1933 Act Registration No. 333-53683
1940 Act Registration No. 811-8791
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [1]
Post-Effective Amendment No. ___
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Pre-Effective Amendment No. [1]
Post-Effective Amendment No. ___
STOCKCAR STOCKS MUTUAL FUND, INC.
(Exact name of registrant as specified in Charter)
256 Raceway Drive, Suite 11
Mooresville, North Carolina 28115
(Address of Principle Executive Offices and Zip Code)
704-662-7097
(Registrant's Telephone Number including Area Code)
Terence P. Smith
The Declaration Group
555 North Lane, Suite 6160
Conshohocken, PA 19428
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective as soon as practicable
after this Registration Statement becomes effective.
Calculation of Registration Fee:
The Registrant hereby declares, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and the Securities Act of 1933, that an indefinite number
of shares of beneficial interest, no par value, is being registered by this
Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall became
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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STOCKCAR STOCKS MUTUAL FUND
CROSS-REFERENCE SHEET
(As required by Rule 495)
Item No. on Form N-1A Caption or Subheading in Prospectus
or Statement of Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
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1. Cover Page. Cover Page
2. Synopsis. Investment Objectives and Policies;
The StockCar Stocks Index; Cover Page
3. Condensed Financial Information. Fees and Expenses
4. General Description General Information; Cover Page
of Registrant.
5. Management of the Fund. Management of the Fund; Investment
Adviser
5a.Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Management of the Fund; Tax
Securities. Considerations; Redeeming Shares
7. Purchase of Securities Being Purchasing Shares; Tax Considerations
Offered.
8. Redemption or Repurchase Redeeming Shares; Tax Considerations
9. Legal Proceedings Not Applicable
PART B. STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page. Cover Page
11. Table of Contents. Table of Contents
12. General Information and History Not covered in Statement of Additional
Information (covered under
Item 4 of Part A)
13. Investment Objectives and Investment Policies and
Policies. Restrictions
14. Management of the Fund. Investment Adviser; Directors and
Officers
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15. Control Persons and Principal Directors and Officers;
Holders of Securities. Investment Adviser
16. Investment Advisory and other Investment Adviser; Custodian;
Services. Transfer Agent; Administration
17. Brokerage Allocation. Portfolio Transactions
18. Capital Stock and Other Capital Stock
Securities.
19. Purchase, Redemption and Pricing Determination of Net Asset Values,
of Securities Being Offered
20. Tax Status. Tax Information
21. Underwriters. Distributor; Transfer Agent
And Transfer Agents
22. Calculations of Performance Data. Performance Information
23. Financial Statements Not Applicable. See item 32 of Part C.
PART C
Information required to be included in PART C is set forth under the appropriate
Item, so numbered, in PART C of the Registration Statement.
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PROSPECTUS
Dated August 15, 1998
StockCar Stocks Mutual Fund
256 Raceway Drive, Suite 11
Mooresville, North Carolina 28115
800-___-____
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 Mutual 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 under the ticker symbol "MPH".
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 August
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. None
Sales Load Imposed on Reinvested Dividends. None
Deferred Sales Load. None
Redemption Fees. 0.5%*
* 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)
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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%
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Total Fund Operating Expenses 1.41%
(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 $1,000 investment, assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period;
One Year Three Years
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$ 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 Advisor 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 Advisor 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 51 publicly traded companies, representing ten out of thirteen
generally recognized industry sectors and ranging in market capitalization from
$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 75% of its net assets
in the common stocks of the companies comprising the Index. For liquidity or
temporary and defensive purposes only, the Fund may also, from time to time,
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. You should be aware that any investment in such other securities 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 American
Stock Exchange under the ticker symbol, "MPH". 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 American Stock Exchange, under a licensing agreement with the
Advisor, 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.
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The Index was created by and is owned by the Advisor. The Advisor is responsible
for selecting the companies that will be included in or deleted from the Index,
based on the criteria described below, and will report such changes to the
American Stock Exchange. The American Stock Exchange will be responsible for
incorporating such changes, and publishing such changes to the public in a
timely manner. The Index presently is composed of 51 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 $170 million in
assets to $300 billion in assets. The Advisor 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.
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 Advisor 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 Advisor 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 Advisor has determined that such critical
and necessary products are limited to tires, gasoline and beverages for the
teams.
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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 Advisor
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 Advisor 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 Advisor is responsible
for monitoring the marketplace, identifying such eligible companies, and
reporting such companies to the American Stock Exchange 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 Advisor is responsible for monitoring the Index companies,
identifying any companies that cease to qualify, and reporting such companies to
the American Stock Exchange for deletion from the Index.
The Index was published By the American Stock Exchange beginning in August,
1998. However, for the purpose of demonstrating the Index's past performance
history, the Advisor recreated the performance of the Index from a beginning
date of January 1, 1993, using an Index value of 100.00 as of that date and
including in the Index those companies that qualified as Index companies in each
of the listed years, using the criteria discussed above. A beginning date of
January 1, 1993 was chosen in order to obtain a five year performance history
for the Index.
Year End
Year Index Value
1992 100.00
1993 109.36
1994 104.47
1995 134.71
1996 157.44
1997 199.55
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The table below shows how the Index would have performed, on an annual basis,
had it been applied to price movements of the companies included in the Index
for the listed time periods. Listed returns are annual returns and have been
calculated by the American Stock Exchange. The returns quoted below are returns
based on price movements only, and do not include any reinvested dividends or
capital gains. You should be aware that past performance of the Index is not an
indication of the future performance of the Fund, and that the future
performance of the Fund will vary from that of the Index.
Annual Returns
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
The Index 9.36% -4.47% 28.95% 16.87% 26.75%
As described above, the Fund will attempt to replicate the performance of the
Index by normally investing at least 75% 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 Advisor 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 and
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 Advisor will attempt to maintain a correlation
coefficient of at least .95% in performance between the Index and the Fund. This
means that the Advisor will attempt to replicate at least 95% of the Index's
performance. The Advisor will be responsible for tracking such performance,
under the supervision of the Board of Directors of the Company, and the Board
will take such actions as it deems appropriate in the event such correlation is
not maintained. The Advisor 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 Advisor will invest Fund assets
in a representative sample of Index securities and such other permissible
securities as the Advisor deems likely to most closely track Index performance.
You should be aware that there is no assurance that the Advisor 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,
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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 75% 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 Advisor 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
10% 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 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.
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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 10% 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 and for
temporary and defensive purposes only. 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 25% 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 and for temporary and defensive purposes only, 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 25% of its net
assets in such transactions.
Cash Reserves. The Fund may, to meet liquidity needs or for temporary defensive
purposes, 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.
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
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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 (10%)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 Advisor 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 Advisor'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.
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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 51 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 THE DECLARATION GROUP, 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.
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.
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<PAGE>
You may direct inquiries concerning the Fund to:
STOCKCAR STOCKS MUTUAL FUNDS, INC.
C/O THE DECLARATION GROUP
555 NORTH LANE, SUITE 6160
CONSHOHOCKEN, PA 19428
1-800-___-____
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 THE DECLARATION GROUP, 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, trustees, 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 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
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<PAGE>
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.
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
December, 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.
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<PAGE>
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.
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. You should consult a tax advisor 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 advisor and administrator. The
day-to-day operations of the Fund are delegated to the Advisor. 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 100,000,000 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.
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<PAGE>
INVESTMENT ADVISER
MANAGEMENT AGREEMENTS. StockCar Stocks Investment Advisors, LLC (the "Advisor")
has entered into an Investment Advisory Agreement (the "Advisory Agreement")
with the Fund to provide investment management services to the Fund. In
addition, the Advisor 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 President and Chief Executive
Officer of the Advisor. Robert T. Carter is Chief Investment Officer and
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 and the Services Agreement, the Fund will pay to the Adviser on the
last day of each month a fee equal to pay to the Adviser on the 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 Advisor 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.
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
Advisor in previous years. If the Advisor 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 Advisor
undertakes such actions.
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<PAGE>
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 Advisor is a newly formed
company. All of the computer programs purchased by the Advisor 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.
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<PAGE>
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 August 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 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 Advisor have entered into an Investment Services Agreement,
dated August 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 Advisor.
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<PAGE>
Declaration Distributors, Inc. ("DDI") has agreed to act as principal
underwriter for the Fund's shares, pursuant to a Distribution Agreement dated
August 15, 1998. The Agreement will expire on August 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 Advisor.
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STOCKCAR STOCKS MUTUAL FUND(TM)
(A No-Load Fund)
Investment Adviser:
StockCar Stocks Investment Advisors
434 Tyson Street
Charlotte, North Carolina 28209
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, LLC
8 Penn Center
Philadelphia, 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 August 15, 1998
STOCKCAR STOCKS MUTUAL FUND, INC.
256 Raceway Drive
Mooresville, North Carolina 28115
800-___-____
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
August 15, 1998. You may obtain a copy of the Prospectus, free of charge, by
writing to StockCar Stocks Mutual Fund, Inc, c/o The Declaration Group, 555
North Lane, Conshohocken, PA 19428 or by calling 800-___-____.
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 *
* to be filed by amendment
<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 75% 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 51 companies representing ten of thirteen
generally recognized industry sectors, the Advisor 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 or for temporary or defensive 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 75% 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 Advisor 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
10% of its net assets in preferred stock.
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<PAGE>
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 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.
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 10% 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 and for
temporary and defensive purposes only. 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 25% 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 and for temporary and defensive purposes only, 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 25% of its net
assets in such transactions.
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<PAGE>
Cash Reserves. The Fund may, to meet liquidity needs or for temporary defensive
purposes, 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.
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 (10%)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 Advisor 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 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 Advisor'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.
4
<PAGE>
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 Advisor 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;
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.
5
<PAGE>
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 25% of its assets (valued at time of investment) in
securities of issuers that are not included in the StockCar Stocks Index.
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 10% of its net assets (valued at the time of investment)
in preferred stock;
b. Invest more than 15% 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 10% 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 10% of the Fund's assets (valued at time of investment) in
initial margin deposits of options or futures contracts;
g. Invest more than 25% of its net assets 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.
