UNITED STATES File No. 333-04983
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-07649
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
Polynous Trust
(Exact name of Registrant as Specified in Charter)
88 Kearny Street, Suite 1300
San Francisco, California 94108
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (415) 956-3384
Kevin L. Wenck, President
Polynous Capital Management, Inc.
88 Kearny St., Suite 1300
San Francisco, California 94108
(Name and Address of Agent for Service)
COPIES TO:
Eric M. Sippel, Esq. Joseph M. O'Donnell, Esq.
Shartsis, Friese & Ginsburg Fund/Plan Services, Inc.
One Maritime Plaza, 18th Floor 2 West Elm Street
San Francisco, CA 94111 Conshohocken, Pennsylvania 19428
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration
Statement.
________________________________________________________________
Registrant has elected to register an indefinite number of shares of
its securities under this Registration Statement pursuant to Rule
24f-2 of the Investment Company Act of 1940, as amended. Registrant
will file a Notice pursuant to Rule 24f-2 within two months after the
fiscal year end.
________________________________________________________________
Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
this Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
TABLE OF CONTENTS
Registration Statement of Polynous Trust
Page
1. Cross-Reference Sheet . . . . . . . . . . . . . . . . 3
2. Polynous Growth Fund Class A Shares -
Part A - Prospectus. . . . . . . . . . . . . . . . . . 4
3. Polynous Growth Fund Class D Shares -
Part A - Prospectus. . . . . . . . . . . . . . . . . . 27
4. Polynous Growth Fund - Part B -
Statement of Additional Information . . . . . . . . . . 48
5. Polynous Growth Fund - Part C - Other Information . . . 62
6. Signature Page. . . . . . . . . . . . . . . . . . . . . 66
7. Index to Exhibits . . . . . . . . . . . . . . . . . . . 67
<PAGE>
POLYNOUS TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481a
Form N-1A Item
Part A Prospectus Heading
1. Cover Page of Prospectus
2. Prospectus Summary; Expense Summary
3. *
4. Investment Objective and Policies; Risk Factors; Prospectus Summary;
The Trust and the Fund; Investment Limitations; General Information
5. Prospectus Summary; Management of the Fund; Distribution Plan
5A. *
6. Prospectus Summary; General Information; Dividends and Taxes; Net Asset
Value
7. Prospectus Summary; How to Purchase Shares; Shareholder Services
8. Prospectus Summary; How to Redeem Shares
9. *
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page of the Statement of Additional Information
11. Table of Contents
12. *
13. Investment Policies and Techniques;Investment Restrictions;
Portfolio Transactions
14. The Trust; Investment Advisory and Other Services; Trustees and
Officers
15. *
16. Investment Advisory and Other Services
17. Portfolio Transactions
18. Other Information
19. Purchases; Redemptions
20. Taxes
21. Underwriter
22. Performance Information
23. *
Part C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration
Statement.
* Item is inapplicable at this time or answer is negative.
<PAGE>
POLYNOUS GROWTH FUND
88 Kearny Street, Suite 1300
San Francisco, California 94108
Class A Shares PROSPECTUS dated August _, 1996
Polynous* Growth Fund (the "Fund") seeks to achieve capital
appreciation by investing in the equity securities of U.S. companies
with total market capitalization at the time of purchase of between
$500 million and $5 billion and which, in the opinion of Polynous
Capital Management, Inc., will have an annual company revenue growth
rate of between 15% and 30%.
The Fund is a separate series of shares of Polynous Trust (the
"Trust"), an open-end, management investment company commonly known
as a mutual fund. Polynous Capital Management, Inc. (the
"Adviser"), serves as the investment adviser of the Fund managing its
assets in accordance with its investment objectives stated in this
prospectus.
The Fund offers its shares through two separate classes of shares:
Class A Shares and Class D Shares. Both classes of shares are
identical except as to the expenses borne by each class. These
alternative classes permit investors to choose the method of
purchasing shares most beneficial to them. This Prospectus provides
information concerning Class A Shares.
You may receive information concerning Class D Shares by calling
(800)-______________.
The Fund is designed for long-term investors and not as a trading
vehicle, and is not intended to present a complete investment
program.
This Prospectus sets forth concisely the information regarding the
Fund that an investor should know before investing in the Fund.
Please read this Prospectus carefully and retain it for future
reference. A Statement of Additional Information dated , 1996,
which may be revised from time to time, provides a greater in-depth
discussion of certain areas which may be of interest to some
investors. It has been filed with the Securities and Exchange
Commission and is available upon request and without charge. To
receive a copy, write to the Fund at the address above or call (800)
.
*The word "Polynous" in ancient Greece would literally mean "many
thoughts".
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 THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary . . . . . . . .
Expense Summary. . . . . . . . . .
Mission Statement. . . . . . . . .
Introduction . . . . . . . . . . .
The Trust and the Fund . . . . . .
Investment Objective . . . . . . .
Investment Policies and Strategies
The Polynous Dynamic Value Process
Risk Factors . . . . . . . . . . .
Management of the Fund . . . . . .
The Distribution Plan. . . . . . .
How to Purchase Shares . . . . . .
How to Redeem Shares . . . . . . .
Shareholder Services . . . . . . .
Net Asset Value. . . . . . . . . .
Dividends and Taxes. . . . . . . .
Performance Information. . . . . .
General Information. . . . . . . .
Underwriter: Adviser:
Fund/Plan Broker Services, Inc. Polynous Capital Management, Inc.
2 W. Elm Street 88 Kearny Street, Suite 1300
Conshohocken, Pennsylvania 19428 San Francisco, California 94108
(800) (800)
(610) (415) 956-3384
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED
IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE
FUND TO MAKE SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE,
DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
<PAGE>
Prospectus Summary
What is the Fund's Investment Objective? Polynous Growth Fund (the
"Fund") seeks to achieve long-term capital growth.
There can be no assurance that the Fund will be able to achieve its
investment objective. See "Investment Objective and Policies".
What are the Permitted Investments? The Fund intends to invest, under
normal circumstances, substantially all of its assets in the equity
securities of U.S. companies whose total market capitalization at the
time of purchase is valued between $500 million and $5 billion and
which, in the opinion of Polynous Capital Management, Inc. (the
"Adviser"), will have an annual company revenue growth rate of
between 15% and 30%. See "Investment Objective" and "The Polynous
Dynamic Value Process".
What are the Risks Involved with an Investment in the Fund? The
investment policies of the Fund have certain risks and considerations
of which investors should be aware. The Fund invests in securities
that fluctuate in value, and therefore investors should expect the
Fund's net asset value per share to fluctuate. Investing in the
equity securities of companies within the target market
capitalization involves special risks and considerations not
typically associated with investing in the equity securities of
larger companies. The securities of such companies are less liquid
and more volatile than the securities of larger companies. See
"Investment Objective and Policies" and "Risk Factors".
Who is the Investment Adviser? Polynous Capital Management, Inc.
serves as the investment adviser of the Fund. See "Expense Summary"
and "Management of the Fund".
Who is the Administrator, Transfer Agent and Fund Accounting Agent?
Fund/Plan Services, Inc. serves as the administrator, transfer agent
and fund accounting agent for the Fund. See "Management of the
Fund".
Who is the Underwriter? Fund/Plan Broker Services, Inc. serves as the
underwriter of the Fund's shares. See "Management of the Fund".
Is There a Sales Load? Purchases of Class A Shares are subject to a
maximum sales charge of 4.50% and are subject to annual 12b-1 Plan
expenses. See "The Distribution Plan" and "How to Purchase Shares".
Is There a Minimum Investment? The minimum initial investment is
$2,500 ($1,000 for IRA and SEP accounts) and $200 for subsequent
investments.
How do I Purchase Shares? Contact your broker or the underwriter
listed above. Class A Shares are offered at the net asset value per
share plus a maximum initial sales charge of 4.50% of the offering
price and are subject to annual 12b-1 Plan expenses not to exceed
0.25%. See "How to Purchase Shares".
