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PROSPECTUS
July 9, 1999
The Shepherd Street Equity Fund(TM)
(the "Fund")
A Series of The Shepherd Street Funds, Inc.
480 Shepherd Street
Winston-Salem, North Carolina 27103
1-888-575-4800
The Fund's primary investment objective is growth of capital. 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
$1,000 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.
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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RISK/RETURN SUMMARY
Investment Objectives and Goals
The Fund's primary investment objective is to achieve growth of capital.
Principal Investment Strategies
The Fund attempts to achieve its investment objectives by investing primarily
in a diversified portfolio of US common stocks and securities convertible into
common stocks.
The Fund invests at least 65% of its assets in domestic common stocks or
securities convertible into common stocks. The Fund's Adviser invests in the
securities of companies that, in the Adviser's opinion, have an above-average
potential for future earnings growth. Generally, the Adviser will invest in:
(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 (less than $6 billion in total market
capitalization) 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 Adviser's opinion, such investments
would be advantageous to the Fund and help the Fund to achieve its investment
objective. However, the Fund will not invest in foreign markets that are
considered to be "emerging markets".
Principal Risks of Investing in the Fund
General Risks- You may lose money by investing in the Fund. Your risk of loss
is greater if you hold your investment for shorter time periods. The 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.
When you sell your Fund shares, they may be worth more or less than what you
paid for them.
Year 2000 Risks- As with other mutual funds, financial and business
organizations around the world, the Fund could be adversely affected if the
computer systems used by the Adviser and the Fund's other service providers
don't properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000" or "Y2K"
problem. The Adviser is taking steps to address the Y2K problem with respect to
the computer systems that it uses and to obtain assurances that comparable
steps are being taken by the Funds' other major service providers. The Adviser
is also seeking ways to minimize the potential disruptions that may occur as a
result of lack of preparation by the companies in which the Fund invests.
However, there can be no assurance that the problem will be corrected in all
respects and that the Fund's operations and services provided to shareholders
will not be adversely affected nor can there be any assurance that the year
2000 problem will not have any adverse affect on the entities whose securities
are held by the Fund or on domestic or global equity markets or economies,
generally. The Adviser is considering and will continue to monitor the
potential effects on the Fund of Y2K risks on the Fund's investments.
Stock Market Risk. The principal risk of investing in the Fund is the risk of
losses due to declines in the prices of the common stocks held by the Fund. The
Fund invests primarily in common stock, so the Fund will be subject to the
risks associated with common stocks, including price volatility and the
creditworthiness of the issuing company. The stock market trades in cyclical
price patterns, with prices generally rising or falling over time. These
cyclical periods may last for a significant period of time.
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Small To Medium-Cap Stocks Risks- The Fund may invest in companies with smaller
market capitalizations (less than $6 billion in market capitalization). These
companies are relatively smaller, engaged in business mostly within their own
geographic region, and may be less well-known to the investment community.
Smaller, newer companies have more volatile share prices for several reasons.
Small companies often have less liquidity, less management depth, narrower
market penetrations, less diverse product lines, and fewer resources than
larger companies. As a result, their stock prices react more violently to
changes in the marketplace.
Foreign Securities Risks- Investments in foreign securities involve greater
risks compared to domestic investments. Foreign companies are not subject to
the regulatory requirements of U.S. companies and, as such, there may be less
publicly available information about issuers than is available in the reports
and ratings published about companies in the U.S. Additionally, foreign
companies are not subject to uniform accounting, auditing and financial
reporting standards. Dividends and interest on foreign securities may be
subject to foreign withholding taxes. Such taxes may reduce the net return to
shareholders. Further, foreign securities are often denominated in a currency
other than the U.S. dollar. Accordingly, the Fund will be subject to the risks
associated with fluctuations in currency values. 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.
Management Risk- The Fund has a limited operating history, and this may pose
additional risks. Further, the Fund's Adviser has no previous experience
providing investment advice to a mutual fund. There is no assurance that the
Fund can achieve its investment objective, since all investments are inherently
subject to market risk.
PERFORMANCE
Because the Fund has not completed its first full year of operations, a
performance bar chart and table describing the Fund's annual performance and
comparing that performance to appropriate indices is not yet available. Annual
performance information will be included in the Fund's first Annual Report,
which will be issued after the end of the Fund's fiscal year, September 30,
1999. Performance information concerning the Fund's first six months of
operations is contained in the "Financial Highlights" Section of this
Prospectus and in the Fund's Semi-Annual Report, dated March 31, 1999.
