As filed with the Securities and Exchange Commission on March 6, 1996
1933 Act Registration No. 33-39574
1940 Act Registration No. 811-6254
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM N-1A
REGISTRATION STATEMENT UNDER THE [ ]
SECURITIES ACT OF 1993
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE [ ]
INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 [X]
(Check appropriate box or boxes)
PENN CAPITAL FUNDS, INC.
(exact name of Registrant as Specified in Charter)
216 Boulevard of the Allies
Pittsburgh, Pennsylvania 15222
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (412) 281-2754
James M. Beimel, Jr., President
Penn Capital Funds,Inc.
216 Boulevard of the Allies
6th Floor
Pittsburgh, PA 15222
(Name and Address of Agent for Service)
Registrant has registered an indefinite number of its shares under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice for Registrant's fiscal year
ended September 30, 1995 has been filed.
It is proposed that this filing will become effective (check
appropriate box)
__ immediately upon filing pursuant to paragraph (b)
__ on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
__ on (date) pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
__ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
PENN CAPITAL FUNDS, INC.
ASSET ALLOCATION FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
1. Cover Page...........................Cover Page
2. Synopsis.............................Summary of Fund Expenses
3. Condensed Financial Information......Financial Highlights
4. General Description of Registrant....General Description of
Fund
5. Management of the Fund...............Management of the Fund
5A. Management's Discussion of
Fund Performance.....................Inapplicable
6. Capital Stock and Other Securities...Description of Shares
7. Purchase of Securities Being
Offered..............................How Shares May Be
Purchased
8. Redemption or Repurchase.............Redemption or
Repurchases
9. Legal Proceedings....................Inapplicable
PENN CAPITAL FUNDS, INC.
ASSET ALLOCATION FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
10. Cover Page...........................Cover Page
11. Table of Contents....................Table of Contents
12. General Information and History......General Information
13. Investment Objectives and Policies...Investment Objective and
Policies
14. Management of the Fund...............Directors and Officers
15. Control Persons and Principal
Holders of Securities................Directors and Officers
16. Investment Advisory and Other
Services.............................Investment Adviser;
Subadviser
17. Brokerage Allocation.................Brokerage
18. Capital Stock and Other Securities...Capital Stock
19. Purchase, Redemption and Pricing of
Securities Being Offered.............Additional Purchase and
Redemption Information;
Tax Shelter Plans
20. Tax Status...........................Federal Taxes
21. Underwriters.........................Distributor
22. Calculation of Performance Data......Inapplicable
23. Financial Statements.................Audited Financial
Statements
PENN CAPITAL FUNDS, INC.
THE ASSET ALLOCATION FUND
116 Boulevard of the Allies
Pittsburgh, Pennsylvania 15222
412-281-0958
PROSPECTUS MAY , 1996
PENN CAPITAL FUNDS, INC. ("PCF") is an open-end, diversified
management investment company. PCF intends to offer shares in more
than one fund, each of which will represent a separate class of PCF's
shares and each of which will have a different investment objective
and different investment policies.
The class of securities offered hereby consists of shares of the
Asset Allocation Fund (the "Fund"). The Fund seeks a high total
investment return for investors willing to assume a higher degree of
risk through investment primarily in common stocks, preferred stocks
and securities convertible into common stocks and common stocks of
companies in the precious metals industry, although the Fund may
invest in fixed income securities from time to time.
The Fund's investment adviser is International Investments, Inc.
This Prospectus sets forth concisely information about the Fund
that a prospective investor ought to know before investing. You
should read this Prospectus and retain it for future reference.
Additional information about the Fund is contained in a Statement
of Additional Information dated May , 1996, which may be revised from
time to time and which provides further information on certain matters
discussed in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and
Exchange Commission and (together with any supplement thereto) is
incorporated herein by reference. A copy of the Statement of
Additional Information may be obtained without charge by writing or
telephoning PCF at the address or telephone number listed above.
Prospectuses for the other series may be obtained by writing PCF
at the above address.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.<PAGE>
CONTENTS
Key Facts:
The Fund at a Glance 3
Summary of Fund Expenses 4
Financial Highlights 5
The Fund In Detail:
General Description of Fund 6
Risks to be Considered 8
Management of the Fund 8
Portfolio Brokerage 10
Rule 12b-1 Distribution Plan 10
Your Account:
How Shares May Be Purchased (including sales charges) 11
Calculation of Net Asset Value 14
Tax-Sheltered Retirement Plans 15
Redemption and Repurchases 15
Automatic Withdrawal Plan 16
Dividends, Distributions and Taxes 16
More About The Fund:
Additional Information 17
THE FUND AT A GLANCE
Investment Goal: Capital appreciation (increase in the value of the
Fund's shares) through investment among specified types of securities
as selected by the Fund's investment adviser.
Strategy: Invest primarily in common stocks, preferred stocks,
securities convertible into common stocks and common stocks of
companies in the precious metals industry, although the Fund may
invest in fixed income securities. The Fund is a diversified
management company.
Risks: The Fund is intended for long-term investors who want long-term
growth rather than income and who are willing to assume significant
fluctuations in value over the short-term. It is not suitable for
short-term investors or those seeking current income.
Investment Adviser: International Investments, Inc., which currently
manages approximately $20 million in assets for its private clients.
See "Management of the Fund" in this Prospectus.
To Purchase Shares: See "How Shares May Be Purchased" in this
Prospectus.
To Redeem Shares: See "Redemption and Repurchases" in this Prospectus.
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSE
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . . . . . . . 4.75%
Maximum Sales Load Imposed on Reinvested Dividends. . . . . . . . . .None
Deferred Sales Loan . . . . . . . . . . . . . . . . . . . . . . . . .None
Redemption Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .None
Exchange Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net asset)
Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.06%
Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Total Fund Operating Expenses. . . . . . . . . . . . . . . . . . . . . .12.56%
The purpose of the tables is to help you understand all expenses
and fees that you would bear directly or indirectly as a Fund
shareholder. The expenses and fees shown are for the fiscal year
ended September 30, 1994.
EXAMPLE
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each time
period and (3) reinvestment of all dividends and capital distribution.
1 Year 3 Years 5 Years 10 Years
$163 $367 $542 $876
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES IN THE FUTURE MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following financial information, with respect to the year ended
September 30, 1995, has been audited by McCurdy & Associates CPA's, Inc.,
independent certified public accountants, whose unqualified report thereon,
appears in the Fund's Annual Report to Shareholders, which is incorporated
by reference in the Statement of Additional Information. The financial
information for the period prior to October 1, 1994 was audited by other
independent certified public accountants. This information should be read
in conjunction with the financial statements and notes thereto which appear
in the Fund's Annual Report to Shareholders. Further information about the
Fund's performance is contained in its Annual Report to Shareholders which
may be obtained without charge from PCF.
PERIOD FROM
NOV. 12, 1991
YEAR ENDED SEPTEMBER 30 START UP
1995 1994 1993 1992
PER SHARE OPERATING PERFORMANCE FOR A SHARE
(for a share outstanding throughout the period)
Net asset value, beginning of period $5.47 $6.29 $7.41 $10.00
Income from investment operations:
Net Investment Income (loss) (1.07) (0.88) (0.60) (0.16)
Net realized and unrealized gains
(losses) on investments 0.90 0.06 (0.12) (2.43)
----- ----- ----- -----
Total from investment operations (0.17) (0.82) (0.72) (2.59)
Less Distributions
Distributions from net realized gains (0.36)
Return of capital (0.04)
Total distributions (0.40)
-----
Change in net asset value (0.17) (0.82) (1.12) (2.59)
Net asset value, end of period $5.30 $5.47 $6.29 $7.41
TOTAL RETURN*** (3.11)% (13.04)% (10.49%)* (25.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) 697 485 664 1,065
Ratios to average net assets:
Expenses 21.92% 12.56% 8.40% ** 4.93%
Net investment income 20.61% (11.55)% (6.48)%** (2.82)%
Portfolio turnover rate 141% 200% 116% 23%
* Not annualized
** Annualized
*** Total return does not reflect sales commissions
GENERAL DESCRIPTION OF FUND
INVESTMENT OBJECTIVE - The Fund's investment objective is to provide
you with long-term high total investment return. Total return is
achieved through current income, but principally through capital
appreciation. The Fund's investment objective cannot be changed
without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the Fund's outstanding voting
shares. There can be no assurance that the Fund's investment
objective will be achieved.
MANAGEMENT POLICIES - The Fund may invest in multiple market segments.
Which segments, and in what proportion the Fund invests at any given
time, will be dictated by current investment conditions and the
judgment of the Fund's investment adviser. When market conditions
warrant, the Fund may have 100% of its assets invested in one market
segment. The Fund is not required to invest a fixed percentage of its
net assets in any market segment. The Fund may invest in the
following market segments: equity securities, equity securities of the
precious metal industry (which the Fund views as a separate market
segment, even though others might view it as only an industry segment
of equity securities), and fixed income securities. Notwithstanding
the foregoing, the Fund has adopted a concentration policy that
restricts investments in the precious metal industry to less than 25%
of the total net assets of the Fund. The investment adviser's
investment approach involves both sector allocation and style
allocation through various proprietary mathematical models.
Equity Securities - The equity securities in which the Fund may invest
consist of common stocks, preferred stocks, including those is the
form of American Depositary Receipts, and convertible securities
(which have characteristics of both debt and equity securities) of
domestic U.S. companies only. See "Certain Portfolio Securities"
below. The securities selected in this sector are those considered by
the Fund's investment adviser to have long-term appreciation
potential. Selections are based on fundamental research
considerations including qualitative and quantitative factors.
Qualitative factors considered include industry outlook, management,
and research and development capability. Quantitative factors
considered include earnings, dividends, and price momentum.
Precious Metals Industry - Investments in the precious metal industry
("Precious Metal Investments") are made by purchasing the common
stocks of U.S. companies, or foreign companies, through the medium of
American Depository Rights (see "Certain Portfolio Securities" below),
which are primarily involved, directly or indirectly, in the business
of exploring for, mining, processing, fabricating, manufacturing,
marketing or otherwise dealing in gold, silver, or platinum. The Fund
does not intend to invest in precious metals bullion or in the
securities of South African issuers. The Fund will not invest in
Precious Metal Investments that do no meet the Fund's criteria for
investing in equity securities generally.
Fixed Income Securities - The fixed income securities in which the
Fund may invest are limited to: (a) corporate obligations rated within
the four highest investment grades as established by Standards &
Poor's or Moody's Investors Service, Inc. (debt securities in the
lowest of these four ratings are medium grade obligations, and have
speculative characteristics, i.e., changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity on
the part of the issuer to make principal and interest payments than is
the case with higher grade debt securities. If any such security is
downgraded in its rating below these guidelines or is otherwise seen
to have become an unsuitable investment under these guidelines, the
Fund will sell that security as soon as practicable.), and (b)
securities issued by, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Examples of U.S. Government securities
are: U.S. Treasury Bills, Notes, and Bonds. See "Certain Portfolio
Securities" below. IT IS THE CURRENT POLICY OF THE FUND, ALTHOUGH NOT
A FUNDAMENTAL POLICY SUBJECT TO CHANGE ONLY UPON SHAREHOLDER APPROVAL,
TO LIMIT ITS INVESTMENTS IN SECURITIES ISSUED OR GUARANTEED BY THE
U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES TO NO MORE THAN 10%
OF THE TOTAL NET ASSETS OF THE FUND. The value of fixed income assets
generally will vary inversely to changes in interest rates. If
interest rates increase after a security is purchased, the security,
if sold prior to maturity, may return less than its cost.
CERTAIN PORTFOLIO SECURITIES
American Depository Receipts - The Fund's assets may be invested in
the securities of foreign issuers in the form of American Depository
Receipts ("ADRs"). ADRs are receipts typically issued by a United
States bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. Generally, ADRs in
registered form are designed for use in the United States securities
markets. The Fund may invest in ADRs through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly
by the issuer of the underlying security and a depository, whereas a
depository may establish an unsponsored facility without participation
by the issuer of the deposited security. Holders of unsponsored
depository receipts generally bear all the costs of such facilities
and the depository of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through voting rights to
the holders of such receipts in respect of the deposited securities.
Other Securities - Although it is authorized to do so under its
investment policy, the Fund does not currently intend to invest more
than 5% of its net assets in convertible securities, U.S. Government
securities, put or call options, repurchase agreements or other
hedging instruments or illiquid securities. Under any circumstances,
less than 15% of the total net assets of the Fund may be invested in
illiquid securities, including repurchase agreements of more than
seven days maturity. For further information on these types of
securities and investment strategies, see the Statement of Additional
Information.
Defensive Asset Allocation - During periods of unusual market
conditions and, as a temporary defensive measure, the Fund may invest
up to 100% of its assets in short-term instruments such as commercial
paper, domestic certificates of deposit, banker's acceptances, and
U.S. Treasury Bills. These short-term, fixed-income investments will
be limited to obligations rated at the time of purchase within the two
highest ratings of either Standard & Poor's Corporation or Moody's
Investors Service, Inc.
INVESTMENT RESTRICTIONS
Borrowings by the Fund are not permitted except (a) from banks
for temporary or emergency purposes up to a maximum of 5% of the value
of the total assets of the Fund at the date of borrowing and (b) in an
amount up to one-third of the value of the Fund's total assets, in
order to meet redemption requests without immediately selling any
securities.
The Fund may invest a portion of its assets in all three market
segments at any given time. However, when market conditions warrant,
the Fund may have 100% of its assets invested in any one market area,
with the limitation that the maximum amount of its assets which are
invested in Precious Metals Investments must be less than 25% of the
total net assets of the Fund at all times. Additionally, during
periods of unusual market conditions and as a temporary defensive
measure, the Fund may invest 100% of its assets in high-quality short-
term money market instruments. The Fund's investment adviser has
determined that current market conditions warrant the investment of
basically all of the Fund's assets in equity securities in order to
meet the Fund's investment goal.
As to 75% of the market value of its total net assets the Fund
shall not: (a) invest more than 5% of the value of the net assets of
the Fund in securities of one issuer (except cash or cash instruments
and securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities); or (b) purchase more than 10% of the
outstanding voting securities of such issuer.
For further discussion of investment policies see the Statement
of Additional Information.
The Fund's investment objective and investment policies are
deemed fundamental policies and may not be changed without shareholder
approval.
CALCULATING FUND PERFORMANCE
Fund performance is calculated pursuant to a formula which is
described in detail in the Statement of Additional Information, which
is incorporated herein by reference. The chart contained in the
Fund's Annual Report to Shareholders for fiscal 1995 which shows
historical performance of the fund is calculated based on the payment
of the maximum sales load, the only non-recurring charge. The annual
return for fiscal 1995 for the Fund which is described in the same
report is calculated without any sales load. The effect of
calculating the Fund's performance without including the sales load is
to improve the Funds' reported performance. In fiscal 1995, the
calculation without including the sales charge improves the Fund's
performance for that year by 4.2%
RISKS TO BE CONSIDERED
The Fund is intended for long-term investors who are willing to
assume the risk of significant fluctuations in value over the short-
run in search of potentially greater-than-average capital
appreciation. It is not suitable for short-term investors or those
seeking current income.
PRECIOUS METALS INDUSTRY - To the extent the Fund allocates assets to
Precious Metal Investments, the Fund will be subject to the risk of
industry-wide adverse developments. Precious metals prices may be
affected by a variety of factors such as economic conditions,
political events, monetary policies and other factors. As a result,
prices of Precious Metal Investments may fluctuate sharply, which
could adversely affect Fund share values.
OTHER INVESTMENT CONSIDERATIONS - Although the Fund's investment
adviser manages money for various private clients, it has no
experience managing a mutual fund. Also, the Fund's net asset value
is not fixed and should be expected to fluctuate. You should purchase
Fund shares only as a supplement to an overall investment program and
only if you are willing to undertake the risks involved.
MANAGEMENT OF THE FUND
International Investments, Inc. (the "Adviser"), located at 100
South Ashley Drive, Suite 1260, Tampa, Florida 36602-5310, was
incorporated in 1989 and serves as the Fund's investment adviser,
subject to the overall authority of the PCF's Board of Directors. The
Adviser is wholly owned by John J. Bartoletta, who is its President.
He is the principal manager of the Fund. From December, 1991 to the
present he has worked for the Adviser. From February, 1991 to
December, 1991, he worked as a pension consultant for The Hannah
Group, Boston, Massachusetts. As of February 1, 1995, the Adviser
managed or administered approximately $21 million in assets for
various clients. For its services as Fund Adviser, it is paid an
advisory fee at an annual rate of 1.00% of the average daily net asset
value of the Fund on the first $25 million of average daily net asset
value; 0.75% on the nest $75 million of average daily net asset value;
and 5/8th of 1% on amount over $100 million in average daily net asset
value.
American Data Services, Inc. ("ADS"), located at 24 West Carver
Street, Huntington, New York 11743, provides the Fund with accounting
services, pursuant to a Fund Accounting Services Agreement dated
1, 1995. For these services ADS is paid a monthly fee based on the
average net assets of the Fund during the prior month on the following
scale: under $2 million - $600; from $2 million to $5 million - $800;
from $5 million to $10 million - $1,100; from $10 million to $15
million - $1,400; from $15 million to $20 million - $1,700; from $20
million to $25 million - $2,000; and for amounts over $25 million -
$2,000 plus 1/12th of .0275% on all average net assets in excess of
$25 million. Fees are subject to increase to reflect the annual
change in the Consumer Price Index for the Northeast region. The Fund
is also to reimburse ADS for its out-of-pocket expenses incurred in
connection with this work.
ADS is also acting as the transfer agent for the Fund. For these
services it will receive a monthly fee of the greater of $200.00 or
$10.00 per account which is open at any time during the year plus
certain transaction fees. These fees are subject to annual increase
to reflect the Consumer Price Index for the Northeast region.
The Fund has entered into an administrative services agreement
with James M. Beimel, Jr., the President of the Fund. Under this
agreement Mr. Beimel, who does not receive a salary from the Fund,
will perform all the needed administrative services for the Fund,
including providing space for PCF's offices in Pittsburgh. Mr. Beimel
has entered into a sub-administrator agreement with ADS whereby it
will perform certain of the administrative functions needed by the
Fund. The total monthly fee for both Mr. Beimel and ADS under these
agreements is 1/12 of 0.5% of the combined average net assets of PCF's
funds, with a minimum fee of $5,000 per month. The fees are subject
to annual increase to reflect the Consumer Price Index for the
Northeast region. Of the total fee amount, Mr. Beimel will receive
each month minimum of $4,000. Mr. Beimel and ADS will be reimbursed
for their out-of-pocket expenses in connection with performing the
agreements, other than those costs which Mr. Beimel has specifically
agreed to assume on the Fund's behalf. The Fund has no employees.
Dunwoody Brokerage Services, Inc. ("Dunwoody") is the Fund's
distributor. It is located at 8309 Dunwoody Place, Atlanta, Georgia
30350-3307.
The Fund's custodian is Star Bank, N.A., whose address is Star
Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202.
PORTFOLIO BROKERAGE
The Adviser intends to direct brokerage through several brokerage
firms, none of which is related to the Fund, based on best price and
execution. The Board of Directors of the Fund must periodically
determine that the brokerage fees being charged it are fair and
reasonable.
PORTFOLIO TURNOVER
The rate of portfolio turnover will depend upon market and other
conditions, and it will not be a limiting factor when the Adviser
believes that portfolio changes are appropriate. It is anticipated
that the annual portfolio turnover rate for the Fund ordinarily will
approximate 100%. An annual turnover rate of 100% or more could
occur, for example, if all, or more than all, of the securities in the
portfolio are replaced within a period of one year. An annual
turnover rate of 100% or more would result in the Fund paying more in
brokerage fees in any given year than a mutual fund with a less active
investment adviser.
RULE 12b-1 DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Distribution
Plan"), pursuant to Rule 12b-1 under the Investment Company Act of
1940, which provides that the Fund may incur certain costs in
connection with the distribution of the Funds shares. In any year
those costs will equal the expenses the Fund may incur in the
distribution of the Fund's shares, other than distribution expenses
incurred by the Fund's primary distributor Dunwoody Brokerage
Services, Inc., (including reasonable allocation of overhead) but will
not exceed 0.25% per annum of the Fund's daily net assets. The Plan
is intended to benefit the Fund through increased sales of shares,
thereby reducing the Fund's expense ratio and providing an asset size
that will allow the Adviser greater flexibility in management.
Amounts paid under the Plan and a related Distribution Assistance
Agreement are paid to the Fund's administrator James Beimel, for his
services in marketing the Fund and may be spent by him on any
activities or expenses primarily intended to result in the sale of
shares of the Fund, including but not limited to, expenses (including
overhead and telephone expenses) of printing of prospectuses and
reports for other than existing shareholders, and advertising and
preparation and distribution of sales literature. Allocation of
overhead (rent, utilities, etc.) will be based on the percentage of
utilization in, and time devoted to, distribution activities. Each
expenditure must be specifically approved in advance by the Board of
Directors and by the President of PCF and persons authorized to make
expenditures must provide at least quarterly to the Board, and Board
is required to review, a written report setting forth amounts expended
and the purposes for which the expenditures were made. Payments
pursuant to the Distribution Plan are included in the operating
expenses of the Fund.
The Distribution Plan was adopted by the Board of Directors of
PCF, including a majority of the directors who are not "interested
persons" and who have no direct or indirect financial interest in the
Distribution Plan (the "Rule 12b-1 Directors"). The Plan will be
presented to the Fund's shareholders for their approval at the next
annual meeting of shareholders. Until it is approved by the
shareholders, no funds will be expended under the Distribution Plan.
While the Distribution Plan is in effect, the Fund is required to
commit the selection and nomination of candidates for disinterested
directors to the discretion of other disinterested directors of the
Fund. The Distribution Plan may be terminated by a vote of a majority
of the Rule 12b-1 Directors or by the vote of a majority of the
outstanding voting shares of the Fund. Under the terms of the
Distribution Plan, any change in the Distribution Plan that would
materially increase the distribution expenses of the Fund will require
shareholder approval; otherwise the Distribution Plan may be amended
by the Board of Directors, including a majority of the Rule 12b-1
Directors.
HOW SHARES MAY BE PURCHASED
An investor wishing to purchase shares of the Fund should use the
Asset Allocation Fund Share Purchase Application. A copy of the Asset
Allocation Fund Share Purchase Application is contained in the back of
this Prospectus. A copy may also be obtained from any broker with
whom Dunwoody, the Fund's distributor, has a dealer agreement. The
executed application, together with the investor's check made payable
to Penn Capital Funds, Inc. should be transmitted to the Fund, c/o
Star Bank, N.A., P.O. Box 640153, Cincinnati, Ohio 45264-0153. Share
purchases become effective at the offering price next determined after
receipt of the above.
Shares of the Fund are continuously offered and may be purchased
at an offering price equal to the net asset value per share next
determined following the time of sale plus the applicable sales
charges. The offering price is computed once daily at 4:00 p.m. New
York time each day the New York Stock Exchange is open. (See
"Calculation of Net Asset Value").
The minimum initial investment in the Fund is $500. Subsequent
investments must be in the minimum amount of $50. Investments under
tax qualified plans sponsored by PCF will be subject only to the
minimum investment requirements specified in such plans. The amount of
sales charge is computed in accordance with the following schedule:
Dealer
Discount
Sales Charges as % of as % of
Amount Offering Offering
Amount of Purchase Invested Price Price
Less than $100,000 4.99% 4.75% 4.00%
$100,000 but under $250,000 3.90% 3.75% 2.85%
$250,000 but under $500,000 2.56% 2.50% 2.00%
$500,000 but under $1,000.000 2.04% 2.00% 1.60%
$1,000,000 but under $3,000,000 1.01% 1.00% 0.80%
There is no sales charge on purchases of $3,000,000 and above. If
investments at net asset value are made, the distributor will pay the
dealer a fee of .15% of the amount invested out of its sales
commission, or if there is no commission on that sale, out of sales
commissions from other sales or its own resources.
Purchases of Fund shares are aggregated in determining the
applicable level of sales charge. The above scale of sales charges
applies to purchases made at one time by a single purchaser or by an
individual, his spouse or their children under the age of 21. The
scale also applies to share purchases made at one time for a single
trust or fiduciary account, including a pension, profit sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Internal Revenue Code.