How do I Sell Back (Redeem) Shares? Shares of the Fund may be
redeemed at the current net asset value per share next determined
after receipt by the transfer agent of a redemption request in proper
form. Signature guarantees may be required for certain redemption
requests. See "How to Redeem Shares".
How are Distributions Paid? Although the investment program is
designed for capital appreciation, some incidental investment income
may be generated in the form of dividends or interest. Substantially
all of the net investment income (exclusive of capital gains) of the
Fund will distributed in the form of annual dividends. If any capital
gains are realized, substantially all of them will be distributed by
the Fund at least annually. All dividends and distributions are paid
in additional shares (without sales charge) unless payment in cash is
requested in writing. See "Dividends and Taxes".
Expense Summary
Shareholder Transaction Expenses:
Class A
Maximum sales charge imposed on purchases
(as a percentage of offering price). . . . . . . . . . . 4.50%(1)
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price). . . . . . None
Deferred sales charge (as a percentage of
original purchase price). . . . . . . . . . . . . . . . None
Redemption fees (as a percentage of
amount redeemed) (2) . . . . . . . . . . . . . . . . . . None
(1) Reduced for purchases of $50,000 and over. See "How to Purchase
Shares".
(2) If you want to redeem shares by wire transfer, the Fund's
transfer agent charges a fee (currently $9.00) for each wire
redemption. Purchases and redemptions may also be made through
broker-dealers and others who may charge a commission or other
transaction fee for their services.
Class A
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory Fees (after fee waivers)(3) . . . . . . . . . . 0.00%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Other Expenses (4) . . . . . . . . . . . . . . . . . . . 1.75%
Total Fund Operating Expenses (after fee waivers)(3). . 2.00%
(3) The Adviser has, on a voluntary basis, agreed to waive all or a
portion of its fees and to reimburse certain expenses of the Fund
necessary to limit the total operating expenses for the first year
of operations to 2.00% of the Fund's average net assets. The Adviser
reserves the right to terminate this waiver or any reimbursement at
any time, in its sole discretion. Absent such fee waivers and
presuming first year assets at $5 million, advisory fees for the Fund
would be 1.00% and estimated total operating expenses would be 7.55%
of the Fund's average daily net assets on an annualized basis.
(4) Since the Fund does not have any actual operating history and
for purposes of this table, "Other Expenses" is based on estimated
amounts for the upcoming fiscal year.
Example
Based on the level of expenses listed above, and (i) imposition of
the maximum sales charge, (ii) 5% annual return and (iii) redemption
at the end of each time period, the total expenses relating to an
investment of $1,000 would be as follows:
Class A
1 Year $ 64
3 Years $105
The foregoing example should not be considered a representation of
past or future expenses. Actual expenses may be more or less than
those shown. The purpose of the expense tables and example is to
assist the investor in understanding the various costs and expenses
that may be directly or indirectly borne by shareholders of the Fund.
Additional information may be found under "Management of the Fund".
The rules of the Securities and Exchange Commission require that the
maximum sales charge be reflected in the above table with respect to
these shares. However, certain investors may qualify for a reduced
sales charge. See "How to Purchase Shares".
Long-term holders of these Shares may eventually pay more than the
economic equivalent of the maximum front-end sales charges otherwise
permitted by the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD").
Mission Statement of Polynous Capital Management, Inc., Adviser to
the Fund
At a time when many organizations in the investment management
business have redefined their objective to be "asset gathering" and
"client retention" rather than investment management excellence,
Polynous Capital Management, Inc. believes that there is an
opportunity to manage a firm whose sole purpose is to pursue
investment management excellence. A principal difference will also
be that the owners and associates of Polynous Capital Management,
Inc. believe the activity of investment management and its concurrent
fiduciary responsibilities are more properly regarded as a profession
rather than as a "business". As a profession, no compromises will be
tolerated in the pursuit of the best investment management results
for this Fund. Although the Adviser will also strive to achieve
excellence in its marketing, client service and administration, these
areas will always be regarded only as necessary functions supporting
our primary investment management activities and not as the principal
focus of the firm.
Introduction
This Prospectus provides a potential investor the information which
is needed so that an informed decision may be made as to including
shares of the Fund in that investor's investment program. The money
that an investor uses to purchase shares of the Fund will be pooled
with other shareholders money and collectively invested, or "managed"
by the Adviser in accordance with the investment objective of the
Fund. The tools used by the Adviser to make those investments of the
pooled money are referred to as Investment Policies and Strategies.
A major difference between the Investment Objective and Investment
Policies and Strategies is that the Investment Objective cannot be
changed unless a majority of the shareholders of the Fund approve
such a change. Other parts of this Prospectus will explain to a
prospective or current shareholder other matters concerning an
investment in the Fund such as the Risk Factors involved with such an
investment, the companies which provide services to the Fund, the
expenses of managing the Fund, the manner by which shares of the Fund
may be purchased or sold back as well as the overall management of
the Fund. Please read this Prospectus carefully before you invest or
send money and keep it for your future reference.
The Trust and the Fund
Polynous Trust (the "Trust") is an open-end management investment
company organized as a business trust under the laws of the State of
Delaware. The Trust is organized to offer separate series of shares
and is currently offering a single series of shares called Polynous
Growth Fund (the "Fund"). The Fund currently offers two separate
classes of shares and additional classes of shares may be added
without shareholder approval. Class A Shares and Class D Shares
differ with respect to sales charges and minimum initial investment.
Except for these differences, each share of the Fund represents an
undivided proportionate interest in the Fund. This Prospectus
concerns the offering of Class A Shares. For more information
regarding Class D Shares, please call (800)- .
Investment Objective
The investment objective of Polynous Growth Fund (the "Fund") is
long-term capital appreciation. The Fund seeks to achieve capital
appreciation by investing in the equity securities of U.S. companies
with total market capitalization at the time of purchase of between
$500 million and $5 billion and which, in the opinion of Polynous
Capital Management, Inc., will have an annual company revenue growth
rate of between 15% and 30%.
This objective is fundamental and may not be changed without a vote
of the holders of the majority of the outstanding voting securities
of the Fund. The Fund's investment process, known as "The Polynous
Dynamic Value Process" described below is not fundamental and may be
changed without shareholder approval. Additional investment policies
and restrictions are described in the Statement of Additional
Information.
Investment Policies and Strategies
The Adviser may invest in or employ one or more of the following
investment policies or strategies to assist in its attempt to attain
the Fund's investment objective.
Equity Securities: Equity securities in which the Fund may invest
include common stocks, preferred stocks and securities convertible
into or exchangeable for common stocks, including warrants and
rights.
Private Placements: The Fund may invest up to 5% of its total assets
at the time of investment, in securities which are subject to
restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined
to be liquid pursuant to the procedures discussed in the following
paragraph, are not subject to the foregoing restriction). These
securities are generally referred to as private placements or
restricted securities. Limitations on the resale of such securities
may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The
Fund may have to bear the expense of registering such securities for
resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under
the Securities Act, which permits the Fund to sell restricted
securities to qualified institutional buyers without limitation. The
Adviser, pursuant to procedures adopted by the Trustees of the Fund,
will make a determination as to the liquidity of each restricted
security purchased by the Fund. If a restricted security is
determined to be "liquid", such security will not be included within
the category "illiquid securities", which under current policy may
not exceed 15% of the Fund's total net assets. The Fund's policy is
to limit illiquid securities (which include, but are not limited to
private placements) to a maximum of 15% of total net assets.
Repurchase agreements with maturities in excess of seven days will be
considered illiquid securities.
