PROSPECTUS
Dated September 16, 1998
StockCar Stocks Index Fund
256 Raceway Drive, Suite 11
Mooresville, North Carolina 28115
800-494-2755
StockCar Stocks Mutual Fund, Inc.(TM) (the "Company") is a newly organized,
diversified open-end management investment company currently consisting of one
portfolio, The StockCar Stocks Index Fund(TM) (the Fund"). The primary
investment objectives of the Fund are growth of capital and current income. The
Fund attempts to achieve its investment objectives by investing primarily in the
stocks of the companies comprising the StockCar Stocks Index(TM) (the "Index"),
a new, price sensitive index of companies involved in the sponsorship of or
deriving income from NASCAR(R) sanctioned racing events at the Winston Cup
racing level. The Index is calculated and published by the American Stock
Exchange ("AMEX") under the ticker symbol "RCE".
The minimum investment in the Fund is $1,000 for regular accounts and $500 for
retirement accounts. The minimum subsequent investment is $500 for regular
accounts and $50 for retirement accounts. The Fund is a pure No-Load Fund. There
are no 12b-1 marketing fees or other sales charges. This means that 100% of your
initial investment is invested in shares of the Fund.
This Prospectus concisely sets forth the information you should know before you
invest. Please read this Prospectus and keep it for future reference. A
Statement of Additional Information (the "SAI") regarding the Fund, dated
September 15, 1998, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. You can get a
copy of the SAI at no charge by writing or calling the Fund at the address or
telephone number listed above. The SEC maintains a web site (www.sec.gov) that
contains the Statement of Additional Information and other information regarding
the Fund.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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"NASCAR(R)" is a registered trademark of the National Association of Stock Car
Auto Racing.
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TABLE OF CONTENTS
Fees And Expenses.
Investment Objectives And Policies.
The StockCar Stocks Index(TM).
Risk Factors.
Purchasing Shares.
Redeeming Shares.
Tax Considerations.
Investment Adviser.
Management of the Fund.
General Information.
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FEES AND EXPENSES
Shareholder Transaction Expenses:
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Sales Load Imposed on Purchases.(1) None
Sales Load Imposed on Reinvested Dividends. None
Deferred Sales Load. None
Redemption Fees. 0.5%*
(1) Investors may be charged a fee if they effect transactions through a broker
or agent.
* This fee is only imposed on shares that are held for less than six months. See
"Redeeming Shares" for a fuller explanation of this fee.
Annual Fund Operating Expenses: (as a percentage of net assets)
- -------------------------------
The following table sets forth the regular operating expenses that are paid out
of the Fund's average daily assets. These fees are used to pay for services such
as the investment management of the Fund, maintaining shareholder records and
furnishing shareholder statements. This is a new Fund without a prior operating
history, so the following expense figures are estimates. True expenses may be
greater or lower than those shown below.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee 0.50%
Operating Services Fee 0.91%
Other Expenses (Estimated) 0.09%
------
Total Fund Operating Expenses 1.50%
(after any expense reimbursements) ======
Example of Shareholder Expenses Over Time.
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Based on the fee schedule set forth above, you would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period;
One Year Three Years
-------- -----------
$ 25.26 $ 57.41
The above example is intended to help you understand the various costs and
expenses you might incur over time when you invest in the Fund, but you should
be aware that this is only an example of anticipated future expenses. Actual
expenses may be greater or less than those shown. Because the Fund has no
operating history, "Other Expenses" is based on estimated amounts for the Fund's
first fiscal year. Not included in this example is a redemption fee of 0.50%,
which is imposed on shares held for less than six months. Also, the Fund's
Adviser has agreed to waive receipt of its fees and/or assume certain expenses
of the Fund, if it becomes necessary, to help ensure that the Fund's expenses do
not exceed 1.50% annually. If it becomes necessary for the Adviser to waive fees
or assume expenses of the Fund, such actions would have the effect of lowering
the expense ratio and increasing the yield to investors. Depending upon the
future growth history of the Fund, the Adviser has estimated that fees and
expenses of the Fund could be as high as 3.5% in the Fund's first fiscal year
absent fee waivers and expense reimbursements.
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INVESTMENT OBJECTIVES AND POLICIES
The Fund is a diversified mutual fund whose primary investment objectives are
growth of capital and current income. The Fund seeks to achieve these objectives
by investing primarily in the common stock of companies listed on the Stockcar
Stocks Index(TM) (the "Index"), in approximately the same percentages as each
company represents in the Index. The Index is a new, price sensitive index of
companies involved in the sponsorship of or deriving income from NASCAR(R)
sanctioned racing events at the Winston Cup(R) racing level. The Index presently
is composed of 52 publicly traded companies, representing ten out of thirteen
generally recognized industry sectors and ranging in market capitalization from
approximately $170 million to $300 billion. The Index is composed of both very
large, well established companies with a long history of capital growth and
dividend payments, as well as smaller companies with rapid growth potential.
Accordingly, the diverse composition of the Index lends itself to the
achievement of both capital growth and current income. However, you should be
aware that any investment in common stock entails risk, and there can be no
assurance that the Fund's objectives will be achieved.
Under normal circumstances, the Fund will invest at least 95% of its net assets
in the common stocks of the companies comprising the Index. For temporary
liquidity purposes only, the Fund may invest up to 25% of its assets in other
securities, such as United States Government bills and notes, money market
instruments, repurchase agreements, and cash. The Fund will not invest in such
securities for temporary or defensive purposes. You should be aware that any
investment in securities not included in the Index will cause the performance of
the Fund to vary from that of the Index.
THE STOCKCAR STOCKS INDEX(TM)
The StockCar Stocks Index(TM) is a new, unmanaged, Index consisting of publicly
traded companies that are involved in the sponsorship of, or that derive
revenues from, NASCAR(R) sanctioned racing events. "Unmanaged" means that the
Index value will fluctuate with the price movements of the companies comprising
the Index, according to a mathematical formulation, and no outside entity will
exercise any influence or control over such movements. It also means that the
criteria for inclusion of companies in the Index are objective and not subject
to arbitrary change, so that any company that is eligible for inclusion in the
Index must be included, and any company that ceases to qualify for inclusion in
the Index must be deleted. The Index is calculated and published by the AMEX
under the ticker symbol, "RCE". The Index is an equally weighted, price
sensitive Index. This means that all the companies in the Index begin each
calendar year with an equal weighting in the Index, and the Index value moves up
and down based on the price movements of the companies in the Index. During the
course of the year, the relative weighting of each company in the Index will
fluctuate, reflecting its price performance relative to the other companies in
the Index. At the end of each calendar year, the companies included in the Index
are rebalanced to an equal weighting per company, and the entire process begins
again. The AMEX, under a licensing agreement with the Adviser, will calculate
and publish the Index, and will be responsible for rebalancing the Index
weightings each year and adjusting the Index to reflect any additions or
deletions to the Index.
The Index was created and is owned by the Adviser. The Adviser selects the
companies to be included in or deleted from the Index, based on the criteria
described below, and suggests such changes to the AMEX. The AMEX verifies the
Adviser's suggested changes and, if necessary, adjusts the Index accordingly.
The Index presently is composed of 52 companies, 33 of which are also listed on
the S&P Composite Index of 500 Stocks(R) *(the "S&P 500"). The companies
presently comprising the Index represent ten out of the thirteen generally
recognized industry sectors and range in size from approximately $170 million to
$300 billion in market capitalization. The Adviser maintains a web Site
(www.stockcarstocks.com) which contains a complete listing of all the companies
included in the Index and more information concerning the construction and
maintenance of the Index.
* The S&P Composite Index of 500 Stocks(R) *(the "S&P 500") is a widely
recognized index of companies generally considered to be representative of the
US economy.
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INDEX COMPOSITION CRITERIA. In order for a company to be included in the Index,
that company must either be involved in the sponsorship of, or derive revenues
from, NASCAR(R) (the National Association for Stock Car Auto Racing) sanctioned
racing events at the Winston Cup(R) level only. NASCAR(R) is a private national
association which oversees and regulates stock car racing in the United States,
and sets standards and rules for such racing. The Winston Cup(R) Series is one
of several NASCAR(R) racing series, and is considered to be the top level of
stock car racing, due to the size of the prize moneys offered, the expense and
time required of the racing teams and their sponsors, and the prestige and
recognition of the racing series worldwide. There are other NASCAR(R) sanctioned
racing levels, but the Adviser has determined not to include such levels in the
Index because of the more frequent turnover in company involvement at such
levels. Company involvement at the Winston Cup(R) level requires a substantial
investment of time and money, and as a result, the companies that are involved
in the sport at the Winston Cup(R) level tend to stay involved for much longer
time periods.
To qualify for inclusion in the Index, a company must be a sponsor or derive
revenue from NASCAR(R) events at the Winston Cup(R) level. The Adviser has
determined that a company is a sponsor of NASCAR(R), and is therefore eligible
for inclusion in the Index, only if it meets one or more of the following
criteria:
(1) Lead Race Sponsors are those companies identified each year by NASCAR(R) as
the lead company sponsoring one or more of the 32 annual Winston Cup(R)
series races. A list of all Lead Race Sponsors is published annually by
NASCAR(R), usually in December, for the following year's racing.
(2) Lead Car Sponsors are those companies that are the lead sponsor for each of
the approximately 45 cars that participate in the Winston Cup(R) Series.
Lead Car Sponsors generally can be distinguished from other car sponsors
because the Company logo will appear on the hood of the car it sponsors. A
list of all Lead Race Sponsors is published annually by NASCAR(R), usually
in December, for the following year's racing.