6
<PAGE>
The adviser is a North Carolina Limited Liability Company, and was registered as
a registered investment advisor 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 Chief Investment officer and Portfolio
Manager. Mr Carter is principally responsible for the investment operations of
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.
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 August 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 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 Advisor,
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 Advisors, Inc.
from 1994 to 1998. Chief Executive
Officer of StockCar Stocks Advisors,
LLC, the investment advisor to StockCar
Stocks Mutual Fund, since May, 1998. BS
from Davidson College.
7
<PAGE>
Kim Torrance (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 advisor to StockCar Stocks
Mutual Fund, since May, 1998. BA from
Stetson University, 1993.
Pamela Clement (Age 43)* Partner in Piedmont Venture Partners
Director 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 44)* An attorney since 1983 practicing with
Director 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: WHELE),
and most recently took American
Aircarriers Support, Inc. (NASDAQ: AIRS)
public.
8
<PAGE>
Sean M. Jones (Age 35) A partner with the law firm Kennedy,
Director Covington, Lobdell & Hickman, L.L.P. in
Charlotte, NC. since 1993. Mr. Jones
specializes in corporate, securities,
mergers and acquisitions. Mr. Jones was
formerly with the firms of Webster &
Sheffield and Haythe & Curley in New
York City.
Scott R. Poole (Age 27) 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 financings, 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 Advisors,
Inc.(1992-96)
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 Sales Departments.
Ms. Wharton-Flynn also served as Vice
President of marketing for NationsBanc
Advisors, 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
9
<PAGE>
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 Torrance $ 0.00 $ 0.00 $ 0.00 $ 0.00
Pamela Clement $ 0.00 $ 0.00 $ 0.00 $ 0.00
David M. Furr $ 0.00 $ 0.00 $ 0.00 $ 0.00
Sean M. Jones $ 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
John P. Allen intends to purchase 10,000 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.
[n]
Average Annual Total Return is computed as follows: P(1+T) = ERV
10
<PAGE>
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
Advisor, 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.
11
<PAGE>
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.
The Fund has elected to be governed by rule 18f-1 under the Investment Company
Act of 1940, pursuant to which it is obligated to redeem shares solely in cash
up to the lesser of $250,000 or 1% of the net asset value of the Fund during any
90 day period for any one shareholder. Redemptions in excess of the above
amounts will normally be paid in cash, but may be paid wholly or partly by a
distribution in kind of securities.
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.
12
<PAGE>
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.
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. Each investor should consult a tax advisor 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.
13
<PAGE>
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 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 Advisor, dated August 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.
14
<PAGE>
For the services to be rendered as transfer agent, The Advisor 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 Services Company also acts as Administrator to the Fund pursuant to
a written agreement with the Company and Advisor, dated August 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 Advisor shall pay
Declaration Services 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 August 15, 1998.
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.
15
<PAGE>
PART C
OTHER INFORMATION
Item 24 Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements included in Part B
Independent Auditors Report *
Statement of Assets and Liabilities *
(b) Exhibits
1. Articles of Incorporation*
2. Bylaws of Registrant*
3. None [Not Applicable]
4. None [See Exhibit 1, Articles of Incorporation, Article IV]
5. Investment Advisory Agreement
6. Distribution Agreement
7. None [Not Applicable]
8 Custodian Agreement*
9 Operating Services Agreement
9.1 Investment Services Agreement
10. Opinion of Counsel
11. Consent of Independent Auditors *
12. None [Not Applicable]
13. Subscription Agreement*
13.1 New Account Application*
14. Individual Retirement Account Custodial Agreement*
15. None [Not Applicable]
16. None [Not Applicable]
17. Financial Data Schedule *
18. [Not Applicable]
* to be filed by amendment
Item 25 Persons Controlled by or under Common Control with Registrant.
- ------- --------------------------------------------------------------
No person is directly or indirectly controlled by, or under common control with
the Registrant.
Item 26 Number of Holders of Securities.
- ------- --------------------------------
As of the date of filing of this registration statement there were no record
holders of capital stock of registrant. Mr. John P. Allen intends to purchase
10,000 shares of the Fund prior to the effective ate of the Fund's registration
and will be deemed initially to control the Fund.
Item 27 Indemnification.
- ------- ----------------
Section 2-418 of the General Corporation Law of Maryland authorizes the
registrant to indemnify its directors and officers under specified
circumstances. Section 7 of Article VII of the bylaws of the registrant (exhibit
2 to the registration statement, which is incorporated herein by reference)
provides in effect that the registrant shall provide certain indemnification to
its directors and officers. In accordance with section 17(h) of the Investment
Company Act, this provision of the bylaws shall not protect any person against
any liability to the registrant or its shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
Item 28 Business and Other Connections of Investment Adviser.
- ------- -----------------------------------------------------
The Advisor is a new company. It has no other business or other connections.
Item 29 Principal Underwriters.
- ------- -----------------------
Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken, PA
will be the Fund's principal underwriter.
Item 30 Location of Accounts and Records.
- ------- ---------------------------------
Declaration Services Company.
555 North Lane, Suite 6160
Conshohocken, PA
Item 31 Management Services.
- ------- --------------------
Declaration Services Company
555 North Lane, Suite 6160
Conshohocken, PA
Item 32 Undertakings.
- ------- -------------
The Registrant will file a post effective amendment containing financial
statements which need not be certified, within four to six months from the
effective date of this registration statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of Charlotte and State of North Carolina on the 27th day of May, 1998.
StockCar Stocks Mutual Fund, Inc.
(Registrant)
By: /s/ John P. Allen, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
Name Title Date
/s/ Kim Torrance Director, Secretary July 29, 1998
/s/ Pamela Clement Director July 29, 1998
/s/ David M. Furr Director July 29, 1998
/s/ Sean M. Jones Director July 29, 1998
/s/ Scott R. Poole Director July 29, 1998
/s/ Andrew Miller Director July 29, 1998
/s/ Heather Wharton- Director July 29, 1998
Flynn
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
EX-99.B1 Registrant's Articles of Incorporation*
EX-99.B2 Registrant's Bylaws*
EX-99.B3 None
EX-99.B4 None [See Exhibit B.1, Articles of Incorporation, Article IV]
EX-99.B5 Investment Advisory Agreement with StockCar Stocks Investment
Advisors, LLC
EX-99.B6 Distribution Agreement with Declaration Distributors, Inc.
EX-99.B7 None
EX-99.B8 Custodian Agreement with CoreStates Bank*
EX-99.B9 Operating Services Agreement with StockCar Stocks Investment
Advisors, LLC
EX-99.B9.1 Investment Services Agreement with Declaration Services Company.
EX-99.B10 Opinion of Counsel
EX-99.B11 Consent of Independent Auditors *
Ex-99.B12 None
EX-99.B13 Subscription Agreement*
EX-99.B13.1 New Account Application*
EX-99.B14 Individual Retirement Account Agreement*
EX-99.B15 None
EX-99.B16 None
EX-99.B17 Financial Data Schedule *
EX-99.B18 None
* To be filed by amendment.
EXHIBIT EX-99.B5
INVESTMENT ADVISORY AGREEMENT
This Agreement is made and entered into as of the 15th of August, 1998, by
and between StockCar Stocks Mutual Fund, Inc., a Maryland corporation (the
"Fund"), and StockCar Stocks Advisors, Inc., a North Carolina limited liability
company (hereinafter referred to as "Adviser").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
authorized to issue shares representing interests in the StockCar Stocks Mutual
Fund (the "Portfolio"); and
WHEREAS, Adviser is registered as an investment adviser under the
Investment Advisor Act of 1940, and engages in the business of asset management;
and
WHEREAS, the Fund desires to retain Adviser to render certain investment
management services to the Fund and Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. OBLIGATIONS OF INVESTMENT ADVISER
(A) SERVICES. Adviser agrees to perform the following services (the
"Services") for the Fund:
(1) manage the investment and reinvestment of the Portfolio's assets;
(2) continuously review, supervise, and administer the investment
program of the Portfolio;
(3) determine, in its discretion, the securities to be purchased,
retained or sold (and implement those decisions);
(4) provide the Fund with records concerning Adviser's activities
which the Fund is required to maintain; and
(5) render regular reports to the Fund's officers and directors
concerning Adviser's discharge of the foregoing responsibilities.
Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the directors of the Fund and in compliance with
such policies as the directors may from time to time establish, and in
compliance with the objectives, policies, and limitations of the Portfolio set
forth in the Fund's prospectus, as amended from time to time, and with all
applicable laws and regulations. All Services to be furnished by Adviser under
this Agreement may be furnished through the medium of any directors, officers or
employees of Adviser or through such other parties as Adviser may determine from
time to time.
Adviser agrees, at its own expense or at the expense of one or more of its
affiliates, to render the Services and to provide the office space, furnishings,
equipment and personnel as may be reasonably required in the judgment of the
Board of Directors of the Fund to perform the Services on the terms and for the
compensation provided herein. Adviser shall authorize and permit any of its
officers, directors and employees, who may be elected as directors or officers
of the Fund, to serve in the capacities in which they are elected.
Except to the extent expressly assumed by Adviser herein and except to the
extent required by law to be paid by Adviser, the Fund shall pay all costs and
expenses in connection with its operation and organization.
(B) BOOKS AND RECORDS. All books and records prepared and maintained by
Adviser for the Fund under this Agreement shall be the property of the Fund and,
upon request therefor, Adviser shall surrender to the Fund such of the books and
records so requested.
2. PORTFOLIO TRANSACTIONS. Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities for
the Portfolio and is directed to use its best efforts to obtain the best net
results as described in the Fund's prospectus from time to time. Adviser may, in
its discretion, purchase and sell portfolio securities from and to brokers and
dealers who provide the Portfolio with research, analysis, advice and similar
services, and Adviser may pay to these brokers and dealers, in return for
research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, provided that Adviser determines in good faith that
such commission is reasonable in terms either of that particular transaction or
of the overall responsibility of Adviser to the Fund and its other clients and
that the total commission paid by the Fund will be reasonable in relation to the
benefits to the Portfolio over the long-term. Adviser will promptly communicate
to the officers and the directors of the Fund such information relating to
portfolio transactions as they may reasonably request.
