1933 Act Registration No. 811-9099
1940 Act Registration No. 333-66839
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [1]
Post-Effective Amendment No. [ ]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [1]
1-800 MUTUALS Fund Group, Inc.
(Formerly 1-800 Mutual Funds, Inc.)
(Exact name of registrant as specified in Charter)
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
(Address of Principle Executive Offices and Zip Code)
214-953-0066
(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:
The securities being registered by this Registration Statement will be offered
to the public as soon as practicable after this Registration Statement becomes
effective.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall became
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
1-800 MUTUALS MULTINATIONAL 25 SECTOR FUND
1-800 MUTUALS TECHNOLOGY 25 SECTOR FUND
1-800 MUTUALS HEALTH CARE 25 SECTOR FUND
1-800 MUTUALS FINANCIAL SERVICES 25 SECTOR FUND
CROSS-REFERENCE SHEET
(As required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. ON FORM N-1A CAPTION OR SUBHEADING IN PROSPECTUS
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OR STATEMENT OF ADDITIONAL INFORMATION
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PART A - INFORMATION REQUIRED IN PROSPECTUS
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<S> <C>
1. Front and Back Cover Pages. Cover Page; Back Cover Page
2. Risk/Return Summary: Investments,
Risks, and Performance. Risk/Return Summary; Fees and Expenses
3. Risk/Return Summary/ Fee Table. Fees and Expenses
4. Investment Objectives, Principal Risk/Return Summary; Investment Objectives
Investment Strategies, and Related and Policies
Risks
5. Management's Discussion of Not Applicable
Fund Performance
6. Management, Organization and Investment Adviser; General Information
Capital Structure
7. Shareholder Information Investing in the Fund; How to Sell (Redeem)
Your Shares; Distribution Fee; Federal Taxes; General
Information; Dividends and Distributions
8. Distribution Arrangements Distribution Fee
9. Financial Highlights Information Not Applicable
PART B. STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Management of the Fund
12. Description of the Fund and its Investment Policies and Restrictions
Investments and Risks
13. Management of the Fund. Investment Adviser; Directors and Officers
14. Control Persons and Principal Directors and Officers; Principal Holders of
Holders of Securities. Securities
15. Investment Advisory and other Investment Adviser; Custodian; Transfer Agent;
Services. Administration
16. Brokerage Allocation and Other
Practices Portfolio Transactions
17. Capital Stock and Other Portfolio Transactions
Securities.
18. Purchase, Redemption and Pricing Purchasing and Redeeming Shares
of Securities Being Offered
19. Taxation of the Fund. Tax Information
20. Underwriters Transfer Agent; Administration
and Transfer Agents
21. Calculations of Performance Data. Performance Information
22. Financial Statements Financial Statements.
</TABLE>
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.
<PAGE>
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PART A
PROSPECTUS
July 15, 1999
1-800 MUTUALS MULTINATIONAL 25 FUND
1-800 MUTUALS TECHNOLOGY 25 SECTOR FUND
1-800 MUTUALS HEALTH CARE 25 SECTOR FUND
1-800 MUTUALS FINANCIAL SERVICES 25 SECTOR FUND
Separate Portfolios of
1-800 MUTUALS Fund Group, Inc.
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
1-800-___-____
Each Fund described in this Prospectus seeks to achieve capital growth by
concentrating on different sectors or cross-sections of the economy of the
economy and using disciplined investment strategies within those sectors. The
Funds are offered by 1-800 MUTUALS Fund Group, Inc. (the "Company"), an
open-end, diversified management investment company.
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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<PAGE>
TABLE OF CONTENTS
1-800 MUTUALS MULTINATIONAL 25 FUND
Risk/Return Summary
1-800 MUTUALS TECHNOLOGY 25 SECTOR FUND
Risk/Return Summary
1-800 MUTUALS HEALTHCARE 25 SECTOR FUND
Risk/Return Summary
1-800 MUTUALS FINANCIAL SERVICES 25 SECTOR FUND
Risk/Return Summary
Fees And Expenses
Investment Objectives And Policies
Management of the Funds
Investing In The Funds
How To Sell (Redeem) Shares
Dividends and Distributions
Tax Considerations
General Information
Distribution Fees
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<PAGE>
1-800 MUTUALS MULTINATIONAL 25 FUND
RISK/RETURN SUMMARY
Investment Objective
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The Fund's investment objective is growth of capital. Current Income, although
common with large companies, is not a factor in selecting securities for the
Fund's portfolio.
Principal Investment Strategies
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The Fund seeks to achieve its objective by normally investing at least 65% of
its net assets in the securities of the largest companies in the world that are
not already held by another 1-800 MUTUALS Fund . Foreign companies, except
Japanese companies, will be included in the Fund's portfolio if such companies
are publicly traded on U.S. exchanges, either directly or in the form of
American Depository Receipts ("ADRs"). ADRs typically are issued by a U.S. bank
or trust company and evidence ownership of underlying securities issued by a
foreign corporation. The Fund does not presently invest in Japanese companies.
The Fund's Adviser believes that the investment opportunities in Japan are
limited due to unfavorable demographics. However, the Fund reserves the right to
invest in Japanese companies in the future if, in the Adviser's opinion,
circumstances change to the point where such investments would benefit the Fund.
Under normal circumstances, the Fund invests primarily in twenty-five of the
largest international companies in the world, based on yearly dollar-equivalent
sales figures. The Fund may invest in companies in any country except Japan, in
any industry. The Fund's Adviser, 1-800 MUTUALS, INC., is responsible for
selecting the companies to be included in the Fund's portfolio. Companies in the
Fund will be analyzed yearly, usually in January, to determine whether they are
among the world's twenty-five largest by sales volume. The Adviser will
rebalance the Fund's portfolio to add and delete companies as needed to maintain
the Fund's composition.
Principal Risks
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Stock Market Risks. The Fund invests primarily in common stock and ADRs, so the
Fund will be subject to the risks associated with common stocks, including price
volatility and the creditworthiness of the issuing company. Stock markets
worldwide tend to trade in a cyclical price pattern, with prices generally
rising or falling over time. These cyclical periods may last for a significant
period of time.
Foreign Securities Risk. Investments in foreign securities involve greater risks
compared to domestic investments. Foreign companies are not subject to the
regulatory requirements of U.S. companies and, as such, there may be less
publicly available information about issuers than is available in the reports
and ratings published about companies in the U.S. Additionally, foreign
companies are not subject to uniform accounting, auditing and financial
reporting standards. Dividends and interest on foreign securities may be subject
to foreign withholding taxes. Such taxes may reduce the net return to
shareholders. Although the Fund intends to invest in securities of foreign
issuers domiciled in nations which the Adviser considers as having stable and
friendly governments, there is the possibility of expropriation, confiscation,
taxation, currency blockage or political or social instability which could
affect investments of foreign issuers domiciled in such nations.
Currency Risk. Because the Fund will invest in foreign securities, the Fund will
be exposed to currency risk. This means that the Fund could lose money due to a
change in the value of its foreign holdings caused by a change in the value of
that country's currency. Changes in the value of a country's currency relative
to the value of the dollar can have a pronounced effect on the value of a
foreign security.
Diversification Risks. Because the Fund normally concentrates its investments in
only twenty-five companies, the Fund may involve significantly greater risk and
experience greater volatility than a mutual fund that diversifies its holdings
among a greater number of companies and industries. Further, because of the
Fund's concentration, it may hold a greater percentage of its assets in a single
issuer than a more diversified fund, so the performance of a single issuer could
have a greater impact on the Fund's performance.
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2
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1-800 MUTUALS TECHNOLOGY 25 SECTOR FUND
RISK/RETURN SUMMARY
Investment Objective
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The Fund's investment objective is growth of capital. Current Income is not a
factor in selecting securities for the Fund's portfolio.
Principal Investment Strategies
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The Fund seeks to achieve its investment objective by normally investing at
least 65% of its total assets in the common stock or securities convertible into
common stock of the twenty-five largest (based on sales volume) U.S. companies
that the Fund's Adviser believes will benefit significantly from advances or
improvements in technology. The Fund's Adviser believes these companies to be
uniquely positioned to take advantage of the changing face of business
communication. These companies may not be exclusively in the technology sector,
but their business is significantly impacted by technological progress. These
companies generally fall into two categories:
a. Companies that the Adviser believes have or will develop products,
processes or services that will provide significant technological
advancements or improvements; and
b. Companies that the Adviser believes rely extensively on technology in
connection with their operations or services.
The Fund will not concentrate its investments in any particular industry or
group of related industries. As a result, the Advisor may have more flexibility
to find companies that it believes will benefit from advances or improvements in
technology in a number of industries. Nevertheless, the Fund may hold a
significant portion of its assets in industries such as: aerospace/ defense;
biotechnology; computers; office/business equipment; semiconductors; software;
telecommunications; and telecommunications equipment.
3
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The Fund's Adviser, 1-800 MUTUALS, Inc., is responsible for selecting the
companies to be included in the Fund's portfolio. Companies in the Fund will be
analyzed yearly, usually in January, to determine whether they are among the
twenty-five largest US companies by sales volume. The Adviser will rebalance the
Fund's portfolio to add and delete companies as needed to maintain the Fund's
composition.
Principal Risks
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Stock Market Risks. The Fund invests primarily in common stock and securities
convertible into 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. Stock markets tend to trade in a
cyclical price pattern, with prices generally rising or falling over time. These
cyclical periods may last for a significant period of time.
Technology Fund Risks. Although the Fund does not concentrate its investments in
specific industries, it may invest in companies related in such a way that they
react similarly to certain market pressures. For example, competition among
technology companies may result in increasingly aggressive pricing of their
products and services, which may affect the profitability of companies in the
Fund's portfolio. In addition, because of the rapid pace of technological
development, products or services developed by companies in the Fund's portfolio
may become rapidly obsolete or have relatively short product cycles. As a
result, the Fund's returns may be considerably more volatile than the returns of
a fund that does not invest in similarly related companies.
Diversification Risks. Because the Fund normally concentrates its investments in
only twenty-five companies, the Fund may involve significantly greater risk and
experience greater volatility than a mutual fund that diversifies its holdings
among a greater number of companies and industries. Further, because of the
Fund's concentration, it may hold a greater percentage of its assets in a single
issuer than a more diversified fund, so the performance of a single issuer could
have a greater impact on the Fund's performance.
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4
<PAGE>
1-800 MUTUALS HEALTH CARE 25 SECTOR FUND
RISK/RETURN SUMMARY
Investment Objective
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The Fund's investment objective is growth of capital. Current Income is not a
factor in selecting securities for the Fund's portfolio.
Principal Investment Strategies
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The Fund seeks to achieve its investment objective by normally investing at
least 65% of its net assets in the common stock or securities convertible into
common stock of the twenty-five largest (based on sales volume) US companies
that are engaged in the design, manufacture, or sales of products or services
used for or in conjunction with the provision of medical and general health
care. The Fund's Adviser believes these companies are positioned to take
advantage of the aging of America's population. These companies include
hospitals, insurance companies, pharmaceutical companies, and medical device
companies.
The Fund's Adviser, 1-800 MUTUALS, Inc., is responsible for selecting the
companies to be included in the Fund's portfolio. Companies in the Fund will be
analyzed yearly, usually in January, to determine whether they are among the
twenty-five largest US companies by sales volume. The Adviser will rebalance the
Fund's portfolio to add and delete companies as needed to maintain the Fund's
composition.
Principal Risks
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Stock Market Risks. The Fund invests primarily in common stock and securities
convertible into 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. Stock markets tend to trade in a
cyclical price pattern, with prices generally rising or falling over time. These
cyclical periods may last for a significant period of time.
Health Care Fund Risks. The Fund concentrates its investments in companies that
are involved in health care. These companies include hospitals, insurance
companies, pharmaceutical companies, and medical device companies. As a result
of the Fund's concentration in this industry, the Fund will be particularly
vulnerable to adverse changes to the industry.
The health care industry is heavily regulated. Changes in regulations and laws
that negatively impact these companies will have a greater impact on the Fund
than if the Fund were invested in a broader variety of securities.
In addition, because of the rapid pace of technological developments, products
or services developed by companies in the Fund's portfolio may become rapidly
obsolete or have relatively short product cycles. As a result, the Fund's
returns may be considerably more volatile than the returns of a fund that does
not invest in similarly related companies.
Also, because of the population demographics of the nation and the aging of
America's population, the industry may undergo significant changes to adjust to
the changing health care needs of the country, and the Fund will be impacted by
those changes.
Diversification Risks. Because the Fund normally concentrates its investments in
only twenty-five companies, the Fund may involve significantly greater risk and
experience greater volatility than a mutual fund that diversifies its holdings
among a greater number of companies and industries. Further, because of the
Fund's concentration, it may hold a greater percentage of its assets in a single
issuer than a more diversified fund, so the performance of a single issuer could
have a greater impact on the Fund's performance.
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5
<PAGE>
1-800 MUTUALS FINANCIAL SERVICES 25 SECTOR FUND
RISK/RETURN SUMMARY
Investment Objective
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The Fund's investment objective is growth of capital. Current Income is not a
factor in selecting securities for the Fund's portfolio.
Principal Investment Strategies
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The Fund seeks to achieve its investment objective by normally investing at
least 65% of its net assets in the common stock or securities convertible into
common stock of the twenty-five largest (based on sales volume) US companies
that are in the banking, thrift, investment and financial service industries.
The Fund seeks to capitalize on the aging of America, which the Fund's Advise
believes will require more financial services than ever before.
The Fund's Adviser, 1-800 MUTUALS, Inc., is responsible for selecting the
companies to be included in the Fund's portfolio. Companies in the Fund will be
analyzed yearly, usually in January, to determine whether they are among the
twenty-five largest US companies by sales volume. The Adviser will rebalance the
Fund's portfolio to add and delete companies as needed to maintain the Fund's
composition.
Principal Risks
- ---------------
Stock Market Risks. The Fund invests primarily in common stock and securities
convertible into 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. Stock markets tend to trade in a
cyclical price pattern, with prices generally rising or falling over time. These
cyclical periods may last for a significant period of time.
Financial Services Fund Risks. The Fund concentrates its investments in
companies that are involved in the financial sector of the economy. These
companies include banks, thrifts, insurance companies, brokerage companies and
investment firms. As a result of the Fund's concentration in this industry, the
Fund will be particularly vulnerable to adverse changes to the industry. The
financial services industry is heavily regulated. Changes in regulations and
laws that negatively impact these companies will have a greater impact on the
Fund than if the Fund were invested in a broader variety of securities. Changes
in the strength of the nation's economy and changes in the investing, spending
and savings habits of people have a significant effect on these companies. Also,
changes in interest rates can have a negative impact on these companies.
Diversification Risks. Because the Fund normally concentrates its investments in
only twenty-five companies, the Fund may involve significantly greater risk and
experience greater volatility than a mutual fund that diversifies its holdings
among a greater number of companies and industries. Further, because of the
Fund's concentration, it may hold a greater percentage of its assets in a single
issuer than a more diversified fund, so the performance of a single issuer could
have a greater impact on the Fund's performance.
6
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Investment Rationale
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Each of the 1-800 MUTUALS Funds described above are designed to expose the
investor to different sectors of the economy. Each of the chosen sectors has had
a history of above-average growth. The Multinational Fund is designed to allow
an investor to invest in large, international companies that are engaged in all
aspects of international trade of goods and services.
All of the Funds are designed for investors seeking growth of capital and who
are willing to accept a price volatility level approximating or exceeding the
S&P 500 Index. You should be able to leave your money invested in the Funds for
at least five years and have no need for current income from the Funds.
General Risks to all the Funds
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Year 2000 Risks: As with other mutual funds, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Adviser and the Funds' 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. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund.
General Risks. You may lose money by investing in the Funds. Your risk of loss
is greater if you hold your investment for shorter time periods. The Funds may
be appropriate for long-term investors who understand the potential risks and
rewards of investing in common stocks. The value of the Funds' investments will
vary from day-to-day, reflecting changes in market conditions, interest rates
and other company, political, and economic news. The Funds have no operating
history, and this may pose additional risks. When you sell your Fund shares,
they may be worth more or less than what you paid for them. There is no
assurance that the Funds can achieve their investment objectives, since all
investments are inherently subject to market risk.
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Funds.
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
Shareholder Fees: offering price) Redemption Fees*
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(fees paid directly from your investment)
Multinational Fund NONE NONE
Technology Fund NONE NONE
Health Care Fund NONE NONE
Financial Services Fund NONE NONE
7
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<TABLE>
<CAPTION>
Annual Fund Multinational Technology Health Care Financial Services
Operating Expenses: Fund Fund Fund Fund
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(expenses that are
deducted from Fund assets)
<S> <C> <C> <C> <C>
Management Fees1 1.20% 1.20% 1.20% 1.20%
Distribution (12b-1) Fees2 0.25% 0.25% 0.25% 0.25%
Other Expenses 3 0.05% 0.05% 0.05% 0.05%
Total Annual Fund
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Operating Expenses4 1.50% 1.50% 1.50% 1.50%
============================================================================================
</TABLE>
* If you hold your shares for less than one year, you will be charged a fee
equal to 1.00% of the net asset value of the shares redeemed.
