenses so that the total operating expenses of the Fund for the
first year of operations will not exceed 2.0%, of the average
daily net assets of the Fund. The Advisor reserves the right to
terminate this waiver or any reimbursement at any time, in its
sole discretion. Any reductions in the Advisor's fee are subject
to reimbursement by the Fund within the following three years, to
the extent such reimbursement would not cause total operating
expenses to exceed 2.0%. Without such waivers and reimbursements,
the Advisors' fee would be 0.95% and total operating expenses for
the Fund are estimated to be 2.24%, of the respective average
daily net assets of the Fund. In subsequent years, overall
expenses for the Fund may not fall below the percentage
limitations until the Advisor has been fully reimbursed for fees
foregone or expenses it paid under the investment advisory
agreement. "Other Expenses" are based on estimated amounts for
the Fund's current fiscal year. The Advisor has not previously
provided investment advisory services to registered investment
companies.
/2/ The Fund is subject to annual 12b-1 Plan fees of 0.25% of the
average daily net assets attributable to the Fund. See
"Distribution Plans."
<PAGE>
Example
Based on the level of expenses listed above, an investor would pay
the following expenses on a $1,000 investment assuming (i) an
operating expense ratio of 2.00% for the Fund (ii) imposition of
the maximum sales charge for the Fund, (iii) a 5% annual return
and (iv) redemption at the end of each time period.
1 Year $79
3 Years $123
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN. The purpose of the foregoing table is to assist the
investor in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly. The 5%
annual return in this example is required by the SEC regulations
applicable to all mutual funds; it does not represent a projection
of the Fund's actual performance.
Long-term shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charge otherwise
permitted by the National Association of Securities Dealers, Inc.
(the "NASD").
DESCRIPTION OF THE FUND
The Fund is an open-end, diversified investment company, commonly
known as a mutual fund. The Fund's investment objective is
fundamental which means that it cannot be changed without a
shareholder vote. Except as noted, the Fund's investment policies
are not fundamental and can be changed without a shareholder vote.
The Fund will not change these policies without notifying its
shareholders. The Fund has also instituted fundamental investment
limitations which are described in the Statement of Additional
Information.
INVESTMENT OBJECTIVE
The Fund's investment objective is to achieve long-term growth by
investing primarily in common stocks that provide the potential
for income and capital appreciation.
INVESTMENT POLICIES
The Fund invests primarily in equity securities companies which
are involved in or associated with Motorsports ("motorsports") and
which offer the potential for income and capital appreciation. By
the term Motorsports, the Fund refers to all forms of auto racing
including, but not limited to: NASCAR, Formula One, IndyCar
racing, Endurance Racing, Open-Wheel Racing, Sprint Cars, Stock
Cars, Hydroplane Racing and Drag Racing. Motorsports companies
include those which design, manufacture, produce or distribute
auto racing products and services. Motorsports Associated
companies include those which host or sponsor racing events,manage
or own racing facilities or provide promotional advertising and
marketing for such events.
The Advisor feels that Motorsports and Motorsports Associated
companies offer a wide range of potential investments for the Fund
which fit the Funds objective of long-term growth and capital
appreciation and allow an investor to support those companies
which support or are involved in the motorsports industry.
The Fund will invest principally in the equity securities of
medium- to large- capitalization companies which the Sub-Advisor
believes to be undervalued. The Sub-Advisor considers medium-
capitalization companies to be those companies with market
capitalizations at the time of purchase ranging from $800 million
to $5 billion. In general, medium-capitalization companies often
involve greater risks than investments in established companies.
See "Investment Practices and Risk Factors."
Under normal market conditions, the Fund will invest at least 80%
of its total assets in equity securities of those companies
related to Motorsports. Equity securities include, but are not
limited to, common stocks, preferred stocks, and securities that
are convertible into common stocks, such as rights and warrants.
The remainder of the Fund's assets may be invested in equity
securities that are not related to Motorsports and in debt
securities such as corporate bonds, notes and debentures or high
quality money market instruments and U.S. Government securities.
The Sub-Advisor's approach to investing is centered around value
investing with a focus on those companies that pay current
dividends. With the oversight of the Advisor, the Sub-Advisor
looks for securities which it believes are undervalued based on
low price-to-earnings ratio, consistent cash flow, and the
particular company's track record and also those which meet the
definition of a Motorsports company. A company may be undervalued
as a result of market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments
affecting the company. The Fund expects to invest primarily in
securities currently paying dividends, although it may buy
securities that are not paying dividends but offer prospects for
growth of capital or future income.
The Fund may diversify its holdings among many different companies
and industries which meet the Advisor's definition of a
Motorsports company either as Motorsports companies or advertisers
and marketers of Motorsports. While it is the Fund's policy to
remain substantially invested in common stocks, preferred stocks
or securities convertible into common stocks, it may invest all or
part of its total assets in high-quality money market securities
and repurchase agreements for temporary defensive purposes when
the Sub-Advisor has determined that adverse market and economic
conditions so warrant.
The Fund may also engage in portfolio management techniques such
as purchasing stock futures and options contracts and lending its
portfolio securities. See "Investment Practices and Risk
Factors."
MANAGEMENT OF THE FUND
Board of Trustees
Under Delaware law, the business and affairs of the Fund are
managed under the direction of the Board of Trustees. The
Trustees elect the officers of the Fund to supervise the day-to-day
operations of the Fund. The Statement of Additional
Information contains the name and background information regarding
each Trustee.
Investment Advisor
Subject to the policies of, review by, and overall control of the
Board of Trustees of the Fund, Pegasus Advisory Group, Inc.( the
"Advisor"), 5-H Oak Branch Drive, Greensboro, North Carolina
27407, has been retained to act as the Fund's manager and
Investment Advisor pursuant to an Investment Advisory Agreement
(the "Advisory Agreement"). The Advisor was incorporated in 1997
and is a registered Investment Advisor under the Investment
Advisors Act of 1940 ("Advisors Act"), as amended. The Advisor is
engaged in the business of managing the investments of the Fund.
The Advisor has no previous experience managing mutual funds. By
reason of its ownership of 100% of the Advisor's stock, Pegasus
Sports Marketing, Inc. may be said to be a "controlling person" of
the Advisor.
The Advisor supervises the management of the Fund including, among
other things, reporting to the Trustees regarding economic and
statistical information as requested by the Trustees. The Advisor
continuously reviews, supervises and administers the Fund's
investment program subject to the supervision of, and policies
established by, the Trustees. The Advisor currently delegates
certain of these services to the Sub-Advisor.
Under the Advisory Agreement, the Fund pays the Advisor a monthly
fee at the annual rate of 0.95% of the Fund's average daily net
assets. The fee is higher than the management fees paid by many
other funds. The fee is accrued daily and paid monthly.
From time to time, the Advisor may voluntarily waive all or a
portion of its management fee and/or reimburse the Fund for
certain expenses without further notification of the commencement
or termination of such waiver or reimbursement. Any such waiver
or absorption will have the effect of lowering the overall expense
ratio of the Fund and increasing the Fund's overall return to
investors at the time any such amounts are waiver and/or absorbed.
The Advisor has voluntarily agreed to waive all or a portion of
its fee, and/or to reimburse expenses of the Fund to the extent
necessary in order to limit net operating expenses for the first
year of operations to an annual rate of not more than 2.00% of the
Fund's average daily net assets. Any amounts waived or reimbursed
by the Advisor are subject to reimbursement by the Fund within the
following three years, provided that the Fund is able to effect
such reimbursement and remain in compliance with the stated
expense limitation.
The continuance of the Advisory Agreement, after the first two
years, must be specifically approved at least annually (i) by the
vote of the Trustees or by a vote of the shareholders of Fund, and
(ii) by the vote of a majority of the Trustees who are not parties
to the Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement will terminate if
assigned, and is terminable at any time without penalty by the
Advisor or by the Trustees of the Fund, or by a majority of the
outstanding shares of the Fund on 60 days' written notice to the
Advisor.
Sub-Advisor
The Advisor has entered into a Sub-Advisory Agreement with
Chartwell Investment Partners L.P.("Chartwell" or the "Sub-Advisor")
to assist in the selection and management of the Fund's
investment securities. For its services, Chartwell is paid an
annual fee by the Advisor equal to 0.70% of the Fund's average
daily net assets.It is the responsibility of the Sub-Advisor,
under the direction of the Advisor, to make the day-to-day
investment decisions for the Fund, and to place the purchase and
sale orders for the portfolio transactions of the Fund, consistent
with the policies established by the Advisor and subject to the
general direction of the Advisor. Chartwell has been engaged in
the investment advisory business and providing investment advice
to individuals, trusts and pension and profit sharing plans since
its inception in April 1997. Prior to that many of the principals
of Chartwell were engaged as portfolio managers or executives of
Delaware Investment Advisors ("Delaware") In addition, the Sub-Advisor
has been managing a portion of the assets of Vanguard's
Explorer Fund since August 1, 1997.
Kevin A. Melich, CFA will be responsible for the day to day
investment decisions for the Fund. Mr. Melich was previously
employed by Delaware from 1983 to 1997. During his entire time at
Delaware, he managed over $1.6 Billion for institutional accounts
in a similar equity value style. He has a Economics degree from
St. John Fisher College, and he is a Chartered Financial Analyst.
The continuance of the Sub-Advisory Agreement, after the first two
years, must be specifically approved at least annually (i) by the
vote of the Trustees or by a vote of the shareholders of Fund, and
(ii) by the vote of a majority of the Trustees who are not parties
to the Sub-Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Sub-Advisory Agreement will
terminate if assigned, and is terminable at any time without
penalty by the Sub-Advisor or by the Trustees of the Fund, or by a
majority of the outstanding shares of the Fund on 60 days' written
notice to the Advisor and the Sub-Advisor.
Expenses of the Fund
In addition to the payments to the Advisor under the Advisory
Agreement described above, the Fund pays certain other costs,
including, but not limited to: (a) custody, transfer agent and
administrator expenses, (b) fees of the Trustees who are not
affiliated with the Advisor or Sub-Advisor, legal and auditing
expenses, (d) clerical, accounting and other office costs, (e)
costs of printing the Fund's prospectuses and shareholder reports,
(f) costs of maintaining the Fund's existence, (g) interest
charges, taxes, brokerage fees and commissions, (h) costs of
stationery and supplies, (i) expenses and fees related to
registration and filing with the SEC and with state regulatory
authorities, and (j) such promotional, shareholder servicing and
other expenses as may be contemplated by the Distribution Services
Agreement, described under "Distribution Plan".
Distributor
FPS Broker Services, Inc. (the "Distributor") is the Fund's
statutory distributor and principal underwriter. First Data
Investor Services Group, Inc., ^ serves the Fund as transfer and
shareholder services agent (the "Transfer Agent").
INVESTMENT PRACTICES AND RISK FACTORS
General
There is no such thing as a guaranteed investment and no one can
see into the future. The risks inherent in investing in the Fund
are similar to those of investing directly in equity securities,
that is, the value of the investment may fluctuate in response to
a variety of situations and factors. Accordingly, the value of an
investment in the Fund will fluctuate over time and may be valued
higher or lower at the time of redemption. The Fund is designed
for long-term investors who can accept the risks entailed in
seeking capital appreciation through investment primarily in
common stocks. An investment in the Fund should be only a part of
an overall investment strategy. The Advisor and Sub-Advisor (the
"Advisors") attempt to reduce the overall risks by investing in a
diversified portfolio through the implementation of value
investing.
Convertible Securities
Securities such as rights, bonds, notes and preferred stocks which
are convertible into or exchangeable for common stocks are
considered convertible securities. They have characteristics
similar to both fixed income and equity securities. Because of
the conversion feature, they provide an opportunity to participate
in capital appreciation resulting from a market price advance in
the underlying common stock. The price of a convertible security
is influenced by the market value of the underlying common stock
and tends to increase as the common stock's market value declines.
Futures Contracts and Related Options
The Fund may invest in futures contracts and options on futures
contracts for hedging purposes or to maintain liquidity. However,
the Fund may not purchase or sell a futures contract or purchase a
related option unless immediately after any such transaction the
sum of the aggregate amount of initial margin deposits on its
existing futures positions and the amount of premiums paid for
related options does not exceed 5% of its total assets.
At maturity, a futures contract obligates the Fund to take or make
delivery of certain securities or the cash value of a securities
index. When the Fund sells a futures contract, it agrees to sell
a specified underlying instrument at a specified future date. The
Fund may sell a futures contract in order to offset a decrease in
the market value of its portfolio securities that might otherwise
result from a market decline. The Fund may do so either to hedge
the value of its portfolio of securities as a whole, or to protect
against declines, occurring prior to sales of securities, in the
value of the securities to be sold. When the Fund purchases a
futures contract, it agrees to purchase a specified underlying
instrument at a specified future date. The Fund may purchase a
futures contract in anticipation of purchases of securities. In
addition, the Fund may utilize futures contracts in anticipation
of changes in the composition of its portfolio holdings.