(3) Major Product Sponsors are those companies that provide critical and
necessary products to the approximately 45 cars and teams that participate
in the Winston Cup(R) Series. The Adviser has determined that such critical
and necessary products are limited to tires, gasoline and beverages for the
teams.
A company will also qualify for inclusion in the Index if it derives revenues
from NASCAR(R) sanctioned racing events at the Winston Cup(R) Level. The Adviser
has determined that a company derives revenue from NASCAR(R), and is therefore
eligible for inclusion in the Index, only if it meets one or more of the
following criteria:
(1) It is a company that has an ownership interest in one or more of the race
tracks that host the 32 annual Winston Cup(R) races.
(2) It is a company that produces souvenirs or memorabilia for the Winston
Cup(R) Series under a licensing agreement with NASCAR(R).
(3) It is a company that broadcasts Winston Cup(R)Series races on television or
radio under an agreement with NASCAR(R).
There are no minimum limits on the amount or percentage of total company revenue
that must be derived from one of the above-described activities to qualify a
company for inclusion in the Index. However, in order to minimize the risk of
liquidity problems for the Fund in purchasing such otherwise eligible companies,
the Adviser has determined that a company must have at least $25 million in
market capitalization in order to be included in the Index. Presently, no
company included in the Index has a market capitalization of less than $100
million.
Any publicly traded company that meets one of more of the criteria set forth
above, and meets the minimum market capitalization requirements, is eligible for
inclusion in the Index and must be included in the Index not later than the
first calendar quarter after it has become eligible. The Adviser is responsible
for monitoring the marketplace, identifying such eligible companies, and
reporting such companies to the AMEX for inclusion in the Index. Conversely, any
company in the Index that ceases to qualify under any of the above-described
criteria must be removed from the Index at the end of the calendar year in which
the company ceases to qualify, when the Index is rebalanced. The Adviser is
responsible for monitoring the Index companies, identifying any companies that
cease to qualify, and reporting such companies to the AMEX for deletion from the
Index.
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As described above, the Fund will attempt to replicate the performance of the
Index by normally investing at least 95% of its net assets in the common stock
of the companies comprising the Index, in approximately the same percentages as
represented by the Index. You should be aware that at the end of each calendar
year, when the Index is rebalanced and/or when companies are added to or deleted
from the Index, the Adviser will also alter the Fund's investments to conform
such investments to the Index composition. Such an investment management
requirement imposes certain risks to the Fund, including the risks of losses or
tax consequences to shareholders as a result of potential realized capital
gains. You should also be aware that, although the Fund will attempt to
replicate the performance of the Index, the Fund will incur certain expenses
that will not be incurred by the Index, including transaction charges.
Accordingly, the performance of the Fund will vary from that of the Index as a
result of such expenses. The Adviser will attempt to maintain a correlation
coefficient of at least 0.95 in performance between the Index and the Fund. This
means that the Adviser will attempt to replicate at least 95% of the Index's
performance. The Adviser will be responsible for tracking such performance,
under the supervision of the Board of Directors of the Company, and the Board
will take actions as it deems appropriate to remedy the lack of correlation
should it not be maintained at the above-described levels. The Adviser has
determined that, in order to fully replicate the performance of the Index, the
Fund must have approximately $25 million in net assets. Until such asset levels
are reached, the Adviser will invest Fund assets in a representative sample of
Index securities and such other permissible securities as the Adviser deems
likely to most closely track Index performance. You should be aware that there
is no assurance that the Adviser will be successful in replicating the
performance of the Index during this period.
A complete listing of the Fund's permissible investments, and the risks and
investment restrictions pertaining to such investments, is as follows;
Common Stocks. The Fund may invest in the common stock of the companies
comprising the Index. Common stock is issued by companies to raise cash for
business purposes and represents a proportionate equity interest in the issuing
companies. Therefore, the Fund participates in the success or failure of any
company in which it holds common stock. The market value of common stock can
fluctuate significantly, reflecting the business performance of the issuing
company, investor perception and general economic or financial market movements.
Smaller companies are especially sensitive to these factors. Despite the risk of
price volatility, however, common stocks historically have offered the greatest
potential for gain on investment, compared to other classes of financial assets.
Further, there are additional risks inherent in the stock car racing business,
and because the Fund will concentrate its investments in companies involved in
that sport, the Fund will be exposed to the risks associated with the sport to a
greater degree than will funds whose investment policies do not require or allow
such concentration., However, the majority of the companies comprising the Index
are large, well-established companies with a long history of growth and
performance and whose product lines and services are only indirectly related to
the stock car racing business, so the risks particular to the stock car racing
business are somewhat reduced. Under normal circumstances, the Fund will invest
at least 95% of its net assets in the common stock of companies comprising the
Index. This is a fundamental policy of the Fund, and may not be changed without
a vote of the majority of the outstanding shares of the Fund. A full listing of
the Fund's fundamental investment policies, as well as those investment policies
which may be changed by the Company's Board of Directors, may be found in the
SAI in the Section entitled, "Investment Policies and Restrictions".
Preferred Stock. The Fund may invest in the preferred stock of the companies
that comprise the Index, when the Adviser believes that such investments will
help the Fund achieve its investment objective of current income without
substantially and negatively affecting the Fund's investment objective of
capital growth. Preferred stock generally pays dividends at a specified rate and
generally has preference over common stock in the payments of dividends and the
liquidation of the issuer's assets. Dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Accordingly,
Shareholders may suffer a loss of value if dividends are not paid. The market
prices of preferred stocks are also sensitive to changes in interest rates and
4
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in the issuer's creditworthiness. Accordingly, shareholders may experience a
loss of value due to adverse interest rate movements or a decline in the
issuer's credit rating. Finally, preferred stock is not included in the Index,
so any investment in such stock will cause the performance of the Fund to vary
from that of the index. For these reasons, the Fund will not invest more than 5%
of its net assets in preferred stock.
Foreign Securities. The Fund may invest in common stock of foreign issuers which
are publicly traded on U.S. exchanges either directly or in the form of American
Depository Receipts (ADRs), but only if such foreign issuers are included in the
Index. The Fund will only invest in ADRs that are issuer sponsored. Sponsored
ADRs typically are issued by a U.S. bank or Trust company and evidence ownership
of underlying securities issued by a foreign corporation. Investments in foreign
securities involve greater risks compared to domestic investments. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about issuers than is
available in the reports and ratings published about companies in the U.S.
Additionally, foreign companies are not subject to uniform accounting, auditing
and financial reporting standards. Dividends and interest on foreign securities
may be subject to foreign withholding taxes. Such taxes may reduce the net
return to shareholders. Although the Fund intends to invest in securities of
foreign issuers domiciled in nations which the Adviser considers as having
stable and friendly governments, there is the possibility of expropriation,
confiscation, taxation, currency blockage or political or social instability
which could affect investments of foreign issuers domiciled in such nations.
Further, there is the risk of loss due to fluctuations in the value of a foreign
corporation's currency relative to the U.S. dollar. Further, if a foreign issuer
is a member of the Index, the Fund will be obligated to invest in such security,
even though the country of the issuer's domicile might not be considered by the
Adviser to be friendly or stable.
Money Market Funds. The Fund may invest in securities issued by other registered
investment companies that invest in short-term debt securities (i.e., money
market funds) to maintain liquidity and for temporary and defensive purposes
only. As a shareholder of another registered investment company, the Fund would
bear its pro rata portion of that company's Advisory fees and other expenses.
Such fees and expenses will be borne indirectly by the Fund's shareholders. The
Fund may invest in such instruments to the extent that such investments do not
exceed 5% of the Fund's net assets and/or 3% of any investment company's
outstanding securities.
Debt Securities. The Fund may invest in U.S. Government debt securities
including Treasury Bills and short term notes, to maintain liquidity. U.S.
Government securities include direct obligations of the U.S. Government and
obligations issued by U.S. Government agencies and instrumentalities. The market
value of such securities fluctuates in response to interest rates and the
creditworthiness of the issuer. In the case of securities backed by the full
faith and credit of the United States Government, shareholders are only exposed
to interest rate risk. The Fund will not invest more than 5% of its net assets
in such securities, and will not invest in any such security with a maturity in
excess of one year.
Repurchase Agreements. The Fund may invest a portion of its assets in repurchase
agreements ("Repos") with broker-dealers, banks and other financial institutions
to maintain liquidity, provided that the Fund's custodian always has possession
of the securities serving as collateral for the Repos or has proper evidence of
book entry receipt of said securities. In a Repo, the Fund purchases securities
subject to the seller's simultaneous agreement to repurchase those securities
from the Fund at a specified time (usually one day) and price. The repurchase
price reflects an agreed-upon interest rate during the time of investment. All
Repos entered into by the Fund must be collateralized by U.S. Government
Securities, the market values of which equal or exceed 102% of the principal
amount of the money invested by the Fund. If an institution with whom the Fund
has entered into a Repo enters insolvency proceedings, the resulting delay, if
any, in the Fund's ability to liquidate the securities serving as collateral
could cause the Fund some loss if the securities declined in value prior to
liquidation. To minimize the risk of such loss, the Fund will enter into Repos
only with institutions and dealers considered creditworthy, and will not invest
more than 5% of its net assets in such transactions.
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Cash Reserves. The Fund may, to meet liquidity needs, hold up to 25% of its net
assets in cash. The primary risk associated with such a policy is that the
Fund's performance will vary, perhaps significantly, from the performance of the
Index when the Fund holds such a high percentage of cash reserves.