1. Management Fees include investment advisory fees of 0.50% and Operating
Service Fees of 0.70% for each Fund. The effect of these fees is to place a cap
on each Fund's normal operating expenses, excepting brokerage, taxes, litigation
expenses, other extraordinary expenses, and distribution fees.
2. 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.
3. Because the Funds have not yet completed their first year of investment
operations, "Other Expenses" are estimated.
4. The Adviser has voluntarily agreed to waive its advisory fee and/or to
reimburse the Funds, if necessary, if Management Fees or Other Expenses would
cause Total Annual Fund Operating Expenses to exceed 1.50% for any Fund. The
Adviser may revise or cancel these expense limitations at any time and will
notify you by letter not less than 30 days prior to any such change.
Example: This example is intended to help you compare the costs of investing in
each Fund with the costs of investing in other mutual funds.
The Example below assumes that you invest $10,000 in the Fund(s) for the time
periods indicated 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
each Fund's operating expenses that were described above remain the same.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
Time Multinational Technology Health Care Financial Services
Period: Fund Fund Fund Fund
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One Year $ 153 $ 153 $ 153 $ 153
Three Years $ 474 $ 474 $ 474 $ 474
8
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INVESTMENT OBJECTIVES AND POLICIES
Information concerning each Fund's principal investment objectives and
strategies is set forth in the Risk/Return Summary above. What follows is
additional information concerning how the Funds invest and what kind of other
securities the Funds may invest in. If the risks of investing in certain kinds
of securities has not already been discussed, the risks of those securities is
also set forth in this Section.
The Funds are each non-diversified funds. Diversification is a way to reduce
risk by investing in a broad range of stocks or other securities. A
"nondiversified" fund has the ability to take larger positions in a smaller
number of issuers. Because the appreciation or depreciation of a single stock
may have a greater impact on the NAV of a nondiversified fund, its share price
can be expected to fluctuate more than a comparable diversified fund. This
fluctuation, if significant, may affect the performance of a Fund.
The Technology Fund, Health Care Fund, and Financial Services Funds each will or
may concentrate in certain industry sectors. Industry risk is the possibility
that a group of related stocks will decline in price due to industry-specific
developments. Companies in the same or similar industries may share common
characteristics and are more likely to react similarly to industry-specific
market or economic developments. In the health care and financial services
sectors, for example, many companies are subject to government regulation and
approval of their products and services, which may affect their price or
availability. In addition, the products and services offered by these companies
may quickly become obsolete in the face of scientific or technological
developments. The economic outlook of such companies may fluctuate dramatically
due to changes in regulatory or competitive environments. In technology-related
industries, competitive pressures may have a significant effect on the
performance of companies in which The Technology Fund may invest. In addition,
technology and technology-related companies often progress at an accelerated
rate, and these companies may be subject to short product cycles and aggressive
pricing which may increase their volatility.
Although the Funds will normally invest in accordance with the policies
described in the Risk/Return Section of the Prospectus for each Fund, the Funds
may also invest in the following securities.
Futures and Options On Securities
- ---------------------------------
The Funds may purchase futures contracts relating to equity, debt and index
securities, write (i.e. sell) covered put and call options, and purchase put and
call options, on equity, debt and index securities. The Funds intend to use
futures and options transactions to decrease their 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, and to seek higher investment returns when a futures or options contract
is priced more attractively than the underlying security or index.
9
<PAGE>
Risk Factors. The primary risks associated with the use of options and futures
are; (1) imperfect correlation between a change in the value of the underlying
security or index and a change in the price of the option or futures contract,
and (2) the possible lack of a liquid secondary market for an options or futures
contract and the resulting inability of the Fund to close out the position prior
to the maturity date. The risk of imperfect correlation will be minimized by
investing only in those contracts whose price fluctuations are expected to
resemble those of the Fund's underlying securities. The risk that the Fund will
be unable to close out a position will be minimized by entering into such
transactions only on national exchanges and over-the-counter markets with an
active and liquid secondary market.
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 Funds net assets and/or 3% of any one investment company's
outstanding securities.
Money Market Instruments
- ------------------------
The Funds may invest in "money market instruments," a term that includes, among
other things, bank obligations (which include U.S. Dollar denominated
certificates of deposit, bankers acceptances and time deposits issued or
supported by the credit of U.S. or foreign banks or savings institutions having
total assets at the time of purchase in excess of $1 billion), commercial paper,
obligations of the U.S. Government, its agencies and instrumentalities, and
repurchase agreements backed by U.S. Government securities, and cash.
Risks of Money Market Instruments
- ---------------------------------
Money Market Instruments are generally fixed-income debt instruments.
Accordingly, the primary risks involved in these securities is interest rate
risk and credit risk. Interest Rate risk is the risk to the value of an
instrument due to changes in the overall rates of interest. Debt instrument
prices generally fall when interest rates rise. In addition, the longer a
security has until it matures, the more severely its price will decline for any
given change in interest rates. Credit risk is the risk to the value of a
security due to changes in the creditworthiness of the issuing entity. The value
of a security may decline if the credit rating of the issuing entity declines.
To minimize interest rate risk to the Fund, the Fund will only invest in
securities with a remaining maturity of not greater than 397 days. To minimize
credit rate risk, the Fund will only invest in securities rated "A" or better by
Standard & Poors, or an equivalent rating by another nationally recognized
rating agency.
A complete listing of the Funds' investment restrictions, including those that
may be changed only by a vote of a Fund's shareholders, may be found in the
Statement of Additional Information ("SAI") for the Funds.
10
<PAGE>
MANAGEMENT OF THE FUNDS
The business affairs of each Fund are managed under the general supervision of
the Company's Board of Directors.
Investment Adviser
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The Company has entered into an Investment Advisory Agreement with 1-800
MUTUALS, Inc. (the "Adviser"), Plaza of the Americas, 600 North Pearl Street,
Dallas, TX 75201. Mr. Richard Sapio is the President of and controls the Adviser
and is responsible for all its investment decisions, including the day-to-day
management of the Fund. Mr. Richard Sapio also serves as the President and as a
Director of the Company.
The Adviser is registered as a registered investment adviser with the Securities
and Exchange Commission. The Adviser operates solely as an investment advisory
firm, and manages the investment of the assets of the Funds in accordance with
each Fund's investment objectives, policies, and restrictions.
Portfolio Manager
- -----------------
Mr. Richard Sapio is the portfolio manager for each Fund. Mr. Sapio is the
founder of the Adviser and has been its President since its founding. Mr. Sapio
has been managing investment portfolios for individuals, corporations, trusts
and retirement accounts since the firm's inception in 1994.
Mr. Sapio previously was a top-producing representative for several
broker/dealer firms before founding the Adviser. Mr. Sapio has earned a B.S.
degree from Rutgers University and has earned his Series 7, 24, 27, 65 and
Series 63 Securities licenses. You should be aware that these are new Funds, and
although Mr. Sapio has extensive experience in managing investment portfolios
for individuals, corporations, trusts and retirement accounts, he has no prior
experience in managing a portfolio for an investment company, and this may
result in additional risks for the Fund.
The Adviser manages the investment portfolio and business affairs of each Fund
under an Investment Advisory Agreement with 1-800 MUTUALS Fund Group, Inc. (the
"Company"), and manages, or arranges to manage, the daily operations of the
Company under an Operating Services Agreement.
Investment Advisory Agreement.
- ------------------------------
Under the terms of the Advisory Agreement, the Adviser, manages the investment
operations of each Fund in accordance with that Fund's investment policies and
restrictions. The Adviser furnishes an investment program for each Fund,
determines what investments should be purchased, sold and held, and makes
changes on behalf of the Company in the investments of each Fund. At all times
the Adviser's actions on behalf of the Funds are subject to the overall
supervision and review of the Board of Directors of the Company,
The Adviser receives from the Company, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.50% of each Fund's net
assets.
11
<PAGE>
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
each 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 each Fund under this Agreement, the Company pays to the
Adviser, on the last day of each month, a fee equal to 0.70% of average net
asset value of each Fund, such fees to be computed daily based upon the net
asset value of each 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 Funds. The Adviser is responsible for compensating such parties.
The Adviser has entered into an Investment Company Services Agreement with the
Company and Declaration Service Company ("DSC") to provide Transfer Agent and
essentially all administrative services for the Funds. The Adviser has also
entered into a Distribution Agreement with the Company 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 each Fund's normal operating expenses at 1.20%.
The only additional 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.
In order to further limit the effect on the Funds of these other expenses, the
Adviser has voluntarily agreed to waive receipt of its fees and/ or voluntarily
assume certain Fund expenses, to cap each 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 a 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 Funds will not be required to pay the Adviser
for any amounts voluntarily waived or assumed, nor will the Funds 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
Company's 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.
12
<PAGE>
INVESTING IN THE FUNDS
Determination of Share Price
- ----------------------------
Shares of each Fund are offered at each Fund's per share net asset value
("NAV"). NAV per share is calculated by adding the value of a Fund's
investments, cash and other assets, subtracting Fund liabilities, and then
dividing the result by the number of shares outstanding. Each 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
Company's Board Of Directors. Each 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 Funds.
Each 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.
Opening and Adding To Your Account
- ----------------------------------
You can invest directly in the Funds 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 1-800-___-____.
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 management
reserves the right to reject any purchase order for Fund shares if, in their
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:
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
13
<PAGE>
<TABLE>
<CAPTION>
HOW TO INVEST TO OPEN AN ACCOUNT TO ADD TO ACCOUNT
- ------------- ------------------ -----------------
<S> <C> <C>
By Mail Complete an Account Make your check payable to
Registration Form, make 1-800 MUTUALS [Name] Fund
a check payable to and mail it to the address at left.
1-800 MUTUALS [Name] Fund
and mail the Form and check
to 1-800 MUTUALS Management Please include your account
Corp, c/o Declaration Service number on your check.
Company, 555 North Lane, Or use the convenient form
Suite 6160, Conshohocken attached to your regular
PA 19428. Fund statement.
By Wire Ask your bank to wire funds Ask your bank to wire
to Account of immediately available funds to
First Union National Bank, the location described at the
NA, ABA #: -------------- left, except that the wire should
Credit: 1-800 MUTUALS purchase rather than to open
Management Corp, Acct. #: a new account.
-----------------, Further credit:
1-800 MUTUALS [Name] Fund.
The wire should state that the Include your name and
Fund purchase is to be in your account number.
name(s).
The wire should state that you are opening a new Fund
account.
Include your name(s), address and taxpayer
identification number or Social Security number and
the name of the Fund in which you are purchasing
shares.
Call 1-800-___-____ to inform us that a wire is being
sent.
By Telephone transactions may Call 1-800-___-____ to make
Tele- not be used for initial purchases your purchase.
Phone. If you want to make
subsequent transactions via telephone,
please select this service on your
account Registration Form.
</TABLE>
1-800 MUTUALS Fund Group, Inc. (the "Company") wants you to be kept current
regarding the status of your account in the Fund(s). 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.
14
<PAGE>
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.
All applications to purchase shares of the Funds are subject to acceptance or
rejection by authorized officers of the Company and are not binding until
accepted. 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 Funds, 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.
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.
15
<PAGE>
Declaration Service Company, the Funds' 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
The selling price of the shares being redeemed will be your 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.
16
<PAGE>
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.
17
<PAGE>
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 your Fund by calling the Transfer Agent at
1-800-___-____ 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.
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.
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 twenty-five 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.
18
<PAGE>
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 Funds. 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.
BROKERAGE ALLOCATION
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 Funds intend 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
their capital gains and net investment income currently distributed to their
shareholders. To qualify as a regulated investment company, the Funds must,
among other things, derive at least 90% of their 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.
Each 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 you have requested in writing
to have them paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to you as ordinary income. Distributions of long-term capital gains are
taxable as long-term capital gains regardless of the length of time shares in
the Fund have been held. Distributions are taxable, whether received in cash or
reinvested in shares of the Fund.
You will be advised annually of the source of distributions for federal income
tax purposes.
If you fail to furnish your social security or other tax identification number
or to certify properly that it is correct, the Fund may be required to withhold
federal income tax at the rate of 31% (backup withholding) from your dividend,
capital gain and redemption payments. Dividend and capital gain payments may
also be subject to backup withholding if you fail to certify properly that you
are not subject to backup withholding due to the under-reporting of certain
income.
Taxable distributions generally are included in your gross income for the
taxable year in which they are received. However, dividends declared in October,
November and December and made payable to shareholders of record in such month
will be deemed to have been received on December 31st if paid by the Fund during
the following January.
19
<PAGE>
Distributions by a 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 Funds 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
Funds may describe general economic and market conditions affecting a 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 Funds may also, from time to time, compare their 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.
DISTRIBUTION FEES
Each 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 Plans provide that each 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 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.
Payments under the 12b-1 Plans 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 Plans 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.
20
<PAGE>
FOR MORE INFORMATION
STATEMENT OF ADDITIONAL
INFORMATION (SAI) BY MAIL:
The SAI contains more detailed 1-800 MUTUALS Fund Group, Inc.
Information on all aspects of the c/o Declaration Service Company
Fund. A current SAI, dated July 15, 555 North Lane, Suite 6160
1999, has been filed with the SEC Conshohocken, PA 19428
and is incorporated by reference
into (is legally a part of) this BY PHONE: 1-800-___-____
prospectus.
ON THE INTERNET:
www.______________.com
To request a free copy of the SAI,
please contact the Funds. OR YOU MAY VIEW OR OBTAIN THESE
DOCUMENTS FROM THE SEC.
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
1-800 MUTUALS MULTINATIONAL 25 FUND
1-800 MUTUALS TECHNOLOGY 25 SECTOR FUND
1-800 MUTUALS HEALTH CARE 25 SECTOR FUND
1-800 MUTUALS FINANCIAL SERVICES 25 SECTOR FUND
c/o Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
1-800-___-____
Investment Company Act No.
811-9099
21
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated JULY 15, 1999
1-800 MUTUALS MULTINATIONAL 25 FUND
1-800 MUTUALS TECHNOLOGY 25 SECTOR FUND
1-800 MUTUALS HEALTH CARE 25 SECTOR FUND
1-800 MUTUALS FINANCIAL SERVICES 25 SECTOR FUND
1-800 MUTUALS Fund Group, Inc.
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
214-953-0066
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of Funds, dated July 15, 1999. You may obtain
a copy of the Prospectus, free of charge, by writing to 1-800 MUTUALS Fund
Group, Inc, c/o The Declaration Group, 555 North Lane, Suite 6160, Conshohocken,
PA 19428, phone number 800-___-____.
TABLE OF CONTENTS
Management of the Fund
Investment Policies and Restrictions
Investment Adviser
Directors and Officers
Performance Information
Purchasing and Redeeming Shares
Tax Information
Portfolio Transactions
Custodian
Transfer Agent
Administration
Distributor
Legal Counsel
Distribution Plan
Financial Statements
Independent Auditors Report *
Financial Statements *
* to be filed by amendment
<PAGE>
MANAGEMENT OF THE FUND
1-800 MUTUALS Fund Group, Inc. (the "Company"), an open-end, diversified
management company, was incorporated in Maryland on July 16, 1998. The Affairs
of the Company are managed by a Board of Directors, which approves all
significant agreements between the Company and the persons and companies that
furnish services to the Funds, including agreements with the Funds' custodian,
transfer agent, investment adviser and administrator. All such agreements are
subject to limitations imposed by state and/or federal securities laws, and to
the extent that any such contract may contradict such statutes, the contract
would be unenforceable. The day-to-day operations of the Company are delegated
to the Adviser.
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 Company shares of the Fund are the only class of shares being
offered by the Company. Shareholders are entitled: (i) to one vote per full
share; (ii) to such distributions as may be declared by the Company's Board of
Directors out of funds legally available; and (iii) upon liquidation, to
participate ratably in the assets available for distribution. There are no
conversion or sinking fund provisions applicable to the shares, and the holders
have no preemptive rights and may not cumulate their votes in the election of
directors. The shares are redeemable and are fully transferable. All shares
issued and sold by the Fund will be fully paid and nonassessable.
INVESTMENT POLICIES AND RESTRICTIONS
Each Fund's investment objectives and the manner in which each Fund pursues its
investment objective are generally discussed in the prospectus. This Section
provides additional information concerning the permissible investments and the
investment restrictions that apply to the Funds.
The Funds are nondiversified Funds. Under federal law, a Fund cannot claim to be
a "diversified fund" unless, under normal circumstances as to 75% of the Fund's
assets (valued at the time of investment), the Fund does 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. Because the
Funds will each generally invest at least 65% of their average net assets in
only twenty-five companies, the Funds will likely not qualify as "diversified".