The Fund may purchase and sell call and put options on futures
contracts traded on an exchange or board of trade. When the Fund
purchases an option on a futures contract, it has the right to
assume a position as a purchaser or seller of a futures contract
at a specified exercise price at any time during the option
period. When the Fund sells an option on a futures contract, it
becomes obligated to purchase or sell a futures contract if the
option is exercised. In anticipation of a market advance, the
Fund may purchase call options on futures contracts as a
substitute for the purchase of futures contracts to hedge against
a possible increase in the price of securities which the Fund
intends to purchase. Similarly, if the market is expected to
decline, the Fund might purchase put options or sell call options
on futures contracts rather than sell futures contracts.
To enter into a futures contract, the Fund must make a deposit of
an initial margin with its custodian in a segregated account in
the name of the futures broker. Subsequent payments to or from
the broker, called variation margin, will be made on a daily
basis as the price of the underlying security or index fluctuates,
making the long and short positions in the futures contracts more
or less valuable.
The primary risks associated with the use of futures contracts and
options are: (i) imperfect correlation between the change in
market value of the securities held by the Fund and the price of
futures contracts and options; (ii) possible lack of a liquid
secondary market for a futures contract and the resulting
inability to close a futures contract when desired; (iii) losses,
which are potentially unlimited, due to unanticipated market
movements; and (iv) the Advisors's ability to predict correctly
the direction of security prices, interest rates and other
economic factors. Successful use of options and futures by the
Fund is subject to the Advisors's ability to predict correctly the
movements in the direction of the market. For example, if the
Fund uses future contracts as a hedge against the possibility of a
decline in the market adversely affecting securities held by it
and securities prices increase instead, the Fund will lose part or
all of the benefit of the increased value of its securities which
it has hedged, because it will have approximately equal offsetting
losses in its futures positions. The risk of loss in trading
futures contracts in some strategies can be substantial, due both
to the low margin deposits required, and the extremely high degree
of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result
in immediate and substantial loss or gain to the investor. Thus,
a purchase or sale of a futures contract may result in losses or
gains in excess of the amount invested in the contract. For
further discussion, see "Investment Policies and Techniques" in
the Statement of Additional Information.
Options
The Fund may purchase put and call options listed on a national
securities exchange and issued by the Options Clearing Corporation
to the extent that premiums paid on all outstanding call options
do not exceed 20% of the Fund's total assets. Purchasing options
is a specialized investment technique that entails a substantial
risk of a complete loss of the amounts paid as premiums to the
writer of the option.
A call option enables the purchaser, in return for the premium
paid, to purchase securities from the writer of the option at an
agreed-upon price during the option period. The advantage is that
the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy or may take advantage of a
rise in a particular index. The Fund will only write call options
on a covered basis (options on securities owned by the Fund). The
Fund will receive premium income from writing call options, which
may offset the cost of purchasing put options and may also
contribute to the Fund's total return. The Fund may lose
potential market appreciation if the Investment Advisor's judgment
is incorrect with respect to interest rates, security prices or
the movement of indices.
A put option enables the purchaser of the option, in return for
the premium paid, to sell the security underlying the option to
the writer at the exercise price during the option period, and the
writer of the option has the obligation to purchase the security
from the purchaser of the option. The advantage is that the
purchaser can be protected should the market value of the security
decline or should a particular index decline. The Fund will only
write put options on a covered basis. The Fund will receive
premium income from writing put options, although it may be
required, when the put is exercised, to purchase securities at
higher prices than the current market price.
An option on a securities index gives the purchaser of the option,
in return for the premium paid, the right to receive cash from the
seller equal to the difference between the closing price of the
index and the exercise price of the option.
Closing transactions essentially let the Fund offset put options
or call options prior to exercise or expiration. If the Fund
cannot effect a closing transaction, it may have to hold a
security it would otherwise sell or deliver a security it might
want to hold. For further discussion, see "Investment Policies
and Techniques" in the Statement of Additional Information.
Debt Securities and High Yield, High Risk Securities
The Fund may invest in debt securities of corporations and
governmental issuer. Some investments in debt securities by the
Fund will be in those that are rated within the four highest
grades( normally referred to as "Investment Grade")assigned by a
nationally recognized statistical rating agency.
The Fund may also invest up to 15% of its net assets in high
yield, high risk fixed-income securities. These securities are
rated lower than BBB by Standard & Poor's Ratings Group ("S&P"),
Baa by Moody's Investors Service, Inc. ("Moody's") and/or rated
similarly by another rating agency, or, if unrated, are considered
by the Advisors to be of equivalent quality. The Fund will not
invest in securities which are rated lower than C by S&P, Ca by
Moody's or similarly by another rating agency, or, if unrated, are
considered by the Advisors to be of a quality that is lower than
such ratings. See Appendix A of the Statement of Additional
Information for more rating information. Fixed-income securities
of this type are considered to be of poor standing and
predominantly speculative. Such securities are subject to a
substantial degree of credit risk.
Medium and low-grade bonds held by the Fund may be issued as a
consequence of corporate restructurings, such as leveraged
buy-outs, mergers, acquisitions, debt recapitalizations or similar
events.
The economy and interest rates may affect these high yield, high
risk securities differently than other securities. Prices may be
more sensitive to adverse economic changes or individual corporate
developments. Also, highly leveraged issuers may experience
financial stress which would affect their ability to service
principal and interest payment obligations. Changes by recognized
rating agencies in their rating of any security and in the ability
of an issuer to make payments of interest and principal will also
ordinarily have a more dramatic effect on the values of these
investments than on the values of higher-rated securities. Changes
in the value of those bonds will affect the Fund's net asset value
per share.
Restricted and Illiquid Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A
("Rule 144A Securities") under the Securities Act of 1933. Rule
144A permits many privately placed and legally restricted
securities to be freely traded among certain institutional buyers
such as the Fund. The Fund may invest no more than 15% of the
value of its net assets in illiquid securities.
Generally speaking, an illiquid security is any asset or
investment which a Fund cannot sell in the ordinary course of
business within seven days at approximately the value at which the
Fund has valued the asset or investment, including securities that
cannot be sold publicly due to legal or contractual restrictions.
Over the past several years, strong institutional markets have
developed for various types of restricted securities, including
repurchase agreements, commercial paper, and some corporate bonds
and notes. Securities freely salable among qualified
institutional investors under special rules adopted by the
Securities and Exchange Commission or otherwise determined to be
liquid may be treated as liquid if they satisfy liquidity
standards established by the Board of Trustees. The continued
liquidity of such securities is not as well assured as that of
publicly traded securities, and accordingly the Board of Trustees
and the Advisors will monitor their liquidity.
Securities Lending
To increase return on portfolio securities, the Fund may lend its
portfolio securities on a short-term basis to banks, broker-dealers
and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the
securities loaned. The Fund will not lend portfolio securities in
excess of 50% of the value of its total assets. There may be
risks of delay in receiving additional collateral or in recovering
the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially.
Borrowing
The Fund may also make use of bank borrowing as a temporary
measure for extraordinary or emergency purposes, such as for
liquidity necessitated by shareholder redemptions, and may use
securities as collateral for such borrowing. Such temporary
borrowing may not exceed 5% of the value of the applicable Fund's
total assets at the time of borrowing.
Repurchase Agreements
The Fund may enter into repurchase agreements to earn income. The
Fund may only enter into repurchase agreements with financial
institutions that are deemed to be creditworthy by the Advisors,
pursuant to guidelines established by the Funds' Board of
Trustees. During the term of any repurchase agreement, the
Advisors will continue to monitor the creditworthiness of the
seller. Repurchase agreements are considered under the 1940 Act
to be collateralized loans by the Funds to the seller secured by
the securities transferred to the Funds. Repurchase agreements
under the 1940 Act will be fully collateralized by securities in
which the Funds may invest directly.
Such collateral will be marked-to-market daily. If the seller of
the underlying security under the repurchase agreement should
default on its obligation to repurchase the underlying security,
the Funds may experience delay or difficulty in exercising its
right to realize upon the security and, in addition, may incur a
loss if the value of the security should decline, as well as
disposition costs in liquidating the security. The Fund will not
invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days. Such securities are deemed
illiquid and are subject to the Fund's restriction to invest no
more than 15% of its net assets in illiquid securities. The Funds
must treat each repurchase agreement as a security for tax
diversification purposes and not as cash, a cash equivalent or
receivable.
Medium Capitalization Companies
The Fund may invest in medium capitalization companies. While
medium-capitalization companies generally have potential for rapid
growth, investments in medium companies often involve greater
risks than investments in larger, more established companies
because medium companies may lack the management experience,
financial resources, product diversification, and competitive
strengths of larger companies. In addition, in many instances the
securities of medium companies are traded only over-the-counter or
on a regional securities exchange, and the frequency and volume of
their trading is substantially less than is typical of larger
companies. Therefore, the securities of medium companies may be
subject to greater and more abrupt price fluctuations. The Fund
does not consider these types of companies to be illiquid.
Portfolio Turnover & Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length
of time they have been held. The degree of portfolio activity will
affect brokerage costs of the Fund and may affect taxes payable by
the Fund's shareholders to the extent that net capital gains are
realized. Given the Fund's investment objective, its annual
portfolio turnover rate is not expected to exceed 100%.
The Fund uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders
may be placed with brokers or dealers who provide brokerage and
research services to the Advisors or their advisory clients. These
services may be used by the Advisors in servicing any of its
accounts.
Motorsports Companies
Some of the companies which the Fund invests in may involve
significantly greater risks and therefore the Fund may experience
greater volatility than a mutual fund that does not concentrate
its investments. These companies include those which design,
manufacture, produce or distribute auto racing products and those
who host, manage or own racing facilities. The Fund's performance
will be closely tied to and affected by, the Motorsports industry,
to the extent that the Fund invests in such companies. Companies
in the industry are often faced with the same obstacles, issues,
or regulatory burdens, and their securities may react similarly to
and move in unison with these or other market conditions.
The Motorsports industry is currently in the development stage
and companies in the industry may suffer periodic operating
losses. While most of the major manufacturers are large,
financially strong companies, some are smaller manufacturers that
have a non-diversified product line or customer base.
HOW TO PURCHASE SHARES
General
You can purchase shares of the Fund through broker-dealers or
directly through FPS Broker Services, Inc. (the "Distributor"),
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA, as
principal underwriter. Shares of the Fund are sold at the net
asset value next determined after receipt by the Fund's transfer
agent, First Data Investor Services Group, Inc.(the "Transfer
Agent"), plus an initial maximum sales charge of up to 5.75% of
the offering price (6.10% of the net amount invested) reduced on
investments of $100,000 or more.The minimum initial investment for
the Fund is $1,000 or $250 for, IRA, Roth IRA, SEP IRA, Uniform
Gift to Minor Accounts ("UGMA", Uniform Transfer to Minor Accounts
("UTMA") and Automatic Investment Plan accounts.
Shares may be purchased through brokers, investment advisors and
other financial intermediaries which have selling group agreements
with the Distributor, or directly through the Transfer Agent.
Shares of the Fund are offered only to residents of states in
which the shares are registered or qualified. No share
certificates will be issued in connection with the purchase of
Fund shares.
Purchase orders for shares of the Fund that are received by the
Transfer Agent in proper form by the close of the New York Stock
exchange ("NYSE")(currently 4:00 p.m. Eastern time), on any day
that the NYSE is open for trading, will be purchased at the Fund's
next determined net asset value (plus any applicable sales
charge). Orders for Fund shares received after the close of the
NYSE will be purchased at the net asset value (plus any applicable
sales charge) determined on the following business day.
The Fund and the Transfer Agent each reserves the right to reject
any purchase order in whole or in part. The Fund reserves the
right to suspend the offering of shares of the Fund. The Fund
also reserves the right to vary the initial and subsequent
investment minimums, or to waive the minimum investment
requirements for any investor. The Fund will not accept for
purchase order a check which has been endorsed by a third party.
Purchases by Mail
Shares may be purchased initially by completing the application
accompanying this Prospectus and mailing it to the Transfer Agent,
together with a check payable to the " Motorsports Associated
Growth & Income Fund." The check or money order and application
should be mailed to First Data Investor Services Group, Inc. ,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903. If this is an initial purchase, please send a minimum
of $1,000 or $250 for Automatic Investment Plans, IRA, Roth IRA,
SEP IRA, Uniform Gift to Minor Accounts ("UGMA") and Uniform
Transfer to Minor Accounts ("UTMA").