3. COMPENSATION OF ADVISER. The Fund will pay to Adviser on the last day of
each month an annual fee equal to 0.50% of average net asset value of the
Portfolio, such fee to be computed daily based upon the net asset value of the
Portfolio as determined by a valuation made in accordance with the Fund's
procedure for calculating Portfolio net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. During any period when
the determination of a Portfolio's net asset value is suspended by the directors
of the Fund, the net asset value of a share of that Portfolio as of the last
business day prior to such suspension shall, for the purpose of this Paragraph
3, be deemed to be net asset value at the close of each succeeding business day
until it is again determined.
4. STATUS OF INVESTMENT ADVISER. The services of Adviser to the Fund are
not to be deemed exclusive, and Adviser shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby. Adviser
shall be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund. Nothing in this
Agreement shall limit or restrict the right of any director, officer or employee
of Adviser, who may also be a director, officer, or employee of the Fund, to
engage in any other business or to devote his or her time and attention in part
to the management or other aspects of any other business, whether of a similar
nature or a dissimilar nature.
5. PERMISSIBLE INTERESTS. Directors, agents, and stockholders of the Fund
are or may be interested in Adviser (or any successor thereof) as directors,
partners, officers, or stockholders, or otherwise; directors, partners,
officers, agents, and stockholders of Adviser are or may be interested in the
Fund as directors, stockholders or otherwise; and Adviser (or any successor) is
or may be interested in the Fund as a stockholder or otherwise.
6. LIABILITY OF INVESTMENT ADVISER. Adviser assumes no responsibility under
this Agreement other than to render the services called for hereunder in good
faith. Adviser shall not be liable for any error of judgment or for any loss
suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940) or a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of, or from
reckless disregard by it of its obligations and duties under, this Agreement.
7. TERM. This Agreement shall remain in effect until no later than August
15, 2000, and from year to year thereafter provided such continuance is approved
at least annually by (1) the vote of a majority of the Board of Directors of the
Fund or (2) a vote of a "majority" (as that term is defined in the Investment
Company Act of 1940) of the Fund's outstanding securities, provided that in
either event the continuance is also approved by the vote of a majority of the
directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, which vote must be cast in
person at meeting called for the purpose of voting on such approval; PROVIDED,
HOWEVER, that;
(a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon 120 days written notice to Adviser;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) Adviser may terminate this Agreement without payment of penalty on 120
days written notice to the Fund; and
(d) the terms of paragraph 6 of this Agreement shall survive the
termination of this Agreement.
8. NOTICES. Except as otherwise provided in this Agreement, any notice or
other communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
IF TO THE FUND: IF TO THE ADVISER:
StockCar Stocks Mutual Fund, Inc. StockCar Stocks Advisors, Inc.
256 Raceway Drive, Suite 11 256 Raceway Drive, Suite 11
Mooresville, NC 28115 Mooresville, NC 28115
Attention: John P. Allen, II Attention: John P. Allen, II
President President
9. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the Fund's outstanding
voting securities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and the year first written above.
STOCKCAR STOCKS MUTUAL FUND, INC. STOCKCAR STOCKS ADVISORS, INC.
By: By:
--------------------------- --------------------------
John P. Allen, II John P. Allen, II
President President
ATTEST: ATTEST:
- ------------------------------- -----------------------------
Secretary Secretary
[Corporate Seal] [Corporate Seal]
EXHIBIT EX-99.B6
DISTRIBUTION AGREEMENT
StockCar Stocks Mutual Fund, Inc.
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of the 15th day of
August, 1998 by and among The StockCar Stocks Mutual Funds, Inc. (the "Fund"), a
Maryland corporation, StockCar Stocks Advisors, LLC (the "Adviser"), a North
Carolina limited liability company, and Declaration Distributors, Inc. (the
"Distributor"), a Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and has registered its shares of common stock (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act") in one or more distinct
series of Shares (the "Portfolio" or "Portfolios");
WHEREAS, the Adviser has been appointed investment adviser to the Fund;
WHEREAS, the Distributor is a broker-dealer registered with the U.S.
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund, the Adviser and the Distributor desire to enter into
this Agreement pursuant to which the Distributor will provide distribution
services to the Portfolios of the Fund identified on Schedule A, as may be
amended from time to time, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund, the Adviser and the Distributor,
intending to be legally bound hereby, agree as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Fund hereby appoints the Distributor as
its exclusive agent for the distribution of the Shares, and the Distributor
hereby accepts such appointment under the terms of this Agreement. The Fund
shall not sell any Shares to any person except to fill orders for the Shares
received through the Distributor; provided, however, that the foregoing
exclusive right shall not apply: (i) to Shares issued or sold in connection with
the merger or consolidation of any other investment company with the Fund or the
acquisition by purchase or otherwise of all or substantially all of the assets
of any investment company or substantially all of the outstanding shares of any
such company by the Fund; (ii) to Shares which may be offered by the Fund to its
shareholders for reinvestment of cash distributed from capital gains or net
investment income of the Fund; or (iii) to Shares which may be issued to
shareholders of other funds who exercise any exchange privilege set forth in the
Fund's Prospectus. Notwithstanding any other provision hereof, the Fund may
terminate, suspend, or withdraw the offering of the Shares whenever, in its sole
discretion, it deems such action to be desirable, and the Distributor shall
process no further orders for Shares after it receives notice of such
termination, suspension or withdrawal.
2. FUND DOCUMENTS. The Fund has provided the Administrator with properly
certified or authenticated copies of the following Fund related documents in
effect on the date hereof: the Fund's organizational documents, including
Articles of Incorporation and by-laws; the Fund's Registration Statement on Form
N-1A, including all exhibits thereto; the Fund's most current Prospectus and
Statement of Additional Information; and resolutions of the Fund's Board of
Directors authorizing the appointment of the Distributor and approving this
Agreement. The Fund shall promptly provide to the Distributor copies, properly
certified or authenticated, of all amendments or supplements to the foregoing.
The Fund shall provide to the Distributor copies of all other information which
the Distributor may reasonably request for use in connection with the
distribution of Shares, including, but not limited to, a certified copy of all
financial statements prepared for the Fund by its independent public
accountants. The Fund shall also supply the Distributor with such number of
copies of the current Prospectus, Statement of Additional Information and
shareholder reports as the Distributor shall reasonably request.
3. DISTRIBUTION SERVICES. The Distributor shall sell and repurchase Shares
as set forth below, subject to the registration requirements of the 1933 Act and
the rules and regulations thereunder, and the laws governing the sale of
securities in the various states ("Blue Sky Laws"):
a. The Distributor, as agent for the Fund, shall sell Shares to the
public against orders therefor at the public offering price, which shall be the
net asset value of the Shares then in effect.
b. The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional Information.
The net asset value of the Shares shall be calculated by the Fund or by another
entity on behalf of the Fund. The Distributor shall have no duty to inquire into
or liability for the accuracy of the net asset value per Share as calculated.
c. Upon receipt of purchase instructions, the Distributor shall
transmit such instructions to the Fund or its transfer agent for registration of
the Shares purchased.
d. The Distributor shall also have the right to take, as agent for the
Fund, all actions which, in the Distributor's judgment, are necessary to effect
the distribution of Shares.
e. Nothing in this Agreement shall prevent the Distributor or any
"affiliated person" from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that the Distributor expressly agrees that it shall
not for its own account purchase any Shares of the Fund except for investment
purposes and that it shall not for its own account sell any such Shares except
for redemption of such Shares by the Fund, and that it shall not undertake
activities which, in its judgment, would adversely affect the performance of its
obligations to the Fund under this Agreement.
f. The Distributor, as agent for the Fund, shall repurchase Shares at
such prices and upon such terms and conditions as shall be specified in the
Prospectus.
4. DISTRIBUTION SUPPORT SERVICES. In addition to the sale and repurchase of
Shares, the Distributor shall perform the distribution support services set
forth on Schedule B attached hereto, as may be amended from time to time. Such
distribution support services shall include: Review of sales and marketing
literature and submission to the NASD; NASD recordkeeping; and quarterly reports
to the Fund's Board of Directors. Such distribution support services may also
include: fulfillment services, including telemarketing, printing, mailing and
follow-up tracking of sales leads; and licensing Adviser or Fund personnel as
registered representatives of the Distributor and related supervisory
activities.
5. REASONABLE EFFORTS. The Distributor shall use all reasonable efforts in
connection with the distribution of Shares. The Distributor shall have no
obligation to sell any specific number of Shares and shall only sell Shares
against orders received therefor. The Fund shall retain the right to refuse at
any time to sell any of its Shares for any reason deemed adequate by it.
6. COMPLIANCE. In furtherance of the distribution services being provided
hereunder, the Distributor and the Fund agree as follows:
a. The Distributor shall comply with the Rules of Conduct of the NASD
and the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares.
b. The Distributor shall require each dealer with whom the Distributor
has a selling agreement to conform to the applicable provisions of the Fund's
most current Prospectus and Statement of Additional Information, with respect to
the public offering price of the Shares.
c. The Fund agrees to furnish to the Distributor sufficient copies of
any agreements, plans, communications with the public or other materials it
intends to use in connection with any sales of Shares in a timely manner in
order to allow the Distributor to review, approve and file such materials with
the appropriate regulatory authorities and obtain clearance for use. The Fund
agrees not to use any such materials until so filed and cleared for use by
appropriate authorities and the Distributor.
d. The Distributor, at its own expense, shall qualify as a broker or
dealer, or otherwise, under all applicable Federal or state laws required to
permit the sale of Shares in such states as shall be mutually agreed upon by the
parties; provided, however that the Distributor shall have no obligation to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction if it
determines that registering or maintaining registration in such jurisdiction
would be uneconomical.
e. The Distributor shall not, in connection with any sale or
solicitation of a sale of the Shares, or make or authorize any representative,
service organization, broker or dealer to make, any representations concerning
the Shares except those contained in the Fund's most current Prospectus covering
the Shares and in communications with the public or sales materials approved by
the Distributor as information supplemental to such Prospectus.