Options On Equity Securities and the Index. The Fund may enter into options
contracts relating to the equity securities of companies included in the Index,
may write (i.e. sell) covered put and call options on such securities and on the
Index, and may purchase put and call options on such equity securities and on
the Index. Such options can include long-term options with durations of up to
three years. Although not normally anticipated to be widely employed, the Fund
may use futures and options to increase or decrease its exposure to the effects
of changes in security prices, to hedge securities held, to maintain cash
reserves while remaining fully invested, to facilitate trading, to reduce
transaction costs, or to seek higher investment returns when a futures or
options contract is priced more attractively than the underlying security or
index. The Fund may enter into these transactions so long as the value of the
underlying securities on which such options or futures contracts may be written
at any one time does not exceed 100% of the net assets of the Fund, and so long
as the initial margin required to enter into such contracts does not exceed five
percent (5%)of the Fund's total net assets.
Risk Factors Associated With Futures And Options. The primary risks associated
with the use of options and futures are; (1) imperfect correlation between a
change in the value of the underlying security or index and a change in the
price of the option or futures contract, and (2) the possible lack of a liquid
secondary market for an options or futures contract and the resulting inability
of the Fund to close out the position prior to the maturity date. The risk of
imperfect correlation will be minimized by investing only in those contracts
whose price fluctuations are expected to resemble those of the Fund's underlying
securities. The risk that the Fund will be unable to close out a position will
be minimized by entering into such transactions only on national exchanges and
over-the-counter markets with an active and liquid secondary market.
Restricted And Illiquid Securities. The Fund will not invest more than 5% of its
net assets in securities that the Adviser determines, under the supervision of
the Board of Directors, to be illiquid and/or restricted. Illiquid securities
are generally defined as securities that cannot be liquidated within seven (7)
days at the approximate price at which the Fund has valued the instrument. Also,
the sale of some illiquid and other types of securities may be subject to legal
restrictions. Because illiquid and restricted securities may present a greater
risk of loss than other types of securities, due to their lack of a ready
market, the Fund will not invest in such securities in excess of the limits set
forth above. You should be aware that in the event that more than 15% of the
Index is comprised of companies considered to be illiquid, the Fund will be
unable to precisely match its investments to the percentages contained in the
Index, and that inability may pose additional risks to the Fund, including the
risk that the performance of the Fund will vary from that of the Index.
When-Issued Securities And Delayed-Delivery Transactions. The Fund may purchase
securities of companies comprising the Index on a when-issued basis, and it may
purchase or sell such securities for delayed-delivery. These transactions occur
when securities are purchased or sold by the Fund with payment and delivery
taking place at some future date. The Fund may enter into such transactions
when, in the Adviser's opinion, doing so may secure an advantageous yield and/or
price to the Fund that might otherwise be unavailable. The Fund has not
established any limit on the percentage of assets it may commit to such
transactions, but to minimize the risks of entering into these transactions, the
Fund will maintain a segregated account with its Custodian consisting of cash,
cash equivalents, U.S. Government Securities or other high-grade liquid debt
securities, denominated in U.S. dollars or non-U.S. currencies, in an amount
equal to the aggregate fair market value of its commitments to such
transactions. The Fund will not invest in excess of 5% of its net assets in
these securities.
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RISK FACTORS
You may lose money by investing in the Fund. Your risk of loss is greater if you
hold your investment for shorter time periods. The Fund may be appropriate for
long-term investors who understand the potential risks and rewards of investing
in common stocks. The value of the Fund's investments will vary from day-to-day,
reflecting changes in market conditions, interest rates and other company,
political, and economic news. Over the short-term, stock prices can fluctuate
dramatically in response to these factors. However, over longer time periods,
stocks, although more volatile, have historically shown greater growth potential
than other investments. Presently, the Index is composed of only 52 companies,
and this limited number of companies may pose additional risks to the Fund. Some
of the companies included in the Index are considered to be smaller companies.
Companies with small market capitalizations can be riskier investments than
larger capitalized companies, due to their lack of experience, product
diversification, cash reserves and lack of management depth. Further, the Fund
has no operating history, and this may pose additional risks. There is risk
involved in the Fund's investment policy of tracking the Index, due to the
potential company turnover which may occur in the Index, the possible addition
of companies to the Index which may not have a long operating history, and the
risks inherent in the stock car auto racing industry. When you sell your Fund
shares, they may be worth more or less than what you paid for them. There is no
assurance that the Fund can achieve its investment objective, since all
investments are inherently subject to market risk.
PURCHASING SHARES
To purchase shares of the Fund, first complete and sign a New Account Purchase
Application and mail it, together with your check for the total purchase price,
to STOCKCAR STOCKS MUTUAL FUND, INC.(TM), C/O DECLARATION SERVICE COMPANY, 555
NORTH LANE, SUITE 6160, CONSHOHOCKEN, PA 19428. Checks are accepted subject to
collection at full face value in United States currency. If your check does not
clear, your purchase will be cancelled and you will be subject to any losses or
fees incurred by the Fund with respect to the transaction.
You will receive a statement showing the number of shares purchased, the net
asset value at which your shares were purchased, and the new balance of Fund
shares owned, each time you purchase shares of the Fund. . The Fund does not
issue stock certificates. All full and fractional shares will be carried on the
books of the Fund.
Shares of the Fund are purchased at the net asset value next computed after the
receipt and acceptance of your purchase order (See, "Determination of Net Asset
Value." in the SAI). The Fund is a pure No-Load Fund. This means that you will
not be charged any sales commissions, ongoing 12b-1 fees, or underwriting
discounts. The minimum initial investment is $1,000, except for Individual
Retirement Accounts (IRAs) where the minimum is $500. Minimum subsequent
purchases for regular accounts are $500 and $50 for IRA accounts. IRA Accounts
are also subject to a transfer fee of $25 and an annual maintenance fee of $12.
The maintenance fee is waived for accounts over $10,000.
You can make systematic investments of as little as $100 per month in the Fund.
Please contact Declaration Service Company, at the address listed above, or call
them at 800-494-2755 to set up a systematic investment plan.
All applications to purchase shares of the Fund are subject to acceptance by
authorized officers of the Fund and are not binding until accepted. The Fund
reserves the right to reject purchase orders under circumstances or in amounts
considered disadvantageous to existing shareholders. Please see the Sections
entitled "Purchasing and Redeeming Shares" and "Tax Information" for more
information concerning share purchases.
You may direct inquiries concerning the Fund to:
STOCKCAR STOCKS MUTUAL FUNDS, INC.
C/O DECLARATION SERVICE COMPANY
555 NORTH LANE, SUITE 6160
CONSHOHOCKEN, PA 19428
1-800-494-2755
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REDEEMING SHARES
You may redeem your shares in the Fund at any time and for any reason. Upon
receipt by the Fund of a redemption request in proper form, your shares of the
Fund will be redeemed at their next determined net asset value. Redemption
requests must be in writing and delivered to the Fund at STOCKCAR STOCKS FUNDS,
INC.(TM), C/O DECLARATION SERVICE COMPANY, 555 NORTH LANE, SUITE 6160,
CONSHOHOCKEN, PA 19428. To be in "proper form," your redemption request must:
1. Specify the number of shares or dollar amount to be redeemed, if less than
all shares are to be redeemed;
2. Be signed by all owners exactly as their names appear on the account;
3. If required, include a signature guarantee from any "eligible guarantor
institution" as defined by the rules under the Securities Exchange Act of
1934. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. A notary public
is not an eligible guarantor.
Further documentation, such as copies of corporate resolutions and instruments
of authority may be requested from corporations, administrators, executors,
personal representatives, Directors, or custodians to evidence the authority of
the person or entity making the redemption request.
Signature Guarantees. A signature guarantee is designed to protect you and the
Fund by verifying your signature. SIGNATURE GUARANTEES ARE REQUIRED WHEN: (1)
establishing certain services after the account is opened; (2) requesting
redemptions in excess of $10,000; (3) redeeming or exchanging shares, when
proceeds are: (i) being mailed to an address other than the address of record,
(ii) made payable to other than the registered owner(s); or (4) transferring
shares to another owner.
The redemption price per share is net asset value per share, determined as of
the close of business on the day your redemption order is accepted by the Fund
(See, "Purchasing and Redeeming Shares" in the SAI). If you hold your shares
longer than six months, there is no redemption charge. Otherwise, a fee of 0.50%
of the value of your redeemed shares will be deducted from the proceeds of your
redemption and paid to the Fund. When you redeem your shares, they may be worth
more or less than you paid for them, depending upon the value of the Fund's
portfolio securities at the time of redemption. The Fund charges a transfer fee
of $25 on redemptions of IRA accounts. This fee is in addition to the early
redemption charge of 0.50%.
The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open. The Fund's share price or net asset value per share ("NAV") is
normally determined as of 4:00 p.m., New York time. The Fund's share price is
calculated by subtracting its liabilities from the closing fair market value of
its total assets and dividing the result by the total number of shares
outstanding on that day. Fund liabilities include accrued expenses and dividends
payable, and its total assets include the market value of the portfolio
securities as well as income accrued but not yet received. Since the Fund
generally does not charge sales or redemption fees, the NAV is the offering
price for shares of the Fund. For shares redeemed prior to being held for at
least six months, the redemption value is the NAV less a service fee equal to
0.50% of the NAV.
