Registration No. 333-46323
ICA No. 811-08655
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 |_|
Pre-Effective Amendment No. 2 |X|
Post-Effective Amendment No. ______ |_|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 |_|
Pre-Effective Amendment No. 2 |X|
Post-Effective Amendment No. _______ |_|
(Check Appropriate Box or Boxes)
QUESTAR FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
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(Address of Principal Executive Offices)(Zip Code)
(516) 951-0500
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(Registrant's Telephone Number, Including Area Code)
Michael Miola
Questar Funds, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
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(Name and Address of Agent For Service)
With a copy to:
Thomas R. Westle, Esq.
Spitzer & Feldman P.C.
405 Park Avenue
New York, NY 10022
As Soon As Practicable After The Effective Date
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(Approximate Date of Proposed Public Offering)
Shares Of Common Stock
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(Title of Securities Being Registered)
It is proposed that this filing will become effective (check
appropriate box):
|_| immediately upon filing pursuant to paragraph (b).
|_| on (date) pursuant to paragraph (b).
|_| 60 days after filing pursuant to paragraph (a)(1).
|_| on (date) pursuant to paragraph (a)(1).
|_| 75 days after filing pursuant to paragraph (a)(2).
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
THE REGISTRANT DECLARES THAT AN INDEFINITE AMOUNT OF ITS SHARES OF
COMMON STOCK IS BEING REGISTERED BY THE REGISTRATION STATEMENT PURSUANT TO
SECTION 24(F) UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND RULE
24F-2 THEREUNDER.
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QUESTAR FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
ITEM NO. CAPTION IN PROSPECTUS
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1 Front and Back Cover Pages
2 Investment Objectives and Policies
3 Transaction and Operating Expense Table
4 Investment Objectives and Policies
5 Dividends and Distributions; Performance Comparisons
6 Management
7 How to Purchase Shares; How to Redeem Shares;
Shareholder Services; Dividends and Distributions; Valuation of
Shares; Tax Status and General Information
8 Not Applicable
9 Not Applicable
CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
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10 Cover Page and Table of Contents
11 Investment Objectives, Policies and Restrictions
12 Directors and Executive Officers
13 Ownership of Common Stock
14 Investment Advisory and Other Services
15 Portfolio Transactions and Allocation of Brokerage
16 Ownership of Common Stock
17 Net Asset Value and Public Offering Price; Redemption of Shares
18 Taxation
19 Investment Advisory and Other Services
20 Performance Comparisons
21 Financial Statements
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QUESTAR FUNDS, INC.
IMPERIAL BANKFUND
Imperial BankFund(the "Fund") is a series of Questar Funds, Inc. (the
"Company"), a Maryland corporation. The investment objectives of the Fund are to
provide shareholders with long-term capital appreciation with income as a
secondary objective by investing in a portfolio consisting primarily of equity
securities of regional banks, lending institutions and financial services
companies.
The Fund is sold subject to an initial sales load of up to 4.75% and has
adopted a distribution and service plan under which it pays distribution fees
equal to 0.50% of its average daily net assets and shareholder servicing fees
equal to 0.25% of its average daily net assets.
This Prospectus, dated January __, 1999, concisely describes the
information about the Fund that you ought to know before investing. Please read
it carefully before investing and retain it for future reference.
A Statement of Additional Information ("SAI") about the Fund, dated January ,
1999, is available free of charge. The address of the Company is Questar Funds,
Inc., The Hauppauge Corporate Center, 150 Motor Parkway, Hauppauge, New York
11788 or telephone (877) 732-7696. The SAI has been filed with the Securities
and Exchange Commission and is incorporated in its entirety by reference in this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INTRODUCTION
THE INVESTMENT ADVISER
The Fund is managed by Retirement Planning Company of New England, Inc.
(the "Adviser"). The Fund will pay the Adviser, on a monthly basis, an annual
fee for managing its investment portfolio equal to 1.00% of its average daily
net assets. The Adviser may voluntarily waive some or all of its fees. See
"Management-Investment Adviser."
THE DISTRIBUTOR
ADS Distributors, Inc. (the "Distributor"), an affiliate of American Data
Services, Inc. ("ADS"), the Fund's Administrator, serves as Distributor of the
Fund's shares. See "Distribution of Fund Shares."
OFFERING PRICE
Shares of the Fund are sold at the net asset value per share next
determined, plus any applicable sales load of up to 4.75%. See "How to Purchase
Shares."
MINIMUM INVESTMENTS
The minimum initial investment for the Fund is $2,000. The minimum initial
investment for retirement accounts and for automatic investment plans for
non-retirement accounts is $1,000. See "How to Purchase Shares."
REDEMPTION PRICE
Shares of the Fund may be redeemed at any time at the net asset value next
determined after a redemption request is received in "good order" by the
Transfer Agent. The Fund reserves the right, upon 30 days' written notice, to
redeem your account if the net asset value of the shares in your Fund account
falls below $1,000, except for retirement accounts which may be redeemed if the
net asset value of such account falls below $500.00. See "How to Redeem Shares."
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CERTAIN RISK FACTORS TO CONSIDER
There can be no assurance that the Fund will achieve its investment
objectives. As set forth in detail under "Investment Objectives and Policies,"
an investment in the Fund is subject to certain risks, such as its net asset
value per share can be expected to fluctuate and the Fund will concentrate its
investments in the banking industry by acquiring the equity securities of banks
and, as a result, is designed for investors who are interested in actively
monitoring the progress of, and are willing to accept the risks of, bank
industry-focused investing. The Fund may also engage in the use of certain
specified investment policies and techniques which involve certain special
risks.
SHAREHOLDER INQUIRIES
Any questions or communications regarding the Fund or a shareholder
account should be directed to the Fund c/o ADS, P.O. Box 5536, Hauppauge, New
York 11788-0132; or by calling the Fund toll free at (877) 732-7696.
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TRANSACTION AND OPERATING EXPENSE TABLE
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
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SHAREHOLDER TRANSACTION FEES
(PAID DIRECTLY FROM YOUR INVESTMENTS):
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<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of the offering price) 4.75%
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ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS,
AS A PERCENTAGE OF NET ASSETS)
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Advisory Fees (1) 1.00%
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Rule 12b-1 Fees 0.50%
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Other Expenses (2)(3) 1.25%
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Total Estimated Fund Operating Expenses (3) 2.75%
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</TABLE>
EXAMPLE:
You would pay the following expenses 1 year - $ 74.00
on a $1,000 investment, assuming a 5% 3 years - $129.00
annual return and redemption at the end
of each time period:
THE PURPOSE OF THE ABOVE TABLE IS TO HELP YOU UNDERSTAND THE VARIOUS COSTS AND
EXPENSES THAT YOU, AS A SHAREHOLDER, WILL BEAR DIRECTLY OR INDIRECTLY IN
CONNECTION WITH AN INVESTMENT IN EACH FUND OFFERED BY THIS PROSPECTUS. THE
EXAMPLE SET FORTH ABOVE ASSUMES REINVESTMENT OF ALL DIVIDENDS AND USES A 5%
ANNUAL RATE OF RETURN AS REQUIRED BY SEC REGULATIONS.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
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(1) The Adviser may, in its discretion, waive some or all of its advisory fees.
(2) Other Expenses include, among other expenses, administrative, custody,
transfer agency and shareholder servicing fees.
(3) Other Expenses and Total Estimated Fund Operating Expenses are based on
estimated amounts assuming net assets of $10 million in the Fund.
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INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are fundamental and may not be changed
without shareholder approval. The investment policies employed by the Adviser to
achieve the Fund's objectives are not fundamental and may be changed or
eliminated by the Company's Board of Directors, without shareholder approval.
The Fund has also adopted investment restrictions, some of which are fundamental
and may not be changed without shareholder approval, and some of which are not
fundamental and, therefore, may be changed by the Company's Board of Directors.
See "Investment Objectives, Policies and Restrictions" in the SAI.
INVESTMENT OBJECTIVES
The Fund seeks to provide investors with long-term capital appreciation
with income as a secondary objective. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objectives.
INVESTMENT POLICIES
The Fund seeks to achieve its objective by investing at least 65% of its
total assets in equity securities of banks, believed by the Adviser to offer
superior prospects for long term growth. The Fund may invest the remaining 35%
of its total assets in the equity securities of lending institutions, insurance
companies and financial services companies, to the extent that the Adviser
determines such investments will enhance the performance of the Fund. The
Adviser expects to select stocks of banks with long histories of profitability
located in stable communities with growth potential, as well as banks that have
exhibited low price to earnings ratios and minimal loan losses.
Commercial banks, generally, range in size from small banks under $10
million in total assets to the largest bank holding companies with assets well
over $100 billion. They can be classified into three general categories: "Money
Center Banks", a bank or bank holding company that is typically located in an
international financial center and has a strong international business with a
significant percentage of its assets outside the United States; "Regional
Banks", banks and bank holding companies which provide full service banking,
often operating in two or more states in the same geographic area, and whose
assets are primarily related to domestic business; and "Community Banks", banks
usually serving a county, rural or suburban geographic area, rather than a
regional or wider area.
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Under normal circumstances, the Fund will invest at least 65% of its
total assets in equity securities (common stock, preferred stock and securities
convertible into common stock) of banks which may include regional, money center
and community banks, bank holding companies, savings banks and commercial and
industrial banks. The Fund may invest in banks that are not members of the
Federal Reserve System or whose deposits are not insured by the Federal Deposit
Insurance Corporation. Although the Adviser primarily seeks opportunities for
capital appreciation, some of the securities of the banks in which the Fund may
invest pay regular dividends. Accordingly, the Fund expects to receive moderate
income in the form of cash or stock dividends. The remaining portion of the
Fund's assets in excess of 65%, may be invested in the equity securities of
other lending institutions, such as savings and loan associations, insurance
companies and financial services companies. The Fund may also invest up to 5% of
its assets in equity securities of foreign banks.
Convertible preferred stock is preferred stock that can be converted into
common stock pursuant to its terms. Convertible debentures are debt instruments
that can be converted into common stock pursuant to their terms. The Adviser
intends to invest only in convertible debentures rated A or higher by Standard &
Poor's Corporation ("S&P") or by Moody's Investors Services, Inc. ("Moody's").
The Fund may hold warrants and rights issued in conjunction with common stock,
but in general will sell any such warrants or rights as soon as practicable
after they are received. Warrants are options to purchase equity securities at a
specified price valid for a specific time period. Rights are similar to
warrants, but normally have a short duration and are distributed by the issuer
to its shareholders.
Although the Fund will invest primarily in equity securities of banks,
other lending institutions and financial services companies, the Fund may invest
in equity securities of companies outside the banking industry and, for
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temporary defensive purposes under abnormal market or economic conditions, may
hold all or a portion of its assets in money market instruments (high quality
income securities with maturities of less than one year), securities of money
market funds or U.S. Government repurchase agreements. The Fund may also invest
in such investments at any time to maintain liquidity or pending selection of
investments in accordance with its policies. If the Fund acquires securities of
money market funds, the shareholders of the Fund will be subject to duplicative
management fees.
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RISK CONSIDERATIONS
The concentration of the Fund's investments in the banking industry will
subject the Fund to risks in addition to those that apply to the general equity
market. Economic, legislative or regulatory developments may occur which
significantly affect the entire banking industry and thus may subject the Fund
to greater market fluctuations than a fund that does not concentrate in a
particular industry. Banks and other lending institutions are subject to
extensive governmental regulation which may limit both the amounts and types of
loans and other financial commitments they can make, and the interest rates and
fees they can charge. Profitability is largely dependent on the availability and
cost of capital funds, and can fluctuate significantly when interest rates
change. Credit losses resulting from financial difficulties of borrowers can
negatively impact the industry. Thus, a number of factors, in addition to
general economic conditions, can adversely affect the financial performance and
condition of the institutions in which the Fund invests.
In addition, as many community banks and other lending institutions are
smaller capitalization companies, the Fund may be subject to the risks
associated with such companies. The trading volume of securities of smaller
capitalization companies is normally less than that of larger capitalization
companies and, therefore, may disproportionately affect their market price,
tending to make them rise more in response to buying demand and fall more in
response to selling pressure than is the case with larger capitalization
companies.
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, the Fund cannot give any assurance that its investment objectives
will be achieved. In addition, you should be aware that the Fund has no
operating history and the Adviser has no prior experience in acting as an
investment adviser to a mutual fund. Rates of total return quoted by the Fund
may be higher or lower than past quotations, and there can be no assurance that
any rate of total return will be maintained.
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OPTIONS PORTFOLIO STRATEGIES
The Fund may, as an alternative to purchasing or selling index futures,
buy and sell covered call and put options on stock indexes. To help assure
appropriate liquidity, the Fund may acquire securities which provide for the
right to resell them to the issuer, a bank or a broker-dealer at a specified
price within a specified period of time prior to the maturity date of such
obligation. Such a right to resell, commonly known as a put option, may be sold,
transferred or assigned only with the underlying security. The Fund may engage
in such options transactions for hedging purposes and for non-hedging purposes,
such as to adjust its exposure to relevant markets or as a substitute for direct
investment. The use of options involves certain special risks. Options
transactions also involve costs and may result in losses. Certain risks arise
from the possibility of imperfect correlations among movements in the prices of
options purchased or sold by the Fund and, in the case of hedging transactions,
of the securities that are the subject of the hedge. The successful use of the
strategies described above further depends on the Adviser's ability to forecast
market movements correctly.
The Fund's ability to engage in options transactions and to sell related
securities may be limited by tax considerations and by certain regulatory
requirements.
Other risks arise from the potential inability to close out options
positions. There can be no assurance that a liquid secondary market will exist
for any option at any particular time. The Fund's ability to terminate option
positions established in the over-the-counter market may be more limited than
for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would fail to meet their obligations
to the Fund. Certain provisions of the Internal Revenue Code and certain
regulatory requirements may limit the use of options transactions. A more
detailed explanation of options transactions, including the risks associated
with them, is included in the SAI.
PORTFOLIO TURNOVER
The length of time the Fund has held a particular security is not
generally a consideration in investment decisions. As a result of the Fund's
investment policies, under certain market conditions, particularly in periods of
volatile markets, its portfolio turnover rate may be higher than that of other
mutual funds. In general, however, the Fund's portfolio turnover rate is
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expected to range from 50% to 150%. Portfolio turnover generally involves some
expense, including brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other securities. These
transactions may also result in realization of taxable capital gains, some or
all of which may be short-term capital gains not eligible for favored tax
treatment.
DIVERSIFICATION
The Fund is a "diversified" investment company under the Investment
Company Act of 1940 (the "1940 Act"). This means that with respect to 75% of its
total assets, (a) the Fund may not invest more than 5% of its total assets in
the securities of any one issuer (except U.S. Government securities) and (b) the
Fund may not own more than 10% of the outstanding voting securities of any one
issuer. The remaining 25% of its total assets is not subject to this
restriction. Because the Fund will be "concentrated" in the banking industry,
I.E., it will invest a significant portion of its total assets in the equity
securities of banks, it will be subject to an increased risk of loss if the
market value of securities in the banking industry decline.
DERIVATIVES
Certain of the instruments in which the Fund may invest, such as options
are considered to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an underlying asset, such
as a security or an index. Further information about these instruments and the
risks involved in their use is included elsewhere in this prospectus and in the
SAI.
OTHER INVESTMENT PRACTICES
SECURITIES LENDING. The Fund may lend portfolio securities, including
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entering into repurchase agreements, amounting to not more than 25% of its
assets to broker-dealers. These transactions must be fully collateralized at all
times with cash and short-term debt obligations. These transactions involve some
risk to the Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral.
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REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
---------------------
collateralized by the securities in which it may invest. A repurchase agreement
involves the purchase by the Fund of securities with the condition that the
original seller (a bank or broker-dealer) will buy back the same securities
("collateral") at a predetermined price or yield. Repurchase agreements involve
certain risks not associated with direct investments in securities. In the event
the original seller defaults on its obligation to repurchase, the Fund will seek
to sell the collateral, which could involve costs or delays. To the extent
proceeds from the sale of collateral are less than the repurchase price, the
Fund would suffer a loss.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
-------------------
illiquid securities which may include Restricted Securities. Illiquid securities
may offer a higher yield than securities which are more readily marketable, but
they may not always be marketable on advantageous terms. The sale of illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets.
"Restricted securities" are securities which were originally sold in
private placements and which have not been registered under the Securities Act
of 1933. Such securities generally have been considered illiquid, since they may
be resold only subject to statutory restrictions and delays or if registered.
Restricted securities are no longer necessarily illiquid. The Fund may therefore
invest in Rule 144A securities and treat them as liquid when they have been
determined to be liquid by the Board of Directors of the Company.
BORROWING. The Fund may borrow money from banks for temporary or
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emergency purposes in order to meet redemption requests. To reduce its
indebtedness, the Fund may have to sell a portion of its investments at a time
when it may be disadvantageous to do so. In addition, interest paid by the Fund
on borrowed funds would decrease its net earnings.
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MANAGEMENT
BOARD OF DIRECTORS
The Company's Board of Directors has the primary responsibility for
overseeing the overall management of the Company and electing its officers.
INVESTMENT ADVISER
Retirement Planning Company of New England, Inc. (the "Adviser") has been
retained under an Investment Advisory Agreement with the Company to act as the
Fund's investment adviser subject to the authority of the Board of Directors.
Messrs. David W. Allaire and Michael R. Laliberte will be responsible for the
overall management of the Fund's portfolio.
The Adviser engages in the financial services business, focusing on
providing investment advisory services. The Adviser currently manages over 110
private investment accounts for individual investors, trusts, profit sharing and
retirement plans, companies and non-profit institutions. Since 1996, the Adviser
has been engaged in the business of researching, buying, holding and selling
shares of equity securities. Additionally, the Adviser offers as a service to
some of its clients and others, a newsletter titled "The Imperial Stock Review".
This newsletter is dedicated to the fundamental analysis and research of
selected equity securities. As a result of research performed, the Adviser
invests a substantial portion of clients' portfolios in banks, brokerage firms,
mutual fund companies, insurance companies and other financial services
companies. The Adviser, based in Providence, RI, is registered as an investment
adviser with the Securities and Exchange Commission.
David W. Allaire is President and Managing Director of the Adviser and
has been a Senior Portfolio Manager with the Adviser since April of 1996. He is
also the Editor and Senior Security analyst of the "The Imperial Stock Review"
newsletter. Mr. Allaire has been employed in the financial services industry
since 1989 and currently holds the following NASD licenses: Series 6, 63, 65, 7
and 24. Additionally, he is licensed to offer various insurance products. He is
currently enrolled in the CFA program and is a Level II CFA candidate. Mr.
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Allaire is also Co-host of a daily financial talk show called "Money Matters".
The show is an in- depth financial talk show which dedicates a majority of its
time to the valuation and research of equity securities, as well as the
financial markets in general. Mr. Allaire earned a Bachelor of Science Business
Administration with a concentration in Finance from the University of Rhode
Island in 1988.
Michael R. Laliberte is the Executive Vice President and Managing Director
of the Adviser and has been a Senior Portfolio Manager with the Adviser since
April 1996. He is also the Publisher and a Security Analyst for the "The
Imperial Stock Review" newsletter. Mr. Laliberte has been employed in the
financial services industry since 1990 and currently holds the following
licenses: Series 6, 63, 65 and 7. Additionally, he is licensed to offer various
insurance products. Mr. Laliberte is currently a Professor of Investments at
Johnson & Wales University and has been so since 1996. Mr. Laliberte is also
co-host of a daily financial talk show called "Money Matters". Mr. Laliberte
earned a Bachelor of Science in management with a concentration in Finance from
Johnson & Wales University in 1989.
The Adviser furnishes the Fund with investment advice and supervises the
Fund's management and investment programs. The Adviser furnishes at its own
expense all necessary administrative services, office space, equipment and
clerical personnel for servicing the investments of the Fund. The Adviser also
provides investment advisory facilities and executive and supervisory personnel
for managing the investments and effecting the portfolio transactions of the
Fund. In addition, the Adviser pays the salaries and fees of all officers of the
Company who are affiliated with the Adviser.
Under the Investment Advisory Agreement, the Fund pays the Adviser a
monthly advisory fee equal, on an annual basis, to 1.00% of its average daily
net assets. The Adviser may, from time to time, voluntarily waive a portion of
its fees.
CODE OF ETHICS
The Company and the Adviser have adopted a Code of Ethics, which
restricts personal investing practices by employees of the Adviser and its
affiliates. Among other provisions, the Code of Ethics requires that employees
with access to information about the purchase or sale of securities in the
Fund's portfolio obtain preclearance before executing personal trades. With
respect to Messrs. Allaire and Laliberte and other investment personnel, the
Code of Ethics prohibits acquisition of securities in an initial public
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offering, as well as profits derived from the purchase and sale of the same
security within 60 calendar days. These provisions are designed to ensure that
the interests of the Fund and its shareholders come before the interests of the
people who manage the Fund. The Board of Directors of the Fund will approve the
Fund's Code of Ethics initially and will, from year to year thereafter,
reapprove such Code after consideration of any appropriate revisions.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Portfolio transactions for the Fund will generally be executed with
broker-dealers on an agency basis. The Adviser will be responsible for placing
all orders for purchases and sales of the Fund's securities. In selecting
broker-dealers, the Adviser may consider research and brokerage services
furnished to the Fund as well as to the Adviser and its affiliates. Subject to
seeking the most favorable price and execution available, the Adviser may
consider sales of shares of the Fund's shares (and of other future series of the
Company) as a factor in the selection of broker-dealers. In addition, any
portfolio transactions for the Fund that are executed on an agency basis may be
effected through the Distributor. For more information, see "Portfolio
Transactions and Allocation of Brokerage" in the SAI.
ADMINISTRATOR
The Fund's Administrator is American Data Services, Inc. ("ADS" or the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds with approximately $3 billion
of total assets through its offices in New York, Denver, Tampa and Los Angeles.
Pursuant to an Administrative Service Agreement with the Fund, the
Administrator provides all administrative services necessary for the Fund,
subject to the supervision of the Company's Board of Directors.
For the services rendered to the Fund by the Administrator, the Fund pays
the Administrator a monthly fee which is based on its average net assets. If the
Fund's average net assets are: less than $5 million, the Administrator's fee is
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$1,500 per month; between $5 and $10 million, the Administrator's fee is $1,750
per month; between $10 and $20 million, the Administrator's fee is $2,000 per
month and in excess of $20 million, the Administrator receives $2,500 per month
or 0.15% of the Fund's average daily net assets, whichever is greater. The Fund
also pays the Administrator for any out-of-pocket expenses. In addition, the
Administrator serves as the Fund's transfer agent and performs fund accounting
services for which it is paid separately. For additional information, see
"Custodian, Transfer Agent and Dividend Agent."
Both the Investment Advisory Agreement and the Administrative Service
Agreement are terminable by the Board of Directors of the Company, the Adviser
or the Administrator, respectively, on sixty days' written notice. The
Investment Advisory Agreement will terminate automatically in the event of an
"assignment" as defined by the Investment Company Act. The Administrative
Service Agreement, however, may be assigned provided the non-assigning party
provides prior written consent. Each Agreement shall remain in effect for two
years from the date of its initial approval, and subject to annual approval of
the Board of Directors for one-year periods thereafter. Each Agreement provides
that in the absence of willful misfeasance, bad faith or gross negligence on the
part of the Adviser or the Administrator, respectively, or reckless disregard of
its obligations thereunder, the Adviser or the Administrator shall not be liable
for any action or failure to act in accordance with its duties thereunder.