7. EXPENSES. Expenses shall be allocated as follows:
a. The Fund and/or the Adviser shall bear the following expenses:
preparation, setting in type, and printing of sufficient copies of the
Prospectus and Statement of Additional Information for distribution to existing
shareholders; preparation and printing of reports and other communications to
existing shareholders; distribution of copies of the Prospectus, Statement of
Additional Information and all other communications to existing shareholders;
registration of the Shares under the Federal securities laws; qualification of
the Shares for sale in the jurisdictions mutually agreed upon by the Fund and
the Distributor; transfer agent/shareholder servicing agent services; supplying
information, prices and other data to be furnished by the Fund under this
Agreement; and any original issue taxes or transfer taxes applicable to the sale
or delivery of the Shares or certificates therefor.
b. The Adviser shall pay all other expenses incident to the sale and
distribution of the Shares sold hereunder, including, without limitation:
printing and distributing copies of the Prospectus, Statement of Additional
Information and reports prepared for use in connection with the offering of
Shares for sale to the public; advertising in connection with such offering,
including public relations services, sales presentations, media charges,
preparation, printing and mailing of advertising and sales literature; data
processing necessary to support a distribution effort; distribution and
shareholder servicing activities of broker-dealers and other financial
institutions; filing fees required by regulatory authorities for sales
literature and advertising materials; any additional out-of-pocket expenses
incurred in connection with the foregoing and any other costs of distribution.
8. COMPENSATION. For the distribution and distribution support services
provided by the Distributor pursuant to the terms of the Agreement, the Adviser
shall pay to the Distributor the compensation set forth in Schedule A attached
hereto, which schedule may be amended from time to time. The Adviser shall also
reimburse the Distributor for its out-of-pocket expenses related to the
performance of its duties hereunder, including, without limitation,
telecommunications charges, postage and delivery charges, record retention
costs, reproduction charges and traveling and lodging expenses incurred by
officers and employees of the Distributor. The Fund shall pay the Distributor's
monthly invoices for distribution fees and out-of-pocket expenses within five
days of the respective month-end. If this Agreement becomes effective subsequent
to the first day of the month or terminates before the last day of the month,
the Fund shall pay to the Distributor a distribution fee that is prorated for
that part of the month in which this Agreement is in effect. All rights of
compensation and reimbursement under this Agreement for services performed by
the Distributor as of the termination date shall survive the termination of this
Agreement.
9. USE OF DISTRIBUTOR'S NAME. The Fund shall not use the name of the
Distributor or any of its affiliates in the Prospectus, Statement of Additional
Information, sales literature or other material relating to the Fund in a manner
not approved prior thereto in writing by the Distributor; provided, however,
that the Distributor shall approve all uses of its and its affiliates' names
that merely refer in accurate terms to their appointments or that are required
by the Securities and Exchange Commission (the "SEC") or any state securities
commission; and further provided, that in no event shall such approval be
unreasonably withheld.
10. USE OF FUND'S NAME. Neither the Distributor nor any of its affiliates
shall use the name of the Fund or material relating to the Fund on any forms
(including any checks, bank drafts or bank statements) for other than internal
use in a manner not approved prior thereto by the Fund; provided, however, that
the Fund shall approve all uses of its name that merely refer in accurate terms
to the appointment of the Distributor hereunder or that are required by the SEC
or any state securities commission; and further provided, that in no event shall
such approval be unreasonably withheld.
11. LIABILITY OF DISTRIBUTOR. The duties of the Distributor shall be
limited to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Distributor hereunder. The Distributor shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which this Agreement
relates, except to the extent of a loss resulting from willful misfeasance, bad
faith or negligence, or reckless disregard of its obligations and duties under
this Agreement. As used in this Section 9 and in Section 10 (except the second
paragraph of Section 10), the term "Distributor" shall include directors,
officers, employees and other agents of the Distributor.
12. INDEMNIFICATION OF DISTRIBUTOR. The Fund shall indemnify and hold
harmless the Distributor against any and all liabilities, losses, damages,
claims and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and investigation expenses incident thereto) which the
Distributor may incur or be required to pay hereafter, in connection with any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which the Distributor may be involved as
a party or otherwise or with which the Distributor may be threatened, by reason
of the offer or sale of the Fund shares prior to the effective date of this
Agreement.
Any director, officer, employee, shareholder or agent of the Distributor
who may be or become an officer, Director, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting on any business of the
Fund (other than services or business in connection with the Distributor's
duties hereunder), to be rendering such services to or acting solely for the
Fund and not as a director, officer, employee, shareholder or agent, or one
under the control or direction of the Distributor, even though receiving a
salary from the Distributor.
The Fund agrees to indemnify and hold harmless the Distributor, and each
person, who controls the Distributor within the meaning of Section 15 of the
1933 Act, or Section 20 of the Securities Exchange Act of 1934, as amended
("1934 Act"), against any and all liabilities, losses, damages, claims and
expenses, joint or several (including, without limitation, reasonable attorneys'
fees and disbursements and investigation expenses incident thereto) to which
they, or any of them, may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other Federal or state laws or regulations, at common law or
otherwise, insofar as such liabilities, losses, damages, claims and expenses (or
actions, suits or proceedings in respect thereof) arise out of or relate to any
untrue statement or alleged untrue statement of a material fact contained in a
Prospectus, Statement of Additional Information, supplement thereto, sales
literature or other written information prepared by the Fund and provided by the
Fund to the Distributor for the Distributor's use hereunder, or arise out of or
relate to any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Distributor (or any person controlling the Distributor) shall
not be entitled to indemnity hereunder for any liabilities, losses, damages,
claims or expenses (or actions, suits or proceedings in respect thereof)
resulting from (i) an untrue statement or omission or alleged untrue statement
or omission made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by the Distributor specifically for
use therein or (ii) the Distributor's own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations in the
performance of this Agreement.
The Distributor agrees to indemnify and hold harmless the Fund, and each
person who controls the Fund within the meaning of Section 15 of the 1933 Act,
or Section 20 of the 1934 Act, against any and all liabilities, losses, damages,
claims and expenses, joint or several (including, without limitation reasonable
attorneys' fees and disbursements and investigation expenses incident thereto)
to which they, or any of them, may become subject under the 1933 Act, the 1934
Act, the 1940 Act or other Federal or state laws, at common law or otherwise,
insofar as such liabilities, losses, damages, claims or expenses arise out of or
relate to any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or Statement of Additional Information or any
supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished in writing to the Fund by the Distributor specifically for
use therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the party from whom indemnification is sought
("Indemnitor") of a written assertion or claim of any threatened or pending
legal proceeding which may be subject to indemnity under this Section; provided,
however, that failure to notify the Indemnitor of such written assertion or
claim shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume the
defense of any suit brought to enforce a claim subject to this Indemnity and
such defense shall be conducted by counsel chosen by the Indemnitor and
satisfactory to the Indemnitee; provided, however, that if the defendants
include both the Indemnitee and the Indemnitor, and the Indemnitee shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor
("conflict of interest"), the Indemnitor shall not have the right to elect to
defend such claim on behalf of the Indemnitee, and the Indemnitee shall have the
right to select separate counsel to defend such claim on behalf of the
Indemnitee. In the event that the Indemnitor elects to assume the defense of any
suit pursuant to the preceding sentence and retains counsel satisfactory to the
Indemnitee, the Indemnitee shall bear the fees and expenses of additional
counsel retained by it, except for reasonable investigation costs which shall be
borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the
defense of a claim, (ii) elects to assume the defense of a claim but chooses
counsel that is not satisfactory to the Indemnitee or (iii) has no right to
assume the defense of a claim because of a conflict of interest, the Indemnitor
shall advance or reimburse the Indemnitee, at the election of the Indemnitee,
reasonable fees and disbursements of any counsel retained by Indemnitee,
including reasonable investigation costs.
13. DUAL EMPLOYEES. The Adviser agrees that only its employees who are
registered representatives of the Distributor ("dual employees") shall offer or
sell Shares of the Portfolios and further agrees that the activities of any such
employees as registered representatives of the Distributor shall be limited to
offering and selling Shares. If there are dual employees, one employee of the
Adviser shall register as a principal of the Distributor and assist the
Distributor in monitoring the marketing and sales activities of the dual
employees. The Adviser shall maintain errors and omissions and fidelity bond
insurance policies providing reasonable coverage for its employees activities
and shall provide copies of such policies to the Distributor. The Adviser shall
indemnify and hold harmless the Distributor against any and all liabilities,
losses, damages, claims and expenses (including reasonable attorneys' fees and
disbursements and investigation costs incident thereto) arising from or related
to the Adviser's employees' activities as registered representatives of the
Distributor, including, without limitation, any and all such liabilities,
losses, damages, claims and expenses arising from or related to the breach by
such dual employees of any rules or regulations of the NASD or SEC.
14. FORCE MAJEURE. The Distributor shall not be liable for any delays or
errors occurring by reason of circumstances not reasonably foreseeable and
beyond its control, including, but not limited, to acts of civil or military
authority, national emergencies, work stoppages, fire, flood, catastrophe, acts
of God, insurrection, war, riot or failure of communication or power supply. In
the event of equipment breakdowns which are beyond the reasonable control of the
Distributor and not primarily attributable to the failure of the Distributor to
reasonably maintain or provide for the maintenance of such equipment, the
Distributor shall, at no additional expense to the Fund, take reasonable steps
in good faith to minimize service interruptions, but shall have no liability
with respect thereto.
15. SCOPE OF DUTIES. The Distributor and the Fund shall regularly consult
with each other regarding the Distributor's performance of its obligations and
its compensation under the foregoing provisions. In connection therewith, the
Fund shall submit to the Distributor at a reasonable time in advance of filing
with the SEC copies of any amended or supplemented Registration Statement of the
Fund (including exhibits) under the 1940 Act and the 1933 Act, and at a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the Fund.