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FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
Shareholder Fees:
(fees paid directly from your investment)
Redemption Fees ............................... 0.50%(1)
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)
Management Fees(2) .............................. 1.00%
Distribution (12b-1) Fees(3) .................... 0.25%
Other Expenses(4) ............................... 0.05%
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Total Annual Fund Operating Expenses(5) ......... 1.30%
(1) The Fund will charge you a redemption fee of 0.5% of the value of your
redemption if you redeem your shares less than 6 months after purchasing
them. If charged, this fee would increase your costs. 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.
(2) Management fees include a fee of 0.40% for investment advisory services and
0.60% for administrative and other services. Both fees are paid to the
Fund's Adviser.
(3) Because 12b-1 fees are paid out of the assets of the Fund on an ongoing
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
(4) Because the Fund has not yet completed its first full year of operations,
these expenses are estimates.
(5) The Adviser has voluntarily agreed to waive receipt of its fees and/or
assume certain expenses of the Fund, if it becomes necessary, to help
ensure that the Fund's expenses do not exceed 1.50% annually. The Adviser
may amend or terminate this agreement at any time, but will notify you in
writing at least 30 days in advance of any change.
Example: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated, reinvest all dividends and distributions, and then redeem all your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
One Year Three Years
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$ 132 $412
A redemption fee of 0.50% of net assets redeemed prior to six months is not
included in these calculations. If that fee were included, your costs would be
higher.
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FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Fund's financial performance since its inception on September 30, 1998. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has not been audited. These Financial
Highlights, along with other information concerning the Fund are included in
the Fund's semi-annual report, which is available without charge upon request.
The Shepherd Street Equity Fund
FINANCIAL HIGHLIGHTS
Per Share Data (For a Share Outstanding from October 2, 1998* through March 31,
1999)
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For the Period
Ended
March 31, 1999
(Unaudited)
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Net Asset Value, Beginning of Period $ 10.00
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Investment Operations:
Net investment income 0.02
Net realized and unrealized gain on investments 2.06
Total from investment operations 2.08
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Net Asset Value, End of Period $ 12.08
Total Return 20.80%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $ 3,886
Ratio of expenses to average net assets 1.25%(1)
Ratio of net investment income to average
net assets 0.88%(1)
Portfolio turnover rate 31.47%
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(1) Annualized
* The Shepherd Street Equity Fund commenced operations on October 2, 1998.
See notes to financial statements contained in the Fund's Semi-Annual Report.
INVESTMENT OBJECTIVES AND POLICIES
The Fund is a diversified mutual fund whose primary investment objective
is growth of capital. 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.
Described below are the types of securities in which the Fund primarily
invests. A full listing of the Fund's investment restrictions and limitations,
including those that may be changed only by vote of the Fund's shareholders,
can be found in the Fund's Statement of Additional Information ("SAI").
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Common Stocks. The Fund will ordinarily invest at least 65% of its total
assets in common stock or securities convertible into 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 common
stock of foreign issuers which are publicly traded on U.S. exchanges, either
directly or in the form of American Depository Receipts (ADRs). The Fund will
only invest in ADRs that are issuer sponsored. Sponsored ADRs typically are
issued by a U.S. bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation.
Preferred Stock. The Fund may invest, without limitation, in 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.
INVESTMENT ADVISER
Salem Investment Counselors, Inc., (the "Adviser") 480 Shepherd Street,
Winston-Salem, North Carolina 27103, an investment advisory company founded in
1979, is the investment adviser to the Fund. The Adviser 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 Adviser
has been investment adviser to the Fund since its inception. The Adviser
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 Operating Services Agreement.
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PORTFOLIO MANAGER
Mr. David B. Rea is President of the Adviser and acts as the portfolio
manager for the Fund. Mr. Rea is also President of The Shepherd Street Funds,
Inc. (the "Company"). Mr. Rea has been managing investment portfolios for
individuals, corporations, trusts and retirement accounts since joining the
Adviser in 1984. Mr. Rea has earned an MBA in finance, a law degree, and is a
Chartered Financial Analyst. He 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, neither he nor Salem Investment Counselors, Inc. has
any prior experience in managing a portfolio for an investment company, and
this may result in additional risks for the Fund.