Under certain other circumstances shares may also be purchased at
net asset value without a sales charge. The shares of the Fund will
be offered and sold without a sales charge to those investors who have
redeemed securities or an interest in securities issued by other
investment companies (including unit investment trusts) not affiliated
with PCF in order to invest in the Fund. You must provide appropriate
documentation that the redemption occurred not more than 60 days prior
to the reinvestment of the proceeds in shares of the Fund, and that
you either paid an up-front sales charge or contingent deferred sales
charge in respect of the redemption of such shares of such other
investment company. Finally, shares of the Fund may be issued at net
asset value without a sales charge in connection with the acquisition
by the Fund of another investment Company. All purchases under the
special sales charge waivers will be subject to minimum purchase
requirement as established by the Fund.
PRE-AUTHORIZED CHECK PLAN
Shareholders may accumulate Fund shares regularly each month by
means of pre-authorized bank drafts drawn on their checking accounts.
Such a plan is voluntary and may be discontinued by the shareholder at
any time without penalty. To participate in this plan, shareholders
should request signature authorization cards from Dunwoody or from any
broker/dealer having a sales agreement with Dunwoody.
WRITTEN STATEMENT OF INTENTION
A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating his/her investments over
a 13-month period for purposes of determining the sales charge (as
calculated from the above chart) applicable to the investments made
over that time. The amount of the aggregate investment can be
calculated to include purchases of shares of the Fund made by the
investor over a 13-month period based on the total amount of intended
purchases plus the purchase price of all shares of the Fund previously
purchased and still owned. An alternative method of calculation is to
compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the
period receives the reduced sales commission applicable to the amount
of the investment goal. If the goal is not achieved within the
period, the investor must pay the difference between the commissions
applicable to the aggregate amount of purchases actually made and the
amount of commissions previously paid.
To insure compliance with provisions of the Investment Company
Act of 1940, out of the initial purchase, 5% of the total dollar
amount of intended purchases stated in the Letter of Intent will be
held in escrow in the form of shares (computed to the nearest full
share at the applicable public offering price) registered in the
purchaser's name. These shares will be held in escrow at ADS.
Dividends and capital distributions paid with respect to these shares
will be used to purchase shares of the Fund at its then current net
asset value. Shares so purchased will be applied to reduce the
investor's total shares to be purchased under the Letter of Intent.
When the total amount of purchases actually made pursuant to the
Letter of Intent equals the amount specified in the Letter, the escrow
shares will be released from restriction.
If the total amount of purchases actually made pursuant to the
Letter of Intent are less than the amount specified in the Letter, the
purchaser must remit to PCF an amount equal to the difference between
the dollar amount of sales charges actually paid by the investor and
the amount of sales charges which would have been paid on the total
purchases if all such purchases had been made at a single time. If
within 10 business days after it makes a written request, PCF does not
receive said difference in sales charges, PCF will redeem an
appropriate number of escrow shares to realize such difference. If
the proceeds from this redemption are inadequate, the purchaser will
be liable to PCF for the difference. The remaining shares after the
redemption will be deposited in the investor's account unless PCF is
otherwise instructed.
The purchaser irrevocably constitutes and appoints PCF as his/her
attorney to surrender for redemption any or all shares on the books of
the Fund under the conditions previously outlined.
RIGHT OF ACCUMULATION
Reduced sales charges are also applicable to Fund shares
purchased by a person if the dollar amount thereof, plus the value of
shares of the Fund then held of record by such person (valued at their
current offering price or at their original purchase price, whichever
is greater), equals $100,000 or more.
Dunwoody must be promptly notified of each sale which entitles a
shareholder to this reduced sales charge. The notice to Dunwoody may
come from either the shareholder or the shareholder's dealer, and
notice from either will be sufficient to entitle the shareholder to
the reduced sales charge.
CALCULATION OF NET ASSET VALUE
The net asset value per share is computed as of the close of
trading on the floor of the New York Stock Exchange (currently 4:00
p.m. New York time), on each day the New York Stock Exchange is open
for business. The Fund observes the following holidays and does not
calculate net asset value on those days: New Years Day, Memorial Day,
Fourth of July, Labor Day, Thanksgiving, and Christmas, or the day on
which any of such holidays is observed as a federal holiday. For
purposes of determining net asset value, options contracts will be
valued 15 minutes after the close of trading on the floor of the New
York Stock Exchange. The net asset value per share is calculated by
determining the value of the Fund's assets, subtracting its
liabilities and dividing the result by the total number of shares
outstanding.
Current values for the Fund's securities are determined as
follows:
1. Securities that are traded on a national securities exchange or on
the over-the-counter Nasdaq National Market are valued on the basis of
the last sales price on the exchange where primarily traded or Nasdaq
prior to the time of the valuation, provided that a sale has occurred
and that this price reflects current market value according to
procedures established by the Board of Directors;
2. Securities traded in the over-the-counter market, other than on
Nasdaq, for which market quotations are readily available, are valued
at the mean of the bid and asked prices at the time of valuation;
3. Short-term debt instruments with remaining maturities of sixty days
or less are valued at market value, if market quotations are
available, or amortized cost (original purchase cost as adjusted for
amortization of premium or accretion of discount), if market
quotations are not available, which, when combined with accrued
interest approximates market and which reflects fair value as
determined by the Fund's Board of Directors; and
4. Short-term debt instruments with remaining maturities of more than
sixty days, for which market quotations are readily available, are
valued at current market value. If such security was traded on the
valuation date, current market value is the last quoted sale price. In
the absence of a sale on the valuation date, the mean of the current
closing bid and ask prices is used.
5. In the event a listed security does not trade on an exchange on any
given date, the security value is the mean of the bid and asked prices
of any market makers making a market in such listed security. In the
absence of such mean prices, the valuation is the fair value as
determined in good faith by the Board of Directors in accordance with
its procedures.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with
the following tax sheltered retirement plans:
- -- Tax Sheltered Custodial Plan Section 403(b)(7) for those persons
who are employees of tax exempt charitable, religious and educational
organizations
- -- Individual Retirement Account Plans for individuals.
Detailed information concerning these plans is available from
Dunwoody. That information should be read carefully before deciding
to invest, and the investor may wish to consult with a tax advisor.
That information describes the Federal income tax consequences of
establishing a plan. ADS, as trustee of all such plans, charges a $13
annual maintenance fee (subject to change by the trustee) for each
retirement plan account.
REDEMPTION AND REPURCHASES
Shares of the Fund may be redeemed at any time at their current
net asset value next determined after the Fund receives a redemption
request in proper form. The value of shares of the Fund on redemption
may be more or less than the shareholder's initial cost, depending
upon the market value of the Fund's assets at the time. Redemption
requests should be sent to Star Bank, N.A. at P.O. Box 640153,
Cincinnati, Ohio 45264-0153.
The shares of the Fund will be redeemed and the redemption
proceeds will be paid to the person(s) entitled thereto within seven
days after receipt by the Fund of the following items:
1. A written request for redemption which sets forth the name(s) in
which the account is registered, the account number, and the number of
shares or the dollar value of the shares to be redeemed. Shareholders
requesting redemption must have their signatures guaranteed either by
a national bank or trust company, a state bank which is a member bank
of the Federal Reserve System or the Federal Deposit Insurance
Corporation, or by a member firm of a national securities exchange or
a firm that is a member of the National Association of Securities
Dealers, Inc.
2. Such additional documents as the Fund may require in the case of
shares held by corporations, trustees, executors or administrators.
In addition, if a check (including a certified or cashier's
check) issued for the purchase of shares being redeemed has not
cleared, then a request for redemption will be held up until such
check has cleared, which may take up to 15 days, although the shares
being redeemed will be priced for redemption at the next determined
net asset value. The "next determined net asset value" will be the
first net asset value per share computed after receipt of the
redemption request.
The Fund has appointed Dunwoody as its agent to accept orders
from dealers by wire or telephone for the redemption of Fund shares.
The Fund may revoke or suspend its authorization at any time. It is
the dealer's responsibility to promptly transmit redemption orders.
The redemption price will be the per share net asset value next
computed after receipt of a redemption order placed by the
shareholder's dealer by telephone or telegraph. Payment of the
redemption proceeds will be made to the dealer who placed the
redemption order promptly upon delivery of a stock power with
signature(s) guaranteed as described above. If any supporting
documents are necessary, these must be forwarded simultaneously.
Dealers may charge a fee for handling your redemption transactions.
The Fund and Dunwoody will employ reasonable procedures to
confirm that instructions communicated by dealer's telephone are
genuine, including use of dealer numbers, call-backs and receipt of
written confirmation. The Fund and Dunwoody may be liable for any
losses due to unauthorized or fraudulent instructions if reasonable
procedures are not employed.
The Board of Directors has authorized the Fund to redeem all Fund
shares in any shareholder account which has a total value of $500 or
less due to redemptions. Prior written notice of at least sixty days
must be given to any shareholder before such a redemption may take
place. If the shareholder increases the value of his/her account
through the purchase of additional shares to an amount equal to or
greater than $500 by the end of the sixty-day period or such longer
period as indicated, no such automatic redemption will take place.
Shareholders making a minimum initial investment of $500 should be
aware that the Fund may redeem the entire shareholder account if the
value of shares in the account falls below $500 due to redemptions.
AUTOMATIC WITHDRAWAL PLAN
Any shareholder who owns or purchases shares of the Fund which
are valued at $10,000 or more, may establish an Automatic Withdrawal
Plan under which he/she will receive a monthly or quarterly check in a
stated amount which cannot be less than $50.
Dividends and distributions with respect to the shareholder's
account must be reinvested in the Fund at net asset value, and shares
of the Fund will be redeemed as necessary to meet withdrawal payments.
A shareholder may request that the amount of the withdrawal be
calculated on the basis of a selected percentage of the aggregate net
asset value of his/her account as of the end of the preceding year.
This will result in a fixed dollar amount for each withdrawal.
Redemption of shares for withdrawal purposes may reduce or even
liquidate the account. A withdrawal plan may be terminated at any
time by the shareholder. Purchases of additional shares made
concurrently with withdrawal are undesirable because of the sales
charges when purchases are made. While an occasional lump sum
investment may be made by a shareholder who is maintaining an
automatic withdrawal plan, such investment should normally be in the
amount of $10,000 or more.
DIVIDENDS, DISTRIBUTIONS AND TAXES
PCF has elected to qualify for treatment as a regulated
investment Company under Subchapter M of the Internal Revenue Code.
The Fund will distribute to shareholders substantially all of their
investment income semiannually in June and December and will
distribute substantially all of its net capital gains, if any, in
December of each year. All dividends and capital gains distributions
made will be reinvested in additional shares of the Fund at net asset
value per share as of the payment date, unless the shareholder
otherwise elects by notifying the Fund in writing or by checking the
appropriate box on the Fund application.
Each PCF fund is treated as a separate corporation for Federal
tax purposes. Any net capital gains recognized by a fund in a tax
year will be distributed to its investors without need to offset (for
Federal tax purposes) such gains against any net capital losses of
another fund. Because the Fund intends to distribute all of its net
investment income and capital gains to shareholders, it is not
expected that the Fund will be required to pay any Federal income tax.
However, shareholders of the Fund normally will have to pay
Federal income taxes, and any applicable state and local taxes, on the
dividends and capital gains distributions they receive from the Fund,
whether or not they are reinvested in additional shares of the Fund.
Shareholders not subject to tax on their income will not be required
to pay tax on amounts distributed to them. Information as to the tax
status of dividends and distributions paid by the Fund on its shares
will be sent annually to shareholders after the close of each year.
You should consult your tax adviser regarding specific questions
as to Federal, state and local taxes.
ADDITIONAL INFORMATION
Penn Capital Funds, Inc. is an open-end, diversified management
investment company located at 216 Boulevard of the Allies, 6th Floor,
Pittsburgh, Pennsylvania 15222. It was incorporated under the laws of
the Commonwealth of Pennsylvania on February 27, 1991. The Fund has
300,000,000 authorized shares of common stock, no par value. The
Board of Directors may classify or reclassify any unissued shares of
common stock into any number of classes or series of common stock. It
is the Board's intention, over time, to create several additional
classes or series of common stock, each to be an interest in a
different investment fund with differing investment approaches. The
Board may set or change the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms or conditions of redemption of any class of
unissued shares of common stock.
Description of Shares
The securities offered hereby are shares of Series A Common
Stock-Penn Asset Allocation Fund. There are 10,000,000 shares of
common stock classified in this Fund. Each share of common stock of
the Fund is without par value, represents an equal proportionate
interest in the Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the
Fund as are declared in the discretion of PCF's Directors. All
consideration received by PCF for the issue or sale of shares of any
class of common stock, together with all assets in which that
consideration is invested and reinvested, income, earnings, profits
and proceeds thereof, including any proceeds derived from the sales,
exchange or liquidation thereof, and any funds or payments derived
from any reinvestment of such proceeds will belong solely to the class
of common stock with respect to which such assets, payments or funds
were received by PCF. Currently, no class of securities of PCF other
than common stock of the Fund is outstanding.
Shareholders are entitled to one vote for each full share held
(and a fractional vote for each fractional share held), and will vote
in the aggregate and not by class except as otherwise expressly
required by law. See the Statement of Additional Information,
"Capital Stock", for a description of each Fund's voting rights.
Shareholders have no preemptive rights. Shares when issued will
be maintained in book entry form. Paper certificates will not be
issued. Shares when issued will be fully paid and nonassessable, and
there are no restrictions on their transferability.
Shareholder Inquiries
Shareholders may direct inquires to ADS at 24 West Carver Street,
Huntington, New York 11743; telephone (516) 385-9580; or to the Fund
at its offices at 216 Boulevard of the Allies, 6th Floor, Pittsburgh,
Pennsylvania 15222; telephone (412) 281-2754.
Withholding
Mutual funds are required to withhold 31% of dividends,
distributions of capital gains and redemption proceeds from accounts
without a valid social security or tax identification number. You
must provide this information when you complete the Fund's application
and certify that your are not currently subject to backup withholding.
The Fund reserves the right to close by redemption accounts for which
the holder fails to provide a valid social security or tax
identification number.
Shareholder Meetings
PCF will hold both annual and special shareholder meetings at
times and places to be determined by the Board of Directors.
<PAGE>
PENN CAPITAL FUNDS, INC.
ASSET ALLOCATION FUND
Statement of Additional Information
May , 1996
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the current prospectus for the
Asset Allocation Fund of Penn Capital Funds, Inc. (dated May , 1996.
A copy of the prospectus may be obtained by writing the Distributor,
Dunwoody Brokerage Services, Inc., at 8309 Dunwoody Place, Atlanta,
Georgia 30350-3307 or by calling (800) 537-9165.
PENN CAPITAL FUNDS, INC.
Statement of Additional Information
May , 1996
Table of Contents
General Information..........................................B-1
Investment Objective and Policies............................B-1
Asset Allocation Fund........................................B-1
Covered Call Options and Hedging.............................B-1
Purchasing Call and Puts.....................................B-2
Convertible Securities.......................................B-4
Illiquid Securities..........................................B-4
Yield Disclosure.............................................B-5
Investment Restrictions......................................B-5
Additional Purchase and Redemption Information...............B-7
Tax-Sheltered Plans..........................................B-8
Individual Retirement Account Plan...........................B-8
Directors and Officers.......................................B-10
Investment Adviser...........................................B-11
Administrator................................................B-12
Rule 12b-1 Distribution Plan.................................B-12
Custodian....................................................B-13
Transfer and Dividend Agent..................................B-13
Independent Certified Public Accountants.....................B-13
Portfolio Brokerage..........................................B-14
Capital Stock................................................B-15
Distributor..................................................B-15
GENERAL INFORMATION
PCF was incorporated under the laws of the Commonwealth of
Pennsylvania on February 27, 1991. It has never operated under any
other name and has only been engaged in business as an open-end
management investment company.
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the Asset Allocation Fund's
investment objectives and policies as set forth in the Prospectus
dated May , 1996.
ASSET ALLOCATION FUND
The Asset Allocation Fund (the "Fund") is classified as being
diversified which means that it will qualify as a diversified open-end
management company under the Investment Company Act of 1940. The Fund
will invest its assets so as to meet its concentration policy of
investing less than 25% of its assets in any one industry group.
Further, the Fund will invest its assets in such a manner that 75% of
its assets will be diversified in the following manner: (a) no
investments will be made in any company that exceeds 5% of the total
net assets of the Fund; and (b) no investments will be made if such
investment would cause the Fund to own more than 10% of the voting
stock of any company. The remaining 25% of the Fund's net assets need
not be diversified as specified in (a) and (b), but still may not
violate the Fund's basic concentration policy.
The Fund may purchase put and call options on individual stocks
and index options, as well as writing covered call options on
portfolio stocks.
COVERED CALL OPTIONS AND HEDGING
The Fund may write covered calls or employ one or more types of
hedging instruments. When hedging to attempt to protect against
declines in the market value of the Fund's portfolio, to permit the
Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for
investment reasons, the Fund may (a) buy puts on such securities, or
(b) write calls on securities held by it. When hedging to permit the
Fund to establish a position in the securities market as a temporary
substitute for purchasing individual securities (which the Fund will
normally purchase, and then terminate that hedging position), the Fund
may buy calls on such securities. Additional information about the
Hedging Instruments the Fund may use is provided below.
WRITING COVERED CALL OPTIONS
When the Fund writes a call, it receives a premium and agrees to
sell the callable investment to a purchaser of a corresponding call
during the call period (usually not more than 9 months) at a fixed
exercise price (which may differ from the market price of the
underlying investment) regardless of market price changes during the
call period. To terminate its obligation on a call it has written,
the Fund may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized depending upon
whether the net of the amount of option transaction costs and the
premium previously received on the call written is more or less than
the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the
related investments and the premium received. If the Fund could not
effect a closing purchase transaction due to a lack of a market, it
would have to hold the callable investments until the call lapsed or
was exercised.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent through the facilities
of the Options Clearing Corporation ("OCC"), as to the investments on
which the Fund has written calls, or as to acceptable escrow
securities, so that no margin will be required for such transactions.
OCC will release the securities on the expiration of the calls or upon
the Fund entering into a closing purchase transaction. Call writing
affects the Fund's turnover rate and the brokerage commissions it
pays. Commissions payable on writing or purchasing a call are
normally higher on a relative basis than on general securities
transactions.
PURCHASING CALLS AND PUTS
When the Fund purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock
indices, has the right to buy the underlying investment from a seller
of a corresponding call on the same investment during the call period
at a fixed exercise price. When the Fund purchases a call on a stock
index, it pays a premium, but settlement is in cash rather than by
delivery of the underlying investment to the Fund. The Fund benefits
only if the call is sold at a profit or if, during the call period,
the market price of the underlying investment is above the sum of the
call price plus the transaction costs and the premium paid and the
call is exercised. If the call is not exercised or sold (whether or
not at a profit), it will become worthless at its expiration date and
the Fund will lose its premium payment and the right to purchase the
underlying investment.
When the Fund purchases a put, it pays a premium and, except as
to puts on stock indexes, has the right to sell the underlying
investment to a seller of a corresponding put on the same investment
during the put period at a fixed exercise price. Buying a put on an
investment the Fund owns enables the Fund to protect itself during the
period against a decline in the value of the underlying investment
below the exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market
price of the underlying investment is equal to or above the exercise
price and as a result the put is not exercised or resold, the put will
become worthless at its expiration date, and the Fund will lose its
premium payment and the right to sell the underlying investment. The
put may, however, be sold prior to expiration (whether or not at a
profit).
An option position may be closed out only on a market which
provides secondary trading for options of the same series, and there
is no assurance that a liquid secondary market will exist for any
particular option. The Fund's option activities may affect its
turnover rate and brokerage commissions. The exercise by the Fund of
puts on securities will cause the sale of related investments, and
increase portfolio turnover. Although such exercise is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the
put. The Fund will pay a brokerage commission each time it buys a put
or call, or sells a call. Such commissions may be higher than those
which would apply to direct purchases or sales of such underlying
investments. Premiums paid for options are small in relation to the
market value of the related investments, and consequently, put and
call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being
more sensitive to change in the value of the underlying investments.
TAX ASPECTS OF HEDGING INSTRUMENTS
The Fund intends to qualify as a "regulated investment company"
under the Internal Revenue Code. One of the tests for such
qualifications is that less than 30% of its gross income (irrespective
of losses) must be derived from gains realized on the sale of
securities held for less than three months. Due to this limitation,
the Fund will limit the extent to which it engages in the following
activities, but will not be precluded from them: (i) selling
investments held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii) writing
calls on investments held for less than three months; (iii) purchasing
calls or puts which expire in less than three months; (iv) effecting
closing transactions with respect to calls or puts purchased less than
three months previously; and (v) exercising puts or calls held by the
Fund for less than three months.
POSSIBLE RISK FACTORS IN HEDGING
In addition to the risks with respect to options tracking
discussed above, there is additional risk to the Fund if it attempts
to engage in short hedging by purchasing puts on stock indexes in that
the prices of the applicable index will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's
portfolio securities.
The risk of imperfect correlation increases as the composition of
the Fund's portfolio diverges from the securities included in any
applicable index. To compensate for the imperfect correlation of
movements in the price of the hedging instruments, the Fund may use
hedging instruments in a greater dollar amount than the dollar amount
of such portfolio securities being hedged if the historical volatility
of the prices of such portfolio securities being hedged is more than
the historical volatility of the applicable index. It is also
possible that where the Fund has used hedging instruments in a short
hedge, the market may advance and the value of the securities held in
the Fund's portfolio may decline. If this occurred, the Fund would
lose money on the hedging instruments and also experience a decline in
value in its portfolio securities. If the Fund uses hedging to
establish a position in the securities markets as a temporary
substitute for the purchase of particular securities (long hedging) by
buying calls on securities or on stock indexes, it is possible that
the market may decline. If the Fund then concludes not to invest in
securities at that time because of concerns as to possible further
market decline or for other reasons, the Fund will realize a loss on
the hedging instruments that is not offset by a reduction in the price
of such securities. In other words, if the investment adviser is
incorrect in the assessment of whether the overall market will advance
or decline, as the case may be, the Fund may not experience any
benefit and may have been better off if the hedging instruments were
not used.
CONVERTIBLE SECURITIES
A convertible security is a fixed-income security (a bond or
preferred stock) which may be converted at a stated price within
a specified period of time into a certain quantity of the common
stock of the same or a different issuer. Convertible securities
are senior to common stocks in a corporation's capital structure,
but are usually subordinated to similar nonconvertible
securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but
lower than that afforded by a similar nonconvertible security) a
convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the
convertible security's underlying common stock.
In general, the market value of a convertible security is at
least the higher of its "investment value" (i.e., its value as a
fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). As a fixed-
income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in
value when interest rates rise. However, the price of a
convertible security is also influenced by the market value of
the security's underlying common stock. The price of a
convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the
market value of the underlying stock declines. While no
securities investment is without some risk, investments in
convertible securities generally entail less risk than
investments in the common stock of the same issuer.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets (determined at
the time of investment) in illiquid securities including
securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on
resale and repurchase agreements which have a maturity of longer
than seven days. This policy is subject to state securities
commissions restrictions. Rule 144A securities that have legal
or contractual restrictions on resale but have a readily
available market are not considered illiquid for purposes of this
limitation. The investment adviser will monitor the liquidity of
such restricted securities under the supervision of the Board of
Directors. Repurchase agreements subject to demand are deemed to
have a maturity equal to the notice period.
The staff of the SEC has taken the position that purchased over-
the-counter options and the assets used as "cover" for written
over-the-counter options are illiquid securities. However, with
respect to U.S. government securities, the Fund may treat the
securities it uses as "cover" for written over-the-counter
options on U.S. Government securities as liquid provided it
follows a specified procedure. The Fund may sell such over-the-
counter options only to qualified dealers who agree that the Fund
may repurchase any options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, over-the-
counter options would be considered liquid only to the extent
that the maximum repurchase price under the formula exceeds the
intrinsic value of the option.