Any change in such materials that would require any change in the Distributor's
obligations under the foregoing provisions shall be subject to the Distributor's
approval. In the event that a change in such documents or in the procedures
contained therein increases the cost or burden to the Distributor of performing
its obligations hereunder, the Distributor shall be entitled to receive
reasonable compensation therefore.
16. DURATION. This Agreement shall become effective as of the date first
above written, and shall continue in force for two years from that date and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the Directors of the Fund, or by the
vote of a majority of the outstanding voting securities of the Fund, and (ii)
the vote of a majority of those Directors of the Fund who are not interested
persons of the Fund, and who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on the approval.
17. TERMINATION. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the
continuance of the Agreement after the initial two year term as set
forth in Section 16 above.
c. This Agreement shall terminate at any time upon a vote of the majority
of the Directors who are not interested persons of the Fund or by a
vote of the majority of the outstanding voting securities of the Fund,
upon not less than 60 days prior written notice to the Distributor.
d. The Distributor may terminate this Agreement upon not less than 60
days prior written notice to the Fund.
Upon the termination of this Agreement, the Fund shall pay to the
Distributor such compensation and out-of-pocket expenses as may be payable for
the period prior to the effective date of such termination. In the event that
the Fund designates a successor to any of the Distributor's obligations
hereunder, the Distributor shall, at the expense and direction of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by the Distributor pursuant to the foregoing
provisions.
Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 21, 22, 24, 25 and 26 shall
survive any termination of this Agreement.
18. AMENDMENT. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Distributor and the Fund and shall not become effective
unless its terms have been approved by the majority of the Directors of the Fund
or by a "vote of majority of the outstanding voting securities" of the Fund and
by a majority of those Directors who are not "interested persons" of the Fund or
any party to this Agreement.
19. NON-EXCLUSIVE SERVICES. The services of the Distributor rendered to the
Fund are not exclusive. The Distributor may render such services to any other
investment company.
20. DEFINITIONS. As used in this Agreement, the terms "vote of a majority
of the outstanding voting securities," "assignment," "interested person" and
"affiliated person" shall have the respective meanings specified in the 1940 Act
and the rules enacted thereunder as now in effect or hereafter amended.
21. CONFIDENTIALITY. The Distributor shall treat confidentially and as
proprietary information of the Fund all records and other information relating
to the Fund and prior, present or potential shareholders and shall not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by the Fund.
22. NOTICE. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 20 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to the Fund:
StockCar Stocks Mutual Fund, Inc.
256 Raceway Drive, Suite 11
Mooresville, NC 28115
Attention: John P. Allen, II, President
(b) if to the Adviser:
StockCar Stocks Advisors, LLC.
256 Raceway Drive, Suite 11
Mooresville, NC 28115
Attention: John P. Allen, II, President
(c) if to the Distributor:
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Attn: Terence P. Smith, President
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
24. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be amended from
time to time.
25. ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
26. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
StockCar Stocks Mutual Fund, Inc.
By:
--------------------------------
John P. Allen, II, President
StockCar Stocks Advisors, LLC
By:
--------------------------------
John P. Allen, II, President
Declaration Distributors, Inc.
By:
--------------------------------
Terence P. Smith, President
<PAGE>
SCHEDULE A
StockCar Stocks Mutual Fund, Inc.
Portfolio and Fee Schedule
Portfolios covered by Distribution Agreement:
StockCar Stocks Mutual Fund
Fees for distribution and distribution support services on behalf of the
Portfolios:
Included in fee schedule "Investment Company Services Agreement",
Schedule B, Dated as of August 15, 1998.
<PAGE>
SCHEDULE B
Distribution Support Services
1. Provide national broker dealer for Fund registration.
2. Review and submit for approval to the NASD all advertising and promotional
materials.
3. Maintain all books and records required by the NASD.
4. Subject to approval of Distributor, license personnel as registered
representatives of the Distributor to distribute no load fund shares
sponsored by the Adviser.
5. Telemarketing services (additional cost- to be negotiated).
6. Fund fulfillment services, including sampling prospective shareholders
inquiries and related mailings (additional cost- to be negotiated).
Exhibit B-99.B9
StockCar Stocks Mutual Fund, Inc.
Operating Services Agreement
This Agreement is made and entered into as of the 15th of August, 1998, by
and between StockCar Stocks Mutual Fund, Inc., a Maryland corporation (the
"Fund"), and StockCar Stocks Investment Advisors, LLC., a North Carolina limited
liability company (hereinafter referred to as "Manager").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
authorized to issue shares representing interests in StockCar Stocks Mutual Fund
(the "Portfolio"); and
WHEREAS, Manager is registered as an investment advisor under the
Investment Advisors Act of 1940, and engages in the business of asset management
and the provision of certain other administrative and recordkeeping services in
connection therewith; and
WHEREAS, the Fund wishes to engage Manager, to provide, or arrange for the
provision of, certain operational services which are necessary for the
day-to-day operations of the Portfolio in the manner and on the terms and
conditions hereinafter set forth, and Manager wishes to accept such engagement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Manager agree as follows:
1. Obligations of Manager
(a) Services. The Fund hereby retains Manager to provide, or, upon
receipt of written approval of the Fund, arrange for other companies to provide,
the following services to the Portfolio in the manner and to the extent that
such services are reasonably necessary for the operation of the Portfolio
(collectively, the "Services"):
(1) accounting services and functions, including costs and expenses of any
independent public accountants;
(2) non-litigation related legal and compliance services, including the
expenses of maintaining registration and qualification of the Fund and
the Portfolio under federal, state and any other applicable laws and
regulations;
(3) dividend disbursing agent, dividend reinvestment agent, transfer
agent, and registrar services and functions (including answering
inquiries related to shareholder Portfolio accounts);
(4) custodian and depository services and functions;
(5) distribution, marketing, and/or underwriting services;
(6) independent pricing services;
(7) preparation of reports describing the operations of the Portfolio,
including the costs of providing such reports to broker-dealers,
financial institutions and other organizations which render services
and assistance in connection with the distribution of shares of the
Portfolio;
(8) sub-accounting and recordkeeping services and functions (other than
those books and records required to be maintained by Manager under the
Investment Advisory Agreement between the Fund and Manager dated
August 15, 1998), including maintenance of shareholder records and
shareholder information concerning the status of their Portfolio
accounts by investment advisors, broker-dealers, financial
institutions, and other organizations on behalf of Manager;
(9) shareholder and board of directors communication services, including
the costs of preparing, printing and distributing notices of
shareholders' meetings, proxy statements, prospectuses, statements of
additional information, Portfolio reports, and other communications to
the Fund's Portfolio shareholders, as well as all expenses of
shareholders' and board of directors' meetings, including the
compensation and reimbursable expenses of the directors of the Fund;
(10) other day-to-day administrative services, including the costs of
designing, printing, and issuing certificates representing shares of
the Portfolio, and premiums for the fidelity bond maintained by the
Fund pursuant to Section 17(g) of the Act and rules promulgated
thereunder (except for such premiums as may be allocated to third
parties, as insureds thereunder).
(b) Exclusions from Service. Notwithstanding the provisions of
Paragraph 1(a) above, the Services shall not include and Manager will not be
responsible for any of the following:
(1) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund or the Portfolio in connection with securities
transactions to which the Fund or the Portfolio is a party or in
connection with securities owned by the Fund or the Portfolio;
(2) the interest on indebtedness, if any, incurred by the Fund or the
Portfolio;
(3) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or the Portfolio
to federal, state, county, city, or other governmental agents;
(4) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund or the Portfolio;
and
(5) any other extraordinary expense of the Fund or Portfolio.
(c) Books and Records. All books and records prepared and maintained
by Manager for the Fund under this Agreement shall be the property of the Fund
and, upon request therefor, Manager shall surrender to the Fund such of the
books and records so requested.
(d) Staff and Facilities. Manager assumes and shall pay for
maintaining the staff, personnel, space, equipment and facilities necessary to
perform its obligations under this Agreement.
2. Obligations of the Fund
(a) Fee. The Fund will pay to Manager on the last day of each month an
annual fee equal to 0.91% of average net asset of the Portfolio, such fee to be
computed daily based upon the net asset value of the Portfolio as determined by
a valuation made in accordance with the Fund's procedure for calculating
Portfolio net asset value as described in the Fund's Prospectus and/or Statement
of Additional Information. During any period when the determination of a
Portfolio's net asset value is suspended by the directors of the Fund, the net
asset value of a share of that Portfolio as of the last business day prior to
such suspension shall, for the purpose of this Paragraph 2(a), be deemed to be
the net asset value at the close of each succeeding business day until it is
again determined.
(b) Information. The Fund will, from time to time, furnish or
otherwise make available to Manager such information relating to the business
and affairs of the Portfolio as Manager may reasonably require in order to
discharge its duties and obligations hereunder.
3. Term. This Agreement shall remain in effect until no later than August
15, 2000, and from year to year thereafter provided such continuance is approved
at least annually by (1) the vote of a majority of the Board of Directors of the
Fund or (2) a vote of a "majority" (as that term is defined in the Investment
Company Act of 1940) of the Fund's outstanding securities, provided that in
either event the continuance is also approved by the vote of a majority of the
directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, which vote must be cast in
person at meeting called for the purpose of voting on such approval; PROVIDED,
HOWEVER, that;
(e) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon 120 days written notice to Manager;
(f) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(g) Manager may terminate this Agreement without payment of penalty on 120
days written notice to the Fund; and
(h) the terms of paragraph 3 of this Agreement shall survive the
termination of this Agreement.