DISTRIBUTOR
ADS Distributors, Inc. ("the Distributor"), an affiliate of the
Administrator, has entered into a distribution agreement with the Company to
serve as distributor for the Fund's shares. The Distributor will be entitled to
receive a distribution fee equal to 0.50% of the Fund's average daily net assets
under the terms of the Fund's Distribution and Service Plan. The Distributor
will pay the promotional and advertising expenses related to the distribution of
the Fund's shares and for the printing of all Fund prospectuses used in
connection with the distribution and sale of the Fund's shares. It is expected
that the Distributor will use a portion of the distribution fee to compensate
financial intermediaries for providing distribution assistance with respect to
the sale of the Fund's shares. See "Management of Fund" in the SAI.
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The Adviser and the Distributor may, out of their own assets, pay for
certain expenses incurred in connection with the distribution of Fund shares. In
particular, the Distributor may make payments out of its own assets to sales
representatives and other broker dealers in connection with their sales of Fund
shares. See "How to Purchase Shares - Purchase Price." Further information
regarding the Distribution and Service Plan is contained in the SAI.
EXPENSES
The Fund pays certain operating expenses directly, including, but not
limited to custodian, audit, and legal fees; fees of the independent directors;
costs of printing and mailing prospectuses, statements of additional
information, proxy statements, notices, and reports to shareholders; insurance
expenses; and costs of registering its shares for sale under federal and state
securities laws. See the SAI for a more detailed discussion of independent
director compensation.
HOW TO PURCHASE SHARES
GENERAL PURCHASE INFORMATION
The minimum initial investment in the Fund is $2,000. The minimum initial
investment for certain retirement and employee savings plans or custodial
accounts for the benefit of minors is $1,000. The Fund may waive or reduce such
minimum initial investments from time to time. The Fund's shares may be
purchased at its public offering price, which is the Fund's net asset value,
plus any applicable sales load (see below) from the Distributor, from other
broker-dealers who are members of the NASD and certain financial institutions
each of which have entered into selling agreements with the Distributor.
When orders are placed for shares of the Fund, the public offering price
used for the purchase will be the net asset value per share next determined,
plus any applicable sales load. If an order is placed with a broker-dealer, or
other financial institution, the broker-dealer or other financial institution is
responsible for promptly transmitting the order to the Fund.
16
<PAGE>
Shares of the Fund may be purchased by opening an account either directly
by mail or by phone using federal funds wire. Shares are deemed to be purchased
as of the time of determination of the Fund's net asset value on the day the
purchase order for the purchase of its shares is received in good form by the
Fund's Transfer Agent.
Investors may make systematic investments in fixed amounts automatically
on a monthly basis through the Fund's Automatic Investment Plan. Additional
information is available from the Transfer Agent.
PURCHASES BY TELEPHONE
To open an account by telephone, you must first call (877) 732-7696 to
obtain an account number and instructions. Information, including the
appropriate federal tax identification number, concerning the account will be
taken over the phone. Subject to acceptance by the Transfer Agent, shares of the
Fund may be purchased by wiring immediately available federal funds (subject to
the minimum investment) to Star Bank, N.A. from your bank which may charge a fee
for doing so (see instructions below). You should provide your bank with the
following information for purposes of wiring your investment:
Star Bank, N.A. Cinti/Trust
ABA# 0420-0001-3
Account# _______________
F/B/O Imperial BankFund
F/F/C:
Shareholder Acct. No.
(write in account number)
Shareholder Acct. Name___________________
(write in account name)
You are required to mail a signed application to the Transfer Agent at
the address listed below in order to complete your initial wire purchase. Wire
orders will be accepted only on a day on which the Fund, the Custodian and the
Transfer Agent are open for business. A wire purchase will not be considered
made until the wired money is received by the Fund. Any delays which may occur
in wiring money, including delays which may occur in processing by the banks,
are not the responsibility of the Fund or the Transfer Agent. There is presently
no fee for the receipt of wired funds, but the Fund reserves the right to charge
shareholders for this service.
17
<PAGE>
PURCHASES BY MAIL
Subject to acceptance by the Fund's Transfer Agent, an account may be
opened by completing and signing an account application and mailing it to the
Fund at the address noted below, together with a check (subject to the Fund's
minimum investment) payable to:
Imperial BankFund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, N.Y. 11788-0132
Payment for the purchase of shares received by mail will be credited to a
shareholder's account at the net asset value per share next determined, plus any
applicable sales load, after receipt. In the event that there are insufficient
funds to cover a check, such prospective investor will be assessed a $15.00
charge.
ADDITIONAL INVESTMENTS
Additional investments of $100 or more may be made at any time by
purchasing shares of the Fund at net asset value, plus any applicable sales
load, by mailing a check to the Fund at the address noted under "Purchases by
Mail" or by wiring monies to the Custodian bank as outlined above from a bank or
other financial institution with which the shareholder has an account and which
is a member of the Federal Reserve system with instructions to transmit Federal
funds by wire to the Fund.
OTHER PURCHASE INFORMATION
Investors should be aware that the Fund's account application contains
provisions in favor of the Company, the Fund, the Transfer Agent, the
Distributor and certain of their affiliates, excluding such entities from
certain liabilities (including, among others, losses resulting from unauthorized
shareholder transactions) relating to the various services (for example,
telephone exchanges) available to investors.
The purchase price paid for Fund shares is the current public offering
price, that is, the next determined net asset value of the shares after the
order is placed plus any applicable sales load. See "Net Asset Value" herein.
18
<PAGE>
The sales load is a one-time charge paid at the time of purchase of shares, most
of which ordinarily goes to the investor's broker-dealer as compensation for the
services provided the investor. Shares of the Fund are sold on a continuous
basis at the public offering price which includes a maximum front-end sales
charge of 4.75% being added to the net asset value per share. Volume discounts
are provided for both initial purchase and for additional purchases. See
"Reduction or Elimination of Sales Loads" herein. The Fund reserves the right to
reject any subscription for shares.
The Fund must receive an order by the close of any business day for the
purchase to be effective. If funds are received after the close of business, the
purchase will become effective on the next business day.
All purchases of the Fund's shares will be made in full and fractional
shares calculated to three decimal places. The Fund will not issue stock
certificates evidencing ownership of Fund shares.
Shares of the Fund may also be sold at the current net asset value to
corporations or other institutions such as trusts, foundations or broker-dealers
purchasing for the accounts of others ("shareholder organizations"). Investors
purchasing and redeeming Fund shares through a shareholder organization may be
charged a transaction-based fee or other fee by such organization for the
services of such organization. Each shareholder organization is responsible for
transmitting to its customers a schedule of any such fees and information
regarding any additional or different conditions regarding purchases and
redemptions. Customers of shareholder organizations should read this Prospectus
in light of the terms governing accounts with their organization. The Fund does
not pay to or receive compensation from shareholder organizations for the sale
of its shares.
19
<PAGE>
REDUCTION OR ELIMINATION OF SALES LOADS
VOLUME DISCOUNTS
Volume discounts are provided if the total amount being invested in
shares of the Fund reach the levels indicated in the sales load schedule
provided below. The applicable volume discount available to investors is
determined by aggregating all share purchases of the Fund. Volume discounts are
also available to investors making sufficient additional purchases of Fund
shares. The applicable sales charge may be determined by adding to the total
current value of shares already owned in the Fund, the value of new purchases
computed at the offering price on the day the additional purchase is made. For
example, if an investor previously purchased, and still holds, shares worth
$70,000 at the current offering price and purchases an additional $30,000 worth
of shares, the sales charge applicable to the new purchase would be that
applicable to the $100,000 to $249,000 bracket in the sales load schedule
provided below.
<TABLE>
<CAPTION>
AMOUNT OF SALES
SALES CHARGE CHARGE REALLOWED
AS OF A % TO DEALERS AS A
%OF NET PERCENT OF
AMOUNT OF PURCHASE SALES CHARGE AMOUNT OFFERING PRICE
INVESTED
- ------------------ ------------ -------- ---------------
<S> <C> <C> <C>
$0 to $49,999 4.75% 4.99% 4.50%
$50,000 to $99,999 4.25% 4.44% 4.00%
$100,000 to $249,999 3.75% 3.90% 3.50%
$250,000 to $499,999 2.50% 2.56% 2.25%
$500,000 to $999,999 2.00% 2.04% 1.75%
In excess of $1 million 0 0 0
</TABLE>
LETTER OF INTENT
Any investor may sign a Letter of Intent, available from the Fund,
stating an intention to make purchases of Fund shares totaling a specified
amount on an aggregate basis within a period of thirteen months from the date of
20
<PAGE>
the initial purchase. Purchases within the thirteen-month period can be made at
the reduced sales load applicable to the total amount of the intended purchase
noted in the Letter of Intent. If a larger purchase is actually made during the
period, then a downward adjustment will be made to the sales charge based on the
actual aggregate amount purchased. Any shares purchased within 90 days preceding
the actual signing of the Letter of Intent are eligible for the reduced sales
charge and the appropriate price adjustment will be made on those share
purchases based on the current offering price. A number of shares equal to 5% of
the dollar amount of intended purchases specified in the Letter of Intent is
held in escrow by the Transfer Agent until the purchases are completed.
Dividends and distributions on the escrowed Fund shares are paid to the
investor. If the intended purchases are not completed during the Letter of
Intent period, the investor is required to pay the Fund an amount equal to the
difference between the regular sales load applicable to a single purchase of the
number of Fund shares actually purchased and the sales load actually paid. If
such payment is not made within 20 days after written request by the Fund, then
the Fund has the right to redeem a sufficient number of escrowed shares to
effect payment of the amount due. Any remaining escrowed shares are released to
the investor's account. Agreeing to a Letter of Intent does not obligate you to
buy, or the Fund to sell, the indicated amount of shares. You should read the
Letter of Intent carefully before signing.
PURCHASES AT NET VALUE
There is no initial sales charge for "Qualified Persons." "Qualified
Persons" is defined to include persons who are active or retired Trustees,
Directors, officers, partners, employees, clients, independent professional
contractors, shareholders or registered representatives (including their spouses
and children) of the Adviser, Distributor or any affiliates or subsidiaries
thereof (the Directors, officers or employees of which shall also include their
parents and siblings for all purchases of Fund shares) or any Director, officer,
partner, employee or registered representative (including their spouses and
children) of any Broker-Dealer or any registered investment adviser who has
executed a valid and currently active selling agreement with the Distributor.
21
<PAGE>
Banks and other lending institutions, in their fiduciary capacity or for
their own accounts, may purchase and redeem shares of the Fund without paying a
sales charge. To the extent permitted by regulatory authorities, a bank trust
department may charge fees to clients for whose account it purchases shares at
net asset value. Employees, officers and directors of these financial
institutions, including members of the immediate family, may also purchase and
redeem shares without paying a sales charge.
HOW TO REDEEM SHARES
GENERAL REDEMPTION INFORMATION
You may redeem all or a portion of your shares on any day that the Fund
values its shares (please refer to "Valuation of Shares" below for more
information). Your shares will be redeemed at the net asset value next
determined after receipt of your instructions in "good order" as explained
below. The Fund's net asset value will fluctuate on a daily basis.
To redeem your shares, you may either contact your broker-dealer or
financial institution with an oral request or send a written request directly to
the Transfer Agent. This request should contain: the dollar amount or number of
shares to be redeemed, your Fund account number and either a social security or
tax identification number (as applicable). You should sign your request in
exactly the same way the account is registered. If there is more than one owner
of the shares, all owners must sign. A signature guarantee is required for
redemptions over $5,000. Please contact the Transfer Agent or refer to the SAI
for more details.
Shares of the Fund may be redeemed by mail, or, if authorized, by
telephone. The value of shares redeemed may be more or less than the purchase
price, depending on the market value of the investment securities held by the
Fund.
BY MAIL
The Fund will redeem its shares at the net asset value next determined
after the request is received in "good order." The net asset value per share of
the Fund is determined as of 4:15 p.m., New York time, on each day that the New
York Stock Exchange, Inc. (the "NYSE"), the Fund and the Transfer Agent are open
for business. Requests should be addressed to: Imperial BankFund, c/o American
Data Services, Inc., P.O. Box 5536, Hauppauge, N.Y. 11788-0132.
<PAGE>
BY TELEPHONE
Requests in "good order" must include the following documentation:
(a) a letter of instruction specifying the number of shares or
dollar amount to be redeemed, signed by all registered owners
of the shares in the exact names in which they are registered;
(b) any required signature guarantees (see "Signature Guarantees"]
below); and
(c) other supporting legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations,
pension and profit sharing plans and other organizations.
SIGNATURE GUARANTEES
To protect shareholder accounts, the Fund and its Transfer Agent from
fraud, signature guarantees are required to enable the Fund to verify the
identity of the person who has authorized a redemption of $5,000 or more from an
account. Signature guarantees are also required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareholder(s) and
the registered address, and (2) share transfer requests. Signature guarantees
may be obtained from certain eligible financial institutions, including but not
limited to, the following: banks, trust companies, credit unions, securities
brokers and dealers, savings and loan associations and participants in the
Securities Transfer Association Medallion Program ("STAMP"), the Stock Exchange
Medallion Program ("SEMP") or the New York Stock Exchange Medallion Signature
Program ("MSP"). Shareholders may contact the Fund at (877) 732-7696 for further
details.
23
<PAGE>
Provided the Telephone Redemption Option has been authorized, a redemption
of shares may be requested by calling the Fund and requesting that the
redemption proceeds be mailed to the primary registration address or wired per
the authorized instructions. If the Telephone Redemption Option is authorized,
the Fund and its Transfer Agent may act on telephone instructions from any
person representing himself or herself to be the shareholder and believed by the
Fund or its Transfer Agent to be genuine. The Transfer Agent's records of such
instructions are binding and each shareholder, and not the Fund or its Transfer
Agent, bears the risk of loss in the event of unauthorized instructions
reasonably believed by the Fund or its Transfer Agent to be genuine. The Fund
will employ reasonable procedures to confirm that instructions communicated are
genuine and, if it does not, it may be liable for any losses due to unauthorized
or fraudulent instructions. The procedures employed by the Fund in connection
with transactions initiated by telephone may include tape recording of telephone
instructions and requiring some form of personal identification prior to acting
upon instructions received by telephone.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make a payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of readily marketable securities held by the
Fund in lieu of cash in conformity with applicable rules of the SEC. Investors
generally will incur brokerage charges on the sale of portfolio securities so
received in payment of redemptions.
PAYMENT OF REDEMPTION PROCEEDS
After your shares have been redeemed, proceeds will normally be mailed
within three business days. In no event will payment be made more than seven
days after receipt of your order in good form, except that payment may be
postponed or the right of redemption suspended for more than seven days under
unusual circumstances, such as when trading is not taking place on the NYSE.
Payment of redemption proceeds may also be delayed if the shares to be redeemed
were purchased by a check drawn on a bank which is not a member of the Federal
Reserve System, or until such check has cleared the banking system (normally up
to 15 days from the purchase date).
24
<PAGE>
INVOLUNTARY REDEMPTION
The Fund reserves the right to redeem your account at any time the net
asset value of the account falls below $1,000 ($500 for retirement accounts) as
the result of a redemption request. You will be notified in writing prior to any
such redemption and will be allowed 30 days to make additional investments
before the redemption is processed.
25
<PAGE>
SHAREHOLDER SERVICES
The Fund offers several shareholder service options to make your account
easier to manage which are listed on the account application. Please make note
of these options and select the ones that are appropriate for you.
AUTOMATIC INVESTMENT PROGRAM
You may arrange to make additional automated purchases of Fund shares by
completing the required section of the account application included with this
prospectus. You can automatically transfer $100 or more per month from your
bank, savings and loan or other financial institution to purchase additional
shares. You should contact your broker-dealer, financial institution or the
Transfer Agent to obtain additional application forms or for additional
information.
TELEPHONE TRANSACTION PRIVILEGES
If you hold your shares in an account with the Transfer Agent, you may
authorize telephone privileges by completing the required section of the account
application included with this prospectus. Please contact the Transfer Agent for
an additional application or for more details. It may be difficult to reach the
Fund by telephone during periods when market or economic conditions lead to an
unusually large volume of telephone activity. If you cannot reach the Fund by
telephone, you should contact your broker-dealer, financial institution or issue
written instructions to the Transfer Agent at the address set forth herein. See
"Management - Transfer Agent, Dividend Disbursing Agent and Custodian." The Fund
reserves the right to modify, suspend or terminate their telephone services at
any time without notice.
TAX-QUALIFIED RETIREMENT PLANS
The Fund is available for your tax-deferred retirement plan. Call or
write us and request the appropriate forms for:
|_| Individual Retirement Accounts ("IRAs"), Simple IRAs and Roth IRAs;
|_| 403(b) plans for employees of public school systems and non-profit
organizations; or
|_| 401(k) Plans;
|_| Profit-sharing plans and pension plans for corporations and other
employees.
26
<PAGE>
You can also transfer your tax-deferred plan to us from another company
or custodian. Call or write us for a "Request to Transfer" form.
CONFIRMATION OF TRANSACTIONS AND REPORTING OF OTHER INFORMATION
The Fund will mail you confirmations of all of your purchases or
redemptions of Fund shares. In addition, you will also receive account
statements on a quarterly basis. This information will be provided to you from
either your broker-dealer, financial institution or the Transfer Agent. You will
also receive various IRS forms after the first of each year detailing important
tax information and the Fund is required to supply annual and semi-annual
reports that list securities held by the Fund and include its then current
financial statements.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute its net investment income, if any, and net
realized capital gains, if any, annually. Distributions from capital gains are
made after applying any available capital loss carryovers.
As a shareholder in the Fund, you can choose from three distribution
options:
-- Reinvest all distributions in additional shares;
-- Receive distributions from net investment income in cash
while reinvesting capital gains distributions, if any, in
additional shares; or
-- Receive all distributions in cash.
You can change your distribution option by notifying the Fund in writing.
If you do not select an option when you open your account, all distributions
will be reinvested in additional shares of the Fund at net asset value. You will
receive a statement confirming reinvestment of distributions in additional
shares promptly following the end of each calendar year.
27
<PAGE>
If a check representing a distribution is not cashed within a specified
period, the Transfer Agent will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund. If the
Transfer Agent does not receive your election, the distribution will be
reinvested in the Fund at the then-current net asset value per share. Similarly,
if correspondence sent by the Fund or the Transfer Agent is returned as
"undeliverable," all Fund distributions will automatically be reinvested in the
Fund.
VALUATION OF SHARES
The Fund computes its net asset value (or price per share) on each day the
NYSE is open for business. The calculation is made as of the regular close of
the Exchange (currently 4:15 p.m., New York time).
Portfolio securities for which market quotations are readily available are
valued at market value. Portfolio securities for which market quotations are not
considered readily available, are stated at fair value on the basis of
valuations furnished by a pricing service approved by the Board of Directors
which determines valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders.
Short-term investments held by the Fund that mature in 60 days or less are
valued at amortized cost, which approximates market value. All other securities
and assets are valued at their fair value following procedures approved by the
Board of Directors.
28
<PAGE>
DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a Distribution and Service Plan (the "Plan"),
pursuant to Rule 12b-1 under the Act (the "Rule"). The Rule provides that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Plan provides that the Fund will compensate the Distributor by paying the
Distributor a monthly fee equal to 0.50% of its average daily net assets, on an
annual basis, to enable it to provide marketing and promotional support to the
Fund, shareholder servicing and maintaining shareholder accounts and to make
payments to broker-dealers and other financial institutions with which it has
written agreements and whose clients are Fund shareholders for providing
distribution assistance. Fees paid under the Plan may not be waived for
individual shareholders. For further information regarding the Plan, see
"Shareholder Servicing and Distribution Plan" in the SAI.
Shareholder servicing agents and broker-dealers may charge investors a fee
in connection with their use of specialized purchase and redemption procedures
offered to investors by the shareholder servicing agents and broker-dealers. In
addition, shareholder servicing agents and broker-dealers offering purchase and
redemption procedures similar to those offered to shareholders who invest in the
Fund directly may impose charges, limitations, minimums and restrictions in
addition to or different from those applicable to shareholders who invest in the
Fund directly. Accordingly, the net return to investors who invest through
shareholder servicing agents and broker-dealers may be less than by investing in
the Fund directly. An investor should read the Prospectus in conjunction with
the materials provided by the shareholder servicing agent and broker-dealer
describing the procedures under which Fund shares may be purchased and redeemed
through the shareholder servicing agent and broker-dealer.
TAX STATUS
The Fund is treated as a corporation for federal income tax purposes under
the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to
qualify and to elect to be treated as a regulated investment company. If so
qualified, the Fund will not be liable for federal income taxes to the extent it
distributes its taxable income to shareholders.
29
<PAGE>
Distributions by the Fund are generally taxable to shareholders as
ordinary income. Interest income from direct investment by noncorporate
taxpayers in United States Government obligations (but not repurchase
agreements) generally is not subject to state taxation. However, some states may
tax mutual fund dividends attributable to such income.
Any redemption of Fund shares is a taxable event that may result in a
capital gain or loss.
For a more detailed discussion of the federal income tax consequences of
investing in shares of the Fund, see "Taxation" in the SAI. Before investing in
the Fund, you should consult your tax adviser regarding the consequences of your
local and state tax laws.
30
<PAGE>
PERFORMANCE COMPARISONS
Advertisements and other sales literature may refer to the Fund's total
return. The total return for the one, five and ten-year periods (or for the life
of the Fund until the Fund is in existence for such longer periods) through the
most recent calendar quarter represents the average annual compounded rate of
return on an investment of $1,000 in the Fund invested at the public offering
price, plus any applicable sales load. Total return may also be presented for
other periods.
All data are based on past investment results and do not predict future
performance. Investment performance, which will vary, is based on many factors,
including market conditions, portfolio composition and Fund operating expenses.
Investment performance also often reflects the risks associated with the Fund's
investment objective and policies. These factors should be considered when
comparing the Fund's investment results with those of other mutual funds and
other investment vehicles.
Quotations of investment performance for any period when an expense
limitation is in effect will be greater than if the limitation had not been in
effect. Fund performance may be compared to that of various indexes.
For additional information regarding comparative performance information
and the calculation of total return see "Performance Comparisons" in the SAI.
GENERAL INFORMATION
YEAR 2000 COMPLIANCE
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Adviser is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Adviser does not expect that the Fund will incur significant
operating expenses or be required to incur materials costs to be year 2000
compliant. Although the Adviser does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.
31
<PAGE>
GENERAL
The Company is a diversified, open-end management investment company which
was incorporated under the laws of the State of Maryland on February 13, 1998.
The Company's business and affairs are managed by its officers under the
direction of its Board of Directors. The Company currently offers its shares in
one series, the Imperial BankFund, which is being offered for sale in this
prospectus. The Board of Directors is authorized under the Company's Articles of
Incorporation to issue additional series of the Company's common stock (" the
shares") without shareholder approval in order to create additional funds. In
addition, the Board of Directors may, without shareholder approval, create and
issue one or more classes of shares within each series.
All shares of the Fund, when issued, will be fully paid and nonassessable
and will be redeemable. They can be issued as full or fractional shares. A
fractional share has, pro rata, the same rights and privileges as a full share.
The shares possess no preemptive or conversion rights. The shares of the Fund
will share ratably in the dividends of the Fund, if any, as may be declared by
the Board of Directors, and in the distribution of any net assets in liquidation
of the Fund, after the payment of all debts and liabilities of the Fund.
Each share of the Fund has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset values of the Fund's
shares. On some issues, such as the election of directors, all shares of the
Company vote together as one series. On an issue affecting only a particular
fund, the shares of the affected fund vote separately. Cumulative voting is not
authorized. This means that the holders of more than 50% of the shares voting
for the election of the Board of Directors can elect all of the directors if
they choose to do so, and, in such event, the holders of the remaining shares
will be unable to elect any directors.