YIELD DISCLOSURE
A non-money market fund must calculate yield based on a 30 day or
one month period ended on the date of the most recent balance
sheet. The following formula is to be used:
6
Yield = 2 [(a - b + 1) - 1]
--------------------
c x d
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 were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
AVERAGE ANNUAL COMPOUNDED TOTAL RATE OF RETURN
n
P(1 + T) = ERV
Where:
P= a hypothetical initial payment of $1,000
T= average annual total return
n= number of years
ERV= ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5 or 10 year periods at the end of the 1,
5, or 10 year periods (or fractional portion
thereof)
The maximum sales load is to be deducted from the initial $1,000
payment. All dividends and capital gains are assumed to have
been reinvested at the price in effect on the reinvestment date.
Full redemption and any corresponding redemption or contingent
deferred sales load are to be assumed as of the last day of each
period.
INVESTMENT RESTRICTIONS
1. The assets of the Fund will be fully invested. The Fund the
Fund intends to invest a portion of its assets in all three
market segments at any given time. However, when market
conditions warrant, the Fund may have 100% of its assets
invested in any one market area with limitation that less
than 25% of the total assets of the Fund will be invested in
the precious metal industry. Additionally, during periods
of unusual market conditions and, as a temporary defensive
measure the Fund may invest 100% of its assets in high-
quality short-term money market instruments.
2. As to 75% of the market value of its total assets, the Fund
shall not:
(a) invest more than 5% of the value of the assets of the
Fund in securities of one issuer (except cash or cash
instruments and securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities).
(b) purchase more than 10% of the outstanding voting
securities of such issuer.
3. Borrowings by the Fund are not permitted except (a) from
banks for temporary or emergency purposes up to maximum of
5% of the value of the total assets of the appropriate Fund
at the date of borrowing and (b) in an amount up to one-
third of the value of the Fund's total assets, in order to
meet redemption requests without immediately selling any
securities. This borrowing provision is not for investment
leverage purposes but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests
where the liquidation of portfolio securities is deemed to
be inconvenient or disadvantageous. A liquidation would be
inconvenient or disadvantageous if it would require a sale
of securities during periods of temporarily depressed
security prices, or if a sale would place the Fund in
violation of rules relating to short security profits or
cause an imbalance in the Fund's asset allocation or
diversification posture. Interest paid on borrowed funds
will not be available for investment. While any such
borrowings are outstanding, no investment securities may be
purchased by the Fund. If the asset coverage of the
indebtedness falls below 300%, the Fund may be required to
sell certain of its portfolio securities to be in compliance
with the Investment Company Act of 1940 which may be at a
time when it is disadvantageous to dispose of such
securities. The Fund will attempt to liquidate any such
borrowings as soon as possible after they are incurred.
4. Securities of other issuers will not be underwritten, which
shall also be deemed to include investment in restricted
securities.
5. Less than 25% of the total assets of the Fund will be
invested in the securities of issuers in any one industry.
6. Investments in real estate or real estate mortgage loans
will not be made. However, investment in United States
Government Agency securities representing real estate loans
may be made.
7. No purchase or sale will be made of future contracts,
commodities or commodity contracts or oil or gas interest.
8. Loans will not be made to other persons except by the
purchase of the debt obligations in which the Fund is
authorized to invest in accordance with its investment
policies.
9. Short sales or purchases on margin will not be made but the
Fund may obtain such short-term credits as may be necessary
for clearance of purchases and sales of securities.
10. The Fund will not issue senior securities, however, the Fund
may borrow money from banks. (See Investment Restriction 3
above.)
11. No investment will be made in the securities of any issuer
for the purpose of exercising management or control.
12. Investments will not be made in restricted securities or
foreign securities, though the Fund may invest in the
American Depository Receipts of non-U.S. Companies.
13. No more than 5% of the total assets of the Fund will be
invested in the securities of other investment companies.
14. The Fund will not purchase any security if, as a result, the
Fund would then have more than 5% of its total assets (taken
at current value) invested in the securities of companies
(including predecessors) less than three years old.
15. The Fund will not purchase or retain securities of any
company if, to the knowledge of the Fund, Officers and
Directors of the Fund or of the Adviser who individually own
more than 1/2 of 1% of the securities of that company
together own beneficially more than 5% of such securities.
16. The Fund's assets will not be mortgaged, pledged or
hypothecated unless there is at all times an asset coverage
of at least 300% for all pledging, mortgaging and
hypothecation of the Fund's assets.
17. Less than 15% of the total net assets of any Series may be
invested in liquid securities including repo agreements of
more than seven days maturity.
With respect to Investment Restrictions 3 and 16, the Fund will
not engage in such activities to the extent of 5% of its net
assets and does not expect to do so during the coming year.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Orders for the purchase of shares of the Fund received prior to
4:00 p.m. on any day on which the New York Stock Exchange is open
for business will be priced at the per share net asset value
computed for that day. Orders received after that time or on
Saturdays, Sundays or holidays will be priced at the per share
net asset value next computed.
The Fund's Board of Directors may suspend the right of redemption
or postpone the date of payment upon redemption when:
1. The New York Stock Exchange is closed for other than
customary weekend or holiday closings or trading on such Exchange
is restricted;
2. There exists an emergency as a result of which (a) disposal
by the Fund of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for the Fund
fairly to determine the value of its net assets;
3. For such other periods as the Securities and Exchange
Commission may permit for the protection of the shareholders.
Payment for shares redeemed may be made either in cash or in
kind or partly in cash and partly in kind. However, the Fund has
elected, pursuant to rule 18f-1 under the Investment Company Act
of 1940, to redeem its shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund during any
ninety (90) day period for any one shareholder. Payments will be
made wholly in cash unless the Board of Directors believes that
conditions exist which would make such a practice detrimental to
the best interests of the Fund. Any portfolio securities paid or
distributed in kind would be valued as described under
"Determination of Net Asset Value". Subsequent sale of such
securities may require payments of brokerage commissions by a
shareholder.
Shares are issued in book entry form. No paper certificates
are issued. The Fund reserves the right to reject any purchase
order.
TAX-SHELTERED PLANS
For those persons who are employees of tax exempt
charitable, religious and educational organizations [technically,
organizations described in Internal Revenue Code Sections
501(c)(3) and 170(b)(1)(A)(ii)], there is available through the
distributor, Dunwoody Brokerage Services, Inc., a Model Tax-
Sheltered Custodial Plan for investment of retirement funds in
shares of the Fund under Code Section 403(b)(7). This plan is
established with the intention that it will qualify and remain
qualified under Code Section 403(b)(7), and it may be amended
prospectively or retrospectively to meet the requirements of that
Section.
Persons interested in the Plan should consult a qualified
tax advisor.
Copies of the Plan Application, the Custodial Plan and
supporting documents as well as further detailed information
concerning the Plan may be obtained from Dunwoody Brokerage
Services, Inc.
INDIVIDUAL RETIREMENT ACCOUNT PLAN
Individuals, who are not active participants (and who do not
have a spouse who is an active participant) in an employer
maintained retirement plan are eligible to contribute on a
deductible basis to an Individual Retirement Account ("IRA").
The IRA deduction is also for individual taxpayers and married
couples with adjusted gross incomes not in excess of certain
specified limits. All individuals may make nondeductible IRA
contributions to a separate account to an extent that they are
not eligible for a deductible contribution. Income earned by an
IRA will continue to be tax deferred. Income dividends and
capital gain distributions on Fund shares held in the account
accumulate free from Federal income tax.
Because investments in the IRA are intended to provide a
retirement fund and because the Internal Revenue Code imposes
penalties on premature distributions from an IRA, investors
should carefully consider the investment objectives of the Fund
and consult with a qualified tax advisor prior to establishing an
IRA.
If you wish to establish an Individual Retirement Account,
the necessary forms, including an Individual Retirement Custodial
Account Form and further detailed information regarding the
Account, are available from Dunwoody Brokerage Services, Inc.,
8309 Dunwoody Place, Atlanta, Georgia 30350-3307; telephone (800)
537-9165.
Included with the forms that you will receive will be a
Disclosure Statement which you should read carefully. This
Disclosure Statement sets forth important Federal tax and other
information concerning the account. An Individual Retirement
Account which is established on the day of receipt of the
Disclosure Statement may be revoked within seven days after the
account is established. An Account established more than seven
days after the date of the receipt of the Disclosure Statement
may not be revoked.
Each Plan provides for a Custodian. For providing its
services, the Custodian will receive the following fees:
Annual Maintenance Fee $13.00
Periodic Distribution Fee $15.00/year
Lump Sum Distribution Fee $15.00
The Annual Maintenance Fee compensates the Custodian for
maintaining the account. The Lump Sum Distribution fee occurs
when there is a complete account liquidation, either to the
account owner or for transfer to another Custodian. The Periodic
Distribution Fee covers the situation where an individual is in
the payout phase of a Tax-Sheltered Account and is receiving
monthly or quarterly checks on a regular periodic basis. The
fees are charged per plan. The total charge per account will be
at least $13 per year. What additional charges will be assessed
against a particular account is dependent on when and if lump sum
or periodic distributions are made.
DIRECTORS AND OFFICERS
The Directors and Officers of Penn Capital Funds, Inc.,
their addresses, principal occupations during the past five years
and their affiliations, if any, with the Fund's adviser,
International Investments, Inc., its distributor, Dunwoody
Securities, Inc., and its administrators, James M. Beimel, Jr.
and American Data Services, Inc., are as follows:
Offices Principal
Name and Address With Fund Occupation
Joseph M. Jacobs Chairman Deputy Director of the
274 Sleepy Hollow Rd. and Director Dept. of Budget and
Pittsburgh, PA 15228 Finance, Allegheny
County, PA
James M. Beimel, Jr.* President President of the
172 Surrey Drive Fund
Delmont, PA 15626
Kathleen A. Donnelly Director Attorney
531 Greenfield Avenue
Pittsburgh, PA 15207
* Mr. Beimel is deemed to be an "interested person" of the Fund
in that he is an officer of the Fund and has an administrative
services contract with the Fund.
Mr. Jacobs has held his current position for over five
years. Mr. Beimel has been consulting with PCF since August,
1995 on all aspects of its operations. From January, 1993 to
August, 1995, he was employed by the Vanguard Group, Valley
Forge, Pennsylvania, a major mutual fund group, where he worked
primarily on marketing and related matters. From January, 1991
to January, 1993, he was employed by and worked as a consultant
in the area of financial management for Unisys, Inc., a major
computer manufacturer located in Blue Bell, Pennsylvania. Ms.
Donnelly has been a self-employed attorney since September, 1995.
Prior to that she was employed as an attorney by Penn Capital
Management, Inc. from May, 1995 to September, 1995, and from May,
1990 to May, 1995, was a budget analyst for Equitable Resources,
Inc., Pittsburgh, Pennsylvania.
During the fiscal year ended September 30, 1995, the Fund
did not pay any directors' fees or reimburse director expenses.
The Fund's arrangement with directors is that, at some time in
the future when its economic situation warrants it, it will
reimburse each director who is not an "interested person" of the
Fund for expenses incurred in connection with attendance of
meetings of the Board of Directors and to pay each such director
an annual fee of $2,000 and $250 for each meeting of the Board of
Directors attended. On February 15, 1996, the directors and
officers, as a group, owned less than 1% of the outstanding
shares of the Fund and, to the knowledge of the Fund, no person
owned of record or beneficially 5% or more of the outstanding
shares of the Fund.
None of the officers or directors of PCF has any affiliation
with the Fund's investment adviser, International Investments,
Inc., or American Data Services, Inc.
INVESTMENT ADVISER
International Investments, Inc. (the "Adviser") serves as
investment adviser to the Fund and has done so since November 1,
1995. The Adviser acts as an investment manager to individuals
and institutional clients with substantial investment portfolios.
The Adviser was organized in 1989 and is wholly owned by John J.
Bartoletta, its President.
The Adviser receives a monthly fee at an annual rate of 1.0%
of the average daily net asset value of the Fund on the first $25
million; 0.75% of the average daily net asset value on the next
$75 million; and 5/8 of 1% on amounts over $100 million.
The Advisory Agreement with the Adviser will remain in
effect for two years and from year - to- year thereafter, as long
as its continuance is specifically approved at least annually by
(i) the Board of Directors of the Fund, or by the vote of a
majority (as defined in the Investment Company Act of 1940) of
the outstanding shares of the Fund, and (ii) by the vote of a
majority of the directors of the Fund who are not parties to the
Advisory Agreement or interested persons of the Adviser, cast in
person at a meeting called for the purpose of voting on such
approval. The Adviser may terminate the Advisory Agreement by
giving the Fund written notice at least 60 days prior to any
anniversary date of it. The Advisory Agreement may also be
terminated at any time without the payment of any penalty, by the
Board of Directors of the Fund or by vote of a majority of the
Fund's shareholders, on sixty day's written notice to the
Adviser. It will automatically terminate if it is assigned.
The Advisory Agreement provides that the Adviser will not be
liable to the Fund for any error of judgement or for any loss
arising out of any investment or recommendation or out of any
other act or omission in the performance of the Advisory
Agreement, except for negligence, willful malfeasance, bad faith
or violation of applicable law.
The Fund will pay, among other expenses and fees, all taxes
and brokerage costs, the Securities and Exchange Commission fees
for federal registration of shares for sale to the public and for
preparing, printing and filing any amendments or supplements to
the federal registration statement of the Fund; state securities
qualification and registration fees; issuance and redemption
expenses; custodian, transfer and dividend disbursing costs;
accounting, auditing and legal services; fidelity bonds and other
insurance premiums necessary to the Fund's operation, including
all or a portion of any Directors' and Officers' liability
insurance premiums if the Fund is the sole insured or a joint
insured under such a policy of insurance; the costs of preparing,
printing and mailing of proxy materials and the costs of the
annual and any special shareholders' meetings, as well as such
extraordinary nonrecurring expenses as may arise, including
litigation affecting the Fund and the legal right or obligation
which the Fund may have to indemnify its Officers or Directors
with respect thereto, unless the Fund has the right to receive
such indemnity payments from the Adviser, subject always to any
reimbursement due to the Fund under any policy of insurance under
which the Fund may be insured. The Fund will also arrange for
the preparation of reports and filings to be made in states in
which the Fund's shares are being sold.
ADMINISTRATOR
James M. Beimel, Jr., the President of the Fund, and
American Data Services, Inc. ("ADS") provide the administrative
and clerical personnel necessary for the proper operation and
general supervision of the affairs of the Fund, including
preparing and maintaining the books, accounts and other documents
required by the Investment Company Act of 1940, calculating the
Fund's net asset value, keeping and maintaining shareholder
records and responding to shareholder inquires, preparing the
Fund's financial statements and tax returns, preparing reports
and filings with the Securities and Exchange Commission (other
than the Fund's registration statements), furnishing statistical
and research data, clerical and bookkeeping services and
stationery and office supplies, keeping and maintaining the
Fund's financial accounts and records, and generally assisting in
all aspects of the Funds operations.
They perform these services pursuant to the Administrative
Services Agreement, Accounting Services Agreement and Transfer
Agency and Services Agrement described in the Prospectus.
RULE 12B-1 DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan")
pursuant to the requirements of Rule 12b-1 under the Investment
Company Act of 1940. Pursuant to a Distribution Assistance
Agreement dated September 30, 1993, PCFS has agreed to act as the
distributor of the shares of the Fund pursuant to the Plan. The
Plan provides that the Fund may incur certain costs relating to
the distribution of its shares. The PCFS is to be reimbursed by
the Fund for these costs (including a reasonable allocation for
overhead) provided that the costs may not exceed 0.25% per annum
of the Fund's daily net assets. The Plan is intended to benefit
the Fund through increased sales of shares, thereby reducing the
Fund's expense ratio and providing an asset size that allows the
adviser greater flexibility in management. Amounts paid under
the Plan and related Distribution Assistance Agreement are paid
to PCFS for its services as distributor of the shares and may be
spent by PCFS on any activities or expenses primarily intended to
result in the sale of the Fund's shares, including but not
limited to, compensation to, and expenses (including overhead and
telephone expenses) of, employees of PCFS who engage in or
support distribution of the shares, printing of prospectuses and
reports for other than existing shareholders, advertising and
preparation and distribution of sales literature. Allocation of
overhead (rent, utilities, etc.) and salaries will be based on
the percentage of utilization in, and time devoted to,
distribution activities. The Fund did not pay PCFS any fee under
the Plan during the fiscal year ending September 30, 1994.
Distribution expenses incurred in a fiscal year which are in
excess of the minimum amount permitted to be borne by the Fund
under the Plan are borne by PCFS (i.e., they cannot be carried
forward and paid in a subsequent year). Further, the Plan does
not permit expenses incurred in one year to be paid out of
amounts authorized to be spent in another year.
The Plan and related Distribution Assistance Agreement will
continue in effect as long as their continuance is specifically
approved at least annually by the Board of Directors, including
the Directors of the Fund who are not interested persons of the
Fund and who have no director or indirect financial interest in
the Plan or any agreement related thereto (the "Rule 12b-1
Directors"). The Plan may be terminated at any time by a vote of
the Rule 12b-1 Directors or by a vote of a majority of the
outstanding shares of the Fund. Any change in the Plan that
would materially increase the distribution expenses of the Fund
provided for in the Plan requires approval of the shareholders
and the Board of Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of
Directors who are not interested persons of the Fund will be
committed to the discretion of the directors of the Fund who are
not interested persons of the Fund. The Board of Directors must
review the amount and purposes of expenditures pursuant to the
Plan quarterly as reported to it by PCFS.
CUSTODIAN
Star Bank, N.A. ("Star"), Star Bank Center, 425 Walnut
Street, Cincinnati, Ohio 45202, as custodian, has custody of all
securities and cash of the Fund. It attends to the collection of
principal and income, and payment for and collection of proceeds
of securities bought and sold by the Fund. Star is not
affiliated with the Fund or any of its affiliates. Star is paid
a minimum fee of $400 per month plus various transaction fees to
act as custodian for the Fund.
TRANSFER AND DIVIDEND AGENT
American Data Services, Inc. serves as the Fund's Transfer
and Dividend Disbursing Agent.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
McCurdy & Associates CPA's, Inc., with principal offices at
27955 Clemens Road, Westlake, Ohio 44145, act as the independent
certified public accountants for the Fund. As such they audit
and report on the Fund's annual financial statements, review
certain regulatory reports, and perform other professional
accounting, auditing, and advisory services when engaged to do so
by the Fund. Shareholders will receive annual audited financial
statements and semi-annual unaudited financial statements. The
selection of independent accountants is subject to annual
ratification by the Fund's shareholders.
PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made
by the Adviser subject to review by the Fund's Board of
Directors. The Adviser intends to direct brokerage on the basis
of best execution of orders at the most favorable price in light
of the overall quality of brokerage and research services
provided, as described in this and the following paragraph. In
selecting brokers to effect portfolio transactions, the
determination of what is expected to result in best execution at
the most favorable price involves a number of largely judgmental
considerations. Among them are the Advisers evaluation of the
broker's efficiency in executing and clearing transactions, block
trading capability (including the broker's willingness to
position securities) and the broker's financial strength and
stability. The most favorable price to the Fund means the best
net price without regard to the mix between purchase or sale
price and commission, if any. Over-the-counter securities may be
purchased and sold directly with principal market makers who
retain the difference in their cost in the security and its
selling price or from non-principal market makers who are paid
commissions directly. The Adviser may allocate portfolio
brokerage on the basis of recommendations to purchase shares of
the Fund made by brokers, but only if the Adviser reasonably
believes the commissions and transaction quality are comparable
to that available from other brokers. Under the Investment
Company Act of 1940, the Adviser is prohibited from dealing with
the Fund as a principal in the purchase and sale of securities.
In allocating brokerage business for the Fund, the Adviser
may also take into consideration the research, analytical,
statistical and other information and services provided by the
broker, such as general economic reports and information, reports
or analyses of particular companies or industry groups, market
timing and technical information, and the availability of the
brokerage firm's analysts for consultation. While the Adviser
believes these services have some value, they are considered
supplemental to the Adviser's own efforts in the performance of
its duties under the Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the
Adviser, and the Fund may indirectly benefit from services
available to the Adviser as a result of transactions for other
clients. The Agreement provides that the Adviser may request
that the Fund pay a broker which provides brokerage and research
services to the Adviser a commission for effecting a securities
transaction in excess of the amount another broker would have
charged for effecting the transaction, if the Adviser determines
in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided
by the executing broker viewed in terms of either the particular
transaction or the Adviser's overall responsibilities with
respect to the Fund and the other accounts as to which it
exercises investment discretion. Brokerage commissions paid by
the Fund during the fiscal year ended September 30, 1995, all of
which were paid to Penn Capital Financial Services, Inc. totaled
$2,543 on transactions involving securities having a total market
value of approximately $1,211,801.
Purchases of government securities and some fixed income
securities may be made directly from dealers in a principal
transaction and not on an agency basis. Buying from a dealer in
a principal transaction involves paying the dealer's mark-up
price which includes an element of profit to the dealer.
CAPITAL STOCK
In the election of directors, shareholders have the
unconditional right of cumulative voting. This means that each
shareholder will be entitled to as many votes as equals the
number of shares registered in the shareholder's name multiplied
by the number of directors to be elected at the meeting. A
shareholder may cast all of such votes for one nominee or
distribute them among any two or more nominees. Directors are
elected by a plurality of the votes cast by the holders of the
Fund's common stock entitled to vote in the election of directors
at a meeting at which a quorum is present. "Plurality" means
that the individuals who receive the largest number of votes cast
are elected as directors up to the maximum number of directors to
be chosen at the meeting. Consequently, any shares not voted
(whether by abstention, broker non-vote or otherwise) have no
effect on the election of directors except to the extent the
failure to vote for an individual results in that individual not
receiving a sufficient number of votes to be elected.
DISTRIBUTOR
Dunwoody Brokerage Services, Inc. ("Dunwoody") serves as the
Fund's distributor in a continuous offering of the Fund's shares
pursuant to a Underwriting Agreement dated February 1, 1996. For
these services, it receives a sales charge (currently ranging
from 1.00% to 4.75% based on the size of the investment) payable
by an investor upon the purchase of shares of the Fund. Dunwoody
received no commissions from the Fund during the preceding three
fiscal years. The previous distributor received sales
commissions of $2,828, $1,436, and $6,210 during the fiscal years
ended September 30, 1995, 1994 and 1993, respectively.
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements - Asset Allocation Fund
(i) Financial Statements included in Part A of the
Registration Statement: None
(ii) Financial Statements included in Part B of the
Registration Statement: Incorporated by reference from
the registrant's Annual Report to Shareholders for the
year ended September 30, 1995, which is on file with
the Commission.
(b) Exhibits
1. Restated Articles of Incorporation****
2. By-Laws**
3. Inapplicable
4. Article IV of the Restated Articles of
Incorporation incorporated by reference to Exhibit 1
hereto
5. Advisory Contract dated December 1, 1995
6. Underwriting Agreement dated February 1, 1996
7. Inapplicable
8. Custody Agreement dated , 1995
9. (a) Transfer Agency and Service Agreement dated
, 1995
(b) Administrative Services Agreement dated
February 1, 1996
10. Opinion of Counsel*****
11. Consent of Independent Auditors
12. Inapplicable
13. Letters of Intent From Initial Investors*
14. Inapplicable
15. Distribution Plan
16. Specimen Price Mark-up Sheet
27. Financial Data Schedule
18. Inapplicable
* Incorporated herein by reference to the Registration Statement
of Registrant on Form N-1A filed on or about March 20, 1991.
** Incorporated herein by reference to Pre-Effective Amendment
No. 3 to the Registration Statement of Registrant on Form N-1A
filed on or about August 6, 1991.
*** Incorporated herein by reference to Pre-Effective Amendment
No. 4 to the Registration Statement of Registrant on Form N-1A
filed on or about September 6, 1991.
**** Incorporated herein by reference to Post-Effective Amendment
No. 5 to the Registration Statement of Registrant on Form N-1A
filed on or about October 24, 1994.
***** Incorporated herein by reference to Post-Effective
Amendment No. 6 to the Registration Statement of Registrant on
Form N-1A filed on or about December 28, 1994.
Item 25. Persons Controlled by or Under Common Control with
Registrant
Inapplicable
Item 26. Number of Holders of Securities
As of February 15, 1996, there were 91 holders of record of
the shares of the Fund and PCF.