Purchases by Wire
Before making an initial investment by wire, an investor must
first telephone the Transfer Agent at (800)358-6215 or (610)
239-4600 in order to be assigned an account number. The
investor's name, account number, taxpayer identification number
orsocial security number and address must be specified in the
wire.
Shareholders having an account with a commercial bank that is a
member firm of the Federal Reserve System may purchase shares of
the Fund by requesting their bank to transmit funds by wire to:
UMB Bank N.A., ABA #10-10-00695/Attention: First Data Investor
Services Group, Inc. , A/C 98-7037-071-9/" Motorsports Associated
Growth & Income Fund", along with the shareholder's name and
account number as specified on the shareholder's account
registration.In addition, an account application should be
promptly forwarded to: First Data Investor Services Group, Inc. ,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903. Shareholders may be subject to 31% withholding if
original application is not received.
Additional investments may be made at any time through the wire
procedures described above, which must include a shareholder's
name and account number. The shareholder's bank may impose a fee
for investments by wire. The Fund will not be responsible for the
consequences of delays, including delays in the banking or Federal
Reserve wire systems.
Purchases through Broker-Dealers
The Fund may accept telephone orders only from broker-dealers or
service organizations that have been previously approved by the
Fund. It is the responsibility of such broker-dealers or service
organizations to promptly forward purchase orders and payments to
the Fund. Brokers, financial institutions, service organizations,
banks and bank trust departments through which an investor
purchases shares of the Fund, may charge the shareholder a
transaction fee or other fee for their services at the time of
purchase. Minimums of broker/dealers or accounts opened through a
fund network may apply.
For any order to be confirmed at the current day's offering price,
it must be received by the Transfer Agent or the selling dealer by
the close of the NYSE. For any dealer order to be confirmed at
the current day's offering price, it not only must be received by
the dealer prior to the close of the NYSE, but it must be
communicated to the Transfer Agent by 5:00 p.m. Eastern time on
that day. It is the responsibility of that dealer to communicate
the details of the order to the Transfer Agent. Orders received by
dealers after 4:00 p.m. Eastern time are confirmed at the offering
price on the following business day.
Purchases by Telephone
The Fund only accepts telephone purchases from brokers, financial
institutions or service organizations. Individuals are not able
to make purchases by telephone.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made
by mail, bank wire, automatic investing or direct deposit. The
minimum for subsequent investments is $50 for all accounts.
When making subsequent investments by mail, please return the
bottom portion of a previous confirmation with your investment in
the envelope that is provided with each confirmation statement.
Your check should be made payable to " Motorsports Associated
Growth & Income Fund" and mailed to First Data Investor Services
Group, Inc. , c/o UMB Bank, N.A., P.O. Box 412797, Kansas City, MO
64141-2797. Orders to purchase shares are effective on the day
the Transfer Agent receives your check or money order.
All investments must be made in U.S. dollars and checks must be
drawn only on banks located in the United States. A charge
(minimum of $20) will be imposed if any check used for the
purchase of shares is returned. Investors who purchase Fund
shares by check or money order may not receive redemption proceeds
until there is reasonable belief that the check has cleared, which
may take up to fifteen calendar days after the purchase date.
Automatic Investment Plan
Once an account has been opened for $250 or more, a shareholder
can make additional purchases of shares of the Fund through an
automatic investment plan. The automatic investment plan provides
a convenient method by which investors may have monies deducted
directly from their bank account for investment in the Fund. An
investor may authorize the automatic withdrawal of funds from his
or her bank account (minimum of $50) and completing the automatic
investment plan form enclosed with this Prospectus. Subsequent
monthly investments are subject to a minimum required amount of
$50. The Fund may alter, modify or terminate this plan at any
time. To begin participating in this plan, please complete the
Automatic Investment Plan Section found on the application.
Sales Load Table
The applicable sales charge a shareholder of the Fund pays depends
on the dollar amount invested, as shown in the table below.
Total Sales Charge Amount Paid to
as a Percentage of Dealer as a
Offering Net Amount Percentage of
Price Invested Offering Price
------ --------- -------------
Under $50,000 5.75% 6.10% 5.00%
$50,000 but less
than $100,000 4.75% 4.99% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.00%
$250,000 but less
than $500,000 2.75% 2.83% 2.25%
$500,000 but less
than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more* * * *
/*/ There is no initial sales charge on purchases of the Fund of
$1,000,000 or more. However, a contingent deferred sales charge
("CDSC") of 1.00% is imposed on redemptions placed within 12
months of purchases. The distributor will pay authorized dealers,
and other qualifying financial institutions except wrap fee client
accounts, 1.00% of the first $2.5 million of such purchases, plus
0.50 % of the on amounts thereafter. A CDSC will be imposed on
the proceeds of a redemption of such shares if redeemed within 12
months of purchase, based on the lower of the shares' cost or
current net asset value. In addition, shares purchased by certain
investors investing $1,000,000 or more that have made arrangements
with the distributor and whose dealer waived commission, as
described above, are not subject to any charge. In determining
whether a CDSC is payable, the Fund will first redeem shares not
subject to any charge. No CDSC charge is imposed on the redemption
of shares acquired through reinvestment if income dividends or
capital gains distributions. FPSB receives the entire amount of
the CDSC to defray its expense in providing certain distribution-
related services to the Fund, including payment of a sales
commission to selling dealers or qualifying financial
institutions, as described above.
FPSB will pay the dealer concession to those selected
dealers who have entered into an agreement with the Distributor.
The dealer's concession may be changed from time to time. The
Distributor may from time to time offer incentive compensation to
dealers which sell shares of the Fund subject to sales charges,
allowing such dealers to retain an additional portion of the sales
load. On some occasions, such cash or incentives will be
conditioned upon the sale of a specified minimum dollar amount of
the shares of the Fund during a specified period of time. A
dealer who receives all or substantially all of the sales load may
be considered an "underwriter" under the Securities Act of 1933,
as amended. All such sales charges are paid to the securities
dealer involved in the trade, if any. No sales charge will be
assessed on the reinvestment of dividends or capital gain
distributions.
Reduced Sales Charges
The sales charge for purchases of the Fund may be reduced through
Rights of Accumulation or Letter of Intent. To qualify for a
reduced sales charge, an investor must so notify his or her
distributor at the time of each purchase of shares which qualifies
for the reduction.
Rights of Accumulation
For investors who already have an account with the Fund, reduced
sales charges based upon the sale charge schedule for the Fund are
applicable to subsequent purchases. The sales charge on each
additional purchase is determined by adding the current market
value of the shares the investor currently owns to the amount
being invested. The reduced sales charge is applicable only to
current purchases. It is the investor's responsibility to notify
the Transfer Agent at the time of subsequent purchases that the
account is eligible for the Right of Accumulation. The investor
must also give the account numbers of his accounts, and those
accounts held in the name of his spouse or for minor children, the
age of such children and the specific relationship of each such
person to the investor.
Letter of Intent
An investor of the Fund may qualify for a reduced sales charge
immediately by signing a non-binding Letter of Intent stating the
investor's intention to invest during the next 13 months a
specified amount which, if made at one time, would qualify for a
reduced sales charge. The first investment cannot be made more
than 90 days prior to the date of the Letter of Intent. Any
redemptions made during the 13-month period will be subtracted
from the amount of purchases in determining whether the Letter of
Intent has been completed. During the term of the Letter of
Intent, the Transfer Agent will hold shares representing 5% of the
indicated amount in escrow for payment of a higher sales load if
the full amount indicated in the Letter of Intent is not
purchased. The escrowed shares will be released when the full
amount indicated has been purchased. If the full amount indicated
is not purchased within the 13-month period, a shareholder's
escrowed shares will be redeemed in an amount equal to the
difference in the dollar amount of sales charge actually paid and
the amount of sales charge the shareholder would have had to pay
on his or her aggregate purchases if the total of such purchases
had been made at a single time. It is the shareholder's
responsibility to notify the Transfer Agent at the time the Letter
of Intent is submitted that there are prior purchases that may
apply.
The term "single purchaser" refers to (i) an individual, (ii) an
individual and spouse purchasing shares of the Fund for their own
account or for trust or custodial accounts of their minor
children, or (iii) a fiduciary purchasing for any one trust,
estate or fiduciary account, including employee benefit plans of a
single employer.
Sales at Net Asset Value
The Fund may sell Shares at net asset value (i.e., without
any initial sales charge) to certain categories of investors,
including:(1) investment advisory clients of the Advisors or their
affiliates; (2) officers and present or former Trustees of the
Fund; directors and present and full-time employees of selected
dealers or agents; or the spouse, sibling, direct ancestor or
direct descendant (collectively "relatives") of any such person;
or any trust, individual retirement account or retirement plan
account for the benefit of any such person or relative; or the
estate of any such person or relative, if such shares are
purchased for investment purposes (such shares may not be resold
except to the Fund); (3) the Advisors, the Distributor, and their
affiliates; and certain employee benefit plans for employees of
the Advisors and the Distributor; (4) employer-sponsored qualified
pension or profit-sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to Section 403(b)(7)
retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee
pension ("SEP") contributions are made), if such plans or accounts
are established or administered under programs sponsored by
administrators or other persons that have been approved by the
Distributor; (5) investors purchasing shares of the Fund with the
redemption proceeds from other mutual fund complexes on which the
investor has paid a front-end sales charge or was subject to a
deferred sales charge, whether or not paid, if such redemption
occurred no more than 30 days prior to the purchase of Fund
shares; and (6) Registered Investment Advisors who are purchasing
on behalf of their clients.
How to Redeem Shares
Shareholders may redeem their shares of the Fund on any business
day that the NYSE is open for business. Redemptions will be
effective at the net asset value (subject to any applicable CDSC
charges) next determined after receipt by the Transfer Agent of a
redemption request meeting the requirements described below.
Redemption by Mail
Shareholders may redeem their shares by submitting a written
request for redemption to First Data Investor Services Group,
Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.
A written redemption request to the Transfer Agent must be in good
order, which means that it must: (i) identify the shareholder's
account name and account number; (ii) state the number of shares
or dollar amount to be redeemed, and (iii) be signed by each
registered owner exactly as the shares are registered. To prevent
fraudulent redemptions, a signature guarantee for the signature of
each person in whose name an account is registered is required for
all written redemption requests exceeding $10,000 or where
proceeds are to be mailed to an address other than the address of
record. A guarantee may be obtained from any commercial bank,
credit union, member firm of a national securities exchange,
registered securities association, clearing agency or savings and
loan association. A credit union must be authorized to issue
signature guarantees. Signature guarantees will be accepted from
any eligible guarantor institution that participates in a
signature guarantee program. Notary public endorsements will not
be accepted in lieu of a signature guarantee. The Transfer Agent
may require additional supporting documents for redemptions made
by corporations, executors, administrators, trustees or guardians
and retirement plans.
A redemption request will not be deemed to be properly received
until the Transfer Agent receives all required documents in proper
form. Questions with respect to the proper form for redemption
requests should be directed to the Transfer Agent at (800)358-6215.
Redemption by Telephone
Shareholders who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by
calling the Transfer Agent at (800)358-6215 or (610) 239-4600
during normal business hours. In order to arrange for redemption
by wire or telephone after an account has been opened, or to
change the bank or account designated to receive redemption
proceeds, a written request with a signature guarantee must be
sent to the Transfer Agent.
The Fund reserves the right to refuse a wire or telephone
redemption if it is believed advisable to do so. Procedures for
redeeming Fund shares by wire or telephone may be modified or
terminated at any time.
During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event,
shareholders should follow the procedures for redemption by mail.
Neither the Fund nor any of its service contractors will be liable
for any loss or expense in acting upon telephone instructions that
are reasonably believed to be genuine. In this regard, the Fund
and the Transfer Agent require personal identification information
before accepting a telephone redemption. To the extent that the
Fund or the Transfer Agent fails to use reasonable procedures to
verify the genuineness of telephone instructions, the Fund may be
liable for losses due to fraudulent or unauthorized instructions.
Written confirmation will be provided for all redemption
transactions initiated by telephone. Proceeds from a telephone
redemption shall only be sent to the shareholder's address of
record or wired to the shareholder's bank account on file with the
Transfer Agent.
General Redemption Information
When a request for redemption is made shortly after the purchase
of shares, you will not receive the redemption proceeds until the
check(s) received for the shares purchased has cleared. The Fund
will mail the redemption proceeds as soon as the purchase check
clears, which may take up to 15 calendar days or more. You may
avoid such delays by purchasing shares with a federal funds wire.