Options and Futures: The Fund may engage in transactions involving
the use of options and futures contracts for the purpose of hedging
against market changes. An "index future" is a contract to buy or
sell units of a particular stock index at an agreed price on a
specified future date. Depending on the change in value of the index
between the time when the Fund enters into and terminates an index
future transaction, the Fund realizes a gain or loss. The Fund may
buy and sell call and put options and index futures on stock indices
in addition to or as an alternative to purchasing or selling index
futures to the extent permitted by applicable law. When the Fund
writes a call option, it gives up the opportunity to profit from any
increase in the price of a security above the exercise price of the
option. The Fund may engage in options and futures transactions
provided that no more than 5% of the Fund's total assets would be
required for premiums on such strategies.
The Fund's ability to use these strategies may be limited by market
conditions, regulatory limits and tax considerations and there can be
no assurance that any of these strategies will succeed.
The Polynous Dynamic Value Process
The Adviser's investment process combines the dynamic opportunities
of growth stock investing with the valuation disciplines of "value
investing". (Value investing refers to the process by which an
investment professional chooses certain stocks because that
professional believes that they are undervalued relative to some
static valuation parameter such as book value). This combination is
a natural result of our "many thoughts" about what the Adviser
believes is an appropriate balance between return and risk for the
Fund.
The Adviser believes that growth stock investing with little or no
concern about absolute valuation subjects the Fund to unnecessary
risks. Conversely, while value investing has typically outperformed
growth investing while also having lower risk, the Adviser believes
the lower growth rates of "value" stocks truncate potential returns.
The Dynamic Value Process combines the advantageous qualities of each
approach in an overall process also having rigorous structure and
discipline, thereby offering the Fund a more thoughtful approach
using higher growth equities.
In addition to using the positive aspects of each approach, the
Adviser seeks to implement an overall investment process that it
believes has more similarities with disciplined business management
than with a typical investment process. This process is divided into
two distinct activities: i) Research, and ii) Portfolio Management;
with both having the same structure, control and discipline that may
be more often associated with a well managed business.
Each separate activity is further divided into discreet tasks for
greater structure. The individual tasks are:
The Research Process
1. Economic/Sector/Industry Analysis
2. Initial Screening
3. Opportunity Assessment
4. Comprehensive Risk Assessment
5. Continuing Review
The Portfolio Management Process
1. Valuation
2. Portfolio Characteristics
3. Buy Discipline
4. Portfolio Monitoring
5. Sell Discipline / Portfolio Optimization
Although having this structure, control and discipline is no
guarantee of success, the Adviser believes that the requirements of
its process will result in both high levels of knowledge about each
company before it can be considered for inclusion in the Fund's
portfolio and high return prospects for the companies which then
satisfy its portfolio purchase discipline. At each step of the
process the primary focus is on risk management, not stock selection.
The Adviser believes that risk is managed best by knowing more about
the Fund's portfolio companies than might be typical and having less
expensive companies in our portfolios than also might be typical for
a growth fund portfolio.
If the structure of the Adviser's research requirements and portfolio
management requirements result in there not being enough companies
meeting these requirements at any given time for the Fund to be fully
invested, the Fund is permitted to purchase and temporarily hold
liquid assets such as U.S. Treasury securities and the debt
securities of the Agencies of the U.S. Government which are
guaranteed by the full faith and credit of the United States.
Pending the investment of new subscriptions, the Fund may also
temporarily hold liquid assets until there are enough companies
meeting the Adviser's "buy discipline". To the extent that the Fund
holds high levels of liquid assets, the Fund will not be invested so
as to achieve its objective. Contrasted with some practices
elsewhere in the investment management industry, the Adviser does not
automatically add to existing position sizes when additional cash
comes into the Fund from new subscriptions. All purchases, either of
new positions or of additions to existing positions, require a
certain minimum projected annualized return based on the Adviser's
research conclusions. All position sizes must also comply with the
Adviser's strict position size limits as specified by the Adviser's
"position size/projected return matrix." The Adviser also believes
that the requirements of its research process and the time which the
Adviser's personnel spend on analyzing each company result in the
Adviser investing cash from new subscriptions more slowly than may be
typical within the investment management industry. As a result,
there may be times during which the Fund holds a higher percentage of
its assets in short-term, high-quality instruments than other growth
oriented funds. During periods of significant subscriptions inflows,
the Adviser reserves the right to close the Fund to new subscriptions
with little or no notice until the Adviser has sufficient new
investment opportunities to enable the Fund to be more fully
invested. There may also be periods where for defensive purposes
when market circumstances so warrant that the Fund may temporarily
convert its assets into liquid assets. Liquid assets are defined as
U.S. Treasury bills, notes and bonds.
Risk Factors
There is no such thing as a guaranteed investment and no one can see
into the future. Accordingly, the value of an investment in the Fund
will probably fluctuate over time and may be valued higher or lower
at the time of redemption. An investment in the Fund should be only
a part of an overall investment strategy. Before investing, please
consider the following special factors in determining the
appropriateness of an investment in the Fund. No assurance can be
given as to the success of the Adviser's investment program.
Mid-Cap Sized Companies
The Adviser attempts to reduce the overall risks connected of
investing in equity securities through the implementation of its
investment process. Some, or even a substantial portion of the
companies in which the Fund will invest, however, are likely to have
limited product lines, smaller markets and more limited financial
resources than larger companies. Also, some of these companies are
relatively young employing unseasoned management. The securities of
these companies may have limited marketability and be subject to
abrupt or erratic market movements compared to the securities of
larger and more established companies. Many of the securities of the
companies chosen for the Fund's portfolio are traded on the
over-the-counter-market (NASDAQ Market) and while this market has
grown substantially over the past seven years, it cannot be stated
that this growth will continue. Further, the securities on the NASDAQ
sometimes trade less often and in smaller volumes that those
securities on the larger exchanges. The value of NASDAQ securities
may fluctuate more sharply than the exchange listed securities and
the Fund may find it difficult to sell certain portfolio securities
under severe market circumstances.
Options and Futures Transactions
The Fund may enter into futures contracts for hedging purposes within
the meaning and intent of the Commodity Futures Trading Commission.
The use of futures and related options involves certain special
risks. Futures and options transactions involve costs and may result
in losses. Certain risks arise because of the possibility of
imperfect correlations between movements in the prices of index
futures and options and movements in the prices of the underlying
stock index or of the securities in the Fund's portfolio that are the
subject of a hedge.
The successful use of options and futures further depends on the
Adviser's ability to forecast market movements correctly. Other
risks arise from the Fund's potential inability to close out its
futures or options positions, and there can be no assurance that a
liquid secondary market will exist for any future or option at any
particular time. The Fund generally expects that its options and
futures transactions will be conducted on recognized exchanges. In
certain instances, however, the Fund may purchase and sell options in
the over-the-counter markets. The Fund's ability to terminate
options in the over-the-counter markets may be more limited than for
exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet
their obligations to the Fund.
Management of the Fund
The Board of Trustees
The Trust has a Board of Trustees that establishes the Fund's
policies and supervises and reviews the management of the Fund. The
day-to-day operations of the Fund are administered by the officers of
the Trust and by the Adviser pursuant to the terms of the Investment
Advisory Agreement with the Fund. The Trustees review the various
services provided by the Adviser to ensure that the Fund's general
investment policies and programs are being properly carried out and
that administrative services are being provided to the Fund in a
satisfactory manner. Information pertaining to the Trustees and
executive officers is set forth in the Statement of Additional
Information.
The Investment Adviser
Polynous Capital Management, Inc. serves as the Fund's investment
adviser and manager, and is an investment adviser registered as such
under the Investment Advisers Act of 1940, as amended. The Adviser
does not have any past experience managing mutual funds but its
principal has managed mutual funds in previous assignments. See
"Portfolio Management" below. The principal business address of the
Adviser is 88 Kearny Street, Suite 1300, San Francisco, California
94108.
The Adviser makes the investment decisions concerning the assets of
the Fund and continuously reviews, supervises and administers the
Fund's investment programs, subject to the supervision of, and
policies established by the Trustees of the Fund.