If the value of your account falls below $1,000 as a result of previous
redemptions and not market price declines, the Fund may redeem the shares in
your account. However, the Fund will notify you first if such an event occurs,
and you will have 60 days to bring your account balance up to the minimum levels
before the Fund will exercise its option to redeem. Also, in the event your
shares are redeemed by the Fund under such circumstances, you will not be
charged any redemption fees, regardless of the time you have held your shares.
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Payment for shares redeemed is made within seven days after receipt by the Fund
of a request for redemption in proper form. If shares are purchased by check and
redeemed by letter within seven business days of purchase, the Fund may hold
redemption proceeds until the purchase check has cleared, provided that the Fund
does not hold such proceeds for more than 15 calendar days. You will also be
subject to a redemption fee of 0.50% of total assets in such a circumstance. The
Fund reserves the right to suspend or postpone redemptions during any period
when (a) trading on any of the major U.S. stock exchanges is restricted, as
determined by the Securities and Exchange Commission, or that the major
exchanges are closed for other than customary weekend and holiday closings, (b)
the Commission has by order permitted such suspension, or (c) an emergency, as
determined by the Commission, exists making disposal of portfolio securities or
valuation of net assets of the Fund not reasonably practicable.
TAX CONSIDERATIONS
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code so as to be relieved of federal income tax on its capital gains and
net investment income currently distributed to its shareholders. To qualify as a
regulated investment company, the Fund must, among other things, derive at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities,
or other income derived with respect to its business of investing in such stock
or securities, and distribute substantially all of such income to its
shareholders at least annually.
The Fund intends to distribute to shareholders, at least annually, usually in
September, substantially all net investment income and any net capital gains
realized from sales of the Fund's portfolio securities. Dividends from net
investment income and distributions from any net realized capital gains are
reinvested in additional shares of the Fund unless the shareholder has requested
in writing to have them paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to you as ordinary income. Distributions of long-term capital gains are
taxable as long-term capital gains regardless of the length of time shares in
the Fund have been held. Distributions are taxable, whether received in cash or
reinvested in shares of the Fund.
You will be advised annually of the source of distributions for federal income
tax purposes.
If you fail to furnish your social security or other tax identification number
or to certify properly that it is correct, the Fund may be required to withhold
federal income tax at the rate of 31% (backup withholding) from your dividend,
capital gain and redemption payments. Dividend and capital gain payments may
also be subject to backup withholding if you fail to certify properly that you
are not subject to backup withholding due to the under-reporting of certain
income.
Taxable distributions generally are included in your gross income for the
taxable year in which they are received. However, dividends declared in October,
November and December and made payable to shareholders of record in such month
will be deemed to have been received on December 31st if paid by the Fund during
the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below your
cost basis, such distribution would be taxable to you as ordinary income or as a
long-term capital gain, even though, from an investment standpoint, it may
constitute a partial return of capital. In particular, you should be careful to
consider the tax implications of buying shares of the Fund just prior to a
distribution. The price of such shares include the amount of any forthcoming
distribution so that you may receive a return of investment upon distribution
which will, nevertheless, be taxable.
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<PAGE>
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. You should consult a tax Adviser regarding the effect of
federal, state, local, and foreign taxes on an investment in the Fund.
MANAGEMENT OF THE FUND
The Company was incorporated in Maryland on May 18, 1998. The Board of Directors
approves all significant agreements between the Company and the persons and
companies that furnish services to the Fund, including agreements with the
Fund's custodian, transfer agent, investment Adviser and administrator. The
day-to-day operations of the Fund are delegated to the Adviser. The Statement of
Additional Information contains background information regarding each of the
Company's Directors and Executive Officers. The Company's Articles of
Incorporation permit the Board of Directors to issue 500,000,000 shares of
common stock. The Board of Directors has the power to designate one or more
classes ("series") of shares of common stock and to classify or reclassify any
unissued shares with respect to such series. Currently the shares of the Fund
are the only class of shares being offered by the Company. Shareholders are
entitled: (i) to one vote per full share; (ii) to such distributions as may be
declared by the Company's Board of Directors out of funds legally available; and
(iii) upon liquidation, to participate ratably in the assets available for
distribution. There are no conversion or sinking fund provisions applicable to
the shares, and the holders have no preemptive rights and may not cumulate their
votes in the election of directors. The shares are redeemable and are fully
transferable. All shares issued and sold by the Fund will be fully paid and
nonassessable.
INVESTMENT ADVISER
MANAGEMENT AGREEMENTS. StockCar Stocks Advisors, LLC (the "Adviser") has entered
into an Investment Advisory Agreement (the "Advisory Agreement") with the Fund
to provide investment management services to the Fund. In addition, the Adviser
has entered into an Operating Services Agreement (the "Services Agreement") with
the Fund to provide virtually all day-to-day operational services to the Fund.
As is further explained below, the combined effect of the Advisory Agreement and
the Services Agreement is to place a cap or ceiling on the Fund's ordinary
operating expenses at 1.41% of daily net asset value of the Fund, excepting
brokerage, interest, taxes, litigation, and other extraordinary expenses. John
P. Allen II is Chief Executive Officer of the Adviser. Robert T. Carter is
Portfolio Manager, and is responsible for all investment decisions relating to
the Fund. Mr. Allen also serves as the President and as a Director of the
Company.
SERVICES AGREEMENT. Under the terms of the Services Agreement, the Adviser,
subject to the supervision of the Board of Directors, will provide day-to-day
operational services to the Fund including, but not limited to, providing or
arranging to provide accounting, administrative, legal (except litigation),
dividend disbursing, transfer agent, registrar, custodial, fund share
distribution, shareholder reporting, sub-accounting and record keeping services.
The Services Agreement provides that the Adviser pays all fees and expenses
associated with these and other functions, including, but not limited to,
expenses of legal compliance, shareholder communications, and meetings of the
shareholders. For such services, the Fund will pay to the Adviser on the last
day of each month a fee equal to 0.91% of the average net asset value of the
Fund, such fee to be computed daily based upon the net asset value of the Fund.
The Adviser has entered into an Investment Company Services Agreement with
Declaration Service Company to provide Transfer Agent and essentially all
administrative services for the Fund.
Mr. Carter, the Fund's portfolio manager, has over thirty-five years experience
managing funds for registered investment companies and private and institutional
clients. From 1996-1998, Mr. Carter was Head of Private Client Financial and
Advisory Services for McCauley Development Group in Chicago, Illinois. He was a
senior equity and fixed-income portfolio manager for Duff & Phelps Investment
Management in Chicago, Illinois from1989-1996, managing over $300 million in
mutual fund, institutional and private client assets. Mr. Carter has managed
private client, institutional and mutual fund assets since 1960. Mr. Carter is a
Chartered Financial Analyst and a graduate of The College of Wooster.
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Pursuant to the terms of the Advisory Agreement, the Adviser manages the
investment of the assets of the Fund in accordance with the Fund's investment
objectives, policies, and restrictions. The Adviser receives from the Fund, as
compensation for its services, a fee, accrued daily and payable monthly, at an
annual rate of 0.50% of the Fund's net assets. The Adviser has voluntarily
agreed to waive its fees and/or assume certain expenses of the Fund, if
necessary, in the event that the Fund's total annual expenses, excluding taxes,
interest and extraordinary litigation expenses, during any of its fiscal years,
exceed 1.5% of its average daily net asset value in such year. The Fund will not
be liable in future years for any fee waivers or expense assumptions made by the
Adviser in previous years. If the Adviser waives fees and/or assumes expenses of
the Fund, such actions will have the effect of lowering the Fund's expense
ratios and increasing the Fund's yield during the time in which the Adviser
undertakes such actions.
Under the Contract, the Adviser furnishes at its own expense office space to the
Company and all necessary office facilities, equipment, and personnel for
managing the assets of the Fund. The Adviser also pays all expenses of marketing
shares of the Fund, placement of securities orders and related bookkeeping.
The Fund pays all expenses incident to its operations and business not
specifically assumed by the Adviser, including expenses relating to custodial,
legal, and auditing charges; printing and mailing of reports and prospectuses to
existing shareholders; taxes and corporate fees; maintaining registration of the
Fund under the Investment Company Act of 1940, and registration of its shares
under the Securities Act of 1933; and qualifying and maintaining qualification
of its shares under the securities laws of certain states.
The "Year 2000 Issue": Many existing computer programs use only two digits to
identify a year in their date fields. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the year 2000. The Fund is a new Fund, and the Adviser is a newly formed
company. All of the computer programs purchased by the Adviser for its own use
or for the use of the Fund are new programs and have been warranted as Year 2000
compliant. Further, the Company has entered into agreements with various third
parties to provide services to the Fund, and as part of those agreements, has
received warranties from each such party that its systems are presently year
2000 compliant, or adequate steps are being undertaken by the party to insure
that compliance is met prior to the turn of the century. The Fund will not enter
into any agreement with a party unless such warranties are given. Accordingly,
at the present time, there do not appear to be any materially adverse
consequences to the Fund relating to the Year 2000 issue.
GENERAL INFORMATION
The Fund will not issue stock certificates evidencing shares. Instead, your
account will be credited with the number of shares purchased, relieving you of
responsibility for safekeeping of certificates and the need to deliver them upon
redemption. Written confirmations are issued for all purchases of shares.
You will be provided at least semi-annually with a report showing the Fund's
portfolio and other information and annually after the close of the Fund's
fiscal year, which ends September 31, with a report containing audited financial
statements.