Item 27. Indemnification
Article VIII of the Registrant's By-Laws (Exhibit 2 hereto,
which is incorporated herein by reference) and Sections 1741 -
1747 of the Pennsylvania Business Corporation Act of 1988
provide, in effect, that the Registrant will indemnify its
officers and directors under certain circumstances. However, in
accordance with Sections 17(h) and 17(i) of the Investment
Company Act of 1940 and by its own terms, said By-Law does not
protect any person against liability to the Registrant or its
shareholders to which he/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/her
office.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
Information pertaining to business and other connections of
the Registrant's investment adviser is hereby incorporated by
reference to the section of the Prospectus captioned "Management
of the Fund" and to the section of the Statement of Additional
Information captioned "Investment Adviser".
The directors of the Adviser are: Dr. Peter Karas, Finance
Professor, University of Souther Florida; Dr. David Brown, Dean
of the Business School, University of Florida; Richard Cope,
Chief Executive Officer, Prudential Florida Realty; and James
Harper, Chief Executive Officer, Accordia Insurance Company.
Item 29. Principal Underwriters
(a) Inapplicable
(b) The following is certain information with respect
to the officers and directors of Penn Capital Financial Services,
Inc., the former principal distributor for the Fund:
Positions and
Positions and Offices Offices
Name with Underwriter with Registrant
William P. Hogan President and Director None
Christopher E. Treasurer and Director None
Beimel
Their principal business address is 7211 Saltsburg Road,
Pittsburgh, PA 15235.
(c) Inapplicable.
Item 30. Location of Accounts and Records
All such accounts, books and other documents are maintained
at the offices the Registrant, 216 Boulevard of the Allies, 6th
Floor, Pittsburgh, Pennsylvania 15222, the officers of American
Data Services, Inc., the sub-administrator, provider of
accounting services and transfer agent of the Fund, 24 West
Carver Street, Huntington, New York 11743 or at the offices of
the custodian Star Bank, N.A., Star Bank Center, 425 Walnut
Street, Cincinnati, Ohio 45202.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
(a) Inapplicable
(b) Inapplicable
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders upon request and
without charge.
(d) Registrant undertakes to have a majority of the non-
interested directors determine at least annually that the
arrangement concerning liability insurance for each Series
of Penn Capital Funds, Inc. satisfied the standards
contained in Section 17(d)-1(d)(7)(i) and (ii) of the
Investment Company Act of 1940, as amended.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Pittsburgh and the State of Pennsylvania on the 4th
day of March, 1996.
Penn Capital Funds, Inc.
By:/s/ James Beimel
President
Pursuant to the requirement of the Securities Act of 1933,
this amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated:
Signature Title Date
/s/ James Beimel President (Principal March 4, 1996
James Beimel Executive Officer)
and Director
/s/ Joseph Jacobs Director March 4, 1996
Joseph Jacobs
/s/ Kathleen A. Donnelly Director March 4, 1996
Kathleen Donnelly
/s/ Karl Beimel Treasurer March 4, 1996
Karl Beimel (Principal Financial
and Accounting Officer)
INDEX TO EXHIBITS
Sequentially
Numbered
Page
Reference
Exhibits
1. Restated Articles of Incorporation****
2. By-Laws**
4. Articles IV of the Restated Articles of Incorporation
incorporated by reference to Exhibit 1 hereto
5. Advisory Contract dated December 1, 1995
6. Underwriting Agreement dated February 1, 1996
8. Custody Agreement dated , 1995
9. (a) Transfer Agency and Service Agreement dated
, 1995
(b) Administrative Services Agreement dated
February , 1996
10. Opinion of Counsel*****
11. Consent of Independent Auditors
13. Letters of Intent From Initial Investors*
15. Distribution Plan
16. Specimen Price Mark-up Sheet
17. Financial Data Schedule
18. Inapplicable
* Incorporated herein by reference to the Registration Statement
of Registrant on Form N-1A filed on or about March 20, 1991.
** Incorporated herein by reference to Pre-Effective Amendment
No. 3 to the Registration Statement of Registrant on Form N-1A
filed on or about August 6, 1991.
*** Incorporated herein by reference to Pre-Effective Amendment
No. 4 to the Registration Statement of Registrant on Form N-1A
filed on or about September 6, 1991.
**** Incorporated herein by reference to Post-Effective Amendment
No. 5 to the Registration Statement of Registrant on Form N-1A
filed on or about October 24, 1994.
***** Incorporated herein by reference to Post-Effective
Amendment No. 6 to the Registration Statement of Registrant on
Form N-1A filed on or about December 28, 1994.
Exhibit 5
ADVISORY CONTRACT
THIS AGREEMENT made this 1st day of December, 1995, by and
between INTERNATIONAL INVESTMENTS, INC., a/k/a ADS/INTERNATIONAL
INVESTMENTS, a Florida corporation, (hereinafter referred to as the
"Adviser"), and PENN CAPITAL FUNDS, INC. a Pennsylvania corporation
(hereinafter referred to as the "Fund").
WHEREAS, the Fund is an open-end management investment company as
that term is defined in the Investment Company Act of 1940, as
amended, and is registered as such with the U.S. Securities and
Exchange Commission; and
WHEREAS, the Adviser is in the business of rendering investment
advisory, statistical and research services, and is registered as an
investment adviser with the U.S. Securities and Exchange Commission
under the Investment Adviser's Act of 1940, as amended; and
WHEREAS, the parties desire to provide for continuing services by
the Adviser to the Fund pursuant to the terms and conditions
hereinafter set forth,
NOW, THEREFORE, in consideration of the premises, the parties
hereto agree as follows:
1. The Fund hereby retains and appoints the Adviser as its
investment adviser and portfolio manager to render research,
statistical and advisory services to the Fund, and to supervise the
investments of the Fund for the period and upon the terms herein set
forth, subject to the direction and control of the Board of Directors
of the Fund. The Advisor accepts such employment and agrees during
such period to render the services and to assume the obligation herein
set forth for the compensation herein provided.
2. The Adviser in its supervision of the investments of the
Fund will be guided by the Fund's fundamental investment policies and
the provisions and restrictions contained in the Charter and By-Laws
of the Fund as set forth in the Fund's registration statement, and
exhibits thereto, as may be filed with the U.S. Securities and
Exchange Commission (the "Commission"), all subject to the applicable
provisions of the Investment Company Act of 1940, as amended (the
"Act").
3. The Fund will pay and is solely responsible for its own
expenses including, without limitation, interest charges, taxes, costs
of purchasing and selling securities for its portfolio, rent expenses
of redemption of shares, auditing and legal expenses; expenses
attributable to printing prospectuses directors' fees and expenses
necessarily incurred by a director in attendance at directors'
meeting; expenses of administrative personnel and administrative
series, custodian fees; fees of transfer agents, registrar and
dividend disbursing agents; the cost of stock certificates and
corporate reports; all other printing expenses; costs in connection
with Board of Director's meetings and the annual or special meetings
of shareholders, including proxy material preparation and
distribution, filing fees, dues, insurance premiums, miscellaneous
management and operating expenses and expenses of an extraordinary and
nonrecurring nature.
In no event shall the Adviser be responsible for the payment or
reimbursement of any Fund expense of any king what-so-ever.
4. Fund Management is solely responsible for the day-to-day
operations of the Fund, maintaining compliance with the Securities Act
of 1933, the Investment Company Act of 1940, Section 851 of the
Internal Revenue Code of 1986, as amended, and any law or regulation
of any governmental agency having jurisdictional over the Fund. The
Adviser shall be held harmless and the Fund will indemnify the Adviser
for any fines or damages that may be levied or charged to the Adviser
and for any expenses incurred by the Adviser, including but not
limited to legal fees, that may arise as a result of any violation or
error committed by Fund Management to any party.
5. Subject to the provision of Paragraph 7 hereof, the Fund
agrees to pay to the Adviser for its services rendered during the
preceding month thereunder on the first business day each month during
the term of the Agreement a cash fee in an amount determined by
applying the following monthly rates to the average daily net asset
value of the Fund during the preceding month, determined in the manner
used for the determination of the offering price of the Fund's shares:
Equivalent Average Daily
Monthly Rate Annual Rate Net Asset Values
1/12 of 1% 1% On the first
$25 million
1/16 of 1% 3/4 of 1% On the next
$75 million
5/96 of 1% 5/8 of 1% On amounts over
$100 million
6. The term of this Agreement shall begin on the date first
above written and shall continue in effect for two years from that
date and from year-to-year thereafter, subject to the provisions for
termination and all of the other terms and conditions hereof, if; (a)
such continuation shall be specifically approved at least annually by
the vote of a majority of the directors who are not parties to such
contract or interested persons of any such party to such contract
(other than as directors of the Fund) cast in person at a meeting
called for that purpose, or by a vote of the majority of the
outstanding voting securities of the Fund, and (b) the Adviser shall
not have notified the Fund in writing at least sixty (60) days prior
to the anniversary date of this Agreement in any year hereafter that
it does not desire such continuation.
7. Notwithstanding anything to the contrary herein, the
Agreement may be terminated at any time, without the payment of any
penalty, by the directors of the Fund or by a vote of a majority of
the outstanding voting securities of the Fund on sixty (60) days
written notice to the Adviser.
8. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for this purpose having the
meaning defined in Section 2(a)(4) of the 1940 Act.
9. The Adviser may employ or contract with such other person or
persons, corporation or corporations at its own cost and expense as it
shall determine in order to assist it in carrying out this Agreement;
provided, however, that to the extent that any such employment or
contract constitutes such other person or persons, corporation or
corporations to be an investment adviser to the Fund within the
meaning of the 1940 Act, such employment or contracts shall be subject
to the approval of the Fund's shareholders in the manner provided by
such Act, prior to its effectiveness.
10. The adviser shall not be liable to the Fund for anything
done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties imposed on it by this Agreement.
11. The services of the Adviser herein provided are not to be
deemed exclusive and, so long as its services hereunder shall not be
impaired thereby, should the Adviser so desire, it may sponsor,
promote, and provide investment advisory and management series to one
or more investment companies other than the Fund.
12. This Agreement may be amended at any time by agreement of
the parties, provided that the amendment shall be approved by the vote
of a majority of directors of the Fund, including a majority of
directors who are not parties to this Agreement or interested persons
of any such party to this Agreement (other than as directors of the
Fund) cast in person at a meeting called for that purpose.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Investment
Advisory Contract to be executed on their behalf by their duly
authorized officers and their corporate seals to be affixed hereto as
of the date first above written.
The Adviser: The Fund:
INTERNATIONAL INVESTMENTS, INC. PENN CAPITAL ASSET
ALLOCATION FUND
By:_/s/ John J. Bartoletta___ By:_/s/ Karl T. Beimel____________
John J. Bartoletta, President Karl T. Beimel
Exhibit 6
UNDERWRITING AGREEMENT
AGREEMENT made as of this 1st day of February, 1996, between PENN
CAPITAL FUNDS, INC., a Pennsylvania corporation (the "Fund"), and
DUNWOODY BROKERAGE SERVICES, a __________ corporation (the
"Underwriter").
1. The Underwriter will use its best efforts to find purchasers
for and the Fund will sell, issue and deliver from time to time such
purchasers, such part of the authorized shares of capital stock of the
Fund remaining unissued as from time to time shall be effectively
registered under the Securities Act of 1933, as amended (the "33
Act"), at prices determined as hereinafter provided and on the terms
hereinafter set forth, all subject to applicable Federal and State
laws and regulations and to the charter of the Fund.
2. The Underwriter shall present all orders received by it for
shares of capital stock of the Fund to the Fund by telegraphic or
written purchase orders and each such orders hall be subject to the
acceptance or rejection by the Fund in its sole discretion.
2.1 notwithstanding any other provision hereof, whenever in
the judgment of the President or a Vice President and the Treasurer or
Secretary of the Fund such action is warranted by market, economic or
political conditions or by abnormal circumstances of any kind, the
Fund may suspend the offer of shares in effect and may, without
liability under the provisions of this Agreement, decline to accept or
confirm any orders or make any sales of shares or capital stock under
this Agreement until such time as the Fund shall deem it advisable to
resume the offering of such shares, provided that as soon as
practicable after the taking of any such action a special meeting of
the Board of Directors shall be called to be held as soon as
practicable thereafter to determine whether or not such action shall
then continue to be effective, and the period during, or the
circumstance under, which such action shall continue or cease to be
effective. During any period during which the offer of shares shall
be suspended or the Fund shall decline to accept or confirm any such
orders or make any such sales, the Fund shall be under no obligation
to confirm or accept any such orders or make any such sale at any
price.
2.2 The Fund will use its best efforts to keep effectively
registered under the 33 Act for sale as herein contemplated such
shares of its capital stock as the Underwriter shall reasonably
request and as the Securities and Exchange Commission (the "SEC")
shall permit to be so registered.
3. Sales by the Underwriter shall be made as agent for the Fund
and all such sales be made to or though qualified dealers or others in
such manner, not inconsistent with the provisions hereof and the then
effective registration statement of the Fund under the 33 Act, (and
related prospectus), as the Underwriter may determine from time to time.
3.1 The Underwriter may form a group of underwriters to
participate with it in performing under this Agreement, and the
composition of such ground may be changed from time to time. If such
group shall be formed, the Underwriter shall remain the principal
underwriter, and be the representative of any other underwriters with
the terms and conditions of this Agreement. It is understood and
agreed that the Underwriter as principal underwriters will be
primarily responsible for the preparation and supply of sales
literature to all underwriters, be paid a fee by the other
underwriters for managing the underwriting group and providing sales
literature, payable out of the premium above net asset value at which
underwriters are permitted to sell shares of capital stock of the
Fund. The Fund reserves the right to engage and contract with other
principal underwriters for the sale and distribution of its shares.
3.2 The Underwriter will not make, or authorize any dealers
or others to make, (a) any short sales of shares or (b) any sales of
such shares to any officers, directors or partners of the Fund or of
the Underwriters or of any corporation or firm furnishing investment
advisory, managerial, or supervisory services to the Fund unless such
sales are at the price then available to the public and unless the
Underwriter shall be advised that the purchases are for investment and
that such purchasers will advise the Underwriter of any sales of
shares so purchased made less than two months after the date of
purchase and the Underwriter will promptly advise the Fund of all such
sales of shares, made less than two months after the purchase, or
which it is advised. The Underwriter shall order shares of capital
stock of the Fund from the Fund only to the extent that it shall have
received purchase orders therefor.
4. All shares of capital stock offered for sale or sold by the
Underwriter shall be so offered or sold at a price per share (the
"Offering Price") equal to the net asset value per share (determined
as authorized from time to time by the Board of Directors of the Fund
pursuant to its charter), plus a premium of not more than 4.75% of the
offering price thereof. If the Offering Price per share so determined
is not an exact multiple of one cent it shall be adjusted to the
nearest cent. In all cases the Offering Price per share for the size
of purchase shall be strictly in accordance with the Offering Price
described in the currently effective prospectus of the Fund.
4.1 For the purpose of determining the offering price, the
net asset value of any such shares shall be so determined in
accordance with the then current offering prospectus. The Fund, or
its authorized agent, will promptly furnish to the Underwriter a
statement of the Offering Price as often as such net asset value is
determined and such statement shall at the request of the Underwriter
show the basis of computation of the Offering Price.
4.2 Orders presented by the Underwriter for shares, if
accepted by the Fund, shall be accepted and confirmed by it or its
duly authorized agent at the Offering Price in effect at the time of
its receipt of such order at its principal office.
4.3 The Underwriter will not in any event (a) offer for
sale or sell shares of capital stock in excess of the number then
effectively registered under the 33 Act, and available for sale, or
(b) offer for sale or sell any shares in violation of any applicable
Federal or State law, rule or regulation.
4.4 The public offering price may be reduced within the
limits of the above-mentioned premium in the case of single sales (as
defined in the prospectus forming part of such registration statement
at the time when the same becomes effective) in amounts equal to or
exceeding $100,000 on such basis or bases as may from time to time be
satisfactory to the Fund and set forth in its then current offering
prospectus.
4.5 Out of the above-mentioned premium, the Underwriter
shall allow commissions or concessions to dealers and may allow them
to others in its discretion in such amounts as the Underwriter shall
determine from time to time; except as may be otherwise determined by
the Underwriter and the Fund from time to time, such commissions or
concessions shall be uniform to all dealers.
4.6 The Underwriter will require all dealers to conform to
the provisions hereof and the registration statement (and related
prospectus) at the time in effect under the 33 Act with respect to the
public offering price of the shares, and no dealer shall in any event
withhold the placing of orders for the shares so that dealers shall
profit as a result of such withholding by a change in the net asset
value of the shares from that used in determining the price to the
customer of such dealer or otherwise.
5. At or prior to the delivery by the Fund to or on the order
of the Underwriter of certificates for any share of capital stock, the
Underwriter will pay or cause to be paid to the Fund or to its order
an amount equal to the offering Price of such shares at which such
order has been confirmed, less the premium included therein as
aforesaid which shall constitute the entire sales load (including the
entire compensation to the Underwriter and of any dealer) other than
incidental issuance of sale expenses to be borne by the issuer.
Delivery of certificates shall be made to or on the order of the
Underwriter as promptly as practicable after confirmation of its order
thereof. Certificates shall be registered in such names and amounts
as the Underwriter may specify.
6. The Underwriter, except as hereinafter stated, will pay or
cause to be paid all expenses (other than expenses which one or more
dealers may bear pursuant to any agreement with the Underwriter)
incident to the sale and distribution of shares issued or sold
hereunder, including, without limiting the generality of the
foregoing, (i) all expenses of preparing, printing and distributing or
disseminating any sales literature, advertising and selling aids in
connection with the offering of the shares for sale (except that such
expenses shall not include expenses incurred by the Fund in connection
with the preparation, printing, and distribution of prospectuses and
of any report or other communication to stockholders to the extent
that such expenses are necessarily incurred to effect compliance by
the Fund with any Federal or State law or to comply with the Articles
of Incorporation or By-Laws of the Fund and director's fees and
expenses necessarily incurred by directors in attendance at directors'
meetings); (ii) expenses of advertising performed by the Underwriter
in connection with such offerings. No transfer taxes, if any, which
may be payable in connection with the issue or delivery of shares sold
as herein shall be borne by the Fund, and the Underwriter will
indemnify and hold the Fund harmless against liability for all such
transfer taxes.
7. The Fund will execute any and all documents and furnish any
and all information which may be reasonably necessary in connection
with the qualification of its shares of capital stock in such states
as the Underwriter may reasonably request (it being understood that
the Fund shall be required without its consent to qualify to do
business in any jurisdiction or to comply with any requirement which
in its opinion is unduly burdensome). The Underwriter, at its own
expense, will effect all qualifications as dealer or broker or
otherwise under all applicable state or Federal laws required in order
that the shares may be sold in as broad a territory as practicable.
8. The Fund will furnish to the Underwriter from time to time
such information with respect to its shares as the Underwriter may
reasonably request for use in connection with the sale of shares. The
Underwriter will not use or distribute or authorize the use,
distribution or dissemination by its dealers or others in connection
with such sale of any literature, advertising or selling aids in any
form or through any medium, written or oral, without prior written
specific approval thereof by the Corporation.
9. Nothing herein contained shall limit the right of the Fund,
in its absolute discretion, to issue or sell shares of its capital
stock for such other considerations (whether in connection with the
acquisition of assets or shares or securities of another corporation
or entity or with the merger or consolidation of any other corporation
into or with the Fund, or otherwise) as and to the extent permitted by
its charter and any applicable laws, or to issue or sell any such
shares directly to the shareholders of the Fund, upon such terms and
conditions and for such consideration, if any, as may be determined by
the Board of Directors, whether pursuant to the distribution of
subscription or purchase rights to such holders or by way of dividends
or otherwise.
10. At the request of the Fund, the Underwriter agrees to act as
agent for the Fund for the repurchase or redemption of shares of the
Fund at such prices as the Fund from time to time shall prescribe.
11. In selling or reacquiring shares, the Underwriter agrees to
conform to the requirements of all state and Federal laws relating to
such sale or reacquisition, as the case may be, and will indemnify and
hold the Fund harmless from any damage or expense on account of any
wrongful act by the Underwriter or any employee, representative or
agent of the Underwriter. The Underwriter will observe and be bound
by all the provisions of the charter of the Fund and any fundamental
policies adopted by the Fund pursuant to the Investment Company Act of
1940, as amended (the "40 Act"), notice of which has been given to the
Underwriter.
11.1 Neither the Underwriter, any dealer nor any other
person is authorized by the Fund to give any information or to make
any representation other than those contained (a) in the latest
effective registration statement (and related prospectus) filed with
the SEC under the 33 Act as such registration statement (and
prospectus) may be amended from time to time, or (b) in any statement
expressly authorized by the Fund for use in connection with any sale
or reacquisition of capital stock for the account of the Fund.
12.1 The Underwriter will:
12.1(a) not, directly or indirectly (i) declare or pay any
dividends or distributions (other than dividends payable in its
capital stock), or (ii) use any part of its assets or property for the
purchase, redemption or other retirement of shares of its capital
stock, or (iii) make any other distribution or transfer of assets to
its stockholders, unless in any such case, after giving effect to such
action, the excess of its assets over its liabilities shall be at
least $5,000;
12.2(b) at all times keep its assets (other than those,
such as office furniture and fixtures, equipment, records and the like
required for the operation of the business herein contemplated) in
cash or invested in readily marketable securities;
12.3(c) not incur any indebtedness on account of borrowing
or any other indebtedness except in the ordinary course of business in
the performance of its obligations under this Agreement.
12.4 Determination required hereunder shall be made by the
independent public accountants of the Fund or of the Underwriter in
accordance with the sound accounting practice at such reasonable
intervals as the Fund may from time to time require.
13. This Agreement shall continue in effect until such time as
there remains no unsold balance of shares of capital stock effectively
registered under the 33 Act; provided, however, that (a) this
Agreement shall continue in effect for a period more than two years
from the date hereof only so long as such continuance is specifically
approved at least annually by the Board of Directors or a majority of
the outstanding voting securities of the Fund, and (b) either party
hereto may terminate this Agreement on any date by giving the other
party at least six months prior written notice of such termination
specifying the date fixed therefor, and (c) without prejudice to any
other remedies, the Fund may terminate this Agreement at any time
immediately upon failure of fulfillment of any of the obligations of
the Underwriter hereunder or any of the conditions set forth in
paragraph 12 hereof.
13.1 This Agreement shall automatically terminate in the
event of its assignment by the Underwriter, the term "assignment"
having the meaning defined in Section 2(a)(4) of the 40 Act.
14. Any notice under this Agreement shall be in writing
addressed and delivered by mail, postage prepaid, to the party to whom
addressed at the address given below, or at such other address as such
party shall theretofore have designated (by notice given to the other
party as herein provided) in writing for the receipt of such notice:
To the Fund:
To the Underwriter:
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused
this Agreement to be executed on its behalf by an officer thereunto
duly authorized on the day and year first above written.
Dunwoody Brokerage
Penn Capital Funds, Inc.______ Services,Inc.
By:_/s/ James M. Beimel, Jr._ By: /s/ Robert T. Hopkins
Exhibit 8
CUSTODY AGREEMENT
Agreement made as of the 1st day of January, 1996, between Penn
Capital Funds, Inc. (the "Corporation"), a corporation organized under
the laws of the State of Pennsylvania and having its office at 7211
Saltsburg Rd, Pittsburgh acting for and on behalf of Asset Allocation
(the "Fund"), which is operated and maintained by the Corporation for
the benefit of the holders of shares of each Fund, and Star Bank, N.A.
(the "Custodian"), a national banking association having its principal
office and place of business at Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202, which Agreement provides for the furnishing of
custodian services to the Fund.
WITNESSETH:
that for and in consideration of the mutual promises hereinafter set
forth the Corporation, on behalf of the Fund, and the Custodian agree
as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following
meanings:
1. "Authorized Persons" shall be deemed to include the
Chairman, President, Secretary, Treasurer, Controller, and the Senior
Vice President, or any other person, whether or not any such person is
an officer or employee of the Corporation, duly authorized by the
Board of Directors of the Corporation to give Oral Instructions and
Written Instructions on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other Certificate as
may be received by the Custodian from time to time, subject in each
case to any limitations on the authority of such person as set forth
in Appendix A or any such Certificate.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees, provided the
Custodian has received a certified copy of a resolution of Board of
Directors of the Corporation specifically approving deposits in the
Book-Entry System.