Management Fees
The investment advisor believes that the benefits from the economies
of scale available in the investment management industry should be
shared with the shareholders of the Fund. As such, the annual
advisory fees described in the following have defined "break points"
at various levels of assets for the Fund. For providing investment
advisory services, the Fund pays the Adviser a monthly fee which is
calculated daily by applying the following annual rates: 1.00% on
assets $100 million and below, 0.75% on the next $150 million, 0.60%
on the next $250 million, 0.50% on the next $500 million, and 0.40%
on all amounts above $1 billion. The table below offers a
theoretical example of the annual percentage management fee if the
Fund's assets were fixed at the following amounts for an entire year:
Fund Size Annual Management Fee
$100 million 1.000%
$250 million .850%
$500 million .725%
$1 billion .6125%
$2 billion .50625%
As the assets of open-ended mutual funds may vary widely within a
given year, the example above is theoretical and the total management
fee within the Fund's fiscal year as a percentage of year-end Fund
assets may vary significantly from the percentage figures in the
example. The investment advisory fee schedule listed above,
particularly at lower amounts of Fund assets, result in fees higher
than that paid by most investment companies, although the Advisor
believes the fees comparable to that paid by investment companies
with similar investment objectives and policies. From time to time,
the Adviser may voluntarily waive all or a portion of its management
fee and/or absorb certain expenses of the Fund without further
notification of the commencement or termination of any such waiver or
absorption. Any such waiver or absorption will have the effect of
lowering the overall expense ratio of the Fund and increasing the
Fund's overall return to investors at the time any such amounts are
waived and/or absorbed. The Adviser has voluntarily agreed to waive
all or a portion of its fee, and/or to reimburse expenses of the Fund
to the extent necessary in order to limit net operating expenses for
the first year of operations to an annual rate of not more than 2.00%
of the Fund's average daily net assets. The Adviser reserves the
right to terminate its voluntary fee waiver and reimbursement at any
time, in its sole discretion. Any reductions in its fee that are
made by the Adviser are subject to reimbursement by the Fund within
the following three years, provided that the Fund is able to effect
such reimbursement and remain in compliance with applicable expense
limitations.
Portfolio Management
Kevin L. Wenck is primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Wenck has been investing his
own portfolio since 1968 and first began managing portfolios for
others in 1974. Mr. Wenck founded Performance Management in 1977 to
manage portfolios for individuals outside his immediate family and
continued those activities until 1983. Mr. Wenck's most recent
experience before founding Polynous Capital Management in May 1996
included five years managing mid-cap and small-cap growth stock
portfolios with G.T. Capital Management. Part of Mr. Wenck's
responsibilities at G.T. Capial Management (renamed LGT Asset
Management in 1996) included portfolio manager for the G.T. Global:
America Growth Fund, which he managed from July 1, 1991 through April
30, 1996. During this period that Fund grew from approximately $100
million in assets to over $700 million in assets and was ranked 22nd
out of 286 growth funds as classified by Micropal over the four year
and ten month period ending April 30, 1996. Supporting Mr. Wenck at
Polynous Capital Management are three analysts, Jeanne Kraus, Eric
Wold, and Don Clark, who worked with Mr. Wenck at G.T. Capital
Management. Mr. Wenck's investment process on which the Adviser
relies, has remained virtually unchanged since 1987. Mr. Wenck's
other professional investment experience includes three years
managing small-cap growth stock portfolios with Matuschka & Co.
Mr. Wenck's other principal business experience includes two years
with Advanced Micro Devices where he was responsible for
corporate-level budgets and forecasts as a member of the Corporate
Planning department. Additional experience includes product
development work with Applied Expert Systems, an artificial
intelligence software company, and also a number of entrepreneurial
activities in various types of businesses.
Mr. Wenck's professionally oriented educational experience includes
being awarded an M.B.A. degree in 1985 from Amos Tuck School of
Business at Dartmouth College and being awarded his C.F.A.
designation in 1986. Mr. Wenck's undergraduate degree was awarded by
Marlboro College in 1981 where he majored in Philosophy and Classical
Literature.
The Underwriter
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street,
Conshohocken, Pennsylvania 19428, serves as statutory Underwriter
pursuant to an agreement. The Underwriter serves the limited purpose
of facilitating the registration of shares of the Fund under state
securities laws and to assist in the sale of shares.
The Administrator
Fund/Plan Services, Inc. ("Fund/Plan"), which has its principal
business address at 2 W. Elm Street, Conshohocken, Pennsylvania
19428, serves as administrator of the Fund pursuant to an
Administrative Services Agreement. The services that Fund/Plan
provides to the Fund include: coordinating and monitoring of any
third parties furnishing services to the Fund; providing the
necessary office space, equipment and personnel to perform
administrative and clerical functions for the Fund; preparing, filing
and distributing proxy materials, periodic reports to shareholders,
registration statements and other documents; and responding to
shareholder inquiries.
The Custodian, Transfer Agent and Fund Accounting/Pricing Agent
The Bank of New York serves as custodian for the safekeeping
securities and cash of the Fund.
Fund/Plan serves as the Fund's transfer agent. As a transfer agent,
it maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions.
Shareholder inquiries should be addressed to the transfer agent at
(800) ________.
Fund/Plan also performs certain accounting and pricing services for
the Fund, including the daily calculation of the Fund's net asset
value per share.
Fund Expenses
The Fund is responsible for all of its own expenses. Such expenses
may include, but are not limited to: management fees; legal expenses;
audit fees; printing and postage costs (e.g. costs of printing annual
reports, semi-annual reports and prospectuses which are distributed
to existing shareholders); brokerage commissions; the expenses of
registering and qualifying shares of the Fund for sale with the
Securities and Exchange Commission and with various state securities
commissions; expenses of the organization of the Fund; transfer
agent, custodian and administrator fees; the expenses of obtaining
quotations of portfolio securities and pricing the Fund's shares;
trade association dues; all costs associated with shareholder
meetings and the preparation and dissemination of proxy materials;
costs of liability insurance and fidelity bonds; fees for Trustees
who are not officers, directors or employees of the Adviser; and any
extraordinary and nonrecurring expenses which are not expressly
assumed by the Adviser.
Class-specific expenses relating to distribution fee payments
associated with a Rule 12b-1 plan for a particular class of shares
and any other costs relating to implementing or amending such plan
(including obtaining shareowner approval of such plan or any
amendment thereto), will be borne solely by shareowners of such class
or classes. Other expense allocations which may differ among
classes, or which are determined by the Trustees to be class-specific,
may include but are not limited to: printing and postage
expenses related to preparing and distributing required documents
such as sharehowner reports, prospectuses, and proxy statements to
current shareowners of a specific class; SEC registration fees and
state blue sky fees incurred by a specific class; litigation or other
legal expenses relating to a specific class; Trustee fees or expenses
incurred as a result of issues relating to a specific class; and
different transfer agency fees attributable to a specific class.
Brokerage
The Fund may execute brokerage or other agency transactions through
an affiliate of the Adviser or through FPBS for which the affiliate
or FPBS may receive "usual and customary" compensation. The Adviser
will use its best efforts to obtain the best available price and most
favorable execution with respect to all transactions of the Fund.
Subject to policies established by the Board of Trustees, however,
the Fund may pay a broker-dealer a commission for effecting a
portfolio transaction for the Fund in excess of the amount of
commission another broker-dealer would have charged if the Adviser
determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such
broker-dealer. In selecting and monitoring broker-dealers and
negotiating commissions, consideration will be given to a
broker-dealer's reliability, the quality of its execution services on
a continuing basis and its financial condition. All commissions paid
are reviewed quarterly by the Board of Trustees of the Trust.
Portfolio Turnover
The Fund anticipates the annual portfolio turnover rate will not
exceed 150%.