The Funds normally invest at least 65% of total average net assets in the common
stock and securities convertible into common stock of the twenty-five largest
companies that qualify under each Fund's investment criteria. As to the
remaining 35% of each Fund's average net assets, the Funds may also invest in a
variety of other securities. The complete list of securities in which the Funds
may ordinarily invest is listed below, along with the investment restrictions
that apply to the Funds:
2
<PAGE>
COMMON STOCKS. The Fund will ordinarily invest at least 65% of its 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.
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.
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.
OPTIONS ON EQUITIES. Although the Fund will not normally do so, the Fund may
occasionally invest in options contracts to 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 write (i.e. sell) covered 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. Options contracts can include long-term options with
durations of up to three years.
3
<PAGE>
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 five percent (5%)
of the Fund's total net assets. When writing covered call options, to minimize
the risks of entering into these transactions, the Fund will maintain a
segregated account with its Custodian consisting of the underlying securities
upon which the option was written, 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.
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.
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.
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.
4
<PAGE>
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.
CASH RESERVES. The Fund may hold up to 100% of its net assets in cash to
maintain liquidity and for temporary defensive purposes.
The Fund may take a temporary defensive position when, in the Adviser's opinion,
market conditions are such that investing according to the Fund's normal
investment objectives would place the Fund in imminent risk of loss. In such an
event, the Adviser could temporarily convert some or all of the Fund's
investments to cash. Such actions are subject to the supervision of the Board of
Directors. You should be aware that any time the Fund is assuming a temporary
defensive position, the Fund will not be invested according to its investment
objectives, and its performance will vary, perhaps significantly, from its norm.
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.
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%.
5
<PAGE>
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 Adviser's opinion, doing so may
secure an advantageous yield and/or price to the Fund that might otherwise be
unavailable. The Fund has not established any limit on the percentage of assets
it may commit to such transactions, but to minimize the risks of entering into
these transactions, the Fund will maintain a segregated account with its
Custodian consisting of cash, cash equivalents, U.S. Government Securities or
other high-grade liquid debt securities, denominated in U.S. dollars or non-U.S.
currencies, in an amount equal to the aggregate fair market value of its
commitments to such transactions.
The complete list of the Fund's investment restrictions is as follows:
The Fund will not:
1. 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, nor invest more than 25% of
its assets (valued at time of investment) in securities of any one company;
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;
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;
6
<PAGE>
INVESTMENT ADVISER
1-800 MUTUALS, Inc. (the "Adviser") was organized under the laws of the State of
Texas as an investment advisory corporation in 1994. The Advisor is also
registered as an Investment Advisor with the Securities and Exchange Commission.
The Advisor provides financial management services to individuals, corporations,
and professional organizations in Texas 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 July 15,
1999 (the "Agreement").
The Agreement provides that the Adviser shall not be liable for any loss
suffered by a Fund or its shareholders as a consequence of any act or omission
in connection with services under the Agreement, except by reason of the
Adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties under the Advisory Agreement.
The 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 Company who are not "interested persons" of the Funds 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 Funds.
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:
7
<PAGE>
The business address of each Director is Plaza of the Americas, 600 North Pearl
Street, Suite 2150, Dallas, Texas 75201
Position Principal Occupation For the
Name, Age with Fund Last Five Years
- --------------------------------------------------------------------------------
Richard A. Sapio* President, CEO, controlling shareholder of
(Age 35) Director 1-800 MUTUALS, Inc., an investment
advisory firm and Adviser to the
Company, since 1994. Creator of the
1-800 MUTUALS concept, and holder
of the worldwide rights to the
1-800 MUTUALS phone number.
Bachelor of Science degree form
Rutgers University, New Brunswick,
NJ. Holder of Series 7, 24, 27, 63,
and 65 securities licenses.
Eric P. McDonald* Director Compliance and Operations Manager
(Age 26) for 1-800 MUTUALS, Inc. since 1997.
Principal of Lloyd Wade Securities
from 1996 to 1997. Account
Executive for La Jolla Capital from
1995 to 1996. Bachelor of Science
degree form Texas A&M University,
1994. Holder of Series 7, 24, 4,
63, and 65 securities licenses.
Gerald B. Stevens Director Regional Marketing Manager for
(Age 56) America Online since 19__.
Previously Vice President Group
Supervisor at GSD&M, the largest
advertising agency in the
Southwest. Mr. Stevens has also
held management positions at J.
Walter Thompson and Bozell & Jacobs
(advertising firms) and Zales
Jewelers. Mr. Stevens has
accumulated over 35 years
experience in marketing and
advertising.
(4)
(5)
(6)
(7)
* Indicates an "interested person" as defined in the Investment Company Act of
1940.
8
<PAGE>
1-800 MUTUALS Fund Group, Inc. (the "Company") was organized as a Maryland
Corporation on _______, 1999. 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 June 30, 2000.
Name of Director Compensation Pension Annual Total Compensation
from Company Benefits Benefits Paid to Director
Richard A. Sapio 0.00 0.00 0.00 0.00
Eric P. McDonald 0.00 0.00 0.00 0.00
Gerald B. Stevens ____ ____ ____ ____
(4)
(5)
(6)
(7)
The Adviser intends to purchase substantially all of the shares 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 Funds 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
9
<PAGE>
Yield. The Funds may advertise performance in terms of a 30-day yield quotation.
The 30-day yield quotation is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
6
Yield = 2[(a-b/cd + 1) - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the period
that they were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
The Funds impose no sales charges. Each 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
each Fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.
In sales literature, each Fund's performance may be compared with that of market
indices and other mutual funds. In addition to the above computations, each 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
Redemptions will be made at net asset value. Each 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 a Fund, securities
traded on security exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales price at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Securities for which quotations are not available and any other
assets are valued at a fair market value as determined in good faith by the
Adviser, subject to the review and supervision of the Board of Directors. The
price per share for a purchase order or redemption request is the net asset
value next determined after receipt of the order.
Each Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open. Each Fund's share price or net asset value per share ("NAV")
is normally determined as of 4:00 p.m., New York time. Each 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 Funds
generally do not charge sales or redemption fees, the NAV is the offering price
for shares of the Funds. For shares redeemed prior to being held for at least
six months, the redemption value is the NAV less a redemption fee equal to 1.00%
of the NAV.
10
<PAGE>
TAX INFORMATION
The Funds intend 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, each 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 each 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.
Each 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.
11
<PAGE>
Distributions by a 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 a 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 each 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 a 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 a Fund that qualifies for the deduction generally will be less
than 100%. Each Fund will notify corporate shareholders annually of the
percentage of Fund dividends that qualifies for the dividend received
deductions.
A portion of a 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 Funds 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 Funds 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 a 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 Funds 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 Funds will generally purchase and sell securities without regard to the
length of time the security has been held. Accordingly, the rate of portfolio
turnover may be substantial. However, each Fund expects that its annual
portfolio turnover rate will not exceed 50% under normal conditions. However,
there can be no assurance that a Fund will not exceed this rate, and the
portfolio turnover rate may vary from year to year.
12
<PAGE>
High portfolio turnover in any year will result in the payment by a 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 Funds 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 Funds, 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
_____________________________ acts as custodian for the Fund. As such,
_______________ 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.
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
13
<PAGE>
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
_______________________ will serve as the Company's independent auditors for its
first fiscal year.
LEGAL COUNSEL
The Law Offices of David D. Jones, P.C., 518 Kimberton, # 134, Phoenixville, PA
19460, has passed on certain matters relating to this Registration Statement and
serves as counsel to the Company.
14
<PAGE>
PART C
OTHER INFORMATION
-----------------
Item 23 Exhibits
- ------- --------
A. Articles of Incorporation of Registrant- Attached as Exhibit 23A
B. Bylaws of Registrant- Attached as Exhibit 23B
C. None [Not Applicable]
D. Investment Advisory Agreement with 1-800 MUTUALS, Inc.- Attached as
Exhibit 23D
E. Distribution Agreement with Declaration Distributors, Inc.- Attached
as Exhibit 23E
F. None [Not Applicable]
G. Custodian Agreement - *To be filed by amendment
H. (1) Operating Services Agreement with 1-800 MUTUALS, Inc.- Attached as
Exhibit 23H(1)
(2) Investment Services Agreement with Declaration Service Company-
Attached as Exhibit 23H(2)
I. Opinion of Counsel- Attached as Exhibit 23I
J. Consent of Independent Auditors- *To be filed by amendment
K. None [Not Applicable]
L. Subscription Agreement- Attached as Exhibit 23L
M. Plan of Distribution Pursuant to Rule 12b-1- Attached as Exhibit 23M
N. Financial Data Schedule- Attached as Exhibit 23N
O. Not Applicable
Item 24. 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 25. 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. With respect to the indemnification provisions of any agreement
entered into by the Company, to the extent that such indemnification provisions
may be inconsistent with, or unenforceable, under any federal or state
securities law, the Company shall not be liable therefore.
Item 26. Business and Other Connections of Investment Adviser.
- -------- -----------------------------------------------------
The Adviser has no other business or other connections.
Item 27. Principal Underwriters.
- -------- -----------------------
Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken, PA
will be the Fund's principal underwriter.
Item 28. Location of Accounts and Records.
- -------- ---------------------------------
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA
1-800 MUTUALS, Inc.
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
Item 29. Management Services.
- -------- --------------------
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA
Item 30. Undertakings.
- -------- -------------
Not Applicable
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement 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 Dallas and
State of Texas on the ___ day of ______________.
1-800 MUTUALS Fund Group, Inc.
(Registrant)
By: /s/ Richard A. Sapio, 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/ Richard A. Sapio President, Director
/s/ Eric P. McDonald Director
/s/ Gerald B. Stevens Director
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT 23A - ARTICLES OF INCORPORATION OF REGISTRANT
EXHIBIT 23B - BYLAWS OF REGISTRANT
EXHIBIT 23D - INVESTMENT ADVISORY AGREEMENT
EXHIBIT 23E - DISTRIBUTION AGREEMENT
EXHIBIT 23H(1) - OPERATING SERVICES AGREEMENT
EXHIBIT 23H(2) - INVESTMENT COMPANY SERVICES AGREEMENT
EXHIBIT 23I - OPINION AND CONSENT OF COUNSEL
EXHIBIT 23L - SUBSCRIPTION AGREEMENT
EXHIBIT 23M - PLAN OF DISTRIBUTION
EXHIBIT 23N - FINANCIAL DATA SCHEDULE
EXHIBIT 23A
ARTICLES OF INCORPORATION
OF
1-800 MUTUALS Fund Group, Inc.
FIRST: The undersigned, Vera M. Norris, whose post office address is 11
East Chase St., Baltimore, MD 21202 being at least eighteen years of age, does
hereby form a corporation under the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
Corporation) is:
1-800 MUTUALS Fund Group, Inc.
THIRD: The purpose or purposes of the corporation shall be: Regulated
Investment Company
FOURTH: The post office address of the principal office of the Corporation
in Maryland is 11 East Chase Street, Baltimore, MD 21202. The name and post
office address of the resident agent is CSC-Lawyers Incorporating Service
Company, at the same address. Said resident agent is a domestic corporation of
the State of Maryland.
FIFTH: The total number of shares of stock which the Corporation has
authority to issue is
Five Hundred Million (500,000,000) at 0.0001 par value
SIXTH: THE NUMBER OF DIRECTORS OF THE Corporation shall be 1 which number
may be increased or decreased pursuant to the by-laws of the Corporation, and so
long as there are less than three (3) stockholders, the number of directors may
be less than three (3) but not less than the number of stockholders, and the
name (s) of the director (s) who shall act until their successors are duly
chosen and qualified is (are):
Richard A. Sapio
SEVENTH: the duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on May
20, 1999, and severally acknowledged the same to be my act.
----------------------------
Vera M. Norris, Incorporator
ACTION OF SOLE INCORPORATOR
1-800 MUTUALS FUND GROUP, INC.
-------------------------------------
The undersigned, without a meeting, being the sole incorporator of the
Corporation, does hereby elect the persons listed below to serve as directors of
the corporation until the first annual meeting of shareholders and until their
successors are elected and qualify:
Richard A. Sapio
----------------------------
Vera M. Norris, Incorporator
Dated: May 20, 1999
----------------
EXHIBIT 23B
BY-LAWS OF
1-800 MUTUALS FUND GROUP, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation in the
State of Maryland shall be in the City of Baltimore.
Section 2. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. Subject to this Article II, an annual meeting of
Shareholders for the election of Directors and the transaction of such other
business as may properly come before the meeting shall be held at such time and
place as the Board of Directors shall select. The Corporation shall not be
required to hold an annual meeting of its Shareholders in any year in which the
election of directors is not required to be acted upon under the Investment
Company Act of 1940.
Section 2. Special Meetings. Special meetings of Shareholders may be called
at any time by the President, the Secretary or by a majority of the Board of
Directors and shall be held at such time and place as may be stated in the
notice of the meeting.
Special meetings of the Shareholders shall be called by the Secretary upon
receipt of written request of the holders of shares entitled to cast not less
than 10% of the votes entitled to be cast at such meeting, provided that (1)
such request shall state the purposes of such meeting and the matters proposed
to be acted on, and (2) the Shareholders requesting such meeting shall have paid
to the Corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the Secretary shall determine and specify to such
Shareholders. No special meeting shall be called upon the request of
Shareholders to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the Shareholders held during the preceding
12 months, unless requested by the holders of a majority of all shares entitled
to be voted at such meeting.
Section 3. Place of Meetings. Meetings of Shareholders shall be held at a
location within the Continental United States as the Board of Directors may from
time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date
and time of the holding of each Shareholders' meeting and, if the meeting is a
special meeting, the purpose or purposes of the meeting, shall be given
personally or by mail, not less that ten (10) nor more that ninety (90) days
before the date of such meeting, to each Shareholder entitled to vote at such
meeting and to each other shareholder entitled to notice of the meeting. Notice
by mail shall be deemed to be duly given when deposited in the United States
mail addressed to the shareholder at his or her address as it appears on the
records of the Corporation, with postage thereon prepaid.
Notice of any meeting of Shareholders shall be deemed waived by any
shareholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting.
Section 5. Quorum, Adjournment of Meetings. The presence at any
Shareholders' meeting, in person or by proxy, of Shareholders of one third of
the shares of the stock of the Corporation thereat shall be necessary and
sufficient to constitute a quorum for the transaction of business, except for
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of Shareholders of one third of the shares of
stock of each class required to vote as a class on the matter shall constitute a
quorum. The holders of a majority of shares entitled to vote at the meeting and
present in person or by proxy, whether or not sufficient to constitute a quorum,
or, any officer present entitled to preside or act as Secretary of such meeting,
may adjourn the meeting without determining the date of a new meeting, or
without notice to a date not more than 120 days after the original record date.
Any business that might have been transacted at the meeting originally called
and so adjourned may be transacted at any such subsequent meeting at which a
quorum is present.
Section 6. Organization. At each meeting of the Shareholders, the Chairman
of the Board (if one has been designated by the Board), or in his or her absence
or inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, the Vice President, shall act as
chairman of the meeting; provided, however, that if no such officer is present
or able to act, a chairman of the meeting shall be elected by a majority of the
Shareholders, present in person or by proxy, at the meeting. The Secretary, or
in his or her absence or inability to act, any person appointed by the chairman
of the meeting, shall act as secretary of the meeting and keep the minutes
thereof.
Section 7. Order of Business. The order of business at all meetings of the
Shareholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the Articles
of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the Shareholders to one
vote for every full share of such stock, with a fractional vote for any
fractional shares, standing in his or her name on the record of Shareholders of
the Corporation as of the record date determined pursuant to Section 9 of this
Article, or if such record date shall not have been so fixed, then at the later
of (i) the close of business on the day on which notice of the meeting is mailed
or (ii) the thirtieth day before the meeting.
Each shareholder entitled to vote at any meeting of Shareholders may
authorize another person or persons to act for him or her by a proxy signed by
such shareholder or his or her attorney-in-fact. No proxy shall be valid after
the expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the shareholder
executing it, except in those cases where such proxy states that it is
irrevocable and where law permits an irrevocable proxy. Except as otherwise
provided by statute, the Articles of Incorporation or these By-Laws, any
corporate action to be taken by vote of the Shareholders shall be authorized by
a majority of the total votes validly cast at a meeting of Shareholders at which
a quorum is present.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the shareholder voting, or by his or her proxy, if there be such
proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may fix a time not
less that 10 nor more than 90 days prior to the date of any meeting of
Shareholders or prior to the last day on which the consent or dissent of
Shareholders may be effectively expressed for any purpose without a meeting, as
the time as of which Shareholders entitled to notice of and to vote at such a
meeting or whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined; and all persons who were
holders of record of voting stock at such time and no other shall be entitled to
notice of and to vote at such meeting or to express their consent or dissent, as
the case may be. If no record date has been fixed, the record date for the
determination of Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting, or, if
notice is waived by all Shareholders, at the close of business on the tenth day
next preceding the day on which the meeting is held. The Board of Directors may
fix a record date for determining Shareholders entitled to receive payment of a
dividend or distribution, but such date shall be not more that 90 days before
the date on which such payment is made. If no record date has been fixed, the
record date for determining Shareholders entitled to receive dividends or
distributions shall be the close of business on the day on which the resolution
of the Board of Directors declaring the dividend or distribution is adopted, but
the payment shall not be made more than 60 days after the date on which the
resolution is adopted.