Redemption proceeds may be wired directly to any bank previously
designated by an investor on his or her new account application.
There is a $9.00 charge for redemptions made by wire to domestic
banks. Wires to foreign or overseas banks may be charged at
higher rates. It should also be noted that banks may impose a fee
for wire services. In addition, there may be fees for redemptions
made through brokers, financial institutions and other service
organizations.
The Fund will satisfy redemption requests for cash to the fullest
extent possible, as long as such payments would not, in the
opinion of the Board of Trustees, result in the need for the Fund
to sell assets under disadvantageous conditions or to the
detriment of the remaining shareholders of the Fund. Pursuant to
the Fund's Trust instrument, however, payment for shares redeemed
may also be made in-kind, or partly in cash and partly in-kind.
The Fund has elected, pursuant to Rule 18f-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), to redeem its
shares solely in cash up to the lesser of $250,000 or 1% of the
net asset value of the Fund, during any 90 day period for any one
shareholder. Any portfolio securities paid or distributed in-kind
would be in readily marketable securities and valued in the manner
described below. See "Net Asset Value." In the event that an
in-kind distribution is made, a shareholder may incur additional
expenses, such as brokerage commissions, on the sale or other
disposition of the securities received from the Fund. In-kind
payments need not constitute a cross-section of the Fund's
portfolio.
The Fund may suspend the right of redemption or postpone the date
of payment for more than seven days during any period when (1)
trading on the NYSE is restricted or the NYSE is closed for other
than customary weekends and holidays, (2) the SEC has by order
permitted such suspension for the protection of the Fund's
shareholders, or (3) an emergency exists making disposal of
portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
Systematic Cash Withdrawal Plan
The Fund offers a Systematic Cash Withdrawal Plan as another
option which may be utilized by an investor who wishes to withdraw
funds from his or her account on a regular basis. To participate
in this option, an investor must either own or purchase shares
having a value of $10,000 or more. Automatic payments by check
will be mailed to the investor on either a monthly, quarterly,
semi-annual or annual basis. All withdrawals are processed on the
25th of the month or, if such day is not a business day, on the
next business day and paid promptly thereafter. If you would like
to start a Systematic Withdrawal, please complete the section of
your application or call the Transfer Agent at (800)358-6215 to
obtain the form.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts,
the Fund reserves the right to involuntarily redeem shares in any
account at its then current net asset value if at any time the
total investment does not have a value of at least $250 as result
of shareholder redemptions, but not market fluctuations. A
shareholder will be notified that the value of his or her account
is less than the required minimum and will be allowed at least 60
days to bring the value of the account up to the minimum before
the redemption is processed.
Retirement Plans
The Fund offers certain Individual Retirement Accounts for use by
certain individuals who qualify (including earned income from
self-employment). More detailed information about how to
participate in these IRA Plans, the fees charged by the custodian
bank, and brochures containing other pertinent information may be
obtained by contacting the Fund at (800)358-6215.
The Taxpayer Relief Act of 1997 ("Relief Act") impacts the
traditional IRA and creates one additional type of IRA.
Traditional (deductible) IRAs: The Relief Act will gradually
increase the adjusted gross income phaseouts for deductible IRAs
over the next ten years. Married individuals may make deductible
contributions even if spouses are active participants in an
employer-sponsored plan. The 10% early withdrawal tax will not
apply for up to $10,000 for first-time home purchases or education
expenses.
Roth IRAs: The Relief Act has created the new Roth IRA. While
contributions to a Roth IRA are not currently deductible, the
amounts within the accounts accumulate tax-free and qualified
distributions will not be included in a shareholder's taxable
income. The contribution limit is $2,000 annually ($4,000 for
joint returns) in aggregate with contributions to Traditional
IRAs. Certain income phaseouts apply.
Net Asset Value
The offering price and net asset value per share of the Fund are
calculated as of the close of regular trading on the NYSE,
currently 4:00 p.m., Eastern Time. Currently, the NYSE is closed
on the following holidays or days on which the following holidays
are observed: New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.
The net asset value per share is computed by adding the value of
all securities and other assets in the portfolio, deducting any
liabilities, and dividing by the total number of outstanding
shares. Expenses are accrued daily and applied when determining
the net asset value. The Fund's equity securities are valued
based on market quotations or, when no market quotations are
available, at fair value as determined in good faith by, or under
direction of, the Board of Trustees. Market quotations are
generally the last reported sales price on the principal exchange
on which the security trades, or if no sale price is reported, the
mean of the latest bid and asked prices provided by the
independent pricing service in accordance with procedures
established by the Board of Trustees. Securities traded
over-the-counter are priced at the mean of the latest bid and
asked prices. Securities are valued through valuations obtained
from a commercial pricing service.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes
represents fair value. When a security is valued at amortized
cost, it is valued at its cost when purchased, and thereafter by
assuming a constant amortization to maturity of any discount or
premium, regardless of the impact on fluctuating interest rates on
the market value of the instrument. All other securities and
other assets are valued at their fair value as determined in good
faith under procedures established by and under the supervision of
the Board of Trustees.
DISTRIBUTION PLAN
Rule 12b-1 adopted by the Commission under the 1940 Act permits an
investment company to pay expenses associated with the
distribution of its shares in accordance with a duly adopted plan.
The Fund has adopted a plan of distribution ("Plan") pursuant to
Rule 12b-1 and has entered into a Distribution Services Agreement
(the "Agreement") with the Distributor. The Plan permits the Fund
to pay the Distributor from the assets of the Fund, a monthly fee
for services provided and expenses incurred in the distribution
and promotion of shares of the Fund, including advertising
expenses and printing costs (e.g., sales materials used to offer
shares to the public). The Distributor may reallow all or a
portion of the payments received under the Plan to third parties,
including and providing personal services and/or maintaining
shareholder accounts ("service fees").
These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses
and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified
periods of time, and paying distribution and maintenance fees to
brokers, dealers and others.
Under the Plan, the fees paid by the Fund from the assets of the
the Fund to the Distributor and others may not exceed 0.25% of the
Funds' average daily net assets in any year. Amounts payable to
the Distributor with respect to the Fund under the Plan in a given
year may not fully reimburse the Distributor for its actual
distribution-related expenses during such year. In such event,
there is no carryover of such reimbursement obligations to
succeeding years.
The Plan is characterized as compensation plans because the
distribution and service fees will be paid to the Distributor
without regard to the distribution or shareholder services
expenses incurred by the Distributor or the amount of payments
made to financial institutions and intermediaries.
The Fund is not obligated under the Plans to pay any distribution
services fee in excess of the amounts set forth above. All
expenses of distribution and marketing in excess of the maximum
amounts permitted by the Plan per annum will be borne by the
Advisor and any amounts paid for the above services will be paid
pursuant to a servicing or other agreement.
Distribution expenses accrued in one fiscal year may not be
paid from distribution services fees received from the Fund in
subsequent fiscal years. The Fund intends to operate the Plan in
accordance with their terms and within the rules of the NASD
concerning sales charges.
The fees paid to the Distributor under the Plan are subject to
review and approval by the Fund's independent Trustees who have
the authority to reduce the fees or terminate the Plan at any
time. All payments to the Plan shall be made for the purpose of
selling shares issued by the Fund or servicing shareholder
accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund intends to distribute substantially all of its net
investment income and capital gains to shareholders each year.
Normally, income dividends will be declared in March, June,
September and December. Capital gains, if any, will normally be
distributed in December but may be made more frequently as deemed
advisable by the Board of Trustees. All such dividends and
distributions are taxable to the shareholder whether or not
reinvested in shares.
Reinvestments of dividends and distributions in additional shares
of the Fund will be made at the net asset value determined on the
ex-date of the dividend or distribution unless you elect in
writing to receive dividends or distributions in cash.
If you buy shares just before the Fund deducts a distribution from
its net asset value, you will pay the full price for the shares
and then receive a portion of the price back as a taxable
distribution.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which remains
uncashed for a period of more than one year may be reinvested in
the shareholder's account at the current net asset value, and the
dividend option may be changed from cash to reinvest.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the
"Code") so it will not pay federal taxes on either income or
capital gains distributed to shareholders, although there can be
no assurance that they will so qualify. Dividends representing net
investment income and distributions of net short-term capital
gains are taxable as ordinary income.
The excess of net capital gains over the net capital losses
realized and distributed by the Fund to its shareholders as
capital gains distributions is expected to be taxable to the
shareholders as mid-term or long-term capital gains, irrespective
of the length of time a shareholder may have held his or her
stock. Capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Distributions received by a shareholder may include nontaxable
returns of capital, which will reduce a shareholder's basis in
shares of the Fund. If that basis is reduced to zero (which could
happen if the shareholder does not reinvest distributions and
returns of capital are significant), any further returns of
capital will be taxable as capital gain.
Under the current federal tax law, the amount of an income
dividend or capital gains distribution declared by the Fund during
October, November and December of a year to shareholders of record
as of a specified date in such a month that is paid during January
of the following year is includable in the prior year's taxable
income of shareholders that are calendar year taxpayers.
A dividend or capital gains distribution with respect to shares of
the Fund held by a tax-deferred or qualified plan, such as an
individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, will not be taxable to
the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard
to the character of the income earned by the qualified plan.
The Fund will be required to withhold 31% of any payments made to
a shareholder if the shareholder has not provided a certified
taxpayer identification number to the Fund, or if they are
otherwise subject to backup withholding.
Shareholders will be advised annually as to the federal tax status
of income dividends, capital gain and return of capital
distributions made by the Fund for the preceding year.
Distributions by the Fund may be subject to state and local taxes.
Shareholders are urged to consult their tax advisor regarding
their own tax situation.
Change in Rates:
The Relief Act has lowered the tax rate for long-term capital
gains from 28% to 20%, but increases the holding period of the
assets from more than one year to more than eighteen months. For
persons in the 15% income tax bracket, the new rate is 10%.
Realized gains from capital assets held more than one year, but
eighteen months or less, will be taxed at a 28% rate. Such gains
will be termed "mid-term" capital gains.
Also, capital gains in property held for more than five years will
be eligible for an 18% tax rate or 8% for persons in the 15% tax
bracket, but this only applies to assets acquired after December
31, 2000; therefore, a shareholder will not benefit from this
provision until the year 2006.
PERFORMANCE INFORMATION
The Fund may advertise a variety of types of performance
information including "average annual return," "total return" and
"cumulative total return." Each of these figures is based upon
historical results and does not represent the future performance
of the Fund. Total return is the change in value of an investment
in the Fund over a particular period, assuming that all
distributions have been reinvested. Average annual return
reflects the average percentage change per year in the value of an
investment in the Fund. Cumulative total return reflects the
total percentage change over the stated period.
Please refer to the Statement of Additional Information for more
information on performance.
GENERAL INFORMATION
ORGANIZATION
The Sports Funds Trust (the "Trust") is a Delaware business trust
organized pursuant to a Trust Instrument dated November 4, 1997.
The Trust is organized to offer separate series of shares and
currently offers a single series of shares called the Motorsports
Associated Growth & Income Fund. Currently, there is one class of
shares issued by the Fund. The Board of Trustees is empowered to
establish, without shareholder approval, additional series or
DESCRIPTION OF SHARES
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with no par value. Shares of the Fund
represent equal proportionate interests in the assets of the Fund
only, and have identical voting, dividend, redemption, liquidation
and other rights. All shares issued are fully paid and non-assessable,
and shareholders have no preemptive or other right to
subscribed to any additional shares.
VOTING RIGHTS
A shareholder is entitled to one vote for each full share held and
a fractional vote for each fractional share held. All shares of
the Fund participate equally in regard to dividends,
distributions, and liquidations with respect to the Fund.
Shareholders do not have preemptive, conversion or cumulative
voting rights.
SHAREHOLDER MEETINGS
Under Delaware law, the Fund is not required, and does not intend,
to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act.
Shareholders of 10% or more of the Fund's outstanding shares may
request that a special meeting be called to consider the removal
of any trustee. The Fund will assist in the communication with
other shareholders.
THE ADMINISTRATOR
The Fund has retained First Data Investor Services Group, Inc.
("Investor Services Group"), a wholly owned subsidiary of First
Data Corporation, which has its principal business address at 4400
Computer Drive, Westboro, MA 01581, to provide administrative
services to the Fund. Such services relate to administration,
operations and compliance. For such services, the Fund has agreed
to pay Investor Services Group a fee, subject to a minimum annual
fee of $55,000 as compared to an asset based fee computed at the
annual rate of 0.15% of the first $50 million of total average net
assets, 0.10% of the next $50 million of total average net assets
and 0.005% of total net assets in excess of $100 million.
