UFOC

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Sample UFOC

OFFERING CIRCULAR

THE MUTUAL FUND STORE, LLC

(a Missouri limited liability company)

355 Ozark Trail Drive, Suite #4

St. Louis, Missouri 63011

Telephone: (636) 386-6868

Business: You will operate a fee-based investment management business under the trade name THE MUTUAL FUND STORE® offering personalized mutual fund management services to retail investors (the "Franchise Business").

Initial Fees: The initial franchise fee ("Initial Franchise Fee") ranges between $50,000 -$250,000 depending on the size of the territory you purchase. See Items 5 and 12 of this Offering Circular.

Initial Investment: We estimate that your initial investment to open THE MUTUAL FUND STORE® will range between $120,700 and $482,250. The low estimate includes a $50,000 Initial Franchise Fee and the high estimate includes a $250,000 Initial Franchise Fee.

Risk Factors:

1.         THE FRANCHISE AGREEMENT REQUIRES THAT ALL DISPUTES (WITH LIMITED EXCEPTIONS) BE RESOLVED FIRST BY NON-BINDING MEDIATION, AND IF THAT PROCESS DOES NOT RESULT IN RESOLUTION, BY COURT PROCEEDING. MEDIATION MUST OCCUR AT OUR HEADQUARTERS. ALL LITIGATION MUST OCCUR IN THE STATE OR FEDERAL COURTS IN OR CLOSEST TO OUR HEADQUARTERS, EXCEPT IF WE BRING THE ACTION IN YOUR HOME STATE UNDER THE CIRCUMSTANCES THAT WE DESCRIBE IN THE FRANCHISE AGREEMENT OR IF LOCAL LAW REQUIRES THAT THE ACTION BE BROUGHT IN YOUR HOME STATE. PRESENTLY, OUR HEADQUARTERS ARE IN ST. LOUIS COUNTY, MISSOURI, BUT WE MAY CHANGE THE LOCATION OF OUR HEADQUARTERS AT ANY TIME.

2.         THE FRANCHISE AGREEMENT PROVIDES THAT MISSOURI LAW GOVERNS THE AGREEMENT. THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS YOUR LOCAL LAW IF YOU RESIDE OUTSIDE OF MISSOURI. YOU MAY WANT TO COMPARE THESE LAWS.

3.         REFER TO THE STATE-SPECIFIC ADDENDUM ATTACHED TO THIS OFFERING CIRCULAR FOR MORE DETAILS ABOUT THE LAWS APPLICABLE IN YOUR STATE.

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4.

THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information comparing companies granting franchises like this one is available. Call the state administrators listed in Exhibit A or your public library for sources of information.

Registration of this franchise with a state does not mean that the state recommends it or has verified the information in this Offering Circular. If you learn that anything in this Offering Circular is untrue, contact the Federal Trade Commission and the applicable state agency listed in Exhibit A.

Effective Date of this Offering Circular: See Exhibit I.

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Table of Contents

Item 1. THE COMPANY, ITS PREDECESSORS AND AFFILIATES........................................1

Item 2. BUSINESS EXPERIENCE.................................................................................................5

Item 3. LITIGATION......................................................................................................................6

Item 4. BANKRUPTCY..................................................................................................................7

Item 5. INITIAL FEE.....................................................................................................................7

Item 6. OTHER FEES......................................................................................................................9

Item 7. INITIAL INVESTMENT..................................................................................................13

Item 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES............................17

Item 9. YOUR OBLIGATIONS....................................................................................................21

Item 10. FINANCING...................................................................................................................22

Item 11. OUR OBLIGATIONS.....................................................................................................22

Item 12. TERRITORY...................................................................................................................31

Item 13. TRADEMARKS..............................................................................................................33

Item 14. PATENTS, COPYRIGHTS AND CONFIDENTIAL INFORMATION.......................35

Item 15. OBLIGATIONS TO PARTICIPATE IN THE ACTUAL OPERATION OF THE

BUSINESS...........................:..........................................................................................36

Item 16. RESTRICTIONS ON WHAT YOU MAY SELL...........................................................37

Item 17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION............39

Item 18. PUBLIC FIGURES.........................................................................................................42

Item 19. EARNINGS CLAIM.......................................................................................................42

Item 20. LIST OF OUTLETS........................................................................................................43

Item 21. FINANCIAL STATEMENTS.........................................................................................43

Item 22. CONTRACTS.................................................................................................................43

Item 23. RECEIPTS.......................................................................................................................44

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UFOC                                                                                                                                                                                 4/7/03 5:29:12 PM


Exhibit A       State Administrators List

Exhibit B       Agents for Service of Process

Exhibit C       Franchise Agreement

Exhibit D       Table of Contents - Operations Manual

Exhibit E       Confidentiality Agreement

Exhibit F       Schwab Institutional Custodian Account Agreement

Schwab Customer Authorization for Payment of Management Fee

Exhibit G       General Release

Exhibit H       Addendum to Lease

Exhibit I        State Addendum and State Effective Dates

Exhibit J        Financial Statements

Exhibit K       List of Operating Locations

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Item 1. THE COMPANY, ITS PREDECESSORS AND AFFILIATES

1.   Terminology. To simplify the language in this Offering Circular, "Company", "us" or "we" means The Mutual Fund Store, LLC. "You" means the person who buys the franchise. If you are a business entity (e.g., a corporation, partnership, LLC, LLP or other entity), "you" means both the entity and its owners.