32
<PAGE>
Except as may be required under the Investment Company Act, the Company
will not hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of members of the Board of Directors or the
appointment of auditors. However, pursuant to the Company's Bylaws, the holders
of shares representing at least 10% of the Fund's total outstanding shares may
request that the Fund hold a special meeting of shareholders. The Company will
assist in the communication with other shareholders. In addition, the Investment
Company Act requires a shareholder vote for all amendments to the Fund's
fundamental investment objective and policies and investment restrictions and
for any amendments to investment advisory contracts.
The Company reserves the right to amend any of its non-fundamental
policies, practices and procedures described in this Prospectus, including the
SAI, without shareholder approval.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
Star Bank, N.A. serves as custodian for the Fund's cash and securities.
The Custodian does not assist in, and is not responsible for, investment
decisions involving assets of the Fund. American Data Services, Inc., the Fund's
Administrator, also acts as the Fund's transfer and dividend agent. The Fund
pays the Administrator the greater of $900 per month or $9.00 per year per
account, plus out-of-pocket expenses, for rendering such transfer and dividend
agency services.
COUNSEL AND INDEPENDENT AUDITORS
Legal matters in connection with the issuance of shares of common stock of
the Fund are passed upon by Spitzer & Feldman P.C., 405 Park Avenue, New York,
New York 10022. McCurdy & Associates, CPAs, Inc., 27955 Clemens Road, Westlake,
Ohio 44145, have been selected as independent accountants for the Fund.
33
<PAGE>
QUESTAR FUNDS, INC. PROSPECTUS
INVESTMENT ADVISER
RETIREMENT PLANNING COMPANY OF
NEW ENGLAND, INC.
ADMINISTRATOR, TRANSFER AGENT AND
SHAREHOLDER SERVICING AGENT
AMERICAN DATA SERVICES, INC.
DISTRIBUTOR
ADS DISTRIBUTORS, INC.
CUSTODIAN
STAR BANK, N.A.
INDEPENDENT ACCOUNTANTS
MCCURDY & ASSOCIATES, CPAS, INC.
LEGAL COUNSEL IMPERIAL BANKFUND
SPITZER & FELDMAN P.C.
TABLE OF CONTENTS PAGE
Introduction.......................................... 2
Transaction and Operating
Expense Table........................................ 4
Investment Objectives and
Policies............................................. 5
Management............................................10
How to Purchase Shares................................14
Reduction or Elimination of
Sale Loads...........................................17
How to Redeem Shares..................................20
Shareholder Services..................................23
Dividends and Distributions...........................24
Valuation of Shares...................................25
Distribution and Service Plan.........................25
Tax Status............................................26
Performance Comparisons...............................27
General Information...................................27 January , 1999
--
Custodian, Transfer Agent and
Dividend Agent.......................................29
Counsel and Independent Auditors......................29
<PAGE>
QUESTAR FUNDS, INC.
IMPERIAL BANKFUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY __, 1999
TABLE OF CONTENTS
PAGE
Investment Objectives, Policies and Restrictions..............................2
Directors and Executive Officers.............................................11
Investment Advisory and Other Services.......................................13
Shareholder Servicing & Distribution Plan....................................17
Portfolio Transactions and Allocation of Brokerage...........................20
Taxation.....................................................................22
Ownership of Shares..........................................................24
Purchase of Shares...........................................................24
Dividends and Distributions..................................................25
Net Asset Value .............................................................25
Performance Comparisons......................................................25
Redemption of Shares.........................................................28
Counsel and Independent Auditors.............................................30
Other Information............................................................30
Financial Statements.........................................................30
This Statement of Additional Information is not a prospectus, but should
be read in conjunction with the Fund's Prospectus dated January __, 1999. A copy
of the Prospectus may be obtained from the Fund at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788 or telephone (516)
951-0500.
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The Fund's investment objectives and a summary of its investment policies
are set forth in the Prospectus. Additional information regarding the Fund's
investment policies and restrictions is set forth below.
INVESTMENT POLICIES
-------------------
The following paragraphs provide a more detailed description of the
investment policies identified in the Prospectus. Unless otherwise noted, the
policies described in this Statement of Additional Information are not
fundamental and may be changed by the Board of Directors.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. A
---------------------
repurchase agreement involves the purchase by the Fund of the securities with
the condition that after a stated period of time the original seller will buy
back the same securities at a predetermined price or yield. The Fund's custodian
will hold the securities underlying any repurchase agreement or such securities
will be part of the Federal Reserve Book Entry System. The market value of the
collateral underlying the repurchase agreement will be determined on each
business day. If at any time the market value of the Fund's collateral falls
below the repurchase price of the repurchase agreement (including any accrued
interest), the Fund will promptly receive additional collateral (so the total
collateral is an amount at least equal to the repurchase price plus accrued
interest).
FOREIGN SECURITIES. Under its current policy, which may be changed without
------------------
shareholder approval, the Fund may invest up to 5% of its total assets in
securities principally traded in markets outside the United States. Eurodollar
certificates of deposit are excluded for purposes of this limitation. Since
foreign securities are normally denominated and traded in foreign currencies,
the value of the Fund's assets may be affected favorably or unfavorably by
changes in currency exchange rates, exchange control regulations, foreign
withholding taxes and restrictions or prohibitions on the repatriation of
3
<PAGE>
foreign currencies. There may be less information publicly available about a
foreign company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The securities of some
foreign companies are less liquid and at times more volatile than securities of
comparable U.S. companies. Foreign brokerage commissions and other fees are also
generally higher than in the United States. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in payment or
delivery of securities or in the recovery of the Fund's assets held abroad) and
expenses not present in the settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange controls, confiscatory
taxation, political or financial instability and diplomatic developments which
could affect the value of the Fund's investments in certain foreign countries.
Legal remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the United States or
in other foreign countries. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located in those
foreign countries. Special tax considerations apply to foreign securities.
The risks described above, including the risks of nationalization or
expropriation of assets, are typically increased to the extent that the Fund
invests in issuers located in less developed and developing nations, whose
securities markets are sometimes referred to as "emerging securities markets."
Investments in securities located in such countries are speculative and subject
to certain special risks. Political and economic structures in many of these
countries may be in their infancy and developing rapidly, and such countries may
lack the social, political and economic stability characteristic of more
developed countries. Certain of these countries have in the past failed to
recognize private property rights and have at times nationalized and
expropriated the assets of private companies. The Fund does not currently intend
to invest in the securities of less developed and developing nations.
4
<PAGE>
In addition, unanticipated political or social developments may affect the
value of the Fund's investments in these countries and the availability to the
Fund of additional investments in these countries. The small size, limited
trading volume and relative inexperience of the securities markets in these
countries may make the Fund's investments in such countries illiquid and more
volatile than investments in more developed countries, and the Fund may be
required to establish special custodial or other arrangements before making
investments in these countries. There may be little financial or accounting
information available with respect to issuers located in these countries, and it
may be difficult as a result to assess the value or prospects of an investment
in such issuers.
PRIVATE PLACEMENTS. The Fund may invest in securities that are purchased
------------------
in private placements (primarily Rule 144A securities) and, accordingly, are
subject to restrictions on resale as a matter of contract or under Federal
securities laws. Because there may be relatively few potential purchasers for
such investments, especially under adverse market or economic conditions or in
the event of adverse changes in the financial condition of the issuer, the Fund
could find it more difficult to sell such securities when the Adviser believes
it advisable to do so or may be able to sell such securities only at prices
lower than if such securities were more widely held. At times, it may also be
more difficult to determine the fair value of such securities for purposes of
computing the Fund's net asset value.
SECURITIES LOANS. The Fund may make secured loans of its portfolio
----------------
securities, on either a short-term or long-term basis, amounting to not more
than 25% of its total assets, thereby realizing additional income. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss rights in the
collateral should the borrower fail financially. As a matter of policy,
securities loans are made to broker-dealers pursuant to agreements requiring
that the loans be continuously secured by collateral consisting of cash or
short-term debt obligations at least equal at all times to the value of the
securities on loan, "marked-to-market" daily. The borrower pays to the Fund an
amount equal to any dividends or interest received on securities lent. The Fund
retains all or a portion of the interest received on investment of the cash
collateral or receives a fee from the borrower. Although voting rights, or
rights to consent, with respect to the loaned securities may pass to the
borrower, the Fund retains the right to call the loans at any time on reasonable
notice, and it will do so to enable the Fund to exercise voting rights on any
matters materially affecting the investment. The Fund may also call such loans
in order to sell the securities.
5
<PAGE>
PUTS. To help assure appropriate liquidity, the Fund may acquire
----
securities which provide for the right to resell them to the issuer, a bank or a
broker-dealer at a specified price within a specified period of time prior to
the maturity date of such obligation. Such a right to resell, which is commonly
known as a "put," may be sold, transferred or assigned only with the underlying
security or securities.
If an issuer, bank or broker-dealer should default on its obligation to
repurchase a security, the Fund might be unable to recover all or a portion of
any loss sustained from having to sell the security elsewhere. It will be the
Fund's policy to enter into puts only with issuers, banks or broker-dealers that
are determined by the Adviser to present minimal credit risks.
WRITING COVERED OPTIONS ON SECURITIES. The Fund may write covered call
-------------------------------------
options and covered put options on optionable securities held in its portfolio,
when in the opinion of the Adviser such transactions are consistent with the
Fund's investment objective and policies. Call options written by the Fund give
the purchaser the right to buy the underlying securities from the Fund at a
stated exercise price; put options give the purchaser the right to sell the
underlying securities to the Fund at a stated price.
The Fund may write only covered options, which means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the Fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The Fund may
write combinations of covered puts and calls on the same underlying security.
6
<PAGE>
The Fund will receive a premium from writing a put or call option, which
increases the Fund's return on the underlying security in the event the option
expires unexercised or is closed out at a profit. The amount of the premium
reflects, among other things, the relationship between the exercise price and
the current market value of the underlying security, the volatility of the
underlying security, the amount of time remaining until expiration, current
interest rates, and the effect of supply and demand in the options market and in
the market for the underlying security. By writing a call option, the Fund
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option but continues to bear
the risk of a decline in the value of the underlying security. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then-current market
value, resulting in a potential capital loss unless the security subsequently
appreciates in value.
The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction, in which it
purchases an offsetting option. The Fund realizes a profit or loss from a
closing transaction if the cost of the transaction (option premium plus
transaction costs) is less or more than the premium received from writing the
option. If the Fund writes a call option but does not own the underlying
security, and when it writes a put option, the Fund may be required to deposit
cash or securities with its broker as "margin," or collateral, for its
obligation to buy or sell the underlying security. As the value of the
underlying security varies, the Fund may have to deposit additional margin with
the broker. Margin requirements are complex and are fixed by individual brokers,
subject to minimum requirements currently imposed by the Federal Reserve Board
and by stock exchanges and other self-regulatory organizations.
PURCHASING CALL OPTIONS. The Fund may purchase call options to hedge
-----------------------
against an increase in the price of securities that the Fund wants ultimately to
buy. Such hedge protection is provided during the life of the call option since
the Fund, as holder of the call option, is able to buy the underlying security
at the exercise price regardless of any increase in the underlying security's
market price. In order for a call option to be profitable, the market price of
the underlying security must rise sufficiently above the exercise price to cover
the premium and transaction costs.
7
<PAGE>
RISK FACTORS IN OPTIONS TRANSACTIONS. The successful use of the Fund's
------------------------------------
options strategies depends on the ability of the Adviser to forecast correctly
interest rate and market movements. For example, if the Fund were to write a
call option based on the Adviser's expectation that the price of the underlying
security would fall, but the price were to rise instead, the Fund could be
required to sell the security upon exercise at a price below the current market
price. Similarly, if the Fund were to write a put option based on the Adviser's
expectation that the price of the underlying security would rise, but the price
were to fall instead, the Fund could be required to purchase the security upon
exercise at a price higher than the current market price.
When the Fund purchases an option, it runs the risk that it will lose its
entire investment in the option in a relatively short period of time, unless the
Fund exercises the option or enters into a closing sale transaction before the
option's expiration. If the price of the underlying security does not rise (in
the case of a call) or fall (in the case of a put) to an extent sufficient to
cover the option premium and transaction costs, the Fund will lose part or all
of its investment in the option. This contrasts with an investment by the Fund
in the underlying security, since the Fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on the Fund's ability to
terminate option positions at times when the Adviser deems it desirable to do
so. There is no assurance that the Fund will be able to effect closing
transactions at any particular time or at an acceptable price.
If a secondary market in options were to become unavailable, the Fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A market may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events -- such as volume in excess of trading or clearing capability -- were to
interrupt its normal operations.
A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening transactions. For
example, if an underlying security ceases to meet qualifications imposed by the
8
<PAGE>
market or the Options Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options market were to
become unavailable, the Fund as a holder of an option would be able to realize
profits or limit losses only by exercising the option, and the Fund, as option
writer, would remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options purchased
or sold by the Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with considerable losses if trading in the security reopens
at a substantially different price. In addition, the Options Clearing
Corporation or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If the
Options Clearing Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by the writers of
all outstanding calls in the event of exercise, it may prohibit indefinitely the
exercise of put options. The Fund, as holder of such a put option, could lose
its entire investment if the prohibition remained in effect until the put
option's expiration.
Foreign-traded options are subject to many of the same risks presented by
internationally-traded securities. In addition, because of time differences
between the United States and various foreign countries, and because different
holidays are observed in different countries, foreign options markets may be
open for trading during hours or on days when U.S. markets are closed. As a
result, option premiums may not reflect the current prices of the underlying
interest in the United States.
Over-the-counter ("OTC") options purchased by the Fund and assets held to
cover OTC options written by the Fund may, under certain circumstances, be
considered illiquid securities for purposes of any limitation on the Fund's
ability to invest in illiquid securities.
9
<PAGE>
OPTIONS ON INDICES. As an alternative to purchasing call and put options
------------------
on index futures, the Fund may purchase and sell call and put options on the
underlying indices themselves. Such options would be used in a manner identical
to the use of options on index futures.
RESTRICTED SECURITIES. The SEC Staff currently takes the view that any
---------------------
delegation by the Board of Directors of the authority to determine that a
restricted security is readily marketable (as described in the investment
restrictions of the Fund) must be pursuant to written procedures established by
the Board of Directors. It is the present intention of the Board of Directors
that, if the Board of Directors decide to delegate such determinations to the
Adviser or another person, they would do so pursuant to written procedures,
consistent with the Staff's position. Should the Staff modify its position in
the future, the Board of Directors would consider what action would be
appropriate in light of the Staff's position at that time.
ILLIQUID SECURITIES. As set forth in the Prospectus, the Fund may invest in
-------------------
Rule 144A securities and commercial paper issued pursuant to Rule 4(2) under the
Securities Act of 1933, and treat such securities as liquid when they have been
determined to be liquid by the Board of Directors or by the Adviser subject to
the oversight of and pursuant to procedures adopted by the Board of Directors.
Under these procedures, factors taken into account in determining the liquidity
of a security include (a) the frequency of trades and quotes for the security;
(b) the number of dealers willing to purchase or sell the security and the
number of other potential purchasers; (c) dealer undertakings to make a market
in the security; and (d) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). With respect to Rule 144A
securities, investing in such securities could have the effect of increasing the
level of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities.
10
<PAGE>
CONCENTRATION. The Fund, as a fundamental policy, will concentrate its
- -------------
investments by investing 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
banking industry, in accordance with its investment objectives. The Fund may
also invest more than 25% of its assets in the securities of the U.S. Government
or its agencies and instrumentalities and repurchase agreements relating
thereto.
INVESTMENT RESTRICTIONS
In addition to the investment objective and policies set forth in the
Prospectus and in this Statement of Additional Information, the Fund is subject
to certain fundamental and non-fundamental investment restrictions, as set forth
below. Fundamental investment restrictions may not be changed with respect to
the Fund individually, without the vote of a majority of the Fund's outstanding
shares. Non-fundamental investment restrictions of the Fund may be changed by
the Board of Directors.
As fundamental investment restrictions, the Fund will not:
1. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities), if, as a
result, as to 75% of the Fund's total assets, more than 5% of its net assets
would be invested in the securities of one issuer or the Fund would hold more
than 10% of the outstanding voting securities of any one issuer.
2. Issue any senior securities, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), other than as set forth in restriction
number 4 below. Purchasing or selling securities on a when-issued or delayed
delivery basis shall not be deemed a senior security for purposes of this
restriction number 3.
11
<PAGE>
3. Borrow amounts in excess of 10% of the cost or 5% of the market value
of its total assets, whichever is less, and then only from a bank and as a
temporary measure for extraordinary or emergency purposes. To secure any such
borrowing, the Fund may pledge or hypothecate not in excess of 15% of the value
of its total assets.
4. Purchase or sell real estate or commodities or commodity futures
contracts. This restriction shall not preclude the Fund from investing in banks
or other financial institutions that have real estate or that buy and sell real
estate.
5. Act as an underwriter of securities of other issuers, except insofar
as the Fund may be technically deemed an underwriter under the federal
securities laws in connection with the disposition of portfolio securities.
6. Engage in any short-selling operations.
7. Lend money other than through the purchase of repurchase agreements
and debt securities in accordance with its investment policies.
8. Engage in margin transactions or in transactions involving puts,
calls, straddles, or spreads, except as permitted by the Fund under its
investment policies.
9. Acquire or retain more than 5% of the securities of any other
investment company.
The Fund is also subject to the following restrictions that are not
fundamental and may therefore be changed by the Board of Directors without
shareholder approval.
12
<PAGE>
The Fund will not:
1. Acquire securities for the purpose of exercising control over
management.
2. Invest more than 15% of its net assets in illiquid securities.
Unless otherwise indicated, percentage limitations included in the
restrictions apply at the time the Fund enters into a transaction. Accordingly,
any later increase or decrease beyond the specified limitation resulting from a
change in the Fund's net assets will not be considered in determining whether
its has complied with its investment restrictions.
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains information concerning the directors and
officers of the Company and their principal occupations during the past five
years. Directors who are interested persons, as defined by the 1940 Act, are
indicated by asterisk.
13
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD WITH THE PRINCIPAL OCCUPATION
NAME AND ADDRESS COMPANY LAST FIVE YEARS
<S> <C> <C>
Dan Calabria (Age 62) Director Retired; currently serves as a
7068 So. Shore Drive So. disinterested trustee/director of The
So. Pasadena, Florida 33707 Idex Mutual Funds, the Florida TaxFree
Funds and ASM Index 30 Fund and as an
arbitrator for the NASD and NYSE.
Mr. Calabria served as Executive Vice
President of William R. Huff & Co.
from June 1993 to June 1995 and was
President, CEO and Director of
Templeton Funds Management, Inc.,
Templeton Funds Distributor, Inc. and
Templeton Funds Trust Company from
1986 to 1992. Mr. Calabria also
served in various capacities with
Lexington Management Corporation
(1979-1983) and Oppenheimer Management
Corporation (1965-1975).
- --------------------------------------------- ----------------------------- ----------------------
- --------------------------------------------- ----------------------------- ----------------------
Anthony J. Hertl (Age 48) Director Chief Financial and Administrative
Colobaugh Pond Road Officer for Marymount College,
Croton-on-Hudson, NY 10520 Tarrytown, NY since 1996. Prior
thereto, he served in a number of
senior management positions at
Prudential Securities Inc. from
1983-1996. Mr. Hertl spent 10 years
at Arthur Andersen & Co. and is a
Certified Public Accountant.
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
*Michael Miola (Age 46) Director and Chief Chief Executive Officer of American
The Hauppauge Executive Officer Data Services, Inc.
Corporate Center
150 Motor Parkway
Hauppauge, NY 11788
- ---------------------------------------------------------------------------------------------------
In addition to Mr. Miola, the other executive officers of the Company
are:
Michael Wagner - Treasurer
James Colantino - Secretary
Michelle Miola - Assistant Secretary
</TABLE>
14
<PAGE>
The members of the Audit Committee of the Board of Directors are Mr.
Calabria and Mr. Hertl. Mr. Hertl acts as the chairperson of such committee. The
Audit Committee oversees the Fund's financial reporting process, reviews audit
results and recommends annually to the Company a firm of independent certified
public accountants.
Those Directors who are officers or employees of the Administrator or its
affiliates receive no remuneration from the Fund. Each disinterested Director
receives a fee from the Fund for each regular quarterly and in-person special
meeting of the Board of Directors attended. Members of the Board who are not
affiliated with the Adviser or the Administrator receive an annual fee of $4,000
plus $500 for each Board meeting attended. The Fund will pay a pro rata portion
of the Directors' fees and expenses based on the net assets of the Fund and the
other series of the Company. In addition, each Director who is not affiliated
with the Adviser or the Administrator is reimbursed for expenses incurred in
connection with attending meetings.
The following table sets forth the estimated compensation expected to be
received by each trustee from the Company during the fiscal year ended November
30, 1999.
- -------------------------------- ========================================
AGGREGATE ESTIMATED COMPENSATION
DIRECTOR FROM THE COMPANY
- -------------------------------- ========================================
- -------------------------------- ========================================
Dan Calabria $6,000.00
- -------------------------------- ========================================
- -------------------------------- ========================================
Anthony J. Hertl $6,000.00
- -------------------------------- ========================================
- -------------------------------- ========================================
Michael Miola $0.00
- -------------------------------- ========================================
15
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Fund is Retirement Planning Company of New
England, Inc.(the "Adviser"). The Adviser will act as such pursuant to a written
agreement which, after its initial two-year period, must be annually re-approved
by the Board of Directors. The address of the Adviser is One Richmond Square,
Providence, RI 02906.
CONTROL OF THE ADVISER
The stock of the Adviser is owned equally by Messrs. David W. Allaire and
Michael R. Laliberte.
INVESTMENT ADVISORY AGREEMENT
The Adviser acts as the investment adviser of the Fund under an
Investment Advisory Agreement which has been approved by the Board of Directors
(including a majority of the Directors who are not parties to the agreement, or
interested persons of any such party).
The Investment Advisory Agreement will terminate automatically in the
event of its assignment. In addition, the agreement is terminable at any time,
without penalty, by the Board of Directors of the Company or by vote of a
majority of the Company's outstanding voting securities on not more than 60
days' written notice to the Adviser, and by the Adviser on 60 days' written
notice to the Company. Unless sooner terminated, the agreement shall continue in
effect for more than two years after its execution only so long as such
continuance is specifically approved at least annually by either the Board of
Directors or by a vote of a majority of the outstanding shares of the Company,
provided that in either event such continuance is also approved by a vote of a
majority of the Directors who are not parties to such agreement, or interested
persons of such parties, cast in person at a meeting called for the purpose of
voting on such approval.
Pursuant to its Investment Advisory Agreement, the Fund will pay the
Adviser monthly an advisory fee equal, on an annual basis, to 1.00% of its
average daily net assets. The Adviser may waive a portion of its fees from time
to time.
16
<PAGE>
Under the Investment Advisory Agreement, the Adviser provides the Fund
with advice and assistance in the selection and disposition of the Fund's
investments. All investment decisions are subject to review by the Board of
Directors of the Company. The Adviser is obligated to pay the salaries and fees
of any affiliates of the Adviser serving as officers of the Company or the Fund.
The same security may be suitable for the Fund or other private accounts
managed by the Adviser. If and when the Fund or two or more accounts
simultaneously purchase or sell the same security, the transactions will be
allocated as to price and amount in accordance with arrangements equitable to
the Fund or account. The simultaneous purchase or sale of the same securities by
the Fund and other accounts may have a detrimental effect on the Fund, as this
may affect the price paid or received by the Fund or the size of the position
obtainable or able to be sold by the Fund.
ADMINISTRATOR
The Administrator for the Fund is American Data Services, Inc. (the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds through its offices in New
York, Denver and Los Angeles.
Pursuant to an Administrative Service Agreement with the Fund, the
Administrator provides all administrative services necessary for the Fund,
subject to the supervision of the Board of Directors. The Administrator will
provide persons to serve as officers of the Fund. Such officers may be
directors, officers or employees of the Administrator or its affiliates.