The Distribution Plan
The Board of Trustees of the Fund has adopted a distribution plan for
the shares pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Plan"). As provided in the Plan, the Fund
will pay an annual fee up to 0.25% of the average daily net assets to
the Underwriter. From this amount, the Underwriter may make payments
to financial institutions and intermediaries such as banks, savings
and loan associations, insurance companies, investment counselors,
and broker-dealers who assist in the distribution of the shares of
the Fund or provide services with respect to both classes of shares
of the Fund, pursuant to service agreements with the Fund. The Plan
is characterized as a compensation plan because the distribution fee
will be paid to the Underwriter without regard to the distribution or
shareholder service expenses incurred by the Underwriter or the
amount of payments made to financial institutions and intermediaries.
The Fund intends to operate the Plan in accordance with its terms and
within NASD rules concerning sales charges.
The fees paid to the Underwriter under the Plan are subject to the
review and approval by the Trust's unaffiliated trustees who may
reduce the fees or terminate the Plan at any time. All such payments
made pursuant to the Plan shall be made for the purpose of selling
shares issued by each respective class of shares. The distribution
fee of one class will not be used to subsidize the sale of the other
class of shares.
How to Purchase Shares
General
The Fund offers these shares to the general public on a continuous
basis through the Underwriter by mail subject to annual distribution
expenses pursuant to Rule 12b-1. See "The Distribution Plan".
Shares of the Fund are offered only to residents of states in which
the shares are eligible for purchase.
Purchase orders for shares of the Fund that are received by Fund/Plan
in proper form by the close of regular trading on the New York Stock
Exchange ("NYSE")(currently 4:00 p.m. Eastern time), on any day that
the NYSE is open for trading, will be purchased at the Fund's next
determined public offering price. Orders for Fund shares received
after the close of the NYSE (currently 4:00 p.m. Eastern time) will
be purchased at the public offering price determined on the following
business day.
The Fund reserves the right to reject any purchase order and to
suspend the offering of shares of the Fund. The Fund reserves the
right to vary the initial investment minimum and minimums for
additional investments at any time. In addition, the Adviser may
waive the minimum initial investment requirement for any investor.
Purchases By Mail
Shares of the Fund may be purchased initially by completing the
application accompanying this Prospectus and mailing it to the
transfer agent, together with a check payable to "Polynous Growth
Fund". The check or money order and application should be mailed to
Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874,
Conshohocken, Pennsylvania 19428-0874. If this is an initial
purchase, please send a minimum of $2,500 (or $1,000 for IRA and SEP
accounts).
Subsequent investments in an existing account in the Fund may be made
at any time by sending a check payable to "Polynous Growth Fund", c/o
Fund/Plan Services, Inc., P.O. Box 412797, Kansas City, Missouri
64141-2797. Please enclose the bottom portion of your account
statement, and indicate the amount of the investment.
Purchases By Wire Transfer
An investor may make purchases by wire, but before making an initial
investment by wire, an investor must first telephone the transfer
agent at (800) or (610) in order to be assigned an
account number. The investor's name, account number, taxpayer
identification number or Social Security number and address must be
specified in the wire. In addition, an account application should be
promptly forwarded to: Fund/Plan Services, Inc., 2 W. Elm Street,
P.O. Box 874, Conshohocken, Pennsylvania 19428-0874. Shareholders
having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares of the Fund by requesting
their bank to transmit funds by wire to:
United Missouri Bank KC NA
ABA #10-10-00695
For: Fund/Plan Services, Inc.
A/C 98-7037-071-9
FBO "Polynous Growth Fund"
Shareholder Name and Account Number
Additional investments may be made at any time through the wire
procedures described above, which must include a shareholder's name
and account number. The shareholder's bank may impose a fee for
investments by wire. The Fund will not be responsible for the
consequence of delays, including delays in the banking or Federal
Reserve wire systems.
Wire orders for shares of the Fund received by dealers prior to 4:00
p.m. Eastern time, and received by Fund/Plan before 5:00 p.m. Eastern
time on the same day, are confirmed at that day's public offering
price. Orders received by dealers after 4:00 p.m. Eastern time are
confirmed at the public offering price on the following business day.
It is the dealer's obligation to place the order with Fund/Plan
before 5:00 p.m. Eastern time.
Purchases Through Broker-Dealers
The Fund may accept telephone orders only from brokers, financial
institutions or service organizations which have been previously
approved by the Fund. It is the responsibility of such brokers,
financial institutions or service organizations to promptly forward
purchase orders and payments for the same to the Fund. Shares of the
Fund purchased through brokers, financial institutions, service
organizations, banks and bank trust departments, may charge the
shareholder a transaction fee or other fee for its services at the
time of purchase.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by
mail, bank wire, automatic investing or direct deposit. The minimum
for subsequent investments is $200 for all accounts. When making
additional investments by mail, please return the bottom portion of a
previous confirmation with your investment in the envelope that is
provided with each confirmation statement. Your check should be made
payable to "Polynous Growth Fund" and mailed to Fund/Plan Services,
Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797. Orders to
purchase shares are effective on the day Fund/Plan receives your
check or money order.
All investments must be made in U.S. dollars, and, to avoid fees and
delays, checks must be drawn only on banks located in the United
States. A charge (minimum of $20) will be imposed if any check used
for the purchase of shares is returned. The Fund and Fund/Plan each
reserve the right to reject any purchase order in whole or in part.
Purchase of Class A Shares
Class A Shares of the Fund are offered at the public offering price
which is the current net asset value per share next determined after
receipt of a purchase order in proper form by the transfer agent,
plus any applicable sales charge. The sales charge is a variable
percentage of the offering price, depending upon the amount of the
sale. No sales charge will be assessed on the reinvestment of
distributions. See "Reduced Sales Charges". Shares may also be
bought and sold through any securities dealer having a dealer
agreement with FPBS, the Fund's principal underwriter.
The minimum initial investment for Class A Shares is $2,500 ($1,000
for IRA and SEP accounts) and subsequent purchases must be at least
$200.
The following table shows the regular sales charge on Class A Shares
of the Fund together with the reallowance paid to dealers and the
agency commission paid to brokers, collectively the "commission":
Sales Charge Sales Charge Reallowance &
as a % as % if Net Brokerage Comm-
Class A Shares of Offer- Amount ission as % of
Amount of Purchase ing Price Invested offering price
Less than $50,000. . . . . 4.50% 4.71% 4.00%
50,000 or more but
less than $100,000. . . . 4.00% 4.17% 3.50%
<PAGE>
$ 100,000 or more but
less than $250,000. . . . 3.00% 3.09% 2.75%
$ 250,000 or more but
less than $500,000. . . . 2.00% 2.04% 1.75%
$ 500,000 or more . . . . 0% 0% *
* The distributor will pay the following commissions to brokers that
are responsible for purchases of any single purchaser of Class A
shares of $500,000 or more in the aggregate: $1.00% of the purchase
amount up to $2.5 million, plus 0.50% on the excess over $2.5
million. To calculate the total commission payable for a purchase,
the distributor will combine purchases made by a single client over a
rolling 13 month period from the date of the initial purchase.
The commissions shown in the table apply to sales through financial
institutions and intermediaries. Under certain circumstances, the
Underwriter or a sub-distributor may use its own funds to compensate
financial institutions and intermediaries in amounts that are in
addition to the commissions shown above. The Underwriter or a
sub-distributor may, from time to time and at its own expense,
provide promotional incentives, in the form of cash or other
compensation, to certain financial institutions and intermediaries
whose registered representatives have sold or are expected to sell
significant amounts of shares of the Fund. Such other compensation
may take the form of payments for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives to places within or outside of the United States.
Under certain circumstances, commissions up to the amount of the
entire sales charge may be reallowed to certain financial
institutions and intermediaries, who might then be deemed to be
"underwriters" under the Securities Act of 1933, as amended.
Reduced Sales Charges
The sales charge for purchases of Class A Shares of the Fund may be
reduced through Rights of Accumulation or Letter of Intent. To
qualify for a reduced sales charge, an investor must so notify his or
her broker at the time of each purchase of shares which qualifies for
the reduction.