2.   Our Business. We were formed as a Missouri limited liability company on August 28, 2000. Our principal business address is 355 Ozark Trail Drive, Suite #4, St. Louis, Missouri 63011. We disclose the background of our current officers, Adam Bold and Chris Braudis, in Item 2. Our members are Adam Bold and VenVest, Inc., a Delaware corporation.

Since July, 1998, Adam Bold has produced a weekly radio talk show, THE MUTUAL FUND SHOW, devoted exclusively to mutual funds and investment strategies, featuring Mr. Bold and different guest hosts. The show currently airs in various markets in the Midwest, including in the markets of the two operating THE MUTUAL FUND STORES®. Mr. Bold also provides voice for radio commercials promoting the radio show. We will negotiate with a local station in your market meeting our broadcast range and audience demographic standards to broadcast THE MUTUAL FUND SHOW and sell you radio advertising time to enhance local awareness of THE MUTUAL FUND STORE® name. As a radio show talk host personality, Mr. Bold indirectly provides services to our franchisees. However, you will not make any payments to him or to any third party for these services.

We have no affiliates that offer franchises in any line of business or that provide products or services to our franchisees. We also have no predecessors.

Our agent for service of process in Missouri is SNR Missouri Registered Agent, Inc. In certain states, we may also appoint a state agency as our agent for service of process in that state. (Exhibit B)

We were formed for the purpose of licensing independent THE MUTUAL FUND STORES® and do not currently engage in other business activities. While we have not operated, and do not currently operate, businesses of the type being franchised, our managers have experience operating THE MUTUAL FUND STORES® in Kansas City and St. Louis through entities in which our managers have an interest (see subpart 3 below). We derive our experience from our managers' experience in the securities industry generally and in operating THE MUTUAL FUND STORES® through these affiliate companies.

3.   Prior Business Experience. With a background in general securities brokerage services and as a Certified Mutual Fund Counselor, Adam Bold founded THE MUTUAL FUND STORE® concept and opened the first THE MUTUAL FUND STORE® in June, 1996 in Kansas City, Kansas. THE MUTUAL FUND STORE® concept focuses on asset allocation services for individual investors through a diverse portfolio of carefully selected mutual funds. Mr. Bold, through a wholly owned corporation, continues to own and operate the Kansas City THE MUTUAL FUND STORE® and is co-owner of the St. Louis THE MUTUAL FUND

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STORE® opened in October, 2000 with VenVest, Inc. The Kansas City and St. Louis THE MUTUAL FUND STORES® are substantially similar to the business which you will conduct as our franchisee. See Item 20 for the addresses of the operating THE MUTUAL FUND STORES®.

4. THE MUTUAL FUND STORE® Franchise.

If we offer you a franchise, you will sign our Franchise Agreement (Exhibit C), which will grant you a license to operate a fee-based investment management company offering personalized mutual fund management services to retail investors under our proprietary name, "THE MUTUAL FUND STORE®," and the other trademarks, service marks, logos and commercial symbols that we designate (the "Proprietary Marks"). The license will permit you to use our distinctive marketing, operating and asset allocation systems and models (collectively, "TMFS System").

TMFS System includes, without limitation:

    Methodologies, including our proprietary SAMS ("Strategic Asset Management System") for developing personalized investment strategies for retail customers based on the investor's income requirements, investment objectives, risk tolerances, and time horizons and the compatibility of our investment proposals with the investor's existing holdings.

    Continuous research using modern portfolio theory to identify a diverse portfolio of mutual funds meeting specific investment objectives. Our research efforts enable us to update continuously a list of diversified mutual funds which you may select among in providing investment management services to your clients.

    Initial and on-going training for you and your Investment Advisor Representatives ("IARs").

    Advertising and marketing services, including distribution of THE MUTUAL FUND SHOW to a radio station in your market meeting our broadcast and audience demographic specifications. You must purchase advertising airtime from the radio station to promote your Franchise Business during the weekly show and at other strategic times during the week. In some markets, the radio station may also charge a fee to broadcast THE MUTUAL FUND SHOW, for which you are responsible. These expenses are included in the Item 7 initial investment chart. For additional disclosures regarding THE MUTUAL FUND SHOW, see Items 8 and 11.

     Strategies for client development, retention and suitability assessment, including recommended sales scripts and closing techniques.