4. Notices. Except as otherwise provided in this Agreement, any notice or
other communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
If to the Fund: If to the Manager:
StockCar Stocks Mutual Fund, Inc. StockCar Stocks Advisors, LLC
256 Raceway Drive, Suite 11 256 Raceway Drive, Suite 11
Mooresville, NC 28115 Mooresville, NC 28115
Attention: John P. Allen, II Attention: John P. Allen, II
President President
5. Miscellaneous
(a) Performance Review. Manager will permit representatives of the
Fund, including the Fund's independent auditors, to have reasonable access to
the personnel and records of Manager in order to enable such representatives to
monitor the quality of services being provided and the level of fees due Manager
pursuant to this Agreement. In addition, Manager shall promptly deliver to the
board of directors of the Fund such information as may reasonably be requested
from time to time to permit the board of directors to make an informed
determination regarding continuation of this Agreement and the payments
contemplated to be made hereunder.
(b) Choice of Law. This Agreement shall be construed in accordance
with the laws of the State of North Carolina and the applicable provisions of
the Act. To the extent the applicable law of the State of Maryland or any of the
provisions herein conflict with the applicable provisions of the Act, the latter
shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
ATTEST: StockCar Stocks Mutual Fund, Inc.
By:
- ----------------------------------- --------------------------------
Secretary John P. Allen, II, President
StockCar Stocks Advisors, LLC
By:
- ----------------------------------- --------------------------------
Secretary John P. Allen, II, President
Exhibit EX-99.B9.1
INVESTMENT COMPANY SERVICES AGREEMENT
STOCKCAR STOCKS MUTUAL FUND, INC.
This AGREEMENT, dated as of the 15th day of August, 1998 , made by and
between StockCar Stocks Mutual Fund, Inc.("Fund"), a corporation operating as an
open-end, management investment company registered under the Investment Company
Act of 1940, as amended (the "Act"), duly organized and existing under the laws
of the State of Maryland, StockCar Stocks Advisors, LLC ("Adviser"), a limited
liability company duly organized under the laws of the State of North Carolina,
and Declaration Service Company ("Declaration"), a corporation duly organized
under the laws of the Commonwealth of Pennsylvania (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized by its Articles of Incorporation and By-
Laws to issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule "C" attached hereto and
which Schedule "C" may be amended from time to time by mutual agreement of the
Fund and Declaration; and
WHEREAS, the Fund and the Adviser have entered into an "Operating Services
Agreement" dated as of August 15, 1998, authorizing the Adviser to provide
certain investment company services to the Fund, and which further authorizes
the Adviser to enter into this Investment Company Services Agreement (hereafter
"Agreement") on behalf of the Fund; and
WHEREAS, the Parties desire to enter into an agreement whereby Declaration
will provide the services to the Fund as specified herein and set forth in
particular in Schedule "A" which is attached hereto and made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
GENERAL PROVISIONS
SECTION 1. APPOINTMENT.
The Adviser hereby appoints Declaration as servicing agent to the Fund and
Declaration hereby accepts such appointment. In order that Declaration may
perform its duties under the terms of this Agreement, the Board of Directors of
the Fund shall direct the officers, investment adviser, legal counsel,
independent accountants and custodian of the Fund to cooperate fully with
Declaration and, upon request of Declaration, to provide such information,
documents and advice relating to the Fund which Declaration requires to execute
its responsibilities hereunder. In connection with its duties, Declaration shall
be entitled to rely, and will be held harmless by the Fund when acting in
reasonable reliance, upon any instruction, advice or document relating to the
Fund as provided to Declaration by any of the aforementioned persons on behalf
of the Fund. All fees charged by any such persons acting on behalf of the Fund
will be deemed an expense of the Fund.
Any services performed by Declaration under this Agreement will conform to
the requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended,
and any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Articles of Incorporation and the by-laws as
amended from time to time and delivered to Declaration;
(d) any policies and determinations of the Board of Directors of the Fund
which are communicated to Declaration; and
(e) the policies of the Fund as reflected in the Fund's registration
statement as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent Declaration or any officer thereof
from providing the same or comparable services for or with any other person,
firm or corporation. While the services supplied to the Fund may be different
than those supplied to other persons, firms or corporations, Declaration will
provide the Fund equitable treatment in supplying services. The Fund recognizes
that it will not receive preferential treatment from Declaration as compared
with the treatment provided to other Declaration clients.
SECTION 2. DUTIES AND OBLIGATIONS OF DECLARATION.
Subject to the provisions of this Agreement, Declaration will provide to
the Fund the specific services as set forth in Schedule "A" attached hereto.
SECTION 3. DEFINITIONS. For purposes of this Agreement:
"CERTIFICATE" will mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be signed
on behalf of the Fund by any two of its designated officers, and the term
Certificate shall also include instructions communicated to the custodian by
Declaration.
"CUSTODIAN" will refer to that agent which provides safekeeping of the
assets of the Fund.
"INSTRUCTIONS" will mean communications containing instructions transmitted
by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an officer or unsigned) and tested telex.
"ORAL INSTRUCTION" will mean an authorization, instruction, approval, item
or set of data, or information of any kind transmitted to Declaration in person
or by telephone, telegram, telecopy or other mechanical or documentary means
lacking original signature, by a person or persons reasonably identified to
Declaration to be a person or persons so authorized by a resolution of the Board
of Directors of the Fund to give Oral Instructions to Declaration on behalf of
the Fund.
"SHAREHOLDERS" will mean the registered owners of the shares of the Fund in
accordance with the share registry records maintained by Declaration for the
Fund.
"SHARES" will mean the issued and outstanding shares of the Fund.
"SIGNATURE GUARANTEE" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
Broker-dealers guaranteeing signatures must be members of a clearing corporation
or maintain net capital of at least $100,000. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program.
"WRITTEN INSTRUCTION" will mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Declaration in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Declaration to be the signature of a person or persons so
authorized by a resolution of the Board of Directors of the Fund, or so
identified by the Fund to give Written Instructions to Declaration on behalf of
the Fund.
CONCERNING ORAL AND WRITTEN INSTRUCTIONS For all purposes under this
Agreement, Declaration is authorized to act upon receipt of the first of any
Written or Oral Instruction it receives from the Fund or its agents. In cases
where the first instruction is an Oral Instruction that is not in the form of a
document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered. In
cases where Declaration receives an Instruction, whether Written or Oral, to
enter a portfolio transaction onto the Fund's records, the Fund shall cause the
broker/dealer executing such transaction to send a written confirmation to the
Custodian.
Declaration shall be entitled to rely on the first Instruction received.
For any act or omission undertaken by Declaration in compliance therewith, it
shall be free of liability and fully indemnified and held harmless by the Fund,
provided however, that in the event a Written or Oral Instruction received by
Declaration is countermanded by a subsequent Written or Oral Instruction
received prior to acting upon such countermanded Instruction, Declaration shall
act upon such subsequent Written or Oral Instruction. The sole obligation of
Declaration with respect to any follow-up or confirmatory Written Instruction or
Oral Instruction in documentary or written form shall be to make reasonable
efforts to detect any such discrepancy between the original Instruction and such
confirmation and to report such discrepancy to the Fund. The Fund shall be
responsible and bear the expense of its taking any action, including any
reprocessing, necessary to correct any discrepancy or error. To the extent such
action requires Declaration to act, the Fund shall give Declaration specific
Written Instruction as to the action required. The Fund will file with
Declaration a certified copy of each resolution of the Fund's Board of Directors
authorizing execution of Written Instructions or the transmittal of Oral
Instructions as provided above.
SECTION 4. INDEMNIFICATION.
(a) Declaration, its directors, officers, employees, shareholders, and
agents will be liable for any loss suffered by the Fund resulting from the
willful misfeasance, bad faith, gross negligence or reckless disregard on the
part of Declaration in the performance of its obligations and duties under this
Agreement.
(b) Any director, officer, employee, shareholder or agent of Declaration,
who may be or become an officer, director, employee or agent of the Fund, will
be deemed, when rendering services to the Fund, or acting on any business of the
Fund (other than services or business in connection with Declaration' duties
hereunder), to be rendering such services to or acting solely for the Fund and
not as a director, officer, employee, shareholder or agent of, or under the
control or direction of Declaration even though such person may be receiving
compensation from Declaration.
(c) The Fund agrees to indemnify and hold Declaration harmless, together
with its directors, officers, employees, shareholders and agents from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Declaration may
sustain or incur or which may be asserted against Declaration by any person by
reason of, or as a result of:
(i) any action taken or omitted to be taken by Declaration except
claims, demands, expenses and liabilities arising from willful misfeasance, bad
faith, negligence or reckless disregard on the part of Declaration in the
performance of its obligations and duties under this Agreement; or
(ii) any action taken or omitted to be taken by Declaration in
reliance upon any Certificate, instrument, order or stock certificate or other
document reasonably believed by Declaration to be genuine and signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Fund, or
upon the written opinion of legal counsel for the Fund or Declaration; or
(iii) the offer or sale of shares of the Fund to any person, natural
or otherwise, which is in violation of any state or federal law.
If a claim is made against Declaration as to which Declaration may seek
indemnity under this Section, Declaration will notify the Fund promptly after
receipt of any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and will notify the Fund promptly of
any action commenced against Declaration within ten (10) days after Declaration
has been served with a summons or other legal process. Failure to notify the
Fund will not, however, relieve the Fund from any liability which it may have on
account of the indemnity under this Section so long as the Fund has not been
prejudiced in any material respect by such failure.
The Fund and Declaration will cooperate in the control of the defense of
any action, suit or proceeding in which Declaration is involved and for which
indemnity is being provided by the Fund to Declaration. The Fund may negotiate
the settlement of any action, suit or proceeding subject to Declaration's
approval, which will not be unreasonably withheld. Declaration reserves the
right, but not the obligation, to participate in the defense or settlement of a
claim, action or proceeding with its own counsel. Costs or expenses incurred by
Declaration in connection with, or as a result of such participation, will be
borne solely by the Fund if: (i) Declaration has received an opinion of counsel
from counsel to the Fund stating that the use of counsel to the Fund by
Declaration would present an impermissible conflict of interest; (ii) the
defendants in, or targets of, any such action or proceeding include both
Declaration and the Fund, and legal counsel to Declaration has reasonably
concluded that there are legal defenses available to it which are different from
or additional to those available to the Fund or which may be adverse to or
inconsistent with defenses available to the Fund (in which case the Fund will
not have the right to direct the defense of such action on behalf of
Declaration); or (iii) the Fund authorizes Declaration to employ separate
counsel at the expense of the Fund.
