1933 Act Registration No. 888-8883
1940 Act Registration No. 333-59149
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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. [2]
Post-Effective Amendment No. ___
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Pre-Effective Amendment No. [2]
Post-Effective Amendment No. ___
THE SHEPHERD STREET FUNDS, INC.
(Exact name of registrant as specified in Charter)
480 Shepherd Street
Winston-Salem, North Carolina 27103
(Address of Principle Executive Offices and Zip Code)
336-768-7230
(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:
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It is proposed that this filing will become effective as soon as practicable
after this Registration Statement becomes effective.
Calculation of Registration Fee:
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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 states that this Registration Statement shall become
effective on September 30, 1998, in accordance with Section 8(a) of the
Securities Act of 1933, or upon such date as the Commission, acting pursuant to
said Section 8(a), may determine.
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THE SHEPHERD STREET EQUITY FUND
CROSS-REFERENCE SHEET
(As required by Rule 495)
ITEM NO. ON FORM N-1A CAPTION OR SUBHEADING IN PROSPECTUS
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PART A - INFORMATION REQUIRED IN PROSPECTUS
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1. Cover Page. Cover Page
2. Synopsis. Investment Objectives and Policies;
Cover Page
3. Condensed Financial Information. Fees and Expenses
4. General Description General Information;
of Registrant. Management of the Fund
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
Securities.
7. Purchase of Securities Being Purchasing Shares; Plan of Distribution;
Offered. Federal Taxes
8. Redemption or Repurchase Redeeming Shares; Plan of Distribution;
Federal Taxes
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 Restrictions
Policies.
14. Management of the Fund. Investment Adviser; Directors and
Officers
15. Control Persons and Principal Directors and Officers; Investment
Holders of Securities. Adviser
16. Investment Advisory and other Investment Adviser; Fund Service
Services. Providers
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 (also covered under Items 7 & 8 of
Part A)
20. Tax Status. Tax Information
21. Underwriters Fund Service Providers
and Transfer Agents
22. Calculations of Performance Data. Performance Information
23. Financial Statements Not Applicable. See item 32 of Part C.
PART C
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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 September 30, 1998
The Shepherd Street Equity Fund(TM)
480 Shepherd Street
Winston-Salem, North Carolina 27103
336-728-7230
The Shepherd Street Funds, Inc.(TM) (the "Company") is a newly organized,
diversified management investment company currently consisting of one portfolio,
The Shepherd Street Equity Fund(TM) (the Fund"). The investment objective of the
Fund is growth of capital. Current income is a secondary factor in considering
the selection of investments. The Fund attempts to achieve its investment
objective by investing primarily in a diversified portfolio of common stocks and
securities convertible into common stocks.
The minimum investment in the Fund is $1,000 for regular accounts and $1000 for
retirement accounts. The minimum subsequent investment is $500 for regular
accounts and $50 for retirement accounts. The Fund is a No-Load Fund. This means
that 100% of your initial investment is invested in shares of the Fund.
This Prospectus concisely sets forth the information you should know before you
invest. Please read this Prospectus and keep it for future reference. A
Statement of Additional Information (the "SAI") regarding the Fund, dated
September 30, 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 FUNDS DESCRIBED IN THIS PROSPECTUS SHALL NOT BE OFFERED IN ANY STATE IN
WHICH SUCH OFFERING IS UNAUTHORIZED. NO SALES REPRESENTATIVE, DEALER OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS.
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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TABLE OF CONTENTS
Fees And Expenses.
Investment Objectives And Policies
Primary Investments of the Fund
Risk Factors.
Federal Taxes.
Purchasing Shares.
Redeeming Shares.
Investment Adviser.
Management of the Fund.
Plan of Distribution
General Information.
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FEES AND EXPENSES
Shareholder Transaction Expenses:
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This is a No-Load Fund. There are no sales loads, deferred sales loads or other
transaction charges imposed on purchases or reinvested dividends. This means
that 100% of your initial investment is invested in shares of the Fund.*
*Shares redeemed prior to being held for at least six months will be charged a
redemption fee equal to 0.50% of the NAV. This would have the effect of
increasing the expenses of such shares. This fee is not a fee to finance sales
or sales promotion expenses, but is imposed to discourage short-term trading of
Fund shares. Furthermore, such fees, when imposed, are credited directly to the
assets of the Fund to help defray the expense to the Fund of such short-term
trading activities.
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.
Management Fees. 1.00%
12b-1 Fees. 0.25%
Other Fees (estimated) 0.05%
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Total Fund Operating Expenses. 1.30%
(before 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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$13.24 $14.24
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, the expense figures are based on estimated amounts for the
Fund's first fiscal year. The Fund's Adviser has agreed to waive receipt of its
fees and/or assume certain expenses of the Fund, to the extent possible, to
insure that the Fund's total expenses do not exceed 1.50% annually. If the
Advisor waives fees or assumes expenses of the Fund, such actions would have the
effect of lowering the expense ratio and increasing the yield to investors.
Also, the Fund is required by law to use a 5% assumed annual rate of return in
the example. The Fund's actual annual rate of return may be higher or lower than
the example.
INVESTMENT OBJECTIVES AND POLICIES
The Fund is a diversified mutual fund whose primary investment objective is
growth of capital. Current income is a secondary factor in considering the
selection of investments. The Fund seeks to achieve its objective by investing
primarily in a diversified portfolio of common stock and securities convertible
into common stock. There can be no assurance that the Fund's investment
objective will be achieved.
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Under normal circumstances, the Fund intends to invest not less than 65% of its
assets in the common stocks of companies whose stock trades on the New York
Stock Exchange, The American Stock Exchange, and the NASDAQ over-the-counter
market, or securities convertible into such common stocks. The Advisor to the
Fund will seek to invest in stocks that, in the Advisor's opinion, have an
above-average potential for future earnings growth. Generally, the Advisor will
select securities that have one or more of the following characteristics:
(1) Established companies with above-average prospects for growth. These
companies will have strong performance records, solid market positions,
high margins and return on equity, and reasonable financial strength;
(2) Small and medium-sized companies that may be out of favor or not closely
followed by investors and are selling at prices which do not reflect
adequately their long-term business potential;
(3) Companies in industries that are undergoing consolidation, where the
likelihood of acquisitions is high.
In addition to common stock, the Fund may invest up to 25% of its assets in
foreign equity securities when, in the Advisor's opinion, such investments would
be advantageous to the Fund and help the Fund to achieve its investment
objective.
The Fund may also, from time to time, invest a portion of its assets in other
securities, such as United States Government bonds, bills, and notes; money
market instruments, repurchase agreements, and options on equities. The Fund may
also hold a portion of its assets in cash. The Advisor may invest in such
securities in order to manage the Fund's cash flows, and for temporary and
defensive purposes.
The Fund will attempt to take prompt advantage of changes in market conditions.
This means that the Fund will purchase and sell securities without regard to the
length of time such securities have been held, whenever the Advisor believes
such actions will help the Fund achieve its investment objective. You should be
aware that certain purchases and sales of securities might result in the Fund
realizing short-term capital gains that may have an impact on your tax status.
Please see the SAI for a more detailed discussion of taxation issues, and
consult with your tax advisor to determine what impact the Fund's investment
policies may have on your personal tax situation.
PRIMARY INVESTMENTS OF THE FUND
COMMON STOCKS. The Fund will ordinarily invest at least 65% of its assets in
common stock or securities convertible into common stock. 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 perceptions 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.
FOREIGN SECURITIES. The Fund may invest up to 25% of its assets in securities of
foreign issuers. Investments in foreign securities may involve greater risks
compared to domestic investments. Foreign companies are not subject to the
regulatory requirements of U.S. companies and, as a result, 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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CASH RESERVES. Although the Fund normally will invest its assets as described
above, it may also invest a portion of its assets in cash, money market
securities such as short-term notes and debentures, certificates of deposit and
bankers acceptances. The Fund may also enter into repurchase agreements. The
Fund will invest in such securities only to meet liquidity needs or for
temporary defensive purposes. If, in the Advisor's opinion, it is appropriate
for the Fund to assume a temporary defensive posture, the Fund may invest up to
100% of its assets in these instruments.
The investments listed above represent the major focus of the Fund's investment
strategy. A complete listing of the Fund's permissible investments, including
investments in which the Fund is permitted to invest, but has no present plans
to do so, as well as the Fund's fundamental investment policies and investment
restrictions, is contained in the SAI in the Section entitled, "Investment
Policies and Restrictions".