INVESTMENT ADVISORY AGREEMENT.
The Company has entered into an Investment Advisory Agreement with the
Adviser. Under the terms of the Advisory Agreement, the Adviser, manages the
investment operations of the Fund in accordance with the Fund's investment
policies and restrictions. The Adviser furnishes an investment program for the
Fund, determines what investments should be purchased, sold and held, and makes
changes on behalf of the Company in the investments of the Fund. At all times
the Adviser's actions on behalf of the Fund are subject to the overall
supervision and review of the Board of Directors of the Company, For its
investment advisory services to the Fund, the Company pays 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.
OPERATING SERVICES AGREEMENT.
The Company has also entered into an Operating Services Agreement with the
Adviser ("Services Agreement"). Under the terms of the Services Agreement, the
Adviser provides, or arranges to provide, day-to-day operational services to
the Fund including, but not limited to;
1. accounting 6. custodial
2. administrative 7. fund share distribution
3. legal (except litigation) 8. shareholder reporting
4. dividend disbursing and transfer agent 9. sub-accounting, and
5. registrar 10. record keeping services
For its services to the Fund under this Agreement, the Fund pays 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.
Under the Services Agreement, the Adviser may, with the Company's permission,
employ third parties to assist it in performing the various services required
of the Fund. The Adviser is responsible for compensating such parties.
The Adviser has entered into an Investment Company Services Agreement with
Declaration Service Company ("DSC") to provide Transfer Agent and essentially
all administrative services for the Fund. The Adviser has also entered into a
Distribution Agreement with the Fund and Declaration Distributors, Inc. ("DDI")
wherein DDI will act as principal underwriter for the Fund's shares.
The effect of the Investment Advisory Agreement and the Operating Services
Agreement is to place a "cap" on the Fund's normal operating expenses at 1.00%.
The only other expenses incurred by the Fund are distribution (12b-1)fees,
brokerage fees, taxes, if any, legal fees relating to Fund litigation, and
other extraordinary expenses.
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In order to further limit the effect on the Fund of these other expenses, the
Adviser has voluntarily agreed to waive receipt of its fees and/ or voluntarily
assume certain fund expenses, to cap the Fund's Total Annual Expenses at not
greater than 1.50% of average net assets. If the Adviser waives fees and/or
absorbs expenses of the Fund, such an action 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 Adviser's commitment to waive fees and/or assume expenses is entirely
voluntary, and may be amended or terminated at any time upon notice to the
Board of Directors. However, should the Adviser amend or terminate its
commitment, it will notify you in writing at least 30 days prior to any change.
INVESTING IN THE FUND
Determination of Share Price
Shares of the Fund are offered at each share's net asset value ("NAV"). NAV per
share is calculated by adding the value of Fund investments, cash and other
assets, subtracting Fund liabilities, and then dividing the result by the
number of shares outstanding. The Fund generally determines the total value of
its shares by using market prices for the securities comprising its portfolio.
Securities for which quotations are not available and any other assets are
valued at a fair market value as determined in good faith by the Adviser,
subject to the review and supervision of the Board Of Directors. The Fund is a
No-Load Fund. This means that you will not be charged any sales commissions or
underwriting discounts, so 100% of your investment is always invested in shares
of the Fund.
The Fund's per share NAV is computed on all days on which the New York Stock
Exchange is open for business at the close of regular trading hours on the
Exchange, currently 4:00 p.m. East Coast time. The Fund's per share NAV will
not be computed on any day that the NYSE is closed, including holidays. Please
see the Fund's Statement of Additional Information for a listing of holidays
and other days in which the Fund's NAV will not be computed. You should be
aware that the Fund may invest in foreign securities. Foreign securities
sometimes trade on exchanges that are open on days when the New York Stock
Exchange is closed. Accordingly, when the Fund is investing in such securities,
the NAV on your shares could change on days when you cannot purchase or redeem
shares
Opening and Adding To Your Account
You can invest directly in the Fund in a number of ways. Simply choose the one
that is most convenient for you. Any questions you may have can be answered by
calling 1-888-575-4800. Payments for Fund shares should be in U.S. dollars, and
in order to avoid fees and delays, should be drawn on a U.S. bank. Please
remember that Fund management reserves the right to reject any purchase order
for Fund shares if, in the Fund's opinion, such an order would cause a material
detriment to existing shareholders. Your purchase of Fund shares is subject to
the following minimum investment amounts:
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MINIMUM
INVESTMENT TO OPEN ACCOUNT TO ADD TO AN ACCOUNT
- ------------------ ----------------- -----------------------
Regular Account $1,000 $500
IRAs $1,000 $ 50
AUTOMATIC
INVESTMENT
PLANS
- ------------------
Regular Accounts $ 1000 $100 per month minimum
IRAs $ 1000 $ 50 per month minimum
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HOW TO INVEST TO OPEN AN ACCOUNT TO ADD TO ACCOUNT
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<S> <C> <C>
By Mail Complete an Account Registration Form, Make your check payable to
make a check payable to The Shepherd The Shepherd Street Equity
Street Equity Fund and mail the Form Fund and mail it to the address
and check to The Shepherd Street Funds, at left.