TRANSFER AGENT AND FUND ACCOUNTANT
Investor Services Group also acts as transfer agent and maintains
the records of each shareholder's account, answers shareholder
inquiries, processes purchases and redemptions and acts as
dividend disbursing agent. Investor Services Group also performs
certain accounting and pricing services for the Fund, including
the daily calculation of the Fund's net asset value per share.
CUSTODIAN
Pursuant to arrangements between the Trust, The Bank of New York
and Investor Services Group, The Bank of New York serves as
custodian of all securities and cash owned by the Trust. The Bank
of New York performs no managerial or policy-making functions for
the Funds. Pursuant to agreements between The Bank of New York
and Investor Services Group, Investor Services Group performs
certain administrative and record keeping services. The Bank of
New York reallows a portion of its custody fee to Investor
Services Group for providing such services.
SHAREHOLDER REPORTS AND INQUIRIES
The Fund issues unaudited financial information semiann
ually and audited financial statements annually. Shareholder
inquiries should be addressed to the Fund c/o First Data Investor
Services Group, Inc. , 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903. Purchase and redemption transactions
should be made through the Transfer Agent by calling (800)358-6215
or (610) 239-4600.
YEAR 2000 ISSUES
Many earlier computer programs include only two digit date codes.
This could cause many computers to read January 1, 2000 as January 1, 1900.
The mutual fund, computer and consulting industry has been working for to fix
this problem for the past five years. The Fund including all of its services
providers intend to be fully Year 2000 compliant by December 1999.
<PAGE>
<PAGE> [OUTSIDE BACK COVER]
INVESTMENT Advisor
Pegasus Advisory Group, Inc.
5-H Oak Branch Dr
Greensboro NC 27407
INVESTMENT SUB-ADVISOR
Chartwell Investment Partners
1235 Westlakes Drive
Suite 330
Berwyn, PA 19312
DISTRIBUTOR
FPS Broker Services, Inc.
3200 Horizon Drive, P.O. Box 61503
King of Prussia, PA 19406
(800)358-6215
SHAREHOLDER SERVICES
First Data Investor Services Group, Inc.
3200 Horizon Drive, P.O. Box 61503
King of Prussia, PA 19406
(800)358-6215
610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
Dechert Price and Rhoads
1500 "K" Street
Washington DC 20005
AUDITORS
Price Waterhouse LLP
30 17th Street
Philadelphia PA 19103
<PAGE>
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
May 29, 1998
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Prospectus describing The
Motorsports Associated Growth & Income Fund (the "Fund") dated May
28, 1998, and is incorporated by reference in its entirety into
the Prospectus. The Prospectus may be amended or supplemented
from time to time. No investment in shares should be made without
first reading the Prospectus. A copy of the Prospectus may be
obtained without charge by contacting the Fund's Distributor, FPS
Broker Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903, or by calling (800) 358-6215.
No person has been authorized to give any information or to make
any representations not contained in this Statement of Additional
Information or in the Prospectus in connection with the offering
made by the Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus does not
constitute an offering by the Trust or by the distributor in any
jurisdiction in which such offering may not lawfully be made.
<PAGE>
<PAGE> TABLE OF CONTENTS
Page
The Trust and the Fund . . . . . . . . . . . . . . . . . .
Investment Policies and Techniques
Common Stock
Preferred Stock
Convertible Securities
Options
Futures
Securities Lending
Illiquid Securities
Rule 144A Securities
Borrowing
Other Investments
Investment Restrictions
Investment Advisory and Other Services
Investment Advisory Agreement
Sub-Advisory Agreements
Administrator, Transfer Agent and Fund Accountant
Distributor
Trustees and Officers
Net Asset Value
Taxes
Federal Income Tax
Portfolio Transactions
Performance Information
In General
Total Return Calculation
Performance and Advertisements
Other Information
Financial Statements<PAGE>
<PAGE> THE TRUST AND THE FUND
This Statement of Additional Information relates to the
Motorsports Associated Growth & Income Fund (the "Fund"), a
separate series of The Sports Funds Trust (the "Trust"), a
diversified, open-end management company established on November
4, 1997 under Delaware law as a Delaware business trust. The
Trust Instrument permits the Trust to offer separate series of
shares of beneficial interest. The Trust currently is comprised
of one series, which offers its shares through one class of
shares. To the extent that the Trust is a newly formed entity, it
has no prior history. The Fund is advised by its Advisor (the
"Advisor") Pegasus Advisory Group, Inc. and its Sub-Advsior (the
"Sub-Advisor"), Chartwell Investment Partners, collectively (the
"Advisors")
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. No
investment in shares of the Fund should be made without first
reading the Prospectus.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the
Prospectus for the Fund regarding the permitted investments and
risk factors and the investment objective and policies of the
Fund.
Common Stock
Common stock is defined as shares of a corporation that entitle
the holder to a pro rata share of the profits of the corporation,
if any, without a preference over any other shareholder or class
of shareholders, including holders of the corporation's preferred
stock and other senior equity. Common stock usually carries with
it the right to vote, and frequently, an exclusive right to do so.
Holders of common stock also have the right to participate in the
remaining assets of the corporation after all other claims,
including those of debt securities and preferred stock, are paid.
Preferred Stock
Generally, preferred stock receives dividends prior to
distributions on common stock and usually has a priority of claim
over common stockholders if the issuer of the stock is liquidated.
Unlike common stock, preferred stock does not usually have voting
rights; preferred stock, in some instances, is convertible into
common stock. In order to be payable, dividends on preferred
stock must be declared by the issuer's Board of Directors or
Trustees. Dividends on the typical preferred stock are
cumulative, causing dividends to accrue even if not declared by
the issuer. There is, however, no assurance that dividends will
be declared by the issuers of the preferred stocks in which the
Fund invests.
Convertible Securities
Each Fund may invest in convertible securities of issuers located
in the United States. Common stock occupies the most junior
position in a company's capital structure. Convertible securities
entitle the holder to exchange the securities for a specified
number of shares of common stock, usually of the same company, at
specified prices within a certain period of time and to receive
interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, and are senior
to the claims of preferred and common shareholders. In the case
of preferred stock and convertible preferred stock, the holder's
claims on assets and earnings are subordinated to the claims of
all creditors but are senior to the claims of common shareholders.
To the extent that a convertible security's investment value is
greater than its conversion value, its price will be primarily a
reflection of such investment value and its price will be likely
to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security. If the conversion
value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition,
may sell at some premium over its conversion value. At such times
the price of the convertible security will tend to fluctuate
directly with the price of the underlying equity security.
Options
The Fund may invest in put and call options for various securities
and securities indices that are traded on national securities
exchanges, from time to time, as the Advisors deems to be
appropriate. The Fund may also engage in writing call options.
The Fund will write only covered call options (options on
securities owned by the Fund). A put option gives the purchaser
of the option the right to sell, and the writer the obligation to
buy, the underlying security at any time during the option period.
A call option gives the purchaser of the option the right to buy,
and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The
premium paid to the writer is the consideration for undertaking
the obligations under the option contract. Options will be used
only for hedging purposes and will not be engaged in for
speculative purposes. Currently, the Fund will not enter into
options transactions to the extent that the aggregate value of the
portfolio securities subject to options or invested in options
positions exceeds 5% of the Fund's net assets as of the time the
Fund purchases or enters into such options.
Futures
The Fund may enter into contracts for the purchase or sale for
future delivery of securities, including index contracts. Futures
contracts are generally considered to be derivative securities.
While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally
terminated by entering into offsetting transactions.
The Fund may enter into such futures contracts to protect against
the adverse effects of fluctuations in security prices, or
interest rates without actually buying or selling the securities.
For example, if interest rates are expected to increase, the Fund
might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as
selling an equivalent value of the debt securities owned by the
Fund. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the
futures contracts to the Fund would increase at approximately the
same rate, thereby keeping the net asset value of the Fund from
declining as much as it otherwise would have. Similarly, when it
is expected that interest rates may decline, futures contracts may
be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices. Since the fluctuations in the value
of futures contracts should be similar to those of debt
securities, the Fund could take advantage of the anticipated rise
in value of debt securities without actually buying them until the
market had stabilized. At that time, the futures contracts could
be liquidated and the Fund could then buy debt securities on the
cash market.
A stock index futures contract obligates the seller to deliver
(and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract
and the price at which the agreement was made. Open futures
contracts are valued on a daily basis and a Fund may be obligated
to provide or receive cash reflecting any decline or increase in
the contract's value. No physical delivery of the underlying
stocks in the index is made in the future.
With respect to options on futures contracts, when the Fund is
temporarily not fully invested, it may purchase a call option on a
futures contract to hedge against a market advance. The purchase
of a call option on a futures contract is similar in some respects
to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the
price of the futures contract upon which it is based, or the price
of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt
securities. As with the purchase of futures contracts, when a
Fund is not fully invested, it may purchase a call option on a
futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is
deliverable upon exercise of the futures contract. If the futures
price at the expiration of the option is below the exercise price,
the Fund will retain the full amount of the option premium which
provides a partial hedge against any decline that may have
occurred in the value of the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security or
foreign currency which is deliverable upon exercise of the futures
contract.
If the futures price at the expiration of the option is higher
than the exercise price, the Fund will retain the full amount of
the option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase.
Call and put options on stock index futures are similar to options
on securities except that, rather than the right to purchase or
sell stock at a specified price, options on a stock index future
give the holder the right to receive cash. Upon exercise of the
option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by delivery
of the accumulated balance in the writer's futures margin account
which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the
futures contract. If an option is exercised on the last trading
day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing price of the futures
contract on the expiration date.
If a put or call option which a Fund has written is exercised, the
Fund may incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation
between changes in the value of its portfolio securities and
changes in the value of its options positions, the Fund's losses
from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The
purchase of a put option on a futures contract is similar in some
respects to the purchase of protective puts on portfolio
securities and for Federal tax purposes, will be considered a
"short sale". For example, a Fund will purchase a put option on a
futures contract to hedge the Fund's portfolio against the
risk of rising interest rates.
To the extent that market prices move in an unexpected direction,
the Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize a loss.
For example, if the Fund is hedged against the possibility of an
increase in interest rates which would adversely affect the price
of securities held in its portfolio and interest rates decrease
instead, the Fund would lose part or all of the benefit of the
increased value which it has because it would have offsetting
losses in its futures position. In addition, in such situations,
if the Fund had insufficient cash, it may be required to sell
securities from its portfolio to meet daily variation margin
requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising
market. A Fund may be required to sell securities at a time when
it may be disadvantageous to do so.
Further, with respect to options on futures contracts, the Fund
may seek to close out an option position by writing or buying an
offsetting position covering the same securities or contracts and
have the same exercise price and expiration date. The ability to
establish and close out positions on options will be subject to
the maintenance of a liquid secondary market, which cannot be
assured.
Securities Lending
The Fund may lend portfolio securities to broker-dealers and
financial institutions provided that (1) the loan is secured
continuously by collateral marked-to-market daily, and maintained
in an amount at least equal to the current market value of the
securities loaned; (2) the Fund may call the loan at any time and
receive the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities and (4) the
aggregate market value of securities loaned by the Fund will not
at any time exceed 33% of the total assets of the Fund.
Collateral will consist of U.S. government securities, cash
equivalents or irrevocable letters of credit. Loans of securities
involve a risk that the borrower may fail to return the securities
or may fail to maintain the proper amount of collateral.
Therefore, the Fund will only enter into portfolio loans after a
review by the Advisors, under the supervision of the Board of
Trustees, including a review of the creditworthiness of the
borrower. Such reviews will be monitored on an ongoing basis.
Illiquid Securities
The Board of Trustees has delegated the function of making
day-to-day determinations of liquidity to the Advisors pursuant to
guidelines approved by the Board of Trustees. The Advisors will
monitor the liquidity of securities held by the Fund, and report
periodically on such determinations to the Board of Trustees. The
Fund will not invest more than 15% of its net assets in illiquid
securities (securities that may not be sold within seven days at
approximately the price used in determining the net asset value of
Fund shares), including restricted securities. See "Rule 144A
Securities" below.
Rule 144A Securities
The Fund may invest in securities that are exempt from the
registration requirements of the Securities Act of 1933 pursuant
to Securities Exchange Commission ("SEC") Rule 144A. Securities
purchased pursuant to Rule 144A are traded among qualified
institutional buyers and may be subject to the Fund's limitation
on illiquid investment.