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is signed on behalf of the Fund by an
officer of the Corporation and is actually received by the Custodian.
4. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission, its successor or successors and its nominee or nominees.
The term "Depository" shall further mean and include any other person
or clearing agency authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and its
nominee or nominees, provided that the Custodian has received a
certified copy of a resolution of the Board of Directors of the
Corporation specifically approving such other person or clearing
agency as a depository.
5. "Dividend and Transfer Agent" shall mean the dividend and
transfer agent active, from time to time, in such capacity pursuant to
a written agreement with the Fund, changes in which the Corporation
shall immediately report to the Custodian in writing.
6. "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to principal
and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including
certificates of deposit, bankers' acceptances, repurchase and reserve
repurchase agreements with respect to the same) and bank time deposits
of domestic banks that are members of Federal Deposit Insurance
Corporation, and short-term corporate obligations where the purchase
and sale of such securities normally require settlement in federal
funds or their equivalent on the same day as such purchase or sale.
7. "Officers" shall be deemed to include the Chairman, the
President, the Secretary, the Treasurer, the Controller, the Senior
Vice President of the Corporation listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by
the Custodian from time to time.
8. "Oral Instructions" shall mean oral instructions actually
received by the Custodian from an Authorized Person (or from a person
which the Custodian reasonably believes in good faith to be an
Authorized Person) and confirmed by Written Instructions from
Authorized Persons in such manner so that such Written Instructions
are received by the Custodian on the next business day.
9. "Prospectus" shall mean the Fund's currently effective
prospectus and statement of additional information, as filed with and
declared effective by the Securities and Exchange Commission.
10. "Security or Securities" shall mean Money Market Securities,
common or preferred stocks, options, bonds, debentures, corporate debt
securities, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same, or evidencing
or representing any other rights or interest therein, or any property
or assets.
11. "Written Instructions" shall mean communication actually
received by the Custodian from one Authorized Person or from one
person which the Custodian reasonably believes in good faith to be an
Authorized Person in writing or by telex or any other such system
whereby the receiver of such communication is able to verify by codes
or otherwise with a reasonable degree of certainty the authenticity of
the senders of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Corporation, acting for and on behalf of the Fund,
hereby constitutes and appoints the Custodian as custodian of all the
Securities and monies at any time owned by the Fund during the period
of this Agreement (the "Fund Assets").
2. The Custodian hereby accepts appointment as such Custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
DOCUMENTS TO BE FURNISHED BY THE CORPORATION
The Corporation hereby agrees to furnish to the Custodian the
following documents:
1. A copy of its Articles of Incorporation certified by its
Secretary.
2. A copy of its By-Laws certified by its Secretary.
3. A copy of the resolution of its Board of Directors
appointing the Custodian certified by its Secretary.
4. A copy of the most recent Prospectus of the Fund.
5. A Certificate of the President and Secretary setting forth
the names and signatures of the present officers of the Corporation.
ARTICLE IV
CUSTODY OF CASH AND SECURITIES
1. The Corporation will deliver or cause to be delivered to the
Custodian all Fund Assets, including cash received for the issuance of
its shares, at any time during the period of this Agreement. The
Custodian will not be responsible for such Fund Assets until actually
received by it. Upon such receipt, the Custodian shall hold in
safekeeping and physically segregate at all times from the property of
any other persons, firms or corporations, all Fund Assets received by
it from or for the account of the Fund. The Custodian will be
entitled to reverse any credits made on the Fund's behalf where such
credits have been previously made and monies are not finally collected
within 90 days of the making of such credits. The Custodian will be
entitled to reverse any credits made on the Fund's behalf where such
credits have been previously made and monies are not finally collected
within 90 days of the making of such credits. The Custodian is hereby
authorized by the Corporation, acting on behalf of the Fund, to
actually deposit any Fund Assets in the Book-Entry System or in a
Depository, provided, however, that the Custodian shall always be
accountable to the Corporation for the Fund Assets so deposited. Fund
Assets deposited in the Book-Entry System or the Depository will be
represented in accounts which include only assets held by the
Custodian for customers, including but not limited to accounts in
which the Custodian acts in a fiduciary or representative capacity.
2. The Custodian shall credit to a separate account or accounts
in the name of the Fund all monies received by it for the account of
the Fund, and shall disburse the same only:
(a) In payment for Securities purchased for the account of
the Fund, as provided in Article V;
(b) In payment of dividends or distributions, as provided
in Article VI hereof;
(c) In payment of original issue or other taxes, as
provided in Article VII hereof;
(d) In payment for shares of the Fund redeemed by it, as
provided in Article VII hereof;
(e) Pursuant to Certificates (i) directing payment and
setting forth the name and address of the person to whom the payment
is to be made, the amount of such payment and the purpose for which
payment is to be made (the Custodian not being required to question
such direction) or (ii) if reserve requirements are established for
the Fund by law or by valid regulation, directing the Custodian to
deposit a specified amount of collected funds in the form of U.S.
dollars at a specified Federal Reserve Bank and stating the purpose of
such deposit; or
(f) In reimbursement of the expenses and liabilities of the
Custodian, as provided in paragraph 10 of Article IX hereof.
3. Promptly after the close of business on each day the fund is
open and valuing its portfolio. The Custodian shall furnish the
Corporation with a detailed statement of monies held for the Fund
under this Agreement and with confirmations and a summary of all
transfers to or from the account of the Fund during said day. Where
Securities are transferred to the account of the Fund without physical
delivery, the Custodian shall also identify as belonging to the Fund a
quantity of securities in a fungible bulk of securities registered in
the name of the Custodian (or its nominee) or shown on the Custodian's
account on the books of the Book-Entry System or the Depository. At
least monthly and from time to time, the Custodian shall furnish the
Corporation with a detailed statement of the Securities held for the
fund under this Agreement.
4. All Securities held for the Fund, which are issued or
issuable only in bearer form, except such Securities as are held in
the Book-Entry System, shall be held by the Custodian in that form;
all other Securities held for the Fund may be registered in the name
of the Fund, in the name of any duly appointed registered nominee of
the Custodian as the Custodian may from time to time determine, or in
the name of the Book-Entry System or the Depository or their successor
or successors, or their nominee or nominees. The Corporation agrees
to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of the
Book-Entry System or the Depository, any Securities which it may hold
for the account of the Fund and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities which are not held in the Book-Entry System by the
Depository or a Sub-Custodian in a separate account or accounts in the
name of the Fund segregated at all times from those of any other fund
maintained and operated by the Corporation and from those of any other
person or persons.
5. Unless otherwise instructed to the contrary by a
Certificate, the Custodian shall with respect to all Securities held
for the Fund in accordance with this Agreement:
(a) Collect all income due or payable to the Fund with
respect to the Fund Assets;
(b) Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed,
or retired, or otherwise become payable;
(c) Surrender Securities in temporary form for
definitive Securities;
(d) Execute, as Custodian, any necessary declarations
or certificates of ownership under the Federal income tax
laws or the laws or regulations of any other taxing
authority, including any foreign taxing authority, now or
hereafter in effect; and
(e) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited,
for the account of the Fund all rights and similar
securities issued with respect to any Securities held by the
Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian directly or through the use of the Book-Entry System or the
Depository shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the
authority of the Fund as owner of any Securities may be
exercised;
(b) Deliver any Securities held for the Fund in
exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of
any corporation, or the exercise of any conversion
privilege;
(c) Deliver any Securities held for the account of the
Fund to any protective committee, reorganization committee
or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale
of assets of any corporation, and receive and hold under the
terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery; and
(d) Make such transfers or exchanges of the assets of
the Fund and take such other steps as shall be stated in
said Certificate to be for the purpose of effectuating any
duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund.
7. The Custodian shall promptly deliver to the Corporation all
notices, proxy material and executed but unvoted proxies pertaining to
shareholder meetings of Securities held by the Fund. The Custodian
shall not vote or authorize the voting of any Securities or give any
consent, waiver, or approval with respect thereto unless so directed
by a Certificate or Written Instruction.
8. The Custodian shall promptly deliver to the Corporation all
material received by the Custodian and pertaining to Securities held
by the Fund with respect to tender or exchange offers, calls for
redemption or purchase, expiration of rights, name changes, stock
splits and stock dividends, or any other activity involving ownership
rights in such Securities.
ARTICLE V
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
1. Promptly after each purchase of Securities by the Fund, the
Corporation shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a
Certificate or Written Instructions, (ii) with respect to each
purchase of Money Market Securities, Written Instructions, a
Certificate or Oral Instructions, specifying with respect to each such
purchase: (a) the name of the issuer and the title of the Securities,
(b) the principal amount purchased and accrued interest, if any, (c)
the date of purchase and settlement, (d) the purchase price per unit,
(e) the total amount payable upon such purchase and (f) the name of
the person from whom or the broker through whom the purchase was made.
The Custodian shall upon receipt of Securities purchased by or for the
Fund, pay out of the monies held for the account of the Fund the total
amount payable to the person from whom or the broker through whom the
purchase was made, provided that the same conforms to the total amount
payable as set forth in such Certificate, Written Instruction or Oral
Instructions.
2. Promptly after each sale of Securities by the Corporation
for the account of the Fund, the Corporation shall deliver to the
Custodian (i) with respect to each sale of Securities which are not
Money Market Securities, a Certificate or Written Instructions, and
(ii) with respect to each sale of Money Market Securities, Written
Instructions, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the name of the issuer and the title of
the Security, (b) the principal amount sold, and accrued interest, if
any, (c) the date of sale, (d) the sale price per unit, (e) the total
amount payable to the Fund upon such sale and (f) the name of the
broker through whom or the person to whom the sale was made. The
Corporation agrees that it will institute no short sales of any
securities, convertible or other. The Custodian shall deliver the
Securities upon receipt of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable
as set forth in such Certificate, Written Instructions or Oral
Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
3. Promptly after the time as of which the Corporation, on
behalf of the Fund, either:
(a) writes an option on Securities or writes a covered
put option in respect of a Security, or
(b) notifies the Custodian that its obligations in
respect of any put or call option, as described in the
Fund's Prospectus, require that the Fund deposit Securities
or additional Securities with the Custodian, specifying the
type and value of Securities required to be so deposited, or
(c) notifies the Custodian that its obligations in
respect of any other Security, as descried in the Fund's
Prospectus, require that the Fund deposit Securities or
additional Securities with the Custodian, specifying the
type and value of Securities required to be so deposited,
the Custodian will cause to be segregated or identified as
deposited, pursuant to the Fund's obligations as set forth
in the Prospectus, Securities of such kinds and having such
aggregate values as are required to meet the Fund's
obligations in respect thereof.
The Corporation will provide to the Custodian, as of the end
of each trading day, the market value of the Fund's option liability
and the market value of its portfolio of common stocks.
4. On contractual settlement date, the amount of the Fund will
be charged for all purchases settling on that day, regardless of
whether or not delivery is made. On contractual settlement date, sale
proceeds will likewise be credited to the account of the Fund
irrespective of delivery.
In the case of "sale fails," the Custodian may request the
assistant of the Fund in making delivery of the failed Security.
ARTICLE VI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Corporation shall furnish to the Custodian a copy of the
resolution of the Board of Directors, certified by the Secretary,
either (i) setting forth the date of the declaration of any dividend
or distribution in respect of shares of the Fund, the date of payment
thereof, the record date as of which Fund shareholders entitled to
payment shall be determined, the amount payable per share to Fund
shareholders of record as of that date and the total amount to be paid
by the Dividend and Transfer Agent of the Fund on the payment date, or
(ii) authorizing the declaration of dividends and distributions in
respect of shares of the Fund on a daily basis and authorizing the
Custodian to rely on Written Instructions or a Certificate setting
forth the date of the declaration of any such dividend or
distribution, the date of payment thereof, the record date as of which
Fund shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date and
the total amount to be paid by the Dividend and Transfer Agent on the
payment date.
2. Upon the payment date specified in such resolution, Written
Instructions or Certificate, as the case may be, the Custodian shall
arrange for such payments to be made by the Dividend and Transfer
Agent out of monies held for the account of the Fund.
ARTICLE VI
SALE AND REDEMPTION OF SHARES OF THE FUND
1. The Custodian shall receive and credit to the account of the
Fund such payments for shares of the Fund issued or sold from time to
time as are received from the distributor for the Fund's shares, from
the Dividend and Transfer Agent of the Fund, or from the Corporation.
2. Upon receipt of Written Instructions, the Custodian shall
arrange for payment of redemption proceeds to be made by the Dividend
and Transfer Agent out of the monies held for the account of the Fund
in the total amount specified in the Written Instructions.
3. Notwithstanding the above provisions regarding the
redemption of any shares of the Fund, whenever shares of the Fund are
redeemed pursuant to any check redemption privilege which may from
time to time be offered by the Fund, the Custodian, unless otherwise
subsequently instructed by Written Instructions shall, upon receipt of
any Written Instructions setting forth that the redemption is in good
form for redemption in accordance with the check redemption procedure,
honor the check presented as part of such check redemption privilege
out of the money held in the account of the Fund for such purposes.
ARTICLE VIII
INDEBTEDNESS
In connection with any borrowings, the Corporation, on behalf of
the Fund, will cause to be delivered to the Custodian by a bank or
broker (including the Custodian, if the borrowing is from the
Custodian), requiring Securities as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank
or broker setting forth the amount which such bank or broker will loan
to the Fund against delivery of a stated amount of collateral. The
Corporation shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the name of the
bank or broker, (b) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached promissory
note, duly endorsed by the Corporation, acting on behalf of the Fund,
or other loan agreement, (c) the date and time, if known, on which the
loan is to be entered into, (d) the date on which the loan becomes due
and payable, (e) the total amount payable to the Fund on the borrowing
date, (f) the market value of Securities collateralizing the loan,
including the name of the issuer, the title and the number of shares
or the principal amount of any particular Securities and (g) a
statement that such loan is in conformance with the Investment Company
Act of 1940 and the Fund's then current Prospectus. The Custodian
shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against
delivery by the lending bank or broker of the total amount of the loan
payable provided that the same conforms to the total amount payable as
set forth in the Certificate. The Custodian may, at the option of the
lending bank or broker, keep such collateral in its possession, but
such collateral shall be subject to all rights therein given the
lending bank or broker, by virtue of any promissory note or loan
agreement. The Custodian shall deliver in the manner directed by the
Corporation from time to time such Securities as additional collateral
as may be specified in a Certificate to collateralize further any
transaction described in this paragraph. The Corporation shall cause
all Securities released from collateral status to be returned directly
to the Custodian and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the event that
the Corporation fails to specify in a Certificate or Written
Instructions the name of the issuer, the title and number of shares or
the principal amount of any particular Securities to be delivered as
collateral by the Custodian, the Custodian shall not be under any
obligation to deliver any Securities. The Custodian may require such
reasonable conditions with respect to such collateral and its dealings
with third-party lenders as it may deem appropriate.
ARTICLE IX
CONCERNING THE CUSTODIAN
1. Except as otherwise provided herein, the Custodian
shall not be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, except for
any such loss or damage arising out of its own negligence or willful
misconduct. The Corporation, on behalf of the Fund and only from Fund
Assets (or insurance purchased by the Corporation with respect to its
liabilities on behalf of the Fund hereunder), shall defend, indemnify
and hold harmless the Custodian and its directors, officers, employees
and agents with respect to any loss, claim, liability or cost
(including reasonable attorneys' fees) arising or alleged to arise
from or relating to the Corporation's duties with respect to the Fund
hereunder or any other action or inaction of the Corporation or its
Directors, officers, employees or agents as to the Fund, except such
as may arise from the negligent action, omission or willful misconduct
of the Custodian, its directors, officers, employees or agents. The
Custodian shall defend, indemnify and hold harmless the Corporation
and its Directors, officers, employees or agents with respect to any
loss, claim, liability or cost (including reasonable attorneys' fees)
arising or alleged to arise from or relating to the Custodian's duties
with respect to the Fund hereunder or any other action or inaction of
the Custodian or its directors, officers, employees, agents, nominees
or Sub-Custodians as to the Fund, except such as may arise from the
negligent action, omission or willful misconduct of the Corporation,
its Directors, officers, employees or agents. The Custodian may, with
respect to questions of law apply for and obtain the advice and
opinion of counsel to the Corporation at the expense of the Fund, or
of its own counsel at its own expense, and shall be fully protected
with respect to anything done or omitted by it in good faith in
conformity with the advice or opinion of counsel to the Corporation,
and shall be similarly protected with respect to anything done or
omitted by it in good faith in conformity with advice or opinion of
its counsel, unless counsel to the Fund shall, within a reasonable
time after being notified of legal advice received by the Custodian,
having a differing interpretation of such question of law. The
Custodian shall be liable to the Corporation for any proximate loss or
damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, misfeasance or
misconduct on the part of the Custodian or any of its employees,
agents, nominees or Sub-Custodians but not for any special,
incidental, consequential, or punitive damages; provided, however,
that nothing contained herein shall preclude recovery by the
Corporation, on behalf of the Fund, of principal and of interest to
the date of recovery on, Securities incorrectly omitted from the
Fund's account or penalties imposed on the Corporation, in connection
with the Fund, for any failures to deliver Securities.
In any case in which one party hereto may be asked to indemnify
the other or hold the other harmless the party from whom
indemnification is sought (the "Indemnifying Party") shall be advised
of all pertinent facts concerning the situation in question, and the
party claiming a right to indemnification (the "Indemnified Party")
will use reasonable care to identify and notify the Indemnifying Party
promptly concerning any situation which presents or appears to present
a claim for indemnification against the Indemnifying Party. The
Indemnifying Party shall have the option to defend the Indemnified
Party against any claim which may be the subject of the
indemnification, and in the event the Indemnifying Party so elects,
such defense shall be conducted by counsel chosen by the Indemnifying
Party and satisfactory to the Indemnified Party and the Indemnifying
Party will so notify the Indemnified Party and thereupon such
Indemnifying Party shall take over the complete defense of the claim
and the Indemnifying Party shall sustain no further legal or other
expenses in such situation for which indemnification has been sought
under this paragraph, except the expenses of any additional counsel
retained by the Indemnified Party. In no case shall any party
claiming the right to indemnification confess any claim or make any
compromise in any case in which the other party has been asked to
indemnify such party (unless such confession or compromise is made
with such other party's prior written consent).
The obligations of the parties hereto under this paragraph shall
survive the termination of this Agreement.
2. Without limiting the generality of the foregoing, the
Custodian, acting in the capacity of Custodian hereunder, shall be
under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities
purchased by or for the account of the Fund, the legality of
the purchase thereof, or the propriety of the amount paid
therefor;
(b) The legality of the sale of any Securities by or
for the account of the Fund, or the propriety of the amount
for which the same are sold;
(c) The legality of the issuer or sale of any shares
of the Fund, or the sufficiency of the amount to be received
therefor;
(d) The legality of the redemption of any shares of
the Fund, or the propriety of the amount to be paid
therefor;
(e) The legality of the declaration or payment of any
dividend by the Corporation in respect of shares of the
Fund;
(f) The legality of any borrowing by the Corporation,
on behalf of the Fund, using Securities as collateral;
(g) The sufficiency of any deposit made pursuant to a
Certificate described in clause (ii) of paragraph 2(e) of
Article IV hereof.
3. The Custodian shall not be liable for any money or collected
funds in U.S. dollars deposited in a Federal Reserve Bank in
accordance with a Certificate described in clause (ii) of paragraph
2(e) of Article IV hereof, nor be liable for or considered to be the
Custodian of any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it on
behalf of the Fund until the Custodian actually receives and collects
such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or
Depository.
4. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from
the Dividend and Transfer Agent of the Fund nor to take any action to
effect payment or distribution by the Dividend and Transfer Agent of
the Fund of any amount paid by the Custodian to the dividend and
Transfer Agent of the Fund in accordance with this Agreement.
5. Income due or payable to the Fund with respect to Fund
Assets will be credited to the account of the Fund as follows:
(a) dividends will be credited on the first business
day following payable date irrespective of collection.
(b) Interest on fixed rate municipal bonds and debt
securities issued or guaranteed as to principal and/or
interest by the government of the United States or agencies
or instrumentalities thereof (excluding securities issued by
the Government National Mortgage Association) will be
credited on payable date irrespective of collection.
(c) Interest on fixed rate corporate debt securities
will be credited on the first business day following payable
date irrespective of collection.
(d) Interest on variable and floating rate debt
securities and debt securities issued by the Government
National Mortgage Association will be credited upon the
Custodian's receipt of funds.
(e) Proceeds from options will be credited upon the
Custodian's receipt of funds.
6. Notwithstanding paragraph 5 of this Article IX, the
Custodian shall not be under any duty or obligation to take action to
effect collection of any amount, if the Securities upon which such
amount is payable are in default, or if payment is refused after due
demand or presentation, unless and until (i) it shall be directed to
take such action by a Certificate and (ii) it shall be assured to its
satisfaction of reimbursement of its costs and expenses in connection
with any such action or, at the Custodian's option, prepayment.
7. The Custodian may appoint one or more financial or banking
institutions, as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, but not limited to, banking institutions
located in foreign countries, of Securities and monies at any time
owned by the Fund, upon terms and conditions approved in a
Certificate. Current Depository(s) and Sub-Custodian(s) are noted in
Appendix B. The Custodian shall not be relieved of any obligations or
liability under this Agreement in connection with the appointment or
activities of such Depositories or Sub-Custodians.
8. The Custodian shall not be under any duty or obligation to
ascertain whether any securities at any time delivered to or held by
it for the account of the Fund are such as properly may be held by the
Fund under the provisions of the Articles of Incorporation and the
Corporation's By-Laws.
9. The Custodian shall treat all records and other information
relating to the Corporation, the Fund and the Fund Assets as
confidential and shall not disclose any such records or information to
any other person unless (a) the Corporation shall have consented
thereto in writing or (b) such disclosure is compelled by law.
10. The Custodian shall be entitled to receive and the
Corporation agrees to pay to the Custodian, for the Fund's account
from Fund Assets only, such compensation as shall be determined
pursuant to Appendix C attached hereto, or as shall be determined
pursuant to amendments to such Appendix approved by the Custodian and
the Corporation, on behalf of the Fund. The Custodian shall be
entitled to charge against any money held by it for the account of the
Fund the amount of any loss, damage, liability, or expense, including
counsel fees, for which it shall be entitled to reimbursement under
the provisions of this Agreement as determined by agreement of the
Custodian and the Corporation or by the final order of any court or
arbitrator having jurisdiction and as to which all rights of appeal
shall have expired. The expenses which the Custodian may charge
against the account of the Fund include, but are not limited to, the
expenses of Sub-Custodians incurred in settling transactions involving
the purchase and sale of Securities of the Fund.
11. The Custodian shall be entitled to rely upon any
Certificate. The Custodian shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by the
Custodian pursuant to Article IV or V hereof. The Corporation agrees
to forward to the Custodian Written Instructions from Authorized
Persons confirming Oral Instructions in such manner so that such
Written Instructions are received by the Custodian, whether by hand
delivery, telex or otherwise, on the first business day following the
day on which such Oral Instructions are given to the Custodian. The
Corporation agrees that the fact that such confirming instructions are
not received by the Custodian shall in no way affect the validity of
the transactions or enforceability of the transactions hereby
authorized by the Corporation. The Corporation agrees that the
Custodian shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions.
12. The Custodian will (a) set up and maintain proper books of
account and complete records of all transactions in the accounts
maintained by the Custodian hereunder in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31 a-1 and 31 a-2
thereunder, and (b) preserve for the periods prescribed by applicable
Federal statute or regulation all records required to be so preserved.
The books and records of the Custodian shall be open to inspection and
audit at reasonable times and with prior notice by Officers and
auditors employed by the Corporation.