Rights of Accumulation
A shareholder may qualify for a reduced sales charge by aggregating
the net asset values of shares requiring the payment of an initial
sales charge, previously purchased and currently owned, with the
dollar amount of shares to be purchased.
Letter of Intent
An investor may qualify for a reduced sales charge immediately by
signing a non-binding Letter of Intent stating the investor's
intention to invest during the next 13 months a specified amount
which, if made at one time, would qualify for a reduced sales charge.
The first investment cannot be made more than 90 days prior to the
date of the Letter of Intent. Any redemptions made during the
13-month period will be subtracted from the amount of purchases in
determining whether the Letter of Intent has been completed. During
the term of the Letter of Intent, the transfer agent will hold shares
representing 4.50% of the indicated amount in escrow for payment of a
higher sales load if the full amount indicated in the Letter of
Intent is not purchased. The escrowed shares will be released when
the full amount indicated has been purchased. If the full amount
indicated is not purchased within the 13-month period, a
shareholder's escrowed shares will be redeemed in an amount equal to
the difference in the dollar amount of sales charge actually paid and
the amount of sales charge the shareholder would have had to pay on
his or her aggregate purchases if the total of such purchases had
been made at a single time. It is the shareholder's responsibility to
notify the transfer agent at the time the Letter of Intent is
submitted that there are prior purchases that may apply.
The term "single purchaser" refers to (i) an individual, (ii) an
individual and spouse purchasing shares of the Fund for their own
account or for trust or custodial accounts of their minor children,
or (iii) a fiduciary purchasing for any one trust, estate or
fiduciary account, including employee benefit plans created under
Sections 401 and 457 of the Internal Revenue Code of 1986, as
amended, including related plans of the same employer.
Sales Charge Waiver
The sales charge may be waived for purchases of these Shares by the
following types of investors: (1) any financial institution or
adviser regulated by federal or state governmental authority when the
institution or adviser is purchasing shares for its own account or
for an account for which the institution or adviser is authorized to
make investment decisions (i.e., a discretionary account); (2)
Trustees, Officers and employees of the Fund, the Adviser, and the
Underwriter (including members of their immediate families and their
retirement accounts or plans); (3) Trustees, officers and employees
of the Fund's service providers; (4) customers, clients or accounts
of the Adviser or other investment advisers or financial planners who
charge a fee for their services; (5) retirement accounts or plans, or
deferred compensation plans and trusts funding such plans for which a
depository institution, trust company or other fiduciary holds shares
purchased through the omnibus accounts for the Fund; (6) qualified
employee benefits plans created under Sections 401, 403(b)(7) or 457
of the Internal Revenue Code (but not IRA's or SEP's); (7) any
non-profit institution investing $1 million or more and (8) investors
purchasing shares of the Fund with redemption proceeds from other
mutual fund complexes on which the investor had paid a front-end
sales charge or was subject to a deferred sales charge, whether or
not paid, if such redemption has occurred no more than 30 days prior
to such purchase. The sales charge is also waived for any registered
representatives, employees or principals of securities dealers
(including members of their immediate families) having a sales
agreement with the distributor.
How to Sell Back (Redeem) Shares
Shareholders may redeem their shares of the Fund without being
subject to any redemption charge on any business day that the NYSE is
open for business. Redemptions will be effective at the current net
asset value per share next determined after the receipt by the
transfer agent of a redemption request meeting the requirements
described below.
Redemption By Mail
Shareholders may redeem their shares by submitting a written request
for redemption to Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box
874, Conshohocken, Pennsylvania 19428-0874.
A written request must be in good order which means that it must:
(i)identify the shareholder's account name and account number; (ii)
state the number of shares or dollar amount to be redeemed and (iii)
be signed by each registered owner exactly as the shares are
registered. To prevent fraudulent redemptions, the transfer agent
requires a signature guarantee for the signature of each person in
whose name an account is registered for any redemption requests
exceeding $10,000. A guarantee may be obtained from any commercial
bank, credit union, member firm of a national securities exchange,
registered securities association, clearing agency and savings and
loan association. A credit union must be authorized to issue
signature guarantees; notary public endorsement will not be accepted.
Signature guarantees will be accepted from any eligible guarantor
institution that participates in a signature guarantee program. The
transfer agent may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees
or guardians and retirement plans.
Redemption By Telephone
Shareholders who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by
calling the transfer agent at (800) or (610)
during normal business hours. In order to arrange for redemption by
wire or telephone after an account has been opened, or to change the
bank or account designated to receive redemption proceeds, a written
request with a signature guarantee must be sent to the transfer agent
at the address listed above, under the caption "Redemption By Mail".
The Fund reserves the right to refuse a wire or telephone redemption
if it is believed advisable to do so. Procedures for redeeming Fund
shares by wire or telephone may be modified or terminated at any
time.
During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event,
shareholders should follow the procedures for redemption by mail.
General Redemption Information
A redemption request will not be deemed to be properly received until
the transfer agent receives all required documents in proper form.
If you have any questions with respect to the proper form for
redemption requests you should contact the transfer agent at (800)
or (610) .
Redemptions will be processed only on a business day during which the
NYSE is open for business. Redemptions will be effective at the
current net asset value per share next determined after the receipt
by the transfer agent of a redemption request meeting the
requirements described above. The Fund normally sends redemption
proceeds on the next business day, but, in any event, redemption
proceeds are sent within seven calendar days of receipt of a
redemption request in proper form. Payment may also be made by wire
directly to any bank previously designated by an investor on his or
her new account application. There is a $9.00 charge for redemptions
made by wire to domestic banks. Wires to foreign or overseas banks
may be charged at higher rates. It should also be noted that banks
may impose a fee for wire services. In addition, there may be fees
for redemptions made through brokers, financial institutions and
service organizations.
Except as noted below, redemption requests received in proper form by
the transfer agent prior to the close of regular trading hours on the
NYSE on any business day on which the Fund calculates its net asset
value are effective as of that day. Redemption requests received
after the close of the NYSE will be effected at the net asset value
per share determined on the next business day following receipt. No
redemption will be processed until the transfer agent has received a
completed application with respect to the account.
The Fund will satisfy redemption requests for cash to the fullest
extent feasible, as long as such payments would not, in the opinion
of the Board of Trustees, result in the necessity of the Fund to sell
assets under disadvantageous conditions or to the detriment of the
remaining shareholders of the Fund.
Pursuant to the Fund's Trust Instrument, however, payment for shares
redeemed may also be made in kind, or partly in cash and partly
in-kind. The Fund has elected, pursuant to Rule 18f-1 under the 1940
Act 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 90 day period
for any one shareholder. Any portfolio securities paid or
distributed in-kind would be in readily marketable securities and
valued in the manner described below. See "Net Asset Value". In the
event that an in-kind distribution is made, a shareholder may incur
additional expenses, such as brokerage commissions, on the sale or
other disposition of the securities received from the Fund. In-kind
payments need not constitute a cross-section of the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of
payment for more than seven days during any period when (1) trading
on the NYSE is restricted or the NYSE is closed, other than customary
weekend and holiday closings; (2) the Securities and Exchange
Commission has, by order, permitted such suspension; (3) an
emergency, as defined by rules of the Securities and Exchange
Commission, exists making disposal of portfolio investments or
determination of the value of the net assets of the Fund not
reasonably practicable.
Shares of the Fund may be redeemed through certain brokers, financial
institutions, service organizations, banks, and bank trust
departments who may charge the investor a transaction or other fee
for their services. Such additional transaction fees would not
otherwise be charged if the shares were redeemed directly from the
Fund.
Telephone Transactions
Shareholders who wish to redeem their shares by telephone must first
elect the option, as described above. Neither the Fund nor any of
its service contractors will be liable for any loss or expense in
acting upon telephone instructions that are reasonably believed to be
genuine. In this regard, the Fund and its transfer agent require
personal identification information before accepting a telephone
redemption. To the extent that the Fund or its transfer agent fail
to use reasonable procedures to verify the genuineness of telephone
instructions, the Fund may be liable for losses due to fraudulent or
unauthorized instructions. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Written
confirmation will be provided for all redemption transactions
initiated by telephone.