The Fund's average annual total return is computed by determining the average
annual compounded rate of return for a specified period that, if applied to a
hypothetical $1000 initial investment, would produce the redeemable value of
that investment at the end of the period, assuming reinvestment of all dividends
and distributions and with recognition of all recurring charges. The Fund may
also utilize a total return calculation for differing periods computed in the
same manner but without annualizing the total return.
The Fund's "yield" refers to the income generated by an investment in the fund
over a thirty day (or one month) period (which period will be stated). Yield is
computed by dividing the net investment income per share earned
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<PAGE>
during the most recent calendar month by the maximum offering price per share on
the last day of the month. This income is then "annualized." That is, the mount
of income generated by the investment during that thirty-day period is assumed
to be generated each month over a twelve month period and is shown as a
percentage of the investment.
For purposes of the yield calculation, interest income is computed based on the
yield to maturity of each debt obligation and dividend income is computed based
on the stated dividend rate of each equity security in the Fund's portfolio, and
all recurring charges are recognized.
In reports or other communications to investors, or in advertising material, the
Fund may describe general economic and market conditions affecting the Fund and
may compare its performance with other mutual funds as listed in the rankings
prepared by Lipper Analytical Services, Inc. or similar nationally recognized
rating services and financial publications that monitor mutual fund performance.
The Fund may also, from time to time, compare its performance to the Standard &
Poors Composite Index of 500 Stocks ("S&P 500"), a widely recognized, unmanaged
index of common stock prices.
According to the law of Maryland, under which the Company is incorporated, and
the Company's bylaws, the Company is not required to hold an annual meeting of
shareholders unless required to do so under the Investment Company Act of 1940.
Accordingly, the Company will not hold annual shareholder meetings unless
required to do so under the Act.
The Company will call a meeting of shareholders for the purpose of voting upon
the removal of a director or directors when requested in writing to do so by
record holders of at least 10% of the Fund's outstanding common shares, and in
connection with such meeting will comply with the provisions of section 16(c) of
the Investment Company Act of 1940 concerning assistance with a record
shareholder communication asking other record shareholders to join in that
request.
The Fund and the Adviser have entered into an Investment Services Agreement,
dated September 15, 1998 with Declaration Services Company ("DSC") wherein DSC
will provide substantially all administrative, accounting and transfer agent
services to the Fund. DSC will be paid for such services by the Adviser.
Declaration Distributors, Inc. ("DDI") has agreed to act as principal
underwriter for the Fund's shares, pursuant to a Distribution Agreement dated
September 15, 1998. The Agreement will expire on September 15, 2000, unless
renewed annually thereafter by the Fund's board of directors voting as a whole
and by a majority of the Fund's "uninterested" directors, as that term is
defined in the Investment Company Act of 1940. Either party to the Distribution
Agreement may terminate the agreement on 60 days written notice, and the
agreement will terminate automatically in the event of its assignment. DDI will
be paid for such services by the Adviser.
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<PAGE>
STOCKCAR STOCKS INDEX FUND(TM)
(A No-Load Fund)
Investment Adviser:
StockCar Stocks Advisers, LLC
256 Raceway Drive, Suite 11
Mooresville, North Carolina 28115
Custodian:
CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19101-7618
Distributor:
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Accounting, Transfer and Dividend Disbursing Agent:
Declaration Services Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
Independent Auditors:
Tait, Weller & Baker
8 Penn Center
Philadelphia, PA 19428
Legal Services:
The Law Offices of David D. Jones, P.C.
555 North Lane, Suite 6160
Conshohocken, PA 19428
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus, the statement of
additional information or the fund's official sales literature in connection
with the offering of shares of the fund, and if given or made, such other
information or representations must not be relied upon as having been authorized
by the fund.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated September 16, 1998
STOCKCAR STOCKS MUTUAL FUND, INC.
256 Raceway Drive
Mooresville, North Carolina 28115
877-223-3863
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of StockCar Stocks Mutual Fund, Inc., dated
September 16, 1998. You may obtain a copy of the Prospectus, free of charge, by
writing to StockCar Stocks Mutual Fund, Inc, c/o Declaration Service Company,
555 North Lane, Conshohocken, PA 19428 or by calling 877-223-3863.
TABLE OF CONTENTS
Investment Policies and Restrictions Custodian
Investment Adviser Transfer Agent
Directors and Officers Administration
Performance Information Distributor
Purchasing and Redeeming Shares Independent Accountants
Tax Information Independent Auditors Report
Portfolio Transactions Financial Statements
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objectives and the manner in which the Fund pursues its
investment objectives are generally discussed in the prospectus under the
captions "Investment Objectives and Policies" and "Risk Factors.", and all of
that information is incorporated herein by reference.
The Fund is a diversified Fund, meaning that the Fund limits the amount of its
assets invested in any one issuer and/or in any one industry, thereby reducing
the risk of loss incurred by that issuer or industry. The Fund normally will
invest at least 95% of its total net assets in the common stock of companies
comprising the StockCar Stocks Index(TM). Because the Index is itself highly
diverse, presently consisting of 52 companies representing ten of thirteen
generally recognized industry sectors, the Adviser does not anticipate any
diversification problems resulting from the Fund's investment policy. However,
if the Fund encounters a problem with respect to the diversification of its
investments, or for liquidity purposes, the Fund may invest up to 25% of its net
assets in other securities. The complete list of securities in which the Fund
may invest is listed below, along with any restrictions on such investments,
and, where necessary, a brief discussion of any risks unique to the particular
security.
Common Stocks. The Fund may invest in the common stock of the companies
comprising the Index. Common stock is issued by companies to raise cash for
business purposes and represents a proportionate equity interest in the issuing
companies. Therefore, the Fund participates in the success or failure of any
company in which it holds common stock. The market value of common stock can
fluctuate significantly, reflecting the business performance of the issuing
company, investor perception and general economic or financial market movements.
Smaller companies are especially sensitive to these factors. Despite the risk of
price volatility, however, common stocks historically have offered the greatest
potential for gain on investment, compared to other classes of financial assets.
Further, there are additional risks inherent in the stock car racing business,
and because the Fund will concentrate its investments in companies involved in
that sport, the Fund will be exposed to the risks associated with the sport to a
greater degree than will funds whose investment policies do not require or allow
such concentration., However, the majority of the companies comprising the Index
are large, well-established companies with a long history of growth and
performance and whose product lines and services are only indirectly related to
the stock car racing business, so the risks particular to the stock car racing
business are somewhat reduced. Under normal circumstances, the Fund will invest
at least 95% of its net assets in the common stock of companies comprising the
Index. This is a fundamental policy of the Fund, and may not be changed without
a vote of the majority of the outstanding shares of the Fund. A full listing of
the Fund's fundamental investment policies, as well as those investment policies
which may be changed by the Company's Board of Directors, may be found in the
SAI in the Section entitled, "Investment Policies and Restrictions".
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<PAGE>
Preferred Stock. The Fund may invest in the preferred stock of the companies
that comprise the Index, when the Adviser believes that such investments will
help the Fund achieve its investment objective of current income without
substantially and negatively affecting the Fund's investment objective of
capital growth. Preferred stock generally pays dividends at a specified rate and
generally has preference over common stock in the payments of dividends and the
liquidation of the issuer's assets. Dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Accordingly,
Shareholders may suffer a loss of value if dividends are not paid. The market
prices of preferred stocks are also sensitive to changes in interest rates and
in the issuer's creditworthiness. Accordingly, shareholders may experience a
loss of value due to adverse interest rate movements or a decline in the
issuer's credit rating. Finally, preferred stock is not included in the Index,
so any investment in such stock will cause the performance of the Fund to vary
from that of the index. For these reasons, the Fund will not invest more than 5%
of its net assets in preferred stock.
Foreign Securities. The Fund may invest in securities of foreign issuers which
are publicly traded on U.S. exchanges either directly or in the form of American
Depository Receipts (ADRs), but only if such foreign issuers are included in the
Index. The Fund will only invest in ADRs that are issuer sponsored. Sponsored
ADRs typically are issued by a U.S. bank or Company and evidence ownership of
underlying securities issued by a foreign corporation. Investments in foreign
securities involve greater risks compared to domestic investments. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about issuers than is
available in the reports and ratings published about companies in the U.S.
Additionally, foreign companies are not subject to uniform accounting, auditing
and financial reporting standards. Dividends and interest on foreign securities
may be subject to foreign withholding taxes. Such taxes may reduce the net
return to shareholders. Although the Fund intends to invest in securities of
foreign issuers domiciled in nations which the Adviser considers as having
stable and friendly governments, there is the possibility of expropriation,
confiscation, taxation, currency blockage or political or social instability
which could affect investments of foreign issuers domiciled in such nations.
Further, there is the risk of loss due to fluctuations in the value of a foreign
corporation's currency relative to the U.S. dollar.
Money Market Funds. The Fund may invest in securities issued by other registered
investment companies that invest in short-term debt securities (i.e., money
market fund) to maintain liquidity and for temporary and defensive purposes
only. As a shareholder of another registered investment company, the Fund would
bear its pro rata portion of that company's advisory fees and other expenses.
Such fees and expenses will be borne indirectly by the Fund's shareholders. The
Fund may invest in such instruments to the extent that such investments do not
exceed 5% of the Funds net assets and/or 3% of any investment company's
outstanding securities.