Investing in securities under Rule 144A could have the effect of
increasing the levels of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in
purchasing these securities. The Fund will limit its investments
in illiquid securities including securities of issuers which the
Fund is restricted from selling to the public without registration
under the Securities Act of 1933 to no more than 15% of the Fund's
net assets (excluding restricted securities eligible for resale
pursuant to Rule 144A that have been determined to be liquid by
the Fund's Board of Trustees).
Borrowing
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not purchase
securities while its borrowings exceed 5% of its total assets.
The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank with the
required asset coverage of at least 300%.
Repurchase Agreements
The financial institutions with whom the Fund may enter into
repurchase agreements are banks and non-bank dealers of U.S.
Government securities that are listed on the Federal Reserve Bank
of New York's list of reporting dealers and banks, if such banks
and non-bank dealers are deemed creditworthy by the Advisors. The
Advisors will continue to monitor the creditworthiness of the
seller under a repurchase agreement, and will require the seller
to maintain during the term of the agreement the value of the
securities subject to the agreement at not less than the
repurchase price. The Fund will only enter into a repurchase
agreement where the market value of the underlying security,
including interest accrued, will at all times be equal to or
exceed the value of the repurchase agreement.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees
may, in the future, authorize the Fund to invest in securities
other than those listed here and in the prospectus, provided that
such investment would be consistent with the Fund's investment
objective, and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental
restrictions and may not be changed without the approval of a
majority of the outstanding voting shares (as defined in the 1940
Act) of the Fund. Unless otherwise indicated, all percentage
limitations listed below apply only at the time of the
transaction. Accordingly, if a percentage restriction is adhered
to at the time of investment, a later increase or decrease in the
percentage which results from a relative change in values or from
a change in the Fund's total assets will not be considered a
violation.
Except as set forth under "INVESTMENT OBJECTIVE" and "INVESTMENT
POLICIES" and "DESCRIPTION OF PERMITTED INVESTMENTS AND RISK
FACTORS" in the Prospectus, the Fund may not:
(1) Invest less than 80% of its total net assets in companies
which are involved in Motorsports or Motorsports Associated;
(2) As to 75% of its total assets, purchase the securities of
any one issuer (other than securities issued by the U.S.
Government or its agencies or instrumentalities), if
immediately after such purchase more than 5% of the value of
the Fund's total assets would be invested in securities of a
single issuer;
(3) Purchase or sell real estate (but this restriction shall not
prevent a Fund from investing directly or indirectly in
portfolio instruments secured by real estate or interests
therein or acquiring securities of real estate investment
trusts or other issuers that deal in real estate), interests
in oil, gas and/or mineral exploration or development
programs or leases;
(4) Purchase or sell commodities or commodity contracts, except
that a Fund may enter into futures contracts and options
thereon in accordance with such Fund's investment objectives
and policies;
(5) Make investments in securities for the purpose of exercising
control;
(6) Purchase the securities of any one issuer if, immediately
after such purchase, a Fund would own more than 10% of the
outstanding voting securities of such issuer;
(7) Sell securities short or purchase securities on margin,
except for such short-term credits as are necessary for the
clearance of transactions. For this purpose, the deposit or
payment by a Fund for initial or maintenance margin in
connection with futures contracts is not considered to be
the purchase or sale of a security on margin;
(8) Make loans, except that this restriction shall not prohibit
(a) the purchase and holding of debt instruments in
accordance with a Fund's investment objectives and policies,
(b) the lending of portfolio securities, or (c) entry into
repurchase agreements with banks or broker-dealers;
(9) Borrow money or issue senior securities, except that each
Fund may borrow from banks for temporary purposes in amounts
up to one-third of the value of its total assets at the time
of such borrowing; or mortgage, pledge, or hypothecate any
assets, except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts
borrowed or 5% of the value of the total assets of the Fund
at the time of its borrowing. All borrowings will be done
from a bank and asset coverage of at least 300% is required.
A Fund will not purchase securities when borrowings exceed
5% of that Fund's total assets;
(10) Purchase the securities of issuers conducting their
principal business activities in the same industry (other
than obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or Motorsports
or Motorsports Associated Companies as defined) if
immediately after such purchase the value of a Fund's
investments in such industry would exceed 25% of the value
of the total assets of the Fund;
(11) Act as an underwriter of securities, except that, in
connection with the disposition of a security, a Fund may be
deemed to be an "underwriter" as that term is defined in the
Securities Act;
(12) Invest in puts, calls, straddles or combinations thereof
except to the extent disclosed in the Prospectus; and
(13) Invest more than 5% of its total assets in securities of
companies less than three years old. Such three-year period
shall include the operation of any predecessor company or
companies.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Advisor have entered into an investment advisory
agreement (the "Investment Advisory Agreement"). The Investment
Advisory Agreement provides that the Advisor shall not be
protected against any liability to the Fund or its shareholders if
it has engaged in conduct constituting willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard of its obligations or duties
thereunder.
The continuance of the Investment Advisory Agreement, after the
first two years, must be specifically approved at least annually
(i) by the vote of the Trustees or by a vote of the shareholders
of Fund, and (ii) by the vote of a majority of the Trustees who
are not parties to the Investment Advisory Agreement or
"interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The
Investment Advisory Agreement will terminate if assigned, and is
terminable at any time without penalty by the Trustees of the
Fund, or by a majority of the outstanding shares of the Fund on 60
days' written notice to the Advisor.
Sub-Advisory Agreement
The Fund has entered into a Sub-Advisory Agreement with Chartwell
Investment Partners ("Chartwell" or the "Sub-Advisor") to assist
in the selection and management of the Fund's investment
securities. It is the responsibility of the Sub-Advisor, under
the direction of the Advisor, to make the day-to-day investment
decisions for the Fund, and to place the purchase and sale orders
for the portfolio transactions of the Fund, consistent with the
Fund's investment objective and policies and subject to the
general direction of the Advisor.
For its services, Chartwell receives from the Fund an annual fee
equal to 0.70% of the Fund's average daily net assets.
The Sub-Advisory Agreement is initially effective for two years.
The Sub-Advisory Agreement may be renewed by the parties after its
initial term only so long as such renewal and continuance are
specifically approved at least annually by the Board of Trustees
or by vote of a majority of the outstanding voting securities of
the Fund, and only if the terms of renewal thereof have been
approved by the vote of a majority of the Trustees of the Fund who
are not parties thereto or interested persons of any such party,
cast in person at the meeting called for the purpose of voting on
such approval. The Sub-Advisory Agreement will automatically
terminate in the event of its assignment, and is terminable at any
time without penalty by the Advisor, Chartwell or by the Trustees
of the Fund, or by a majority of the outstanding shares of the
Fund on 60 days' written notice to the Advisor, Chartwell or the
Fund.
Chartwell is a limited partnership organized under the laws of the
commonwealth of Pennsylvania. Winthrop S. Jessup serves as
Chartwell's principal executive officer. Chartwell has one
general partne, Chartwell G.P., Inc. The address for Chartwell
and for Chartwell G.P. is 1235 Westlakes Drive, Suite 330, Berwyn
PA 19312.
The Administrator, Transfer Agent and Fund Accountant
First Data Investor Services Group, Inc. ("Investor Services
Group"), a wholly owned subsidiary of First Data Corporation,which
has its principal business address at 4400 Computer Drive,
Westboro, MA 01581 (the "Administrator", "Transfer Agent" and
"Fund Accountant") provides certain administrative and other
services to the Fund pursuant to an Investment Company Services
Agreement.
Under the Investment Company Services Agreement, the
Administrator: (1) coordinates with the Custodian and Transfer
Agent and monitors the services they provide to the Fund; (2)
coordinates with and monitors any other third parties furnishing
services to the Fund (e.g. the Fund's independent auditors,
printers, etc.); (3) provides the Fund with necessary office
space, telephones and other communications facilities and
personnel competent to perform administrative and clerical
functions; (4) supervises the maintenance by third parties of such
books and records of the Fund as may be required by applicable
federal or state law; (5) prepares and, after approval by the
Fund, files and arranges for the distribution of proxy materials
and periodic reports to shareholders of the Fund as required by
applicable law; (6) prepares and, after approval by the Fund,
arranges for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory
authorities as may be required by applicable law; (7) reviews and
submits to the officers of the Fund for their approval invoices or
other requests for payment of the Fund's expenses and instructs
the Custodian to issue checks in payment thereof and (8) takes
such other action with respect to the Fund as may be necessary in
the opinion of the Administrator to perform its duties under the
agreement.
Pursuant to this Investment Company Services Agreement, Investor
Services Group receives an administrative services fee computed at
the annual rate of 0.15% of the first $50 million of total average
net assets, 0.10% of the next $50 million of total average net
assets and 0.05% of total net assets in excess of $100 million.
Pursuant to the Investment Company Services Agreement, aggregate
administrative services fees shall not be less than $55,000.
Investor Services Group also receives fees under the Investment
Company Services Agreement for providing transfer agency services
and fund accounting services.
Distributor
FPS Broker Services, Inc. ( "FPSB"), a broker-dealer affiliated
with Investor Services Group, acts as the Fund's principal
underwriter in a continuous offering of the Fund's shares pursuant
to an underwriting agreement approved by the Board of Trustees.
In this regard, the FPSB has agreed at its own expense to qualify
as a broker-dealer under all applicable federal or state laws in
those states which the Fund shall from time to time identify to
the FPSB as states in which it wishes to offer its shares for
sale, in order that state registrations may be maintained for the
Fund.
The FPSB is a broker-dealer registered with the U.S. Securities
and Exchange Commission and a member in good standing of the
National Association of Securities Dealers, Inc.
Shares of the Fund are subject to a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act.
As provided in the Distribution Plan, the Fund will pay an annual
fee of 0.25% of the Fund's average daily net assets to FPSB as
compensation for its services. From this amount, FPSB may make
payments to financial institutions and intermediaries such as
banks, savings and loan associations, insurance companies,
investment counselors and broker-dealers as compensation for
services, reimbursement of expenses incurred in connection with
distribution assistance or provision of shareholder services. The
Distribution Plan is characterized as a compensation plan because
the distribution fee will be paid to the FPSB without regard to
the distribution or shareholder service expenses incurred by FPSB
or the amount of payments made to financial institutions and
intermediaries. The Fund intends to operate the Distribution Plan
in accordance with its terms and within the rules of the National
Association of Securities Dealers, Inc. concerning sales charges.
Pursuant to such rules, the FPSB is required to limit aggregate
initial sales charges and asset-based sales charges to 6.25% of
total gross sales.
The Distribution Plan will continue in effect from year to year,
provided that each such continuance is approved at least annually
by a vote of the Board of Trustees, including a majority vote of
the Trustees who are not parties to the Distribution Plan or
"interested persons" of any party thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of
voting on such continuance. The Distribution Plan may be
terminated at any time, without penalty, by vote of a majority of
the Disinterested Trustees or by vote of the holders of a majority
of the outstanding shares of the Fund on not more than 60 days',
nor less than 30 days' written notice to any other party to the
Distribution Plan. The Distribution Plan may not be amended to
increase materially the amounts to be spent for the services
described herein without approval by the shareholders, and all
material amendments are required to be approved by the Board of
Trustees. The Distribution Plan will automatically terminate in
the event of its assignment. Pursuant to the Distribution Plan,
the Board of Trustees will review at least quarterly a written
report of the distribution expenses incurred on behalf of the
Fund. The report will include an itemization of the distribution
expenses and the purpose of such expenditures.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund and their
principal occupations for the last five years are set forth below.
Each Trustee who is an "interested person" of the Fund, as that
term is defined in the 1940 Act, is indicated by an asterisk.
Position Principal
Name Age with Fund Occupation
Jack Ray Plymale 53 President & Trustee
5 H-Oak Branch Drive
Greensboro NC 27507 President of
Pegasus Sports
Marketing, Inc.
(marketing
consulting) from
12/96 to present.
Vice President of
Newman Machine
Company(Manufacturing)
from 5/75 to 11/95
Kenneth Alan Melton 48 Trustee & Vice-President
5-H Oak Branch Drive
Greensboro NC 27507 Executive Vice-
President of
Pegasus Sports
Marketing, Inc.
(Marketing
consulting) from
5/97 to present.
President of
Falcon Financial
Management Group,
Inc. from 6/95
to 10/96.
Manager, Human
Resources,
Shionogi
Qualicaps
(Manufactoring)
from 7/93 to
2/95.
Dixon R Johnston 56 Trustee
P.O. Box 100
Valdese NC 28690 Vice president of
Albs-Waldensian
(Apparel) from
2/96 to Present.
Executive Vice-
President of Geta
Davies (apparel)
from 2/95 to
2/96. Director,
Sun Box
International
(collectibles)
from 10/94 to
2/95. Executive
Vice-President,
Trune
Advertising(advertising)
from 10/90 to 10/94.