(d) The terms of this Section will survive the termination of this
Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) Declaration represents and warrants that:
(i) it is a corporation duly organized and existing and in good
standing under the laws of Pennsylvania;
(ii) it is empowered under applicable laws and by its Certificate
of Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to
authorize Declaration to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities,
personnel and equipment required to fully perform its duties and obligations
hereunder;
(v) no legal or administrative proceedings have been instituted
or threatened which would impair Declaration's ability to perform its duties and
obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or obligation of
Declaration or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section
17A(c)(2) of the Exchange Act;
(viii) this Agreement has been duly authorized by Declaration
and, when executed and delivered, will constitute valid, legal and binding
obligation of Declaration, enforceable in accordance with its terms.
(b) The Fund represents and warrants that:
(i) it is a corporation duly organized and existing and in good
standing under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Fund to enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted
or threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligations of the Fund, or any law or regulation applicable to either;
(vi) the Shares are properly registered or otherwise authorized
for issuance and sale;
(vii) this Agreement has been duly authorized by the Fund and,
when executed and delivered, will constitute valid, legal and binding obligation
of the Fund, enforceable in accordance with its terms.
(c) The Adviser represents and warrants that:
(i) it is a corporation duly organized and existing and in good
standing under the laws of the State of North Carolina;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Adviser to enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted
or threatened which would impair the Adviser's ability to perform its duties and
obligations under this Agreement;
(v) the Adviser's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligations of the Adviser, or any law or regulation applicable to either;
(vi) this Agreement has been duly authorized by the Adviser and,
when executed and delivered, will constitute valid, legal and binding obligation
of the Adviser, enforceable in accordance with its terms.
(d) Delivery of Documents The Fund will furnish or cause to be
furnished to Declaration the following documents;
(i) current Prospectus and Statement of Additional Information;
(ii) most recent Annual Report;
(iii) most recent Semi-Annual Report for registered investment
companies on Form N-SAR;
(iv) certified copies of resolutions of the Fund's Board of
Directors authorizing the execution of Written Instructions or the transmittal
of Oral Instructions and those persons authorized to give those Instructions.
(e) Record Keeping and Other Information
Declaration will create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Fund and will be
available during regular business hours for inspection, copying and use by the
Fund. Where applicable, such records will be maintained by Declaration for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, Declaration will deliver all such records to the Fund or such
person as the Fund may designate.
In case of any request or demand for the inspection of the Share records of
the Fund, Declaration shall notify the Fund and secure instructions as to
permitting or refusing such inspection. Declaration may, however, exhibit such
records to any person in any case where it is advised by its counsel that it may
be held liable for failure to do so.
SECTION 6. COMPENSATION.
The Adviser agrees to pay Declaration compensation for its services, and to
reimburse it for expenses at the rates, times, manner and amounts as set forth
in Schedule "B" attached hereto and incorporated herein by reference and as will
be set forth in any amendments to such Schedule "B" agreed upon in writing by
the Parties. Upon receipt of an invoice therefor, the Adviser agrees to pay such
fees within five (5) business days. In addition, the Adviser agrees to reimburse
Declaration for any out-of-pocket expenses paid by Declaration on behalf of the
Fund within ten (10) calendar days of the Fund's receipt of an invoice therefor.
In the event Adviser is unable to pay such invoices for services or out- of-
pocket expenses, for any reason, Associates agrees to pay Declaration the full
amount(s) due within five (5) additional business days.
For the purpose of determining fees payable to Declaration, the value of
the Fund's net assets will be computed at the times and in the manner specified
in the Fund's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Fund seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by the Parties.
In the event that Adviser is more than thirty (30) days delinquent in its
payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice by
Declaration. The Adviser must notify Declaration in writing of any contested
amounts within five (5) days of receipt of a billing for such amounts. Disputed
amounts are not due and payable while they are being disputed.
SECTION 7. DAYS OF OPERATION.
Nothing contained in this Agreement is intended to or will require
Declaration, in any capacity hereunder, to perform any functions or duties on
any holiday, day of special observance or any other day on which the New York
Stock Exchange ("NYSE") is closed. Functions or duties normally scheduled to be
performed on such days will be performed on and as of the next succeeding
business day on which the NYSE is open. Notwithstanding the foregoing,
Declaration will compute the net asset value of the Fund on each day required
pursuant to Rule 22c-1 promulgated under the Act.
SECTION 8. ACTS OF GOD, ETC.
Declaration will not be liable or responsible for delays or errors caused
by acts of God or by reason of circumstances beyond its control including, acts
of civil or military authority, national emergencies, labor difficulties,
mechanical breakdown, insurrection, war, riots, or failure or unavailability of
transportation, communication or power supply, fire, flood or other catastrophe.
In the event of equipment failures beyond Declaration's control,
Declaration will, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but will have no liability with respect thereto.
The foregoing obligation will not extend to computer terminals located outside
of premises maintained by Declaration. Declaration has entered into and
maintains in effect agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
SECTION 9. INSPECTION AND OWNERSHIP OF RECORDS.
In the event of a request or demand for the inspection of the records of
the Fund, Declaration will use its best efforts to notify the Fund and to secure
instructions as to permitting or refusing such inspection. Declaration may,
however, make such records available for inspection to any person in any case
where it is advised in writing by its counsel that it may be held liable for
failure to do so after notice to the Fund.
Declaration recognizes that the records it maintains for the Fund are the
property of the Fund and will be surrendered to the Fund upon written notice to
Declaration as outlined under Section 10(c) below. The Fund is responsible for
the payment in advance of any fees owed to Declaration. Declaration agrees to
maintain the records and all other information of the Fund in a confidential
manner and will not use such information for any purpose other than the
performance of Declaration' duties under this Agreement.
SECTION 10. DURATION AND TERMINATION.
(a) The initial term of this Agreement will be for the period of two
(2) years, commencing on the date hereinabove first written (the "Effective
Date") and will continue thereafter subject to termination by either Party as
set forth in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will
be fixed for the initial term commencing on the Effective Date of this Agreement
and will continue thereafter subject to their review and any adjustment.
(c) After the initial term of this Agreement, a Party may give written
notice to the other (the day on which the notice is received by the Party
against which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination Date
shall be set on a day not less than ninety (90) days after the Notice Date. The
period of time between the Notice Date and the Termination Date is hereby
identified as the "Notice Period". Any time up to, but not later than fifteen
(15) days prior to the Termination Date, the Adviser or Associates will pay to
Declaration such compensation as may be due as of the Termination Date and will
likewise reimburse Declaration for any out-of-pocket expenses and disbursements
reasonably incurred or expected to be incurred by Declaration up to and
including the Termination Date.
(d) In connection with the termination of this Agreement, if a
successor to any of Declaration' duties or responsibilities under this Agreement
is designated by the Fund by written notice to Declaration, Declaration will
promptly, on the Termination Date and upon receipt by Declaration of any
payments owed to it as set forth in Section 10(c) above, transfer to the
successor, at the Adviser's expense, all records which belong to the Fund and
will provide appropriate, reasonable and professional cooperation in
transferring such records to the named successor.
(e) Should the Fund desire to move any of the services outlined in
this Agreement to a successor service provider prior to the Termination Date,
Declaration shall make a good faith effort to facilitate the conversion on such
prior date, however, there can be no guarantee that Declaration will be able to
facilitate a conversion of services prior to the end of the Notice Period.
Should services be converted to a successor service provider prior to the end of
the Notice Period, or if the Fund is liquidated or its assets merged or
purchased or the like with another entity, payment of fees to Declaration shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained at Declaration until the expiration
of the Notice Period and shall be calculated at the asset levels on the Notice
Date.
(f) Notwithstanding any other provisions of Paragraph 10, in the event
the Fund deregisters as an Investment Company with the United States Securities
and Exchange Commission ("SEC"), this Agreement may be terminated by the Fund
upon ninety (90) days written notice to Declaration. The Termination Date shall
be ninety (90) days after the receipt of such notice by Declaration. Any time up
to, but not later than fifteen (15) days prior to the Termination Date, the
Adviser or Associates will pay to Declaration such compensation as may be due as
of the Termination Date and will likewise reimburse Declaration for any out- of-
pocket expenses and disbursements reasonably incurred or expected to be incurred
by Declaration up to and including the Termination Date.
(g) Notwithstanding the foregoing, this Agreement may be terminated at
any time by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a reckless disregard of
its obligations and duties under this Agreement provided that such breach shall
have remained unremedied for sixty (60) days or more after receipt of written
specification thereof.
SECTION 11. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services required
to be provided by Declaration under this Agreement are the property of
Declaration. All records and other data except such computer programs and
procedures are the exclusive property of the Fund and all such other records and
data will be furnished to the Fund in appropriate form as soon as practicable
after termination of this Agreement for any reason.
SECTION 12. AMENDMENTS TO DOCUMENTS.
The Fund will furnish Declaration written copies of any amendments to, or
changes in, the Articles of Incorporation, by-laws, Prospectus or Statement of
Additional Information in a reasonable time prior to such amendments or changes
becoming effective. In addition, the Fund agrees that no amendments will be made
to the Prospectus or Statement of Additional Information of the Fund which might
have the effect of changing the procedures employed by Declaration in providing
the services agreed to hereunder or which amendment might affect the duties of
Declaration hereunder unless the Fund first obtains Declaration' approval of
such amendments or changes.
SECTION 13. CONFIDENTIALITY.