The Administrative Service Agreement is terminable by the Board of
Directors of the Fund or the Administrator on sixty days' written notice and may
be assigned provided the non-assigning party provides prior written consent. The
Agreement shall remain in effect for two years from the date of its initial
approval, and subject to annual approval of the Board of Directors for one-year
periods thereafter. The Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Administrator or
reckless disregard of its obligations thereunder, the Administrator shall not be
liable for any action or failure to act in accordance with its duties
thereunder.
17
<PAGE>
Under the Administrative Service Agreement, the Administrator provides
all administrative services, including, without limitation: (i) provides
services of persons competent to perform such administrative and clerical
functions as are necessary to provide effective administration of the Fund; (ii)
overseeing the performance of administrative and professional services to the
Fund by others, including the Fund's Custodian; (iii) preparing, but not paying
for, the periodic updating of the Fund's Registration Statement, Prospectus and
Statement of Additional Information in conjunction with Fund counsel, including
the printing of such documents for the purpose of filings with the Securities
and Exchange Commission and state securities administrators, preparing the
Fund's tax returns, and preparing reports to the Fund's shareholders and the
Securities and Exchange Commission; (iv) preparing in conjunction with Fund
counsel, but not paying for, all filings under the securities or "Blue Sky" laws
of such states or countries as are designated by the Distributor, which may be
required to register or qualify, or continue the registration or qualification,
of the Fund and/or its shares under such laws; (v) preparing notices and agendas
for meetings of the Board of Directors and minutes of such meetings in all
matters required by the 1940 Act to be acted upon by the Board; and (vi)
monitoring daily and periodic compliance with respect to all requirements and
restrictions of the Investment Company Act, the Internal Revenue Code and the
Prospectus.
The Administrator, pursuant to the Fund Accounting Service Agreement,
provides the Fund with all accounting services, including, without limitation:
(i) daily computation of net asset value; (ii) maintenance of security ledgers
and books and records as required by the Investment Company Act; (iii)
production of the Fund's listing of portfolio securities and general ledger
reports; (iv) reconciliation of accounting records; (v) calculation of yield and
total return for the Fund; (vi) maintaining certain books and records described
in Rule 31a-1 under the 1940 Act, and reconciling account information and
balances among the Fund's Custodian and Adviser; and (vii) monitoring and
evaluating daily income and expense accruals, and sales and redemptions of
shares of the Fund.
18
<PAGE>
ADMINISTRATOR'S FEES
For the services rendered to the Fund by the Administrator, the Fund pays
the Administrator a monthly fee based on the Fund's average net assets. The Fund
also pays the Administrator for any out-of-pocket expenses.
These fees are set forth in the Fund's Prospectus.
In return for providing the Fund with all accounting related services,
the Fund pays the Administrator a monthly fee based on the Fund's average net
assets, plus any out-of-pocket expenses for such services.
19
<PAGE>
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
Star Bank, N.A. serves as custodian for the Fund's cash and securities.
Pursuant to a Custodian Agreement, it is responsible for maintaining the books
and records of the Fund's portfolio securities and cash. The Custodian does not
assist in, and is not responsible for, investment decisions involving assets of
the Fund. American Data Services, Inc., the Administrator, also acts as the
Fund's transfer and dividend agent.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement, ADS Distributors, Inc. (the
"Distributor") has agreed to act as the principal underwriter for the Fund in
the sale and distribution to the public of shares of the Fund, either through
dealers or otherwise. The Distributor has agreed to offer such shares for sale
at all times when such shares are available for sale and may lawfully be offered
for sale and sold.
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
The Fund has adopted a Distribution and Service Plan (the "Plan"), which
was reviewed and approved by a majority of the disinterested directors of the
Fund, pursuant to Rule 12b-1 under the Act (the "Rule"). The Rule provides that
an investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Plan provides that the Fund will compensate the Distributor for certain expenses
and costs incurred in connection with providing marketing and promotional
support to the Fund, shareholder servicing and maintaining shareholder accounts,
to compensate parties with which it has written agreements and whose clients own
shares of the Fund for providing servicing to their clients ("shareholder
servicing") and financial institutions with which it has written agreements and
whose clients are Fund shareholders (each a "broker-dealer") for providing
distribution assistance and promotional support to the Fund, which is subject to
a maximum of 0.50% per annum of the Fund's average daily net assets. Fees paid
under the Plan may not be waived for individual shareholders.
20
<PAGE>
Each shareholder servicing agent and broker-dealer will, as agent for its
customers, among other things: answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Fund may be effected and certain other matters pertaining to the Fund;
assist shareholders in designating and changing dividend options, account
designations and addresses; provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder designated accounts;
furnish quarterly and year-end statements and confirmations within five business
days after activity in the account; transmit to shareholders of the Fund proxy
statements, annual reports, updated prospectuses and other communications;
receive, tabulate and transmit proxies executed by shareholders with respect to
meetings of shareholders of the Fund; and provide such other related services as
the Fund or a shareholder may request.
The Plan, the shareholder servicing agreements and the form of
distribution agreement each provide that the Adviser or the Distributor may make
payments from time to time from their own resources which may include the
advisory fee and the asset based sales charges and past profits for the
following purposes: (i) to defray the costs of and to compensate others,
including financial intermediaries with whom the Distributor has entered into
written agreements, for performing shareholder servicing and related
administrative functions of the Fund; to compensate certain financial
intermediaries for providing assistance in distributing Fund shares; (ii) to pay
the costs of printing and distributing the Fund's prospectus to prospective
investors; and (iii) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor will determine the amount of such payments made pursuant
to the Plan with the shareholder servicing agents and broker-dealers with whom
it has contracted, provided that such payments made pursuant to the Plan will
not increase the amount which the Fund is required to pay the Distributor for
any fiscal year under the shareholder servicing agreements or otherwise.
21
<PAGE>
Shareholder servicing agents and broker-dealers may charge investors a
fee in connection with their use of specialized purchase and redemption
procedures offered to investors by the shareholder servicing agents and
broker-dealers. In addition, shareholder servicing agents and broker-dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in the fund directly may impose charges, limitations,
minimums and restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly. Accordingly, the net yield to
investors who invest through shareholder servicing agents and broker-dealers may
be less than realized by investing in the Fund directly. An investor should read
the Prospectus in conjunction with the materials provided by the shareholder
servicing agent and broker-dealer describing the procedures under which Fund
shares may be purchased and redeemed through the shareholder servicing agent and
broker-dealer.
The Glass-Steagall Act limits the ability of a depository institution to
become an underwriter or distributor of securities. It is the Fund's position,
however, that banks are not prohibited from acting in other capacities for
investment companies, such as providing administrative and shareholder account
maintenance services and receiving compensation from the distributor for
providing such services. This is an unsettled area of the law, however, and if a
determination contrary to the Fund's position concerning shareholder servicing
and administration payments to banks from the distributor is made by a bank
regulatory agency or court, any such payments will be terminated and any shares
registered in the banks' names, for their underlying customers, will be
re-registered in the names of the customers at no cost to the Fund or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
In accordance with the Rule, the Plan provides that all written
agreements relating to the Plan entered into by the Fund, the Distributor or the
Adviser, and the shareholder servicing agents, broker-dealers, or other
organizations, must be in a form satisfactory to the Board of Directors. In
addition, the Plan requires the Fund and the Distributor to prepare, at least
quarterly, written reports setting forth all amounts expended for distribution
purposes by the Fund and the Distributor pursuant to the Plan and identifying
the distribution activities for which those expenditures were made for review by
the Board of Directors.
22
<PAGE>
OTHER EXPENSES
The Fund pays certain operating expenses that are not assumed by the
Adviser, the Administrator or any of their respective affiliates. These
expenses, together with fees paid to the Adviser, the Administrator, the
Distributor and the Transfer Agent, are deducted from income of the Fund before
dividends are paid. These expenses include, but are not limited to,
organizational costs, fees and expenses of officers and Directors who are not
affiliated with the Adviser, the Administrator or any of their respective
affiliates, taxes, interest, legal fees, custodian fees, audit fees, brokerage
fees and commissions, fees and expenses of registering and qualifying the Fund
and its shares for distribution under federal and state securities laws, the
expenses of reports to shareholders, shareholders' meetings and proxy
solicitations.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
The Fund's assets are invested by the Adviser in a manner consistent with
its investment objectives, policies, and restrictions and with any instructions
the Board of Directors may issue from time to time. Within this framework, the
Adviser is responsible for making all determinations as to the purchase and sale
of portfolio securities and for taking all steps necessary to implement
securities transactions on behalf of the Fund.
U.S. Government securities generally are traded in the over-the-counter
market through broker-dealers. A broker-dealer is a securities firm or bank that
makes a market for securities by offering to buy at one price and sell at a
slightly higher price. The difference between the prices is known as a spread.
In placing orders for the purchase and sale of portfolio securities for
the Fund, the Adviser will use its best efforts to obtain the best possible
price and execution and will otherwise place orders with broker-dealers subject
to and in accordance with any instructions the Board of Directors may issue from
time to time. The Adviser will select broker-dealers including, the Distributor,
to execute portfolio transactions on behalf of the Fund primarily on the basis
of best price and execution.
23
<PAGE>
When consistent with the objectives of prompt execution and favorable net
price, business may be placed with broker-dealers who furnish investment
research or services to the Adviser. Such research or services include advice,
both directly and in writing, as to the value of securities; the advisability of
investing in, purchasing or selling securities; and the availability of
securities, or purchasers or sellers of securities; as well as analyses and
reports concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. To the extent portfolio
transactions are effected with broker-dealers who furnish research services to
the Adviser, the Adviser receives a benefit, not capable of evaluation in dollar
amounts, without providing any direct monetary benefit to the Fund from these
transactions. The Adviser believes that most research services obtained by it
generally benefit several or all of the investment companies and private
accounts which it manages, as opposed to solely benefitting one specific managed
fund or account.
Transactions on U.S. stock exchanges, commodities markets and futures
markets and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
24
<PAGE>
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, the Adviser may receive brokerage and research services and other
similar services from many broker-dealers with which the Adviser may place the
Fund's portfolio transactions and from third parties with which these
broker-dealers have arrangements. These services include such matters as general
economic and market reviews, industry and company reviews, evaluations of
investments, recommendations as to the purchase and sale of investments,
newspapers, magazines, pricing services, quotation services, news services and
personal computers utilized by the Adviser. Where the services referred to above
are not used exclusively by the Adviser for research purposes, the Adviser,
based upon its own allocations of expected use, bears that portion of the cost
of these services which directly relates to their non-research use. Some of
these services are of value to the Adviser and its affiliates in advising
various of their clients (including the Fund), although not all of these
services are necessarily useful and of value in managing the Fund. The
management fee paid by the Fund is not reduced because the Adviser and its
affiliates receive these services even though the Adviser might otherwise be
required to purchase some of these services for cash.
As permitted by Section 28(e) of the 1934 Act, the Adviser may cause the
Fund to pay a broker-dealer which provides "brokerage and research services" (as
defined in the 1934 Act) to the Adviser an amount of disclosed commission for
effecting securities transactions on stock exchanges and other transactions for
the Fund on an agency basis in excess of the commission which another
broker-dealer would have charged for effecting that transaction. The Adviser's
authority to cause the Fund to pay any such greater commissions is also subject
to such policies as the Directors may adopt from time to time. The Adviser does
not currently intend to cause any Fund to make such payments. It is the position
of the staff of the Securities and Exchange Commission that Section 28(e) does
not apply to the payment of such greater commissions in "principal"
transactions. Accordingly, the Adviser will use its best effort to obtain the
most favorable price and execution available with respect to such transactions,
as described above.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Adviser may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
25
<PAGE>
TAXATION
The Fund intends to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). By so qualifying, the Fund will not incur federal income or state taxes
on its net investment income and on net realized capital gains to the extent
distributed as dividends to shareholders.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, the Fund must distribute during each calendar
year an amount equal to the sum of (a) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (b) at
least 98% of its capital gains in excess of capital losses (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31st of the
calendar year, and (c) all ordinary income and capital gains for previous years
that were not distributed during such years.
Under the Code, dividends derived from interest, and any short-term
capital gains, are taxable to shareholders as ordinary income for federal and
state tax purposes, regardless of whether such dividends are taken in cash or
reinvested in additional shares. Distributions made from the Fund's net realized
long-term capital gains (if any) and designated as capital gain dividends are
taxable to shareholders as long-term capital gains, regardless of the length of
time Fund shares are held. Corporate investors are not eligible for the
dividends-received deduction with respect to distributions derived from interest
on short-or long-term capital gains from the Fund but may be entitled to such a
deduction in respect to distributions attributable to dividends received by the
Fund. A distribution will be treated as paid on December 31st of a calendar year
if it is declared by the Fund in October, November or December of the year with
a record date in such a month and paid by the Fund during January of the
following year. Such distributions will be taxable to shareholders in the
calendar year the distributions are declared, rather than the calendar year in
which the distributions are received.
26
<PAGE>
Distributions paid by the Fund from net long-term capital gains (excess
of long-term capital gains over long-term capital losses), if any, whether
received in cash or reinvested in additional shares, are taxable as long-term
capital gains, regardless of the length of time you have owned shares in the
Fund. Distributions paid by the Fund from net short-term capital gains (excess
of short-term capital gains over short-term capital losses), if any, whether
received in cash or reinvested in additional shares are taxable as ordinary
income. Capital gains distributions are made when the Fund realizes net capital
gains on sales of portfolio securities during the year. Realized capital gains
are not expected to be a significant or predictable part of the Fund's
investment return.
Any redemption of the Fund shares is a taxable event and may result in a
capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares.
Dividend distributions, capital gains distributions, and capital gains or
losses from redemptions and exchanges may also be subject to state and local
taxes.
Ordinarily, distributions and redemption proceeds paid to Fund
shareholders are not subject to withholding of federal income tax. However, 31%
of the Fund's distributions and redemption proceeds must be withheld if a Fund
shareholder fails to supply the Fund or its agent with such shareholder's
taxpayer identification number or if the Fund shareholder who is otherwise
exempt from withholding fails to properly document such shareholder's status as
an exempt recipient.
The information above is only a summary of some of the tax considerations
generally affecting the Fund and its shareholders. No attempt has been made to
discuss individual tax consequences. To determine whether the Fund is a suitable
investment based on his or her tax situation, a prospective investor may wish to
consult a tax advisor.
27
<PAGE>
OWNERSHIP OF SHARES
Each share has one vote in the election of Directors. Cumulative voting
is not authorized. This means that the holders of more than 50% of the shares
voting for the election of Directors can elect 100% of the Directors if they
choose to do so, and, in that event, the holders of the remaining shares will be
unable to elect any Directors.
On January 13, 1999, certain private investors, invested $100,000 in
shares of the Fund at $10.00 per share, as seed capital. These investors will
control the Fund until public shareholders come into the Fund.
PURCHASE OF SHARES
Shares of the Fund may be purchased at the net asset value per share next
determined, plus any applicable sales load, after receipt of an order by the
Fund's Transfer Agent in proper form with accompanying check or other bank wire
payment arrangements satisfactory to the Fund. Fund shares are sold subject to
an initial sales load of up to 4.75%. The Fund's minimum initial investment is
$2,000 (except for retirement accounts for which the minimum initial investment
is $1,000) and the minimum subsequent investment is $100.
DIVIDENDS AND DISTRIBUTIONS
Net investment income, if any, is declared as dividends and paid
annually. Substantially all the realized net capital gains for the Fund, if any,
are also declared and paid on an annual basis. Dividends and distributions are
payable to shareholders of record at the time of declaration.
Distributions are automatically reinvested in additional Fund shares
unless the shareholder has elected to have them paid in cash.
The net investment income of the Fund for each business day is determined
immediately prior to the determination of net asset value. Net investment income
for other days is determined at the time net asset value is determined on the
prior business day. See "Purchase of Shares" and "Redemption of Shares" in the
Prospectus.
28
<PAGE>
NET ASSET VALUE
The method for determining the Fund's net asset value is summarized in
the Prospectus in the text following the heading "Valuation of Shares." The net
asset value of the Fund's shares is determined on each day on which the New York
Stock Exchange is open, provided that the net asset value need not be determined
on days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The New York Stock Exchange is not open for business on the
following holidays (or on the nearest Monday or Friday if the holiday falls on a
weekend): New Year's Day, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
PERFORMANCE COMPARISONS
Total return quoted in advertising and sales literature reflects all
aspects of the Fund's return, including the effect of reinvesting dividends and
capital gain distributions and any change in the Fund's net asset value during
the period.
The Fund's total return must be displayed in any advertisement containing
the Fund's yield. Total return is the average annual total return for the 1-, 5-
and 10-year period ended on the date of the most recent balance sheet included
in the Statement of Additional Information, computed by finding the average
annual compounded rates of return over 1-, 5- and 10-year periods that would
equate the initial amount invested to the ending redeemable value according to
the following formula:
P(1 + T)n = ERV
Where:
P = a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1000 payment made at the beginning of the
1-, 5- or 10-year periods at the end of the
1-, 5-or 10-year periods (or fractions
thereof).
29
<PAGE>
Because the Fund has not had a registration in effect for 1, 5 or 10
years, the period during which the registration has been effective shall be
substituted.
Average annual total return is calculated by determining the growth or
decline in value of a hypothetical historical investment in the Fund over a
stated period and then calculating the annual compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant throughout the period. For example, a cumulative total return
of 100% over 10 years would produce an average annual total return of 7.18%,
which is the steady annual rate that would result in 100% growth on a compounded
basis in 10 years. While average annual total returns are a convenient means of
comparing investment alternatives, investors should realize that the Fund's
performance is not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to actual
year-to-year performance.
In addition to average annual total returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total returns
may be quoted as a percentage or as a dollar amount and may be calculated for a
single investment, a series of investments, or a series of redemptions over any
time period. Performance information may be quoted numerically or in a table,
graph, or similar illustration.
The Fund's performance may be compared with the performance of other
funds with comparable investment objectives, tracked by fund rating services or
with other indexes of market performance. Sources of economic data that may be
considered in making such comparisons may include, but are not limited to,
rankings of any mutual fund or mutual fund category tracked by Lipper Analytical
Services, Inc. or Morningstar, Inc.; data provided by the Investment Company
Institute; major indexes of stock market performance; and indexes and historical
data supplied by major securities brokerage or investment advisory firms. The
Fund may also utilize reprints from newspapers and magazines furnished by third
parties to illustrate historical performance.
30
<PAGE>
The agencies listed below measure performance based on their own criteria
rather than on the standardized performance measures described in the preceding
section.
Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated
by Lipper, generally reflecting changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year, and
10-year performance. Lipper classifies mutual funds by investment
objective and asset category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
ratings are divided into five groups: highest, above average, neutral,
below average and lowest. They represent the fund's historical
risk/reward ratio relative to other funds in its broad investment class
as determined by Morningstar, Inc. Morningstar ratings cover a variety
of performance periods, including 1-year, 3-year, 5-year, 10-year and
overall performance. The performance factor for the overall rating is a
weighted-average assessment of the fund's 1-year, 3-year, 5-year, and
10-year total return performance (if available) reflecting deduction of
expenses and sales charges. Performance is adjusted using quantitative
techniques to reflect the risk profile of the fund. The ratings are
derived from a purely quantitative system that does not utilize the
subjective criteria customarily employed by rating agencies such as
Standard & Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings
and is distributed monthly. The rankings are based entirely on total
return calculated by Weisenberger for periods such as year-to-date,
1-year, 3-year, 5-year and 10-year. Mutual funds are ranked in general
categories (e.g., international bond, international equity, municipal
bond, and maximum capital gain). Weisenberger rankings do not reflect
deduction of sales charges or fees.
31
<PAGE>
Independent publications may also evaluate the Fund's performance. The
Fund may from time to time refer to results published in various periodicals,
including Barrons, Financial World, Forbes, Fortune, Investor's Business Daily,
Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The
Wall Street Journal.
Independent, unmanaged indexes, such as those listed below, may be used
to present a comparative benchmark of the Fund's performance. The performance
figures of an index reflect changes in market prices, reinvestment of all
dividend and interest payments and, where applicable, deduction of foreign
withholding taxes, and do not take into account brokerage commissions or other
costs. Because the Fund is a managed portfolio, the securities it owns will not
match those in an index. Securities in an index may change from time to time.
The Dow Jones Industrial Average is an index of 30 common stocks
frequently used as a general measure of stock market performance.
The NASDAQ Industrial Average is an index of stocks traded in The
Nasdaq Stock Market, Inc. National Market System.
Standard & Poor's 500 Composite Stock Price Index is an index of common
stocks frequently used as a general measure of stock market
performance.
The NASDAQ Combined Bank Index is an index of bank stocks.
The S&P Major Regional Bank Index is an index of major regional bank
stocks.
32
<PAGE>
REDEMPTION OF SHARES
Redemption of shares, or payment for redemptions, may be suspended at
times (a) when the New York Stock Exchange is closed for other than customary
weekend or holiday closings, (b) when trading on said Exchange is restricted,
(c) when an emergency exists, as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable, or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or (d)
during any other period when the Securities and Exchange Commission, by order,
so permits, provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in (b)
or (c) exist.
Shareholders who purchased shares through a broker-dealer may also
redeem such shares by written request to the Transfer Agent which shares are
held by the Transfer Agent at the address set forth in the Prospectus. To be
considered in "good order", written requests for redemption should indicate the
dollar amount or number of shares to be redeemed, refer to the shareholder's
Fund account number, including either the social security or tax identification
number. The request should be signed in exactly the same way the account is
registered. If there is more than one owner of the shares, all owners must sign.
If shares to be redeemed have a value of $5,000 or more or redemption proceeds
are to be paid by someone other than the shareholder at the shareholder's
address of record, the signature(s) must be guaranteed by an "eligible guarantor
institution," which includes a commercial bank that is a member of the Federal
Deposit Insurance Corporation, a trust company, a member firm of a domestic
stock exchange, a savings association or a credit union that is authorized by
its charter to provide a signature guarantee. The Transfer Agent may reject
redemption instructions if the guarantor is neither a member of nor a
participant in a signature guarantee program. Signature guarantees by notaries
public are not acceptable. The purpose of a signature guarantee is to protect
shareholders against the possibility of fraud. Further documentation will be
requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by facsimile
will not be accepted. Unless other instructions are given in proper form, a
check for the proceeds of the redemption will be sent to the shareholder's
address of record.
33
<PAGE>
Share purchases and redemptions are governed by Maryland law.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Legal matters in connection with the issuance of shares of common stock
of the Fund are passed upon by Spitzer & Feldman P.C., 405 Park Avenue, New
York, New York 10022. McCurdy & Associates, CPAs, Inc., 27955 Clemens Road,
Westlake, Ohio 44145, have been selected as independent accountants for the
Fund.
OTHER INFORMATION
The Adviser has been continuously registered with the Securities
Exchange Commission (SEC) under the Investment Advisers Act of 1940 since
October 13, 1998. The Company has filed a registration statement under the
Securities Act of 1933 and the 1940 Act with respect to the shares offered. Such
registrations do not imply approval or supervision of the Fund or the Adviser by
the SEC.
For further information, please refer to the registration statement and
exhibits on file with the SEC in Washington, D.C. These documents are available
upon payment of a reproduction fee. Statements in the Prospectus and in this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
34
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
QUESTAR FUNDS, INC
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 14, 1999
Imperial BankFund
ASSETS:
Cash in Bank $100,000
--------
Total Assets 100,000
--------
NET ASSETS $100,000
--------
NET ASSETS CONSIST OF:
Capital Paid In $100,000
--------
OUTSTANDING SHARES
100 Million Shares
Authorized at .001 Par Value 10,000
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $10.00
MAXIMUM OFFERING PRICE PER SHARE (NET
ASSET VALUE PLUS SALES CHARGE OF 4.75%) $10.50
See Accountants' Audit Report
F-1
<PAGE>
QUESTAR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
January 14, 1999
1. ORGANIZATION
Questar Capital, Inc. (the "Trust") is an open-end manage-
ment investment company organized as a corporation under the
laws of the State of Maryland on February 13, 1998. The
Certificate of Formation provides for one billion authorized
shares, which may, without shareholder approval, be divided
into an unlimited number of series of such shares, and which
presently consist of one series of shares for the Imperial
BankFund.