Charles K. Criss 66 Trustee
312 Niblick Circle
Winter Haven Fl 33881 Owner of Criss
Associates
(consulting) from
1/97 to present.
Treasurer of Sun
Pacific Foods,
Inc (Citrus
Processing) from
11/82 to 1/97
COMPENSATION TABLE
Trustees and Officers
Estimated Aggregate Estimated total
Name of Compensation from Compensation from
Trustee/ Trust for Fiscal Trust and Fund
Officer /1/ Year End 2/28/99 Complex Paid to Trustees/1/
Jack Ray Plymale* 0 0
Kenneth Alan Melton* 0 0
Dixon R Johnston $3,500 $3,500
Charles K. Criss $3,500 $3,500
* These Trustee is considered an "Interested Person" of the Trust
as defined under the 1940 Act.
(1) This amount represents the estimated aggregate amount of
compensation paid to the Trustees for service on the Board of
Trustees for the fiscal year ending February 28, 1999.
No officer or Trustee of the Trust who is also an officer or
employee of the Advisor or Sub-Advisor receives any compensation
from the Trust for services to the Trust. The Trust pays each
Trustee who is not affiliated with the Advisor or Sub-Advisor an
annual retainer of $2,500 plus a fee of $250 for attendance at
Board Meetings and reimburses each Trustee and officer for
out-of-pocket expenses in connection with travel and attendance at
such meetings. Members of the audit committee, Mr Johnston and
Criss, receive no money for audit committee meetings.
NET ASSET VALUE
A more complete discussion of the Fund's determination of net
asset value is contained in the Prospectus. The net asset value
per share is computed by dividing the value of the assets of the
Fund, less its liabilities, by the number of shares outstanding.
The net asset value of all outstanding shares will be computed on
a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value
of shares. All income earned and expenses incurred by the Fund
will be borne on a pro-rata basis by each outstanding share.
Portfolio securities are valued and net asset value per share is
determined as of the close of regular trading on the New York
Stock Exchange ("NYSE") which currently is 4:00 p.m. (Eastern
Time), on each day the NYSE is open for trading.
TAXES
The following is only a summary of certain federal tax
considerations generally affecting the Fund and its shareholders
that are not described in the Prospectus, and is not intended as a
substitute for careful tax planning. Shareholders are urged to
consult their tax advisor with specific reference to their own tax
situations, including their state and local tax liabilities.
Non-U.S. investors should consult their tax advisor concerning the
tax consequences of ownership of shares of the Fund, including the
possibility that distributions may be subject to a 30% United
States withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. New
legislation, as well as administrative changes or court decisions,
may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions
contemplated herein.
The Fund intends to qualify as a "regulated investment company"
("RIC") as defined under Subchapter M of the Code. By following
such a policy, the Fund expects to eliminate or reduce to a
nominal amount the federal income taxes to which it may be
subject. In order to qualify for treatment as a RIC under the
Code, the Fund generally must distribute annually to its
shareholders at least 90% of its investment company taxable income
(generally, net investment income plus net short-term capital
gain) (the "Distribution Requirement") and also must meet several
additional requirements. Among these requirements are the
following: (i) at least 90% of the Fund's gross income each
taxable year must be derived from dividends, interest, payments
with respect to securities loans, and gains from the sale or other
disposition of stock or securities, or certain other income; (ii)
at the close of each quarter of the Fund's taxable year, at least
50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other
RICs and other securities, with such other securities limited, in
respect to any one issuer, to an amount that does not exceed 5% of
the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer and
(iii) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its assets may be invested in
securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same,
similar or related trades or businesses. Notwithstanding the
Distribution Requirement described above, which requires only that
the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of
net capital gain, the Fund will be subject to a nondeductible 4%
federal excise tax to the extent that it fails to distribute by
the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income (the excess of short-
and long-term capital gains over short- and long-term capital
losses) for the one-year period ending on October 31 of that year,
plus certain other amounts. The Fund intends to make sufficient
distributions of its ordinary income and capital gain net income
prior to the end of each calendar year to avoid liability for
federal excise tax.
In certain cases, the Fund will be required to withhold, and remit
to the United States Treasury, 31% of any distributions paid to a
shareholder who (1) has failed to provide a correct taxpayer
identification number, (2) is subject to backup withholding by the
Internal Revenue Service or (3) has not certified to the Fund that
such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it
will be subject to tax on its taxable income at regular corporate
rates. In such an event, all distributions from the Fund generally
would be eligible for the corporate dividend received deduction
for corporate shareholders.
PORTFOLIO TRANSACTIONS
The Fund does not have an obligation to deal with any
broker/dealer or group of broker/dealers in the execution of
transactions in portfolio securities.
Subject to policies established by the Trustees, the Sub-Advisor
is responsible for placing the orders to execute transactions for
the Fund. In placing orders, it is the policy of the Fund to seek
to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and
difficulty of the transaction involved, the firm's general
execution and operational facilities, and the firm's risk in
positioning the securities involved. While the Sub-Advisor
generally seeks reasonably competitive spreads, the Fund will not
necessarily be paying the lowest spread available.
PERFORMANCE INFORMATION
From time to time, the Fund's total return may be quoted in
advertisements, shareholder reports or other communications to
shareholders.
Total Return Calculation
The Fund computes average annual total return by determining the
average annual compounded rate of return during specified periods
that equate the initial amount invested to the ending redeemable
value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial investment by
$1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation
can be expressed as follows:
T = [( ERV ) 1/n - 1 ]
----
P
Where: T = average annual total return
ERV = ending redeemable value at the end of
the period covered by the computation of
a hypothetical $1,000 investment made at
the beginning of the period.
P = hypothetical initial investment of
$1,000.
n = period covered by the computation,
expressed in terms of years.
The Fund may also compute the aggregate total return by
determining the aggregate compounded rate of return during
specified periods that likewise equate the initial amount invested
to the ending redeemable value of such investment. The formula
for calculating aggregate total return is as follows:
A = [ERV - P ]
---
P
Where: A = aggregate total return
ERV = ending redeemable value at the end of
the period covered by the computation of
hypothetical $1,000 investment made at
the beginning of the period.
P = hypothetical initial investment of
$1,000.
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital
gain distributions on the reinvestment dates during the period.
The ending redeemable value (variable "ERV" in each formula) is
determined by assuming complete redemption of the hypothetical
investment and the deduction of all nonrecurring charges at the
end of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund
should not be used to compare an investment in the Fund's shares
with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed-upon or guaranteed
fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and
quality of the instruments held in a portfolio, portfolio
maturity, operating expenses and market conditions.
Performance and Advertisements
From time to time, in marketing and other fund literature, the
Fund's performance may be compared to the performance of other
mutual funds in general or to the performance of particular types
of mutual funds with similar investment goals, as tracked by
independent organizations. Among these organizations, Lipper
Analytical Services, Inc. ("Lipper"), a widely used independent
research firm which ranks mutual funds by overall performance,
investment objectives and assets, may be cited. Lipper
performance figures are based on changes in net asset value, with
all income and capital gains dividends reinvested. Such
calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and
portfolio holdings. The Fund's performance may also be compared
to the average performance of its Lipper category.
The Fund's performance may also be compared to the performance of
other mutual funds by Morningstar, Inc. ("Morningstar") which
ranks funds on the basis of historical risk and total return.
Morningstar's rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the historical
risk level and total return of a fund as a weighted average for
three-, five- and ten-year periods. Ranks are not absolute or
necessarily predictive of future performance. The Fund may also
compare its performance to a wide variety of indices.
In assessing such comparisons of yield, return or volatility, an
investor should keep in mind that the composition of the
investments in the reported indices and averages is not identical
to those of the Fund, that the averages are generally unmanaged,
and that the items included in the calculations of such averages
may not be identical to the formula used by the Fund to calculate
its figures.
OTHER INFORMATION
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only
for his or her own willful defaults and, if reasonable care has
been exercised in the selection of officers, agents, employees
Advisors or Sub-Advisors, shall not be liable for any neglect or
wrongdoing of any such person. The Trust Instrument also provides
that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of
their offices with the Trust unless it is determined in the manner
provided in the Trust Instrument that they have not acted in good
faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Trust Instrument
shall protect or indemnify a Trustee against any liability for his
willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties.
Custodian
The Bank of New York, 48 Wall Street, New York, New York 10286 is
custodian of the Fund's assets pursuant to a custody agreement.
Under the custody agreement, The Bank of New York (i) maintains a
separate account or accounts in the name of the Fund, (ii) holds
and transfers portfolio securities on account of the Fund, (iii)
accepts receipts and makes disbursements of money on behalf of the
Fund, (iv) collects and receives all income and other payments and
distributions on account of the Fund's securities, and (v) makes
periodic reports to the Board of Trustees concerning the Fund's
operations.
Independent Auditors
Price Waterhouse LLP ("Price Waterhouse") has been selected as the
independent auditors for the Fund. Price Waterhouse provides audit
and tax services. The books of the Fund will be audited at least
once a year by Price Waterhouse.
Reports to Shareholders
Shareholders will receive unaudited semi-annual reports describing
the Fund's investment operations and annual financial statements
audited by independent accountants.
Shareholder Inquiries
Inquiries regarding the Fund may be directed to the Fund by
calling (800)358-6215. <PAGE>
<PAGE>
The Sports Funds Trust
Motorsports Associated Growth & Income Fund
Statement of Assets and Liabilities
May 29, 1998
Assets
Cash $100,000
Deferred Organization Costs 65,000
Prepaid Assets 21,810
---------
Total Assets $186,810
---------
Liabilities
Due to Pegasus Advisory Group, Inc.
for Organizational Costs $ 65,000
Due to Pegasus Advisory Group, Inc.
for State Registration Costs 21,810
---------
Total Liabilities 86,810
---------
Net Assets $100,000
----------
----------
Net Assets consist of:
An unlimited number of shares of beneficial
interest authorized-no par value; 6,666.667
shares issued and outstanding $100,000
---------
---------
Net asset value, offering and redemption
price per share $15.00
------
------
Maximum offering price per share:
Net asset value per share/94.25% $15.92
------
------
The accompanying notes are an integral part of this financial statement.
<PAGE>
<PAGE>
THE SPORTS FUNDS TRUST
MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
Notes to Financial Statements
May 29, 1998
1. Organization
The Motorsports Associated Growth & Income Fund (the "Fund")
is the only series of The Sports Funds Trust (the "Trust") a
Delaware Business Trust organized on November 4, 1997. The
Fund is an open-end diversified fund that seeks capital
appreciation and current income. The Fund seeks to achieve its
investment objective by investing in the equity securities of
companies involved in or related to Motorsports. The Fund has
adopted a fsical year end of February 1999. The Fund's investment
advisor is Pegasus Advisory Group, Inc. ("Pegasus") and the
Sub-Advisor is Chartwell Investment Partners ("Chartwell").
The Fund is organized and intends to qualify as a "regulated
investment company" under the Internal Revenue Code (the
"Code"), which will relieve the Fund of any liability for
federal income tax to the extent that substantially all of its
earnings and net realized capital gains are distributed to
shareholders, pursuant to the requirements of the Code.
The preparation of the accompanying financial statement in
conformity with the generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the
date of the financial statement. Actual results could differ
from the estimates.
2. Investment Advisory, Management, Distribution and
Shareholder Servicing Agreements
The Fund has entered into the following service agreements:
Under the Investment Advisory Agreement with the Fund, Pegasus
will act as the investment advisor to the Fund. For providing
investment advisory services, the Fund will pay the Advisor a
monthly fee which is calculated daily at an annual rate of
0.95% of the Fund's average daily net assets.
Under the Sub-Advisory Agreement with Pegasus, Chartwell will
act as the sub-advisor to the Fund. For providing sub-
investment advisory services, the Advisor pays Chartwell a
monthly fee which is calculated daily at an annual rate of
0.70% of the Fund's average daily net assets
Under the Investment Company Services Agreement, First Data
Investor Services Group, Inc. ("Investor Services Group"), a
wholly owned subsidiary of First Data Corporation, will provide
administrative services to the Fund. The Fund will pay Investor
Services Group an asset based fee (subject to a minimum annual
fee of $55,000) computed at the annual rate of 0.15% on the
first $50 million of total average net assets, 0.10% on the
next $50 million of total average net assets and 0.05% of total
average net assets in excess of $100 million. Investor Services
Group has also been engaged as the transfer agent and fund
accounting service provider for the Fund under the Investment
Company Services Agreement.