13. The Custodian and its Sub-Custodians shall promptly send to
the Corporation, for the account of the Fund, any report received on
the systems of internal accounting control of the Book-Entry System or
the Depository and with such reports on their own systems of internal
accounting control as the Corporation may reasonably request from time
to time.
14. The Custodian performs only the services of a custodian and
shall have no responsibility for the management, investment or
reinvestment of the Securities from time to time owned by the Fund.
The Custodian is not a selling agent for shares of the Fund and
performance of its duties as a custodial agent shall not be deemed to
be a recommendation to the Custodian's depositors or others of shares
of the Fund as an investment.
ARTICLE X
TERMINATION
1. Either of the parties hereto may terminate this Agreement
for any reason by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than
ninety (90) days after the date of giving of such notice. If such
notice is given by the Corporation, on behalf of the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors,
certified by the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or corporation company
having not less than $2,000,000 aggregate capital, surplus and
undivided profits. In the event such notice is given by the
Custodian, the Corporation shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of its Board of
Directors, certified by the Secretary, designating a successor
custodian or custodians to act on behalf of the Fund. In the absence
of such designation by the Corporation, the Custodian may designate a
successor custodian which shall be a bank or trust company having not
less than $2,000,000 aggregate capital surplus, and undivided profits.
Upon the date set forth in such notice this Agreement shall terminate,
and the Custodian provided that it has received a notice of acceptance
by the successor custodian, shall deliver, on the date, directly to
the successor custodian all Securities and monies then owned by the
Fund and held by it as Custodian. Upon termination of this Agreement,
the Corporation shall pay to the Custodian on behalf of the Fund such
compensation as may be due as of the date of such termination. The
Corporation agrees on behalf of the Fund that the Custodian shall be
reimbursed for its reasonable costs in connection with the termination
of this Agreement.
2. If a successor custodian is not designated by the
Corporation, on behalf of the Fund, or by the Custodian in accordance
with the preceding paragraph, or the designated successor cannot or
will not serve, the Corporation shall upon the delivery by the
Custodian to the Corporation of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the
Corporation) and monies then owned by the Fund, other than monies
deposited with the Federal Reserve Bank pursuant to a Certificate
described in clause (ii) of paragraph 2(e) of Article IV, be deemed to
be the custodian for the Fund, and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the
Book Entry System which cannot be delivered to the Corporation to hold
such Securities hereunder in accordance with this Agreement.
ARTICLE X
MISCELLANEOUS
1. Appendix A sets forth the names and the signatures of all
Authorized Persons. The Corporation agrees to furnish to the
Custodian, on behalf of the Fund, a new Appendix A in form similar to
the attached Appendix A, if any present Authorized Person ceases to be
an Authorized Person or if any other or additional Authorized Persons
are elected or appointed. Until such new Appendix A shall be
received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered
Appendix A.
2. No recourse under any obligation of this Agreement or for
any claim based thereon shall be had against any organizer,
shareholder, Officer, Director, past, present or future as such, of
the Corporation or of any predecessor or successor, either directly or
through the Corporation or any such predecessor or successor, whether
by virtue of any constitution, statute or rule of law or equity, or be
the enforcement of any assessment or penalty or otherwise; it being
expressly agreed and understood that this Agreement and the
obligations thereunder are enforceable solely against Fund Assets, and
that no such personal liability whatever shall attach to, or is or
shall be incurred by, the organizers, shareholders, Officers,
Directors of the Corporation or of any predecessor or successor, or
any of them as such, because of the obligations contained in this
Agreement or implied therefrom and that any and all such liability is
hereby expressly waived and released by the Custodian as a condition
of, and as a consideration for, the execution of this Agreement.
3. The obligations set forth in this Agreement as having been
made by the Corporation have been made by the Board of Directors,
acting as such Directors for and on behalf of the Fund, pursuant to
the authority vested in them under the laws of the State of
________________, the Articles of Incorporation and the By-Laws of the
Corporation. This Agreement has been executed by Officers of the
Corporation as officers, and not individually, and the obligations
contained herein are not binding upon any of the Directors, Officers,
agents or holders of shares, personally, but bind only the Corporation
and them only to the extent of Fund Assets.
4. Such provisions of the Prospectus of the Fund and any other
documents (including advertising material) specifically mentioning the
Custodian (other than merely by name and address) shall be reviewed
with the Custodian by the Corporation.
5. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the custodian and mailed or
delivered to it at its offices at Star Bank Center, 425 Walnut Street,
M. L. 6118, Cincinnati, Ohio 45202, attention Mutual Fund Custody
Department, or at such other place as the Custodian may from time to
time designate in writing.
6. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Corporation shall be
sufficiently given when delivered to the Corporation or on the second
business day following the time such notice is deposited in the U.S.
mail postage prepaid and addressed to the Corporation at its office at
_______________, or at such other place as the Corporation may from
time to time designate in writing.
7. This Agreement with the exception of Appendices A & B may
not be amended or modified in any manner except by a written agreement
executed by both parties with the same formality as this Agreement,
and authorized and approved by a resolution of the Board of Directors.
8. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the
Corporation or by the Custodian, and no attempted assignment by the
Corporation or the Custodian shall be effective without the written
consent of the other party hereto.
9. This Agreement shall be construed in accordance with the
laws of the State of Ohio.
10. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective Officers, thereunto duly authorized
as of the day and year first above written.
ATTEST: Penn Capital Funds, Inc.
______________________________
______________________________ By: /s/ James M. Beimel, Jr.
ATTEST: STAR BANK, N.A.
______________________________ By:___________________________
APPENDIX A
Board of Directors
Authorized Person Specimen Signatures
Chairman: _________________ ____________________
President: _________________ ____________________
Secretary: _________________ ____________________
Treasurer: _________________ ____________________
Controller: _________________ ____________________
Adviser Employees: _________________ ____________________
_________________ ____________________
_________________ ____________________
APPENDIX B
The following Depository(s) and Sub-Custodian(s) are employed
currently by Star Bank, N.A. for securities processing and control . .
.
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
APPENDIX C
Star Bank, N.A.
Proporsed Custody Fee Schedule
for Penn Capital Funds
Star Bank, N.A., as Custodian, will receive monthly compensation for
services according to the terms of the following Schedule:
1. Portfolio Transaction Fees:
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserev $9.00
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA prin/Int Paydown, GNMA Sales $8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $5.00
A transaction is a purchase/sale of a security, free receipt/free
delivery (excludes initial conversion), maturity, tender or exchange.
2. Market Value Fee:
Based upon an annual rate of: Million
.0003 (3 Basis Points) on Firest $20
.0002 (2 Basis Points) on Next $20
.00015 (1.5 Basis Points) on Balance
3. Monthly Minimum Fee-Per Fund $400.00
4. Out-of-Pocket Expenses
The only out-of-pocket expenses charged to your account will be
shipping fees and transfer fees.
5. IRA Documents
Per Shareholder/year to hold each IRA Document $8.00
*Star Bank agrees for a period of one year from the date of the
custody conversion to Star Bank to reduce the custody fee from $400.00
per fund per month to $300.00 for the first fund and $200.00 for the
second fund. On the one year anniversary, the minimum annual fees
will revert to the standard published fee schedule in effect at that
time.<PAGE>
Appendix C
Star Bank
Proposed Cash Management Fee Schedule For
Penn Capital Funds
Services Unit Cost($) Monthly Cost ($)
D.D.A. Account Maintenance .37 12.00
Deposits .105
Deposited Items .159
Balance Reporting - P.C. Access 50.00
ACH Transaction .095
ACH Monthly Maintenance 40.00
Controlled Disbursement (1st account) 110.00
Each additional account 25.00
Deposited Items Returned 5.50
International Items Returned 10.00
NSF Returned Checks 20.00
Stop Payments 20.00
Data Transmission per account 110.00
Data Capture* .10
Drafts cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
- with copy of check .32
- without copy of check .26
Wires Incoming
- Domestic
- Repetitive 10.00
- Non-Repetitive 10.00
- International
- Repetitive 35.00
- Non-Repetitive 40.00
PC-Initiated Wires:
- Domestic
- Repetitive 9.00
- Non-Repetitive 9.00
- International
- Repetitive 25.00
- Non-Repetitive 25.00
__________________
*** Uncollected Charge Star Bank Prime Rate as of first of month
plus 4%
* Price can vary depending upon what information needs to be
captured
** With the use of lockbox, the collected balance in the demand
deposit account will be significantly increased and therefore
earnings to offset cash management service fees will be maximized
*** Fees for uncollected balances are figured on the monthly average
of all combined accounts.
**** Other available cash management services are priced separately.
EXHIBIT 9(A)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
PENN CAPITAL FUNDS, INC.
AND
AMERICAN DATA SERVICES, INC.
INDEX
1. TERMS OF APPOINTMENT; DUTIES OF ADS . . . . . . . . . . . . . . . . . . 1
2. FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. REPRESENTATIONS AND WARRANTIES OF ADS . . . . . . . . . . . . . . . . . 3
4. REPRESENTATIONS AND WARRANTIES OF THE FUND. . . . . . . . . . . . . . . 4
5. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. COVENANTS OF THE FUND AND ADS . . . . . . . . . . . . . . . . . . . . . 6
7. TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 7
8. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
10. NEW YORK LAWS TO APPLY. . . . . . . . . . . . . . . . . . . . . . . . . 7
11. MERGER OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FEE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(A) ACCOUNT MAINTENANCE CHARGE. . . . . . . . . . . . . . . . . . . . . . . 9
(B) IRA PLAN FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
FEE INCREASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
(C) EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
(D) SPECIAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
(E) SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
(F) CONVERSION CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . .11
SCHEDULE A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT MADE THE 1ST DAY OF NOVEMBER, 1995, BY AND BETWEEN PENN
CAPITAL FUNDS, INC. HAVING ITS PRINCIPAL OFFICE AND PLACE OF BUSINESS
AT 7211 SALTSBURG ROAD, PITTSBURGH, PENNSYLVANIA 15235 (THE "FUND"),
AND AMERICAN DATA SERVICES, INC., A NEW YORK CORPORATION HAVING ITS
PRINCIPAL OFFICE AND PLACE OF BUSINESS AT 24 WEST CARVER STREET,
HUNTINGTON, NEW YORK 11743 ("ADS").
WHEREAS, THE FUND DESIRES TO APPOINT ADS AS ITS TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND AGENT IN CONNECTION WITH CERTAIN OTHER
ACTIVITIES, AND ADS DESIRES TO ACCEPT SUCH APPOINTMENT;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN
CONTAINED, THE PARTIES HERETO AGREE AS FOLLOWS:
1. TERMS OF APPOINTMENT; DUTIES OF ADS
1.01 SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS
AGREEMENT, THE FUND HEREBY EMPLOYS AND APPOINTS ADS TO ACT AS, AND ADS
AGREES TO ACT AS ITS TRANSFER AGENT FOR THE FUND'S AUTHORIZED AND
ISSUED SHARES OF ITS COMMON STOCK, ("SHARES"), DIVIDEND DISBURSING
AGENT AND AGENT IN CONNECTION WITH ANY ACCUMULATION, OPEN-ACCOUNT OR
SIMILAR PLANS PROVIDED TO THE SHAREHOLDERS OF THE FUND
("SHAREHOLDERS") SET OUT IN THE CURRENTLY EFFECTIVE PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION ("PROSPECTUS") OF THE FUND.
1.02 ADS AGREES THAT IT WILL PERFORM THE FOLLOWING SERVICES:
(A) IN ACCORDANCE WITH PROCEDURES ESTABLISHED FROM TIME TO
TIME BY AGREEMENT BETWEEN THE FUND AND ADS, ADS SHALL:
(I) RECEIVE FOR ACCEPTANCE, ORDERS FOR THE PURCHASE OF SHARES, AND
PROMPTLY DELIVER PAYMENT AND APPROPRIATE DOCUMENTATION THEREFORE TO
THE CUSTODIAN OF THE FUND AUTHORIZED BY THE BOARD OF DIRECTORS OF THE
FUND (THE "CUSTODIAN");
(II) PURSUANT TO PURCHASE ORDERS, ISSUE THE APPROPRIATE NUMBER OF
SHARES AND HOLD SUCH SHARES IN THE APPROPRIATE SHAREHOLDER ACCOUNT;
(III) RECEIVE FOR ACCEPTANCE REDEMPTION REQUESTS AND REDEMPTION
DIRECTIONS AND DELIVER THE APPROPRIATE DOCUMENTATION THEREFORE TO THE
CUSTODIAN;
(IV) AT THE APPROPRIATE TIME AS AND WHEN IT RECEIVES MONEYS PAID TO IT
BY THE CUSTODIAN WITH RESPECT TO ANY REDEMPTION, PAY OVER OR CAUSE TO
BE PAID OVER IN THE APPROPRIATE MANNER SUCH MONEYS AS INSTRUCTED BY
THE REDEEMING SHAREHOLDERS;
(V) EFFECT TRANSFERS OF SHARES BY THE REGISTERED OWNERS THEREOF UPON
RECEIPT OF APPROPRIATE INSTRUCTIONS;
(VI) PREPARE AND TRANSMIT PAYMENTS FOR DIVIDENDS AND DISTRIBUTIONS
DECLARED BY THE FUND;
(VII) MAINTAIN RECORDS OF ACCOUNT FOR AND ADVISE THE FUND AND ITS
SHAREHOLDERS AS TO THE FOREGOING; AND
(VIII) RECORD THE ISSUANCE OF SHARES OF THE FUND AND MAINTAIN PURSUANT
TO SEC RULE 7AD-10(E) A RECORD OF THE TOTAL NUMBER OF SHARES OF THE
FUND WHICH ARE AUTHORIZED, BASED UPON DATA PROVIDED TO IT BY THE FUND,
AND ISSUED AND OUTSTANDING. ADS SHALL ALSO PROVIDE THE FUND ON A
REGULAR BASIS WITH THE TOTAL NUMBER OF SHARES WHICH ARE AUTHORIZED AND
ISSUED AND OUTSTANDING AND SHALL HAVE NO OBLIGATION, WHEN RECORDING
THE ISSUANCE OF SHARES, TO MONITOR THE ISSUANCE OF SUCH SHARES OR TO
TAKE COGNIZANCE OF ANY LAWS RELATING TO THE ISSUE OR SALE OF SUCH
SHARES, WHICH FUNCTIONS SHALL BE THE SOLE RESPONSIBILITY OF THE FUND.
(B) IN ADDITION TO AND NOT IN LIEU OF THE SERVICES SET
FORTH IN THE ABOVE PARAGRAPH (A), ADS SHALL:
(I) PERFORM ALL OF THE CUSTOMARY SERVICES OF A TRANSFER AGENT,
DIVIDEND DISBURSING AGENT, INCLUDING BUT NOT LIMITED TO: MAINTAINING
ALL SHAREHOLDER ACCOUNTS, PREPARING SHAREHOLDER MEETING LISTS, MAILING
PROXIES, RECEIVING AND TABULATING PROXIES, MAILING SHAREHOLDER REPORTS
AND PROSPECTUSES TO CURRENT SHAREHOLDERS, WITHHOLDING TAXES ON US
RESIDENT AND NON-RESIDENT ALIEN ACCOUNTS, PREPARING AND FILING US
TREASURY DEPARTMENT FORMS 1099 AND OTHER APPROPRIATE FORMS REQUIRED
WITH RESPECT TO DIVIDENDS AND DISTRIBUTIONS BY FEDERAL AUTHORITIES FOR
ALL SHAREHOLDERS, PREPARING AND MAILING CONFIRMATION FORMS AND
STATEMENTS OF ACCOUNT TO SHAREHOLDERS FOR ALL PURCHASES REDEMPTION'S
OF SHARES AND OTHER CONFIRMABLE TRANSACTIONS IN SHAREHOLDER ACCOUNTS,
PREPARING AND MAILING ACTIVITY STATEMENTS FOR SHAREHOLDERS, AND
PROVIDING SHAREHOLDER ACCOUNT INFORMATION AND (II) PROVIDE A SYSTEM
AND REPORTS WHICH WILL ENABLE THE FUND TO MONITOR THE TOTAL NUMBER OF
SHARES SOLD IN EACH STATE.
(C) IN ADDITION, THE FUND SHALL (I) IDENTIFY TO ADS IN
WRITING THOSE TRANSACTIONS AND SHARES TO BE TREATED AS EXEMPT FROM
BLUE SKY REPORTING FOR EACH STATE AND (II) VERIFY THE ESTABLISHMENT OF
SUCH TRANSACTIONS FOR EACH STATE ON THE SYSTEM PRIOR TO ACTIVATION AND
THEREAFTER MONITOR THE DAILY ACTIVITY FOR EACH STATE AS PROVIDED BY
ADS. THE RESPONSIBILITY OF ADS FOR THE FUND'S BLUE SKY STATE
REGISTRATION STATUS IS SOLELY LIMITED TO THE INITIAL ESTABLISHMENT OF
TRANSACTIONS SUBJECT TO BLUE SKY COMPLIANCE BY THE FUND AND THE
REPORTING OF SUCH TRANSACTIONS TO THE FUND AS PROVIDED ABOVE.
PROCEDURES APPLICABLE TO CERTAIN OF THESE SERVICES MAY BE
ESTABLISHED FROM TIME TO TIME BY AGREEMENT BETWEEN THE FUND AND ADS.
2. FEES AND EXPENSES
2.01 FOR PERFORMANCE BY ADS PURSUANT TO THIS AGREEMENT, THE FUND
AGREES TO PAY ADS AN ANNUAL MAINTENANCE FEE FOR EACH SHAREHOLDER
ACCOUNT AND TRANSACTION FEES FOR EACH PORTFOLIO OR CLASS OF SHARES
SERVICED UNDER THIS AGREEMENT (SEE SCHEDULE A) AS SET OUT IN THE FEE
SCHEDULE ATTACHED HERETO. SUCH FEES AND OUT-OF-POCKET EXPENSES AND
ADVANCES IDENTIFIED UNDER SECTION 2.02 BELOW MAY BE CHANGED FROM TIME
TO TIME SUBJECT TO MUTUAL WRITTEN AGREEMENT BETWEEN THE FUND AND ADS.
2.02 IN ADDITION TO THE FEE PAID UNDER SECTION 2.01 ABOVE, THE
FUND AGREES TO REIMBURSE ADS FOR OUT-OF-POCKET EXPENSES OR ADVANCES
INCURRED BY ADS FOR THE ITEMS SET OUT IN THE FEE SCHEDULE ATTACHED
HERETO. IN ADDITION, ANY OTHER EXPENSES INCURRED BY ADS AT THE
REQUEST OR WITH THE CONSENT OF THE FUND, WILL BE REIMBURSED BY THE
FUND.
2.03 THE FUND AGREES TO PAY ALL FEES AND REIMBURSABLE EXPENSES
WITHIN FIVE DAYS FOLLOWING THE RECEIPT OF THE RESPECTIVE BILLING
NOTICE. POSTAGE FOR MAILING OF DIVIDENDS, PROXIES, FUND REPORTS AND
OTHER MAILINGS TO ALL SHAREHOLDER ACCOUNTS SHALL BE ADVANCED TO ADS BY
THE FUND AT LEAST SEVEN (7) DAYS PRIOR TO THE MAILING DATE OF SUCH
MATERIALS.
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS REPRESENTS AND WARRANTS TO THE FUND THAT:
3.01 IT IS A CORPORATION DULY ORGANIZED AND EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF THE STATE OF NEW YORK.
3.02 IT IS DULY QUALIFIED TO CARRY ON ITS BUSINESS IN THE STATE
OF NEW YORK.
3.03 IT IS EMPOWERED UNDER APPLICABLE LAWS AND BY ITS CHARTER AND
BY-LAWS TO ENTER INTO AND PERFORM THIS AGREEMENT.
3.04 ALL REQUISITE CORPORATE PROCEEDINGS HAVE BEEN TAKEN TO
AUTHORIZE IT TO ENTER INTO AND PERFORM THIS AGREEMENT.
3.05 IT HAS AND WILL CONTINUE TO HAVE ACCESS TO THE NECESSARY
FACILITIES, EQUIPMENT AND PERSONNEL TO PERFORM ITS DUTIES AND
OBLIGATIONS UNDER THIS AGREEMENT.
3.06 ADS IS DULY REGISTERED AS A TRANSFER AGENT UNDER THE
SECURITIES ACT OF 1934 AND SHALL CONTINUE TO BE REGISTERED THROUGHOUT
THE REMAINDER OF THIS AGREEMENT.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
THE FUND REPRESENTS AND WARRANTS TO ADS THAT:
4.01 IT IS A CORPORATION DULY ORGANIZED AND EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF PENNSYLVANIA.
4.02 IT IS EMPOWERED UNDER APPLICABLE LAWS AND BY ITS ARTICLES OF
INCORPORATION AND BY-LAWS TO ENTER INTO AND PERFORM THIS AGREEMENT.
4.03 ALL CORPORATE PROCEEDINGS REQUIRED BY SAID ARTICLES OF
INCORPORATION AND BY-LAWS HAVE BEEN TAKEN TO AUTHORIZE IT TO ENTER
INTO AND PERFORM THIS AGREEMENT.
4.04 IT IS AN OPEN-END AND DIVERSIFIED MANAGEMENT INVESTMENT
COMPANY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940.
4.05 A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 IS
CURRENTLY OR WILL BECOME EFFECTIVE AND WILL REMAIN EFFECTIVE, AND
APPROPRIATE STATE SECURITIES LAW FILINGS AS REQUIRED, HAVE BEEN OR
WILL BE MADE AND WILL CONTINUE TO BE MADE, WITH RESPECT TO ALL SHARES
OF THE FUND BEING OFFERED FOR SALE.
5. INDEMNIFICATION
5.01 ADS SHALL NOT BE RESPONSIBLE FOR, AND THE FUND SHALL
INDEMNIFY AND HOLD ADS HARMLESS FROM AND AGAINST, ANY AND ALL LOSSES,
DAMAGES, COSTS, CHARGES, COUNSEL FEES, PAYMENTS, EXPENSES AND
LIABILITY ARISING OUT OF OR ATTRIBUTABLE TO:
(A) ALL ACTION OF ADS OR ITS AGENTS OR SUBCONTRACTORS REQUIRED TO BE
TAKEN PURSUANT TO THIS AGREEMENT, PROVIDED THAT SUCH ACTIONS ARE TAKEN
IN GOOD FAITH AND WITHOUT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(B) THE FUND'S REFUSAL OR FAILURE TO COMPLY WITH THE TERMS OF THIS
AGREEMENT, OR WHICH ARISE OUT OF THE FUND'S LACK OF GOOD FAITH, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OR WHICH ARISE OUT OF THE BREACH OF
ANY REPRESENTATION OR WARRANTY OF THE FUND HEREUNDER.
(C) THE RELIANCE ON OR USE BY ADS OR ITS AGENTS OR SUBCONTRACTORS OF
INFORMATION, RECORDS AND DOCUMENTS WHICH (I) ARE RECEIVED BY ADS OR
ITS AGENTS OR SUBCONTRACTORS AND FURNISHED TO IT BY OR ON BEHALF OF
THE FUND, AND (II) HAVE BEEN PREPARED AND/OR MAINTAINED BY THE FUND OR
ANY OTHER PERSON OR FIRM ON BEHALF OF THE FUND OTHER THAN BY ADS.
(D) THE RELIANCE ON, OR THE CARRYING OUT BY ADS OR ITS AGENTS OR
SUBCONTRACTORS OF ANY INSTRUCTIONS OR REQUESTS OF THE FUND.
(E) THE OFFER OR SALE OF SHARES IN VIOLATION OF ANY REQUIREMENT UNDER
THE FEDERAL SECURITIES LAWS OR REGULATIONS OR THE SECURITIES LAWS OR
REGULATIONS OF ANY STATE THAT SUCH SHARES BE REGISTERED IN SUCH STATE
OR IN VIOLATION OF ANY STOP ORDER OR OTHER DETERMINATION OR RULING BY
ANY FEDERAL AGENCY OR ANY STATE WITH RESPECT TO THE OFFER OR SALE OF
SUCH SHARES IN SUCH STATE.