The Fund uses an independent custodian and transfer agent. No
transactions other than those relating to organizational
matters and the sale of 10,000 Shares of the Imperial BankFund
have taken place to date.
The investment objective of the Fund is long term capital
appreciation with income as a secondary objective.
2. RELATED PARTY TRANSACTIONS
Retirement Planning Company of New England, Inc., the Fund's
investment adviser, is registered as an investment adviser
under the Investment Advisers Act of 1940. As compensation for
Retirement Planning Company of New England, Inc.'s services
rendered to the Fund, such Fund pays a fee, computed at an
annual rate of 1.00% of its average daily net assets. The
adviser may, from time to time, voluntarily waive a portion of
its fees.
American Data Services, Inc. is the Fund's administrator, Fund
accountant, and transfer agent. As compensation for services
rendered to the Fund, American Data Services, Inc. receives a
fee based on the following schedule:
Net Assets Fee
$ 0 $ 5 million $1,500 per month
$ 5 $10 million $1,750 per month
$10 $20 million $2,000 per month
in excess of $20 million $2,500 per month or
.15% of average daily
net assets whichever
is greater.
The Fund has adopted a distribution and service plan pursuant
to Rule 12b-1 under the act. ADS Distributors, Inc., an
affiliate of the administrator, has entered into a distribution
agreement with the Fund to serve as distributor of the Fund's
shares. The distributor will be entitled to a distribution fee
equal to 0.50% of the Fund's average daily net assets.
Michel Miola is an owner and officer of American Data Services,
Inc. and ADS Distributors, Inc. as well as an officer and
director of Questar Funds, Inc.
F-2
<PAGE>
QUESTAR FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
January 14, 1999
2. RELATED PARTY TRANSACTIONS (CONT'D)
Michael R. Laliberte' and David W. Allaire are owners and
officers of Retirement Planning Company of New England, Inc. as
well as directors of Questar Funds, Inc.
3. CONTROL PERSONS
As of January 15, 1999, 50% of the outstanding shares of the
Fund were owned by the Everson Family Limited Partnership and
50% of the outstanding shares of the Fund were owned by Robert
D. Vincent. A shareholder who beneficially owns, directly or
indirectly, more than 25% of the Fund's voting securities may
be deemed a "control person" (as defined in the 1940 Act) of
the Fund.
4. CAPITAL STOCK AND DISTRIBUTION
At January 14, 1999, an unlimited number of shares were
authorized and paid in capital amounted to $100,000 for the
Imperial BankFund. Transactions in capital stock were as
follows:
Shares Sold:
The Imperial BankFund 10,000
Shares Redeemed:
The Imperial BankFund 0
Net Increase:
The Imperial BankFund 10,000
Shares Outstanding:
The Imperial BankFund 10,000
5. SALES CHARGE
The sales charge for shares of the Fund are outlined below:
Sales Charge
Sales as a % of
Investment Charge Net Amount Invested
Up to $49,999 4.75% 4.99%
$ 50,000 - 99,999 4.25% 4.44%
$100,000 - 249,999 3.75% 3.90%
$250,000 - 499,999 2.50% 2.56%
$500,000 - 999,999 2.00% 2.04%
$1 million and up 0
F-3
<PAGE>
APPENDIX
SECURITY RATINGS
The following rating services describe rated securities as follows:
MOODY'S INVESTORS SERVICE, INC.
BONDS
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
edged." 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 risk appear somewhat larger than the 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.
-i-
<PAGE>
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 thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
STANDARD & POOR'S
BONDS
AAA--Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
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 somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit 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
bonds in this category than for bonds in higher rated categories.
BB-B-CCC-CC-C--Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. 'BB'
indicates the lowest degree of speculation and 'C' the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
-ii-
<PAGE>
BB--Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. 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 payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B--Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.
CCC--Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment 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. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
DUFF & PHELPS CORPORATION
LONG-TERM DEBT
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A, A-Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
-iii-
<PAGE>
BBB+, BBB, BBB--Below-average protection factors but still considered sufficient
for prudent investment. Considerable variability in risk during economic cycles.
BB+, BB, BB-Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B, B-Below investment grade and possessing risk that obligations will not be
met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
CCC--Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
-iv-
<PAGE>
PART C
ITEM 23. EXHIBITS.
* (1) Articles of Incorporation;
* (2) Bylaws of the Company;
(3) Not Applicable.
**(4) Investment Advisory Agreement.
**(5) Distribution Agreement.
(6) Not Applicable.
**(7) Custody Agreement.
**(8.1) Administrative Service Agreement.
**(8.2) Transfer Agency Agreement.
**(9) Opinion of Spitzer & Feldman P.C. as to the legality
of the securities being registered, including their
consent to the filing thereof and as to the use of
their names in the Prospectus.
**(10) Consent of McCurdy & Associates, CPAs, Inc,
independent accountants.
(11) Not Applicable.
**(12) Subscription Letter.
**(13) Not Applicable.
**(14) Financial Data Schedule.
(15) Distribution Plan.
C-i
<PAGE>
- ---------------------
* Filed with the Securities and Exchange Commission as an Exhibit to the
Registrant's Registration
statement (Reg. No. 333-46323) on February 13, 1998.
** Filed herewith.
C-ii
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable
ITEM 25. INDEMNIFICATION.
(a) In accordance with Section 2-418 of the General Corporation
Law of the State of Maryland, Article NINTH of the Registrant's
Articles of Incorporation provides as follows:
"NINTH:(1) The Corporation shall indemnify (i) its currently
acting and former directors and officers, whether serving the
Corporation or at its request any other entity, to the fullest
extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the fullest extent permitted
by law, and (ii) other employees and agents to such extent as
shall be authorized by the Board of Directors or the By-Laws and
as permitted by law. Nothing contained herein shall be construed
to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. The foregoing rights of
indemnification shall not be exclusive of any other rights to
which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such by-laws, resolutions or
contracts implementing such provisions or such indemnification
arrangements as may be permitted by law. No amendment of the
charter of the Corporation or repeal of any of its provisions
shall limit or eliminate the right of indemnification provided
hereunder with respect to acts or omissions occurring prior to
such amendment or repeal.
C-iii
<PAGE>
(2) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment
Company Act of 1940, no director or officer of the Corporation
shall be personally liable to the Corporation or its
stockholders for money damages; provided, however, that
nothing herein shall be construed to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. No amendment of the
charter of the Corporation or repeal of any of its provisions
shall limit or eliminate the limitation of liability provided
to directors and officers hereunder with respect to any act or
omission occurring prior to such amendment or repeal."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Retirement Planning Company of New England, Inc. serves as investment
adviser to the Fund. Set forth below are the names of the directors and officers
of the Adviser:
David W. Allaire President, CEO, and Director
Michael R. Laliberte CFO and Director
ITEM 27. PRINCIPAL UNDERWRITER.
(a) The principal underwriter of the Company's shares currently
acts as a principal underwriter for other investment
companies.
(b) The following table contains information with respect to each
director, officer or partner of each principal underwriter
named in the answer to Item 21:
C-iv
<PAGE>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT
----------------- ---------------- ---------------
Michael Miola Treasurer, Director President, CFO and
Chairman Director
*The Hauppauge
Corporate Center
150 Motor Parkway
Hauppauge, NY 11788
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Company required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are located,
in whole or in part, at the office of the Adviser at One Richmond Square,
Providence, RI 02906; except transfer agency records which are maintained at the
offices of the Administrator and the Company: American Data Services, Inc., The
Hauppauge Corporate Center, 150 Motor Parkway, Hauppauge, New York 11788 and
custodial records which are maintained at the offices of the Custodian, Star
Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202.
ITEM 29 MANAGEMENT SERVICES.
Not Applicable
ITEM 30. UNDERTAKINGS.
Not Applicable
<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 Hauppauge and State of New York, on the 16th day of
December, 1998.
QUESTAR FUNDS, INC.
By:/S/ MICHAEL MIOLA
-----------------------
Michael Miola, 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.
/S/ MICHAEL MIOLA Director, Chairman of the December 16, 1998
- ------------------- Board and Chief Executive Officer
Michael Miola
/S/ DAN CALABRIA Director December 16, 1998
- ----------------
Dan Calabria
/S/ ANTHONY HERTL Director December 16, 1998
- -----------------
Anthony Hertl
The above person signing as Director is currently the sole member of the
Company's Board of Directors.
QUESTAR FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
-----------------------------
THIS INVESTMENT ADVISORY AGREEMENT is made as of the 16th day
of December, 1998, by and between QUESTAR FUNDS, INC., a Maryland corporation
(hereinafter called the "Corporation"), on behalf of its series, Imperial
BankFund (the "Fund") and Retirement Planning Company of New England, Inc., a
Rhode Island corporation (hereinafter called the "Adviser").
WITNESSETH:
WHEREAS, the Corporation is an open-end management investment
company, registered as such under the Investment Company Act of 1940 (the
"Investment Company Act"); and
WHEREAS, the Fund is a series of the Corporation having
separate assets and liabilities; and
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940 and is engaged in the business of
providing investment advice to individual clients and investment companies; and
WHEREAS, the Corporation desires to retain the Adviser to
render advice and services to the Fund pursuant to the terms and provisions of
this Agreement, and the Adviser desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties to this Agreement, intending
to be legally bound hereby, mutually agree as follows:
1. APPOINTMENT OF ADVISER. The Corporation hereby employs the
----------------------
Adviser and the Adviser hereby accepts such employment, to render investment
advice and related services with respect to the assets of the Fund for the
period and on the terms set forth in this Agreement, subject to the supervision
and direction of the Board of Directors.
<PAGE>
1. DUTIES OF ADVISER.
-----------------
(1) GENERAL DUTIES. The Adviser shall act as investment
--------------
adviser to the Fund and shall supervise investments of the Fund on behalf of the
Fund in accordance with the investment objective, policies and restrictions of
the Fund as set forth in the Fund's and Corporation's governing documents,
including, without limitation, the Corporation's Articles of Incorporation and
By-Laws; the Fund's prospectus, statement of additional information and
undertakings; and such other limitations, policies and procedures as the
Directors may impose from time to time in writing to the Adviser. In providing
such services, the Adviser shall at all times adhere to the provisions and
restrictions contained in the federal securities laws, applicable state
securities laws, the Internal Revenue Code, the Uniform Commercial Code and
other applicable law.
Without limiting the generality of the foregoing, the Adviser
shall: (i) furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (I.E., placing the orders); (ii)
manage and oversee the investments of the Fund, subject to the ultimate
supervision and direction of the Board of Directors; (iii) vote proxies for the
Fund, file ownership reports under Section 13 of the Securities Exchange Act of
1934 for the Fund, and take other actions on behalf of the Fund; (iv) maintain
the books and records required to be maintained by the Fund except to the extent
arrangements have been made for such books and records to be maintained by the
Administrator or another agent of the Fund; (v) furnish reports, statements and
other data on securities, economic conditions and other matters related to the
investment of the Fund's assets which the Fund's Administrator or distributor or
the officers of the Corporation may reasonably request; and (vi) render to the
Board of Directors such periodic and special reports with respect to the Fund's
investment activities as the Board may reasonably request, including at least
one in-person appearance annually before the Board of Directors.
(2) BROKERAGE. The Adviser shall be responsible for decisions
---------
to buy and sell securities for the Fund, for broker-dealer selection, and for
negotiation of brokerage commission rates, provided that the Adviser shall not
direct orders to an affiliated person of the Adviser without general prior
-2-
<PAGE>
authorization to use such affiliated broker or dealer from the Board of
Directors. The Adviser's primary consideration in effecting a securities
transaction will be execution at the most favorable price. In selecting a
broker-dealer to execute each particular transaction, the Adviser may take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. The price to the Fund in any transaction may be less favorable than that
available from another broker-dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Directors may
determine, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides (directly or
indirectly) brokerage or research services to the Adviser an amount of
commission for effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Corporation. The Adviser is further authorized to allocate the orders placed
by it on behalf of the Fund to such brokers or dealers who also provide research
or statistical material, or other services, to the Corporation, the Adviser, or
any affiliate of either. Such allocation shall be in such amounts and
proportions as the Adviser shall determine, and the Adviser shall report on such
allocations regularly to the Corporation, indicating the broker-dealers to whom
such allocations have been made and the basis therefor. The Adviser is also
authorized to consider sales of shares as a factor in the selection of brokers
or dealers to execute portfolio transactions, subject to the requirements of
best execution, I.E., that such brokers or dealers are able to execute the order
promptly and at the best obtainable securities price.
-3-
<PAGE>
On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as of other clients, the
Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and the most efficient execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Adviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
2. REPRESENTATIONS OF THE ADVISER.
------------------------------
(3) The Adviser shall use its best judgment and efforts in
rendering the advice and services to the Fund as contemplated by this Agreement.
(4) The Adviser shall maintain all licenses and
registrations necessary to perform its duties hereunder in good order.
(5) The Adviser shall conduct its operations at all times
in conformance with the Investment Advisers Act of 1940, the Investment Company
Act of 1940, and any other applicable state and/or self-regulatory organization
regulations.
(6) The Adviser shall maintain errors and omissions
insurance in an amount at least equal to that disclosed to the Board of
Directors in connection with their approval of this Agreement.
3. INDEPENDENT CONTRACTOR. The Adviser shall, for all purposes
----------------------
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Corporation or the Fund in any way, or in any way be deemed an
agent for the Corporation or for the Fund. It is expressly understood and agreed
that the services to be rendered by the Adviser to the Fund under the provisions
of this Agreement are not to be deemed exclusive, and the Adviser shall be free
to render similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be impaired
thereby.
-4-
<PAGE>
4. ADVISER'S PERSONNEL. The Adviser shall, at its own expense,
-------------------
maintain such staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Adviser shall be
deemed to include persons employed or retained by the Adviser to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Adviser or the Board of Directors may desire and reasonably request.
5. EXPENSES.
--------
(7) With respect to the operation of the Fund, the Adviser
shall be responsible for (i) providing the personnel, office space and equipment
reasonably necessary for the investment management of the Fund, (ii) the
expenses of printing and distributing extra copies of the Fund's prospectus,
statement of additional information, and sales and advertising materials (but
not the legal, auditing or accounting fees attendant thereto) to prospective
investors (but not to existing shareholders), and (iii) the costs of any special
Board of Directors meetings or shareholder meetings convened for the primary
benefit of the Adviser. If the Adviser has agreed to limit the operating
expenses of the Fund, the Adviser shall also be responsible on a monthly basis
for any operating expenses that exceed the agreed upon expense limitation.
(8) The Fund is responsible for and has assumed the
obligation for payment of all of its expenses, other than as stated in
Subparagraph 6(a) above, including but not limited to: investment advisory and
administrative fees payable to the Adviser or the Administrator under the
appropriate agreements entered into with the Adviser or the Administrator, as
the case may be; fees and expenses incurred in connection with the issuance,
registration and transfer of its shares; brokerage and commission expenses; all
expenses of transfer, receipt, safekeeping, servicing and accounting for the
cash, securities and other property of the Corporation for the benefit of the
Fund including all fees and expenses of its custodian, shareholder services
agent and accounting services agent; interest charges on any borrowings; costs
-5-
<PAGE>
and expenses of pricing and calculating its daily net asset value and of
maintaining its books of account required under the Investment Company Act;
taxes, if any; a pro rata portion of expenditures in connection with meetings of
the Fund's shareholders and the Corporation's Board of Directors that are
properly payable by the Fund; salaries and expenses of officers and fees and
expenses of members of the Board of Directors or members of any advisory board
or committee who are not members of, affiliated with or interested persons of
the Adviser or the Administrator; insurance premiums on property or personnel of
the Fund which inure to its benefit, including liability and fidelity bond
insurance; the cost of preparing and printing reports, proxy statements,
prospectuses and statements of additional information of the Fund or other
communications for distribution to existing shareholders; legal, auditing and
accounting fees; trade association dues; fees and expenses (including legal
fees) of registering and maintaining registration of its shares for sale under
federal and applicable state and foreign securities laws; all expenses of
maintaining and servicing shareholder accounts, including all charges for
transfer, shareholder recordkeeping, dividend disbursing, redemption, and other
agents for the benefit of the Fund, if any; and all other charges and costs of
its operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed.
(9) The Adviser may voluntarily absorb certain Fund
expenses or waive the Adviser's own Advisory fee. (1)
(10) To the extent the Adviser incurs any costs by
assuming expenses which are an obligation of the Fund as set forth herein, the
Fund shall promptly reimburse the Adviser for such costs and expenses, except to
the extent the Adviser has otherwise agreed to bear such expenses. To the extent
the services for which the Fund is obligated to pay are performed by the
Adviser, the Adviser shall be entitled to recover from the Fund to the extent of
the Adviser's actual costs for providing such services. In determining the
Adviser's actual costs, the Adviser may take into account an allocated portion
of the salaries and overhead of personnel performing such services.
6. INVESTMENT ADVISORY FEE.
-----------------------
(11) The Fund shall pay to the Adviser, and the Adviser
agrees to accept, as full compensation for all investment and advisory services
furnished or provided to the Fund pursuant to this Agreement, an annual
investment advisory fee at the rate set forth in Schedule A to this Agreement.
-6-
<PAGE>
(12) The investment advisory fee shall be accrued daily by
the Fund and paid to the Adviser on the first business day of the succeeding
month.
(13) The initial fee under this Agreement shall be payable
on the first business day of the first month following the effective date of
this Agreement and shall be prorated as set forth below. If this Agreement is
terminated prior to the end of any month, the fee to the Adviser shall be
prorated for the portion of any month in which this Agreement is in effect which
is not a complete month according to the proportion which the number of calendar
days in the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
(14) The fee payable to the Adviser under this Agreement
will be reduced to the extent of any receivable owed by the Adviser to the Fund
and as required under any expense limitation applicable to the Fund.
(15) The Adviser voluntarily may reduce any portion of the
compensation or reimbursement of expenses due to it pursuant to this Agreement
and may agree to make payments to limit the expenses which are the
responsibility of the Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Adviser hereunder or to continue future payments. Any such reduction will
be agreed to prior to accrual of the related expense or fee and will be
estimated daily and reconciled and paid on a monthly basis.
(16) Any fee withheld or voluntarily reduced and any Fund
expense absorbed by the Adviser voluntarily or pursuant to an agreed upon
expense cap shall be reimbursed by the Fund to the Adviser, if so requested by
the Adviser, no later than the fifth fiscal year succeeding the fiscal year of
the withholding, reduction or absorption if the aggregate amount actually paid
by the Fund toward the operating expenses for such fiscal year (taking into
-7-
<PAGE>
account the reimbursement) do not exceed the applicable limitation on Fund
expenses. Such reimbursement may be paid prior to the Fund's payment of current
expenses if so requested by the Adviser even if such practice may require the
Adviser to waive, reduce or absorb current Fund expenses.
(17) The Adviser may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Adviser hereunder.
7. NO SHORTING; NO BORROWING. The Adviser agrees that neither
-------------------------
it nor any of its officers or employees shall take any short position in the
shares of the Fund. This prohibition shall not prevent the purchase of such
shares by any of the officers or employees of the Adviser or any trust, pension,
profit-sharing or other benefit plan for such persons or affiliates thereof, at
a price not less than the net asset value thereof at the time of purchase, as
allowed pursuant to rules promulgated under the Investment Company Act. The
Adviser agrees that neither it nor any of its officers or employees shall borrow
from the Fund or pledge or use the Fund's assets in connection with any
borrowing not directly for the Fund's benefit. For this purpose, failure to pay
any amount due and payable to the Fund for a period of more than thirty (30)
days shall constitute a borrowing.
8. CONFLICTS WITH CORPORATION'S GOVERNING DOCUMENTS AND
----------------------------------------------------
APPLICABLE LAWS. Nothing herein contained shall be deemed to require the
- ---------------
Corporation or the Fund to take any action contrary to the Corporation's
Articles of Incorporation, By-Laws, or any applicable statute or regulation, or
to relieve or deprive the Board of Directors of the Corporation of its
responsibility for and control of the conduct of the affairs of the Corporation
and the Fund. In this connection, the Adviser acknowledges that the Directors
retain ultimate plenary authority over the Fund and may take any and all actions
necessary and reasonable to protect the interests of shareholders.
9. REPORTS AND ACCESS. The Adviser agrees to supply such
------------------
information to the Fund's Administrator and to permit such compliance
inspections by the Administrator as shall be reasonably necessary to permit the
Administrator to satisfy its obligations and respond to the reasonable requests
of the Directors.
-8-
<PAGE>
10. ADVISER'S LIABILITIES AND INDEMNIFICATION.
-----------------------------------------
(18) The Adviser shall have responsibility for the
accuracy and completeness (and liability for the lack thereof) of the statements
in the Fund's offering materials (including the prospectus, the statement of
additional information, advertising and sales materials), except for information
supplied by the Administrator or the Corporation or another third party for
inclusion therein.
(19) The Adviser shall be liable to the Fund for any loss
(including brokerage charges) incurred by the Fund as a result of any improper
investment made by the Adviser.
(20) In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the obligations or duties hereunder
on the part of the Adviser, the Adviser shall not be subject to liability to the
Corporation or the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(21) Each party to this Agreement shall indemnify and hold
harmless the other party and the shareholders, directors, officers and employees
of the other party (any such person, an "Indemnified Party") against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or nonperformance of any duties under
this Agreement provided, however, that nothing herein shall be deemed to protect
any Indemnified Party against any liability to which such Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
-9-
<PAGE>
(22) No provision of this Agreement shall be construed to
protect any Director or officer of the Corporation, or officer of the Adviser,
from liability in violation of Sections 17(h) and (i) of the Investment Company
Act.
11. NON-EXCLUSIVITY; TRADING FOR ADVISER'S OWN ACCOUNT. The
--------------------------------------------------
Corporation's employment of the Adviser is not an exclusive arrangement. The
Corporation may from time to time employ other individuals or entities to
furnish it with the services provided for herein. Likewise, the Adviser may act
as investment adviser for any other person, and shall not in any way be limited
or restricted from having, selling or trading any securities for its or their
own accounts or the accounts of others for whom it or they may be acting,
provided, however, that the Adviser expressly represents that it will undertake
no activities which will adversely affect the performance of its obligations to
the Fund under this Agreement; and provided further that the Adviser will adhere
to a code of ethics governing employee trading and trading for proprietary
accounts that conforms to the requirements of the Investment Company Act and the
Investment Advisers Act of 1940 and has been approved by the Corporation's Board
of Directors.
12. TERM. This Agreement shall become effective at the time
----
the Fund commences operations pursuant to an effective amendment to the
Corporation's Registration Statement under the Securities Act of 1933 and shall
remain in effect for a period of two (2) years, unless sooner terminated as
hereinafter provided. This Agreement shall continue in effect thereafter for
additional periods not exceeding one (1) year so long as such continuation is
approved for the Fund at least annually by (i) the Board of Directors of the
Corporation or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) the vote of a majority of the Directors of the Corporation who
are not parties to this Agreement nor interested persons thereof, cast in person
at a meeting called for the purpose of voting on such approval. The terms
"majority of the outstanding voting securities" and "interested persons" shall
have the meanings as set forth in the Investment Company Act.