<PAGE>
THE SPORTS FUNDS TRUST
MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
Notes to Financial Statements
May 29, 1998
The Fund has adopted a Distribution Plan pursuant to Rule 12b-
1(the "Plan") under the Investment Company Act of 1940, as
amended. The Plan permits the Fund to pay FPS Broker Services,
Inc. (the "Distributor") from the assets of the Fund, a monthly
administrative service fee which may not exceed an annual rate
of 0.25% of the Fund's total average daily net assets. The
Fund intends to operate the Plan in accordance with its terms
and within NASD rules concerning sales charges.
3. Deferred Organizational Costs
Pursuant to the Investment Company Commencement Agreement
between Pegasus and Investor Services Group dated October 16,
1997, Investor Services Group assumed responsibility for all
actions necessary to properly organize and register the
Investment Company and was compensated in the amount of $65,000
for such services.
Such organizational costs have been capitalized by the Fund and
are being amortized over 60 months upon commencement of the
Fund's operations. In the event any of the initial shares are
redeemed by the holder thereof during the period that the Fund
is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof by the Fund will be reduced by
the unamortized organizational costs in the same ratio as the
number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of the redemption.
On April 3, 1998, the American Institute of Certified Public
Accountants (AICPA) adopted Statement of Position (SOP) 98-5
"Reports on the Costs of Start-Up Activities". The SOP
provides that organization costs associated with the formation
of an investment company may only be capitalized if the
organization costs are incurred prior to June 30, 1998 and the
fund sells shares to independent third parties prior to June
30, 1998.
In the event shares of The Motorsports Associated Growth &
Income Fund have not been sold to independent third parties
prior to June 30, 1998, the organization costs will be charged
against net asset value of the Fund as an expense.
4. Prepaid Assets
State registration fees in the amount of $21,810 have been
capitalized by the Fund as prepaid expenses in the accompanying
Statement of Assets and Liabilities and will be amortized over
the remainder of the Fund's fiscal year upon commencement of
the Fund's operations.
<PAGE>
<PAGE>
Report of Independent Accountants
May 29, 1998
To the Board of Trustees of
The Sports Funds Trust
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of
The Motorsports Associated Growth & Income Fund at May 29, 1998, in
conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Fund's management;
our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
<PAGE>
<PAGE>
APPENDIX
Bond Ratings
Moody's Investors Service, Inc. ("Moody's") describes
classifications of corporate bonds as follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment
sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment
grade bonds.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may
be very moderate, and therefore not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal
payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other market shortcomings.
C Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2,
and 3 in each generic rating classification from Aa through B in
its corporate and municipal bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Standard & Poor's Corporation ("S&P") describes classification of
corporate and municipal debt as follows:
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest-rated issues
only in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated
categories.
Bonds rated AAA, AA, A and BBB are considered investment grade
bonds.
BB Debt rated BB has less near-term vulnerability to default
than other speculative grade debt. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payment.
B Debt rated B has a greater vulnerability to default but
presently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or
economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC Debt rated CCC has a current identifiable vulnerability to
default, and is dependent upon favorable business,
financial and economic conditions to meet timely payments of
interest and repayments of principal. In the event of
adverse business, financial or economic conditions, it is
not likely to have the capacity to pay interest and repay
principal.
CC The rating CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC
rating.
C The rating C is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC -
debt rating.
CI The rating CI is reserved for income bonds on which no
interest is being paid.
D Debt rated D is in default. The D rating is assigned on the
day an interest or principal payment is missed.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
S&P does not rate a particular type of obligation as a
matter of policy.<PAGE>
<PAGE>
THE SPORTS FUNDS TRUST
Form N-1A
Part C -- Other Information
Part C. Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
Included in Part A: None
Included in Part B:
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument --Incorporated by reference to
Pre-Effective No. 2 to Registrant's
Registration Statement on Form N-1A filed March
23, 1998 ("Pre-Effective No. 2")filed as
Exhibit 99.1
(2) By-Laws --Incorporated by reference to Pre-Effective
No.2 filed as Exhibit 99.2
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders
None
(5) Investment Advisory Contracts --
A. Investment Advisory Agreement
Incorporated by reference to Pre-Effective No. 2
filed as Exhibit 99.A.5
B. Sub-Advisory Agreement Incorporated by
reference to Pre-Effective No. 2 filed
as Exhibit 99.B.5
(6) Underwriting Agreement --Incorporated by
reference to Pre-Effective No. 2 filed as
Exhibit 99.6
(7) Bonus, Profit Sharing, Pension or Other
Similar Contracts -- None
(8) Custodian Agreements -- Incorporated by
reference to Pre-Effective No. 2 filed as
Exhibit 99.8
(9) Investment Company Services Agreement --
Incorporated by reference to Pre-Effective No.
2 filed as Exhibit 99.9
(10) Opinion and Consent of Counsel -- Filed herein
as Exhibit 99.10
(11) Consent of Independent Auditors -- Filed herein
as Exhibit 99.11.
(12) Financial Statements Omitted from Item 23.--
None
(13) Agreements or Understandings Made in
Consideration for Providing the Initial Capital
Filed herein as Exhibit 99.13.
(14) Model Plan -- None
(15) Plan of Distribution pursuant to Rule 12b-1 --
Incorporated by reference to Pre-Effective No.
2 filed as Exhibit 99.15
(16) Schedule for Computation of Performance
Quotations -- None.
(17) Financial Data Schedule -- None.
(18) Trustees' Powers of Attorney -- Filed herein as
Exhibit 99.18.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 26. Number of Holders of Securities.
None.
Item 27. Indemnification.
Reference is made to Article X of the Registrant's
Trust Instrument filed herewith.
The Trust Instrument limits the liabilities of a Trustee to
that of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
the office of Trustee, and in the event a Trustee is sued
for his or her activities concerning the Trust, the Trust
will indemnify that Trustee to the fullest extent permitted
by law, except if a Trustee engages in willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Item 28
(a) Business and Other Connections of Investment Advisor Pegasus
Advisory Group, Inc.
For information as to any other business, vocation or
employment of a substantial nature in which each Trustee or
officer of the Registrant's Investment Advisor is or has
been engaged for his own account or in the capacity of
Trustee, officer, employee, partner or trustee, reference is
made to Form ADV for Pegasus Advisory Group, Inc.(File
#801-55238) filed under the Investment Advisors Act of 1940
which is incorporated herein by reference.
Item 28
(b) Business and Other Connections of Officers and
Directors of Chartwell Investment Partners, the
investment Sub-Advisor.
Chartwell Investment Partners ("Chartwell") is an investment
Advisor registered under the Investment Advisors Act of
1940, as amended (the "Advisors Act"). The list required by
this Item 28 of officers and partners of Chartwell, together
with any information as to any business profession, vocation
or employment of substantial nature engaged in by such
officers and partners during the past two years, is
incorporated herein by reference to Schedules A and D of
Form ADV filed by Chartwell pursuant to the Advisors Act
(SEC File No. (801-54124).
Item 29. Principal Underwriter.
a) FPS Broker Services, Inc. ("FPSB"), the principal
underwriter for the Registrant's securities, currently acts
as principal underwriter for the following entities:
The Bjurman Funds
Focus Trust, Inc.
The Govett Funds, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Matthews International Funds
McM Funds
Metropolitan West Funds
Polynous Trust
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Sports Funds Trust
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Stratton Funds, Inc
Trainer Wortham First Mutual Funds
(b) The information required by this Item 29 with respect
to each Director, Officer or Partner of FPSB is
incorporated herein by reference to Form BD filed by
FPSB with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 (Sec
File No. 8-41540)
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All records described in Section 31(a) of the 1940 Act and
theRules 17 CFR 270.31a-1 to 31a-3 promulgated thereunder,
aremaintained by the Trust's Investment Advisor, Pegasus
Advisory Group, Inc., 5-H Oak Branch Drive, Greensboro,
North Carolina, 27407, except for those maintained by the
Fund's Custodian, The Bank of New York, 48 Wall Street, New
York, New York 10172 and the Trust's Administrator, Transfer
Agent and Fund Accounting Services Agent, First Data
Investor Services Group, Inc. Services Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.
Item 31. Management Services.
There are no management-related service contracts not discussed in
Part A or Part B.
Item 32. Undertakings.
(a) Registrant hereby undertakes to file a post-effective
amendment within four to six months from the effective
date of this Registration Statement under the
Securities Act of 1933. Registrant understands that
such post-effective amendment will contain reasonably
current financial statements which need not be
certified by independent public accountants.
(b) Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon
the question of removal of any trustee or trustees
when requested in writing to do so by the record
holders of not less than 10 percent of the
Registrant's outstanding shares and to assist its
shareholders in accordance with the requirements of
Section 16-c of the Investment Company Act relating to
shareholder communications.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greensboro,
and State of North Carolina on the 27th day of May, 1998.
The Sports Funds Trust
Registrant
By /s/ Jack Plymale*
Jack Plymale, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Capacity Date
/s/ Jack Plymale* Trustee 5/27/98
Jack Plymale
/s/ Ken Melton* Trustee 5/27/98
Ken Melton
/s/ Dixon R. Johnston* Trustee 5/27/98
Dixon R. Johnston
/s/ Charlie Criss* Trustee 5/27/98
Charlie Criss
/s/ Jack Plymale* President and Principal 5/27/98
Jack Plymale Executive Officer
/s/ Jack Plymale* Principal Financial and
Jack Plymale and Accounting Officer 5/27/98
/s/William J. Baltrus 5/27/98
* By William J. Baltrus, as
Attorney-in-fact and agent
pursuant to Power of Attorney <PAGE>
<PAGE>
The Sports Funds Trust
Index to Exhibits to Form N-1A
Exhibit No.
EX-99.10 Opinion and Consent of Counsel
EX-99.11 Consent of Independent Auditors
EX-99-13 Agreements or Understandings Made in
Consideration for Providing the Initial Capital
EX-99.18 Power of Attorney for Trustees
(Letterhead)
DECHERT PRICE & RHOADS
1775 Eye Street, N.W.
Washington DC 20006
(202) 261-3300
May 28, 1998
The Sports Funds Trust
5-H Oak Branch Drive
Greensboro, North Carolina 27407
Gentleman:
In connection with the registration under the Securities Act of 1933 of an
indefinite number of shares of beneficial interest of The Sports Funds Trust
(the "Trust"), we have examined such matters as we have deemed necessary to
give this opinion.
On the basis of the foregoing, it is our opinion that the shares have been
duly authoirzed and, when paid for as contemplated bt the Trust's Registration
Statement, will be validly issues, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all rewferences to our firm therein.
Very truly yours,
Dechert Price & Rhoads
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this Pre-Effective Amendment No. 3
to the registration statement on Form N-1A (the "Registration
Statement") of our report dated May 28, 1998, relating to the
Statement of Assets and Liabilities of The Sports Funds Trust - The
Motorsports Associated Growth & Income Fund, which appears in such
Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of
this Registration Statement. We also consent to the reference to us
under the heading "Independent Auditors" in such Statement of
Additional Information.
PRICE WATERHOUSE LLP
Philadelphia, PA
May 28, 1998
May 8, 1998
Securities & Exchange Commission
Division of Investment Management
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, DC 20549
RE: The Sports Funds Trust (the "Trust")
The Motorsports Associated Growth & Income Fund (the "Fund")
File No's 333-42583 and 811-8563
To whom it may concern:
I propose to acquire as a separate series of shares:
6,666.667 shares of beneficial interest (the "Shares") for The
Motorsports Associated Growth & Income Fund (the "Fund")at a purchase price
of $15.00 per share.
These Shares will be issued in a private offering prior to the effectiveness
of the Form N-1A Registration Statement filed by The Sports Funds Trust under
the Securities Act of 1933. The Shares are being purchased pursuant to Section
14 of the Investment Act of 1940 to serve as the seed money for the Fund
before the commencement of the public offering of its shares.
In connection with such purchase, I understand that: (i) as the purchaser, I
intend to acquire the Shares for my own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired; and (ii) in the event any of the initial 6,666.667 Shares are
redeemed during the first five years, the Fund may charge against my redemption
proceeds a pro rata portion of any unamortized organizational expenses which
would be borne by such Shares during the balance of the initial five year
period were they not to be redeemed.
I consent to the filing of this Investment Letter as an exhibit to the Form
N-1A Registration Statement of the Fund.
Sincerely,
/s/ MICHAEL STALEY
Michael Staley
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Ken Melton, Trustee
Name and Title
<PAGE>
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Jack Plymale, President & Trustee
Name and Title
<PAGE>
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Dixon R. Johnston, Trustee
Name and Title
<PAGE>
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Charlie Criss, Trustee
Name and Title