Both Parties hereto agree that any non-public information obtained
hereunder concerning the other Party is confidential and may not be disclosed to
any other person without the consent of the other Party, except as may be
required by applicable law or at the request of the U.S. Securities and Exchange
Commission or other governmental agency. Declaration agrees that it will not use
any non-public information for any purpose other than performance of its duties
or obligations hereunder. The obligations of the Parties under this Section will
survive the termination of this Agreement. The Parties further agree that a
breach of this Section would irreparably damage the other Party and accordingly
agree that each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
SECTION 14. NOTICES.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
IF TO THE FUND: IF TO DECLARATION:
StockCar Stocks Mutual Fund, Inc. Declaration Service Company.
256 Raceway Drive, Suite 11 555 North Lane, Suite 6160
Mooresville, NC 28115 Conshohocken, PA 19428
Attention: John P. Allen, II Attention: Mr. Terence P. Smith
President President
IF TO THE ADVISER:
StockCar Stocks Advisors, LLC
256 Raceway Drive, Suite 11
Mooresville, NC 28115
Attention: John P. Allen, II
President
SECTION 15. AMENDMENT.
No provision of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by the Parties.
This Agreement may be amended from time to time by supplemental agreement
executed by the Parties and the compensation stated in Schedule "B" attached
hereto may be adjusted accordingly as mutually agreed upon.
SECTION 16. AUTHORIZATION.
The Parties represent and warrant to each other that the execution and
delivery of this Agreement by the undersigned officer of each Party has been
duly and validly authorized; and when duly executed, this Agreement will
constitute a valid and legally binding enforceable obligation of each Party.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
when so executed will be deemed to be an original, but such counterparts will
together constitute but one and the same instrument.
SECTION 18. ASSIGNMENT.
This Agreement will extend to and be binding upon the Parties hereto and
their respective successors and assigns; provided, however, that this Agreement
will not be assignable by any of the parties without the written consent of the
other parties, which consents shall be authorized or approved by a resolution by
its respective Boards of Directors.
SECTION 19. GOVERNING LAW.
This Agreement will be governed by the laws of the State of Pennsylvania
and the exclusive venue of any action arising under this Agreement will be
Montgomery County, Commonwealth of Pennsylvania.
SECTION 20. SEVERABILITY.
If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions will be considered severable and not be affected and the rights and
obligations of the parties will be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the basic agreement is not thereby materially impaired.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of twenty (20) typewritten pages, together with Schedules "A," "B"
and "C" (Pages 21-28, attached), to be signed by their duly authorized officers
as of the day and year first above written.
StockCar Stocks Mutual Fund, Inc. Declaration Service Company
By: John P. Allen, II By: Terence P. Smith
President President
StockCar Stocks Advisors, LLC
By: John P. Allen, II
President
<PAGE>
SCHEDULE A
ACCOUNTING SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
o Journalize each Portfolio's investment, capital share and income and expense
activities.
o Verify investment buy/sell trade tickets when received from the adviser and
transmit trades to the Fund's custodian for proper settlement.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the custodian,
and provide the adviser with the beginning cash balance available for
investment purposes.
o Update the cash availability throughout the day as required by the adviser.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities and
Statement of Operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund.
o Calculate capital gains and losses.
o Determine each Portfolio's net income.
o At the Portfolio's expense, obtain security market prices or if such market
prices are not readily available, then obtain such prices from services
approved by the adviser, and in either case calculate the market or fair
value of each Portfolio's investments.
o Where applicable, calculate the amortized cost value of debt instruments.
o Transmit or mail a copy of the portfolio valuations to the adviser.
o Compute the net asset value of each Portfolio.
o Report applicable net asset value and performance data to performance
tracking organizations.
o Compute each Portfolio's yields, total returns, expense ratios and portfolio
turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare monthly financial statements, which will include, without limitation,
the Schedule of Investments, the Statement of Assets and Liabilities, the
Statement of Operations, the Statement of Changes in Net Assets, the Cash
Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Supply various Fund and Portfolio statistical data as requested on an ongoing
basis.
o Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statements.
o Assist with the preparation of amendments to the Fund's Registration
Statements on From N-1A and other filings relating to the registration of
shares.
o Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the qualification
as a regulated investment company of each Portfolio of the Fund under the
Code.
o Provide other accounting services as may be agreed upon from time to time in
writing by the Fund and Declaration.
ADMINISTRATIVE SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
o Provide overall day-to-day Fund administrative management, including
coordination of investment adviser, custodian, transfer agency, distribution
and pricing and accounting services.
o Preparation and filing of all Federal and State reports including:
o Fund's post-effective amendments under the Securities Act of 1933 and the
Investment Company Act of 1940.
o Form N-SAR - Semi-Annual report for Registered Investment Companies.
o The Fund's Annual and Semi-Annual Report.
o Rule 24f-2 Notice - filing regarding sale(s) of securities.
o Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
o Ongoing monitoring and filing of State Blue Sky registrations.
o Prepare and file such reports, applications and documents as may be necessary
or desirable to register the Fund's shares with the Federal and state
securities authorities, and monitor the sale of Fund shares for compliance
with Federal and state securities laws.
o Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy statements,
proxies and other reports to shareholders.
o Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
o Administer contracts on behalf of the Fund with, among others, the Fund's
investment adviser, custodian, transfer agent/shareholder servicing agent,
distributor, and accounting services agent.
o Prepare and maintain materials for directors/management meetings including,
agendas, minutes, attendance records and minute books.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment
policies and limitations set forth in the Fund's Prospectuses and Statement
of Additional Information, and the investment restrictions and limitations
necessary for each Portfolio of the Fund to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended,
or any successor statute.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide administrative services as may be agreed from time to time in writing
by Declaration.
Blue Sky Administration
o Produce and mail the following required filings: Initial Filings - produce
all required forms and follow-up on any comments, including notification of
SEC effectiveness. Renewals - produce all renewal documents and mail to
states, includes follow-up to ensure all is in order to continue selling in
states.
o Sales Reports - produce all the relevant sales reports for the states and
complete necessary documents to properly file sales reports with states.
o Annual Report Filings - file copies of all annual reports with states.
Prospectus Filings - file all copies of Definitive SAI & Prospectuses with
the states.
o Post-Effective Amendment Filing - file all Post-Effective Amendments with the
states, as well as, any other required documents.
o On demand additional states - complete filing for any states that you would
like to add.
o Amendments to current permits - file in a timely manner any amendment to
registered share amounts.
o Update and file hard copy of all data pertaining to individual permits.
TRANSFER AGENT, SHAREHOLDER SERVICING AGENT AND DIVIDEND DISBURSING AGENT
SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e. Dividend Codes,
etc.
o Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts in accordance with Federal
regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(fund responsible for connection line and monthly fee).
o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of Shares.
o Number of Shares, issuance date of each share outstanding and cancellation
date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend code (daily accrual, monthly reinvest, monthly cash or quarterly
cash).
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the most recent 18 months, or
other period as mutually agreed to from time to time.
o Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar activity
for the previous day.
o Supply information monthly for Fund's preparation of Blue Sky reporting.
o Supply monthly purchase, redemption and liquidation information for use in
Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
o Prepare and mail copies of summary statements to dealers and investment
advisers.
o Mail transaction confirmation statements daily to investors.
o Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably specified
by the Transfer Agent).
o Mail periodic statement to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
o Enclose various marketing material as designated by the Fund in statement
mailings, i.e. monthly and quarterly statements (material must be
adaptable to mechanical equipment as reasonably specified by the Transfer
Agent).
o Prepare and mail confirmation statements to dealers daily.
o Prepare certified list of stockholders for proxy mailing.
<PAGE>
SCHEDULE B
Compensation Schedule for Services Provided by Declaration Service Company
PER PORTFOLIO
0.20% on first $25 million of average annual assets 0.15% on next $25
million of average annual assets 0.10% on next $50 million of average
annual assets 0.075% in excess of $100 million of average annual assets
TRANSFER AGENT/ SHAREHOLDER SERVICES:
$ 7.50 per Shareholder Account
MINIMUM ANNUAL FEES:
Year one (1) $ 56,000
Year two (2) 67,000
Year three (3) 78,000
Thereafter 89,000
PLUS OUT-OF-POCKET EXPENSES TO INCLUDE, BUT NOT LIMITED TO: wire fees, Fund/SERV
and Networking fees, bank service charges, printing, copying, postage, courier,
account statement/ confirmation (including programming costs for specialized
statements/ confirmations), portfolio price quotation service, asset allocation
charges, travel, telephone, registration fees, and other standard miscellaneous
items.
ADDITIONAL CLASSES OF SHARES PER PORTFOLIO
Each category of fee ( including annual minimums) increases by 50% for the
second class of shares per portfolio, and by 25% for each additional class of
shares per portfolio.
<PAGE>
SCHEDULE C
STOCKCAR STOCKS MUTUAL FUND, INC.
Portfolios covered by this Agreement:
StockCar Stocks Mutual Fund
THE LAW OFFICES OF DAVID D. JONES, P.C.
555 North Lane, Suite 6160
Conshohocken, PA 19428
610-834-9158 (phone)
610-832-8128 (fax)
[email protected] (e-mail)
StockCar Stocks Mutual Fund, Inc. July 23, 1998
256 Raceway Drive, Suite 11
Mooresville, NC 28115
Dear Sirs:
As counsel to StockCar Stocks Mutual Fund, Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, I have been asked to render
my opinion with respect to the issuance of an indefinite number of shares of
beneficial interest of the Company (the "Shares") representing proportionate
interests in the StockCar Stocks Mutual Fund (the "Fund"). The Shares of the
Fund are a series of the Company, all as more fully described in the Prospectus
and Statement of Additional Information contained in the Registration Statement
on Form N-1A, to which this opinion is an exhibit, to be filed with the
Securities and Exchange Commission.
I have examined the Company's Articles of Incorporation, dated May 18, 1998, the
Prospectus and Statement of Additional Information contained in the Registration
Statement, and such other documents, records and certificates as deemed
necessary for the purposes of this opinion.
Based on the foregoing, I am of the opinion that the Shares, when issued,
delivered and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, will be legally issued, fully paid, and
non-assessable by the Company.
Very Truly Yours,
David D. Jones
Attorney & Counselor at Law