-10-
<PAGE>
13. TERMINATION; NO ASSIGNMENT.
--------------------------
(23) This Agreement may be terminated by the Corporation
on behalf of the Fund at any time without payment of any penalty, by the Board
of Directors or by vote of a majority of the outstanding voting securities of a
Fund, upon sixty (60) days' written notice to the Adviser, and by the Adviser
upon sixty (60) days' written notice to a Fund. In the event of a termination,
the Adviser shall cooperate in the orderly transfer of the Fund's affairs and,
at the request of the Board of Directors, transfer any and all books and records
of the Fund maintained by the Adviser on behalf of the Fund.
(24) This Agreement shall terminate automatically in the
event of any transfer or assignment thereof, as defined in the Investment
Company Act.
14. SEVERABILITY. If any provision of this Agreement shall be
------------
held or made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
15. CAPTIONS. The captions in this Agreement are included for
--------
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
16. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York without giving
effect to the conflict of laws principles thereof; provided that nothing herein
shall be construed to preempt, or to be inconsistent with, any federal law,
regulation or rule, including the Investment Company Act and the Investment
Advisers Act of 1940 and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
-11-
<PAGE>
QUESTAR FUNDS, INC. RETIREMENT PLANNING COMPANY OF
on behalf of its series, the NEW ENGLAND, INC.
Imperial BankFund
By: /S/ MICHAEL MIOLA By: /S/ DAVID ALLAIRE
------------------- -----------------
Name: Michael Miola Name: David Allaire
Title: President Title: President
Schedule A
SERIES OR FUND OF QUESTAR FUNDS, INC. ANNUAL FEE RATE
- ------------------------------------- ---------------
Imperial BankFund 1.00% of average net assets
UNDERWRITING AGREEMENT
BETWEEN
QUESTAR FUNDS, INC
IMPERIAL BANKFUND
AND
ADS DISTRIBUTORS, INC.
[GRAPHIC OMITTED]
<PAGE>
UNDERWRITING AGREEMENT
AGREEMENT made as of this 16th day of December, 1998 between QueStar Funds, Inc.
a Maryland Corporation (the "Fund"), and ADS Distributors, Inc., a Florida
Corporation (the "Underwriter").
1. The Underwriter will receive orders from purchasers for and the Fund will
sell, issue and deliver from time to time to such purchasers, such part of
the authorized shares of capital stock of the Fund remaining un-issued as
from time to time shall be effectively registered under the Securities Act
of 1933, as amended (the "33 Act"), at prices determined as hereinafter
provided and on the terms hereinafter set forth, all subject to applicable
Federal and State laws and regulations and to the charter of the Fund.
2. The Underwriter shall present all orders received by it for shares of
capital stock of the Fund to the Fund by telegraphic or written purchase
orders and each such order shall be subject to the acceptance or rejection
by the Fund in its sole discretion
2.1 Notwithstanding any other provision hereof, whenever in the judgment of
the Fund such action is warranted by market, economic or political
conditions or by abnormal circumstances of any kind, the Fund may suspend
the offer of shares in effect and may, without liability under the provision
of this Agreement, decline to accept or confirm any orders or make any sales
of shares or capital stock under this Agreement until such time as the Fund
shall deem it advisable to resume the offering of such shares, provided that
as soon as practicable after the taking of any such action a special meeting
of the Board of Directors shall be called to be held as soon as practicable
thereafter to determine whether or not such action shall then continue to be
effective, and the period during, or the circumstance under, which such
action shall continue or cease to be effective. During any period during
which the offer of shares shall be suspended or the Fund shall decline to
acceptor confirm any such orders or make any such sales, the Fund shall be
under no obligation to confirm or accept any such orders or make any such
sale at any price.
2.2 The Fund will use its best efforts to keep effectively registered under
the 33 Act for sale as herein contemplated such shares of its capital stock
as the Underwriter shall reasonably request and as the Securities and
Exchange Commission (the "SEC") shall permit to be so registered.
3. Sales by the Underwriter shall be made as agent for the Fund and all such
sales be made to or though qualified dealers or others in such manner, not
inconsistent with the provisions hereof and the then effective registration
statement of the Fund under the 33 Act, (and related prospectus), as the
Underwriter may determine from time to time.
<PAGE>
4. All shares of capital stock offered for sale or sold by the Underwriter
shall be so offered or sold at a price per share (the "Offering Price")
equal to the net asset value per share (determined as authorized from time
to time by the Board of Directors of the Fund pursuant to its charter).
4.1 For the purpose of determining the offering price, the net asset value
of any such shares shall be so determined in accordance with the then
current offering prospectus. The Fund, or its authorized agent, will
promptly furnish to the Underwriter a statement of the Offering Price as
often as such net asset value is determined and such statement shall at the
request of the Underwriter show the basis of computation of the Offering
Price.
4.2 Orders presented by the Underwriter for shares, if accepted by the Fund,
shall be accepted and confirmed by it or its duly authorized agent at the
Offering Price in effect at the time of its receipt of such order at its
principal office.
4.3 The Underwriter will not in any event (a) offer for sale or sell shares
of capital stock in excess of the number then effectively registered under
the 33 Act, and available for sale, or (b) offer for sale or sell any shares
in violation of any applicable Federal or State law, rule or regulation.
5. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of its shares of capital stock in such states as the
Underwriter may reasonably request (it being understood that the Fund shall
not be required without its consent to qualify to do business in any
jurisdiction or to comply with any requirement which in its opinion is
unduly burdensome). The Underwriter, at its own expense, will effect all
qualifications as dealer or broker.
6. The Fund will furnish to the Underwriter from time to time such information
with respect to its shares as the Underwriter may reasonably request for
use in connection with the sale of shares. The Underwriter will not use or
distribute or authorize the use, distribution or dissemination by its
dealers or others in connection with such sale of any literature,
advertising or selling aids in any form or through any medium, written or
oral, without prior written specific approval thereof by the Fund.
7. Nothing herein contained shall limit the right of the Fund, in its absolute
discretion, to issue or sell shares of its capital stock for such other
considerations (whether in connection with the acquisition of assets or
shares or securities of another corporation or entity or with the merger or
consolidation of any other corporation into or with the Fund, or otherwise)
as and to the extent permitted by its charter and any applicable laws, or
to issue or sell any such shares directly to the shareholders of the Fund,
upon such terms and conditions and for such consideration, if any, as may
be determined by the Board of Directors, whether pursuant to the
distribution of subscription or purchase rights to such holders or by way
of dividends or otherwise.
<PAGE>
8. At the request of the Fund, the Underwriter agrees to act as agent for the
Fund for the repurchase or redemption of shares of the Fund at such prices
as the Fund from time to time shall prescribe.
9. In selling or reacquiring shares, the Underwriter agrees to conform to the
requirements of all state and Federal laws relating to such sale or
reacquisition, as the case may be, and will indemnify and hold the Fund
harmless from any damage or expense on account of any wrongful act by the
Underwriter or any employee, representative or agent of the Underwriter.
The Underwriter will observe and be bound by all the provisions of the
charter of the Fund and any fundamental policies adopted by the Fund
pursuant to the Investment Company Act of 1940, as amended (the "40 Act"),
notice of which has been given to the Underwriter.
10. Neither the Underwriter, any dealer nor any other person is authorized by
the Fund to give any information or to make any representation other than
those contained (a) in the latest effective registration statement (and
related prospectus) filed with the SEC under the 33 Act as such
registration statement (and prospectus) may be amended from time to time,
or (b) in any statement expressly authorized by the Fund for use in
connection with any sale or reacquisition of capital stock for the account
of the Fund.
11. In Consideration of the agreements on the part of the Underwriter herein
contained, the Underwriter shall receive payment in the amount of $5,000
per annum, or one (1) basis point, whichever is greater, billed monthly,
plus reimbursement of all reasonable out-of-pocket expenses incurred at the
request of the Fund in fulfillment of its responsibilities in this
Agreement.
12. This Agreement shall continue in effect until such time as there remain no
unsold balance of shares of capital stock effectively registered under the
33 Act; provided, however, that (a) this Agreement shall continue in effect
for a period more than two years from the date hereof only so long as such
continuance is specifically approved at least annually by the Board of
Directors or a majority of the outstanding voting securities of the Fund,
and (b) either party hereto may terminate this Agreement on any date by
giving the other party at least six months prior written notice of such
termination specifying the date fixed therefor..
12.1 This Agreement shall automatically terminate in the event of its
assignment by the Underwriter, the term "assignment" having the meaning
defined in Section 2(a)(4) of the 40 Act.
<PAGE>
13. Any notice under this Agreement shall be in writing addressed and delivered
by mail, postage prepaid, to the party to whom addressed at the address
given below, or at such other address as such party shall theretofore have
designated (by notice given to the other party as herein provided) in
writing for the receipt of such notice:
TO THE FUND: TO THE UNDERWRITER:
Mr. Michael Wagner Mr. Michael Miola
Vice President Treasurer
QueStar Funds, Inc. Imperial BankFund ADS Distributors, Inc.
150Motor Parkway, Suite 109 c/o American Data Services, Inc.
Hauppauge, New York 11788 150 Motor Parkway
Hauppauge, New York 11788
IN WITNESS WHEREOF, The Fund and the Underwriter have each
caused this Agreement to be executed on its behalf by an officer thereunto duly
authorized on the day and year first above written.
QueStar Funds, Inc. Imperial BankFund ADS Distributors, Inc.
By: _________________________ By: ___________________________
Michael Wagner, Vice President Michael Miola, Treasurer
DISTRIBUTION PLAN OF
IMPERIAL BANKFUND
PURSUANT TO RULE 12B-1
Distribution Plan, (the "Plan"), of Imperial BankFund (the
"Fund"), a series of Questar Funds, Inc. (the "Corporation"), a Maryland
corporation.
WHEREAS, the Fund and ADS Distributors, Inc. (the
"Distributor"), a broker-dealer registered under the Securities Exchange Act of
1934, have entered into a Distribution Agreement pursuant to which the
Distributor will act as principal underwriter of shares of the Fund for sale to
the public;
WHEREAS, the Directors of the Corporation have determined to
adopt this Distribution Plan (the "Plan") on behalf of the Fund, in accordance
with the requirements of the Investment Company Act of 1940, as amended (the
"Act") and have determined that there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts the Plan on the
following terms and conditions:
1. The Fund shall reimburse the Distributor, at the end of
each month, up to a maximum on an annual basis of 0.50% of the average daily
value of the net assets of the Fund, subject to any applicable restrictions
imposed by rules of the National Association of Securities Dealers, Inc., for
distribution expenditures incurred by the Distributor in connection with the
sale and promotion of the Fund and the furnishing of services to shareholders of
the Fund. Such expenditures shall consist of: (i) commissions to sales personnel
for selling shares of the Fund; (ii) compensation, sales incentives and payments
to sales, marketing and service personnel; (iii) payments to broker-dealers and
other financial institutions which have entered into agreements with the
Distributor in the form of the Dealer Agreement for National Affiliated
Investment Companies for services rendered in connection with the sale and
distribution of shares of the Fund; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Fund; (v) the costs of preparing and distributing promotional materials; (vi)
the cost of printing the Fund's Prospectus and Statement of Additional
Information for distribution to potential investors; and (vii) such other
similar services that the Directors of the Corporation determine are reasonably
calculated to result in sales of shares of the Fund; provided, however, that a
portion of such amount paid to the Distributor, which portion shall be equal to
or less than 0.25% annually of the average daily net assets of the Fund shares,
may be paid for reimbursing the costs of providing services to shareholders,
including assistance in connection with inquiries related to shareholder
accounts (the "Service Fee").
<PAGE>
Amounts paid or payable by the Fund under this Plan or any
agreement with any person or entity relating to the implementation of this Plan
("related agreement") shall only be used to pay for, or reimburse payment for,
the distribution expenditures described in the preceding paragraph and shall,
given all surrounding circumstances, represent charges within the range of what
would have been negotiated at arm's-length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Directors, in the exercise of reasonable
business judgment, in light of fiduciary duties under state law and Sections
36(a) and (b) of the Act and based upon appropriate business estimated and
projections.
2. At least quarterly in each year the Plan remains in effect,
the Fund's Principal Financial Officer or Treasurer, or such other person
authorized to direct the disposition of monies paid or payable by the Fund,
shall prepare and furnish to the Directors for their review, and the Directors
shall review a written report complying with the requirements of Rule 12b-1
under the Act regarding the amounts expended under the Plan and the purposes for
which such expenditures were made.
3. This Plan shall not take effect until it, together with any
related agreements, have been approved by a vote of at least a majority of the
Directors, as well as a vote of at least a majority of the Directors who are not
interested persons (as defined in the Act) of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any related
agreements (the "Disinterested Directors"), cast in person at a meeting called
for the purpose of voting on the Plan or any related agreement, and the Plan
shall not take effect with respect to the Fund until it has been approved by a
vote of at least a majority of the outstanding voting securities (as defined in
the Act) of the Fund.
4. This Plan shall remain in effect for one year from the date
of its execution and may be continued thereafter if specifically approved at
least annually by a vote of at least a majority of the Directors, as well as a
majority of the Disinterested Directors. This Plan may be amended at any time,
provided that (a) the Plan may not be amended to increase materially the amount
of the distribution expenses provided in Paragraph 1 hereof (including the
Service Fee) without the approval of at least a majority of the outstanding
voting securities (as defined in the Act) of the Fund and (b) all material
amendments to this Plan must be approved by a vote of the Directors and the
Disinterested Directors cast in person at a meeting called for the purpose of
such vote.
5. While this Plan is in effect, the selection and nomination
of Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Disinterested Directors then in
office.
6. Any related agreement shall be in writing and shall provide
that (a) such agreement shall be subject to termination, without penalty, by
vote of a majority of the outstanding voting securities (as defined in the Act)
of the Fund on not more than 60 days' written notice to the other party to the
agreement, and (b) such agreement shall terminate automatically in the event of
its assignment.
2
<PAGE>
7. This Plan may be terminated at any time by a vote of a
majority of the Disinterested Directors or by a vote of a majority of the
outstanding voting securities (as defined in the Act) of the Fund. In the event
this Plan is terminated or otherwise discontinued, no further payments hereunder
will be made by the Plan.
8. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 2 hereof, and any other
information, estimates, projections and other materials that serve as a basis
therefor, considered by the Directors, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
Adopted as of the 16th
day of December, 1998.
3
CUSTODY AGREEMENT
This agreement (the "Agreement") is entered into as of the_____day of
_________, 1998, by and between Questar Funds, Inc., (the "Corporation"), a
corporation organized under the laws of the State of Maryland and having its
office at 150 Motor Parkway, Suite 109, Hauppauge, New York 11788 acting for and
on behalf of Imperial Bank Fund (the "Fund"), which is operated and maintained
by the Corporation for the benefit of the holders of shares of each Fund, and
Star Bank, N.A. (the "Custodian"), a national banking association having its
principal office and place of business at Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202.
WHEREAS, THE FUND HEREBY APPOINTS THE CUSTODIAN AS CUSTODIAN
OF ALL THE FUND'S SECURITIES AND MONEYS AT ANY TIME OWNED BY THE FUND DURING THE
TERM OF THIS AGREEMENT (THE "FUND ASSETS").
WHEREAS, THE CUSTODIAN HEREBY ACCEPTS SUCH APPOINTMENT AS CUSTODIAN AND
AGREES TO PERFORM THE DUTIES THEREOF AS HEREINAFTER SET FORTH.
THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES HEREINAFTER SET
FORTH, THE FUND AND THE CUSTODIAN AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
-----------
The following words and phrases, when used in this Agreement, unless
the context otherwise requires, shall have the following meanings:
AUTHORIZED PERSON - the Chairman, President, Secretary, Treasurer,
-----------------
Controller, or Senior Vice President of the Fund, or any other person, whether
or not any such person is an officer or employee of the Fund, duly authorized by
the Board Of Directors of the Fund to give Oral Instructions and Written
Instructions on behalf of the Fund, and listed in the Certificate annexed hereto
as Appendix A, or such other Certificate as may be received by the Custodian
from time to time.
BOOK-ENTRY SYSTEM - the Federal Reserve Bank book-entry system for
-----------------
United States Treasury securities and federal agency securities.
DEPOSITORY - The Depository Trust Company ("DTC"), a limited purpose
----------
trust company its successor(s) and its nominee(s) or any other person or
clearing agent
1
<PAGE>
DIVIDEND AND TRANSFER AGENT - the dividend and transfer agent
---------------------------
appointed, from time to time, pursuant to a written agreement between the
dividend and transfer agent and the Fund.
FOREIGN SECURITIES - a) securities issued and sold primarily outside of
------------------
the United States by a foreign government, a national of any foreign country, or
a trust or other organization incorporated or organized under the laws of any
foreign country OR; b) securities issued or guaranteed by the government of the
United States, by any state, by any political subdivision or agency thereof, or
by any entity organized under the laws of the United States or of any state
thereof, which have been issued and sold primarily outside of the United States.
MONEY MARKET SECURITY - debt obligations issued or guaranteed as to
---------------------
principal and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including certificates
of deposit, bankers' acceptances, repurchase agreements and reverse repurchase
agreements with respect to the same), and time deposits of domestic banks and
thrift institutions whose deposits are insured by the Federal Deposit Insurance
Corporation, and short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or their equivalent
on the same day as such purchase and sale, all of which mature in not more than
thirteen (13) months.
OFFICERS - the Chairman, President, Secretary, Treasurer, Controller,
--------
and Senior Vice President of the Fund listed in the Certificate annexed hereto
as Appendix A, or such other Certificate as may be received by the Custodian
from time to time.
ORAL INSTRUCTIONS - verbal instructions received by the Custodian from
-----------------
an Authorized Person (or from a person that the Custodian reasonably believes in
good faith to be an Authorized Person) and confirmed by Written Instructions in
such a manner that such Written Instructions are received by the Custodian on
the business day immediately following receipt of such Oral Instructions.
PROSPECTUS - the Fund's then currently effective prospectus and
----------
Statement of Additional Information, as filed with and declared effective from
time to time by the Securities and Exchange Commission.
SECURITY OR SECURITIES - Money Market Securities, common stock,
----------------------
preferred stock, options, financial futures, bonds, notes, debentures, corporate
debt securities, mortgages, and any certificates, receipts, warrants, or other
instruments representing rights to receive, purchase, or subscribe for the same
or evidencing or representing any other rights or interest therein, or any
property or assets.
WRITTEN INSTRUCTIONS - communication received in writing by the
--------------------
Custodian from an Authorized Person.
2
<PAGE>
ARTICLE II
DOCUMENTS AND NOTICES TO BE FURNISHED BY THE FUND
-------------------------------------------------
A. The following documents, including any amendments thereto, will be
provided contemporaneously with the execution of the Agreement, to the Custodian
by the Fund:
1. A copy of the Articles of Incorporation of the Fund certified
by the Secretary.
2. A copy of the By-Laws of the Fund certified by the Secretary.
3. A copy of the resolution of the Board Of Directors of the Fund
appointing the Custodian, certified by the Secretary.
4. A copy of the then current Prospectus.
5. A Certificate of the President and Secretary of the Fund
setting forth the names and signatures of the Officers of the
Fund.
B. The Fund agrees to notify the Custodian in writing of the
appointment of any Dividend and Transfer Agent.
ARTICLE III
RECEIPT OF FUND ASSETS
----------------------
A. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all moneys constituting Fund Assets. The Custodian
shall be entitled to reverse any deposits made on the Fund's behalf where such
deposits have been entered and moneys are not finally collected within 30 days
of the making of such entry.
B. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all Securities constituting Fund Assets. The
Custodian will not have any duties or responsibilities with respect to such
Securities until actually received by the Custodian.
C. As and when received, the Custodian shall deposit to the account(s)
of the Fund any and all payments for shares of the Fund issued or sold from time
to time as they are received from the Fund's distributor or Dividend and
Transfer Agent or from the Fund itself.
3
<PAGE>
ARTICLE IV
DISBURSEMENT OF FUND ASSETS
---------------------------
A. The Fund shall furnish to the Custodian a copy of the resolution of
the Board Of Directors of the Fund, certified by the Fund's Secretary, either
(i) setting forth the date of the declaration of any dividend or distribution in
respect of shares of the Fund, the date of payment thereof, the record date as
of which Fund shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date, and the total
amount to be paid by the Dividend and Transfer Agent on the payment date, OR
(II) AUTHORIZING THE DECLARATION OF DIVIDENDS AND DISTRIBUTIONS IN RESPECT OF
SHARES OF THE FUND ON A DAILY BASIS AND AUTHORIZING THE CUSTODIAN TO RELY ON A
CERTIFICATE SETTING FORTH THE DATE OF THE DECLARATION OF ANY SUCH DIVIDEND OR
DISTRIBUTION, THE DATE OF PAYMENT THEREOF, THE RECORD DATE AS OF WHICH FUND
SHAREHOLDERS ENTITLED TO PAYMENT SHALL BE DETERMINED, THE AMOUNT PAYABLE PER
SHARE TO FUND SHAREHOLDERS OF RECORD AS OF THAT DATE, AND THE TOTAL AMOUNT TO BE
PAID BY THE DIVIDEND AND TRANSFER AGENT ON THE PAYMENT DATE.
On the payment date specified in such resolution or
Certificate described above, the Custodian shall segregate such amounts from
moneys held for the account of the Fund so that they are available for such
payment.
B. Upon receipt of Written Instructions so directing it, the Custodian
shall segregate amounts necessary for the payment of redemption proceeds to be
made by the Dividend and Transfer Agent from moneys held for the account of the
Fund so that they are available for such payment.
C. Upon receipt of a Certificate directing payment and setting forth
the name and address of the person to whom such payment is to be made, the
amount of such payment, and the purpose for which payment is to be made, the
Custodian shall disburse amounts as and when directed from the Fund Assets. The
Custodian is authorized to rely on such directions and shall be under no
obligation to inquire as to the propriety of such directions.
D. Upon receipt of a Certificate directing payment, the Custodian shall
disburse moneys from the Fund Assets in payment of the Custodian's fees and
expenses as provided in Article VIII hereof.
ARTICLE V
CUSTODY OF FUND ASSETS
----------------------
A. The Custodian shall open and maintain a separate bank account or
accounts in the United States in the name of the Fund, subject only to draft or
4
<PAGE>
order by the Custodian acting pursuant to the terms of this Agreement, and shall
hold all cash received by it from or for the account of the Fund, other than
cash maintained by the Fund in a bank account established and used by the Fund
in accordance with Rule 17f-3 under the Act. Moneys held by the Custodian on
behalf of the Fund may be deposited by the Custodian to its credit as Custodian
in the banking department of the Custodian. Such moneys shall be deposited by
the Custodian in its capacity as such, and shall be withdrawable by the
Custodian only in such capacity.
B. The Custodian shall hold all Securities delivered to it in
safekeeping in a separate account or accounts maintained at Star Bank, N.A. for
the benefit of the Fund.
C. All Securities held which are issued or issuable only in bearer
form, shall be held by the Custodian in that form; all other Securities held for
the Fund shall be registered in the name of the Custodian or its nominee. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold, or deliver in proper form for transfer, any Securities that
it may hold for the account of the Fund and which may, from time to time, be
registered in the name of the Fund.
D. With respect to all Securities held for the Fund , the Custodian
shall on a timely basis (concerning items 1 and 2 below, as defined in the
Custodian's Standards of Service Guide, as amended from time to time, annexed
hereto as Appendix C):
1.) Collect all income due and payable with respect to such
Securities;
2.) Present for payment and collect amounts payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
3.) Surrender Securities in temporary form for definitive
Securities; and
4.) Execute, as agent, any necessary declarations or certificates
of ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority, including any
foreign taxing authority, now or hereafter in effect.