Debt Securities. The Fund may invest in U.S. Government debt securities
including Treasury Bills and short term notes, to maintain liquidity, for
periods not to exceed thirty days. U.S. Government securities include direct
obligations of the U.S. Government and obligations issued by U.S. Government
agencies and instrumentalities. The market value of such securities fluctuates
in response to interest rates and the creditworthiness of the issuer. In the
case of securities backed by the full faith and credit of the United States
Government, shareholders are only exposed to interest rate risk. The Fund will
not invest more than 5% of its net assets in such securities, and will not
invest in any such security with a maturity in excess of one year.
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<PAGE>
Repurchase Agreements. The Fund may invest a portion of its assets in repurchase
agreements ("Repos") with broker-dealers, banks and other financial institutions
to maintain liquidity, provided that the Fund's custodian always has possession
of the securities serving as collateral for the Repos or has proper evidence of
book entry receipt of said securities. In a Repo, the Fund purchases securities
subject to the seller's simultaneous agreement to repurchase those securities
from the Fund at a specified time (usually one day) and price. The repurchase
price reflects an agreed-upon interest rate during the time of investment. All
Repos entered into by the Fund must be collateralized by U.S. Government
Securities, the market values of which equal or exceed 102% of the principal
amount of the money invested by the Fund. If an institution with whom the Fund
has entered into a Repo enters insolvency proceedings, the resulting delay, if
any, in the Fund's ability to liquidate the securities serving as collateral
could cause the Fund some loss if the securities declined in value prior to
liquidation. To minimize the risk of such loss, the Fund will enter into Repos
only with institutions and dealers considered creditworthy, and will not invest
more than 5% of its net assets in such transactions, and for periods not to
exceed thirty days.
Cash Reserves. The Fund may, to meet liquidity needs, hold up to 25% of its net
assets in cash for periods not to exceed thirty days. The primary risk
associated with such a policy is that the Fund's performance will vary, perhaps
significantly, from the performance of the Index when the Fund holds such a high
percentage of cash reserves.
Futures and Options On Equity Securities and the Index. The Fund may enter into
futures contracts relating to the equity securities of companies included in the
Index, may write (i.e. sell) covered put and call options on such securities and
on the Index, and may purchase put and call options on such equity securities
and on the Index. Such options can include long-term options with durations of
up to three years. Although not normally anticipated to be widely employed, the
Fund may use futures and options to increase or decrease its exposure to the
effects of changes in security prices, to hedge securities held, to maintain
cash reserves while remaining fully invested, to facilitate trading, to reduce
transaction costs, or to seek higher investment returns when a futures or
options contract is priced more attractively than the underlying security or
index. The Fund may enter into these transactions so long as the value of the
underlying securities on which such options or futures contracts may be written
at any one time does not exceed 100% of the net assets of the Fund, and so long
as the initial margin required to enter into such contracts does not exceed ten
percent (5%)of the Fund's total net assets.
Risk Factors Associated With Futures And Options. The primary risks associated
with the use of options and futures are; (1) imperfect correlation between a
change in the value of the underlying security or index and a change in the
price of the option or futures contract, and (2) the possible lack of a liquid
secondary market for an options or futures contract and the resulting inability
of the Fund to close out the position prior to the maturity date. The risk of
imperfect correlation will be minimized by investing only in those contracts
whose price fluctuations are expected to resemble those of the Fund's underlying
securities. The risk that the Fund will be unable to close out a position will
be minimized by entering into such transactions only on national exchanges and
over-the-counter markets with an active and liquid secondary market.
Restricted And Illiquid Securities. The Fund will not invest more than 15% of
its net assets in securities that the Adviser determines, under the supervision
of the Board of Directors, to be illiquid and/or restricted. Illiquid securities
are securities that cannot be liquidated within seven (7) days at the
approximate price at which the Fund has valued the instrument. Also, the sale of
some illiquid and other types of securities may be subject to legal
restrictions. Because illiquid and restricted securities may present a greater
risk of loss than other types of securities, due to their lack of a ready
market, the Fund will not invest in such securities in excess of the limits set
forth above. You should be aware that in the event that more than 5% of the
Index is comprised of companies considered to be illiquid, the Fund will be
unable to precisely match its investments to the percentages contained in the
Index, and that inability may pose additional risks to the Fund, including the
risk that the performance of the Fund will vary from that of the Index.
3
<PAGE>
When-Issued Securities And Delayed-Delivery Transactions. The Fund may purchase
securities of companies comprising the Index on a when-issued basis, and it may
purchase or sell such securities for delayed-delivery. These transactions occur
when securities are purchased or sold by the Fund with payment and delivery
taking place at some future date. The Fund may enter into such transactions
when, in the Adviser's opinion, doing so may secure an advantageous yield and/or
price to the Fund that might otherwise be unavailable. The Fund has not
established any limit on the percentage of assets it may commit to such
transactions, but to minimize the risks of entering into these transactions, the
Fund will maintain a segregated account with its Custodian consisting of cash,
cash equivalents, U.S. Government Securities or other high-grade liquid debt
securities, denominated in U.S. dollars or non-U.S. currencies, in an amount
equal to the aggregate fair market value of its commitments to such
transactions. The Fund will not invest in such securities in excess of 5% of the
Fund's net assets.
Portfolio Turnover. The Fund has no operating history and therefore has no
reportable portfolio turnover. Higher portfolio turnover rates may result in
higher rates of net realized capital gains to the Fund, thus the portion of the
Fund's distributions constituting taxable gains may increase. In addition,
higher portfolio turnover activity can result in higher brokerage costs to the
Fund. The Fund anticipates that its annual portfolio turnover will be not
greater than 50%.
The complete list of the Fund's investment restrictions is as follows:
The Fund will not:
1. To the extent of 75% of its assets (valued at time of investment), invest
more than 5% of its assets in securities of any one issuer, except in
obligations of the United States Government and its agencies and
instrumentalities;
2. Acquire securities of any one issuer that at the time of investment (a)
represent more than 10% of the voting securities of the issuer or (b) have
a value greater than 10% of the value of the outstanding securities of the
issuer;
3. Borrow money except from banks for temporary or emergency purposes in
amounts not exceeding 5% of the value of the Fund's assets at the time of
borrowing;
4. Underwrite the distribution of securities of other issuers, or acquire
"restricted" securities that, in the event of a resale, might be required
to be registered under the Securities Act of 1933;
5. Make margin purchases or short sales of securities;
6. Invest in companies for the purpose of management or the exercise of
control;
7. Lend money (but this restriction shall not prevent the Fund from investing
in debt securities or repurchase agreements).
8. Acquire or retain any security issued by a company, an officer or director
of which is an officer or director of the Company or an officer, director
or other affiliated person of the Adviser or Distributor.
9. Invest in oil, gas or other mineral exploration or development programs, or
marketable securities of companies engaged in oil, gas or mineral
exploration, unless such companies are included in the Index;
4
<PAGE>
10. Purchase or sell real estate or real estate loans or real estate limited
partnerships, or invest in marketable securities of companies that invest
in real estate or interests in real estate, unless such issuers are
included in the Index.
11. Engage in the writing of put and call options, except that the Fund may
write (i.e. sell) covered put and call options, and may purchase put and
call options, on the equity securities of companies included in the Index
and on the Index itself. The Fund may enter into these transactions so long
as the value of the underlying securities on which such options contracts
may be written at any one time does not exceed 100% of the net assets of
the Fund, and so long as the initial margin required to enter into such
contracts does not exceed ten percent (10%)of the Fund's total net assets.
12. Purchase warrants on securities.
13. Issue senior securities.
14. Invest in commodities or in commodities futures or options.
15. Invest more than 5% of its assets (valued at time of investment) in
investments that do not include common stock of companies that are not
included in the StockCar Stocks Index, except for temporary liquidity
purposes.
Restrictions 1 through 15 listed above are fundamental policies, and may be
changed only with the approval of a "majority of the outstanding voting
securities" of the Fund as defined in the Investment Company Act of 1940.
The Fund has also adopted the following restrictions that may be changed by the
Board of Directors without shareholder approval:
The Fund may not:
a. Invest more than 5% of its net assets (valued at the time of investment) in
preferred stock;
b. Invest more than 5% of its net assets (valued at time of investment) in
securities that are not readily marketable;
c. Acquire securities of other investment companies except (a) by purchase in
the open market, where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission and
(b) where acquisition results from a dividend or merger, consolidation or
other reorganization.
d. purchase more than 3% of the voting securities of any one investment
company nor invest more than 5% of the Funds assets (valued at time of
investment) in all investment company securities purchased by the Fund;
e. Pledge, mortgage or hypothecate its assets, except for temporary or
emergency purposes and then to an extent not greater than 5% of its total
assets at cost;
f. Invest more than 5% of the Fund's assets (valued at time of investment) in
initial margin deposits of options or futures contracts;
g. Invest more than 5% of its net assets, in the aggregate, in any one or more
of the following investments: cash, money market instruments, debt
securities and/or repurchase agreements.
INVESTMENT ADVISER
Information on the Fund's investment adviser, StockCar Stocks Advisors, LLC, is
set forth in the prospectus under "Investment Adviser," and is incorporated
herein by reference.
The adviser is a North Carolina Limited Liability Company, and was registered as
a registered investment adviser with the Securities and Exchange Commission in
July, 1998. John P. Allen II is the Chief Executive Officer with a 64% interest
in the company. Robert T. Carter is Portfolio Manager. Mr. Carter is principally
responsible for the investment operations of the Fund.