Section 10. Consent of Shareholders in Lieu of Meeting. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any meeting of Shareholders, or any action which may be taken at any
meeting of such Shareholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
Shareholders meetings: (i) a unanimous written consent which sets forth the
action and is signed by each shareholder entitled to vote on the matter, and
(ii) a written waiver of any right to dissent signed by each shareholder
entitled to notice of the meeting but not entitled to vote thereat.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors and all powers of
the Corporation may be exercised by or under the authority of the Board of
Directors.
Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of Directors
shall in no event be less that three (3) nor more than twenty-five (25) except
that the Corporation may have less than three (3) but not less than one (1)
Director if there is no stock outstanding, and may have a number of Directors no
fewer than the number of Shareholders so long as there are fewer than three (3)
Shareholders. Any vacancy created by an increase in Directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
Directors shall have the effect of removing any Director from office prior to
the expiration of his or her term unless such Director is specifically removed
pursuant to Section 5 of this Article III at the time of such decrease.
Directors need not be Shareholders.
Section 3. Election and Term of Directors. Directors shall be elected
annually, by written ballot at the annual meeting of Shareholders or a special
meeting held for that purpose; provided, however, that if no annual meeting of
the Shareholders of the Corporation is required to be held in a particular year
pursuant to Section 1 of Article II of these By-Laws, Directors shall be elected
at the next annual meeting held. The term of office of each Director shall be
from the time of his or her election and qualification until the election of
Directors next succeeding his or her election and until his or her successor
shall have been elected and shall have qualified.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his or her resignation to the Board, or the
Chairman of the Board, or the President, or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the Corporation may be
removed by the Shareholders by a vote of a majority of the shares entitled to be
cast for the election of Directors.
Section 6. Vacancies. If any vacancies shall occur in the Board of
Directors (i) by reason of death, resignation, removal or otherwise, the
remaining directors shall continue to act, and, subject to the provisions of the
Investment Company Act of 1940, such vacancies (if not previously filled by the
Shareholders) may be filled by a majority of the remaining Directors, although
less than a quorum, and (ii) by reason of an increase in the authorized number
of Directors, such vacancies (if not previously filled by the Shareholders) may
be filled only by a majority vote of the entire Board of Directors.
Section 7. Offices, Records, Places of Meetings. The Directors may have one
or more offices and may keep the books of the Corporation outside the State of
Maryland, and within or without the United States of America, at any office or
offices of the Corporation or at any other place as they may from time to time
by resolution determine; and in the case of meetings of the Board of Directors,
such meetings may be held at any place, within or without the United States of
America, as the Board may from time to time by resolution determine, or as shall
be specified or fixed in the respective notices or waivers of notice thereof.
Section 8. Regular Meetings. The Board of Directors from time to time may
provide by resolution for the holding of regular meetings and fix their time and
place as the Board of Directors may determine. Notice of such regular meetings
need not be in writing, provided that notice of any change in the time or place
of such fixed regular meetings shall be communicated promptly to each Director
not present at the meeting at which such change was made, in the manner provided
in Section 9 of this Article III for notice of special meetings. Members of the
Board of Directors or any committee designated thereby may participate in a
meeting of such Board or committee by telephone conference or other
communications method by means of which all persons participating in the meeting
can hear each other at the same time, and participation by such means shall
constitute presence in person at a meeting, subject to the requirements of the
Investment Company Act of 1940.
Section 9. Special Meetings. Special meetings of the Board of Directors may
be held at any time or place and for any purpose when called by the President,
the Secretary or two or more of the Directors. Notice of special meetings,
stating the time and place, shall be communicated to each Director personally by
telephone or transmitted to him or her by mail, telegraph, telefax, telex,
cable, e-mail or wireless at least one day before the meeting.
Section 10. Waiver of Notice. No notice of any meeting of the Board of
Directors or a committee of the Board need be given to any Director who is
present at the meeting or who waives notice of such meeting in writing (which
waiver shall be filed with the records of such meeting), either before or after
the time of the meeting.
Section 11. Quorum and Voting. At all meetings of the Board of Directors,
the presence of one third of the entire Board of Directors shall constitute a
quorum unless there are only two or three Directors, in which case two Directors
shall constitute a quorum. If there is only one Director, the sole Director
shall constitute a quorum. At any adjourned meeting at which a quorum was
present, any business may be transacted at a subsequent meeting, at which a
quorum is present, which might have been transacted at the meeting as originally
called.
Section 12. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President, or, in his or her
absence or inability to act, another Director chosen by a majority of the
Directors present, shall act as chairman of the meeting and preside thereat. The
Secretary (or, in his or her absence or inability to act, any person appointed
by the Chairman) shall act as secretary of the meeting and keep the minutes
thereof.
Section 13. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
Section 14. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board, subject to
any limitations on such compensation as provided in the Investment Company Act
of 1940.
ARTICLE IV
COMMITTEES
Section 1. Organization. By resolution adopted by the Board of Directors,
the Board may designate one or more committees, including an Executive
Committee, composed of two or more Directors. The Board of Directors shall elect
the Chairmen of such committees. The Board of Directors shall have the power at
any time to change the members of such committees and to fill vacancies in the
committees. The Board may delegate to these committees any of its powers, except
the power to authorize the issuance of stock, declare a dividend or distribution
on stock, recommend to Shareholders any action requiring shareholder approval,
amend these By-Laws, or approve any merger or share exchange which does not
require shareholder approval. If the Board of Directors has given general
authorization for the issuance of stock, a committee of the Board, in accordance
with a general formula or method specified by the Board by resolution or by
adoption of a stock option or other plan, may fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
Section 2. Proceedings and Quorum. In the absence of an appropriate
resolution of the Board of Directors, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable. In the event any member of any committee is absent
from any meeting, the members thereof present at the meeting, whether or not
they constitute a quorum, may appoint a member of the Board of Directors to act
in the place of such absent member.
ARTICLE V
OFFICERS, AGENTS AND EMPLOYEES
Section 1. General. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, and may include one or more Vice Presidents,
Assistant Secretaries or Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 8 of this Article.
Section 2. Election, Tenure and Qualifications. The officers of the
Corporation, except those appointed as provided in Section 8 of this Article V,
shall be elected by the Board of Directors at its first meeting and thereafter
annually at an annual meeting. If any officers are not chosen at any annual
meeting, such officers may be chosen at any subsequent regular or special
meeting of the Board. Except as otherwise provided in this Article V, each
officer chosen by the Board of Directors shall hold office until the next annual
meeting of the Board of Directors and until his or her successor shall have been
elected and qualified. Any person may hold one or more offices of the
Corporation except the offices of President and Vice President.
Section 3. Removal and Resignation. Whenever in the judgment of the Board
of Directors the best interest of the Corporation will be served thereby, any
officer may be removed from office by the vote of a majority of the members of
the Board of Directors at any regular meeting or at a special meeting called for
such purpose. Any officer may resign his office at any time by delivering a
written resignation to the Board of Directors, the President, the Secretary, or
any Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 4. President. The president shall be the chief executive officer of
the Corporation. Subject to the supervision of the Board of Directors, he or she
shall have general charge of the business, affairs and property of the
Corporation, and general supervision over its officers, employees and agents.
Except as the Board of Directors may otherwise order, he or she may sign in the
name and on behalf of the Corporation all deeds, bonds, contracts, or
agreements. He or she shall exercise such other powers and perform such other
duties as from time to time may be assigned to him or her by the Board of
Directors.
Section 5. Vice president. The Board of Directors may from time to time
elect one or more Vice Presidents who shall have such powers and perform such
duties as from time may be assigned to them by the Board of Directors or the
President. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents then the more
senior of such officers present and able to act) may perform all the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice President may perform such
duties as the Board of Directors may assign.
Section 6. Treasurer and Assistant Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he or she shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He or she shall render to
the Board of Directors whenever directed by the Board, an account of the
financial condition of the Corporation and of all his or her transactions as
Treasurer; and as soon as possible after the close of each fiscal year, he or
she shall make and submit to the Board of Directors a like report for such
fiscal year. He or she shall perform all acts incidental to the Office of
Treasurer, subject to the control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, the Assistant Treasurer (or if there are two or more Assistant
Treasurers, then the more senior of such officers present and able to act) may
perform all the duties of the Treasurer.
Section 7. Secretary and Assistant Secretaries. The Secretary shall attend
to the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the Shareholders and Directors in books to be
kept for that purpose. He or she shall keep in safe custody the seal of the
corporation, and shall have charge of the records for the Corporation, including
the stock books and such other books and papers as the Board of Directors may
direct and such books, reports, certificates and other documents required by law
to be kept, all of which shall at all reasonable times be open to inspection by
any Director. He or she shall perform such other duties as appertain to his or
her office or as may be required by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, he or she (or if there are two or more Assistant Secretaries, then
the more senior of such officers present and able to act) may perform all the
duties of the Secretary.
Section 8. Subordinate Officers. The Board of Directors from time to time
may appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors may from time to time delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
rights, terms of office, authorities and duties.
Section 9. Remuneration. The salaries or other compensation of the officers
of the Corporation shall be fixed from time to time by resolution of the Board
of Directors, except that the Board of Directors may by resolution delegate to
any person or group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in accordance with
the provisions of Section 8 of this Article V.
Section 10. Surety Bonds. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission) to the Corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his or her duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his or
her hands.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify (a) its Directors and officers, whether
serving the Corporation or, at its request, any other entity, to the full extent
required or permitted by (i) Maryland law now or hereafter in force, including
the advance of expenses under the procedures and to the full extent permitted by
law, and (ii) the Investment Company Act of 1940, as amended, and (b) other
employees and agents to such extent as shall be authorized by the Board of
Directors and as permitted by law. The foregoing rights of indemnification shall
not be exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be permitted
by law.
ARTICLE VII
CAPITAL STOCK
Section 1. Stock Certificates. The interest of each shareholder of the
Corporation may be evidenced by certificates for shares of stock in such form as
the Board of Directors may from time to time prescribe. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President or a Vice President and countersigned by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.
Certificates may be sealed with the actual corporate seal or a facsimile of it
or in any other form. Any or all of the signatures of the seal on the
certificate may be manual or facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue unless written instructions of the Corporation to
the contrary are delivered to such officer, transfer agent or registrar.
Section 2. Stock Ledgers. The stock ledgers of the Corporation, containing
the names and addresses of the Shareholders and the number of shares held by
them respectively, shall be kept at the principal offices of the Corporation or,
if the Corporation employs a transfer agent, at the offices of the transfer
agent of the Corporation.
Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require and the payment of all taxes thereon. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person in whose name any share or shares stand on the record of Shareholders as
the owner of such share or shares for all purposes, including, without
limitation, the rights to receive dividends or other distributions, and to vote
as such owner, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in any such share or shares on the part of any
other person. The Board may make such additional rules and regulations, not
inconsistent with these By-Laws, as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of the
Corporation.
Section 4. Transfer Agents and Registrars. The Board of Directors may from
time to time appoint or remove transfer agents and/or registrars of transfers of
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his or her legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
ARTICLE VIII
SEAL
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." The Board of Directors may otherwise alter the form of the
seal. Said seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced. Any Officer or Director of the
Corporation shall have the authority to affix the corporate seal of the
Corporation to any document requiring the same.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall be determined by resolution of the
Board of Directors.
ARTICLE X
DEPOSITORIES AND CUSTODIANS
Section 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.
ARTICLE XI
EXECUTION OF INSTRUMENTS
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board or these
By-Laws provide.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities owned by the Corporation may be held on behalf of the
Corporation by a Custodian selected by the Board of Directors, and may be
transferred or otherwise disposed of only as allowed pursuant to these By-Laws
and pursuant to authorization by the Board; and when so authorized to be held on
behalf of the Corporation or sold, transferred or otherwise disposed of, may be
transferred from the name of the Corporation by the signature of the President,
any Vice President or the Treasurer, or pursuant to any procedure approved by
the Board of Directors, subject to applicable law.
ARTICLE XII
INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation shall employ an independent public accountant or a firm of
independent public accountants as its accountants to examine the accounts of the
Corporation and to sign and certify financial statements filed by the
Corporation.
ARTICLE XIII
AMENDMENTS
These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the Shareholders or at any special meeting of the
Shareholders at which a quorum is present or represented, provided that notice
of the proposed amendment, alteration or repeal be contained in the notice of
such special meeting. These By-Laws may also be amended, altered or repealed by
the affirmative vote of a majority of the Board of Directors, except any
particular by-laws which is specified as not subject to alteration or repeal by
the Board of Directors, subject to the requirements of the Investment Company
Act of 1940, as amended.
EXHIBIT 23(D)
INVESTMENT ADVISORY AGREEMENT
1-800 MUTUALS FUND GROUP, INC.
This Agreement is made and entered into as of the 15th day of July, 1999 by
and between 1-800 MUTUALS Fund Group, Inc, a Maryland Corporation (the "Fund"),
and 1-800 MUTUALS, Inc., a Texas corporation (hereinafter referred to as
"Adviser").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
is currently authorized to issue shares representing interests in the following
Portfolios:
1-800 MUTUALS Multinational 25 Fund
1-800 MUTUALS Technology 25 Sector Fund
1-800 MUTUALS Health Care 25 Sector Fund
1-800 MUTUALS Financial Services 25 Sector Fund
(Individually a "Portfolio" and together the "Portfolios"); and
WHEREAS, Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of asset
management; and
WHEREAS, the Fund desires to retain Adviser to render certain investment
management services to the Fund's Portfolios and Adviser is willing to render
such services;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. OBLIGATIONS OF INVESTMENT ADVISER
(A) SERVICES. Adviser agrees to perform the following services (the
"Services") for the Fund:
(1) manage the investment and reinvestment of each Portfolio's assets;
(2) continuously review, supervise, and administer the investment program
of each Portfolio;
(3) determine, in its discretion, the securities to be purchased, retained
or sold for each Portfolio (and implement those decisions);
(4) provide the Fund with records concerning Adviser's activities which
the Fund is required to maintain; and
(5) render regular reports to the Fund's officers and directors concerning
Adviser's discharge of the foregoing responsibilities.
Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the directors of the Fund and in compliance with
such policies as the directors may from time to time establish, and in
compliance with the objectives, policies, and limitations of each Portfolio as
set forth in the Fund's prospectus and statement of additional information, as
amended from time to time, and with all applicable laws and regulations. All
Services to be furnished by Adviser under this Agreement may be furnished
through the medium of any directors, officers or employees of Adviser or through
such other parties as Adviser may determine from time to time.
Adviser agrees, at its own expense or at the expense of one or more of its
affiliates, to render the Services and to provide the office space, furnishings,
equipment and personnel as may be reasonably required in the judgment of the
Board of Directors of the Fund to perform the Services on the terms and for the
compensation provided herein. Adviser shall authorize and permit any of its
officers, directors and employees, who may be elected as directors or officers
of the Fund, to serve in the capacities in which they are elected.
Except to the extent expressly assumed by Adviser herein and except to the
extent required by law to be paid by Adviser, the Fund shall pay all costs and
expenses in connection with its operation and organization.
(B) BOOKS AND RECORDS. All books and records prepared and maintained by
Adviser for the Fund under this Agreement shall be the property of the Fund and,
upon request therefor, Adviser shall surrender to the Fund such of the books and
records so requested.
2. PORTFOLIO TRANSACTIONS.
Adviser is authorized to select the brokers or dealers that will execute
the purchases and sales of portfolio securities for each Portfolio and is
directed to use its best efforts to obtain the best net results as described in
the Fund's prospectus from time to time. Adviser may, in its discretion,
purchase and sell portfolio securities from and to brokers and dealers who
provide a Portfolio with research, analysis, advice and similar services, and
Adviser may pay to these brokers and dealers, in return for research and
analysis, a higher commission or spread than may be charged by other brokers and
dealers, provided that Adviser determines in good faith that such commission is
reasonable in terms either of that particular transaction or of the overall
responsibility of Adviser to the Fund and its other clients and that the total
commission paid by the Fund will be reasonable in relation to the benefits to a
Portfolio over the long-term. Adviser will promptly communicate to the officers
and the directors of the Fund such information relating to portfolio
transactions as they may reasonably request.