5.02 ADS SHALL INDEMNIFY AND HOLD THE FUND HARMLESS FROM AND
AGAINST ANY AND ALL LOSSES, DAMAGES, COSTS, CHARGES, COUNSEL FEES,
PAYMENTS, EXPENSES AND LIABILITY ARISING OUT OF OR ATTRIBUTABLE TO ANY
ACTION OR FAILURE OR OMISSION TO ACT BY ADS AS A RESULT OF ADS'S LACK
OF GOOD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
5.03 AT ANY TIME ADS MAY APPLY TO ANY OFFICER OF THE FUND FOR
INSTRUCTIONS, AND MAY CONSULT WITH LEGAL COUNSEL WITH RESPECT TO ANY
MATTER ARISING IN CONNECTION WITH THE SERVICES TO BE PERFORMED BY ADS
UNDER THIS AGREEMENT, AND ADS AND ITS AGENTS OR SUBCONTRACTORS SHALL
NOT BE LIABLE AND SHALL BE INDEMNIFIED BY THE FUND FOR ANY ACTION
TAKEN OR OMITTED BY IT IN RELIANCE UPON SUCH INSTRUCTIONS OR UPON THE
OPINION OF SUCH COUNSEL. ADS, ITS AGENTS AND SUBCONTRACTORS SHALL BE
PROTECTED AND INDEMNIFIED IN ACTING UPON ANY PAPER OR DOCUMENT
FURNISHED BY OR ON BEHALF OF THE FUND, REASONABLY BELIEVED TO BE
GENUINE AND TO HAVE BEEN SIGNED BY THE PROPER PERSON OR PERSONS, OR
UPON ANY INSTRUCTION, INFORMATION, DATA, RECORDS OR DOCUMENTS PROVIDED
ADS OR ITS AGENTS OR SUBCONTRACTORS BY MACHINE READABLE INPUT, TELEX,
CRT DATA ENTRY OR OTHER SIMILAR MEANS AUTHORIZED BY THE FUND, AND
SHALL NOT BE HELD TO HAVE NOTICE OF ANY CHANGE OR AUTHORITY OF ANY
PERSON, UNTIL RECEIPT OF WRITTEN NOTICE THEREOF FROM THE FUND. ADS,
ITS AGENTS AND SUBCONTRACTORS SHALL ALSO BE PROTECTED AND INDEMNIFIED
IN RECOGNIZING STOCK CERTIFICATES WHICH ARE REASONABLY BELIEVED TO
BEAR THE PROPER MANUAL OR FACSIMILE SIGNATURES OF THE OFFICERS OF THE
FUND, AND THE PROPER COUNTERSIGNATURE OF ANY FORMER TRANSFER AGENT OR
REGISTRAR, OR OF A CO-TRANSFER AGENT OR CO-REGISTRAR.
5.04 IN THE EVENT EITHER PARTY IS UNABLE TO PERFORM ITS
OBLIGATIONS UNDER THE TERMS OF THIS AGREEMENT BECAUSE OF ACTS OF GOD,
STRIKES, EQUIPMENT OR TRANSMISSION FAILURE OR DAMAGE REASONABLY BEYOND
ITS CONTROL, OR OTHER CAUSES REASONABLY BEYOND ITS CONTROL, SUCH PARTY
SHALL NOT BE LIABLE FOR DAMAGES TO THE OTHER FOR DAMAGES RESULTING
FROM SUCH FAILURE TO PERFORM OR OTHERWISE FROM SUCH CAUSES.
5.05 NEITHER PARTY TO THIS AGREEMENT SHALL BE LIABLE TO THE OTHER
PARTY FOR CONSEQUENTIAL DAMAGES UNDER ANY PROVISIONS OF THIS AGREEMENT
OR FOR ANY ACT OR FAILURE TO ACT HEREUNDER.
5.06 IN ORDER THAT THE INDEMNIFICATION PROVISIONS CONTAINED IN
THIS ARTICLE 5 SHALL APPLY, UPON THE ASSERTION OF A CLAIM FOR WHICH
EITHER PARTY MAY BE REQUIRED TO INDEMNIFY THE OTHER, THE PARTY OF
SEEKING INDEMNIFICATION SHALL PROMPTLY NOTIFY THE OTHER PARTY OF SUCH
ASSERTION, AND SHALL KEEP THE OTHER PARTY ADVISED WITH RESPECT TO ALL
DEVELOPMENTS CONCERNING SUCH CLAIM. THE PARTY WHO MAY BE REQUIRED TO
INDEMNIFY SHALL HAVE THE OPTION TO PARTICIPATE WITH THE PARTY SEEKING
INDEMNIFICATION THE DEFENSE OF SUCH CLAIM. THE PARTY SEEKING
INDEMNIFICATION SHALL IN NO CASE CONFESS ANY CLAIM OR MAKE ANY
COMPROMISE IN ANY CASE IN WHICH THE OTHER PARTY MAY BE REQUIRED TO
INDEMNIFY IT EXCEPT WITH THE OTHER PARTY'S PRIOR WRITTEN CONSENT.
6. COVENANTS OF THE FUND AND ADS
6.01 THE FUND SHALL PROMPTLY FURNISH TO ADS A CERTIFIED COPY OF
THE RESOLUTION OF THE BOARD OF DIRECTORS OF THE FUND AUTHORIZING THE
APPOINTMENT OF ADS AND THE EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.02 ADS HEREBY AGREES TO ESTABLISH AND MAINTAIN FACILITIES AND
PROCEDURES REASONABLY ACCEPTABLE TO THE FUND FOR SAFEKEEPING OF STOCK
CERTIFICATES, CHECK FORMS AND FACSIMILE SIGNATURE IMPRINTING DEVICES,
IF ANY; AND FOR THE PREPARATION OR USE, AND FOR KEEPING ACCOUNT OF,
SUCH CERTIFICATES, FORMS AND DEVICES.
6.03 ADS SHALL KEEP RECORDS RELATING TO THE SERVICES TO BE
PERFORMED HEREUNDER, IN THE FORM AND MANNER AS IT MAY DEEM ADVISABLE.
TO THE EXTENT REQUIRED BY SECTION 31 OF THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED, AND THE RULES THEREUNDER, ADS AGREES THAT ALL SUCH
RECORDS PREPARED OR MAINTAINED BY ADS RELATING TO THE SERVICES TO BE
PERFORMED BY ADS HEREUNDER ARE THE PROPERTY OF THE FUND AND WILL BE
PRESERVED, MAINTAINED AND MADE AVAILABLE IN ACCORDANCE WITH SUCH
SECTION AND RULES, AND WILL BE SURRENDERED PROMPTLY TO THE FUND ON AND
IN ACCORDANCE WITH ITS REQUEST.
6.04 ADS AND THE FUND AGREE THAT ALL BOOKS, RECORDS, INFORMATION
AND DATA PERTAINING TO THE BUSINESS OF THE OTHER PARTY WHICH ARE
EXCHANGED OR RECEIVED PURSUANT TO THE NEGOTIATION OR THE CARRYING OUT
OF THIS AGREEMENT SHALL REMAIN CONFIDENTIAL, AND SHALL NOT BE
VOLUNTARILY DISCLOSED TO ANY OTHER PERSON, EXCEPT AS MAY BE REQUIRED
BY LAW.
6.05 IN CASE OF ANY REQUESTS OR DEMANDS FOR THE INSPECTION OF THE
SHAREHOLDER RECORDS OF THE FUND, ADS WILL ENDEAVOR TO NOTIFY THE FUND
AND TO SECURE INSTRUCTIONS FROM AN AUTHORIZED OFFICER OF THE FUND AS
TO SUCH INSPECTION. ADS RESERVES THE RIGHT, HOWEVER, TO EXHIBIT THE
SHAREHOLDER RECORDS TO ANY PERSON WHENEVER IT IS ADVISED BY ITS
COUNSEL THAT IT MAY BE HELD LIABLE FOR THE FAILURE TO EXHIBIT THE
SHAREHOLDER RECORDS TO SUCH PERSON, AND SHALL PROMPTLY NOTIFY THE FUND
OF ANY UNUSUAL REQUEST TO INSPECT OR COPY THE SHAREHOLDER RECORDS OF
THE FUND OR THE RECEIPT OF ANY OTHER UNUSUAL REQUEST TO INSPECT, COPY
OR PRODUCE THE RECORDS OF THE FUND.
7. TERMINATION OF AGREEMENT
7.01 THIS AGREEMENT SHALL BECOME EFFECTIVE AS OF THE DATE HEREOF
AND SHALL REMAIN IN FORCE FOR A PERIOD OF THREE (3) YEARS, PROVIDED,
HOWEVER, THAT BOTH PARTIES TO THIS AGREEMENT HAVE THE OPTION TO
TERMINATE THE AGREEMENT, WITHOUT PENALTY, UPON NINETY (90) DAYS PRIOR
WRITTEN NOTICE.
7.02 SHOULD THE FUND EXERCISE ITS RIGHT TO TERMINATE, ALL OUT-OF-
POCKET EXPENSES ASSOCIATED WITH THE MOVEMENT OF RECORD AND MATERIAL
WILL BE BORNE BY THE FUND. ADDITIONALLY, ADS RESERVES THE RIGHT TO
CHARGE FOR ANY OTHER REASONABLE EXPENSES ASSOCIATED WITH SUCH
TERMINATION.
8. ASSIGNMENT
8.01 NEITHER THIS AGREEMENT NOR ANY RIGHTS OR OBLIGATIONS
HEREUNDER MAY BE ASSIGNED BY EITHER PARTY WITHOUT THE WRITTEN CONSENT
OF THE OTHER PARTY.
8.02 THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING
UPON THE PARTIES AND THEIR RESPECTIVE PERMITTED SUCCESSORS AND
ASSIGNS.
9. AMENDMENT
9.01 THIS AGREEMENT MAY BE AMENDED OR MODIFIED BY A WRITTEN
AGREEMENT EXECUTED BY BOTH PARTIES AND AUTHORIZED OR APPROVED BY A
RESOLUTION OF THE BOARD OF DIRECTORS OF THE FUND.
10. NEW YORK LAWS TO APPLY
10.01 THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS AT
THE TIME IN EFFECT AND THE APPLICABLE PROVISIONS OF THE 1940 ACT. TO
THE EXTENT THAT THE APPLICABLE LAW OF THE STATE OF NEW YORK, OR ANY OF
THE PROVISIONS HEREIN, CONFLICT WITH THE APPLICABLE PROVISIONS OF THE
1940 ACT, THE LATTER SHALL CONTROL.
11. MERGER OF AGREEMENT
11.01 THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES HERETO AND SUPERSEDES ANY PRIOR AGREEMENT WITH RESPECT TO THE
SUBJECT MATTER HEREOF WHETHER ORAL OR WRITTEN.
<PAGE>
12. NOTICES.
ALL NOTICES AND OTHER COMMUNICATIONS HEREUNDER SHALL BE IN
WRITING, SHALL BE DEEMED TO HAVE BEEN GIVEN WHEN RECEIVED OR WHEN SENT
BY TELEX OR FACSIMILE, AND SHALL BE GIVEN TO THE FOLLOWING ADDRESSES
(OR SUCH OTHER ADDRESSES AS TO WHICH NOTICE IS GIVEN):
TO THE FUND: TO THE ADMINISTRATOR:
CHRISTOPHER BEIMEL MICHAEL MIOLA
SECRETARY-TREASURER PRESIDENT
PENN CAPITAL FUNDS, INC. AMERICAN DATA SERVICES, INC.
7211 SALTSBURG ROAD 24 WEST CARVER STREET
PITTSBURGH, PA 15235 HUNTINGTON, NY 11743
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS
AGREEMENT AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
PENN CAPITAL FUNDS, INC. AMERICAN DATA SERVICES, INC.
BY: /S/ JOSEPH JACOBS BY:_/S/ MICHAEL MIOLA
MICHAEL MIOLA, PRESIDENT
FEE SCHEDULE
FOR THE SERVICES RENDERED BY ADS IN ITS CAPACITY AS TRANSFER
AGENT, THE FUND SHALL PAY ADS, WITHIN TEN (10) DAYS AFTER RECEIPT OF
AN INVOICE FROM ADS AT THE BEGINNING OF EACH MONTH, A FEE, CALCULATED
AS A COMBINATION OF ACCOUNT MAINTENANCE CHARGES AND TRANSACTION
CHARGES AS FOLLOWS:
(A) ACCOUNT MAINTENANCE CHARGE:
THE GREATER OF:
(1) MINIMUM MAINTENANCE CHARGE PER FUND - $200.00/MONTH (NO PRORATING
PARTIAL MONTHS);
OR
(2) BASED UPON THE TOTAL OF ALL OPEN/CLOSED ACCOUNTS IN THE FUND
GROUP UPON THE FOLLOWING ANNUAL RATES (BILLED MONTHLY):**
EQUITY FUND . . . . . . . . . .$10.00 PER ACCOUNT
FIXED INCOME FUND . . . . . . .$12.00 PER ACCOUNT
MONEY MARKET FUND . . . . . . .$16.00 PER ACCOUNT
CLOSED ACCOUNTS . . . . . . . .$ 2.00 PER ACCOUNT***
** ALL ACCOUNTS CLOSED DURING A CALENDAR YEAR WILL BE CONSIDERED AS
OPEN ACCOUNTS FOR BILLING PURPOSES UNTIL THE END OF THAT CALENDAR
YEAR.
*** CLOSED ACCOUNTS WILL REMAIN IN THE SHAREHOLDER FILES UNTIL ALL
1099'S AND 5498'S HAVE BEEN SENT TO SHAREHOLDERS AND REPORTED (VIA MAG
MEDIA) TO THE IRS.
PLUS
TRANSACTION FEES:
TRADE ENTRY (PURCHASE/LIQUIDATION) AND
MAINTENANCE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . .$1.35 EACH
NEW ACCOUNT SET-UP . . . . . . . . . . . . . . . . . . . . . . . . .$2.50 EACH
CUSTOMER SERVICE CALLS . . . . . . . . . . . . . . . . . . . . . . .$1.00 EACH
CORRESPONDENCE/INFORMATION REQUESTS. . . . . . . . . . . . . . . . .$1.25 EACH
CHECK PREPARATION. . . . . . . . . . . . . . . . . . . . . . . . . .$ .50 EACH
LIQUIDATION'S PAID BY WIRE TRANSFER. . . . . . . . . . . . . . . . .$3.00 EACH
OMNIBUS ACCOUNTS . . . . . . . . . . . . . . . .( PER TRANSACTION)* $1.25
ACH CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ .30 EACH
SWP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *$1.25 EACH
*NOT INCLUDED AS A TRADE ENTRY<PAGE>
(B) IRA PLAN FEES:
THE FOLLOWING FEES WILL BE CHARGED DIRECTLY TO THE SHAREHOLDER
ACCOUNT:
ANNUAL MAINTENANCE FEE . . . . . . . . . . . . . . . . $15.00/ACCOUNT*
INCOMING TRANSFER FROM PRIOR CUSTODIAN . . . . . . . . $12.00
DISTRIBUTION TO A PARTICIPANT. . . . . . . . . . . . . $15.00
REFUND OF EXCESS CONTRIBUTION. . . . . . . . . . . . . $15.00
TRANSFER TO SUCCESSOR CUSTODIAN. . . . . . . . . . . . $15.00
AUTOMATIC PERIODIC DISTRIBUTIONS $15.00/YEAR PER ACCOUNT
*INCLUDES STAR BANK N.A. $8.00 CUSTODY FEE.
FEE INCREASES
ON EACH ANNUAL ANNIVERSARY DATE OF THIS AGREEMENT, THE FEES ENUMERATED
ABOVE WILL BE INCREASED BY THE CHANGE IN THE CUSTOMER PRICE INDEX FOR
THE NORTHEAST REGION (CPI) FOR THE TWELVE MONTH PERIOD ENDING WITH THE
MONTH PRECEDING SUCH ANNUAL ANNIVERSARY DATE.
(C) EXPENSES:
THE FUND SHALL REIMBURSE ADS FOR ANY OUT-OF-POCKET EXPENSES,
EXCLUSIVE OF SALARIES, ADVANCED BY ADS IN CONNECTION WITH BUT NOT
LIMITED TO THE PRINTING OF CONFIRMATION FORMS AND STATEMENTS, PROXY
EXPENSES, TRAVEL REQUESTED BY THE FUND, TELEPHONE, FACSIMILE
TRANSMISSIONS, STATIONERY AND SUPPLIES (RELATED TO FUND RECORDS),
RECORD STORAGE, POSTAGE (PLUS A $.015 SERVICE CHARGE FOR ALL MAILINGS,
PRO-RATA PORTION OF ANNUAL 17AD-13 AUDIT LETTER, TELEX AND COURIER
CHARGES INCURRED IN CONNECTION WITH THE PERFORMANCE OF ITS DUTIES
HEREUNDER. ADS SHALL PROVIDE THE FUND WITH A MONTHLY INVOICE OF SUCH
EXPENSES AND THE FUND SHALL REIMBURSE ADS WITHIN FIFTEEN (15) DAYS
AFTER RECEIPT THEREOF.
(D) SPECIAL REPORTS:
ALL REPORTS AND/OR ANALYSES REQUESTED BY THE FUND THAT ARE NOT
INCLUDED IN THE FEE SCHEDULE, SHALL BE SUBJECT TO AN ADDITIONAL
CHARGE, AGREED UPON IN ADVANCE, BASED UPON THE FOLLOWING RATES:
LABOR:
SENIOR STAFF - $100.00/HR.
JUNIOR STAFF - $ 50.00/HR.
COMPUTER TIME - $ 45.00/HR.
(E) SECURITY DEPOSIT:
THE FUND WILL REMIT TO ADS UPON EXECUTION OF THIS AGREEMENT A
SECURITY DEPOSIT OF EQUAL TO TWO (2) MONTH'S SHAREHOLDER SERVICE FEE.
THE SECURITY DEPOSIT COMPUTATION WILL BE BASED EITHER ON THE TOTAL
NUMBER OF SHAREHOLDER ACCOUNTS (OPEN AND CLOSED) OF THE FUND OR THE
MINIMUM FEE, WHICHEVER IS GREATER ON THE DATE ABOVE WRITTEN. THE FUND
WILL HAVE THE OPTION TO HAVE THE SECURITY DEPOSIT APPLIED TO THE LAST
MONTH'S SERVICE FEE, OR APPLIED TO ANY NEW CONTRACT BETWEEN THE FUND
AND ADS.
(F) CONVERSION CHARGE:
NOTE: FOR EXISTING FUNDS ONLY (NEW FUNDS PLEASE IGNORE):
THERE WILL BE A CHARGE TO CONVERT THE FUND'S SHAREHOLDER
ACCOUNTING RECORDS ON TO THE ADS STOCK TRANSFER SYSTEM (ADSHARE). IN
ADDITION, ADS WILL BE REIMBURSED FOR ALL OUT-OF-POCKET EXPENSES,
ENUMERATED IN PARAGRAPH (B) ABOVE AND DATA MEDIA CONVERSION COSTS,
INCURRED DURING THE CONVERSION PROCESS.
THE MINIMUM CONVERSION CHARGE WILL BE ESTIMATED AND AGREED
UPON IN ADVANCE BY THE FUND AND ADS. THE CHARGE WILL BE BASED UPON
THE QUANTITY OF RECORDS TO BE CONVERTED AND THE CONDITION OF THE
PREVIOUS SERVICE AGENTS RECORDS.
SCHEDULE A
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
ASSET ALLOCATION FUND
AGGRESSIVE GROWTH FUND
EXHIBIT 9(B)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT MADE THE 1ST DAY OF FEBRUARY, 1996, BY AND BETWEEN PENN
CAPITAL FUNDS, INC. (THE "FUND") AND JAMES BEIMEL (THE
"ADMINISTRATOR").
BACKGROUND
WHEREAS, THE FUND IS A DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT
COMPANY REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE
"1940 ACT"); AND
WHEREAS, THE ADMINISTRATOR IS AN INDIVIDUAL EXPERIENCED IN
PROVIDING ADMINISTRATIVE SERVICES TO MUTUAL FUNDS AND HAS ACCESS TO
FACILITIES SUFFICIENT TO PROVIDE SUCH SERVICES; AND
WHEREAS, THE FUND DESIRES TO AVAIL ITSELF OF THE EXPERIENCE,
ASSISTANCE AND FACILITIES OF THE ADMINISTRATOR AND TO HAVE THE
ADMINISTRATOR PERFORM FOR THE FUND CERTAIN SERVICES APPROPRIATE TO THE
OPERATIONS OF THE FUND AND THE ADMINISTRATOR IS WILLING TO FURNISH
SUCH SERVICES IN ACCORDANCE WITH THE TERMS HEREINAFTER SET FORTH.
TERMS
NOW, THEREFORE, IN CONSIDERATION OF THE PROMISES AND MUTUAL
COVENANTS HEREINAFTER CONTAINED, THE FUND AND THE ADMINISTRATOR HEREBY
AGREE TO THE FOLLOWING:
1. DUTIES OF THE ADMINISTRATOR. THE ADMINISTRATOR WILL PROVIDE
THE FUND WITH THE NECESSARY OFFICE SPACE, COMMUNICATION FACILITIES AND
PERSONNEL TO PERFORM THE FOLLOWING SERVICES FOR THE FUND:
(A) MONITOR ALL REGULATORY (1940 ACT AND IRS) AND
PROSPECTUS RESTRICTIONS FOR COMPLIANCE;
(B) PREPARE AND COORDINATE THE PRINTING OF SEMI-ANNUAL
AND ANNUAL FINANCIAL STATEMENTS;
(C) PREPARE SELECTED MANAGEMENT REPORTS FOR
PERFORMANCE AND COMPLIANCE ANALYSES AS AGREED UPON BY THE
FUND AND ADMINISTRATOR FROM TIME TO TIME;
(D) PREPARE SELECTED FINANCIAL DATA REQUIRED FOR
DIRECTORS' MEETINGS AS AGREED UPON BY THE FUND AND THE
ADMINISTRATOR FROM TIME TO TIME AND COORDINATE DIRECTORS
MEETING AGENDAS WITH OUTSIDE LEGAL COUNSEL TO THE FUND;
(E) DETERMINE INCOME AND CAPITAL GAINS AVAILABLE FOR
DISTRIBUTION AND CALCULATE DISTRIBUTIONS REQUIRED TO MEET
REGULATORY, INCOME, AND EXCISE TAX REQUIREMENTS, TO BE
REVIEWED BY THE FUND'S INDEPENDENT PUBLIC ACCOUNTANTS;
(F) PREPARE THE FUND'S FEDERAL, STATE, AND LOCAL TAX
RETURNS TO BE REVIEWED BY THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS;
(G) PREPARE AND MAINTAIN THE FUND'S OPERATING EXPENSE
BUDGET TO DETERMINE PROPER EXPENSE ACCRUALS TO BE CHARGED TO
THE FUND IN ORDER TO CALCULATE ITS DAILY NET ASSET VALUE;
(H) 1940 ACT FILINGS -
IN CONJUNCTION WITH THE FUND'S OUTSIDE LEGAL COUNSEL
THE ADMINISTRATOR WILL:
* PREPARE THE FUND'S FORM N-SAR REPORTS;
* UPDATE ALL FINANCIAL SECTIONS OF THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION AND COORDINATE ITS
COMPLETION;
* UPDATE ALL FINANCIAL SECTIONS OF THE FUND'S PROSPECTUS
AND COORDINATE ITS COMPLETION;
* UPDATE ALL FINANCIAL SECTIONS OF THE FUND'S PROXY
STATEMENT AND COORDINATE ITS COMPLETION;
* PREPARE AN ANNUAL UPDATE TO FUND'S 24F-2 FILING (IF
APPLICABLE);
(I) MONITOR SERVICES PROVIDED BY THE FUND'S CUSTODIAN
BANK AS WELL AS ANY OTHER SERVICE PROVIDERS TO THE FUND;
(J) PROVIDE APPROPRIATE FINANCIAL SCHEDULES (AS
REQUESTED BY THE FUND'S INDEPENDENT PUBLIC ACCOUNTANTS OR
SEC EXAMINERS), COORDINATE THE FUND'S ANNUAL OR SEC AUDIT,
AND PROVIDE OFFICE FACILITIES AS MAY BE REQUIRED;
(K) ATTEND MANAGEMENT AND BOARD OF DIRECTORS MEETINGS
AS REQUESTED;
(L) THE PREPARATION AND FILING (FILING FEE TO BE PAID
BY THE FUND) OF APPLICATIONS AND REPORTS AS NECESSARY TO
REGISTER OR MAINTAIN THE FUNDS REGISTRATION UNDER THE
SECURITIES OF "BLUE SKY" LAWS OF THE VARIOUS STATES SELECTED
BY THE FUND'S DISTRIBUTOR.