RISK FACTORS
You may lose money by investing in the Fund. The likelihood of loss is greater
if you invest for a shorter period of time. Your investment in the Fund is not a
deposit or obligation of, or insured or guaranteed by, any entity or person,
including the U.S. Government and the Federal Deposit Insurance Corporation. 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. Further, the
Fund has no operating history, and this may pose additional risks. There is no
assurance that the Fund can achieve its investment objective, since all
investments are inherently subject to market risk.
FEDERAL TAXES
The Fund intends to qualify each year as a regulated investment company under
the rules and regulations of the Internal Revenue Service (IRS). In any fiscal
year in which the Fund qualifies as a regulated investment company and
distributes to shareholders all of its net investment income and net capital
gains, the Fund will not have to pay any federal income tax.
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash, unless you are exempt from taxation or entitled
to a tax deferral. The Fund intends to pay out any dividends and/or capital
gains at least annually, usually in December. Early each following year, you
will be notified as to the amount and federal tax status of all income
distributions paid to you from the prior year. Such distributions may also be
subject to state or local taxes. The tax treatment of redemptions from a
retirement plan account may differ from redemptions from an ordinary shareholder
account.
You must provide the Fund with your correct taxpayer identification number, and
certify that you are not subject to backup withholding (your taxpayer
identification number is usually your Social Security number). If you fail to do
so, the IRS may require the Fund to withhold 31% of your taxable distributions
and redemptions. Federal law also requires the Fund to withhold 30% or the
applicable treaty rate from dividends paid to certain nonresident aliens,
non-U.S. partnerships, and non-U.S. corporations.
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This is a brief summary of the tax laws that affect your investment in the Fund.
Please see the Section entitled "Tax Information" in the SAI for additional
information, and consult with your own tax advisor, since every investor's tax
situation is unique.
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 THE SHEPHERD STREET FUNDS, INC.(TM), C/O DECLARATION DISTRIBUTORS, INC., 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. 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, a period of up to fifteen days. You will also be subject to a
redemption fee of 0.50% of total assets in such a circumstance.
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's share price, also called its net asset value, is
determined as of the close of trading (normally 4:00 p.m., Eastern Time) every
day the New York Stock Exchange is open. The Fund calculates its net asset value
per share by dividing the total value of its assets after subtracting
liabilities by the number of its shares outstanding. The Fund generally
determines the total value of its shares by using market prices for the
securities comprising its portfolio. The Fund is a No-Load Fund. This means that
you will not be charged any sales commissions or underwriting discounts, so 100%
of your initial investment is invested in shares of the Fund. The minimum
initial investment is $1,000 for regular accounts and $1,000 for Individual
Retirement Accounts (IRAs). 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 SAI Sections
entitled "Purchasing and Redeeming Shares" and "Tax Information" for more
information concerning share purchases.
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 (See the Sections
entitled "Determination of Net Asset Value" and "Purchasing and Redeeming
Shares" in the SAI). Redemption requests must be in writing and delivered to the
Fund at THE SHEPHERD STREET FUNDS, INC.(TM), C/O DECLARATION DISTRIBUTORS, INC.,
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.
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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, determined as of the close of
business on the day your redemption order is accepted by the Fund (See the
Sections entitled, "Purchasing and Redeeming Shares" and "Determination of Net
Asset Value" in the SAI). 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.
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 may exercise its option to redeem.
Payment for shares redeemed is made within seven days after receipt by the Fund
of a request for redemption in proper form. 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.
MANAGEMENT OF THE FUND
The Company, an open-end, diversified management company, was incorporated in
Maryland on July 16, 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 500,000,000 shares of common stock. The Board of Directors
has the power to designate one or more classes ("series") of shares of common
stock and to classify or reclassify any unissued shares with respect to such
series. Currently, the shares of the Fund are the only class of shares being
offered by the Company.
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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.
The Company is aware of a potential problem that may occur when the year changes
from 1999 to 2000. Many computers and computer programs have been built where
dates are calculated using only two digits. As a result, these computers and
programs cannot tell the difference between 1900 and 2000, and when the year
changes from 1999 to 2000, there may be significant problems. The Company has
taken steps to address this problem, specifically by entering into contracts
only with vendors who are aggressively addressing the problem and by updating
the Company's own systems to address the problem. As of the date of this filing,
the Company does not foresee "The Year 2000 Problem" as having any significant
negative impact on the Company or the Fund.
INVESTMENT ADVISER
Salem Investment Counselors, Inc., an investment advisory company founded in
1979, is the investment advisor to the Fund. Salem Investment Counselors, Inc.
is headquartered at 480 Shepherd Street, Winston-Salem, North Carolina 27103.
Mr. David B. Rea is the portfolio manager for the Fund. Mr. Rea has been
managing investment portfolios for individuals, corporations, trusts and
retirement accounts since joining the Advisor in 1984. Mr. Rea has earned an
M.B.A. in finance, a law degree, and is a Chartered Financial Analyst. Mr. Rea
is President of the Adviser and President of the Company. Mr. Rea has also
served as Treasurer to the North Carolina Society of Chartered Financial
analysts. You should be aware that, although Mr. Rea has extensive experience in
managing investment portfolios for clients of the Adviser, he has no prior
experience in managing a portfolio for an investment company, and this may
result in additional risks for the Fund.
Salem Investment Counselors, Inc. manages the investment portfolio and business
affairs of the Fund under an Investment Advisory Agreement with the Fund, and
manages, or arranges to manage, the daily operations of the Fund under an
Operational Services Agreement.
INVESTMENT ADVISORY AGREEMENT. Under the terms of the Advisory Agreement, the
Adviser, subject to the supervision of the Board of Directors, will manage the
investment operations of the Fund in accordance with the Fund's investment
policies. In consideration of the Adviser's investment advisory services, the
Fund will pay to the Adviser on the last day of each month a fee equal to 0.40%
of average net asset value of the Fund, such fee to be computed daily based upon
the net asset value of the Fund.
The Advisor furnishes an investment program for the Fund, determines, subject to
the overall supervision and review of the Board of Directors of the Company,
what investments should be purchased, sold and held, and makes changes on behalf
of the Company in the investments of the Fund.
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OPERATIONAL 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. Under the Services Agreement, the Fund will pay to the Adviser
on the last day of each month a fee equal to 0.60% of average net asset value of
the Fund, such fee to be computed daily based upon the net asset value of the
Fund. The Adviser has entered into an Investment Company Services Agreement with
Declaration Service Company to provide Transfer Agent and essentially all
administrative services for the Fund. The Adviser has also entered into a
Distribution Agreement with Declaration Distributors, Inc. ("DDI") wherein DDI
will act as principal underwriter for the Fund's shares.
From time to time, the Adviser may waive receipt of its fees and/ or voluntarily
assume certain fund expenses, which would have the effect of lowering the Fund's
expense ratio and increasing yield to investors during the time such amounts are
waived or assumed. The Fund will not be required to pay the Adviser for any
amounts voluntarily waived or assumed, nor will the Fund be required to
reimburse the Adviser for any amounts waived or assumed during a prior fiscal
year.
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.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution, or "12b-1 Plan" under which it may
finance activities primarily intended to sell shares. Under the 12b-1 Plan, the
Fund's Distributor, Declaration Distributors, Inc., is paid a distribution fee
at an annual rate of 0.25% of average daily net assets of the Fund for
distributing shares of the Fund and for providing certain shareholder services.
These services include, among other things, processing new shareholder account
applications, preparing and transmitting to the Fund's Transfer Agent computer
processable tapes of all transactions by customers, and serving as the primary
source of information to customers in answering questions concerning the Fund
and their transactions with the Fund. The Distributor may compensate securities
dealers (which may include the Distributor itself) and other financial
organizations who provide similar distribution and shareholder services.
Payments under the 12b-1 Plan are not tied exclusively to the distribution
and/or shareholder servicing expenses actually incurred by the Distributor, and
such payments may exceed the expenses actually incurred. The Company's Board of
Directors evaluates the Plan on a regular basis.
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 to you for all purchases of shares.
You will be provided at least semi-annually with a report showing the Fund's
portfolio and other information and annually after the close of the Fund's
fiscal year, which ends December 31, with a report containing audited financial
statements.
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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.
Inquiries regarding the Fund should be directed to the Fund at its address or
telephone number shown on the front cover of this Prospectus.
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.
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THE SHEPHERD STREET EQUITY FUND(TM)
(A No-Load Fund)
Investment Adviser:
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Salem Investment Counselors, Inc.
480 Shepherd Street
Winston-Salem, North Carolina 27103
Custodian:
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CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19101-7618
Distributor:
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Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Management Services:
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Salem Investment Counselors, Inc.