3. COMPENSATION OF ADVISER.
The Fund will pay to Adviser on the last day of each month a fee at an
annual rate equal to 0.50% of the daily average net asset value of each
Portfolio, such fee to be computed daily based upon the net asset value of each
Portfolio as determined by a valuation made in accordance with the Fund's
procedure for calculating Portfolio net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. During any period when
the determination of a Portfolio's net asset value is suspended by the directors
of the Fund, the net asset value of a share of that Portfolio as of the last
business day prior to such suspension shall, for the purpose of this Paragraph
3, be deemed to be net asset value at the close of each succeeding business day
until it is again determined.
4. STATUS OF INVESTMENT ADVISER.
The services of Adviser to the Fund are not to be deemed exclusive, and
Adviser shall be free to render similar services to others so long as its
services to the Fund are not impaired thereby. Adviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund. Nothing in this Agreement shall limit
or restrict the right of any director, officer or employee of Adviser, who may
also be a director, officer, or employee of the Fund, to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar nature or a dissimilar
nature.
5. PERMISSIBLE INTERESTS.
Directors, agents, and stockholders of the Fund are or may be interested in
Adviser (or any successor thereof) as directors, partners, officers, or
stockholders, or otherwise, and directors, partners, officers, agents, and
stockholders of Adviser are or may be interested in the Fund as directors,
stockholders or otherwise; and Adviser (or any successor) is or may be
interested in the Fund as a stockholder or otherwise.
6. LIABILITY OF INVESTMENT ADVISER.
Adviser assumes no responsibility under this Agreement other than to render
the Services called for hereunder in good faith. Adviser shall not be liable for
any error of judgment or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to receipt of compensation for services
(in which case any award of damages shall be limited to the period and the
amount set forth in Section 36(b)(3) of the Investment Company Act of 1940 or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of, or from reckless disregard by it of its obligations
and duties under, this Agreement.
7. TERM.
This Agreement shall remain in effect until July 14, 2001, and from year to
year thereafter provided such continuance is approved at least annually by (1)
the vote of a majority of the Board of Directors of the Fund or (2) a vote of a
"majority" (as that term is defined in the Investment Company Act of 1940) of
the Fund's outstanding securities, provided that in either event the continuance
is also approved by the vote of a majority of the directors of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the Act) of
any such party, which vote must be cast in person at meeting called for the
purpose of voting on such approval; provided, however, that;
(a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon 60 days written notice to Adviser;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) Adviser may terminate this Agreement without payment of penalty on 60
days written notice to the Fund; and
(d) the terms of paragraph 6 of this Agreement shall survive the
termination of this Agreement.
8. NOTICES.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
If to the Fund: If to the Adviser:
1-800 MUTUALS Fund Group, Inc. 1-800 MUTUALS, Inc.
Plaza of the Americas Plaza of the Americas
600 Pearl Street, Suite 2150 600 Pearl Street, Suite 2150
Dallas, Texas 75201 Dallas, Texas 75201
Attn: Richard A. Sapio Richard A. Sapio
Chief Executive Officer President
9. AMENDMENTS.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
vote of the holders of a majority of the Fund's outstanding voting securities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and the year first written above.
1-800 MUTUALS Fund Group, Inc. 1-800 MUTUALS, Inc.
By: ___________________________ By: __________________________
Richard A. Sapio Richard A. Sapio
President Chief Executive Officer
ATTEST: ATTEST:
- ------------------------------- ------------------------------
Secretary Secretary
[Corporate Seal] [Corporate Seal]
EXHIBIT 23E
DISTRIBUTION AGREEMENT
1-800 MUTUALS FUND GROUP, INC.
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of the 15th day of
July,1999 by and among 1-800 MUTUALS Fund Group, Inc. (the "Fund"), a Maryland
corporation, 1-800 MUTUALS, Inc. (the "Adviser"), a Texas corporation, and
Declaration Distributors, Inc. (the "Distributor"), a Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and has registered its shares of common stock (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act") in one or more distinct
series of Shares (the "Portfolio" or "Portfolios");
WHEREAS, the Adviser has been appointed investment adviser to the Fund;
WHEREAS, the Distributor is a broker-dealer registered with the U.S.
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund, the Adviser and the Distributor desire to enter into
this Agreement pursuant to which the Distributor will provide distribution
services to the Portfolios of the Fund identified on Schedule A, as may be
amended from time to time, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund, the Adviser and the Distributor,
intending to be legally bound hereby, agree as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Fund hereby appoints the Distributor as
its exclusive agent for the distribution of the Shares, and the Distributor
hereby accepts such appointment under the terms of this Agreement. The Fund
shall not sell any Shares to any person except to fill orders for the Shares
received through the Distributor; provided, however, that the foregoing
exclusive right shall not apply: (i) to Shares issued or sold in connection with
the merger or consolidation of any other investment company with the Fund or the
acquisition by purchase or otherwise of all or substantially all of the assets
of any investment company or substantially all of the outstanding shares of any
such company by the Fund; (ii) to Shares which may be offered by the Fund to its
shareholders for reinvestment of cash distributed from capital gains or net
investment income of the Fund; or (iii) to Shares which may be issued to
shareholders of other funds who exercise any exchange privilege set forth in the
Fund's Prospectus. Notwithstanding any other provision hereof, the Fund may
terminate, suspend, or withdraw the offering of the Shares whenever, in its sole
discretion, it deems such action to be desirable, and the Distributor shall
process no further orders for Shares after it receives notice of such
termination, suspension or withdrawal.
2. FUND DOCUMENTS. The Fund has provided the Administrator with properly
certified or authenticated copies of the following Fund related documents in
effect on the date hereof: the Fund's organizational documents, including
Articles of Incorporation and by-laws; the Fund's Registration Statement on Form
N-1A, including all exhibits thereto; the Fund's most current Prospectus and
Statement of Additional Information; and resolutions of the Fund's Board of
Directors authorizing the appointment of the Distributor and approving this
Agreement. The Fund shall promptly provide to the Distributor copies, properly
certified or authenticated, of all amendments or supplements to the foregoing.
The Fund shall provide to the Distributor copies of all other information which
the Distributor may reasonably request for use in connection with the
distribution of Shares, including, but not limited to, a certified copy of all
financial statements prepared for the Fund by its independent public
accountants. The Fund shall also supply the Distributor with such number of
copies of the current Prospectus, Statement of Additional Information and
shareholder reports as the Distributor shall reasonably request.
3. DISTRIBUTION SERVICES. The Distributor shall sell and repurchase Shares
as set forth below, subject to the registration requirements of the 1933 Act and
the rules and regulations thereunder, and the laws governing the sale of
securities in the various states ("Blue Sky Laws"):
a. The Distributor, as agent for the Fund, shall sell Shares to the
public against orders therefor at the public offering price, as
determined in accordance with the Fund's then current Prospectus and
Statement of Additional Information.
b. The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information. The net asset value of the Shares shall be calculated by
the Fund or by another entity on behalf of the Fund. The Distributor
shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
c. Upon receipt of purchase instructions, the Distributor shall transmit
such instructions to the Fund or its transfer agent for registration
of the Shares purchased.
d. The Distributor shall also have the right to take, as agent for the
Fund, all actions which, in the Distributor's judgment, are necessary
to effect the distribution of Shares.
e. Nothing in this Agreement shall prevent the Distributor or any
"affiliated person" from buying, selling or trading any securities for
its or their own account or for the accounts of others for whom it or
they may be acting; provided, however, that the Distributor expressly
agrees that it shall not for its own account purchase any Shares of
the Fund except for investment purposes and that it shall not for its
own account sell any such Shares except for redemption of such Shares
by the Fund, and that it shall not undertake activities which, in its
judgment, would adversely affect the performance of its obligations to
the Fund under this Agreement.
f. The Distributor, as agent for the Fund, shall repurchase Shares at
such prices and upon such terms and conditions as shall be specified
in the Prospectus.
4. DISTRIBUTION SUPPORT SERVICES. In addition to the sale and repurchase of
Shares, the Distributor shall perform the distribution support services set
forth on Schedule B attached hereto, as may be amended from time to time. Such
distribution support services shall include: Review of sales and marketing
literature and submission to the NASD; NASD record keeping; and quarterly
reports to the Fund's Board of Directors. Such distribution support services may
also include: fulfillment services, including telemarketing, printing, mailing
and follow-up tracking of sales leads; and licensing Adviser or Fund personnel
as registered representatives of the Distributor and related supervisory
activities.
5. REASONABLE EFFORTS. The Distributor shall use all reasonable efforts in
connection with the distribution of Shares. The Distributor shall have no
obligation to sell any specific number of Shares and shall only sell Shares
against orders received therefor. The Fund shall retain the right to refuse at
any time to sell any of its Shares for any reason deemed adequate by it.
6. COMPLIANCE. In furtherance of the distribution services being provided
hereunder, the Distributor and the Fund agree as follows:
a. The Distributor shall comply with the Rules of Conduct of the NASD and
the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares.
b. The Distributor shall require each dealer with whom the Distributor
has a selling agreement to conform to the applicable provisions of the
Fund's most current Prospectus and Statement of Additional
Information, with respect to the public offering price of the Shares.
c. The Fund agrees to furnish to the Distributor sufficient copies of any
agreements, plans, communications with the public or other materials
it intends to use in connection with any sales of Shares in a timely
manner in order to allow the Distributor to review, approve and file
such materials with the appropriate regulatory authorities and obtain
clearance for use. The Fund agrees not to use any such materials until
so filed and cleared for use by appropriate authorities and the
Distributor.
d. The Distributor, at its own expense, shall qualify as a broker or
dealer, or otherwise, under all applicable Federal or state laws
required to permit the sale of Shares in such states as shall be
mutually agreed upon by the parties; provided, however that the
Distributor shall have no obligation to register as a broker or dealer
under the Blue Sky Laws of any jurisdiction if it determines that
registering or maintaining registration in such jurisdiction would be
uneconomical.
e. The Distributor shall not, in connection with any sale or solicitation
of a sale of the Shares, or make or authorize any representative,
service organization, broker or dealer to make, any representations
concerning the Shares except those contained in the Fund's most
current Prospectus covering the Shares and in communications with the
public or sales materials approved by the Distributor as information
supplemental to such Prospectus.
7. EXPENSES. Expenses shall be allocated as follows:
a. The Fund shall bear the following expenses: preparation, setting in
type, and printing of sufficient copies of the Prospectus and
Statement of Additional Information for distribution to existing
shareholders; preparation and printing of reports and other
communications to existing shareholders; distribution of copies of the
Prospectus, Statement of Additional Information and all other
communications to existing shareholders; registration of the Shares
under the Federal securities laws; qualification of the Shares for
sale in the jurisdictions mutually agreed upon by the Fund and the
Distributor; transfer agent/shareholder servicing agent services;
supplying information, prices and other data to be furnished by the
Fund under this Agreement; and any original issue taxes or transfer
taxes applicable to the sale or delivery of the Shares or certificates
therefor.
b. The Adviser shall pay all other expenses incident to the sale and
distribution of the Shares sold hereunder, including, without
limitation: printing and distributing copies of the Prospectus,
Statement of Additional Information and reports prepared for use in
connection with the offering of Shares for sale to the public;
advertising in connection with such offering, including public
relations services, sales presentations, media charges, preparation,
printing and mailing of advertising and sales literature; data
processing necessary to support a distribution effort; distribution
and shareholder servicing activities of broker-dealers and other
financial institutions; filing fees required by regulatory authorities
for sales literature and advertising materials; any additional
out-of-pocket expenses incurred in connection with the foregoing and
any other costs of distribution.
8. COMPENSATION. For the distribution and distribution support services
provided by the Distributor pursuant to the terms of the Agreement, the Adviser
shall pay to the Distributor the compensation set forth in Schedule A attached
hereto, which schedule may be amended from time to time. The Adviser shall also
reimburse the Distributor for its out-of-pocket expenses related to the
performance of its duties hereunder, including, without limitation,
telecommunications charges, postage and delivery charges, record retention
costs, reproduction charges and traveling and lodging expenses incurred by
officers and employees of the Distributor. The Adviser shall pay the
Distributor's monthly invoices for distribution fees and out-of-pocket expenses
within ten days of the respective month-end. If this Agreement becomes effective
subsequent to the first day of the month or terminates before the last day of
the month, the Fund shall pay to the Distributor a distribution fee that is
prorated for that part of the month in which this Agreement is in effect. All
rights of compensation and reimbursement under this Agreement for services
performed by the Distributor as of the termination date shall survive the
termination of this Agreement.
9. USE OF DISTRIBUTOR'S NAME. The Fund shall not use the name of the
Distributor or any of its affiliates in the Prospectus, Statement of Additional
Information, sales literature or other material relating to the Fund in a manner
not approved prior thereto in writing by the Distributor; provided, however,
that the Distributor shall approve all uses of its and its affiliates' names
that merely refer in accurate terms to their appointments or that are required
by the Securities and Exchange Commission (the "SEC") or any state securities
commission; and further provided, that in no event shall such approval be
unreasonably withheld.
10. USE OF FUND'S NAME. Neither the Distributor nor any of its affiliates
shall use the name of the Fund or material relating to the Fund on any forms
(including any checks, bank drafts or bank statements) for other than internal
use in a manner not approved prior thereto by the Fund; provided, however, that
the Fund shall approve all uses of its name that merely refer in accurate terms
to the appointment of the Distributor hereunder or that are required by the SEC
or any state securities commission; and further provided, that in no event shall
such approval be unreasonably withheld.
11. LIABILITY OF DISTRIBUTOR. The duties of the Distributor shall be
limited to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Distributor hereunder. The Distributor shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which this Agreement
relates, except to the extent of a loss resulting from willful misfeasance, bad
faith or negligence, or reckless disregard of its obligations and duties under
this Agreement. As used in this Section 9 and in Section 10 (except the second
paragraph of Section 10), the term "Distributor" shall include directors,
officers, employees and other agents of the Distributor.
12. INDEMNIFICATION OF DISTRIBUTOR. The Fund shall indemnify and hold
harmless the Distributor against any and all liabilities, losses, damages,
claims and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and investigation expenses incident thereto) which the
Distributor may incur or be required to pay hereafter, in connection with any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which the Distributor may be involved as
a party or otherwise or with which the Distributor may be threatened, by reason
of the offer or sale of the Fund shares prior to the effective date of this
Agreement.
Any director, officer, employee, shareholder or agent of the Distributor
who may be or become an officer, director, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting on any business of the
Fund (other than services or business in connection with the Distributor's
duties hereunder), to be rendering such services to or acting solely for the
Fund and not as a director, officer, employee, shareholder or agent, or one
under the control or direction of the Distributor, even though receiving a
salary from the Distributor.
The Fund agrees to indemnify and hold harmless the Distributor, and each
person, who controls the Distributor within the meaning of Section 15 of the
1933 Act, or Section 20 of the Securities Exchange Act of 1934, as amended
("1934 Act"), against any and all liabilities, losses, damages, claims and
expenses, joint or several (including, without limitation, reasonable attorneys'
fees and disbursements and investigation expenses incident thereto) to which
they, or any of them, may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other Federal or state laws or regulations, at common law or
otherwise, insofar as such liabilities, losses, damages, claims and expenses (or
actions, suits or proceedings in respect thereof) arise out of or relate to any
untrue statement or alleged untrue statement of a material fact contained in a
Prospectus, Statement of Additional Information, supplement thereto, sales
literature or other written information prepared by the Fund and provided by the
Fund to the Distributor for the Distributor's use hereunder, or arise out of or
relate to any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Distributor (or any person controlling the Distributor) shall
not be entitled to indemnity hereunder for any liabilities, losses, damages,
claims or expenses (or actions, suits or proceedings in respect thereof)
resulting from (i) an untrue statement or omission or alleged untrue statement
or omission made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by the Distributor specifically for
use therein or (ii) the Distributor's own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations in the
performance of this Agreement.
The Distributor agrees to indemnify and hold harmless the Fund, and each
person who controls the Fund within the meaning of Section 15 of the 1933 Act,
or Section 20 of the 1934 Act, against any and all liabilities, losses, damages,
claims and expenses, joint or several (including, without limitation reasonable
attorneys' fees and disbursements and investigation expenses incident thereto)
to which they, or any of them, may become subject under the 1933 Act, the 1934
Act, the 1940 Act or other Federal or state laws, at common law or otherwise,
insofar as such liabilities, losses, damages, claims or expenses arise out of or
relate to any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or Statement of Additional Information or any
supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished in writing to the Fund by the Distributor specifically for
use therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the party from whom indemnification is sought
("Indemnitor") of a written assertion or claim of any threatened or pending
legal proceeding which may be subject to indemnity under this Section; provided,
however, that failure to notify the Indemnitor of such written assertion or
claim shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume the
defense of any suit brought to enforce a claim subject to this Indemnity and
such defense shall be conducted by counsel chosen by the Indemnitor and
satisfactory to the Indemnitee; provided, however, that if the defendants
include both the Indemnitee and the Indemnitor, and the Indemnitee shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor
("conflict of interest"), the Indemnitor shall not have the right to elect to
defend such claim on behalf of the Indemnitee, and the Indemnitee shall have the
right to select separate counsel to defend such claim on behalf of the
Indemnitee. In the event that the Indemnitor elects to assume the defense of any
suit pursuant to the preceding sentence and retains counsel satisfactory to the
Indemnitee, the Indemnitee shall bear the fees and expenses of additional
counsel retained by it, except for reasonable investigation costs which shall be
borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the
defense of a claim, (ii) elects to assume the defense of a claim but chooses
counsel that is not satisfactory to the Indemnitee or (iii) has no right to
assume the defense of a claim because of a conflict of interest, the Indemnitor
shall advance or reimburse the Indemnitee, at the election of the Indemnitee,
reasonable fees and disbursements of any counsel retained by Indemnitee,
including reasonable investigation costs.