THE ADMINISTRATOR SHALL, FOR ALL PURPOSES HEREIN, 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.
2. COMPENSATION OF THE ADMINISTRATOR. IN CONSIDERATION OF THE
SERVICES TO BE PERFORMED BY THE ADMINISTRATOR AS SET FORTH HEREIN FOR
EACH PORTFOLIO LISTED IN SCHEDULE B, THE ADMINISTRATOR SHALL BE
ENTITLED TO RECEIVE COMPENSATION AND REIMBURSEMENT FOR ALL REASONABLE
OUT-OF-POCKET EXPENSES. THE FUND AGREES TO PAY THE ADMINISTRATOR THE
FEES AND REIMBURSEMENT OF OUT-OF-POCKET EXPENSES AS SET FORTH IN THE
FEE SCHEDULE ATTACHED HERETO AS SCHEDULE A.
3. RESPONSIBILITY AND INDEMNIFICATION. (A) THE ADMINISTRATOR
SHALL BE HELD TO THE EXERCISE OF REASONABLE CARE IN CARRYING OUT THE
PROVISIONS OF THE AGREEMENT, BUT SHALL BE WITHOUT LIABILITY TO THE
FUND FOR ANY ACTION TAKEN OR OMITTED BY HIM IN GOOD FAITH WITHOUT
GROSS NEGLIGENCE, BAD FAITH, WILLFUL MISCONDUCT OR RECKLESS DISREGARD
OF HIS DUTIES HEREUNDER. HE SHALL BE ENTITLED TO RELY UPON AND MAY
ACT UPON THE ACCOUNTING RECORDS AND REPORTS GENERATED BY THE FUND,
ADVICE OF THE FUND, OR OF COUNSEL FOR THE FUND AND UPON STATEMENTS OF
THE FUND'S INDEPENDENT ACCOUNTANTS, AND SHALL BE WITHOUT LIABILITY FOR
ANY ACTION REASONABLY TAKEN OR OMITTED PURSUANT TO SUCH RECORDS AND
REPORTS OR ADVICE, PROVIDED THAT SUCH ACTION IS NOT, TO THE KNOWLEDGE
OF THE ADMINISTRATOR, IN VIOLATION OF APPLICABLE FEDERAL OR STATE LAWS
OR REGULATIONS, AND PROVIDED FURTHER THAT SUCH ACTION IS TAKEN WITHOUT
GROSS NEGLIGENCE, BAD FAITH, WILLFUL MISCONDUCT OR RECKLESS DISREGARD
OF HIS DUTIES.
(B) THE ADMINISTRATOR SHALL NOT BE LIABLE TO THE FUND FOR ANY
ERROR OF JUDGMENT OR MISTAKE OF LAW OR FOR ANY LOSS ARISING OUT OF ANY
ACT OR OMISSION BY THE ADMINISTRATOR IN THE PERFORMANCE OF HIS DUTIES
HEREUNDER EXCEPT AS HEREINAFTER SET FORTH. NOTHING HEREIN CONTAINED
SHALL BE CONSTRUED TO PROTECT THE ADMINISTRATOR AGAINST ANY LIABILITY
TO THE FUND OR HIS SECURITY HOLDERS TO WHICH THE ADMINISTRATOR SHALL
OTHERWISE BE SUBJECT BY REASON OF WILLFUL MISFEASANCE, BAD FAITH,
GROSS NEGLIGENCE IN THE PERFORMANCE OF HIS DUTIES ON BEHALF OF THE
FUND, RECKLESS DISREGARD OF THE ADMINISTRATOR'S OBLIGATIONS AND DUTIES
UNDER THIS AGREEMENT OR THE WILLFUL VIOLATION OF ANY APPLICABLE LAW.
(C) EXCEPT AS MAY OTHERWISE BE PROVIDED BY APPLICABLE LAW,
NEITHER THE ADMINISTRATOR NOR HIS STOCKHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES OR AGENTS SHALL BE SUBJECT TO, AND THE FUND SHALL INDEMNIFY
AND HOLD SUCH PERSONS HARMLESS FROM AND AGAINST, ANY LIABILITY FOR ANY
DAMAGES, EXPENSES OR LOSSES INCURRED BY REASON OF THE INACCURACY OF
INFORMATION FURNISHED TO THE ADMINISTRATOR BY THE FUND OR HIS
AUTHORIZED AGENTS OR IN CONNECTION WITH ANY ERROR IN JUDGMENT OR
MISTAKE OF LAW OR ANY ACT OR OMISSION IN THE COURSE OF, CONNECTED WITH
OR ARISING OUT OF ANY SERVICES TO BE RENDERED HEREUNDER, EXCEPT BY
REASON OF WILLFUL MISFEASANCE, BAD FAITH OR GROSS NEGLIGENCE IN THE
PERFORMANCE OF HIS DUTIES, BY REASON OF RECKLESS DISREGARD OF THE
ADMINISTRATOR'S OBLIGATIONS AND DUTIES UNDER THIS AGREEMENT OR THE
WILLFUL VIOLATION OF ANY APPLICABLE LAW.
4. REPORTS. (A) THE FUND SHALL PROVIDE TO THE ADMINISTRATOR
ON A QUARTERLY BASIS A REPORT OF A DULY AUTHORIZED OFFICER OF THE FUND
REPRESENTING THAT ALL INFORMATION FURNISHED TO THE ADMINISTRATOR
DURING THE PRECEDING QUARTER WAS TRUE, COMPLETE AND CORRECT TO THE
BEST OF HIS KNOWLEDGE. THE ADMINISTRATOR SHALL NOT BE RESPONSIBLE FOR
THE ACCURACY OF ANY INFORMATION FURNISHED TO IT BY THE FUND, AND THE
FUND SHALL HOLD THE ADMINISTRATOR HARMLESS IN REGARD TO ANY LIABILITY
INCURRED BY REASON OF THE INACCURACY OF SUCH INFORMATION.
(B) THE ADMINISTRATOR SHALL PROVIDE TO THE BOARD OF DIRECTORS OF
THE FUND, ON A QUARTERLY BASIS, A REPORT, IN SUCH A FORM AS THE
ADMINISTRATOR AND THE FUND SHALL FROM TIME TO TIME AGREE, REPRESENTING
THAT, TO HIS KNOWLEDGE, THE FUND WAS IN COMPLIANCE WITH ALL
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE LAW, INCLUDING WITHOUT
LIMITATION, THE ROLES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION AND THE INTERNAL REVENUE SERVICE, OR SPECIFYING ANY
INSTANCES IN WHICH THE FUND WAS NOT SO IN COMPLIANCE. WHENEVER, IN
THE COURSE OF PERFORMING HIS DUTIES UNDER THIS AGREEMENT, THE
ADMINISTRATOR DETERMINES, ON THE BASIS OF INFORMATION SUPPLIED TO THE
ADMINISTRATOR BY THE FUND, THAT A VIOLATION OF APPLICABLE LAW HAS
OCCURRED, OR THAT, TO HIS KNOWLEDGE, A POSSIBLE VIOLATION OF
APPLICABLE LAW MAY HAVE OCCURRED OR, WITH THE PASSAGE OF TIME, COULD
OCCUR, THE ADMINISTRATOR SHALL PROMPTLY NOTIFY THE FUND AND HIS
COUNSEL OF SUCH VIOLATION.
5. ACTIVITIES OF THE ADMINISTRATOR. THE ADMINISTRATOR SHALL BE
FREE TO RENDER SIMILAR SERVICES TO OTHERS SO LONG AS HIS SERVICES
HEREINUNDER ARE NOT IMPAIRED THEREBY.
6. RECORDS. THE RECORDS MAINTAINED BY THE ADMINISTRATOR SHALL
BE THE PROPERTY OF THE FUND, AND SHALL BE MADE AVAILABLE TO THE FUND
PROMPTLY UPON REQUEST BY THE FUND IN THE FORM IN WHICH SUCH RECORDS
HAVE BEEN MAINTAINED OR PRESERVED. THE ADMINISTRATOR SHALL UPON
APPROVAL OF THE FUND ASSIST THE FUND'S INDEPENDENT AUDITORS, OR, ANY
REGULATORY BODY, IN ANY REQUESTED REVIEW OF THE FUND'S ACCOUNTS AND
RECORDS. THE ADMINISTRATOR SHALL PRESERVE THE RECORDS IN HIS
POSSESSION (AT THE EXPENSE OF THE FUND) AS REQUIRED BY RULE 31A-1 OF
THE 1940 ACT.
7. CONFIDENTIALITY. THE ADMINISTRATOR AGREES THAT IT WILL, ON
BEHALF OF HIMSELF AND HIS OFFICERS AND EMPLOYEES, TREAT ALL
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND ALL OTHER INFORMATION
GERMANE THERETO, AS CONFIDENTIAL AND SUCH INFORMATION SHALL NOT BE
DISCLOSED TO ANY PERSON EXCEPT AS MAY BE AUTHORIZED BY THE FUND.
8. DURATION AND TERMINATION OF THE AGREEMENT. THIS AGREEMENT
SHALL BECOME EFFECTIVE AS OF THE DATE HEREOF AND SHALL REMAIN IN FORCE
FOR A PERIOD OF THREE (3) YEARS, PROVIDED, HOWEVER, THAT BOTH PARTIES
TO THIS AGREEMENT HAVE THE OPTION TO TERMINATE THE AGREEMENT, WITHOUT
PENALTY, UPON NINETY (90) DAYS PRIOR WRITTEN NOTICE.
SHOULD THE FUND EXERCISE ITS RIGHT TO TERMINATE, ALL OUT-OF-
POCKET EXPENSES ASSOCIATED WITH THE MOVEMENT OF RECORDS AND MATERIAL
WILL BE BORNE BY THE FUND. ADDITIONALLY, THE ADMINISTRATOR RESERVES
THE RIGHT TO CHARGE FOR ANY OTHER REASONABLE EXPENSES ASSOCIATED WITH
SUCH TERMINATION.
9. ASSIGNMENT. THIS AGREEMENT SHALL EXTEND TO AND SHALL BE
BINDING UPON THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS; PROVIDED, HOWEVER, THAT THIS AGREEMENT SHALL NOT BE
ASSIGNABLE BY THE FUND WITHOUT THE PRIOR WRITTEN CONSENT OF THE
ADMINISTRATOR, OR BY THE ADMINISTRATOR WITHOUT THE PRIOR WRITTEN
CONSENT OF THE FUND. HOWEVER, THE ADMINISTRATOR RESERVES THE RIGHT TO
SUB-CONTRACT THE PERFORMANCE OF PARAGRAPH 1 ENTITLED DUTIES OF THE
ADMINISTRATOR TO AMERICAN DATA SERVICES, INC., A NEW YORK CORPORATION,
LOCATED AT 24 WEST CARVER STREET, HUNTINGTON, NEW YORK 11743, AND SUCH
SUB-CONTRACT WILL NOT BE CONSIDERED AN ASSIGNMENT OF THIS AGREEMENT.
10. LAWS TO APPLY. THE PROVISIONS OF THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA AS AT THE TIME IN EFFECT AND THE
APPLICABLE PROVISIONS OF THE 1940 ACT. TO THE EXTENT THAT THE
APPLICABLE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, OR ANY OF THE
PROVISIONS HEREIN, CONFLICT WITH THE APPLICABLE PROVISIONS OF THE 1940
ACT, THE LATTER SHALL CONTROL.
11. AMENDMENTS TO THIS AGREEMENT. THIS AGREEMENT MAY BE AMENDED
BY THE PARTIES HERETO ONLY IF SUCH AMENDMENT IS IN WRITING AND SIGNED
BY BOTH PARTIES.
12. MERGER OF AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO AND SUPERSEDES ANY PRIOR
AGREEMENT WITH RESPECT TO THE SUBJECT MATTER HEREOF WHETHER ORAL OR
WRITTEN.
13. NOTICES. ALL NOTICES AND OTHER COMMUNICATIONS HEREUNDER
SHALL BE IN WRITING, SHALL BE DEEMED TO HAVE BEEN GIVEN WHEN DELIVERED
IN PERSON OR BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, AND SHALL BE
GIVEN TO THE FOLLOWING ADDRESSES (OR SUCH OTHER ADDRESSES AS TO WHICH
NOTICE IS GIVEN):
TO THE FUND: TO THE ADMINISTRATOR:
216 BOULEVARD OF THE ALLIES C/O JMB HOLDINGS, INC.
6TH FLOOR 216 BOULEVARD OF THE ALLIES
PITTSBURGH, PA 15222 6TH FLOOR
PITTSBURGH, PA 15222
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS
AGREEMENT AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
PENN CAPITAL FUNDS, INC. JAMES BEIMEL
BY:/S/ KARL T. BEIMEL BY: /S/ JAMES BEIMEL
NAME:_________________________ NAME:_________________________
TITLE:________________________ TITLE:________________________
SCHEDULE A
(A) ADMINISTRATIVE SERVICE FEE:
FOR THE SERVICES RENDERED BY THE ADMINISTRATOR IN HIS CAPACITY AS
ADMINISTRATOR, AS SPECIFIED IN PARAGRAPH 1 DUTIES OF THE
ADMINISTRATOR, THE FUND SHALL PAY THE ADMINISTRATOR WITHIN TEN (10)
DAYS AFTER RECEIPT OF AN INVOICE FROM THE ADMINISTRATOR AT THE
BEGINNING OF EACH MONTH, A FEE EQUAL TO THE GREATER OF:
NOTE: THE FOLLOWING MINIMUM FEES ARE PER PORTFOLIO SERVICED.
MINIMUM FEE:
CALCULATED FEE WILL BE BASED UPON
PRIOR MONTH AVERAGE NET ASSETS:
(NO PRORATING PARTIAL MONTHS)
$5,000 PER MONTH
OR,
NET ASSET CHARGE:
1/12TH OF 0.50% (50 BASIS POINTS) OF COMBINED
AVERAGE NET ASSETS OF FUND GROUP (IF APPLICABLE) FOR MONTH.
FEE INCREASES
ON EACH ANNUAL ANNIVERSARY DATE OF THIS AGREEMENT, THE FEES ENUMERATED
ABOVE WILL BE INCREASED BY THE CHANGE IN THE CONSUMER PRICE INDEX FOR
THE NORTHEAST REGION (CPI) FOR THE TWELVE MONTH PERIOD ENDING WITH THE
MONTH PRECEDING SUCH ANNUAL ANNIVERSARY DATE.
(B) EXPENSES:
THE FUND SHALL REIMBURSE THE ADMINISTRATOR FOR ANY OUT-OF-POCKET
EXPENSES, EXCLUSIVE OF SALARIES, ADVANCED BY THE ADMINISTRATOR IN
CONNECTION WITH BUT NOT LIMITED TO THE PRINTINGS OR FILINGS OF
DOCUMENTS FOR THE FUND, TRAVEL, TELEPHONE, QUOTATION SERVICES,
FACSIMILE TRANSMISSIONS, STATIONERY AND SUPPLIES, RECORD STORAGE,
POSTAGE, TELEX, AND COURIER CHARGES, INCURRED IN CONNECTION WITH THE
PERFORMANCE OF HIS DUTIES HEREUNDER. THE ADMINISTRATOR SHALL PROVIDE
THE FUND WITH A MONTHLY INVOICE OF SUCH EXPENSES AND THE FUND SHALL
REIMBURSE THE ADMINISTRATOR WITHIN FIFTEEN (15) DAYS AFTER RECEIPT
THEREOF.
(C) STATE REGISTRATION (BLUE SKY) SURCHARGE:
THE FEES ENUMERATED IN PARAGRAPH (A) ABOVE INCLUDE THE INITIAL
STATE REGISTRATION, RENEWAL AND MAINTENANCE OF REGISTRATIONS (AS
DETAILED IN PARAGRAPH 1 (DUTIES OF THE ADMINISTRATOR) FOR THREE
STATES. EACH ADDITIONAL STATE REGISTRATION REQUESTED WILL BE SUBJECT
TO THE FOLLOWING FEES:
INITIAL REGISTRATION $275.00
REGISTRATION RENEWAL $100.00
SALES REPORTS (IF REQUIRED) $ 25.00
(D) SPECIAL REPORTS.
ALL REPORTS AND/OR ANALYSES REQUESTED BY THE FUND, ITS AUDITORS,
LEGAL COUNSEL, PORTFOLIO MANAGER, OR ANY REGULATORY AGENCY HAVING
JURISDICTION OVER THE FUND, THAT ARE NOT IN THE NORMAL COURSE OF FUND
ADMINISTRATIVE ACTIVITIES AS SPECIFIED IN SECTION 1 OF THIS AGREEMENT
SHALL BE SUBJECT TO AN ADDITIONAL CHARGE, AGREED UPON IN ADVANCE,
BASED UPON THE FOLLOWING RATES:
LABOR:
SENIOR STAFF $100.00/HR.
JUNIOR STAFF $ 50.00/HR.
COMPUTER TIME $ 45.00/HR.
(E) SECURITY DEPOSIT.
THE FUND WILL REMIT TO THE ADMINISTRATOR UPON EXECUTION OF THIS
AGREEMENT A SECURITY DEPOSIT EQUAL TO ONE (1) MONTH'S MINIMUM FEE
UNDER THIS AGREEMENT, COMPUTED IN ACCORDANCE WITH THE NUMBER OF
PORTFOLIOS LISTED IN SCHEDULE B OF THIS AGREEMENT WITHOUT GIVING
EFFECT TO ANY FEE WAIVERS THAT MAY BE IN EFFECT. THE FUND WILL HAVE
THE OPTION TO HAVE THE SECURITY DEPOSIT APPLIED TO THE LAST MONTH'S
SERVICE FEE, OR APPLIED TO ANY NEW CONTRACT BETWEEN THE FUND AND THE
ADMINISTRATOR.
SCHEDULE B
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
ASSET ALLOCATION FUND
AGGRESSIVE GROWTH FUND (WHEN ORGANIZED)
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
WE CONSENT TO THE USE IN THIS POST-EFFECTIVE AMENDMENT NUMBER 7 TO THE
PENN CAPITAL ASSET ALLOCATIONS FUND'S REGISTRATION STATEMENT ON FORM
N-1A OF OUR REPORT DATED DECEMBER 12, 1995 ON THE FINANCIAL STATEMENTS
OF THE PENN CAPITAL ASSET ALLOCATION FUND AND THE SUMMARY FINANCIAL
INFORMATION INCLUDED IN THE PROSPECTUS AND TO THE REFERENCES MADE TO
US UNDER THE CAPTION "CONDENSED FINANCIAL INFORMATION" INCLUDED IN THE
PROSPECTUS AND UNDER THE CAPTION "AUDITORS" INCLUDED IN THE STATEMENT
OF ADDITIONAL INFORMATION.
/S/ MCCURDY & ASSOCIATES
MCCURDY & ASSOCIATES CPA'S, INC.
WESTLAKE, OHIO 44415
JANUARY 24, 1996
Exhibit 15 (a)
DISTRIBUTION PLAN
OF
ASSET ALLOCATION FUND
WHEREAS, THE ASSET ALLOCATION FUND (the "Fund") is a series
of Penn Capital Funds, Inc., (the "Corporation") as that term is used
under the Investment Company Act of 1940, and the rules and
regulations thereunder (the "Act");
WHEREAS, the Corporation has registered as an open-end
management investment company under the Act;
WHEREAS, the Board of Directors of the Corporation has
determined that there is a reasonable likelihood that this
Distribution Plan will benefit the Fund and its shareholders; and
WHEREAS, the Corporation intends to have James M. Beimel,
Jr., as part of his obligations as administrator of the Fund
("Administrator"), perform certain marketing activities with respect
to shares of the Asset Allocation Fund ("Common Stock").
NOW, THEREFORE, the Corporation hereby adopts the
Distribution Plan (the "Plan") with respect to the Fund in accordance
with Rule 12b-1 under the Act having the following terms and
conditions:
1. Payments to Administrator. The Corporation shall pay
out of the assets belonging to the Fund to the Administrator (as the
marketer of the Common Stock), a distribution fee for distribution of
the Common Stock at the rate of the lesser of (a) .25% per annum of
the Fund's average daily net assets or (b) the Administrator's total
costs incurred during the year (including reasonable allocation of
overhead) in the distribution of the Common Stock. Such distribution
fee shall be calculated and accrued daily and paid monthly or at such
other intervals as the Board of Directors shall determine or as
otherwise required by the Act. Such payments shall be in addition to
any payments received by the Administrator pursuant to an
Administration Agreement between the Corporation and the Administrator
with respect to the Fund.
2. Permitted Expenditures. The amount set forth in
paragraph 1 of this Plan shall be paid for Administrator's services in
assisting in the distribution of the shares of Common Stock and may be
spent by Administrator on any activities or expenses primarily
intended to result in the sale of the Common Stock, including but not
limited to expenses (including overhead and telephone expenses) of
printing of prospectuses and reports for other than existing
shareholders, and advertising and preparation and distribution of sale
literature.
3. Effective Date of Plan. This Plan shall not take
effect until (a) it has been approved by a vote of at least a majority
of the outstanding shares of Common Stock (as defined in the Act) and
(b) (together with any related agreements) by votes of a majority of
both (i) the Board of Directors of the Corporation, and (ii) those
Directors of the Corporation who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such
related agreements.
4. Continuance. This Plan shall continue in effect for as
long as such continuance is specifically approved at least annually in
the manner provided for approval of this Plan in paragraph 3(b).
5. Reports. The Administrator and other persons
authorized to direct the disposition of monies paid or payable by the
Fund pursuant to this Plan or any related agreement shall provide to
the Board of Directors of the Corporation and the Board shall review,
at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made. The Administrator
shall annually certify in writing that the aggregate payments received
from the Fund pursuant to the Plan during the year did not exceed its
total costs incurred during the year (including reasonable allocation
of overhead) in assisting in the distribution of the Common Stock.
6. Termination. This Plan may be terminate at any time by
vote of a majority of the Rule 12b-1 Directors, or by a vote of a
majority of the outstanding shares of Common Stock (as defined in the
Act).
7. Amendments. This Plan may not be amended to increase
materially the amount of payments provided for in paragraph 1 hereof
unless such amendment is approved in the manner provided for initial
approval in paragraph 3 hereof.
8. Selection of Directors. While this Plan is in effect,
the selection and nomination of Directors who are not interested
persons (as defined in the Act) of the Corporation shall be committed
to the discretion of the Directors who are not interested persons.
9. Records. The Corporation shall preserve copies of this
Plan and any related agreements and all reports made pursuant to
paragraph 5 hereof, for a period of not less than six years from the
ate of this Plan, or the agreements or such reports, as the case may
be, the first two years in an easily accessible place.
10. Allocation of Certain Expenses. For purposes of
Paragraphs 1, 2 and 5 hereof the following allocations will be made in
determining permitted expenditures. Overhead expenses, including rent
and utilities will be allocated based on the percentage of time used
to assist the distribution of shares of the Fund as contrasted with
all other uses of rented space. For example rent will be allocated
pursuant to the following formula:
(a) The total rent paid by the Administrator will be
multiplied by a fraction, the numerator of which is the square feet
utilized by him in assisting in the distribution of shares of the Fund
and the denominator of which is the total square feet rented by the
Administrator.
(b) The product obtained will be multiplied by the
percentage of the Administrator's time devoted to assisting in the
distribution of shares of the Fund.
Exhibit 16
SPECIMEN PRICE MARK-UP SHEET
(Based on September 30, 1995 Balance Sheet)
Net Assets Excluding Securities $90,256
Securities at Cost $566,538 566,538
Market Value 607,232
Unrealized Gain/(Loss) 40,694
Total Net Assets $697,488
Shares Outstanding - 131,495
NAV per Share ($697,488/131,495) $ 5.30
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<NAME> PENN CAPITAL FUNDS, INC.
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