480 Shepherd Street
Winston-Salem, North Carolina 27114
Independent Auditors:
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Tait, Weller & Baker
8 Penn Center, Suite 800
Philadelphia, PA 19103-2108
Legal Counsel:
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The Law Offices of David D. Jones, P.C., Conshohocken, PA, has passed on certain
legal matters relating to this registration and serves as counsel to the
Company.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus, the statement of
additional information or the fund's official sales literature in connection
with the offering of shares of the fund, and if given or made, such other
information or representations must not be relied upon as having been authorized
by the fund.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated September 30, 1998
THE SHEPHERD STREET FUNDS, INC.
480 Shepherd Street
Winston-Salem, North Carolina 27103
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of The Shepherd Street Equity Fund, dated
September 30 1998. You may obtain a copy of the Prospectus, free of charge, by
writing to The Shepherd Street Funds, Inc, c/o The Declaration Group, 555 North
Lane, Suite 6160, Conshohocken, PA 19428, phone number 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
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INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective and the manner in which the Fund pursues its
investment objective is generally discussed in the prospectus under the captions
"Investment Objectives and Policies", "Primary Fund Investments" and "Risk
Factors", and all of that information is incorporated herein by reference.
The Fund is a diversified Fund, meaning that as to 75% of the Fund's assets
(valued at the time of investment), the Fund will not 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, thereby reducing the
risk of loss. The Fund normally will invest at least 65% of total assets in the
common stock of Companies whose stock trades on the New York Stock Exchange, The
American Stock Exchange, and the NASDAQ over-the-counter market. However, for
temporary and defensive purposes, the Fund may ordinarily invest in a variety of
other securities. The complete list of securities in which the Fund may
ordinarily 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.
Cash Reserves. Although the Fund normally will invest its assets as described
above, it may, to meet liquidity needs or for temporary defensive purposes,
ordinarily invest a portion of its assets in cash, money market securities such
as short term notes issued by the United States Government, its agencies and/or
instrumentalities, and debentures, certificates of deposit or bankers
acceptances. The Fund may also enter into repurchase agreements. If, in the
Advisor's opinion, it is appropriate for the Fund to assume a temporary
defensive posture, the Fund may invest up to 100% of its assets in these
instruments.
Common Stocks. 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.
Preferred Stock. 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.
Foreign Securities. The Fund may invest in securities of foreign issuers.
Investments in foreign securities may 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. The Fund may
invest not more than 25% of its assets (valued at the time of investment) in
foreign securities.
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Real Estate Investment Trusts. The Fund may invest in real estate investment
trusts (REITs). Equity REITs invest directly in real property while mortgage
REITs invest in mortgages on real property. REITs may be subject to certain
risks associated with the direct ownership of real estate including declines in
the value of real estate, risks related to general and local economic
conditions, overbuilding and increased competition, increases in property taxes
and operating expenses, and variations in rental income. REITs pay dividends to
their shareholders based upon available funds from operations. It is quite
common for these dividends to exceed the REITs taxable earnings and profits
resulting in the excess portion of such dividends being designated as a return
of capital. The Fund intends to include the gross dividends from such REITs in
its distribution to its shareholders and, accordingly, a portion of the Fund's
distributions may also be designated as a return of capital. The Fund will not
invest more than 10% of its assets in REITS.
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). 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 Fund's net assets and/or 3% of any
investment company's outstanding securities.
Debt Securities. The Fund may invest in corporate or U.S. Government debt
securities including zero coupon bonds. Corporate debt securities may be
convertible into preferred or common stock. In selecting corporate debt
securities for the Fund, the Adviser reviews and monitors the creditworthiness
of each issuer and issue. 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.
Zero coupon bonds do not provide for cash interest payments but instead are
issued at a discount from face value. Each year, a holder of such bonds must
accrue a portion of the discount as income. Because issuers of zero coupon bonds
do not make periodic interest payments, their prices tend to be more volatile
than other types of debt securities when market interest rates change.
Repurchase Agreements. The Fund may invest a portion of its assets in repurchase
agreements ("Repos") with broker-dealers, banks and other financial
institutions, 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.
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Options On Equities. The Fund may write (i.e. sell) covered put and call
options, and may purchase put and call options, on equity securities traded on a
United States exchange or properly regulated over-the-counter market. The Fund
may also enter into such transactions on Indexes. Option contracts can include
long-term options with durations of up to three years. Although not normally
anticipated to be widely employed, the Fund may use 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 an 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 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.
Risk Factors. The primary risks associated with the use of options 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. Investing only in those contracts whose price fluctuations
are expected to resemble those of the Fund's underlying securities will minimize
the risk of imperfect correlation. Entering into such transactions only on
national exchanges and over-the-counter markets with an active and liquid
secondary market will minimize the risk that the Fund will be unable to close
out a position.
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 may be difficult to sell promptly at an acceptable price
because of lack of available market and other factors. 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, the Fund will not invest in such securities in excess of
the limits set forth above.
When-Issued Securities and Delayed-Delivery Transactions. The Fund may purchase
securities on a when-issued basis, and it may purchase or sell 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.
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. Invest more than 25% of its assets (valued at time of investment) in
securities of companies in any one industry;
4
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4. 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;
5. 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;
6. Make margin purchases or short sales of securities;
7. Invest in companies for the purpose of management or the exercise of
control;
8. Lend money (but this restriction shall not prevent the Fund from investing
in debt securities or repurchase agreements, or lend its portfolio
securities).
9. 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.
10. Invest in oil, gas or other mineral exploration or development programs,
although it may invest in marketable securities of companies engaged in
oil, gas or mineral exploration;
11. Purchase or sell real estate or real estate loans or real estate limited
partnerships, although it may invest in marketable securities of companies
that invest in real estate or interests in real estate.
12. Purchase warrants on securities.
13. Issue senior securities.
14. Invest in commodities, or invest in futures or options on commodities.
Restrictions 1 through 14 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 25% of its assets (valued at time of investment) in
securities of issuers with less than three years' operation (including
predecessors);
b. Invest more than 15% of its net assets 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;
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<PAGE>
INVESTMENT ADVISER
Information on the Fund's investment adviser, Salem Investment Counselors, Inc.,
is set forth in the prospectus under "Investment Adviser," and is incorporated
herein by reference.
Salem Investment Counselors, Inc. (the "Adviser") was organized under the laws
of the State of North Carolina as an investment advisory corporation in 1979.
The Advisor registered as an Investment Advisor with the Securities and Exchange
Commission in April 1979. The Advisor is one of the largest private financial
counseling firms in North Carolina, providing financial management services to
individuals, corporations, and professional organizations in North Carolina and
throughout the United States. The Advisor manages the investment portfolio and
the general business affairs of the Fund pursuant to an investment services
agreement with the Fund dated September 30, 1998 (the "Agreement").
The 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, negligence, or reckless disregard of
its obligations and duties under the Advisory Agreement.
The Agreement has a term of two years, 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:
Name, Age, Address, Position Principal Occupation For the
with Fund Last Five Years
(1) David B. Rea*; (Age42) President of Salem Investment Counselors
480 Shepherd Street Inc. since 1994. Registered Investment
Winston-Salem, NC 27103 Advisor, Chartered Financial Analyst
President, Director (1987) M.B.A. degree, Indiana University
(1981) Juris Doctorate degree, Wake
Forest University School of Law, (1979),
Certified Public Accountant (1982).
(2) Robert T. Beach*, (Age51) Investment Counselor with Salem
480 Shepherd Street Investment Counselors since 1985.
Winston-Salem, NC 27103 Undergraduate degree, Dartmouth College.
Director M.B.A. degree, Stanford Graduate School
of Business. Juris Doctorate degree,
Stanford Law School. Chartered Financial
Analyst (1988)
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(3) William R. Watson*, (Age 57) Investment Counselor with Salem
480 Shepherd Street Investment Counselors since 1982.
Winston-Salem, NC 27103 Undergraduate degree, North Carolina
Director State University, 1963. M.B.A. Degree,
University of North Carolina, 1976.
Chartered Financial Analyst (1975)
(4) James T. Broyhill, (Age 70) Retired. Former Secretary of North
480 Shepherd Street Carolina Dept. of Economic & Community
Winston-Salem, NC 27103 Development, 1989-1991. United States
Director Senator, July 1996-November 1996. Member
of The United States House of
Representatives, 1963-1986.