    Operating protocols, including covering the following subjects: minimum account balance recommendations; reporting and record keeping forms; specifications for office design, decoration, and signs; recommendations for staffing; workflow processes; and other matters. We publish our operating protocols in our confidential operations manual ("Manual") and loan you a copy of the Manual for the franchise term when you sign the Franchise Agreement. Exhibit D is a copy of our Manual's table of contents. We give you a copy of

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the Manual to review before you execute the Franchise Agreement if you sign our Confidentiality Agreement (see Exhibit E).

    Access to SchwabLINK, proprietary software provided free to our franchisees by Schwab Institutional, Charles Schwab & Co., Inc.'s professional investment manager division serving more than 2 million clients and custodian of more than $25 billion of funds from clients of investment managers world-wide. SchwabLINK enables you to track your client accounts and process trades electronically using Schwab Institutional as custodian, and allows your clients to view their account balance instantly on-line. We are not affiliated with Schwab Institutional and Schwab Institutional does not compensate us for designating them as the custodian of all THE MUTUAL FUND STORE® accounts.

    As custodian for all THE MUTUAL FUND STORES®, Schwab Institutional's services include sending monthly account statements and trade confirmations directly to your clients. You do not make any payments to Schwab Institutional or any third party in exchange for their services as custodian. You must enter into Schwab Institutional's form of custodian account agreement (see Schwab's current form of Investment Manager Service Agreement attached as Exhibit F) before you open the Franchise Business, and maintain an investment management account with Schwab. See additional disclosures in Item 8.

    Access to proprietary software programs available from third parties enabling you to set up, monitor and close client accounts, perform portfolio assessments; prepare investment portfolios; maintain client contact information; and manage your accounts receivable.

    Back office assistance, including the following services: compiling and sending out quarterly reports to your clients that compares their portfolio to leading indices; monitoring and assisting with client transfers and initial account set-up; maintaining your client contact and account information; and performing all client billing and accounts receivable management.

    A simplified process for collecting Management Revenue. To establish an account at Schwab Institutional, your clients will sign a limited power of attorney that allows Schwab to debit their account for the quarterly management fees which they owe to you under your fee schedule. (See Schwab's authorization form which your clients must sign to open an account, attached as Exhibit F). We compile a quarterly accounting for each of your clients estimating the quarterly management fees due from the client, which you will approve and process with Schwab Institutional, which will then debit your clients' accounts and credit your investment management account for your quarterly management fees. Under the Custodian Account Agreement that you sign with Schwab Institutional, when Schwab Institutional credits your investment management account for quarterly management fees, it will also immediately debit your account, and credit our account, for the Royalty Fees due to us. Through this process, we simplify your collection procedure as well as your payment of Royalty Fees to us. See disclosures in Items 6 and 8.

We distinguish THE MUTUAL FUND STORES® by promoting fee-based investment management services. Fee-based means that clients pay an all-inclusive pre-set management fee for all services that you provide, ranging from account management, portfolio selection, and

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processing of trades, to preparation and distribution of quarterly performance reports. You will establish your own fees, which you may choose to vary depending on the size of the portfolios that you manage. While we may recommend certain fee structures and promote THE MUTUAL FUND STORES® as following our recommended fee structure, we do not set the fees you must charge and require only that you follow a one-rate, flat fee approach.

The one-rate, flat fee approach bases compensation on the total portfolio value under management, typically calculating the fee as a percentage of the portfolio value, applying a descending percentage as portfolios exceed specific levels. The traditional model of compensation for investment advisors is to charge a percentage commission on the dollar amount of each transaction. A one-rate, flat fee approach, unlike traditional transactional (percentage) broker commissions, eliminates any incentive for an investment advisor to recommend trades for the sake of generating commissions for himself or herself. Therefore, a one-rate, flat fee approach removes a potential source of conflict from the advisor-client relationship and a frequent focus of regulatory inquiry. The one-rate, flat fee commission approach is a distinctive feature of THE MUTUAL FUND STORE® marketing program.

If you purchase a large Territory which we believe can support a second THE MUTUAL FUND STORE®, you may apply to open a second location after 2 years of operation if your first location meets our minimum asset level (see Item 12) and you are in good standing under the Franchise Agreement. You must sign our current form of Franchise Agreement for the second location, which may materially differ from the Franchise Agreement that we attach to this Offering Circular (Exhibit C). We will waive the Initial Franchise Fee for the second location. In selling you a franchise for a large Territory, we do not require you to open a second location, but may impose this obligation as a condition to renewing your franchise rights. Additionally, as we disclose in Item 12, if you purchase a large Territory and do not reach our minimum asset level after 2 years of operation, we may reduce the boundaries of your Territory.

5.   Competition

The financial products and services industry is highly competitive. You will compete with a variety of financial institutions, including banks; national, regional and local general securities brokerage firms; financial planners and personal investment advisors; mutual funds that sell their products directly to consumers; insurance companies that offer securities and financial planning services in addition to traditional insurance products; discount brokers; and other financial entities that offer similar products and services. Your competitors will include large institutions with global operations and highly-recognizable brand names in the financial industry offering all types of financial products and investment services not limited to mutual funds, as well as individual advisors focusing specifically on mutual fund products as we do. Mutual fund companies selling their products directly to consumers are another source of competition, although they traditionally do not offer investment advice.