5
<PAGE>
Mr. Carter, the Fund's portfolio manager, has over thirty-five years experience
managing funds for registered investment companies and private and institutional
clients. From 1996-1998, Mr. Carter was Head of Private Client Financial and
Advisory Services for McCauley Development Group in Chicago, Illinois. He was a
senior equity and fixed-income portfolio manager for Duff & Phelps Investment
Management in Chicago, Illinois from1989-1996, managing over $300 million in
mutual fund, institutional and private client assets. Mr. Carter has managed
private client, institutional and mutual fund assets since 1960. Mr. Carter is a
Chartered Financial Analyst and a graduate of The College of Wooster.
The Advisory Agreement provides that the adviser shall not be liable for any
loss suffered by the Fund or its shareholders as a consequence of any act or
omission in connection with services under the Agreement, except by reason of
the adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties under the Advisory Agreement.
The Advisory Agreement expires on September 15, 2000, but may be continued from
year to year so long as its continuance is approved annually (a) by the vote of
a majority of the Directors of the Fund who are not "interested persons" of the
Fund or the adviser cast in person at a meeting called for the purpose of voting
on such approval, and (b) by the Board of Directors as a whole or by the vote of
a majority (as defined in the Investment Company Act of 1940, the "1940 Act") of
the outstanding shares of the Fund. The Agreement will terminate automatically
in the event of its assignment (as defined in the 1940 Act).
DIRECTORS AND OFFICERS
The board of directors has overall responsibility for conduct of the Company's
affairs. The day-to-day operations of the Fund are managed by the Adviser,
subject to the bylaws of the Company and review by the Board of Directors. The
directors of the Company, including those directors who are also officers, are
listed below. The business address of each director is:
256 Raceway Drive, Suite 11
Mooresville, North Carolina 28115
Name, Age, Position Principal Occupation For the
with Fund Last Five Years
- --------------------------------------------------------------------------------
John P. Allen, II (Age 26)* Previously was Vice President of
Director, President of Fund, marketing for NationsBanc Advisers, Inc.
Chief Executive Officer of Adviser from 1994 to 1998. Chief Executive
Officer of StockCar Stocks Advisors,
LLC, the investment Adviser to StockCar
Stocks Index Fund, since May, 1998. BS
from Davidson College.
Kim Torrence (Age 27)* Previously was a broker in the direct
Director, Secretary of Fund sales unit of NationsBanc Investments,
Inc. from 1996 to 1998. President of
StockCar Stocks Advisors, LLC, the
investment Adviser to StockCar Stocks
Index Fund, since May, 1998. BA from
Stetson University, 1993.
6
<PAGE>
Pamela K. Clement (Age 44)* Managing Partner, Piedmont Venture
Director of Fund, Adviser Partners since 1996. Previously was
President, Chief Operating Officer and
Director of Sovereign Advisers,
co-founder, Chairman and Director of New
York based Prime Asset Management Corp.,
and was a senior officer at Smith Barney
and Lehman Brothers. She currently
serves on the Board of Directors of
American Aircarriers Support, Inc.
(NASDAQ: AIRS) and on the boards of a
number of private portfolio companies in
Piedmont's venture fund including
MotorTrax Interactive. MotorTrax
Interactive has licensing agreements
with NASCAR and dozens of top drivers,
including Dale Earnhardt and Jeff
Gordon, to broadcast the live
conversations between drivers and crew
via telephone and the Internet. Pam has
over 23 years experience as a venture
capitalist, Wall Street investment
professional and institutional money
manager
David M. Furr (Age 40)* An attorney since 1983 practicing with
Director of Fund, Adviser Gray, Layton, Kersh, Solomon, Sigmon,
Furr & Smith, P.A. in Gastonia, North
Carolina, David brings extensive NASCAR
experience and connections, having
represented the sale of Sports Image,
Inc., owned by Dale and Teresa
Earnhardt, to Action Performance
Companies, Inc. (NASDAQ: ACTN). He also
served as general counsel to the NASCAR
licensees MotorTrax Interactive and Wave
Media. David brings extensive Wall
Street contacts, having assisted in the
public offerings of Action Performance
and Wheels Sports Group (NASDAQ: RACN),
and most recently took American
Aircarriers Support, Inc. (NASDAQ: AIRS)
public.
Scott R. Poole (Age 26) Associate with NationsBank Capital
Director Investors in Charlotte, NC. since 1995.
Mr. Poole works in the principal
investment group which provides risk
capital for growth financing, buyouts,
acquisitions and recapitalizations.
Previously Mr. Poole was a Financial
Analyst with First Union Capital
Partners specializing in private equity
and subordinated debt financing
(1994-95). Graduated university of
Virginia in 1994.
Andrew Miller (Age 28) President of Research Solutions, a
Director quantitative research and consulting
firm specializing in the financial
services industry since 1997. Most
recently he served as an Investment and
Communication Consultant at Putnam
Investments in Boston (1196-97). Prior
to working at Putnam Investments, Mr.
Miller was employed as an Assistant Vice
President of Retirement Services
Marketing at NationsBanc Advisers,
Inc.(1992-96)
7
<PAGE>
Heather Wharton-Flynn (Age 31) Previously worked at the New York
Director offices of Chase Manhattan Bank and
United Bank of Switzerland in the
Institutional Index Management
Department. Ms. Wharton-Flynn also
served as Vice President of marketing
for NationsBanc Advisers, Inc.
(1992-97). Currently is President of
Pentimento, LLC in Charlotte, NC. since
1997.
* Indicates an "interested person" as defined in the Investment Company Act of
1940.
The Corporation was organized as a Maryland Corporation on May 18, 1998 (See the
Sections titled "Management of the Fund" and "General Information" in the Fund's
Prospectus). The table below sets forth the compensation anticipated to be paid
by the Corporation to each of the directors of the Corporation during the fiscal
year ending December 31, 1998.
Name of Director Compensation Pension Annual Total Compensation
from Corp Benefits Benefits Paid to Director
- --------------------------------------------------------------------------------
John P. Allen II $0.00 $0.00 $0.00 $0.00
Kim Torrence $0.00 $0.00 $0.00 $0.00
Pamela K. Clement $0.00 $0.00 $0.00 $0.00
David M. Furr $0.00 $0.00 $0.00 $0.00
Scott R Poole $0.00 $0.00 $0.00 $0.00
Andrew Miller $0.00 $0.00 $0.00 $0.00
Heather Wharton $0.00 $0.00 $0.00 $0.00
- -Flynn
The Adviser intends to purchase substantially all of the shares of the Fund
prior to the effective date of the Fund's registration and will be deemed
initially to control the Fund.
The Company will call a meeting of shareholders for the purpose of voting upon
the question of removal of a director or directors when requested in writing to
do so by record holders of at least 10% of the Fund's outstanding common shares.
The Corporation's bylaws contain procedures for the removal of directors by its
stockholders. At any meeting of stockholders, duly called and at which a quorum
is present, the stockholders may by the affirmative vote of the holders of a
majority of the votes entitled to be cast thereon, remove any director or
directors from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of the removed directors.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures. "Total Return" for a
period is the percentage change in value during the period of an investment in
Fund shares, including the value of shares acquired through reinvestment of all
dividends and capital gains distributions. "Average Annual Total Return" is the
average annual compounded rate of change in value represented by the Total
Return Percentage for the period.
8
<PAGE>
Average Annual Total Return is computed as follows: 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 shares at the end of the period
Yield. The Fund may advertise performance in terms of a 30-day yield quotation.
The 30-day yield quotation is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
6
Yield = 2[(a-b/cd + 1) - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the
period that they were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
The Fund imposes no sales charge and pays no distribution expenses. Income taxes
are not taken into account. The Fund's performance is a function of conditions
in the securities markets, portfolio management, and operating expenses.
Although information such as that shown above is useful in reviewing the Fund's
performance and in providing some basis for comparison with other investment
alternatives, it should not be used for comparison with other investments using
different reinvestment assumptions or time periods.
In sales literature, the Fund's performance may be compared with that of market
indices and other mutual funds. In addition to the above computations, the Fund
might use comparative performance as computed in a ranking determined by Lipper
Analytical Services, Morningstar, Inc., or that of another service.
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's prospectus under the
headings "Purchasing Shares" and "Redeeming Shares." All of that information is
incorporated herein by reference.
Redemptions will be made at net asset value. The Fund's net asset value is
determined on days on which the New York Stock Exchange is open for trading. For
purposes of computing the net asset value of a share of the Fund, securities
traded on security exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales price at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Securities for which quotations are not available and any other
assets are valued at a fair market value as determined in good faith by the
Adviser, subject to the review and supervision of the board of directors. The
price per share for a purchase order or redemption request is the net asset
value next determined after receipt of the order.
The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open. The Fund's share price or net asset value per share ("NAV") is
normally determined as of 4:00 p.m., New York time. The Fund's share price is
calculated by subtracting its liabilities from the closing fair market value of
its total assets and dividing the result by the total number of shares
outstanding on that day. Fund liabilities include accrued expenses and dividends
payable, and its total assets include the market value of the portfolio
securities as well as income accrued but not yet received. Since the Fund
generally does not charge sales or redemption fees, the NAV is the offering
price for shares of the Fund. For shares redeemed prior to being held for at
least six months, the redemption value is the NAV less a service fee equal to
0.50% of the NAV.
9
<PAGE>
TAX INFORMATION
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code so as to be relieved of federal income tax on its capital gains and
net investment income currently distributed to its shareholders. To qualify as a
regulated investment company, the Fund must, among other things, derive at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities,
or other income derived with respect to its business of investing in such stock
or securities.