(5) Ralph Stockton (Age 71) Attorney, partner in firm of Kilpatrick
480 Shepherd Street Stockton Since 1952.Undergraduate
Winston-Salem, NC 27103 degree, University of North Carolina,
Director 1948, Juris Doctorate degree, with
Honors, University of North Carolina
School of Law, 1952. Member, American
Bar Association, U.S. Supreme Court
Historical Society, North Carolina Bar
Association. Inducted into North
Carolina Bar Association General
Practice Hall of Fame, 1993.
(6) Helen C. Haynes (Age 80) Private Investor. Undergraduate degrees
480 Shepherd Street from Marion College and Wittenberg
Winston-Salem, NC 27103 University. Doctorate of Humane Letters
Director from Roanoke College.
* Indicates an "interested person" as defined in the Investment Company Act of
1940.
The Shepherd Street Funds, Inc. (the "Company") was organized as a Maryland
Corporation on July 16, 1998 (See the Sections titled "Management of the Fund"
and "General Information" in the Fund's Prospectus). The table below sets forth
the compensation anticipated to be paid by the Company to each of the directors
of the Company during the fiscal year ending December 31, 1998.
Name of Director Compensation Pension Annual Total Compensation
from Company Benefits Benefits Paid to Director
- --------------------------------------------------------------------------------
David B. Rea* $ 0.00 $ 0.00 $ 0.00 $ 0.00
William R. Watson* $ 0.00 $ 0.00 $ 0.00 $ 0.00
Robert T. Beach* $ 0.00 $ 0.00 $ 0.00 $ 0.00
James T. Broyhill $ 0.00 $ 0.00 $ 0.00 $ 0.00
Ralph Stockton $ 0.00 $ 0.00 $ 0.00 $ 0.00
Helen C. Haynes $ 0.00 $ 0.00 $ 0.00 $ 0.00
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William R. Watson, David B. Rea, Robert T. Beach, Dale M. Brown, and Jeffrey C.
Howard intend to purchase 2000 shares each 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 Company'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
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:
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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.
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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.
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.
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The Fund intends to distribute to shareholders, at least annually, substantially
all net investment income and any net capital gains realized from sales of the
Fund's portfolio securities. Dividends from net investment income and
distributions from any net realized capital gains are reinvested in additional
shares of the Fund unless the shareholder has requested in writing to have them
paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to the shareholder as ordinary income. Distributions of long-term
capital gains are taxable as long-term capital gains regardless of the length of
time shares in the Fund have been held. Distributions are taxable, whether
received in cash or reinvested in shares of the Fund.
Each shareholder is advised annually of the source of distributions for federal
income tax purposes. A shareholder who is not subject to federal income tax will
not be required to pay tax on distributions received.
If shares are purchased shortly before a record date for a distribution, the
shareholder will, in effect, receive a return of a portion of his investment,
but the distribution will be taxable to him even if the net asset value of the
shares is reduced below the shareholder's cost. However, for federal income tax
purposes the original cost would continue as the tax basis.
If a shareholder fails to furnish his social security or other tax
identification number or to certify properly that it is correct, the Fund may be
required to withhold federal income tax at the rate of 31% (backup withholding)
from dividend, capital gain and redemption payments to him. Dividend and capital
gain payments may also be subject to backup withholding if the shareholder fails
to certify properly that he is not subject to backup withholding due to the
under-reporting of certain income.
Taxation of the Shareholder. Taxable distributions generally are included in a
shareholder's gross income for the taxable year in which they are received.
However, dividends declared in October, November and December and made payable
to shareholders of record in such month will be deemed to have been received on
December 31st if paid by the Fund during the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below a
shareholder's cost basis, such distribution would be taxable to the shareholder
as ordinary income or as a long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares of the Fund just prior to a distribution. The price of such shares
include the amount of any forthcoming distribution so that those investors may
receive a return of investment upon distribution which will, nevertheless, be
taxable to them.
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.
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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 subsequently such shares are sold at a loss, the portion
of the loss equal to the amount of the long-term capital gain distribution may
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. Taxation issues are complex and highly individual. You should consult
with your tax advisor concerning the effects of transactions in the Fund.
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 Company'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
evaluations 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 that are paid commissions
directly.
CUSTODIAN
CoreStates Bank, N.A., 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 Bank does not exercise any supervisory function over the
management of the Fund, the purchase and sale of securities or the payment of
distributions to shareholders.
11
<PAGE>
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 Advisor and Fund. 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.
ADMINISTRATION
DSC also provides services as Administrator to the Fund pursuant to a written
agreement with the Advisor and Fund. The Administrator supervises all aspects of
the operations of the Fund except those performed by the 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
DISTRIBUTOR
Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken, Pa
19428, a wholly-owned subsidiary of The Declaration Group, serves as distributor
and principal underwriter of the Fund's shares pursuant to a written agreement
with the Advisor and Fund.
INDEPENDENT ACCOUNTANTS
Tait, Weller & Baker, Inc., 8 Penn Center, Suite 800, Philadelphia, PA
19103-2108 will serve as the Company's independent auditors for its first fiscal
year.
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
THE SHEPHERD STREET FUNDS, INC.
Winston-Salem, North Carolina
We have audited the accompanying statement of assets and liabilities of The
Shepherd Street Equity Fund, (a series of The Shepherd Street Funds, Inc.). This
financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit of the statement of
assets and liabilities provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of The
Shepherd Street Equity Fund as of September 23, 1998, in conformity with
generally accepted accounting principles.
Tait, Weller & Baker
PHILADELPHIA, PENNSYLVANIA
SEPTEMBER 23, 1998
13
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
THE SHEPHERD STREET EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 23, 1998
- --------------------------------------------------------------------------------
ASSETS
Cash $100,000
--------
LIABILITIES --
--------
NET ASSETS $100,000
========
Shares of $.0001 par value, capital stock
outstanding, 500,000,000 authorized 10,000
========
Net asset value, offering and redemption price per share $ 10.00
========
At September 23, 1998 the components of net assets were as follows:
Paid-in capital $100,000
========
- --------------------------------------------------------------------------------
SEE NOTE TO STATEMENT OF ASSETS AND LIABILITIES
14
<PAGE>
THE SHEPHERD STREET EQUITY FUND
NOTE TO STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 23, 1998
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Shepherd Street Funds, Inc. (the "COMPANY"), is registered under the
Investment Company Act of 1940, as amended (the "1940 ACT"), as an open-end
management investment company and is authorized to issue shares of capital
stock. The Company currently offers shares of capital stock in one
portfolio, The Shepherd Street Equity Fund.
The Company was organized on July 16, 1998, and between that date and
September 23, 1998, the Company had no operations other than those relating
to organizational matters and the registration of its shares under
applicable securities laws.
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 of Registrant, incorporated by
reference from PEA # 1, filed on August 26, 1998.
2. Bylaws of Registrant, incorporated by reference from PEA # 1,
filed on August 26, 1998.
3. None [Not Applicable]
4. None [See Exhibit 1, Articles of Incorporation, Article IV]
5. Investment Advisory Agreement with Salem Counselors, Inc.,
incorporated by reference from PEA # 1, filed on August 26, 1998.
6. Distribution Agreement with Declaration Distributors, Inc.,
incorporated by reference from PEA # 1, filed on August 26, 1998.
7. None [Not Applicable]
8. Custodian Agreement with CoreStates Bank, N.A.- Enclosed
9. Operating Services Agreement with Salem Investment Counselors,
Inc., incorporated by reference from PEA # 1, filed on August 26,
1998.
9.1 Investment Services Agreement with Declaration Service Company,
incorporated by reference from PEA # 1, filed on August 26, 1998.
10. Opinion of Counsel, incorporated by reference from PEA # 1, filed
on August 26, 1998.
11. Consent of Independent Auditors - Enclosed
12. None [Not Applicable]
13. Subscription Agreement - Enclosed
13.1 Power of Attorney- Enclosed
14. None [Not Applicable]
15. None [Not Applicable]
16. None [Not Applicable]
17. Financial Data Schedule- Enclosed
18. Not Applicable
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. William R. Watson,
David B. Rea, Robert T. Beach, Dale M. Brown, and Jeffrey C. Howard
intend to purchase 2000 shares each of the Fund prior to the effective
date 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 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 Service Company.
555 North Lane, Suite 6160
Conshohocken, PA
Item 31 Management Services.
- ------- --------------------
Declaration Service 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 25th day of September, 1998.
The Shepherd Street Funds, Inc.
(Registrant)
By: /s/ David B. Rea, 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/ William R. Watson* Director September 25, 1998
/s/ Robert T. Beach* Director September 25, 1998
/s/ James T. Broyhill* Director September 25, 1998
/s/ Ralph Stockton* Director September 25, 1998
/s/ Helen C. Haynes* Director September 25, 1998
By David B. Rea as Attorney-In-Fact pursuant to Power of Attorney executed on or
about September 3, 1998 and filed as Exhibit 13.2 to this Registration
Statement.