6.   Applicable Laws

Extensive laws and regulations apply to the sale of securities and will affect the way you do business. Individuals who provide investment supervisory services and financial advice to the public must qualify as an investment advisor representative ("IAR") by passing the National

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Association of Securities Dealers ("NASD") Series 65 exam or any other exams required by the applicable state1 and must affiliate with a firm that separately qualifies as an investment advisor in its home state. To qualify as an investment advisor, the firm must (i) file a Uniform Application for Investment Advisor (Form ADV) with each state in which they maintain an office (beginning in April 2001, some states require that filings be made through a national organization, the IARD, which is consolidating the regulatory requirements applicable to IARs); (ii) comply with applicable surety bonding requirements; and (iii) consent to jurisdiction in the state for claims arising out of their investment advisory services.

Many states require companies doing business as an investment advisor to register in the state even if they do not maintain an office in the state when the company manages money for more than 5 residents of that state. If the total assets under your supervisory management exceeds $25 million, you may register your firm as an investment advisor with the federal Securities and Exchange Commission ("SEC"). However, when the total assets under your management exceed $30 million, registration with the SEC is mandatory.

We use, and recommend that you retain, National Compliance Consultants, Inc., ("NCCI"), an independent consulting firm specializing in providing compliance and regulatory information services to the securities industry, to handle regulatory compliance with the SEC and applicable state agencies both for your firm and for the IARs that you employ or retain. We are not affiliated with NCCI and receive no compensation or other material benefits from NCCI by referring our franchisees to them for compliance and regulatory services.

In addition to licensing requirements for IARs, the NASD as well as individual states also regulate certain operational activities of IARs, including an IAR's custody or handling of client funds. You must investigate and comply with the laws applicable in your state.

Item 2. BUSINESS EXPERIENCE

Our managers and executives with management responsibility are: Chief Executive Officer: Adam S. Bold

Adam Bold founded THE MUTUAL FUND STORE® concept and opened the first THE MUTUAL FUND STORE® in June, 1996 in Kansas City, Kansas through his wholly-owned

1 Under the Franchise Agreement, all IARs must successfully complete Series 65 testing and any other testing or licensing requirements under the laws of the state in which they operate the Franchise Business. We may modify the minimum requirements for IARs or impose different qualifications in the future. You must also operate the Franchise Business in compliance with all laws. States differ with respect to the regulation of IARs. Some states require only Series 65 testing, some require Series 63 and Series 65, some require Series 66 and Series 7, and some waive examination based on other qualifications. Currently Michigan, Minnesota, New York, Puerto Rico, Tennessee and Wyoming do not register IARs and therefore do not require testing. Georgia only requires principals to test. New Jersey does not register IARs, but requires employees of IARs to complete testing. Texas requires IARs to pass a Texas Securities Exam. The adoption of a uniform regulatory system applicable to IARs has been the subject of extensive examination among industry groups and state legislatures for some time, but, at the moment, no uniform regulatory system exists, resulting in significantly disparities among states.

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corporation, Bold Financial Group, Inc. ("BFGI"), a Kansas corporation, located in Kansas City, Kansas. BFGI has operated the Kansas City THE MUTUAL FUND STORE® continuously since 1996, changing its corporate name in September, 2000 to The Mutual Fund Store, Inc., a Kansas Corporation (the "Kansas Licensor").

Mr. Bold is the creator and producer of the weekly THE MUTUAL FUND SHOW, currently, the Midwest's only radio show devoted exclusively to mutual funds and investments. Mr. Bold is a Certified Mutual Fund Counselor, a designation awarded to him in 1999 by the College for Financial Planning located in Boulder, Colorado. Mr. Bold has been affiliated with Cambridge Investment Research, Inc., with principal offices in Fairfield, Iowa, as a Registered Representative selling general securities from September 2000 until May, 2001. Before his affiliation with Cambridge, he was affiliated as a Registered Representative with Securities America, Inc. (Omaha, Nebraska) from October, 1999 until August, 2000; Round Hill Securities, Inc. (Leawood, Kansas) from July, 1996 until September, 1999; Prudential Securities, Inc. (Kansas City, Kansas) from February, 1995 until July, 1996; and Smith Barney, Inc. (Kansas City, Kansas) from May, 1992 until February, 1995.

Mr. Bold will primarily focus on marketing and operational matters with franchisees.

President and Chief Operating Officer: Christopher R. Braudis

Chris Braudis joined VenVest, Inc., a St. Louis, Missouri venture capital company engaged in strategic investments, as its officer responsible for business development and expansion, in January, 2000. He was responsible for opening the St. Louis THE MUTUAL FUND STORE® in August, 2000 and manages its operations. From January, 1998 through December, 1999, Mr. Braudis was in the mergers and acquisition group of the investment banking division of A.G. Edwards in St. Louis, Missouri. From August, 1995 until December, 1997, Mr. Braudis was a full-time student at the University of Missouri in Columbia, Missouri. He received a Bachelor of Science degree in Business Administration with an emphasis in finance in December, 1997 from the University.