13. DUAL EMPLOYEES. The Adviser agrees that only its employees who are
registered representatives of the Distributor ("dual employees") shall offer or
sell Shares of the Portfolios and further agrees that the activities of any such
employees as registered representatives of the Distributor shall be limited to
offering and selling Shares. If there are dual employees, one employee of the
Adviser shall register as a principal of the Distributor and assist the
Distributor in monitoring the marketing and sales activities of the dual
employees. The Adviser shall maintain errors and omissions and fidelity bond
insurance policies providing reasonable coverage for its employees activities
and shall provide copies of such policies to the Distributor. The Adviser shall
indemnify and hold harmless the Distributor against any and all liabilities,
losses, damages, claims and expenses (including reasonable attorneys' fees and
disbursements and investigation costs incident thereto) arising from or related
to the Adviser's employees' activities as registered representatives of the
Distributor, including, without limitation, any and all such liabilities,
losses, damages, claims and expenses arising from or related to the breach by
such dual employees of any rules or regulations of the NASD or SEC.
14. FORCE MAJEURE. The Distributor shall not be liable for any delays or
errors occurring by reason of circumstances not reasonably foreseeable and
beyond its control, including, but not limited, to acts of civil or military
authority, national emergencies, work stoppages, fire, flood, catastrophe, acts
of God, insurrection, war, riot or failure of communication or power supply. In
the event of equipment breakdowns which are beyond the reasonable control of the
Distributor and not primarily attributable to the failure of the Distributor to
reasonably maintain or provide for the maintenance of such equipment, the
Distributor shall, at no additional expense to the Fund, take reasonable steps
in good faith to minimize service interruptions, but shall have no liability
with respect thereto.
15. SCOPE OF DUTIES. The Distributor and the Fund shall regularly consult
with each other regarding the Distributor's performance of its obligations and
its compensation under the foregoing provisions. In connection therewith, the
Fund shall submit to the Distributor at a reasonable time in advance of filing
with the SEC copies of any amended or supplemented Registration Statement of the
Fund (including exhibits) under the 1940 Act and the 1933 Act, and at a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the Fund.
Any change in such materials that would require any change in the Distributor's
obligations under the foregoing provisions shall be subject to the Distributor's
approval. In the event that a change in such documents or in the procedures
contained therein increases the cost or burden to the Distributor of performing
its obligations hereunder, the Distributor shall be entitled to receive
reasonable compensation therefore.
16. DURATION. This Agreement shall become effective as of the date first
above written, and shall continue in force for two years from that date and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the Directors of the Fund, or by the
vote of a majority of the outstanding voting securities of the Fund, and (ii)
the vote of a majority of those Directors of the Fund who are not interested
persons of the Fund, and who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on the approval.
17. TERMINATION. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the
continuance of the Agreement after the initial two year term as set
forth in Section 16 above.
c. This Agreement shall terminate at any time upon a vote of the majority
of the Directors who are not interested persons of the Fund or by a
vote of the majority of the outstanding voting securities of the Fund,
upon not less than 60 days prior written notice to the Distributor.
d. The Distributor may terminate this Agreement upon not less than 60
days prior written notice to the Fund.
Upon the termination of this Agreement, the Fund shall pay to the
Distributor such compensation and out-of-pocket expenses as may be payable for
the period prior to the effective date of such termination. In the event that
the Fund designates a successor to any of the Distributor's obligations
hereunder, the Distributor shall, at the expense and direction of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by the Distributor pursuant to the foregoing
provisions.
Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 21, 22, 24, 25 and 26 shall
survive any termination of this Agreement.
18. AMENDMENT. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Distributor, the Adviser and the Fund and shall not
become effective unless its terms have been approved by the majority of the
Directors of the Fund or by a "vote of a majority of the outstanding voting
securities" of the Fund and by a majority of those Directors who are not
"interested persons" of the Fund or any party to this Agreement.
19. NON-EXCLUSIVE SERVICES. The services of the Distributor rendered to the
Fund are not exclusive. The Distributor may render such services to any other
investment company.
20. DEFINITIONS. As used in this Agreement, the terms "vote of a majority
of the outstanding voting securities," "assignment," "interested person" and
"affiliated person" shall have the respective meanings specified in the 1940 Act
and the rules enacted thereunder as now in effect or hereafter amended.
21. CONFIDENTIALITY. The Distributor shall treat confidentially and as
proprietary information of the Fund all records and other information relating
to the Fund and prior, present or potential shareholders and shall not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by the Fund.
22. NOTICE. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 20 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to the Fund:
1-800 MUTUALS Fund Group, Inc.
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
Attention: Richard A. Sapio
(b) if to the Adviser:
1-800 MUTUALS, Inc.
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
Attention: Richard A. Sapio
(c) if to the Distributor:
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Attn: Terence P. Smith, President
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
24. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be amended from
time to time.
25. ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
26. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
1-800 MUTUALS Fund Group, Inc.
By: /s/ Richard A. Sapio
-----------------------------
President
1-800 MUTUALS, Inc.
By: /s/ Richard A. Sapio
-----------------------------
Chief Executive Officer
Declaration Distributors, Inc.
By: /s/ Terence P. Smith
-----------------------------
Chief Executive Officer
<PAGE>
SCHEDULE A
----------
1-800 MUTUALS FUND GROUP, INC.
------------------------------
Portfolio and Fee Schedule
--------------------------
Portfolios covered by Distribution Agreement:
1-800 MUTUALS Multinational 25 Fund
1-800 MUTUALS Technology 25 Sector Fund
1-800 MUTUALS Health Care 25 Sector Fund
1-800 MUTUALS Financial Services 25 Sector Fund
Fees for distribution and distribution support services on behalf of the
Portfolios:
$20,000 per annum
<PAGE>
SCHEDULE B
----------
1-800 MUTUALS FUND GROUP, INC.
------------------------------
Distribution Support Services
-----------------------------
1. Provide national broker dealer for Fund registration.
2. Review and submit for approval to the NASD all advertising and promotional
materials.
3. Maintain all books and records required by the NASD.
4. Subject to approval of Distributor, license personnel as registered
representatives of the Distributor to distribute no load fund shares
sponsored by the Adviser.
5. Telemarketing services (additional cost- to be negotiated).
6. Fund fulfillment services, including sampling prospective shareholders
inquiries and related mailings (additional cost- to be negotiated).
EXHIBIT 23H(1)
OPERATING SERVICES AGREEMENT
1-800 MUTUALS FUND GROUP, INC.
THIS AGREEMENT is made and entered into as of the 15th day of July, 1999,
by and between 1-800 MUTUALS Fund Group, Inc., a Maryland corporation (the
"Fund"), and 1-800 MUTUALS, Inc., a Texas corporation (hereinafter referred to
as "Manager").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
authorized to issue shares representing interests in the following Portfolios:
1-800 MUTUALS Multinational 25 Fund
1-800 MUTUALS Technology 25 Sector Fund
1-800 MUTUALS Health Care 25 Sector Fund
1-800 MUTUALS Financial Services 25 Sector Fund
(Individually a "Portfolio" and together the "Portfolios"); and
WHEREAS, Manager is registered as an investment advisor under the
Investment Advisors Act of 1940, and engages in the business of asset management
and the provision of certain other administrative and record keeping services in
connection therewith; and
WHEREAS, the Fund wishes to engage Manager, to provide, or arrange for the
provision of, certain operational services which are necessary for the
day-to-day operations of the Portfolios in the manner and on the terms and
conditions hereinafter set forth, and Manager wishes to accept such engagement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Manager agree as follows:
1. OBLIGATIONS OF MANAGER
(a) Services. The Fund hereby retains Manager to provide, or, upon receipt
of written approval of the Fund arrange for other companies to provide, the
following services to the Portfolios in the manner and to the extent that such
services are reasonably necessary for the operation of the Portfolios
(collectively, the "Services"):
(1) accounting services and functions, including costs and expenses of any
independent public accountants;
(2) non-litigation related legal and compliance services, including the
expenses of maintaining registration and qualification of the Fund and
the Portfolio under federal, state and any other applicable laws and
regulations;
(3) dividend disbursing agent, dividend reinvestment agent, transfer
agent, and registrar services and functions (including answering
inquiries related to shareholder Portfolio accounts);
(4) custodian and depository services and functions;
(5) distribution, marketing, and/or underwriting services;
(6) independent pricing services;
(7) preparation of reports describing the operations of the Portfolio,
including the costs of providing such reports to broker-dealers,
financial institutions and other organizations which render services
and assistance in connection with the distribution of shares of the
Portfolio;
(8) sub-accounting and recordkeeping services and functions (other than
those books and records required to be maintained by Manager under the
Investment Advisory Agreement between the Fund and Manager dated
August 15, 1998), including maintenance of shareholder records and
shareholder information concerning the status of their Portfolio
accounts by investment advisors, broker-dealers, financial
institutions, and other organizations on behalf of Manager;
(9) shareholder and board of directors communication services, including
the costs of preparing, printing and distributing notices of
shareholders' meetings, proxy statements, prospectuses, statements of
additional information, Portfolio reports, and other communications to
the Fund's Portfolio shareholders, as well as all expenses of
shareholders' and board of directors' meetings, including the
compensation and reimbursable expenses of the directors of the Fund;
(10) other day-to-day administrative services, including the costs of
designing, printing, and issuing certificates representing shares of
the Portfolio, and premiums for the fidelity bond maintained by the
Fund pursuant to Section 17(g) of the Act and rules promulgated
thereunder (except for such premiums as may be allocated to third
parties, as insureds thereunder).
(b) Exclusions from Service. Notwithstanding the provisions of Paragraph
1(a) above, the Services shall not include and Manager will not be responsible
for any of the following:
(1) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund or the Portfolios in connection with securities
transactions to which the Fund or any Portfolio is a party or in
connection with securities owned by the Fund or the Portfolio(s);
(2) the interest on indebtedness, if any, incurred by the Fund or any
Portfolio;
(3) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or any Portfolio
to federal, state, county, city, or other governmental agents;
(4) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund or any Portfolio;
and
(5) any other extraordinary expense of the Fund or any Portfolio.
(c) Books and Records. All books and records prepared and maintained by
Manager for the Fund under this Agreement shall be the property of the Fund and,
upon request therefor, Manager shall surrender to the Fund such of the books and
records so requested.
(d) Staff and Facilities. Manager assumes and shall pay for maintaining the
staff, personnel, space, equipment and facilities necessary to perform its
obligations under this Agreement.
2. OBLIGATIONS OF THE FUND
(a) Fee. The Fund will pay to Manager on the last day of each month a fee
at an annual rate equal to 0.70% of average net asset of each Portfolio, such
fee to be computed daily based upon the net asset value of each Portfolio as
determined by a valuation made in accordance with the Fund's procedure for
calculating Portfolio net asset value as described in the Fund's Prospectus
and/or Statement of Additional Information. During any period when the
determination of a Portfolio's net asset value is suspended by the directors of
the Fund, the net asset value of a share of that Portfolio as of the last
business day prior to such suspension shall, for the purpose of this Paragraph
2(a), be deemed to be the net asset value at the close of each succeeding
business day until it is again determined.
(b) Information. The Fund will, from time to time, furnish or otherwise
make available to Manager such information relating to the business and affairs
of each Portfolio as Manager may reasonably require in order to discharge its
duties and obligations hereunder.
3. TERM. This Agreement shall remain in effect until July 14, 2001, and from
year to year thereafter provided such continuance is approved at least annually
by (1) the vote of a majority of the Board of Directors of the Fund or (2) a
vote of a "majority" (as that term is defined in the Investment Company Act of
1940) of the Fund's outstanding securities, provided that in either event the
continuance is also approved by the vote of a majority of the directors of the
Fund who are not parties to this Agreement or "interested persons" (as defined
in the Act) of any such party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that;
(a) the Fund, at any time and without the payment of any penalty may
terminate this Agreement upon 120 days written notice to Manager;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) Manager may terminate this Agreement without payment of penalty on 120
days written notice to the Fund.
4. NOTICES. Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
If to the Fund: If to the Adviser:
1-800 MUTUALS Fund Group, Inc. 1-800 MUTUALS, Inc.
Plaza of the Americas Plaza of the Americas
600 North Pearl Street, Suite 2150 600 North Pearl Street, Suite 2150
Dallas, Texas 75201 Dallas, Texas 75201
Attn: Richard A. Sapio Attn: Richard A. Sapio
President Chief Executive Officer
5. MISCELLANEOUS
(a) Performance Review. Manager will permit representatives of the Fund,
including the Fund's independent auditors, to have reasonable access to the
personnel and records of Manager in order to enable such representatives to
monitor the quality of services being provided and the level of fees due
Manager pursuant to this Agreement. In addition, Manager shall promptly
deliver to the board of directors of the Fund such information as may
reasonably be requested from time to time to permit the board of directors
to make an informed determination regarding continuation of this Agreement
and the payments contemplated to be made hereunder.
(b) Choice of Law. This Agreement shall be construed in accordance with the
laws of the State of Maryland and the applicable provisions of the Act. To
the extent the applicable law of the State of Maryland or any of the
provisions herein conflict with the applicable provisions of the Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
1-800 MUTUALS Fund Group, Inc. 1-800 MUTUALS, Inc.
By: ____________________________ By: __________________________
Richard A. Sapio, President Richard A. Sapio, CEO
ATTEST: ATTEST:
By: __________________________ By: __________________________
Secretary Secretary
EXHBIT 23(H)(2)
INVESTMENT COMPANY SERVICES AGREEMENT
1-800 MUTUALS FUND GROUP, INC.
THIS AGREEMENT, dated as of the 15th day of July, 1999 , made by and
between 1-800 MUTUALS Fund Group, Inc. ("Fund"), a Maryland corporation
operating as an open-end, management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"), 1-800 MUTUALS, Inc.
("Adviser"), a corporation duly organized under the laws of Texas, and
Declaration Service Company ("Declaration"), a corporation duly organized under
the laws of the Commonwealth of Pennsylvania (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized by its Articles of Incorporation and By-
Laws to issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule "C" attached hereto and
which Schedule "C" may be amended from time to time by mutual agreement of the
Fund and Declaration; and
WHEREAS, the Fund and the Adviser have entered into an "Operating Services
Agreement" dated as of July 15, 1999 authorizing the Adviser to provide certain
investment company services to the Fund, and which further authorizes the
Adviser to enter into this Investment Company Services Agreement (hereafter
"Agreement") on behalf of the Fund; and
WHEREAS, the Parties desire to enter into an agreement whereby Declaration
will provide the services to the Fund as specified herein and set forth in
particular in Schedule "A" which is attached hereto and made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange for good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
GENERAL PROVISIONS
SECTION 1. APPOINTMENT. The Adviser hereby appoints Declaration as
servicing agent to the Fund and Declaration hereby accepts such appointment. In
order that Declaration may perform its duties under the terms of this Agreement,
the Board of Directors of the Fund shall direct the officers, investment
adviser, legal counsel, independent accountants and custodian of the Fund to
cooperate fully with Declaration and, upon request of Declaration, to provide
such information, documents and advice relating to the Fund which Declaration
requires to execute its responsibilities hereunder. In connection with its
duties, Declaration shall be entitled to rely, and will be held harmless by the
Fund when acting in reasonable reliance, upon any instruction, advice or
document relating to the Fund as provided to Declaration by any of the
aforementioned persons on behalf of the Fund. All fees charged by any such
persons acting on behalf of the Fund will be deemed an expense of the Fund.
Any services performed by Declaration under this Agreement will conform to the
requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended,
and any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Articles of Incorporation and the by-laws of the
Fund, as amended from time to time and delivered to Declaration;
(d) any policies and determinations of the Board of Directors of the Fund
which are communicated to Declaration; and
(e) the policies of the Fund as reflected in the Fund's registration
statement as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent Declaration or any officer thereof from
providing the same or comparable services for or with any other person, firm or
corporation. While the services supplied to the Fund may be different than those
supplied to other persons, firms or corporations, Declaration will provide the
Fund equitable treatment in supplying services. The Fund recognizes that it will
not receive preferential treatment from Declaration as compared with the
treatment provided to other Declaration clients.