<PAGE>
EXHIBIT INDEX
Exhibits
8. Custodian Agreement
11. Consent of Independent Auditors
13. Subscription Agreement
13.1. Power of Attorney
17. Financial Data Schedule
- --------------------------------------------------------------------------------
EXHIBIT 8
CUSTODIAN AGREEMENT
SHEPHERD STREET FUNDS, INC.
THIS AGREEMENT, dated as of the 30th day of September, 1998 is by an
between Shepherd Street Funds, Inc. (the "Company"), a corporation duly
organized under the laws of the state of Maryland, Salem Investment Counselors,
Inc., a corporation organized under the laws of the state of North Carolina (the
"Adviser"), and CoreStates Bank, N.A. (the "Bank")
WHEREAS, the Company and the Adviser have entered into an Operating
Services Agreement wherein the Adviser is obligated to provide, or arrange to
provide, certain services to the Company, including custodial services, and;
WHEREAS, the Adviser desires to appoint the Bank to act as Custodian of the
Company's portfolio securities, cash and other property from time to time
deposited with or collected by the Bank for the Company, and the Company
consents to such appointment, and;
WHEREAS, the Bank is qualified and authorized to act as Custodian for the
Company and the separate series thereof (each a "Fund", and collectively, the
"Funds"), and is willing to act in such capacity upon the terms and conditions
herein set forth;
NOW THERFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto, intending to be legally bound, do hereby agree as
follows:
SECTION 1. The terms defined in this Section 1, wherever used in this Agreement,
or in any amendment or supplement hereto, shall have the meanings herein
specified unless the context otherwise requires.
CUSTODIAN: The term Custodian shall mean the Bank in its capacity as Custodian
under this Agreement.
DEPOSITORY: The term depository means any depository service which acts as a
system for the central handling of securities where all securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred by bookkeeping entry without physical
delivery.
PROPER INSTRUCTIONS: For purposes of this Agreement, the Custodian shall be
deemed to have Proper Instructions upon receipt of written (including
instructions received by means of computer terminals or facsimile
transmissions), telephone or telegraphic instructions from a person or persons
authorized from time to time by the Directors of the Company to give the
particular class of instructions. Telephone or telegraphic instructions shall be
confirmed in writing by such persons as said Directors shall have from time to
time authorized to give the particular instructions without awaiting receipt of
written confirmation, and the Custodian shall not be liable for the Company's
failure to confirm such instructions in writing.
SECURITIES: The term securities means stocks, bonds, rights, warrants and all
other negotiable or non-negotiable paper issued in certificated or book-entry
form commonly known as "Securities" in banking custom or practice.
SHAREHOLDER: The term Shareholder shall mean the registered owner from time to
time of the Shares of the Company in accordance with the registry records
maintained by the Company or any agent on the Company's behalf.
SECTION 2. The Adviser hereby appoints the Custodian as Custodian of the
Company's cash, Securities and other property, to be held by the Custodian as
provided in this Agreement. The Custodian hereby accepts such appointment
subject to the terms and conditions hereinafter provided. The Bank shall open a
separate custodial account in the name of the Company on the books and records
of the Bank to hold the Securities of the Company deposited with, transferred to
or collected by the Bank for the account of each Fund of the Company, and a
separate cash account to which the Bank shall credit monies received by the Bank
for the account of or from each Fund of the Company. Such cash shall be
segregated from the assets of any and all other accounts of the Company and
shall be and remain the sole property of the Company.
SECTION 3. The Company shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Directors authorizing certain
person or persons to give Proper Instructions and specifying the class of
instructions that may be given by each person to the Custodian under this
Agreement, together with certified signatures of such persons authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and signatories designated therein to act, and shall be considered in
full force and effect with the Custodian fully protected in acting in reliance
thereon until it receives written notice to the contrary; provided, however,
that if the certifying officer is authorized to give Proper Instructions, the
certification shall be also signed by a second officer of the Company.
SECTION 4. The Company will cause to be deposited with the Custodian hereunder
the applicable net asset value of the Shares sold from time to time whether
representing initial issue, other stock or reinvestments of dividends and/or
distributions payable to Shareholders.
SECTION 5. The Bank, acting as agent for the Company, is authorized, directed
and instructed, subject to the further provisions of this Agreement:
(a) to hold Securities issued only on bearer from in bearer form
(b) to register in the name of the nominee of the Bank, the Bank's
Depositories, or sub-custodians, (I) Securities issued only in
registered form, and (ii) Securities issued in both bearer and
registered form, which are freely interchangeable without penalty;
(c) to deposit any securities which are eligible foe deposit (I) with any
domestic or foreign Depository on such terms and conditions as such
Depository may require, including provisions for limitation or
exclusion of liability on the part of the Depository; and (ii) with
any sub-custodian which the Bank uses, including any subsidiary or
affiliate of the Bank;
(d) (i) to credit for the account of the Company all proceeds received
and payable on or in respect of the assets maintained hereunder.
(ii) to debit the account of the Company for the cost of acquiring
Securities the Bank has received for the Company, against
delivery of such Securities to the Bank;
(iii)to present for payment Securities and other obligations
(including coupons) upon maturity, when called foe redemption,
and when income payments are due, and
(iv) to make exchanges of Securities which, in the Bank's opinion, are
purely ministerial as, for example, the exchange of Securities in
temporary for Securities in definitive form or the mandatory
exchange of certificates;
(e) to forward to the Company, and/or any other person designated by the
Company, all proxies and proxy materials received by the Bank in
connection with Securities held in the Company's account, which have
been registered in the name of the Bank's nominee, or being held by
any Depository, or sub-custodian, on behalf of the Bank;
(f) to sell any fractional interest of any Securities which the Bank has
received resulting from any stock dividend, stock split, distribution,
exchange, conversion or similar activity;
(g) to release the Company's name, address and aggregate share position to
the issuers of any domestic Securities in the account of the Company,
provided any such information to any issuer;
(h) to endorse and collect all checks, drafts or other orders for the
payment of money received by the Bank for the account of or from the
Company;
(i) at the direction of the Company, to enroll designated Securities
belonging to the Company and held hereunder in a program for the
automatic reinvestment of all income and capital gains distributions
on those Securities in new shares (an "Automatic Reinvestment
Program"), or instruct any Depository holding such Securities to
enroll those Securities in an Automatic Reinvestment Program;
(j) At the direction of the Company, to receive, deliver and transfer
Securities and make payments and collections of monies in connection
therewith, enter purchase and sale orders and perform any other acts
incidental or necessary to the performance of the above acts with
brokers, dealer or similar agents selected by the Company, including
any broker, dealer or similar agent affiliated with the Bank, for the
account and risk of the Company in accordance with accepted industry
practice in the relevant market, provided, however, if it so
determined that any certificated Securities transferred to a
Depository or sub-custodian, the Bank, or the Banks nominee, the
Bank's sole responsibility for such Securities under this Agreement
shall be to safekeep the Securities in accordance with Section 11
hereof; and
(k) to notify the Company and/or any other person designated by the
Company upon receipt of notice by the Bank of any call for redemption,
render offer, subscription, rights, merger, consolidation,
reorganization or recapitalization which (I) appears in The Wall
Street Journal (New York edition), The Standard & Poor's Called Bond
Record for Preferred Stocks, Financial Daily Called Bond Service, The
Kenny Services, any official notifications from The Depository Trust
Company and such other publications or services to which the Bank may
from time to time subscribe, (ii) requires the Bank to act in response
thereto and (iii) pertain to Securities belonging to the Company and
held hereunder which have been registered in the name of the Bank's
nominee or are being held by a Depository or sub-custodian on behalf
of the Bank. Notwithstanding anything contained herein to the
contrary, the Company shall have the sole responsibility for
monitoring the applicable dates on which Securities with put option
features must be exercised. All solicitation fees payable to the Bank
unless expressly agreed to the contrary in writing by the Bank.
Notwithstanding anything in this Section to the contrary, the Bank is authorized
to hold Securities for the Company which have transfer limitations imposed upon
them by the Securities Act of 1933, as amended, or represent shares of mutual
funds (I) in the name of the Company, (ii) in the name of the Bank's nominee, or
(iii) with any Depository or sub-custodian
SECTION 6. The Custodian's compensation shall be as set forth in Schedule A
hereto attached, or as shall be set forth in amendments to such schedule
approved by the Company and the Adviser and to the extent such compensation
relates to services provided hereunder to such Fund. All expenses and taxes
payable with respect to the Securities in the account of the Company including,
without limitation, commission charges on purchases and sales and the amount of
any loss or liability for stockholders' assessments or otherwise, claimed or
asserted against the Bank's nominee by reason of any registration hereunder
shall be charged to the Adviser.