Inc., c/o Declaration Service Company,
555 North Lane, Suite 6160, Please include your account
Conshohocken PA 19428 number on your check. Or use
the convenient form attached to
your regular Fund statement.
By Wire Ask your bank to wire funds to Account Ask your bank to wire
of First Union National Bank, NA, ABA immediately available funds to
#031201467 Credit: Sheperd Street the location described at the
Funds, Inc., Acct. #2014225620084 left, except that the wire should
Further Credit: The Shepherd Street purchase rather than to open a
Equity Fund. The wire should state that new account.
the purchase is to be in your name(s).
Include your name and Fund
The wire should state that you are account number.
opening a new Fund account.
Include your name(s), address and
taxpayer identification number and the
name of the Fund in which you are
purchasing shares.
Call 1-888-575-4800 to inform us that a
wire is being sent.
By Telephone Telephone transactions may not be used Call 1-888-575-4800 to make
for initial purchases If you wnat to make your purchase.
subsequent transactions via telephone,
please select this service on your account
Registration Form.
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The Shepherd Street Funds, Inc. (the "Company") wants you to be kept current
regarding the status of your account in the Fund. To assist you, the following
statements and reports will be sent to you:
Confirmation Statements After every transaction that affects your account
balance or your account registration.
Financial Reports Quarterly -- to reduce Fund expenses, only one copy
of the financial report will be mailed to each
taxpayer identification number even if you have more
than one account in the Fund.
Purchase By Mail
Your purchase order, if accompanied by payment, will be processed upon receipt
by Declaration Service Company, the Fund's Transfer Agent. If the Transfer
Agent receives your order and payment by the close of regular trading on the
Exchange (currently 4:00 p.m. East Coast time), your shares will be purchased
at the Fund's net asset value calculated at the close of regular trading on
that day. Otherwise, your shares will be purchased at the net asset value
determined as of the close of regular trading on the next business day.
The Company does not consider the U.S. Postal Service or any other independent
delivery service to be its agent. Therefore, deposit in the mail or with such
services, or receipt at Declaration Service Company's Post Office Box, of
purchase applications or redemption requests does not constitute receipt by the
Custodian or the Fund. Do not mail letters by overnight courier to the post
office box address. Correspondence mailed by overnight courier should be sent
to the Fund at:
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
The Fund reserves the right to reject purchase applications when the Fund
determines that such applications would be disadvantageous to existing
shareholders. Applications will not be accepted unless they are accompanied by
payment in U.S. funds. Payment must be made by check or money order drawn on a
U.S. bank, savings & loan or credit union. The Custodian will charge a $20.00
fee against your account, in addition to any loss sustained by the Fund, for
any payment check returned to the Custodian for insufficient funds. The Company
reserves the right to refuse to accept applications under circumstances or in
amounts considered disadvantageous to shareholders. If you place an order for
Fund shares through a securities broker, and you place your order in proper
form before 4:00 p.m. East Coast time on any business day in accordance with
their procedures, your purchase will be processed at the public offering price
calculated at 4:00 p.m. on that day, if the securities broker then transmits
your order to the Transfer Agent before the end of its business day (which is
usually 5:00 p.m. East Coast time). The securities broker must send to the
Transfer Agent immediately available funds in the amount of the purchase price
within three business days for the order.