SECTION 2. DUTIES AND OBLIGATIONS OF DECLARATION.
Subject to the provisions of this Agreement, Declaration will provide to
the Fund the specific services as set forth in Schedule "A" attached hereto.
SECTION 3. DEFINITIONS. For purposes of this Agreement:
"Certificate" will mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be
signed on behalf of the Fund by any two of its designated officers, and the
term Certificate shall also include instructions communicated to the
custodian by Declaration.
"Custodian" will refer to that agent which provides safekeeping of the
assets of the Fund.
"Instructions" will mean communications containing instructions transmitted
by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an officer or unsigned) and tested
telex.
"Oral Instruction" will mean an authorization, instruction, approval, item
or set of data, or information of any kind transmitted to Declaration in
person or by telephone, telegram, telecopy or other mechanical or
documentary means lacking original signature, by a person or persons
reasonably identified to Declaration to be a person or persons so
authorized by a resolution of the Board of Directors of the Fund to give
Oral Instructions to Declaration on behalf of the Fund.
"Shareholders" will mean the registered owners of the shares of the Fund in
accordance with the share registry records maintained by Declaration for
the Fund.
"Shares" will mean the issued and outstanding shares of the Fund.
"Signature Guarantee" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. Broker-dealers guaranteeing signatures must be
members of a clearing corporation or maintain net capital of at least
$100,000. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
"Written Instruction" will mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Declaration
in an original writing containing an original signature or a copy of such
document transmitted by telecopy including transmission of such signature
reasonably identified to Declaration to be the signature of a person or
persons so authorized by a resolution of the Board of Directors of the
Fund, or so identified by the Fund to give Written Instructions to
Declaration on behalf of the Fund.
Concerning Oral and Written Instructions For all purposes under this
Agreement, Declaration is authorized to act upon receipt of the first of
any Written or Oral Instruction it receives from the Fund or its agents. In
cases where the first instruction is an Oral Instruction that is not in the
form of a document or written record, a confirmatory Written Instruction or
Oral Instruction in the form of a document or written record shall be
delivered. In cases where Declaration receives an Instruction, whether
Written or Oral, to enter a portfolio transaction onto the Fund's records,
the Fund shall cause the broker/dealer executing such transaction to send a
written confirmation to the Custodian.
Declaration shall be entitled to rely on the first Instruction received.
For any act or omission undertaken by Declaration in compliance therewith, it
shall be free of liability and fully indemnified and held harmless by the Fund,
provided however, that in the event a Written or Oral Instruction received by
Declaration is countermanded by a subsequent Written or Oral Instruction
received prior to acting upon such countermanded Instruction, Declaration shall
act upon such subsequent Written or Oral Instruction. The sole obligation of
Declaration with respect to any follow-up or confirmatory Written Instruction or
Oral Instruction in documentary or written form shall be to make reasonable
efforts to detect any such discrepancy between the original Instruction and such
confirmation and to report such discrepancy to the Fund. The Fund shall be
responsible and bear the expense of its taking any action, including any
reprocessing, necessary to correct any discrepancy or error. To the extent such
action requires Declaration to act, the Fund shall give Declaration specific
Written Instruction as to the action required. The Fund will file with
Declaration a certified copy of each resolution of the Fund's Board of Directors
authorizing execution of Written Instructions or the transmittal of Oral
Instructions as provided above.
SECTION 4. INDEMNIFICATION.
(a) Declaration, its directors, officers, employees, shareholders, and
agents will be liable for any loss suffered by the Fund resulting from the
willful misfeasance, bad faith, gross negligence or reckless disregard on the
part of Declaration in the performance of its obligations and duties under this
Agreement.
(b) Any director, officer, employee, shareholder or agent of Declaration,
who may be or become an officer, director, employee or agent of the Fund, will
be deemed, when rendering services to the Fund, or acting on any business of the
Fund (other than services or business in connection with Declaration' duties
hereunder), to be rendering such services to or acting solely for the Fund and
not as a director, officer, employee, shareholder or agent of, or under the
control or direction of Declaration even though such person may be receiving
compensation from Declaration.
(c) The Fund agrees to indemnify and hold Declaration harmless, together
with its directors, officers, employees, shareholders and agents from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Declaration may
sustain or incur or which may be asserted against Declaration by any person by
reason of, or as a result of:
(i) any action taken or omitted to be taken by Declaration except claims,
demands, expenses and liabilities arising from willful misfeasance,
bad faith, negligence or reckless disregard on the part of Declaration
in the performance of its obligations and duties under this Agreement;
or
(ii) any action taken or omitted to be taken by Declaration in reliance
upon any Certificate, instrument, order or stock certificate or other
document reasonably believed by Declaration to be genuine and signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the
Fund, or upon the written opinion of legal counsel for the Fund or
Declaration; or
(iii)the offer or sale of shares of the Fund to any person, natural or
otherwise, which is in violation of any state or federal law.
If a claim is made against Declaration as to which Declaration may seek
indemnity under this Section, Declaration will notify the Fund promptly after
receipt of any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and will notify the Fund promptly of
any action commenced against Declaration within ten (10) days after Declaration
has been served with a summons or other legal process. Failure to notify the
Fund will not, however, relieve the Fund from any liability which it may have on
account of the indemnity under this Section so long as the Fund has not been
prejudiced in any material respect by such failure.
The Fund and Declaration will cooperate in the control of the defense of
any action, suit or proceeding in which Declaration is involved and for which
indemnity is being provided by the Fund to Declaration. The Fund may negotiate
the settlement of any action, suit or proceeding subject to Declaration's
approval, which will not be unreasonably withheld. Declaration reserves the
right, but not the obligation, to participate in the defense or settlement of a
claim, action or proceeding with its own counsel. Costs or expenses incurred by
Declaration in connection with, or as a result of such participation, will be
borne solely by the Fund if:
(i) Declaration has received an opinion of counsel from counsel to the
Fund stating that the use of counsel to the Fund by Declaration would
present an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Declaration and the Fund, and legal counsel to
Declaration has reasonably concluded that there are legal defenses
available to it which are different from or additional to those
available to the Fund or which may be adverse to or inconsistent with
defenses available to the Fund (in which case the Fund will not have
the right to direct the defense of such action on behalf of
Declaration); or
(iii)the Fund authorizes Declaration to employ separate counsel at the
expense of the Fund.
(d) The terms of this Section will survive the termination of this
Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) Declaration represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of Pennsylvania;
(ii) it is empowered under applicable laws and by its Certificate of
Incorporation and by-laws to enter into and perform this Agreement;
(iii)all requisite corporate proceedings have been taken to authorize
Declaration to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities, personnel
and equipment required to fully perform its duties and obligations
hereunder;
(v) no legal or administrative proceedings have been instituted or
threatened which would impair Declaration's ability to perform its
duties and obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of
Declaration or any law or regulation applicable to it;
(vii)it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act;
(viii) this Agreement has been duly authorized by Declaration and, when
executed and delivered, will constitute valid, legal and binding
obligation of Declaration, enforceable in accordance with its terms.
(b) The Fund represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii)all requisite proceedings have been taken to authorize the Fund to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties
and obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Fund, or any law or regulation applicable to
either;
(vi) the Shares are properly registered or otherwise authorized for
issuance and sale;
(vii)this Agreement has been duly authorized by the Fund and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Fund, enforceable in accordance with its terms.
(c) The Adviser represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the State of Pennsylvania;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii)all requisite proceedings have been taken to authorize the Adviser to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Adviser's ability to perform its
duties and obligations under this Agreement;
(v) the Adviser's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Adviser, or any law or regulation applicable to
either;
(vi) this Agreement has been duly authorized by the Adviser and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Adviser, enforceable in accordance with its terms.
(d) Delivery of Documents
The Fund will furnish or cause to be furnished to Declaration the following
documents;
(i) current Prospectus and Statement of Additional Information;
(ii) most recent Annual Report;
(iii)most recent Semi-Annual Report for registered investment companies on
Form N-SAR;
(iv) certified copies of resolutions of the Fund's Board of Directors
authorizing the execution of Written Instructions or the transmittal
of Oral Instructions and those persons authorized to give those
Instructions.
(e) Record Keeping and Other Information
Declaration will create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Fund and will be
available during regular business hours for inspection, copying and use by the
Fund. Where applicable, such records will be maintained by Declaration for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, Declaration will deliver all such records to the Fund or such
person as the Fund may designate.
In case of any request or demand for the inspection of the Share records of
the Fund, Declaration shall notify the Fund and secure instructions as to
permitting or refusing such inspection. Declaration may, however, exhibit such
records to any person in any case where it is advised by its counsel that it may
be held liable for failure to do so.
SECTION 6. COMPENSATION. The Adviser agrees to pay Declaration compensation for
its services, and to reimburse it for expenses at the rates, times, manner and
amounts as set forth in Schedule "B" attached hereto and incorporated herein by
reference and as will be set forth in any amendments to such Schedule "B" agreed
upon in writing by the Parties. Upon receipt of an invoice therefor, the Adviser
agrees to pay such fees within ten (10) business days. In addition, the Adviser
agrees to reimburse Declaration for any out-of-pocket expenses paid by
Declaration on behalf of the Fund within ten (10) calendar days of the Fund's
receipt of an invoice therefor. In the event Adviser is unable to pay such
invoices for services or out- of- pocket expenses, for any reason, the Fund
agrees to pay Declaration the full amount(s) due within ten (10) additional
business days.
For the purpose of determining fees payable to Declaration, the value of
the Fund's net assets will be computed at the times and in the manner specified
in the Fund's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Fund seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by the Parties.
In the event that Adviser is more than thirty (30) days delinquent in its
payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice by
Declaration. The Adviser must notify Declaration in writing of any contested
amounts within ten (10) days of receipt of a billing for such amounts. Disputed
amounts are not due and payable while they are being disputed.
SECTION 7. DAYS OF OPERATION. Nothing contained in this Agreement is intended to
or will require Declaration, in any capacity hereunder, to perform any functions
or duties on any holiday, day of special observance or any other day on which
the New York Stock Exchange ("NYSE") is closed. Functions or duties normally
scheduled to be performed on such days will be performed on and as of the next
succeeding business day on which the NYSE is open. Notwithstanding the
foregoing, Declaration will compute the net asset value of the Fund on each day
required pursuant to Rule 22c-1 promulgated under the Act.
SECTION 8. ACTS OF GOD, ETC. Declaration will not be liable or responsible for
delays or errors caused by acts of God or by reason of circumstances beyond its
control including, acts of civil or military authority, national emergencies,
labor difficulties, mechanical breakdown, insurrection, war, riots, or failure
or unavailability of transportation, communication or power supply, fire, flood
or other catastrophe.
In the event of equipment failures beyond Declaration's control,
Declaration will, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but will have no liability with respect thereto.
The foregoing obligation will not extend to computer terminals located outside
of premises maintained by Declaration. Declaration has entered into and
maintains in effect agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
SECTION 9. INSPECTION AND OWNERSHIP OF RECORDS. In the event of a request or
demand for the inspection of the records of the Fund, Declaration will use its
best efforts to notify the Fund and to secure instructions as to permitting or
refusing such inspection. Declaration may, however, make such records available
for inspection to any person in any case where it is advised in writing by its
counsel that it may be held liable for failure to do so after notice to the
Fund.
Declaration recognizes that the records it maintains for the Fund are the
property of the Fund and will be surrendered to the Fund upon written notice to
Declaration as outlined under Section 10(c) below. The Fund is responsible for
the payment in advance of any fees owed to Declaration. Declaration agrees to
maintain the records and all other information of the Fund in a confidential
manner and will not use such information for any purpose other than the
performance of Declaration' duties under this Agreement.
SECTION 10. DURATION AND TERMINATION.
(a) The initial term of this Agreement will be for the period of two (2)
years, commencing on the date hereinabove first written (the "Effective Date")
and will continue thereafter subject to termination by either Party as set forth
in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be
fixed for the initial term commencing on the Effective Date of this Agreement
and will continue thereafter subject to their review and any adjustment.
(c) After the initial term of this Agreement, a Party may give written
notice to the other (the day on which the notice is received by the Party
against which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination Date
shall be set on a day not less than ninety (90) days after the Notice Date. The
period of time between the Notice Date and the Termination Date is hereby
identified as the "Notice Period". Any time up to, but not later than fifteen
(15) days prior to the Termination Date, the Adviser or the Fund will pay to
Declaration such compensation as may be due as of the Termination Date and will
likewise reimburse Declaration for any out-of-pocket expenses and disbursements
reasonably incurred or expected to be incurred by Declaration up to and
including the Termination Date.
(d) In connection with the termination of this Agreement, if a successor to
any of Declaration' duties or responsibilities under this Agreement is
designated by the Fund by written notice to Declaration, Declaration will
promptly, on the Termination Date and upon receipt by Declaration of any
payments owed to it as set forth in Section 10(c) above, transfer to the
successor, at the Adviser's expense, all records which belong to the Fund and
will provide appropriate, reasonable and professional cooperation in
transferring such records to the named successor.
(e) Should the Fund desire to move any of the services outlined in this
Agreement to a successor service provider prior to the Termination Date,
Declaration shall make a good faith effort to facilitate the conversion on such
prior date, however, there can be no guarantee that Declaration will be able to
facilitate a conversion of services prior to the end of the Notice Period.
Should services be converted to a successor service provider prior to the end of
the Notice Period, or if the Fund is liquidated or its assets merged or
purchased or the like with another entity, payment of fees to Declaration shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained at Declaration until the expiration
of the Notice Period and shall be calculated at the asset levels on the Notice
Date.
(f) Notwithstanding any other provisions of Paragraph 10, in the event the
Fund deregisters as an Investment Company with the United States Securities and
Exchange Commission ("SEC"), this Agreement may be terminated by the Fund upon
ninety (90) days written notice to Declaration. The Termination Date shall be
ninety (90) days after the receipt of such notice by Declaration. Any time up
to, but not later than fifteen (15) days prior to the Termination Date, the
Adviser or the Fund will pay to Declaration such compensation as may be due as
of the Termination Date and will likewise reimburse Declaration for any out- of-
pocket expenses and disbursements reasonably incurred or expected to be incurred
by Declaration up to and including the Termination Date.
(g) Notwithstanding the foregoing, this Agreement may be terminated at any
time by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a reckless disregard of
its obligations and duties under this Agreement provided that such breach shall
have remained unremedied for sixty (60) days or more after receipt of written
specification thereof.
SECTION 11. RIGHTS OF OWNERSHIP. All computer programs and procedures developed
to perform services required to be provided by Declaration under this Agreement
are the property of Declaration. All records and other data except such computer
programs and procedures are the exclusive property of the Fund and all such
other records and data will be furnished to the Fund in appropriate form as soon
as practicable after termination of this Agreement for any reason.
SECTION 12. AMENDMENTS TO DOCUMENTS. The Fund will furnish Declaration written
copies of any amendments to, or changes in, the Articles of Incorporation,
by-laws, Prospectus or Statement of Additional Information in a reasonable time
prior to such amendments or changes becoming effective. In addition, the Fund
agrees that no amendments will be made to the Prospectus or Statement of
Additional Information of the Fund which might have the effect of changing the
procedures employed by Declaration in providing the services agreed to hereunder
or which amendment might affect the duties of Declaration hereunder unless the
Fund first obtains Declaration' approval of such amendments or changes.
SECTION 13. CONFIDENTIALITY. All Parties hereto agree that any non-public
information obtained hereunder concerning the other Party is confidential and
may not be disclosed to any other person without the consent of the other Party,
except as may be required by applicable law or at the request of the U.S.
Securities and Exchange Commission or other governmental agency. Declaration
agrees that it will not use any non-public information for any purpose other
than performance of its duties or obligations hereunder. The obligations of the
Parties under this Section will survive the termination of this Agreement. The
Parties further agree that a breach of this Section would irreparably damage the
other Party and accordingly agree that each of them is entitled, without bond or
other security, to an injunction or injunctions to prevent breaches of this
provision.
SECTION 14. NOTICES. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement will be in writing and will be delivered in person or sent by
first class mail, postage prepaid or by prepaid overnight delivery service to
the respective parties as follows:
If to the Fund: If to Declaration:
1-800 MUTUALS Fund Group, Inc. Declaration Service Company
600 North Pearl Street, Suite 2150 555 North Lane, Suite 6160
Dallas , Texas 75201 Conshohocken, PA 19428
Attention: Richard A. Sapio Attention: Gregory Sanginitti
President President
If to the Adviser:
1-800 MUTUALS, Inc.
600 North Pearl Street, Suite 2150
Dallas , Texas 75201
Attention: Richard A. Sapio
Chief Executive Officer
SECTION 15. AMENDMENT. No provision of this Agreement may be amended or modified
in any manner except by a written agreement properly authorized and executed by
the Parties. This Agreement may be amended from time to time by supplemental
agreement executed by the Parties and the compensation stated in Schedule "B"
attached hereto may be adjusted accordingly as mutually agreed upon.