E. Upon receipt of a Certificate AND NOT OTHERWISE, THE CUSTODIAN
SHALL:
1.) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the
authority of the Fund as beneficial owner of any Securities
may be exercised;
2.) Deliver any Securities in exchange for other Securities or
cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation, or
recapitalization of any trust, or the exercise of any
conversion privilege;
5
<PAGE>
3.) Deliver any Securities to any protective committee,
reorganization committee, or other person in connection with
the reorganization, refinancing, merger, consolidation,
recapitalization, or sale of assets of any trust, and receive
and hold under the terms of this Agreement such certificates
of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
4.) Make such transfers or exchanges of the assets of the Fund
and take such other steps as shall be stated in said
Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund; and
5.) Deliver any Securities held for the Fund to the depository
agent for tender or other similar offers.
F. The Custodian shall promptly deliver to the Fund all notices, proxy
material and executed but unvoted proxies pertaining to shareholder meetings of
Securities held by the Fund. The Custodian shall not vote or authorize the
voting of any Securities or give any consent, waiver or approval with respect
thereto unless so directed by a Certificate or Written Instruction.
G. The Custodian shall promptly deliver to the Fund all information
received by the Custodian and pertaining to Securities held by the Fund with
respect to tender or exchange offers, calls for redemption or purchase, or
expiration of rights.
ARTICLE VI
PURCHASE AND SALE OF SECURITIES
-------------------------------
A. Promptly after each purchase of Securities by the Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, Written Instructions, and (ii) with
respect to each purchase of Money Market Securities, Written Instructions or
Oral Instructions, specifying with respect to each such purchase the;
6
<PAGE>
1.) name of the issuer and the title of the Securities,
2.) principal amount purchased and accrued interest, if any,
3.) date of purchase and settlement,
4.) purchase price per unit,
5.) total amount payable, and
6.) name of the person from whom, or the broker through
which, the purchase was made.
The Custodian shall, against receipt of Securities purchased by or for the Fund,
pay out of the Fund Assets, the total amount payable to the person from whom or
the broker through which the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Written Instructions or Oral
Instructions, as the case may be.
B. Promptly after each sale of Securities by the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, Written Instructions, and (ii) with respect to each
sale of Money Market Securities, Written Instructions or Oral Instructions,
specifying with respect to each such sale the;
1.) name of the issuer and the title of the Securities,
2.) principal amount sold and accrued interest, if any,
3.) date of sale and settlement,
4.) sale price per unit,
5.) total amount receivable, and
6.) name of the person to whom, or the broker through which,
the sale was made.
The Custodian shall deliver the Securities against receipt of the total amount
receivable, provided that the same conforms to the total amount receivable as
set forth in such Written Instructions or Oral Instructions, as the case may be.
C. On contractual settlement date, the account of the Fund will be
charged for all purchased Securities settling on that day, regardless of whether
or not delivery is made. Likewise, on contractual settlement date, proceeds from
the sale of Securities settling that day will be credited to the account of the
Fund, irrespective of delivery.
D. Purchases and sales of Securities effected by the Custodian will be
made on a delivery versus payment basis. The Custodian may, in its sole
discretion, upon receipt of a Certificate, elect to settle a purchase or sale
transaction in some other manner, but only upon receipt of acceptable
indemnification from the Fund.
E. The Custodian shall, upon receipt of a Written Instructions so
directing it, establish and maintain a segregated account or accounts for and on
behalf of the Fund. Cash and/or Securities may be transferred into such account
or accounts for specific purposes, to-wit:
7
<PAGE>
1.) in accordance with the provision of any agreement among
the Fund, the Custodian, and a broker-dealer registered
under the Securities and Exchange Act of 1934, as
amended, and also a member of the National Association
of Securities Dealers (NASD) (or any futures commission
merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of the Options
Clearing Corporation and of any registered national
securities exchange, the Commodity Futures Trading
Commission, any registered contract market, or any
similar organization or organizations requiring escrow
or other similar arrangements in connection with
transactions by the Fund;
2.) for purposes of segregating cash or government
securities in connection with options purchased,
sold, or written by the Fund or commodity futures
contracts or options thereon purchased or sold by the
Fund;
3.) for the purpose of compliance by the fund with the
procedures required for reverse repurchase agreements,
firm commitment agreements, standby commitment
agreements, and short sales by Act Release No. 10666, or
any subsequent release or releases or rule of the
Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered
investment companies; and
4.) for other corporate purposes, ONLY IN THE CASE OF
THIS CLAUSE 4 UPON RECEIPT OF A COPY OF A RESOLUTION
OF THE BOARD OF DIRECTORS OF THE FUND, CERTIFIED BY
THE SECRETARY OF THE FUND, SETTING FORTH THE PURPOSES
OF SUCH SEGREGATED
ACCOUNT.
F. Except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with any Written Instructions to
settle the purchase of any Securities on behalf of the Fund unless there is
sufficient cash in the account(s) at the time or to settle the sale of any
Securities from an account(s) unless such Securities are in deliverable form.
Notwithstanding the foregoing, if the purchase price of such Securities exceeds
the amount of cash in the account(s) at the time of such purchase, the Custodian
may, in its sole discretion, advance the amount of the difference in order to
8
<PAGE>
settle the purchase of such Securities. The amount of any such advance shall be
deemed a loan from the Custodian to the Fund payable on demand and bearing
interest accruing from the date such loan is made up to but not including the
date such loan is repaid at a rate per annum customarily charged by the
Custodian on similar loans.
ARTICLE VII
FUND INDEBTEDNESS
-----------------
In connection with any borrowings by the Fund, the Fund will cause to
be delivered to the Custodian by a bank or broker requiring Securities as
collateral for such borrowings (including the Custodian if the borrowing is from
the Custodian), a notice or undertaking in the form currently employed by such
bank or broker setting forth the amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to each such
borrowing: (a) the name of the bank or broker, (b) the amount and terms of the
borrowing, which may be set forth by incorporating by reference an attached
promissory note duly endorsed by the Fund, or a loan agreement, (c) the date,
and time if known, on which the loan is to be entered into, (d) the date on
which the loan becomes due and payable, (e) the total amount payable to the Fund
on the borrowing date, and (f) the description of the Securities securing the
loan, including the name of the issuer, the title and the number of shares or
the principal amount. The Custodian shall deliver on the borrowing date
specified in the Certificate the required collateral against the lender's
delivery of the total loan amount then payable, provided that the same conforms
to that which is described in the Certificate. The Custodian shall deliver, in
the manner directed by the Fund, such Securities as additional collateral, as
may be specified in a Certificate, to secure further any transaction described
in this Article VII. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it.
The Custodian may, at the option of the lender, keep such collateral in
its possession, subject to all rights therein given to the lender because of the
loan. The Custodian may require such reasonable conditions regarding such
collateral and its dealings with third-party lenders as it may deem appropriate.
ARTICLE VIII
CONCERNING THE CUSTODIAN
------------------------
A. Except as otherwise provided herein, the Custodian shall not be
liable for any loss or damage resulting from its action or omission to act or
otherwise, except for any such loss or damage arising out of its own gross
negligence or willful misconduct. The Fund shall defend, indemnify and hold
harmless the Custodian and its directors, officers, employees and agents with
9
<PAGE>
respect to any loss, claim, liability or cost (including reasonable attorneys'
fees) arising or alleged to arise from or relating to the Fund's duties
hereunder or any other action or inaction of the Fund or its Directors,
officers, employees or agents, except such as may arise from the negligent
action, omission, willful misconduct or breach of this Agreement by the
Custodian. The Custodian may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel, at the expense of the Fund, and shall
be fully protected with respect to anything done or omitted by it in good faith
in conformity with the advice or opinion of counsel. The provisions under this
paragraph shall survive the termination of this Agreement.
B. Without limiting the generality of the foregoing, the Custodian,
acting in the capacity of Custodian hereunder, shall be under no obligation to
inquire into, and shall not be liable for:
1.) The validity of the issue of any Securities purchased by
or for the account of the Fund, the legality of the
purchase thereof, or the propriety of the amount paid
therefor;
2.) The legality of the sale of any Securities by or for the
account of the Fund, or the propriety of the amount for
which the same are sold;
3.) The legality of the issue or sale of any shares of
the Fund, or the sufficiency of the amount to be
received therefor;
4.) The legality of the redemption of any shares of the
Fund, or the propriety of the amount to be paid
therefor;
5.) The legality of the declaration or payment of any
dividend by the Fund in respect of shares of the
Fund;
6.) The legality of any borrowing by the Fund on behalf
of the Fund, using Securities as collateral;
C. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from any Dividend and
Transfer Agent of the Fund nor to take any action to effect payment or
distribution by any Dividend and Transfer Agent of the Fund of any amount paid
by the Custodian to any Dividend and Transfer Agent of the Fund in accordance
with this Agreement.
D. Notwithstanding Section D of Article V, the Custodian shall not be
under any duty or obligation to take action to effect collection of any amount,
if the Securities upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless and until (i) it
shall be directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction (including prepayment thereof) of reimbursement of
its costs and expenses in connection with any such action.
E. The Fund acknowledges and hereby authorizes the Custodian to hold
Securities through its various agents described in Appendix B annexed hereto.
The Fund hereby represents that such authorization has been duly approved by the
Board Of Directors of the Fund as required by the Act. The Custodian
acknowledges that although certain Fund Assets are held by its agents, the
Custodian remains primarily liable for the safekeeping of the Fund Assets.
10
<PAGE>
In addition, the Fund acknowledges that the Custodian may appoint one
or more financial institutions, as agent or agents or as sub-custodian or
sub-custodians, including, but not limited to, banking institutions located in
foreign countries, for the purpose of holding Securities and moneys at any time
owned by the Fund. The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the appointment or activities
of such agents or sub-custodians. Any such agent or sub-custodian shall be
qualified to serve as such for assets of investment companies registered under
the Act. Upon request, the Custodian shall promptly forward to the Fund any
documents it receives from any agent or sub-custodian appointed hereunder which
may assist trustees of registered investment companies fulfill their
responsibilities under Rule 17f-5 of the Act.
F. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account of
the Fund are such as properly may be held by the Fund under the provisions of
the Articles of Incorporation and the Fund's By-Laws.
G. The Custodian shall treat all records and other information relating
to the Fund and the Fund Assets as confidential and shall not disclose any such
records or information to any other person unless (i) the Fund shall have
consented thereto in writing or (ii) such disclosure is required by law.
H. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian such compensation as shall be determined pursuant to
Appendix D attached hereto, or as shall be determined pursuant to amendments to
such Appendix D. The Custodian shall be entitled to charge against any money
held by it for the account of the Fund, the amount of any of its fees, any loss,
damage, liability or expense, including counsel fees. The expenses which the
Custodian may charge against the account of the Fund include, but are not
limited to, the expenses of agents or sub-custodians incurred in settling
transactions involving the purchase and sale of Securities of the Fund.
I. The Custodian shall be entitled to rely upon any Oral Instructions
and any Written Instructions. The Fund agrees to forward to the Custodian
Written Instructions confirming Oral Instructions in such a manner so that such
Written Instructions are received by the Custodian, whether by hand delivery,
facsimile or otherwise, on the same business day on which such Oral Instructions
were given. The Fund agrees that the failure of the Custodian to receive such
confirming instructions shall in no way affect the validity of the transactions
or enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund for acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions.
J. The Custodian will (i) set up and maintain proper books of account
and complete records of all transactions in the accounts maintained by the
Custodian hereunder in such manner as will meet the obligations of the Fund
under the Act, with particular attention to Section 31 thereof and Rules 31a-1
11
<PAGE>
and 31a-2 thereunder and those records are the property of the Fund, and (ii)
preserve for the periods prescribed by applicable Federal statute or regulation
all records required to be so preserved. All such books and records shall be the
property of the Fund, and shall be open to inspection and audit at reasonable
times and with prior notice by Officers and auditors employed by the Fund.
K. The Custodian shall send to the Fund any report received on the
systems of internal accounting control of the Custodian, or its agents or
sub-custodians, as the Fund may reasonably request from time to time.
L. The Custodian performs only the services of a custodian and shall
have no responsibility for the management, investment or reinvestment of the
Securities from time to time owned by the Fund. The Custodian is not a selling
agent for shares of the Fund and performance of its duties as custodian shall
not be deemed to be a recommendation to the Fund's depositors or others of
shares of the Fund as an investment.
M. The Custodian shall take all reasonable action, that the Fund may
from time to time request, to assist the Fund in obtaining favorable opinions
from the Fund's independent accountants, with respect to the Custodian's
activities hereunder, in connection with the preparation of the Fund's Form
N-1A, Form N-SAR, or other annual reports to the Securities and Exchange
Commission.
N. The Fund hereby pledges to and grants the Custodian a security
interest in any Fund Assets to secure the payment of any liabilities of the Fund
to the Custodian, whether acting in its capacity as Custodian or otherwise, or
on account of money borrowed from the Custodian. This pledge is in addition to
any other pledge of collateral by the Fund to the Custodian.
ARTICLE IX
FORCE MAJEURE
-------------
Neither the Custodian nor the Corporation shall be liable for any
failure or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes; fires; floods;
wars; civil or military disturbances; sabotage; strikes; epidemics; riots; labor
disputes; acts of civil or military authority; governmental actions; or
inability to obtain labor, material, equipment or transportation; provided,
however, that the Custodian, in the event of a failure or delay, shall use its
best efforts to ameliorate the effects of such failure or delay.
ARTICLE X
TERMINATION
-----------
A. Either of the parties hereto may terminate this Agreement for any
reason by giving to the other party a notice in writing specifying the date of
12
<PAGE>
such termination, which shall be not less than ninety (90) days after the date
of giving of such notice. If such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board Of Directors of the Fund,
certified by the Secretary of the Fund, electing to terminate this Agreement and
designating a successor custodian or custodians. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board Of Directors of the
Fund, certified by the Secretary, designating a successor custodian or
custodians to act on behalf of the Fund. In the absence of such designation by
the Fund, the Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $100,000,000 aggregate capital,
surplus, and undivided profits. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian, provided that it has received a
notice of acceptance by the successor custodian, shall deliver, on that date,
directly to the successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian. Upon termination of this Agreement, the Fund
shall pay to the Custodian on behalf of the Fund such compensation as may be due
as of the date of such termination. The Fund agrees on behalf of the Fund that
the Custodian shall be reimbursed for its reasonable costs in connection with
the termination of this Agreement.
B. If a successor custodian is not designated by the Fund, or by the
Custodian in accordance with the preceding paragraph, or the designated
successor cannot or will not serve, the Fund shall, upon the delivery by the
Custodian to the Fund of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund, be deemed to be the custodian for the Fund, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the Book-Entry
System, which cannot be delivered to the Fund, which shall be held by the
Custodian in accordance with this Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
A. Appendix A sets forth the names and the signatures of all Authorized
Persons, as certified by the Secretary of the Fund. The Fund agrees to furnish
to the Custodian a new Appendix A in form similar to the attached Appendix A, if
any present Authorized Person ceases to be an Authorized Person or if any other
or additional Authorized Persons are elected or appointed. Until such new
Appendix A shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the then current Authorized Persons as set forth in the last delivered Appendix
A.
B. No recourse under any obligation of this Agreement or for any claim
based thereon shall be had against any organizer, shareholder, Officer,
Director, past, present or future as such, of the Fund or of any predecessor or
successor, either directly or through the Fund or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law or
equity, or be the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that this Agreement and the obligations
thereunder are enforceable solely against the Fund, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
13
<PAGE>
organizers, shareholders, Officers, Directors of the Fund or of any predecessor
or successor, or any of them as such. To the extent that any such liability
exists, it is hereby expressly waived and released by the Custodian as a
condition of, and as a consideration for, the execution of this Agreement.
C. The obligations set forth in this Agreement as having been made by
the Fund have been made by the Board Of Directors, acting as such Directors for
and on behalf of the Fund, pursuant to the authority vested in them under the
laws of the State of Maryland, the Articles of Incorporation and the By-Laws of
the Fund. This Agreement has been executed by Officers of the Fund as officers,
and not individually, and the obligations contained herein are not binding upon
any of the Directors, Officers, agents or holders of shares, personally, but
bind only the Fund.
D. Provisions of the Prospectus and any other documents (including
advertising material) specifically mentioning the Custodian (other than merely
by name and address) shall be reviewed with the Custodian by the Fund prior to
publication and/or dissemination or distribution, and shall be subject to the
consent of the Custodian.
E. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at Star
Bank Center, 425 Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention
Mutual Fund Custody Department, or at such other place as the Custodian may from
time to time designate in writing.
F. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given when
delivered to the Fund or on the second business day following the time such
notice is deposited in the U.S. mail postage prepaid and addressed to the Fund
at its office at 150 Motor Parkway, Suite 109, Hauppauge, New York 11788 or at
such other place as the Fund may from time to time designate in writing.
G. This Agreement, with the exception of the Appendices, may not be
amended or modified in any manner except by a written agreement executed by both
parties with the same formality as this Agreement, and authorized and approved
by a resolution of the Board Of Directors of the Fund.
H. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund or by the Custodian, and no
attempted assignment by the Fund or the Custodian shall be effective without the
written consent of the other party hereto.
I. This Agreement shall be construed in accordance with the laws of the
State of Ohio.
14
<PAGE>
J. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto duly authorized
as of the day and year first above written.
ATTEST: QUESTAR FUNDS, INC.
______________________ By: ________________________
Title:______________________
ATTEST: STAR BANK, N.A.
_______________________ By: ________________________
Title:______________________
15
<PAGE>
APPENDIX A
AUTHORIZED PERSONS SPECIMEN SIGNATURES
Chairman: ____________________ ____________________
President: _____________________ _____________________
Secretary: ______________________ _____________________
Treasurer: ______________________ _____________________
Controller: ______________________ _____________________
Adviser Employees: _______________________ _____________________
_______________________ _____________________
_______________________ _____________________
Transfer Agent/Fund Accountant
Employees:
_______________________ ____________________
_______________________ ____________________
_______________________ ____________________
16
<PAGE>
APPENDIX B
The following agents are employed currently by Star Bank, N.A. for securities
processing and control . . .
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible Securities)
17
<PAGE>
APPENDIX C
STANDARDS OF SERVICE GUIDE
18
<PAGE>
APPENDIX D
SCHEDULE OF COMPENSATION
19
ADMINISTRATIVE SERVICE AGREEMENT
BETWEEN
QUESTAR FUNDS, INC
IMPERIAL BANKFUND
AND
AMERICAN DATA SERVICES, INC.
[GRAPHIC OMITTED]
<PAGE>
- --------------------------------------------------------------------------------
INDEX
- --------------------------------------------------------------------------------
1. DUTIES OF THE ADMINISTRATOR.............................................3
2. COMPENSATION OF THE ADMINISTRATOR.......................................5
3. RESPONSIBILITY AND INDEMNIFICATION......................................5
4. REPORTS.................................................................6
5. ACTIVITIES OF THE ADMINISTRATOR.........................................6
6. RECORDS.................................................................6
7. CONFIDENTIALITY.........................................................6
8. DURATION AND TERMINATION OF THE AGREEMENT...............................6
9. ASSIGNMENT..............................................................7
10. NEW YORK LAWS TO APPLY.................................................7
11. AMENDMENTS TO THIS AGREEMENT............................................7
12. MERGER OF AGREEMENT.....................................................7
13. NOTICES.................................................................7
SCHEDULE A..................................................................8
(A) ADMINISTRATIVE SERVICE FEE:.............................................8
FEE INCREASES............................................................8
(B) EXPENSES................................................................9
(C) STATE REGISTRATION (BLUE SKY) SURCHARGE:................................9
(D) SPECIAL REPORTS................................ERROR! BOOKMARK NOT DEFINED.
(E) SERVICE DEPOSIT................................ERROR! BOOKMARK NOT DEFINED.
SCHEDULE B.........................................ERROR! BOOKMARK NOT DEFINED.
2
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
AGREEMENT made the 16th day of December, 1998, by and between QueStar Funds,
Inc. Imperial BankFund., a Maryland Corporation, having its principal office and
place of business at the Hauppauge Corporate Center, 150 Motor Parkway, Suite
109, Hauppauge, New York 11788 (the "Fund"), and American Data Services, Inc., a
New York corporation having its principal office and place of business at the
Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New York
11788 (the "Administrator").
BACKGROUND
WHEREAS, the Fund is a diversified open-end management investment
company registered with the United States Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator is a corporation experienced in
providing administrative services to mutual funds and possesses facilities
sufficient to provide such services; and
WHEREAS, the Fund desires to avail itself of the experience,
assistance and facilities of the Administrator and to have the Administrator
perform for the Fund certain services appropriate to the operations of the Fund
and the Administrator is willing to furnish such services in accordance with the
terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual
covenants hereinafter contained, the Fund and the Administrator hereby agree to
the following:
1. DUTIES OF THE ADMINISTRATOR.
The Administrator agrees that it will provide all administrative
services necessary and customary to administer a mutual fund, as well as all
necessary and customary fund accounting services other than those provided by
the Fund's independent accountants, and will provide the Fund with the necessary
office space, communication and data processing facilities and personnel to
perform such services for the Fund, including:
ADMINISTRATION
(a) Monitor all regulatory (1940 Act and IRS) and prospectus
restrictions for compliance;
(b) Prepare and coordinate the printing of semi-annual and
annual financial statements;
(c) Prepare selected management reports for performance and
compliance analyses as agreed upon by the Fund Adviser and
Administrator from time to time;
(d) Prepare selected financial data required for directors'
meetings as agreed upon by the Fund's Board of Directors and
the Administrator from time to time and coordinate directors
meeting agendas with outside legal counsel to the Fund;
3
<PAGE>
(e) Determine income and capital gains available for
distribution and calculate distributions required to meet
regulatory, income, and excise tax requirements, to be
reviewed by the Fund's independent public accountants;
(f) Prepare the Fund's federal, state, and local tax returns
to be reviewed by the Fund's independent public accountants;
(g) Prepare and maintain the Fund's operating expense budget
to determine proper expense accruals to be charged to the Fund
in order to calculate it's daily net asset value;
(h) 1940 ACT filings -
In conjunction with the Fund's outside legal counsel the
Administrator will:
-- Prepare the Fund's Form N-SAR reports;
-- Update all financial sections of the Fund's Statement of
Additional Information and coordinate its completion;
-- Update all financial sections of the Fund's prospectus and
coordinate its completion;
-- Update all financial sections of the Fund's proxy
statement and coordinate its completion;
-- Prepare an annual update to Fund's 24f-2 filing
(if applicable);
(i) Monitor services provided by the Fund's custodian bank as
well as any other service providers to the Fund;
(j) Provide appropriate financial schedules (as requested by
the Fund's independent public accountants or SEC examiners),
coordinate the Fund's annual or SEC audit, and provide office
facilities as may be required;
(k) Attend all management and board of directors meetings;
(l) The preparation and filing (filing fee to be paid by the
Fund) of applications and reports as necessary to register or
maintain the Funds registration under the securities or "Blue
Sky" laws of the various states selected by the Fund's Adviser
or its Distributor.
FUND ACCOUNTING
(a) Timely calculate and transmit to NASDAQ the Fund's daily net asset value
and communicate such value to the Fund and its transfer agent. Net asset
value as determined by 1940 Act and prospectus;
(b) Maintain and keep current all books and records of the Fund as required by
Rule 31a-1 under the 1940 Act, as such rule or any successor rule may be
amended from time to time ("Rule 31a-1"), that are applicable to the
fulfillment of Administrator's duties hereunder, as well as any other
documents necessary or advisable for compliance with applicable regulations
as may be mutually agreed to between the Fund and the Administrator.
Without limiting the generality of the foregoing, the Administrator will
prepare and maintain the following records:
--Cash receipts journal
--Cash disbursements journal
--Dividend record
--Purchase and sales - portfolio securities
journals
--Subscription and redemption journals
--Security ledgers
--Broker ledger
--General ledger
4
<PAGE>
--Daily expense accruals
--Daily income accruals
--Securities and monies borrowed or loaned and
collateral therefore
--Foreign currency journals
--Trial balances
(c) Provide the Fund and its investment adviser with daily cash forecast
report, portfolio valuation, securities transaction report, net asset value
calculation, daily income and expense accrual report, and other standard
operational reports.