Mr. Braudis will oversee all financial functions as well as marketing and operational matters with franchisees.

Item 3. LITIGATION

On August 6, 1996, Adam S. Bold was named as a defendant in a matter filed with the Kansas City, Kansas office of the NASD, captioned Paul E. Goffv. Prudential Securities, Inc., Vincent Lee Morris, Adam S. Bold, and Samuel Richard Taylor, Jr., Case No. 96-03463. Mr. Goff sought damages for alleged excessive trading, unauthorized trading and unsuitable trading. The plaintiff dismissed Mr. Bold with prejudice on July 23, 1997. Mr. Bold did not pay anything to settle the action or obtain the dismissal.

On July 24, 2001, Adam S. Bold and the Kansas Licensor (see Item 1) were named as defendants in a matter filed with the Kansas City, Kansas office of the NASD, captioned Richard

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& Winifred Kreitzer v. Adam S. Bold & The Mutual Fund Store, Inc, Case No. NASD-DR 297-012252. The Kreitzers sought damages for alleged misrepresentations and omissions, negligence, breach of contract and breach of fiduciary duty. The parties entered into a confidential settlement and full release of all claims on or about May 13, 2002, which resulted in the complainants dismissing the case with prejudice and the Kansas Licensor paying the Krietzers a material sum of money, but substantially less than the amount sought in the complaint.

Except for the above, no other litigation is required to be disclosed in this Offering Circular.

Item 4. BANKRUPTCY

No person previously identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this item.

Item 5. INITIAL FEE

1. Amount and Method of Payment.

The Initial Franchise Fee ranges between $50,000 - $250,000 depending on the population size of the Territory you purchase. See Item 12 for additional disclosures regarding your Territory.

We define your Territory using Metropolitan Statistical Areas ("MSAs"), which are geographic areas which the federal Office of Management and Budget (OMB) identifies according to uniform statistical criteria. The OMB publishes geographic, statistical and population data for MSAs relying on the most recent U.S. census data. Our Initial Franchise Fee schedule is as follows:

Amount

Population Size in Your Territory According to MSA Data

$50,000

Under 500,000 population

$75,000

500,000 or more, but less than 1 Million population

$100,000

1 Million or more, but less than 1,500,000 population

$125,000

1,500,000 or more, but less than 2 Million population

$150,000

2 Million or more, but less than 2,500,000 population

$175,000

2,500,000 or more, but less than 3 Million population

$200,000

3 Million or more, but less than 3,500,000 population

$225,000

3,500,000 or more, but less than 4 Million population

$250,000

4 Million or more population

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We identify your Territory and determine the amount of the Initial Franchise Fee when you are ready to sign the Franchise Agreement (Exhibit C). You pay the entire Initial Franchise Fee when you sign the Franchise Agreement and it is fully earned when paid. Except as we disclose in this Item 5, the Initial Franchise Fee is not refundable. Later fluctuations in the population size of your Territory do not affect the amount of the Initial Franchise Fee that you must pay to us, nor does it obligate us to refund any portion of the Initial Franchise Fee to you.

We do not collect any other fees or payments from you for goods or services that we provide to you before your THE MUTUAL FUND STORE® opens for business.

As noted in Item 1, if we allow you to open a second THE MUTUAL FUND STORE® in your Territory, we will enter into our then-current Franchise Agreement for the second store, but waive payment of the Initial Franchise Fee.

2. Conditions for Refund

We have 60 days after we sign the Franchise Agreement to negotiate a contract with a local radio show for broadcasting rights for THE MUTUAL FUND SHOW. The local station must meet our broadcast range and audience demographic standards and agree to sell you at least the minimum amount of broadcast advertising time we require at strategic time slots that will reach the show's target audience. We will use our best efforts to complete negotiations within 60 days, and, as soon as we are successful, we will notify you in writing so that you can begin site selection for your THE MUTUAL FUND STORE®. In some markets, radio stations may impose a fee to broadcast THE MUTUAL FUND SHOW in addition to requiring the purchase of advertising air time. When we notify you that we have a contract with a local radio station, we will also advise you of the broadcast advertising minimum we will require you to spend monthly to purchase advertising air time, as we explain in Item 8.

If we are not successful in negotiating a favorable broadcasting contract with a local radio station meeting our criteria, either you, or we, may terminate the Franchise Agreement. Additionally, if you are unwilling to accept the broadcast advertising minimum that we will require, you may terminate the Franchise Agreement.

To elect termination, you, or we, must give written notice to the other within 15 days after the end of the 60 day period (or by 75 days after we sign the Franchise Agreement). If either one of us elects to terminate the Franchise Agreement, we will refund the entire Initial Franchise Fee. To qualify for the refund, you must sign our General Release (Exhibit G).