SECTION 16. AUTHORIZATION. The Parties represent and warrant to each other that
the execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
<PAGE>
SECTION 17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed will be deemed to be an original,
but such counterparts will together constitute but one and the same instrument.
SECTION 18. ASSIGNMENT. This Agreement will extend to and be binding upon the
Parties hereto and their respective successors and assigns; provided, however,
that this Agreement will not be assignable by any of the parties without the
written consent of the other parties, which consents shall be authorized or
approved by a resolution by its respective Boards of Directors.
SECTION 19. GOVERNING LAW. This Agreement will be governed by the laws of the
State of Pennsylvania.
SECTION 20. SEVERABILITY. If any part, term or provision of this Agreement is
held by any court to be illegal, in conflict with any law or otherwise invalid,
the remaining portion or portions will be considered severable and not be
affected and the rights and obligations of the parties will be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid, provided that the basic agreement is
not thereby materially impaired.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement, together
with Schedules "A," "B" and "C" (attached), to be signed by their duly
authorized officers as of the day and year first above written.
1-800 MUTUALS FUND GROUP, INC. DECLARATION SERVICE COMPANY
- --------------------------- ------------------------------
By: Richard A. Sapio By: Terence P. Smith
President Chief Executive Officer
1-800 MUTUALS, INC.
- ---------------------------
By: Richard A. Sapio
Chief Executive Officer
<PAGE>
SCHEDULE A
- ----------
ACCOUNTING SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
- --------------------------------------------------------------------------------
o Journalize each Portfolio's investment, capital share and income and expense
activities.
o Verify investment buy/sell trade tickets when received from the adviser and
transmit trades to the Fund's custodian for proper settlement.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the custodian,
and provide the adviser with the beginning cash balance available for
investment purposes.
o Update the cash availability throughout the day as required by the adviser.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities and
Statement of Operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund.
o Calculate capital gains and losses.
o Determine each Portfolio's net income.
o At the Portfolio's expense, obtain security market prices or if such market
prices are not readily available, then obtain such prices from services
approved by the adviser, and in either case calculate the market or fair
value of each Portfolio's investments.
o Where applicable, calculate the amortized cost value of debt instruments.
o Transmit or mail a copy of the portfolio valuations to the adviser.
o Compute the net asset value of each Portfolio.
o Report applicable net asset value and performance data to performance
tracking organizations.
o Compute each Portfolio's yields, total returns, expense ratios and portfolio
turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare monthly financial statements, which will include, without limitation,
the Schedule of Investments, the Statement of Assets and Liabilities, the
Statement of Operations, the Statement of Changes in Net Assets, the Cash
Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Supply various Fund and Portfolio statistical data as requested on an ongoing
basis.
o Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statements.
o Assist with the preparation of amendments to the Fund's Registration
Statements on From N-1A and other filings relating to the registration of
shares.
o Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the qualification
as a regulated investment company of each Portfolio of the Fund under the
Code.
o Provide other accounting services as may be agreed upon from time to time in
writing by the Fund and Declaration.
ADMINISTRATIVE SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
- --------------------------------------------------------------------------------
o Provide overall day-to-day Fund administrative management, including
coordination of investment adviser, custodian, transfer agency, distribution
and pricing and accounting services.
o Preparation and filing of all Federal and State reports including:
o Fund's post-effective amendments under the Securities Act of 1933 and the
Investment Company Act of 1940.
o Form N-SAR - Semi-Annual report for Registered Investment Companies.
o The Fund's Annual and Semi-Annual Report.
o Rule 24f-2 Notice - filing regarding sale(s) of securities.
o Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
o Ongoing monitoring and filing of State Blue Sky registrations.
o Prepare and file such reports, applications and documents as may be necessary
or desirable to register the Fund's shares with the Federal and state
securities authorities, and monitor the sale of Fund shares for compliance
with Federal and state securities laws.
o Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy statements,
proxies and other reports to shareholders.
o Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
o Administer contracts on behalf of the Fund with, among others, the Fund's
investment adviser, custodian, transfer agent/shareholder servicing agent,
distributor, and accounting services agent.
o Prepare and maintain materials for directors/management meetings including,
agendas, minutes, attendance records and minute books.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment
policies and limitations set forth in the Fund's Prospectuses and Statement
of Additional Information, and the investment restrictions and limitations
necessary for each Portfolio of the Fund to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended,
or any successor statute.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide administrative services as may be agreed from time to time in writing
by Declaration.
Blue Sky Administration
- --------------------------------------------------------------------------------
o Produce and mail the following required filings:
o Initial Filings - produce all required forms and follow-up on any
comments, including notification of SEC effectiveness.
o Renewals - produce all renewal documents and mail to states, includes
follow-up to ensure all is in order to continue selling in states.
o Sales Reports - produce all the relevant sales reports for the states and
complete necessary documents to properly file sales reports with states.
o Annual Report Filings - file copies of all annual reports with states.
o Prospectus Filings - file all copies of Definitive SAI & Prospectuses with
the states.
o Post-Effective Amendment Filing - file all Post-Effective Amendments with
the states, as well as, any other required documents.
o On demand additional states - complete filing for any states that you would
like to add.
o Amendments to current permits - file in a timely manner any amendment to
registered share amounts.
o Update and file hard copy of all data pertaining to individual permits.
TRANSFER AGENT, SHAREHOLDER SERVICING AGENT AND DIVIDEND DISBURSING AGENT
SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
- --------------------------------------------------------------------------------
o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e. Dividend Codes,
etc.
o Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts in accordance with Federal
regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(fund responsible for connection line and monthly fee).
o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of Shares.
o Number of Shares, issuance date of each share outstanding and cancellation
date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend code (daily accrual, monthly reinvest, monthly cash or quarterly
cash).
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the most recent 18 months, or
other period as mutually agreed to from time to time.
o Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar activity
for the previous day.
o Supply information monthly for Fund's preparation of Blue Sky reporting.
o Supply monthly purchase, redemption and liquidation information for use in
Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
o Prepare and mail copies of summary statements to dealers and investment
advisers.
o Mail transaction confirmation statements daily to investors.
o Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably specified
by the Transfer Agent).
o Mail periodic statement to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
o Enclose various marketing material as designated by the Fund in statement
mailings, i.e. monthly and quarterly statements (material must be
adaptable to mechanical equipment as reasonably specified by the Transfer
Agent).
o Prepare and mail confirmation statements to dealers daily.
o Prepare certified list of stockholders for proxy mailing.
<PAGE>
SCHEDULE B
----------
Compensation Schedule for Services Provided by Declaration Service Company
PER PORTFOLIO
- -------------
0.20% on first $25 million of average annual assets
0.15% on next $25 million of average annual assets
0.10% on next $50 million of average annual assets
0.075% in excess of $100 million of average annual assets
Transfer Agent/ Shareholder Services:
- -------------------------------------
$ 7.50 per Shareholder Account
Minimum annual fees:
- --------------------
Year one (1) $ 56,000
Year two (2) $ 67,000
Year three (3) $ 78,000
Thereafter $ 89,000
Plus out-of-pocket expenses to include, but not limited to: wire fees, Fund/SERV
and Networking fees, bank service charges, printing, copying, postage, courier,
account statement/ confirmation (including programming costs for specialized
statements/ confirmations), portfolio price quotation service, asset allocation
charges, travel, telephone, registration fees, and other standard miscellaneous
items.
ADDITIONAL CLASSES OF SHARES PER PORTFOLIO
- ------------------------------------------
Each category of fee ( including annual minimums) increases by 50% for the
second class of shares per portfolio, and by 25% for each additional class of
shares per portfolio.
<PAGE>
SCHEDULE C
----------
1-800 MUTUALS FUND GROUP, INC.
------------------------------
Portfolios covered by this Agreement:
- -------------------------------------
1-800 MUTUALS Multinational 25 Fund
1-800 MUTUALS Technology 25 Sector Fund
1-800 MUTUALS Health Care 25 Sector Fund
1-800 MUTUALS Financial Services 25 Sector Fund
EXHIBIT 23(I)
THE LAW OFFICES OF DAVID D. JONES, P.C.
518 Kimberton, # 134
Phoenixville, PA 19460
(610) 718-5381 (phone)
(610) 718-5391 (facsimile)
[email protected] (e-mail)
1-800 MUTUALS Fund Group, Inc. . May 20, 1999
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
Dear Sirs:
As counsel to 1-800 MUTUALS Fund Group, Inc. (the "Company"), an
corporation organized under the laws of the State of Maryland, I have been asked
to render my opinion with respect to the issuance of an indefinite number of
shares of beneficial interest of the Company (the "Shares") representing
proportionate interests in:
1-800 MUTUALS Multinational 25 Fund
1-800 MUTUALS Technology 25 Sector Fund
1-800 MUTUALS Health Care 25 Sector Fund, and
1-800 MUTUALS Financial Services 25 Sector Fund (the "Funds").
The Shares of the Funds are each a separate series or Portfolio of the
Company, each Fund currently consisting of a single class of shares, all as more
fully described in the Prospectus and Statement of Additional Information
contained in the Registration Statement on Form N-1A, to which this opinion is
an exhibit, to be filed with the Securities and Exchange Commission.
I have examined the Company's Articles of Incorporation, by-laws, the
Prospectus and Statement of Additional Information contained in the Registration
Statement, and such other documents, records and certificates as deemed
necessary for the purposes of this opinion.
Based on the foregoing, I am of the opinion that the Shares, when issued,
delivered and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, will be legally issued, fully paid, and
non-assessable by the Company. I also give my consent for the Company to
included this opinion as an Exhibit to the Trust's Registration Statement on
Form N-1A.
Very Truly Yours,
/s/ David D. Jones
Attorney & Counselor at Law
EXHIBIT 23L
SUBSCRIPTION AGREEMENT
1-800 MUTUALS Fund Group, Inc.
Plaza of the Americas
600 North Pearl Street, Suite 2150
Dallas, Texas 75201
Gentlemen:
The undersigned ("Subscriber") hereby subscribes for and agrees to acquire
from 1-800 MUTUALS Fund Group, 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 following portfolios of the Corporation ;
1-800 MUTUALS Multinational 25 Fund
1-800 MUTUALS Technology 25 Sector Fund
1-800 MUTUALS Health Care 25 Sector Fund
1-800 MUTUALS Financial Services 25 Sector Fund, (the "Shares")
in consideration of a cash contribution of $100,000 ($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
Dated as of the ___ day of July, 1999
Shares
Fund Subscribed Purchase Amount
---- ---------- ---------------
Multinational 25 Fund 2,500 $ 25,000
Technology 25 Sector Fund 2,500 $ 25,000
Health Care 25 Sector Fund 2,500 $ 25,000
Financial Services 25 Sector Fund 2,500 $ 25,000
SUBSCRIBED BY:
- -------------------------------------
[NAME OF SUBSCRIBER]
ACCEPTED BY:
1-800 MUTUALS FUND GROUP, INC.
- -------------------------------------
RICHARD A. SAPIO
PRESIDENT
EXHIBIT 23(M)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
WHEREAS, 1-800 MUTUALS Fund Group, Inc., a corporation organized and existing
under the laws of the State of Maryland (the "Company"),engages in business as
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the"1940 Act"); and
WHEREAS, the Company is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Company currently offers four series of such Shares representing
interests in the following series of the Trust;
1-800 MUTUALS Multinational 25 Fund
1-800 MUTUALS Technology 25 Sector Fund
1-800 MUTUALS Health Care 25 Sector Fund
1-800 MUTUALS Financial Services 25 Sector Fund, (the "Funds"); and
WHEREAS, the Directors of the Company as a whole, and the Directors who are not
interested persons of the Company (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Directors"), having determined,
in the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast at a meeting called for the
purpose of voting hereon and on any agreements related hereto; and
NOW, THEREFORE, the Company hereby adopts this Plan in accordance with Rule
12b-1 under the 1940 Act, on the following terms and conditions:
1. Distribution and Servicing Activities. Subject to the supervision of the
Directors of the Company, the Company may, directly or indirectly, engage
in any activities primarily intended to result in the sale of Shares of the
Funds, which activities may include, but are not limited to, the following:
(a) payments to the Company 's Distributor and to securities dealers and
others in respect of the sale of Shares of the Funds; (b) payment of
compensation to and expenses of personnel (including personnel of
organizations with which the Company has entered into agreements related to
this Plan) who engage in or support distribution of Shares of the Funds or
who render shareholder support services not otherwise provided by the
Company 's transfer agent, administrator, or custodian, including but not
limited to, answering inquiries regarding the Company, processing
shareholder transactions, providing personal services and/or the
maintenance of shareholder accounts, providing other shareholder liaison
services, responding to shareholder inquiries, providing information on
shareholder investments in the Funds, and providing such other shareholder
services as the Company may reasonably request; (c) formulation and
implementation of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (d) preparation, printing and
distribution of sales literature; (e) preparation, printing and
distribution of prospectuses and statements of additional information and
reports of the Company for recipients other than existing shareholders of
the Company; and (f) obtaining such information, analyses and reports with
respect to marketing and promotional activities as the Company may, from
time to time, deem advisable. The Company is authorized to engage in the
activities listed above, and in any other activities primarily intended to
result in the sale of Shares of the Funds, either directly or through other
persons with which the Company has entered into agreements related to this
Plan.
2. Maximum Expenditures. The expenditures to be made by the Company pursuant
to this Plan and the basis upon which payment of such expenditures will be
made shall be determined by the Directors of the Company, but in no event
may such expenditures exceed an amount calculated at the rate of 0.25% per
annum of the average daily net asset value of the Shares of each Fund for
each year or portion thereof included in the period for which the
computation is being made, elapsed since the inception of this Plan to the
date of such expenditures. Notwithstanding the foregoing, in no event may
such expenditures paid by the Company as service fees exceed an amount
calculated at the rate of 0.25% of the average annual net assets of the
Shares of the Fund, nor may such expenditures paid as service fees to any
person who sells Shares of the Fund exceed an amount calculated at the rate
of 0.25% of the average annual net asset value of such shares. Such
payments for distribution and shareholder servicing activities may be made
directly by the Company or to other persons with which the Company has
entered into agreements related to this Plan.
3. Term and Termination. (a) This Plan shall become effective as of the 15th
day of July, 1999. Unless terminated as herein provided, this Plan shall
continue in effect for one year from the date hereof and shall continue in
effect for successive periods of one year thereafter, but only so long as
each such continuance is specifically approved by votes of a majority of
both (i) the Directors of the Company and (ii) the Non-Interested
Directors, cast at a meeting called for the purpose of voting on such
approval. (b) This Plan may be terminated at any time with respect to any
Fund by a vote of a majority of the Non-Interested Directors or by a vote
of a majority of the outstanding voting securities of the affected Fund as
defined in the 1940 Act.
4. Amendments. This Plan may not be amended to increase materially the maximum
expenditures permitted by Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of
the Funds as defined in the 1940 Act with respect to which a material
increase in the amount of expenditures is proposed, and no material
amendment to this Plan shall be made unless approved in the manner provided
for annual renewal of this Plan in Section 3(a) hereof.
5. Selection and Nomination of Directors. While this Plan is n effect, the
selection and nomination of the Non-Interested Directors of the Company
shall be committed to the discretion of such Non-Interested Directors.
6. Quarterly Reports. The Treasurer of the Company shall provide to the
Directors of the Company and the Directors shall review quarterly a written
report of the amounts expended pursuant to this Plan and any related
agreement and the purposes for which such expenditures were made.
7. Record keeping. The Company shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan. Any such
related agreement or such reports for the first two years will be
maintained in an easily accessible place.
8. Limitation of Liability. Any obligations of the Company hereunder shall not
be binding upon any of the Directors, officers or shareholders of the
Company personally, but shall bind only the assets and property of the
Company. The term "1-800 MUTUALS Fund Group, Inc." means and refers to the
Directors from time to time serving under the Articles of Incorporation of
the Company, a copy of which is on file with the Secretary of the State of
Maryland. The execution of this Plan has been authorized by the Directors,
and this Plan has been signed on behalf of the Company by an authorized
officer of the Company, acting as such and not individually, and neither
such authorization by such Directors nor such execution by such officer
shall be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the assets and
property of the Company as provided in the Articles of Incorporation and
bylaws of the Company.
IN WITNESS THEREOF, the parties hereto have caused this Plan to be executed as
of the date written above.
1-800 MUTUALS FUND GROUP, INC.
By__________________________________
Richard A. Sapio
Attest:
By__________________________________
EXHIBIT 23N
FINANCIAL DATA SCHEDULE
This is a new Fund Company without an operating history. Accordingly,
information concerning the financial performance of the Funds is not yet
available. The Company will provide such information at such time as required by
law.