No purchases of shares may be made by telephone unless made by a
licensed investment professional with whom an agreement has been
signed by the Underwriter.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to involuntarily redeem shares in any account
at its then current net asset value (which will be promptly paid to
the shareholder) if at any time the total investment does not have a
value of at least $500 as a result of redemptions, but not market
fluctuations. A shareholder will be notified that the value of his
or her account is less than the required minimum and such shareholder
will be allowed at least 60 days to bring the value of his or her
account up to the minimum before the redemption is processed.
SHAREHOLDER SERVICES
The following special services are available to shareholders of the
Fund. There are no charges for the programs noted below and a
shareholder may change or stop these plans at any time by written
notice to the Fund.
Automatic Investment Plan
Once an account has been opened, a shareholder can make additional
monthly purchases of shares of the Fund through an automatic
investment plan. An investor may authorize the automatic withdrawal
of funds from his or her bank account by opening his or her account
with a minimum of $2,500 and completing the appropriate section on
the new account application enclosed with this Prospectus.
Subsequent monthly investments are subject to a minimum required
amount of $100.
Retirement Plans
The Fund is available for investment by pension and profit sharing
plans including Individual Retirement Accounts, SEP, Keogh, 401(k)
and 403(b) plans through which an investor may purchase Fund shares.
For details concerning any of the retirement plans, please call the
Fund at (800) or (610) .
NET ASSET VALUE
The net asset value per share is calculated separately for each class
of the Fund and is computed once daily as of the close of regular
trading on the NYSE, currently 4:00 p.m. Eastern time. Currently,
the NYSE is closed on the following holidays or days on which the
following holidays are observed: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas.
The net asset value per share is computed by adding the value of all
securities and other assets in the portfolio, deducting any
liabilities (expenses and fees are accrued daily) and dividing by the
number of outstanding shares. Expenses are accrued daily and applied
when determining the net asset value. The portfolio securities of
the Fund listed or traded on a stock exchange are valued at the
latest sale price. If no sale price is reported, the mean of the
latest bid and asked prices is used. Securities traded over-the-
counter are priced at the mean of the latest bid and asked prices.
When market quotations are not readily available, securities and
other assets are valued at fair value as determined in good faith by
the Board of Trustees. The Fund's equity securities are valued based
on market quotations or, when no market quotations are available, at
fair value as determined in good faith by, or under direction, of the
Board of Trustees.
Securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked
prices provided by investment dealers in accordance with procedures
established by the Board of Trustees. Options, futures and options
on futures are valued at the settlement price as determined by the
appropriate clearing corporation.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes
represents fair value. When a security is valued at amortized cost,
it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Board of
Trustees.
Net asset value is calculated separately for each class of the Fund
based on expenses applicable to the particular class. Although the
methodology and procedures for determining net asset value are
identical for the Fund's classes, the net asset value of the classes
may differ because of the different fees and expenses charged to each
class.
DIVIDENDS AND TAXES
Dividends
The Fund will distribute its net investment income annually in
December. Any net gain realized from the sale of portfolio securities
and net gains realized from foreign currency transactions are
distributed at least once each year unless they are used to offset
losses carried forward from prior years, in which case no such gain
will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at
net asset value, unless a shareholder elects to receive them in cash.
Distribution options may be changed at any time by requesting a
change in writing.
Dividends paid by the Fund with respect to Class A shares are
calculated in the same manner and at the same time. Both Class A and
Class D Shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the per share
dividends of Class A Shares will differ from the per share dividends
of Class D Shares as a result of additional distribution expenses
applicable to Class D Shares.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which remains
uncashed for a period of more than one year may be reinvested in the
shareholder's account at the then current net asset value, and the
dividend option may be changed from cash to reinvest. Dividends are
reinvested on the ex-dividend date (the "ex-date") at the net asset
value determined at the close of business on that date. Dividends
and distributions are treated the same for tax purposes whether
received in cash or reinvested in additional shares. Please note
that shares purchased shortly before the record date for a dividend
or distribution may have the effect of returning capital although
such dividends and distributions are subject to taxes.
Taxes
The Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"), which will relieve the Fund of
any liability for federal income tax to the extent that its earnings
and net realized capital gains are distributed to shareholders. To
so qualify, the Fund will, among other things, limit its investments
so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be
invested in the securities of any single issuer and (ii) with respect
to 50% of the market value of its total assets, not more than 5% of
the market value of its total assets will be invested in the
securities of any single issuer, and the Fund will not own more than
10% of the outstanding voting securities of any single issuer.
An investment in the Fund has certain tax consequences, depending on
the type of account. The Fund will distribute all of its net
investment income to shareholders. Distributions are subject to
federal income tax and may also be subject to state and local income
taxes. Distributions are generally taxable when they are paid,
whether in cash or by reinvestment in additional shares, except that
distributions declared in October, November or December and paid in
the following January are taxable as if they were paid on December
31. If you have a qualified retirement account, taxes are generally
deferred until distributions are made from the retirement account.
For federal income tax purposes, income dividends and short-term
capital gain distributions are taxed as ordinary income.
Distributions of net capital gains (the excess of net long-term
capital gain over net short-term capital loss) are usually taxed as
long-term capital gains, regardless of how long a shareholder has
held the Fund's shares. The tax treatment of distributions of
ordinary income or capital gains will be the same whether the
shareholder reinvests the distributions or elects to receive them in
cash.
Shareholders may be subject to a 31 percent back-up withholding on
reportable dividend and redemption payments ("back-up withholding")
if a certified taxpayer identification number is not on file with the
Fund, or if to the Fund's knowledge, an incorrect number has been
furnished. An individual's taxpayer identification number is his/her
social security number.
Shareholders will be advised annually of the source and tax status of
all distributions for federal income tax purposes. Information
accompanying a shareholder's statement will show the portion of those
distributions that are not taxable in certain states. Further
information regarding the tax consequences of investing in the Fund
is included in the Statement of Additional Information. The above
discussion is intended for general information only. Investors
should consult their own tax advisers for more specific information
on the tax consequences of particular types of distributions.
The Fund intends to make sufficient distributions prior to the end of
each calendar year in order to avoid liability for federal excise
tax.
Sale, exchange or redemption of the Fund's shares is a taxable event
to the shareholder.
PERFORMANCE INFORMATION
Performance information such as total return for the Fund may be
quoted in advertisements or in communications to shareholders. Such
performance information may be useful in reviewing the performance of
the Fund and for providing a basis for comparison with other
investment alternatives. However, because the net investment return
of the Fund changes in response to fluctuations in market conditions,
interest rates and Fund expenses, any given performance quotation
should not be considered representative of the Fund's performance for
any future period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more
or less than their original cost.
The Fund's total return is the change in value of an investment in
the Fund over a particular period, assuming that all distributions
have been reinvested. Thus, total return reflects not only income
earned, but also variations in share prices at the beginning and end
of the period. Average annual return reflects the average percentage
change per year in the value of an investment in the Fund. Aggregate
total return reflects the total percentage change over the stated
period. Please refer to the Statement of Additional Information for
more information on performance.
GENERAL INFORMATION
Trustees and Officers of the Fund
The Trustees of the Fund have overall responsibility for the
operation of the Fund. The officers of the Fund who are employees or
officers of the Adviser serve without compensation from the Fund.
Description of Shares
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with no par value. Shares of the Fund represent
equal proportionate interests in the assets of the Fund only, and
have identical voting, dividend, redemption, liquidation and other
rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other right to subscribe to any
additional shares. Currently, there are two classes of shares issued
by the Fund. The validity of shares of beneficial interest offered by
this prospectus will be passed on by Shartsis, Friese & Ginsburg, One
Maritime Plaza, 18th Floor, San Francisco, California 94111. All
accounts will be maintained in book entry form and no share
certificates will be issued.