If neither one of us elects to terminate the Franchise Agreement, the Franchise Agreement will remain in force.

You are responsible for investigating potential sites in the Territory that we assign to you for your THE MUTUAL FUND STORE® and must obtain our approval of a location before you may enter into a lease for the location. You have 60 days in which to obtain site approval. This 60 day period starts with the first to occur of the following two events: (i) the date that we notify you that we have a contract for the broadcast of THE MUTUAL FUND SHOW by an acceptable radio station in your market, or (ii) in cases when we cannot negotiate a contract on terms acceptable to us, the end of the 15 day period within which either one of us may terminate the

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Franchise Agreement under the conditions that we describe in this Item 5. If you fail to get our approval of a site by the end of this 60-day period, we may terminate the Franchise Agreement, in which case we will refund all but $5,000 of the Initial Franchise Fee. To qualify for the refund, you must sign our General Release (Exhibit G).

[End of Page]

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Item 6.

OTHER FEES

Name of Fee*

Amount

Due Date

Remarks

Royalty Fee

30% of Management Revenue, except under limited circumstances as we disclose in Note 2, when we will reduce the Royalty Fee to 15% of Management Revenue.

Quarterly, payable each time when your investment management account at Schwab Institutional receives credit for Management Revenue. See Note 1

Management Revenue consists of the management fees and other charges that you collect from your clients for providing investment advisory services. See definition of Management Revenue in Note 1.

Note 2 explains the conditions under which you may qualify for a lower Royalty Fee equal to 15% of Management Revenue.

Advertising Fee

After the Franchise Business has been open for 12 months, you must be able to show that your expenditures on Local Advertisements for the most recent trailing 12 months are at least 8% of Management Revenue. If you spend less, we may collect the difference between what you spend, and 8% of Management Revenue, as an Advertising Fee.

We will review your Local Advertisement Expense Reports monthly. If they indicate that your expenditures on Local Advertisements for the most recent trailing 12 months are less than 8% of Management Revenue, you authorize Schwab Institutional to debit your investment management account for the difference.

See Note 3.

Part 1 Initial Training After Opening

Our per diem training fee at our current rate at the time we provide services. Currently Part 1 training is a 5-day program. See Item 11.

Before training begins

We do not impose any training fee for providing training to you or your IARs before opening. IARs must complete at least 3 days of Part 1 training (see Item 11, Section 7), and IARs whom you want to qualify as a Supervising IAR (see Item 15) must complete the entire Part 1 training course. If your IARs do not attend pre-opening training with you (because, for example, you hire them after you open), you must pay our current per person, per diem training fee. Additionally, you remain responsible for any travel, lodging, food, and salary expenses for them to attend our training programs (both pre and post opening).

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99


On-Site Training and Assistance

Per diem at our current rate at the time we provide services, plus reimbursement of reasonable travel, lodging and out-of-pocket expenses to send one of our staff members to your THE MUTUAL FUND STORE®

Per diem fee is payable in advance;

reimbursement of travel, lodging and personal expenses is payable within 30 days after invoice.

Only if you request on-site assistance.

We publish our current per diem on-site fee in the Manual. Fee does not apply to Part 2 of the pre-opening initial training program.

Seminars and Other Additional Training After Opening (Other than Annual Meeting)

If we host additional training, we may impose a training fee, which will be at our current rates at the time we provide the training. The rate we charge may vary depending on the length of the course and the curriculum. If a third party conducts a seminar or training program for us or during a program that we host, the third party vendor may impose a separate fee. In some cases, you may pay the fee directly to the vendor, not to us.

Training or seminar fees are payable before you attend the course. You remain responsible for all travel, lodging, personal expenses and salary for you and your staff.

We may host or offer additional training programs both in-person and through Internet-enabled technology and computer software. For both live, instructor-led training, and for online training, we may impose a training fee at our current rates.

We may also host an Annual Meeting. We do not impose any training or meeting fee to attend the Annual Meeting.

See Item 11.

Transfer Fee

20% of your Initial Franchise Fee

When you apply for our consent to a proposed transfer

The Franchise Agreement defines what events constitute a "transfer" requiring payment of a transfer fee and what constitutes a "Qualified Transfer." See Item 17 and applicable provisions in the Franchise Agreement.

Short-Term Management Fee in the Event of your Death or Disability

20% of all Management Revenue for as long as we manage the Franchise Business after your death or disability. Payable in addition to Royalty Fees.

Payable quarterly at the same time, and in the same manner, as Royalty Fees.

After your death or disability, we allow your successor, such as your surviving spouse, heirs or remaining owners, 180 days to qualify as a transferee, or to sell the Franchise Business. If your successor does not have the proper licenses to operate the Franchise Business under applicable laws, we may, in our discretion, assign our own IAR to operate the Franchise Business for you. During this time, your successor (i) is liable for all operating expenses, including salary to our IARs, and (ii) must pay us a Short-Term Management Fee equal to 20% of the Management Revenue of the Franchise Business, in addition to the Royalty Fee.