The Administrator shall, for all purposes herein, be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. COMPENSATION OF THE ADMINISTRATOR.
In consideration of the services to be performed by the Administrator
as set forth herein, the Administrator shall be entitled to receive compensation
and reimbursement for all reasonable out-of-pocket expenses. The Fund agrees to
pay the Administrator the fees and reimbursement of out-of-pocket expenses as
set forth in the fee schedule attached hereto as Schedule A.
3. RESPONSIBILITY AND INDEMNIFICATION.
(a) The Administrator shall be held to the exercise of reasonable care
in carrying out the provisions of the Agreement, but shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence, bad faith, willful misconduct or reckless disregard of its duties
hereunder. It shall be entitled to rely upon and may act upon the accounting
records and reports generated by the Fund, advice of the Fund, or of counsel for
the Fund and upon statements of the Fund's independent accountants, and shall be
without liability for any action reasonably taken or omitted pursuant to such
records and reports or advice, provided that such action is not, to the
knowledge of the Administrator, in violation of applicable federal or state laws
or regulations, and provided further that such action is taken without
negligence, bad faith, willful misconduct or reckless disregard of its duties.
(b) The Administrator shall not be liable to the Fund for any error of
judgment or mistake of law or for any loss arising out of any act or omission by
the Administrator in the performance of its duties hereunder except as
hereinafter set forth. Nothing herein contained shall be construed to protect
the Administrator against any liability to the Fund or its security holders to
which the Administrator shall otherwise be subject by reason of willful
misfeasance, bad faith, negligence in the performance of its duties on behalf of
the Fund, reckless disregard of the Administrator's obligations and duties under
this Agreement or the willful violation of any applicable law.
(c) Except as may otherwise be provided by applicable law, neither the
Administrator nor its stockholders, officers, directors, employees or agents
shall be subject to, and the Fund shall indemnify and hold such persons harmless
from and against, any liability for and any damages, expenses or losses incurred
by reason of the inaccuracy of information furnished to the Administrator by the
Fund or its authorized agents or in connection with any error in judgment or
mistake of law or any act or omission in the course of, connected with or
arising out of any services to be rendered hereunder, except by reason of
willful misfeasance, bad faith or negligence in the performance of its duties,
by reason of reckless disregard of the Administrator's obligations and duties
under this Agreement or the willful violation of any applicable law.
5
<PAGE>
4. REPORTS.
(a) The Fund's Adviser shall provide to the Administrator on a
quarterly basis a report of a duly authorized officer of the Fund representing
that all information furnished to the Administrator during the preceding quarter
was true, complete and correct to the best of its knowledge. The Administrator
shall not be responsible for the accuracy of any information furnished to it by
the Fund's Adviser, and the Fund shall hold the Administrator harmless in regard
to any liability incurred by reason of the inaccuracy of such information.
(b) The Administrator shall provide to the Board of Directors of the
Fund, on a quarterly basis, a report, in such a form as the Administrator and
the Fund's Board of Directors shall from time to time agree, representing that,
to its knowledge, the Fund was in compliance with all requirements of applicable
federal and state law, including without limitation, the rules and regulations
of the Securities and Exchange Commission and the Internal Revenue Service, or
specifying any instances in which the Fund was not so in compliance. Whenever,
in the course of performing its duties under this Agreement, the Administrator
determines, that a violation of applicable law has occurred, or that, to its
knowledge, a possible violation of applicable law may have occurred or, with the
passage of time, could occur, the Administrator shall promptly notify the Fund
counsel of such violation.
5. ACTIVITIES OF THE ADMINISTRATOR.
The Administrator shall be free to render similar services to others so
long as its services hereinunder are not impaired thereby.
6. RECORDS.
The records maintained by the Administrator shall be the property of
the Fund, and shall be surrendered to the Fund, at the expense of the Fund,
promptly upon request by the Fund, provided that all service fees and expenses
charged by the Administrator in the performance of its duties hereunder have
been fully paid to the satisfaction of the Administrator, in the form in which
such accounts and records have been maintained or preserved. The Administrator
agrees to maintain a back-up set of accounts and records of the Fund (which
back-up set shall be updated on at least a weekly basis) at a location other
than that where the original accounts and records are stored. The Administrator
shall assist the Fund's independent auditors, or, upon approval of the Fund, any
regulatory body, in any requested review of the Fund's accounts and records. The
Administrator shall preserve the accounts and records as they are required to be
maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
The Administrator agrees that it will, on behalf of itself and its
officers and employees, treat all transactions contemplated by this Agreement,
and all other information germane thereto, as confidential and such information
shall not be disclosed to any person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THE AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, upon
ninety (90) days prior written notice.
6
<PAGE>
Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, the Administrator reserves the right to charge for any
other reasonable expenses associated with such termination.
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the prior written consent
of the Administrator, or by the Administrator without the prior written consent
of the Fund.
10. NEW YORK LAWS TO APPLY
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
13. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when delivered in person or by certified
mail, return receipt requested, and shall be given to the following addresses
(or such other addresses as to which notice is given):
To the Fund:...... To the Administrator:
Michael Miola..... Michael Wagner
President......... Vice President
QueStar Funds, Inc. Imperial BankFund American Data Services, Inc.
150 Motor Parkway, Suite 109 150 Motor Parkway, Suite 109
Hauppauge, NY 11788 Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
QUESTAR FUNDS, INC. AMERICAN DATA SERVICES, INC.
IMPERIAL BANKFUND
By:____________________________ By:_________________________
Michael Miola, President Michael Wagner, Vice President
7
<PAGE>
SCHEDULE A
(A) ADMINISTRATIVE SERVICE FEE:
For the services rendered by the Administrator in its capacity as
administrator, as specified in Paragraph 1. DUTIES OF THE ADMINISTRATOR., the
Fund shall pay the Administrator within ten (10) days after receipt of an
invoice from the Administrator at the beginning of each month, a fee equal to
the greater of:
NOTE: The following fees are per portfolio serviced.
MINIMUM FEE:
CALCULATED FEE WILL BE BASED UPON PRIOR MONTH AVERAGE NET ASSETS:
(No prorating partial months)
EACH PORTFOLIO
--------------
Under $5 million ............................. $1,950
From $5 million to $10 million................ 2,500
From $10 million to $20 million............... 3,000
From $20 million on........................... 3,700
OR,
NET ASSET CHARGE:
--First $75 million of average net assets of portfolio for month 1/12th of
0.175% (17.5 basis points), plus
--Next $75 million of average net assets of portfolio for month 1/12th of
0.125% (12.5 basis points), plus
--Over $150 million of average net assets of portfolio for month 1/12th of
0.075% (7.5 basis points).
MULTI-CLASS PROCESSING CHARGE
$300 per month will be charged for each additional class of stock per
portfolio.
FEE INCREASES
On each annual anniversary date of this Agreement, the fees enumerated above
will be increased by the change in the Consumer Price Index for the Northeast
region (CPI) for the twelve-month period ending with the month preceding such
annual anniversary date.
8
<PAGE>
(B) EXPENSES.
The Fund shall reimburse the Administrator for any out-of-pocket
expenses , exclusive of salaries, advanced by the Administrator in connection
with but not limited to the printing or filing of documents for the Fund,
travel, telephone, quotation services (currently (1) $0.12 per equity valuation,
$0.60 per bond valuation, and 1.50 for each foreign quotation or manual quote
insertion), facsimile transmissions, stationery and supplies, record storage,
NASDAQ insertion fee ($22 (1) per month), prorata portion of annual SAS 70
review, postage, telex, and courier charges, incurred in connection with the
performance of its duties hereunder. The Administrator shall provide the Fund
with a monthly invoice of such expenses and the Fund shall reimburse the
Administrator within fifteen (15) days after receipt thereof.
(1) Rate subject to change on 30 days notice.
(C) STATE REGISTRATION (BLUE SKY) SURCHARGE:
The fees enumerated in paragraph (a) above include the initial state
registration, renewal and maintenance of registrations (as detailed in Paragraph
1(l) DUTIES OF THE ADMINISTRATOR) for three (3) states. Each additional state
registration requested will be subject to the following fees:
Initial registration ............... $295.00
Registration renewal ............... $150.00
Sales reports (if required) ........ $ 25.00
9
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
QUESTAR FUNDS, INC
IMPERIAL BANKFUND
AND
AMERICAN DATA SERVICES, INC.
[GRAPHIC OMITTED]
<PAGE>
INDEX
- --------------------------------------------------------------------------------
1. TERMS OF APPOINTMENT; DUTIES OF ADS......................................3
2. FEES AND EXPENSES........................................................4
3. REPRESENTATIONS AND WARRANTIES OF ADS....................................4
4. REPRESENTATIONS AND WARRANTIES OF THE FUND...............................5
5. INDEMNIFICATION..........................................................5
6. COVENANTS OF THE FUND AND ADS............................................6
7. TERMINATION OF AGREEMENT.................................................7
8. ASSIGNMENT...............................................................7
9. AMENDMENT................................................................7
10. NEW YORK LAWS TO APPLY..................................................7
11. MERGER OF AGREEMENT.....................................................8
12. NOTICES.................................................................8
FEE SCHEDULE.................................................................9
(A) ACCOUNT MAINTENANCE CHARGE:..............................................9
(B) TRANSACTION FEES:........................................................9
(C) 24 HOUR AUTOMATED VOICE RESPONSE:.......................................10
(D) FUND/SERV.......................................ERROR! BOOKMARK NOT DEFINED.
FEE INCREASES............................................................10
(E) IRA PLAN FEES:..........................................................10
(F) EXPENSES:...............................................................10
(G) SPECIAL REPORTS:................................ERROR! BOOKMARK NOT DEFINED.
(H) SERVICE DEPOSIT:................................ERROR! BOOKMARK NOT DEFINED.
(I) CONVERSION CHARGE: (EXISTING FUNDS ONLY, NEW FUNDS PLEASE IGNORE).........
ERROR! BOOKMARK NOT DEFINED.
SCHEDULE A..........................................ERROR! BOOKMARK NOT DEFINED.
2
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made the 16th day of December, 1998, by and between QueStar Funds,
Inc. Imperial BankFund., a Maryland Corporation, having its principal office and
place of business at the Hauppauge Corporate Center, 150 Motor Parkway, Suite
109, Hauppauge, New York 11788 (the "Fund"), and American Data Services, Inc., a
New York corporation having its principal office and place of business at the
Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New York
11788 ("ADS")
WHEREAS, the Fund desires to appoint ADS as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and ADS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ADS
1.01 Subject to the terms and conditions set forth in this agreement,
the Fund hereby employs and appoints ADS to act as, and ADS agrees to act as its
transfer agent for the Fund's authorized and issued shares of its common stock,
("Shares"), dividend disbursing agent and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
fund ("Shareholders") set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund.
1.02 ADS agrees that it will perform the following services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and ADS, ADS shall:
I. Receive for acceptance, orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation therefore to the Custodian of
the Fund authorized by the Board of Directors of the Fund (the
"Custodian");
II. Pursuant to purchase orders, issue the appropriate number of Shares and
hold such Shares in the appropriate Shareholder account;
III. Receive for acceptance redemption requests and redemption directions and
deliver the appropriate documentation therefore to the Custodian;
IV. At the appropriate time as and when it receives monies paid to it by the
Custodian with respect to any redemption, pay over or cause to be paid over
in the appropriate manner such monies as instructed by the redeeming
Shareholders;
V. Effect transfers of Shares by the registered owners thereof upon receipt of
appropriate instructions;
VI. Prepare and transmit payments for dividends and distributions declared by
the Fund;
VII. Maintain records of account for and advise the Fund and its Shareholders
as to the foregoing; and
3
<PAGE>
VIII.Record the issuance of shares of the Fund and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of shares of the Fund which
are authorized, based upon data provided to it by the Fund, and issued and
outstanding. ADS shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of shares, to monitor
the issuance of such shares or to take cognizance of any laws relating to
the issue or sale of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), ADS shall:
I. Perform all of the customary services of a transfer agent, dividend
disbursing agent, including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving
and tabulating proxies, mailing Shareholder reports and prospectuses to
current Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts, preparing and filing U.S. Treasury Department Forms 1099
and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to Shareholders for
all purchases redemption's of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and (ii)
provide a system and reports which will enable the Fund to monitor the
total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to ADS in writing
those transactions and shares to be treated as exempt from
blue sky reporting for each State and (ii) verify the
establishment of such transactions for each state on the
system prior to activation and thereafter monitor the daily
activity for each State as provided by ADS. The responsibility
of ADS for the Fund's blue sky State registration status is
solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting
of such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and ADS.
2. FEES AND EXPENSES
2.01 For performance by ADS pursuant to this Agreement, the Fund agrees
to pay ADS an annual maintenance fee for each Shareholder account and
transaction fees for each portfolio or class of shares serviced under this
Agreement as set out in the fee schedule attached hereto. Such fees and out-of
pocket expenses and advances identified under Section 2.02 below may be changed
from time to time subject to mutual written agreement between the Fund and ADS.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse ADS for out-of-pocket expenses or advances incurred by ADS
for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by ADS at the request or with the consent of the Fund,
will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to ADS by the Fund at least seven (7)
days prior to the mailing date of such materials.
4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS represents and warrants to the Fund that:
3.01 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.02 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.03 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.04 ADS is duly registered as a transfer agent under the Securities
Act of 1934 and shall continue to be registered throughout the remainder of this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to ADS that;
4.01 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws / Declaration of Trust to enter into and perform this
Agreement.
4.02 All proceedings required by said Articles of Incorporation and
By-Laws / Declaration of Trust have been taken to authorize it to enter into and
perform this Agreement.
4.03 It is an open-end management investment company registered under
the Investment Company Act of 1940.
4.04 A registration statement under the Securities Act of 1933 is
currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
5. INDEMNIFICATION
5.01 ADS shall not be responsible for, and the Fund shall indemnify and
hold ADS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of ADS or its agents or subcontractors required to be taken
pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack good faith, negligence
or willful misconduct or which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by ADS or its agents or subcontractors of
information, records and documents which (i) are received by ADS or its
agents or subcontractors and furnished to it by or on behalf of the
Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by ADS or its agents or
subcontractors of any instructions or requests of the Fund.
5
<PAGE>
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state
or in violation of any stop order or other determination or ruling by
any federal agency or any state with respect to the offer or sale of
such Shares in such state.
5.02 ADS shall indemnify and hold the Fund harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by ADS as a result of ADS's lack of good faith, negligence or
willful misconduct.
5.03 At any time ADS may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by ADS under this
Agreement, and ADS and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. ADS, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided ADS or its agents
or subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Fund. ADS, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Fund, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party of seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6. COVENANTS OF THE FUND AND ADS
6.01 The Fund shall promptly furnish to ADS a certified copy of the
resolution of the Board of Directors of the Fund authorizing the appointment of
ADS and the execution and delivery of this Agreement.
6.02 ADS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6
<PAGE>
6.03 ADS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, ADS agrees that all such records prepared or maintained by
ADS relating to the services to be performed by ADS hereunder are the property
of the Fund and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to the Fund on and
in accordance with its request.
6.04 ADS and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ADS will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. ADS reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person, and shall
promptly notify the Fund of any unusual request to inspect or copy the
shareholder records of the Fund or the receipt of any other unusual request to
inspect, copy or produce the records of the Fund.
7. TERMINATION OF AGREEMENT
7.01 This Agreement shall become effective as of the date hereof and
shall remain in force for a period of three (3) years, provided however, that
both parties to this Agreement have the option to terminate the Agreement upon
ninety (90) days prior written notice.
7.02 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, ADS reserves the right to charge for any other
reasonable expenses associated with such termination.
8. ASSIGNMENT
8.01 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
9. AMENDMENT
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors / Trustees of the Fund.
10. NEW YORK LAWS TO APPLY
10.01 ...The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
7
<PAGE>
11. MERGER OF AGREEMENT
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
12. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To the Administrator:
Michael Miola Michael Wagner
President Vice President
QueStar Funds, Inc. Imperial BankFund American Data Services, Inc.
150 Motor Parkway, Suite 109 150 Motor Parkway, Suite 109
Hauppauge, NY 11788 Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
QUESTAR FUNDS, INC. AMERICAN DATA SERVICES, INC.
IMPERIAL BANKFUND
By:____________________________ By:_________________________
Michael Miola, President Michael Wagner, Vice President
8
<PAGE>
FEE SCHEDULE
For the services rendered by ADS in its capacity as transfer agent, the
Fund shall pay ADS, within ten (10) days after receipt of an invoice from ADS at
the beginning of each month, a fee, calculated as a combination of account
maintenance charges plus transaction charges as follows:
(A) ACCOUNT MAINTENANCE CHARGE:
The Greater of (No prorating for partial months):
(1) Minimum maintenance charge per portfolio/class $1,25.00/ month
OR,
(2) Based upon the total of all open/closed accounts (1) per portfolio/class
upon the following annual rates (billed monthly):
FUND TYPE:
Dividend calculated and
paid annually, semi-annually, quarterly.................. $ 9.00 per account
Dividend calculated and paid monthly.......................$10.50 per account
Dividend accrued daily and paid monthly .................. $14.00 per account
Closed accounts ................. $ 2.00 per account (2)
(1) All accounts closed during a month will be considered as open accounts
for billing purposes in the month the account is closed.
(2) Closed accounts remain on the shareholder files until all 1099's and
5498's have been distributed to the shareholders and send via mag-media
to the IRS.
PLUS,
(B) TRANSACTION FEES:
Trade Entry (purchase/liquidation) and maintenance
transactions ..........................................$ 1.50 each
New account set-up .........................................$ 3.00 each
Customer service calls ......................................$ 1.25 each
Correspondence/ information requests ........................$ 1.75 each (2)
Check preparation ...........................................$ .50 each
Liquidation's paid by wire transfer .........................$ 3.00 each
ACH charge ..................................................$ .45 each
SWP .........................................................$ 1.25 each
9
<PAGE>
(C) 24 HOUR AUTOMATED VOICE RESPONSE:
Initial set-up (one-time) charge per portfolio - $750.00
All calls processed through automated voice response will be billed as a
customer service call listed above.
FEE INCREASES
On each annual anniversary date of this Agreement, the fees enumerated above
will be increased by the change in the Consumer Price Index for the Northeast
region (CPI) for the twelve month period ending with the month preceding such
annual anniversary date.
(E) IRA PLAN FEES:
The following fees will be charged directly to the shareholder account:
Annual maintenance fee .....................................$15.00 /account *
Incoming transfer from prior custodian .....................$12.00
Distribution to a participant ..............................$15.00
Refund of excess contribution ..............................$15.00
Transfer to successor custodian ............................$15.00
Automatic periodic distributions ..........................$15.00/year
per account
* Includes $8.00 Bank Custody Fee.
(F) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive
of salaries, advanced by ADS in connection with but not limited to the costs for
printing fund documents, (i.e. printing of confirmation forms, shareholder
statements, redemption/dividend checks, envelopes, financial statements, proxy
statement, fund prospectus, etc.) proxy solicitation and mailing expenses,
travel requested by the Fund, telephone toll charges, 800-line costs and fees,
facsimile and data transmission costs, stationery and supplies (related to Fund
records), record storage, postage (plus a $0.085 service charge for all
mailings), pro-rata portion of annual SAS-70 audit letter, telex and courier
charges incurred in connection with the performance of its duties hereunder. ADS
shall provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse ADS within fifteen (15) days after receipt thereof.
10
Spitzer & Feldman P.C.
405 Park Avenue
New York, NY 10022
January 19, 1999
Imperial BankFund, a series of
Questar Funds, Inc.
c/o American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, NY 11788
Gentlemen:
We have acted as counsel to Imperial BankFund (the "Fund"), a
series of Questar Funds, Inc. (the "Company"), a Maryland corporation, in
connection with the preparation and filing of Registration Statement No.
333-46323; ICA No. 811-08655 on Form N-1A and all Pre-Effective Amendments
thereto (the "Registration Statement") covering shares of Common Stock, par
value $.001 per share, of the Fund.
We have examined copies of the Articles of Incorporation, the
By-Laws of the Company, the Registration Statement, and such other corporate
records, proceedings and documents, including the consents of the Board of
Directors of the Company, as we have deemed necessary for the purpose of this
opinion. In our examination of such material, we have assumed the genuineness of
all signatures and the conformity to original documents of all copies submitted
to us. As to various questions of fact material to such opinion, we have relied
upon statements and certificates of officers and representatives of the Company
and others.
We are not admitted to the practice of law in any jurisdiction
but the State of New York and we do not express any opinion as to the laws of
other states or jurisdictions, except as to matters of Federal law. For purposes
of Maryland corporate law, we have assumed that for purposes of this opinion
they are substantially similar to those of the State of New York.
Based upon and subject to the foregoing, we are of the opinion
that the shares of Common Stock, par value $.001 per share, of the Fund, to be
issued in accordance with the terms of the offering, as set forth in the
Prospectus and Statement of Additional Information included as part of the
Registration Statement, and when issued and paid for, will constitute validly
authorized and legally issued shares of Common Stock, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us in the Fund's
Prospectus and the Statement of Information, included as part of the
Registration Statement.
Very truly yours,
Spitzer & Feldman P.C.
To The Shareholders and Trustees
Questar Funds, Inc.
We have audited the accompanying statement of assets and liabilties of Questar
Funds, Inc. (comprised of the Imperial BankFund) as of January 14, 1999. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. Our procedures included
confirmation of cash held by the custodian as of January 14, 1999, by
correspondence with the custodian. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Imperial BankFund as of January 14, 1999, in conformity with generally accepted
accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
January 14, 1999
FORM OF SUBSCRIPTION LETTER
Robert D. Vincent
120 Fort St.
East Providence, RI 02903
Board of Directors of
Questar Funds, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
Gentlemen:
I hereby subscribe for 5,000 shares of the Common Stock, $.001 par value
per share, of Imperial BankFund, a series of Questar Funds, Inc. (The "Fund"), a
Maryland corporation (the "Company") in shares of the Common Stock of the Fund,
at $10.00 per share for an aggregate purchase price of $50,000.00. My payment in
full is confirmed.
I hereby represent and agree that I am purchasing shares of stock for
investment purposes, for my own account and risk and not with a view to any
sale, division or other distribution thereof within the meaning of the
Securities Act of 1933 as amended, nor with any present intention of
distributing or selling such shares. I also acknowledge that I have received a
prospectus. I will read it carefully before I invest or send any money.
Very truly yours,
By: /s/ ROBERT D. VINCENT
---------------------
Robert D. Vincent
Confirmed and Accepted:
QUESTAR FUNDS, INC.
By: /s/ MICHAEL MIOLA
--------------------
Michael Miola
<PAGE>
FORM OF SUBSCRIPTION LETTER
Kirke B. Everson
Everson Family Limited Partnership
223 Allens Avenue
Providence, RI 02903
Gentlemen:
I hereby subscribe for 5,000 shares of the Common Stock, $.001 par value
per share, of Imperial BankFund, a series of Questar Funds, Inc. (The "Fund"), a
Maryland corporation (the "Company") in shares of the Common Stock of the Fund,
at $10.00 per share for an aggregate purchase price of $50,000.00. My payment in
full is confirmed.
I hereby represent and agree that I am purchasing shares of stock for
investment purposes, for my own account and risk and not with a view to any
sale, division or other distribution thereof within the meaning of the
Securities Act of 1933 as amended, nor with any present intention of
distributing or selling such shares. I also acknowledge that I have received a
prospectus. I will read it carefully before I invest or send any money.
Very truly yours,
By: /s/ KIRKE B. EVERSON
---------------------
Kirke B. Everson
Confirmed and Accepted:
QUESTAR FUNDS, INC.
By: /s/ MICHAEL MIOLA
--------------------
Michael Miola