SECTION 7. In connection with its functions under this Agreement, the Custodian
shall:
(a) render to the Company a daily report of all monies received or paid on
behalf of the Company; and
(b) create, maintain, and retain all records relating to its activities
and obligations under this Agreement in such manner as will meet the
obligations of the Company with respect to the Custodian's activities
in accordance with generally accepted accounting principles. All
records maintained by the Custodian in connection with the performance
of its duties under this Agreement will remain the property of the
Company, and in the event of termination of this Agreement, will be
relinquished to the Company.
SECTION 8. Any Securities deposited with any Depository or with any
sub-custodian will be represented in accounts in the name of the Bank which
include only property held by the Bank as Custodian for customers in which the
Bank acts in a fiduciary or agency capacity.
Should any Securities which are forwarded to the Bank by the Company, and which
are subsequently deposited to the Bank's account in any Depository or with any
sub-custodian, or which the Company may arrange to deposit in the Bank's account
in any Depository or with any sub-custodian, not be deemed acceptable for
deposit by such Depository or sub-custodian, for any reason, and as a result
thereof there is a short position in the account of the Bank with the Depository
for such Security, the Company agrees to furnish the Bank immediately with like
Securities in acceptable form.
SECTION 9. The Company represents and warrants that: (I) it has the legal right,
power and authority to execute, deliver and perform this Agreement and to carry
out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated and
performance of this Agreement and the carrying out of any of the transactions
contemplated hereby will not be in conflict with, result in a breach of or
constitute a default under any agreement or other instrument to which the
Company is a party of which is otherwise known to the Company; (iv) it does not
require the consent of approval of any governmental agency or instrumentality,
except any such consents and approvals which the Company has obtained; (v) the
execution and delivery of this Agreement by the Company will not violate any
law, regulation, charter, by-law, order of any court or governmental agency or
judgement applicable to the Company; and (vi) all persons executing this
Agreement on behalf of the Company are duly authorized to do so.
In the event any of the foregoing representation should become untrue, incorrect
or misleading, the Company agrees to notify the Bank immediately in writing
thereof.
The Adviser represents and warrants that: (I) it has the legal right, power and
authority to execute, deliver and perform this Agreement and to carry out all of
the transactions contemplated hereby; (ii) it has obtained all necessary
authorizations; (iii) the execution, delivery and performance of this Agreement
and the carrying out of any of the transactions contemplated and performance of
this Agreement and the carrying out of any of the transactions contemplated
hereby will not be in conflict with, result in a breach of or constitute a
default under any agreement or other instrument to which the Adviser is a party
of which is otherwise known to the Adviser; (iv) it does not require the consent
of approval of any governmental agency or instrumentality, except any such
consents and approvals which the Adviser has obtained; (v) the execution and
delivery of this Agreement by the Adviser will not violate any law, regulation,
charter, by-law, order of any court of governmental agency or judgement
applicable to the Adviser; and (vi) all persons executing this Agreement on
behalf of the Adviser are duly authorized to do so.
In the event any of the foregoing representation should become untrue, incorrect
or misleading, the Adviser agrees to notify the Bank immediately in writing
thereof.
SECTION 10. The Bank represents and warrants that: (I) it has the legal right,
power and authority to execute, deliver and perform this Agreement and to carry
out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated hereby
will not be in conflict with, result in a breach of or constitute a default
under any agreement or other instrument to which the Bank is a party or which is
otherwise known to the Bank; (iv) it does not require the consent or approval of
any governmental agency or instrumentality, except any such consents or
approvals which the Bank has obtained; (v) the execution and delivery of this
Agreement by the Bank will not violate any law, regulation, charter, by-law,
order of any court or governmental agency or judgement applicable to the Bank;
and (vi) all persons executing this Agreement on behalf of the Bank and carrying
out the transactions contemplated hereby on behalf of the Bank are duly
authorized to do so. In the event that any of the foregoing representations
should become untrue, incorrect or misleading, the Bank agrees to notify the
Company and the Adviser immediately in writing thereof.
SECTION 11. All cash and Securities held by the Bank hereunder shall be kept
with the care exercised as to the Bank's own similar property. The Bank may at
its option insure itself against loss from any cause but shall be under no
obligation to insure for the benefit of the Company.
SECTION 12. No liability of any kind shall by attached to or incurred by the
Custodian by reason of its custody of the Company's assets held by it from time
to time under this Agreement, or otherwise by reason of its position as
Custodian hereunder except only for its own negligence, bad faith, or willful
misconduct in the performance of its duties as specifically set forth in the
this Agreement. Without limiting the generality of the foregoing sentence, the
Custodian:
(a) may rely upon the advice of counsel for the Company; and for any
action taken or suffered in good faith based upon such advice or
statements the Custodian shall not be liable to anyone;
(b) shall not be liable for anything done or suffered to be done in good
faith in accordance with any request or advice of, or based upon
information furnished by, the Company or its authorized officers or
agents;
(c) is authorized to accept a certificate of the Secretary or Assistant
Secretary of the Company, or Proper Instructions, to the effect that a
resolution in the form submitted has been duly adopted by its Board of
Directors or by the Shareholders, as conclusive evidence that such
resolution has been duly adopted and is in full force and effect; and
(d) may rely and shall be protected in acting upon any signature, written
(including telegraph or other mechanical) instructions, request,
letter of transmittal, certificate, opinion of counsel, statement,
instrument, report, notice, consent, order, or other paper or document
reasonably believed by it to b genuine and to have been signed,
forwarded or presented by the purchaser, Company or other proper party
or parties.
SECTION 13. The Company, its successors and assigns do hereby fully indemnify
and hold harmless the Custodian its successors and assigns, from any and all
loss, liability, claims, demand, actions, suits and expenses of any nature as
the same may arise from the failure of the Company to comply with any law, rule,
regulation, or order of the United States, any state or any other jurisdiction,
governmental authority, body, or board relating to the sale, registration,
qualification of units of beneficial interest in the Company, or from the
failure of the Company to perform any duty or obligation under this Agreement.
Upon written request of the Custodian, the Company shall assume the entire
defense of any claim subject to the foregoing indemnity, or the joint defense
with the Custodian of such claim, as the Custodian shall request. The
indemnities and defense provisions of this Section 13 shall indefinitely survive
termination of this Agreement.
SECTION 14. This Agreement may be amended from time to time without notice to or
approval of the Shareholders by a supplemental agreement executed by the
Company, the Adviser and the Bank amending and supplementing this Agreement in
the manner mutually agreed.
SECTION 15. Either the Company or the Custodian may give one-hundred and twenty
days' (120) written notice to the other of the termination of this Agreement,
such termination to take effect at the time specified in the notice. In case
such notice of termination is given either by the Company or by the Custodian,
the Directors of the Company shall, by resolution duly adopted, promptly appoint
a successor Custodian, (the "Successor Custodian") which Successor Custodian
shall be a bank or a Trust company in good standing, with legal capacity to
accept custody of the cash and Securities of a mutual fund. Upon receipt of
Proper Instructions, the Custodian shall deliver such cash and Securities as it
may then be holding hereunder directly as above provided, the Custodian then
acting shall continue to act as Custodian under this Agreement.
Every Successor Custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, powers, obligations and custody of its predecessor
Custodian. The Custodian ceasing to act shall nevertheless, upon request of the
Company and the Successor Custodian and upon payment of its charges and
disbursements, execute and instrument in form approved by its counsel
transferring to the Successor Custodian all the predecessor Custodian's rights,
duties, obligations and custody.
Subject to the provisions of Section 21 hereof, in case the Custodian shall
consolidate with or merge into any other corporation, the corporation remaining
after or resulting from such consolidation or merger shall ipso facto without
the execution or filing of any papers or other documents, succeed to and be
substituted for the Custodian with like effect as though originally named as
such, provided, however, in every case that said Successor corporation maintains
the qualifications set out in Section 17(f) of the Investment Company Act of
1940, as amended.
SECTION 16. This Agreement shall take effect when assets of the Company are
first delivered to the Custodian.
SECTION 17. This Agreement may be executed in two or more counterparts, each of
which when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
SECTION 18. A copy of the Articles of Incorporation of the Company is on file
with the Secretary of State of Maryland, and notice is hereby given that this
instrument is executed on behalf of the Company only, and that the obligations
of this instrument are not binding upon any of the Directors, officers or
Shareholders of the Company individually, but binding only upon the assets and
property of the Company. No Fund of the Company shall be liable for the
obligations of any other Fund of the Company.