By Financial Service Organization
If you are a client of a securities broker or other financial organization, you
should note that such organizations may charge a separate fee for
administrative services in connection with investments in Fund shares and may
impose account minimums and other requirements. These fees and requirements
would be in addition to those imposed by the Fund. If you are investing through
a securities broker or other financial organization, please refer to its
program materials for any additional special provisions or conditions that may
be different from those described in this Prospectus (for example, some or all
of the services and privileges described may not be available to you).
Securities brokers and other financial organizations have the responsibility of
transmitting purchase orders and funds, and of crediting their customers'
accounts following redemptions, in a timely manner in accordance with their
customer agreements and this Prospectus.
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Telephone Purchases
In order to be able to purchase shares by telephone, your account authorizing
such purchases must have been established prior to your call. Your initial
purchase of shares may not be made by telephone. Shares purchased by telephone
will be purchased at the per share net asset value determined at the close of
business on the day that the transfer agent receives payment through the
Automatic Clearing House. Call the Transfer Agent for details.
You may make purchases by telephone only if you have an account at a bank that
is a member of the Automated Clearing House. Most transfers are completed
within three business days of your call. To preserve flexibility, the Company
may revise or eliminate the ability to purchase Fund shares by phone, or may
charge a fee for such service, although the Company does not currently expect
to charge such a fee.
Declaration Service Company, the Fund's transfer agent, employs certain
procedures designed to confirm that instructions communicated by telephone are
genuine. Such procedures may include, but are not limited to, requiring some
form of personal identification prior to acting upon telephonic instructions,
providing written confirmations of all such transactions, and/or tape recording
all telephonic instructions. Assuming procedures such as the above have been
followed, neither the Transfer Agent nor the Fund will be liable for any loss,
cost, or expense for acting upon telephone instructions that are believed to be
genuine. The Company shall have authority, as your agent, to redeem shares in
your account to cover any such loss. As a result of this policy, you will bear
the risk of any loss unless the Fund has failed to follow procedures such as
the above. However, if the Fund fails to follow such procedures, it may be
liable for such losses.
Wire Purchases
If you purchase Fund shares by wire, you must complete and file an Account
Registration Form with the Transfer Agent before any of the shares purchased
can be redeemed. You should contact your bank (which will need to be a
commercial bank that is a member of the Federal Reserve System) for information
on sending funds by wire, including any charges that your bank may make for
these services.
Miscellaneous Purchase Information
Federal regulations require that you provide a certified taxpayer
identification number whenever you open or reopen an account. Congress has
mandated that if any shareholder fails to provide and certify to the accuracy
of the shareholder's social security number or other taxpayer identification
number, the Company will be required to withhold a percentage, currently 31%,
of all dividends, distributions and payments, including redemption proceeds, to
such shareholder as a backup withholding procedure.
For economy and convenience, share certificates will not be issued.
HOW TO SELL (REDEEM) YOUR SHARES
You may sell (redeem) your shares at any time. You may request the sale of your
shares either by mail, by telephone or by wire.
By Mail
Sale requests should be mailed via U.S. mail or overnight courier service to:
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
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The selling price of the shares being redeemed will be the Fund's per share net
asset value next calculated after receipt of all required documents in Good
Order. Payment of redemption proceeds will be made no later than the third
business day after the valuation date unless otherwise expressly agreed by the
parties at the time of the transaction.
Good Order means that the request must include:
1. Your account number.
2. The number of shares to be sold (redeemed) or the dollar value of the amount
to be redeemed.
3. The signatures of all account owners exactly as they are registered on the
account.
4. Any required signature guarantees.
5. Any supporting legal documentation that is required in the case of estates,
trusts, corporations or partnerships and certain other types of accounts.
Signature Guarantees. A signature guarantee of each owner is required to
redeem shares in the following situations, for all size transactions:
(i) if you change the ownership on your account;
(ii) when you want the redemption proceeds sent to a different address than is
registered on the account;
(iii) if the proceeds are to be made payable to someone other than the
account's owner(s);
(iv) any redemption transmitted by federal wire transfer to your bank; and
(v) if a change of address request has been received by the Company or
Declaration Service Company within 15 days previous to the request for
redemption.
In addition, signature guarantees are required for all redemptions of $10,000
or more from any Fund shareholder account. A redemption will not be processed
until the signature guarantee, if required, is received in Good Order.
Signature guarantees are designed to protect both you and the Fund from fraud.