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Indemnification and Defense

All costs including attorneys' fees; amount will vary under circumstances

As we incur expenses and present them to you

You must reimburse us for losses which we suffer resulting from the operation of your business. We may retain our own legal counsel. You must reimburse us for our legal and other professional expenses in connection with the claim.

Cost and Attorneys' Fees

Will vary under circumstances

Upon settlement or conclusion of claim or action

Awarded to prevailing party.

Replacement Manual

$500, plus shipping costs

Within 10 days of invoice

If you lose the Manual that we lend to you and the loss is not the result of your breach of the Franchise Agreement and you are not otherwise in default.

[Notes to Item 6 continue on next page]

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Notes to Item 6 - Other Fees

* All fees are non-refundable and payable to us.

NOTE 1: "Management Revenue" means the aggregate of all management fees and other revenue which you collect from your clients for investment advisory services during the applicable client's quarterly accounting period, less any credits or rebates that you document you have given to the client during the accounting quarter. As we disclose in Item 1, while we require you to follow a one-rate, flat fee approach, you establish your own fee structure.

NOTE 2: The applicable quarterly period starts on the date of the client's initial deposit. Therefore, your clients will have different quarterly accounting periods.

Within 15 days after the end of each client's quarterly accounting period, we will provide you with an accounting, for your approval, showing an estimate of the quarterly management fees due from the client under your fee structure. You are responsible for reviewing the accounting for accuracy, revising it, if necessary, and submitting it to Schwab Institutional for processing. Schwab Institutional will (i) debit the client's account and credit your investment management account for your quarterly fee, and immediately (ii) debit your investment management account, and credit our own account at Schwab for our Royalty Fee, which is 30% of your Management Revenue (15% in limited circumstances). We may change the manner in which we collect Royalty Fees at any time upon no less than 30 days written notice.

After your THE MUTUAL FUND STORE® opens, the radio station that agrees to broadcast THE MUTUAL FUND SHOW may, for any reason, cancel the show or change the broadcast time or frequency, or we may cease producing THE MUTUAL FUND SHOW. We are not liable to you if any of these events occurs. However, if THE MUTUAL FUND SHOW no longer is broadcast in your Territory to at least the majority of the region, or if live weekly broadcast does not occur over any period of 4 consecutive weeks or longer, we will reduce the Royalty Fee to 15% of Management Revenue. The Royalty Fee shall remain at 15% of Management Revenue for the remainder of the franchise term or until broadcast of THE MUTUAL FUND SHOW resumes on a comparable radio station in your market, in which case the Royalty Fee will return to 30% of Management Revenue starting on the date that live broadcast resumes. We make no promise about our ability to enter into a broadcasting contract with a suitable substitute radio station.

If, before your THE MUTUAL FUND STORE® opens, we cannot negotiate a favorable contract with a local radio station in your market meeting our criteria, but you do not elect to terminate the Franchise Agreement as we explain in Item 5, your Royalty Fee is 30% of Management Revenue.

Except for reducing the Royalty Fee under the circumstance we describe in this Note 2, you have no claim against us if (i) the radio station we select cancels broadcast of THE MUTUAL FUND SHOW in the Territory at any time; (ii) we cannot negotiate a broadcasting contract for THE MUTUAL FUND SHOW with a comparable radio station in the Territory acceptable to us; (iii) the radio station fails to broadcast THE MUTUAL FUND SHOW live for any period; (iv) we decide to stop producing THE MUTUAL FUND SHOW;

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or (v) we or the radio station make material changes in the format, content or broadcast schedule of THE MUTUAL FUND SHOW. We have sole discretion (i) to negotiate a broadcasting contract with a radio station meeting our broadcast and demographic criteria and on terms acceptable to us, and (ii) to cease producing THE MUTUAL FUND SHOW at any time for any reason.

NOTE 3: After your Franchise Business is open for 12 months, you must spend at least 8% of Management Revenue on Local Advertisements. See Item 11, Section 3. Expenses for Local Advertisements include, for example, the cost to produce broadcast advertising and buy airtime from the radio station that broadcasts THE MUTUAL FUND SHOW. To verify your expenditures, you must submit a Local Advertisement Expense Report to us each month starting with the date that your Franchise Business opens.

After your Franchise Business has been open for a full year, we look back at your total expenditures on Local Advertisements for each trailing 12-month period. Thus, in the 13th month after your Franchise Business opens, your monthly Local Advertisement Expense Reports for months 1 through 12 must show that you have spent at least 8% of Management Revenue for the corresponding 12 month period on Local Advertisements; in the 14th month, your monthly Local Advertisement Expense Reports for months 2 through 13 must show that you have spent at least 8% of Management Revenue for the corresponding 12 month period on Local Advertisements, and so on.