If the Fund qualifies as a regulated investment company and distributes at least
90% of its net investment income, the Fund will not be subject to Federal income
tax on the income so distributed. However, the Fund would be subject to
corporate income tax on any undistributed income other than tax-exempt income
from municipal securities.
The Fund intends to distribute to shareholders, at least annually, substantially
all net investment income and any net capital gains realized from sales of the
Fund's portfolio securities. Dividends from net investment income and
distributions from any net realized capital gains are reinvested in additional
shares of the Fund unless the shareholder has requested in writing to have them
paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to the shareholder as ordinary income. Distributions of long-term
capital gains are taxable as long-term capital gains regardless of the length of
time shares in the Fund have been held. Distributions are taxable, whether
received in cash or reinvested in shares of the Fund.
Each shareholder is advised annually of the source of distributions for federal
income tax purposes. A shareholder who is not subject to federal income tax will
not be required to pay tax on distributions received.
If shares are purchased shortly before a record date for a distribution, the
shareholder will, in effect, receive a return of a portion of his investment,
but the distribution will be taxable to him even if the net asset value of the
shares is reduced below the shareholder's cost. However, for federal income tax
purposes the original cost would continue as the tax basis.
If a shareholder fails to furnish his social security or other tax
identification number or to certify properly that it is correct, the Fund may be
required to withhold federal income tax at the rate of 31% (backup withholding)
from dividend, capital gain and redemption payments to him. Dividend and capital
gain payments may also be subject to backup withholding if the shareholder fails
to certify properly that he is not subject to backup withholding due to the
under-reporting of certain income.
Taxation of the Shareholder. Taxable distributions generally are included in a
shareholder's gross income for the taxable year in which they are received.
However, dividends declared in October, November and December and made payable
to shareholders of record in such month will be deemed to have been received on
December 31st if paid by the Fund during the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below a
shareholder's cost basis, such distribution would be taxable to the shareholder
as ordinary income or as a long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares of the Fund just prior to a distribution. The price of such shares
include the amount of any forthcoming distribution so that those investors may
receive a return of investment upon distribution which will, nevertheless, be
taxable to them.
10
<PAGE>
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. Each investor should consult a tax Adviser regarding the
effect of federal, state, local, and foreign taxes on an investment in the Fund.
Dividends. A portion of the Fund's income may qualify for the dividends-received
deduction available to corporate shareholders to the extent that the Fund's
income is derived from qualifying dividends. Because the Fund may earn other
types of income, such as interest, income from securities loans, non-qualifying
dividends, and short-term capital gains, the percentage of dividends from the
Fund that qualifies for the deduction generally will be less than 100%. The Fund
will notify corporate shareholders annually of the percentage of Fund dividends
that qualifies for the dividend received deductions.
A portion of the Fund's dividends derived from certain U.S. Government
obligations may be exempt from state and local taxation. Short-term capital
gains are distributed as dividend income. The Fund will send each shareholder a
notice in January describing the tax status of dividends and capital gain
distributions for the prior year.
Capital Gain Distribution. Long-term capital gains earned by the Fund from the
sale of securities and distributed to shareholders are federally taxable as
long-term capital gains, regardless of the length of time shareholders have held
their shares. If a shareholder receives a long-term capital gain distribution on
shares of the Fund, and such shares are held six months or less and are sold at
a loss, the portion of the loss equal to the amount of the long-term capital
gain distribution will be considered a long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to shareholders as
dividends, not as capital gains.
PORTFOLIO TRANSACTIONS
The Fund will generally purchase and sell securities without regard to the
length of time the security has been held. Accordingly, it can be expected that
the rate of portfolio turnover may be substantial. The Fund expects that its
annual portfolio turnover rate will not exceed 50% under normal conditions.
However, there can be no assurance that the Fund will not exceed this rate, and
the portfolio turnover rate may vary from year to year.
High portfolio turnover in any year will result in the payment by the Fund of
above-average transaction costs and could result in the payment by shareholders
of above-average amounts of taxes on realized investment gains. Distributions to
shareholders of such investment gains, to the extent they consist of short-term
capital gains, will be considered ordinary income for federal income tax
purposes.
Decisions to buy and sell securities for the Fund are made by the Adviser
subject to review by the Corporation's Board of Directors. In placing purchase
and sale orders for portfolio securities for the Fund, it is the policy of the
Adviser to seek the best execution of orders at the most favorable price. In
selecting brokers to effect portfolio transactions, the determination of what is
expected to result in the best execution at the most favorable price involves a
number of largely judgmental considerations. Among these are the Adviser's
evaluation of the broker's efficiency in executing and clearing transactions.
Over-the-counter securities are generally purchased and sold directly with
principal market makers who retain the difference in their cost in the security
and its selling price. In some instances, the Adviser feels that better prices
are available from non-principal market makers who are paid commissions
directly.
CUSTODIAN
CoreStates Bank, 1345 Chestnut Street, Philadelphia PA 19101, acts as custodian
for the Fund. As such, CoreStates Bank holds all securities and cash of the
Fund, delivers and receives payment for securities sold, receives and pays for
securities purchased, collects income from investments and performs other
duties, all as
11
<PAGE>
directed by officers of the Company. CoreStates does not exercise any
supervisory function over management of the Fund, the purchase and sale of
securities or the payment of distributions to shareholders.
TRANSFER AGENT
Declaration Services Company ("DSC") acts as transfer, dividend disbursing, and
shareholder servicing agent for the Fund pursuant to a written agreement with
the Company and the Adviser, dated September 15, 1998 . Under the agreement, DSC
is responsible for administering and performing transfer agent functions,
dividend distribution, shareholder administration, and maintaining necessary
records in accordance with applicable rules and regulations.
For the services to be rendered as transfer agent, The Adviser shall pay
Declaration Service Company an annual fee, paid monthly, based on the average
net assets of the Fund, as determined by valuations made as of the close of each
business day of the month.
ADMINISTRATION
Declaration Service Company also acts as Administrator to the Fund pursuant to a
written agreement with the Company and Adviser, dated September 15, 1998. The
Administrator supervises all aspects of the operations of the Fund except those
performed by the Fund's investment adviser under the Fund's investment advisory
agreement. The Administrator is responsible for:
(a) calculating the Fund's net asset value
(b) preparing and maintaining the books and accounts specified in Rule 31a-1
and 31a-2 of the Investment Company Act of 1940
(c) preparing financial statements contained in reports to stockholders of the
Fund
(d) preparing the Fund's federal and state tax returns
(e) preparing reports and filings with the Securities and Exchange Commission
(f) preparing filings with state Blue Sky authorities
(g) maintaining the Fund's financial accounts and records
For the services to be rendered as Administrator, The Adviser shall pay
Declaration Service Company an annual fee, paid monthly, based on the average
net assets of the Fund, as determined by valuations made as of the close of each
business day of the month.
DISTRIBUTOR
Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken, PA
19428, will be the principal underwriter of the Fund's shares pursuant to a
written agreement with the Fund dated September 15, 1998. For its services to
the Fund, the Distributor will be paid a monthly fee equal to $20,000 annually.
Until the Fund reaches assets of $25 million, no fees will be paid to the
Distributor. The Distributor is a wholly owned subsidiary of Declaration
Holdings, a Delaware corporation. The Distributor specializes in providing
distribution services to small and medium-sized mutual funds. The Distributor is
affiliated with Declaration Service Company.
INDEPENDENT ACCOUNTANTS
Tait, Weller & Baker, 8 Penn Center, Philadelphia, PA have agreed to act as the
Fund's independent auditors for the first fiscal year.
12
<PAGE>
LEGAL COUNSEL
The Law Offices of David D. Jones, P.C., 555 North Lane, Conshohocken, PA,
19428, has passed on certain legal matters relating to this registration and
acts as legal counsel to the Company.
13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
StockCar Stocks Mutual Fund, Inc.
Mooresville, North Carolina
We have audited the accompanying statement of assets and liabilities of The
StockCar Stocks Mutual Fund, Inc. (consisting of the StockCar Stocks Mutual
Fund). This financial statement is the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit 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
financial statement presentation. We believe that our audit of the statement of
assets and liabilities 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
StockCar Stocks Mutual Fund as of September 9, 1998, in conformity with
generally accepted accounting principles.
Philadelphia, Pennsylvania
September 9, 1998
14
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
STOCKCAR STOCKS MUTUAL FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 9, 1998
- --------------------------------------------------------------------------------
ASSETS
Cash $100,000
--------
LIABILITIES --
--------
NET ASSETS $100,000
========
Shares of capital stock outstanding, unlimited amount authorized 6,667
========
Net asset value, offering and redemption price per share $ 15.00
========
At September 9, 1998 the components of net assets were as follows:
Paid-in capital $100,000
========
- --------------------------------------------------------------------------------
*SEE NOTES TO STATEMENT OF ASSETS AND LIABILITIES
15
<PAGE>
STOCKCAR STOCKS MUTUAL FUND
NOTE TO STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 9, 1998
- --------------------------------------------------------------------------------
(1) ORGANIZATION
StockCar Stocks Mutual Fund, Inc. (the "COMPANY"), is registered under the
Investment Company Act of 1940, as amended (the "1940 ACT"), as an open-end
management investment company and is authorized to issue shares of capital
stock. The Company currently offers shares of capital stock in one
portfolio, the StockCar Stocks Mutual Fund.
The Company was organized on May 18, 1998, and between that date and
September 9, 1998, the Company had no operations other than those relating
to organizational matters and the registration of its shares under
applicable securities laws.