To obtain a signature guarantee, you should visit a bank, trust company, member
of a national securities exchange or other broker-dealer, or other eligible
guarantor institution. (Notaries public cannot provide signature guarantees.)
Guarantees must be signed by an authorized person at one of these institutions,
and be accompanied by the words "Signature Guarantee."
By Telephone
You may redeem your shares in the Fund by calling the Transfer Agent at
1-888-575-4800 if you elected to use telephone redemption on your account
application when you initially purchased shares. Redemption proceeds must be
transmitted directly to you or to your pre-designated account at a domestic
bank. You may not redeem by telephone if a change of address request has been
received by the Company or the Transfer Agent within 15 days previous to the
request for redemption. During periods of substantial economic or market
changes, telephone redemptions may be difficult to implement. If you are unable
to contact the Transfer Agent by telephone, shares may be redeemed by
delivering the redemption request in person or by mail. You should understand
that with the telephone redemption option, you may be giving up a measure of
security that you might otherwise have had were you to redeem your shares in
writing. In addition, interruptions in telephone service may mean that you will
be unable to effect a redemption by telephone if desired.
Shares purchased by check for which a redemption request has been received will
not be redeemed until the check or payment received for investment has cleared,
a period that may last up to 15 days.
By Wire
You may request the redemption proceeds be wired to your designated bank if it
is a member bank or a correspondent of a member bank of the Federal Reserve
System. The Custodian charges a $10 fee for outgoing wires.
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Redemption At The Option Of The Fund
If the value of the shares in your account falls to less than $1000, the
Company may notify you that, unless your account is increased to $1000 in
value, it will redeem all your shares and close the account by paying you the
redemption proceeds and any dividends and distributions declared and unpaid at
the date of redemption. You will have thirty days after notice to bring the
account up to $1000 before any action is taken. This minimum balance
requirement does not apply to IRAs and other tax-sheltered investment accounts.
This right of redemption shall not apply if the value of your account drops
below $1000 as the result of market action. The Company reserves this right
because of the expense to the Fund of maintaining very small accounts.
DIVIDENDS AND DISTRIBUTIONS
Dividends paid by the Fund are derived from its net investment income. Net
investment income will be distributed at least annually. The Fund's net
investment income is made up of dividends received from the stocks it holds, as
well as interest accrued and paid on any other obligations that might be held
in its portfolio.
The Fund realizes capital gains when it sells a security for more than it paid
for it. The Fund may make distributions of its net realized capital gains
(after any reductions for capital loss carry forwards), generally, once a year.
Unless you elect to have your distributions paid in cash, your distributions
will be reinvested in additional shares of the Fund. You may change the manner
in which your dividends are paid at any time by writing to Declaration Service
Company, 555 North Lane, Suite 6160, Conshohocken, PA 19428.
PRINCIPAL UNDERWRITER
Declaration Distributors, Inc. ("DDI") acts as principal underwriter for the
Company. The purpose of acting as an underwriter is to facilitate the
registration of the Funds' shares under state securities laws and to assist in
the sale of shares. DDI is an affiliated company of the Fund's Transfer Agent,
Declaration Service Company. DDI is compensated by the Adviser for its services
to the Company under a written agreement for such services.
TAX CONSIDERATIONS
The Fund intends to qualify as a regulated investment company under Sub Chapter
M of the Internal Revenue Code so as to be relieved of federal income tax on
its capital gains and net investment income currently distributed to its
shareholders. To qualify as a regulated investment company, the Fund must,
among other things, derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or other income derived with respect to
its business of investing in such stock or securities, and distribute
substantially all of such income to its shareholders at least annually.
The Fund intends to distribute to shareholders, at least annually, usually in
December, substantially all net investment income and any net capital gains
realized from sales of the Fund's portfolio securities. Dividends from net
investment income and distributions from any net realized capital gains are
reinvested in additional shares of the Fund unless the shareholder has
requested in writing to have them paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to you as ordinary income. Distributions of long-term capital gains are
taxable as long-term capital gains regardless of the length of time shares in
the Fund have been held. Distributions are taxable, whether received in cash or
reinvested in shares of the Fund.
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You will be advised annually of the source of distributions for federal income
tax purposes.