If your aggregate expenditures on Local Advertisements for any trailing 12 month period are less than 8% of Management Revenue for the corresponding 12 month period, we may collect the difference as an Advertising Fee, which we will deposit into our Marketing Fund. See Item 11 for further disclosures.

Item 7. INITIAL INVESTMENT

Unless otherwise shown, all initial investment categories cover the first 3 months of operations. We assume that you do not already own or lease suitable retail premises and that you are not currently registered as an IAR in your state. Your initial investment costs will be lower if you currently occupy suitable retail premises and/or have the requisite permits, licenses, registrations, certificates and authorizations.

If we give you permission to open a second THE MUTUAL FUND STORE® in your Territory (see Item 1), we will at that time provide you with our current Offering Circular, which will include the Franchise Agreement for the second store and our current initial investment estimate.

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Name of Cost

Amount

Method of Payment

Due Date

Payable To

Initial Franchise Fee (Note 1)

$50,000 to $250,000

Lump sum

Upon signing

Franchise

Agreement

Us

Real estate costs and deposits

(Note 2)

$5,000 to $31,250

As incurred

Before opening and according to lease

Third party landlord

Leasehold improvements and miscellaneous fixtures

(Note 3)

$15,000 to $60,000

As incurred

Before opening

Contractor and miscellaneous third parties

Furniture, furnishings and interior decoration

(Note 4)

$10,000 to $30,000

As incurred

Before opening

Suppliers, retailers, and other third parties

Computer hardware, software, installation and set-up costs

(Note 5)

$10,000 to

$25,000

As incurred. Financing may be available, but we assume you purchase outright.

Before opening

Suppliers, retailers, and other third parties

Other business equipment;

telephones; start-up business supplies; signage

(Note 6)

$3,000 to $15,000

As incurred

Before opening

Suppliers, retailers, and other third parties

Utilities

(Note 7)

$900 to $4,500

As incurred

Before opening

Utility companies

IAR and other securities licenses, certificates, and registration fees

(Note 8)

$1,000 to $3,000

As incurred

Before opening

Government agencies, NCCI or comparable compliance consulting firm

Travel and living expenses during initial training

(Note 9)

$2,000 to $6,000

As incurred

-Before and in connection with opening

Airlines and other transportation providers, hotels, restaurants, employee salaries.

Insurance

(Note 10)

$300 to $1,500

As incurred

Either lump sum or in monthly installments

Insurance companies

Advertising expenses -initial phase

(Note 11)

$1,500 to $21,000

As incurred

As incurred during initial period

Various media, advertising agencies, graphic designer, and other third parties

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Name of Cost

Amount

Method of Pavment

Due Date

Pavable To

Additional Funds (Note 12)

$22,000 to $35,000

As incurred

As incurred

Miscellaneous; Schwab Institutional

TOTAL

$120,700 to

$482,250

Notes to Item 7 - Initial Investment

NOTE 1: See Item 5 regarding the conditions for refund.

NOTE 2: We base our estimates on a prototype office of 1,500 square feet. You must locate in retail space with storefront visibility meeting our site specifications (see Item 11). The cost per square foot of retail space varies considerably depending upon the location and market conditions affecting commercial property, the size and pre-existing condition of the premises, and your own credit-rating. We estimate that rent per square foot will range from $10/sq. ft. (low) to $50/sq. ft. (high), therefore, monthly rent will range from $1,250 (low) to $6,250 (high). Most commercial landlords require security deposits of one or two months' rent. Our estimate for real estate costs includes rent for the first 3 months, plus security deposit of one month (low) to two months (high).

NOTE 3: Depending on the prior use and condition of your location, you may have to do some leasehold improvement work to convert the space to professional offices, including relocating and adding walls and changing lighting, flooring, wall coverings, and ceiling treatments. The Manual contains specifications for imaging, decoration, furnishings, and furniture. We estimate that costs for leasehold improvements and miscellaneous fixtures will range from $10 (low) to $40 (high) per square foot.

NOTE 4: We assume you purchase all furniture and furnishings. Our estimate allows for expenses for a professional decorator.

NOTE 5: At your option, you may purchase or lease computer hardware meeting our minimum specifications, although we recommend that you purchase, rather than lease, equipment to avoid extra financing costs. Your total expense for this category will depend on the size of your opening staff and whether you purchase desktop or laptop computers. Our estimate assumes you open with 1 IAR and 1 non-professional administrative staff and that each person has a desktop computer and shares one high-quality network printer. This category includes the cost to get connectivity to our computer network (with Internet access) either through a Wide Area Network (WAN) in our space or with a secure Internet account. You will need to install network and telephone cabling to properly operate your computer system. See Item 8 for the initial and continuing costs of the proprietary software that we require you to use to operate the Franchise Business. We include those costs in our estimates.

NOTE 6: You will incur expenses for other business equipment including calculators, telephones, photocopier, and postage machine, which you may purchase or lease at your option by arrangement with the vendor. You will also incur expenses for stationery, business

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The original documents were scanned as an image. The original file can be downloaded at the link above.