SECTION 19. The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Company under the Investment Company Act of 1940, as amended,
with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, applicable Federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Company.
Subject to security requirements of the Custodian applicable to its own
employees having access to similar records within the Custodian, the books and
records of the Custodian pertaining to this Agreement shall be open to
inspection and audit at any reasonable times by officers of, attorneys for, and
auditors employed by, the Company.
SECTION 20. Any sub-custodian appointed hereunder shall be qualified under
Section 17(f) of the 1940 act and will perform its duties in accordance with the
requirements of this Agreement.
SECTION 21. Nothing contained in this Agreement is intended to or shall require
the Custodian in any capacity hereunder to perform any functions or duties on
any holiday or other day of special observance on which the Custodian is closed.
Functions or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day the Custodian is open.
SECTION 22. This Agreement shall extent to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Company without the written consent of
the Custodian, or by the Custodian without the written consent of the Company,
authorized or approved by a resolution of its Board of Directors.
SECTION 23. All communications (other that Proper Instructions which are to be
furnished hereunder to either party, or under any amendment hereto, shall be
sent by mail to the address listed below, provided that in the event that the
Bank, in its sole discretion, shall determine that an emergency exists, the Bank
may use such other means of communication as the Bank deems advisable.
To the Company: Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, NC 27113
To the Adviser: Salem Investment Counselors, Inc.
480 Shepherd Street
Winston-Salem, NC 27113
To the Bank: CoreStates Bank N.A.
530 Walnut St.
Philadelphia, PA 19101-7618
SECTION 24. This Agreement, and any amendments hereto, shall be governed,
construed, and interpreted in accordance with the laws of The Commonwealth of
Pennsylvania applicable to agreements made and to be performed entirely within
such Commonwealth.
SECTION 25. Fees and expenses
As compensation for its services under this Agreement, the Custodian may retain
those fees which are specified in its published or otherwise generally
applicable fee schedule in effect at the time its services are being rendered.
The Company recognizes that this schedule might be changed from time to time
with prior notice to the Company.
MUTUAL FUND CUSTODY ADMINISTRATIVE FEES
1.0 basis points on the first $2.5 billion
.75 basis points on the next $2.5 billion
.50 basis points on the next $5.0 billion
.40 basis points on the remainder
MINIMUM ANNUAL FEE: $3,500
TRANSACTION FEES
$ 4.00 per trade and maturity through Depository Trust Company via DepLink
$10.00 per trade and maturity through Depository Trust Company via non DepLink
$10.00 per trade and maturity clearing book entry through Federal Reserve
$30.00 per transaction for GIC contracts/Physical Securities
$10.00 per trade and maturity clearing through Participants Trust Company
$ 4.00 paydowns on mortgage-backed securities
$ 5.50 Fed wire charge on Repo collateral in/out
$ 5.50/$7.50 other wired transfers in/out
$ 5.50 dividend reinvestment
$ 2.50 Fed charge for sale/return of collateral
$ 8.00 future contracts
$15.00 options
IN WITNESS WHEREOF, The Company, the Adviser and the Custodian have caused this
Agreement to be signed by their respective officers as of the day and year first
above written.
SHEPHERD STREET SALEM INVESTMENT
FUNDS, INC. COUNSELORS, INC.
- ----------------------- ----------------------
By: David B. Rea By: Jeffrey C. Howard
President Vice President
CORESTATES BANK N.A.
- -----------------------
Paul T. Cahill
Vice President
- --------------------------------------------------------------------------------
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Pre-Effective Amendment to the
Registration Statement on Form N-1A of The Shepherd Street Funds, Inc. and to
the use of our report dated September 23, 1998 on the statement of assets and
liabilities of The Shepherd Street Equity Fund ("FUND"). Such statement of
assets and liabilities appears in the Fund's Statement of Additional
Information.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
September 23, 1998
- --------------------------------------------------------------------------------
EXHIBIT 13
SUBSCRIPTION AGREEMENT
The Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, NC
Gentlemen:
The undersigned ("Subscriber") hereby subscribes for and agrees to acquire
from The Shepherd Street Funds, Inc., a corporation incorporated under the laws
of the State of Maryland (the "Corporation"), the number of shares of $.0001 par
value Common stock of The Shepherd Street Equity Fund (the "Shares") of the
Corporation shown below in consideration of a cash contribution of $20,000
($10.00 per share).
Subscriber hereby represents and warrants to the Corporation that:
(a) Subscriber hereby acknowledges and agrees that the shares will be
issued in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933 (the "Securities Act"), and
that such Shares will or may also be issued in reliance upon the
exemptions from registration contained in relevant sections of the
Maryland Securities Act and/or comparable exemptions contained in the
securities laws of other jurisdictions to the extent applicable, and
that the transfer of such shares may be restricted or limited as a
condition to the availability of such exemptions.
(b) The shares are being purchased for investment for the account of the
undersigned and without the intent of participating directly or
indirectly in a distribution of such Shares, and the Shares will not
be transferred except in a transaction that is in compliance with any
and all applicable securities laws.
(c) Subscriber has been supplied with, or has had access to, all
information, including financial statements and other financial
information, of the Corporation, to which a reasonable investor would
attach significance in making investment decisions, and has had the
opportunity to ask questions of, and receive answers from,
knowledgeable individuals concerning the Corporation and the Shares.
(d) Subscriber understands that no registration statement or prospectus
with respect to the corporation or the shares is yet effective, and
Subscriber has made his own inquiry and analysis with respect to the
Corporation and the shares.
(e) Subscriber personally, or together with his purchaser representative,
has such knowledge and experience in financial and business matters to
be capable of evaluating the merits and risks of an investment in the
Corporation and the Shares.
(f) Subscriber is financially able to bear the economic risk of this
investment, can afford to hold the shares for an indefinite period and
can afford a complete loss of this investment. Subscriber has no
present plans to sell or otherwise dispose of the Shares.
Dated as of the 23rd day of September, 1998
Shares of
The Shepherd Street Equity Fund Subscribed Purchase Amount
------------------------------------------ ---------------
2,000 $20,000
SUBSCRIBED BY:
-------------------------------------
DAVID B. REA
ACCEPTED BY:
THE SHEPHERD STREET FUNDS, INC.
-------------------------------------
DAVID B. REA
PRESIDENT
<PAGE>
SUBSCRIPTION AGREEMENT
The Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, NC
Gentlemen:
The undersigned ("Subscriber") hereby subscribes for and agrees to acquire
from The Shepherd Street Funds, Inc., a corporation incorporated under the laws
of the State of Maryland (the "Corporation"), the number of shares of $.0001 par
value Common stock of The Shepherd Street Equity Fund (the "Shares") of the
Corporation shown below in consideration of a cash contribution of $20,000
($10.00 per share).
Subscriber hereby represents and warrants to the Corporation that:
(d) Subscriber hereby acknowledges and agrees that the shares will be
issued in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933 (the "Securities Act"), and
that such Shares will or may also be issued in reliance upon the
exemptions from registration contained in relevant sections of the
Maryland Securities Act and/or comparable exemptions contained in the
securities laws of other jurisdictions to the extent applicable, and
that the transfer of such shares may be restricted or limited as a
condition to the availability of such exemptions.
(e) The shares are being purchased for investment for the account of the
undersigned and without the intent of participating directly or
indirectly in a distribution of such Shares, and the Shares will not
be transferred except in a transaction that is in compliance with any
and all applicable securities laws.
(f) Subscriber has been supplied with, or has had access to, all
information, including financial statements and other financial
information, of the Corporation, to which a reasonable investor would
attach significance in making investment decisions, and has had the
opportunity to ask questions of, and receive answers from,
knowledgeable individuals concerning the Corporation and the Shares.
(d) Subscriber understands that no registration statement or prospectus
with respect to the corporation or the shares is yet effective, and
Subscriber has made his own inquiry and analysis with respect to the
Corporation and the shares.
(e) Subscriber personally, or together with his purchaser representative,
has such knowledge and experience in financial and business matters to
be capable of evaluating the merits and risks of an investment in the
Corporation and the Shares.
(f) Subscriber is financially able to bear the economic risk of this
investment, can afford to hold the shares for an indefinite period and
can afford a complete loss of this investment. Subscriber has no
present plans to sell or otherwise dispose of the Shares.