If you fail to furnish your social security or other tax identification number
or to certify properly that it is correct, the Fund may be required to withhold
federal income tax at the rate of 31% (backup withholding) from your dividend,
capital gain and redemption payments. Dividend and capital gain payments may
also be subject to backup withholding if you fail to certify properly that you
are not subject to backup withholding due to the under-reporting of certain
income.
Taxable distributions generally are included in your gross income for the
taxable year in which they are received. However, dividends declared in
October, November and December and made payable to shareholders of record in
such month will be deemed to have been received on December 31st if paid by the
Fund during the following January.
Distributions by the Fund will result in a reduction in the fair market value
of the Fund's shares. Should a distribution reduce the fair market value below
your cost basis, such distribution would be taxable to you as ordinary income
or as a long-term capital gain, even though, from an investment standpoint, it
may constitute a partial return of capital. In particular, you should be
careful to consider the tax implications of buying shares of the Fund just
prior to a distribution. The price of such shares include the amount of any
forthcoming distribution so that you may receive a return of investment upon
distribution which will, nevertheless, be taxable.
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. You should consult a tax Adviser regarding the effect
of federal, state, local, and foreign taxes on an investment in the Fund.
GENERAL INFORMATION
The Fund will not issue stock certificates evidencing shares. Instead,
your account will be credited with the number of shares purchased, relieving
you of responsibility for safekeeping of certificates and the need to deliver
them upon redemption. Written confirmations are issued for all purchases of
shares.
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 S&P 500, or some other appropriate index.
According to the law of Maryland under which the Company is incorporated,
and the Company's bylaws, the Company is not required to hold an annual meeting
of shareholders unless required to do so under the Investment Company Act of
1940. Accordingly, the Company will not hold annual shareholder meetings unless
required to do so under the Act. Shareholders do have the right to call a
meeting of shareholders for the purpose of voting to remove directors. Please
see the SAI for further information on your rights as a shareholder.
DISTRIBUTION FEES
The Fund has adopted a Distribution Plan (the "12B-1 Plan"), pursuant to
which the Fund pays the Adviser a monthly fee for shareholder servicing
expenses of up to 0.25% per annum of the Fund's average daily net assets on all
of its share classes
The 12B-1 Plan provides that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's shares. 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 transac-tions by customers, and serving as the primary source of
information to customers in answering questions concerning the Fund and their
transactions with the Fund.
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Payments under the 12b-1 Plan are not tied exclusively to the distribution
and/or shareholder servicing expenses actually incurred by the Adviser, and
such payments may exceed the expenses actually incurred. The Company's Board of
Directors evaluates the Plan on a regular basis.
You should be aware that if you hold your shares for a substantial period
of time, you may indirectly pay more than the economic equivalent of the
maximum front-end sales charge allowed by the National Association of
Securities Dealers due to the recurring nature of Distribution (12b-1) fees.
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FOR MORE INFORMATION
Additional information about the Fund is available in the Fund's Statement of
Additional Information (SAI) and semi-annual report. The SAI contains more
detailed information on all aspects of the Fund. A current SAI, dated July 9,
1999, has been filed with the SEC and is incorporated by reference into (is
legally a part of) this prospectus. The Fund's semi-annual report, dated March
31, 1999, contains information concerning the Fund's performance during its
first six months of operations.
To receive information concerning the Fund, or to request a copy of the SAI or
other documents relating to the Fund, please contact the Fund at:
The Shepherd Street Funds, Inc.
c/o Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
1-888-575-4800
A copy of your requested document(s) will be sent to you within three days of
your request.
You may also receive information concerning the Fund, or request a copy of the
SAI or other documents relating to the Fund, by contacting the Securities and
Exchange Commission:
In person: at the SEC's Public Reference Room in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section, Securities and Exchange Commission,
Washington, D.C. 20549-6009 (duplicating fee required)
On the Internet: www.sec.gov
Investment Company Act No.
811-8883
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SHEPHERD
STREET
EQUITY
FUND
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TABLE OF CONTENTS
Page
-----
Risk/Return Summary ......................... 2
Fees And Expenses ........................... 4
Financial Highlights ........................ 5
Investment Objectives And Policies .......... 5
Investment Adviser .......................... 6
Investing In The Fund ....................... 8
How To Sell (Redeem) Shares ................. 11
Dividends and Distributions ................. 13
Principal Underwriter ....................... 13
Tax Considerations .......................... 13
General Information ......................... 14
Distribution Fee ............................ 14