Dated as of the 23rd day of September, 1998
Shares of
The Shepherd Street Equity Fund Subscribed Purchase Amount
------------------------------------------ ---------------
2,000 $20,000
SUBSCRIBED BY:
-------------------------------------
WILLIAM R. WATSON
ACCEPTED BY:
THE SHEPHERD STREET FUNDS, INC.
-------------------------------------
DAVID B. REA
PRESIDENT
<PAGE>
SUBSCRIPTION AGREEMENT
The Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, NC
Gentlemen:
The undersigned ("Subscriber") hereby subscribes for and agrees to acquire
from The Shepherd Street Funds, Inc., a corporation incorporated under the laws
of the State of Maryland (the "Corporation"), the number of shares of $.0001 par
value Common stock of The Shepherd Street Equity Fund (the "Shares") of the
Corporation shown below in consideration of a cash contribution of $20,000
($10.00 per share).
Subscriber hereby represents and warrants to the Corporation that:
(g) Subscriber hereby acknowledges and agrees that the shares will be
issued in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933 (the "Securities Act"), and
that such Shares will or may also be issued in reliance upon the
exemptions from registration contained in relevant sections of the
Maryland Securities Act and/or comparable exemptions contained in the
securities laws of other jurisdictions to the extent applicable, and
that the transfer of such shares may be restricted or limited as a
condition to the availability of such exemptions.
(h) The shares are being purchased for investment for the account of the
undersigned and without the intent of participating directly or
indirectly in a distribution of such Shares, and the Shares will not
be transferred except in a transaction that is in compliance with any
and all applicable securities laws.
(i) Subscriber has been supplied with, or has had access to, all
information, including financial statements and other financial
information, of the Corporation, to which a reasonable investor would
attach significance in making investment decisions, and has had the
opportunity to ask questions of, and receive answers from,
knowledgeable individuals concerning the Corporation and the Shares.
(d) Subscriber understands that no registration statement or prospectus
with respect to the corporation or the shares is yet effective, and
Subscriber has made his own inquiry and analysis with respect to the
Corporation and the shares.
(e) Subscriber personally, or together with his purchaser representative,
has such knowledge and experience in financial and business matters to
be capable of evaluating the merits and risks of an investment in the
Corporation and the Shares.
(f) Subscriber is financially able to bear the economic risk of this
investment, can afford to hold the shares for an indefinite period and
can afford a complete loss of this investment. Subscriber has no
present plans to sell or otherwise dispose of the Shares.
Dated as of the 23rd day of September, 1998
Shares of
The Shepherd Street Equity Fund Subscribed Purchase Amount
------------------------------------------ ---------------
2,000 $20,000
SUBSCRIBED BY:
-------------------------------------
ROBERT T. BEACH
ACCEPTED BY:
THE SHEPHERD STREET FUNDS, INC.
-------------------------------------
DAVID B. REA
PRESIDENT
<PAGE>
SUBSCRIPTION AGREEMENT
The Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, NC
Gentlemen:
The undersigned ("Subscriber") hereby subscribes for and agrees to acquire
from The Shepherd Street Funds, Inc., a corporation incorporated under the laws
of the State of Maryland (the "Corporation"), the number of shares of $.0001 par
value Common stock of The Shepherd Street Equity Fund (the "Shares") of the
Corporation shown below in consideration of a cash contribution of $20,000
($10.00 per share).
Subscriber hereby represents and warrants to the Corporation that:
(j) Subscriber hereby acknowledges and agrees that the shares will be
issued in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933 (the "Securities Act"), and
that such Shares will or may also be issued in reliance upon the
exemptions from registration contained in relevant sections of the
Maryland Securities Act and/or comparable exemptions contained in the
securities laws of other jurisdictions to the extent applicable, and
that the transfer of such shares may be restricted or limited as a
condition to the availability of such exemptions.
(k) The shares are being purchased for investment for the account of the
undersigned and without the intent of participating directly or
indirectly in a distribution of such Shares, and the Shares will not
be transferred except in a transaction that is in compliance with any
and all applicable securities laws.
(l) Subscriber has been supplied with, or has had access to, all
information, including financial statements and other financial
information, of the Corporation, to which a reasonable investor would
attach significance in making investment decisions, and has had the
opportunity to ask questions of, and receive answers from,
knowledgeable individuals concerning the Corporation and the Shares.
(d) Subscriber understands that no registration statement or prospectus
with respect to the corporation or the shares is yet effective, and
Subscriber has made his own inquiry and analysis with respect to the
Corporation and the shares.
(e) Subscriber personally, or together with his purchaser representative,
has such knowledge and experience in financial and business matters to
be capable of evaluating the merits and risks of an investment in the
Corporation and the Shares.
(f) Subscriber is financially able to bear the economic risk of this
investment, can afford to hold the shares for an indefinite period and
can afford a complete loss of this investment. Subscriber has no
present plans to sell or otherwise dispose of the Shares.
Dated as of the 23rd day of September, 1998
Shares of
The Shepherd Street Equity Fund Subscribed Purchase Amount
------------------------------------------ ---------------
2,000 $20,000
SUBSCRIBED BY:
-------------------------------------
JEFFREY C. HOWARD
ACCEPTED BY:
THE SHEPHERD STREET FUNDS, INC.
-------------------------------------
DAVID B. REA
PRESIDENT
<PAGE>
SUBSCRIPTION AGREEMENT
The Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, NC
Gentlemen:
The undersigned ("Subscriber") hereby subscribes for and agrees to acquire
from The Shepherd Street Funds, Inc., a corporation incorporated under the laws
of the State of Maryland (the "Corporation"), the number of shares of $.0001 par
value Common stock of The Shepherd Street Equity Fund (the "Shares") of the
Corporation shown below in consideration of a cash contribution of $20,000
($10.00 per share).
Subscriber hereby represents and warrants to the Corporation that:
(m) Subscriber hereby acknowledges and agrees that the shares will be
issued in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933 (the "Securities Act"), and
that such Shares will or may also be issued in reliance upon the
exemptions from registration contained in relevant sections of the
Maryland Securities Act and/or comparable exemptions contained in the
securities laws of other jurisdictions to the extent applicable, and
that the transfer of such shares may be restricted or limited as a
condition to the availability of such exemptions.
(n) The shares are being purchased for investment for the account of the
undersigned and without the intent of participating directly or
indirectly in a distribution of such Shares, and the Shares will not
be transferred except in a transaction that is in compliance with any
and all applicable securities laws.
(o) Subscriber has been supplied with, or has had access to, all
information, including financial statements and other financial
information, of the Corporation, to which a reasonable investor would
attach significance in making investment decisions, and has had the
opportunity to ask questions of, and receive answers from,
knowledgeable individuals concerning the Corporation and the Shares.
(d) Subscriber understands that no registration statement or prospectus
with respect to the corporation or the shares is yet effective, and
Subscriber has made his own inquiry and analysis with respect to the
Corporation and the shares.
(e) Subscriber personally, or together with his purchaser representative,
has such knowledge and experience in financial and business matters to
be capable of evaluating the merits and risks of an investment in the
Corporation and the Shares.
(f) Subscriber is financially able to bear the economic risk of this
investment, can afford to hold the shares for an indefinite period and
can afford a complete loss of this investment. Subscriber has no
present plans to sell or otherwise dispose of the Shares.
Dated as of the 23rd day of September, 1998
Shares of
The Shepherd Street Equity Fund Subscribed Purchase Amount
------------------------------------------ ---------------
2,000 $20,000
SUBSCRIBED BY:
-------------------------------------
DALE M. BROWN
ACCEPTED BY:
THE SHEPHERD STREET FUNDS, INC.
-------------------------------------
DAVID B. REA
PRESIDENT
- --------------------------------------------------------------------------------
EXHIBIT 13.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below consititutes and appoints David B. Rea and Jeffrey C. Howard, or either of
them, as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Given and signed in Winston-Salem, North Carolina, on September 3, 1998.
By: _________________ By: _________________
David B. Rea Robert T. Beach
By: _________________ By: _________________
William R Watson James T. Broyhill
By: __________________ By: _________________
Ralph Stockton Helen C. Haynes
- --------------------------------------------------------------------------------
EXHIBIT 17
FINANCIAL DATA SCHEDULE
The Company was established on July 17, 1998 and will commence offering shares
of the Fund on October 1, 1998. The Fund is a newly created fund, and as such,
has not yet developed an operating history. Financial Statements of the Fund
will be included in the Statement of Additional Information as they become
available and as required by law, [unless previously provided, in which event
the Company will promptly provide another copy, free of charge, upon request to:
Declaration Service Company, P.O. Box 844, Conshohocken, Pennsylvania
19428-0844.