Voting Rights
A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held). All shares of the
Fund participate equally in regard to dividends, distributions, and
liquidations with respect to the Fund. Shareholders do not have
preemptive, conversion or cumulative voting rights.
Shareholder Meetings
The Trustees are not required, and do not intend, to hold annual
meetings of shareholders. The Trustees have undertaken to the SEC,
however, that they will promptly call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee
when requested to do so by holders of not less than 10% of the
outstanding shares of the Fund. In addition, subject to certain
conditions, shareholders of the Fund may apply to the Fund to
communicate with other shareholders to request a shareholders'
meeting to vote upon the removal of a Trustee or Trustees.
Shareholder Reports and Inquiries
The Trust issues unaudited financial information semiannually and
audited financial statements annually. Shareholder inquiries should
be addressed to the Fund c/o Polynous Capital Management, Inc., 88
Kearny Street, Suite 1300, San Francisco, California 94108 (800)
or (415) 956-3384. Purchase and redemption transactions should be
made through the transfer agent by calling (800) or (610) .
<PAGE>
INVESTMENT ADVISER
Polynous Capital Management, Inc.
88 Kearny Street, Suite 1300
San Francisco, California 94108
(415) 956-3384
UNDERWRITER
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)
(610)
SHAREHOLDER SERVICES
Fund/Plan Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)
(610)
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York
LEGAL COUNSEL
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, California 94111
AUDITORS
Ernst & Young LLP
Suite 1700
555 California
San Francisco, California 94104
For Additional Information about Polynous Growth Fund call:
(800)
(610)
<PAGE>
POLYNOUS GROWTH FUND
88 Kearny Street, Suite 1300
San Francisco, California 94108
Class D Shares PROSPECTUS _____________, 1996
Polynous* Growth Fund (the "Fund") seeks to achieve capital
appreciation by investing in the equity securities of U.S. companies
with total market capitalization at the time of purchase of between
$500 million and $5 billion and which, in the opinion of Polynous
Capital Management, Inc., will have an annual company revenue growth
rate of between 15% and 30%.
The Fund is a separate series of shares of Polynous Trust (the
"Trust"), an open-end, management investment company commonly known
as a mutual fund. Polynous Capital Management, Inc. (the "Adviser"),
serves as the investment adviser of the Fund managing its assets in
accordance with its investment objectives stated in this prospectus.
The Fund offers its shares through two separate classes of shares:
Class A Shares and Class D Shares. Both classes of shares are
identical except as to the expenses borne by each class. These
alternative classes permit investors to choose the method of
purchasing shares most beneficial to them. This Prospectus provides
information concerning Class D Shares. You may receive information
concerning Class A Shares by calling (800)-___________.
The Fund is designed for long-term investors and not as a trading
vehicle, and is not intended to present a complete investment
program.
This Prospectus sets forth concisely the information regarding the
Fund that an investor should know before investing in the Fund.
Please read this Prospectus carefully and retain it for future
reference. A Statement of Additional Information dated August ,
1996, which may be revised from time to time, provides a greater
in-depth discussion of certain areas which may be of interest to some
investors. It has been filed with the Securities and Exchange
Commission and is available upon request and without charge. To
receive a copy, write to the Fund at the address above or call
(800)_________.
*The word "Polynous" in ancient Greece would literally mean "many
thoughts".
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 THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary . . . . . . . .
Expense Summary. . . . . . . . . .
Mission Statement. . . . . . . . .
Introduction . . . . . . . . . . .
The Trust and the Fund . . . . . .
Investment Objective . . . . . . .
Investment Policies and Strategies
The Polynous Dynamic Value Process
Risk Factors . . . . . . . . . . .
Management of the Fund . . . . . .
The Distribution Plan. . . . . . .
How to Purchase Shares . . . . . .
How to Redeem Shares . . . . . . .
Shareholder Services . . . . . . .
Net Asset Value. . . . . . . . . .
Dividends and Taxes. . . . . . . .
Performance Information. . . . . .
General Information. . . . . . . .
Underwriter: Adviser:
Fund/Plan Broker Services, Inc. Polynous Capital Management, Inc.
2 W. Elm Street 88 Kearny Street, Suite 1300
Conshohocken, Pennsylvania 19428 San Francisco, California 94108
(800) (800)
(610) (415) 956-3384
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED
IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE
FUND TO MAKE SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE,
DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
<PAGE>
Prospectus Summary
What is the Fund's Investment Objective? Polynous Growth Fund (the
"Fund") seeks to achieve long-term capital growth.
There can be no assurance that the Fund will be able to achieve its
investment objective. See "Investment Objective and Policies".
What are the Permitted Investments? The Fund intends to invest, under
normal circumstances, substantially all of its assets in the equity
securities of U.S. companies whose total market capitalization at the
time of purchase is valued between $500 million and $5 billion and
which, in the opinion of Polynous Capital Management, Inc. (the
"Adviser"), will have an annual company revenue growth rate of
between 15% and 30%. See "Investment Objective" and "The Polynous
Dynamic Value Process".
What are the Risks Involved with an Investment in the Fund? The
investment policies of the Fund have certain risks and considerations
of which investors should be aware. The Fund invests in securities
that fluctuate in value, and therefore investors should expect the
Fund's net asset value per share to fluctuate. Investing in the
equity securities of companies within the target market
capitalization involves special risks and considerations not
typically associated with investing in the equity securities of
larger companies. The securities of such companies are less liquid
and more volatile than the securities of larger companies. See
"Investment Objective and Policies" and "Risk Factors".
Given the specific risks of investing in the Fund and the overall
risks of investing in general, the Fund's Adviser strongly suggests
that potential investors consider purchase of the Class A shares
which are sold through professional financial advisers such as stock
brokers or financial planners. Although the underlying investment
portfolio will be the same for both the Class A shares and the Class
D shares, the Adviser considers the Class D shares suitable only for
those investors who are very experienced and sophisticated concerning
equity investments or those who have had the Class D shares
specifically recommended by a professional financial adviser. Our
comments are based on our belief that a professional financial
adviser adds significant value through various market cycles through
tempering tendencies toward investing aggressively during periods of
positive sentiment and toward liquidating investments during periods
of negative sentiment.
Who is the Investment Adviser? Polynous Capital Management, Inc.
serves as the investment adviser of the Fund. See "Expense Summary"
and "Management of the Fund".
Who is the Administrator, Transfer Agent and Fund Accounting Agent?
Fund/Plan Services, Inc. serves as the administrator, transfer agent
and fund accounting agent for the Fund. See "Management of the
Fund".
Who is the Underwriter? Fund/Plan Broker Services, Inc. serves as the
underwriter of the Fund's shares. See "Management of the Fund".
Is There a Sales Load? Purchases of Class D Shares are not subject to
sales charge, but, are subject to annual 12b-1 Plan expenses. See
"The Distribution Plan" and "How to Purchase Shares".
Is There a Minimum Investment? The minimum initial investment is
$10,000 ($1,000 for IRA and SEP accounts) and $200 for subsequent
investments.
How do I Purchase Shares? Contact your financial adviser or the
underwriter listed above. Class D Shares are offered at the net
asset value per share and are subject to annual 12b-1 Plan expenses
not to exceed 0.35%. See "How to Purchase Shares".
How do I Sell Back (Redeem) Shares? Shares of the Fund may be
redeemed at the current net asset value per share next determined
after receipt by the transfer agent of a redemption request in proper
form. Signature guarantees may be required for certain redemption
requests. See "How to Redeem Shares".
How are Distributions Paid? Although the investment program is
designed for capital appreciation, some incidental investment income
may be generated in the form of dividends or interest. Substantially
all of the net investment income (exclusive of capital gains) of the
Fund will distributed in the form of annual dividends. If any capital
gains are realized, substantially all of them will be distributed by
the Fund at least annually. All dividends and distributions are paid
in additional shares (without sales charge) unless payment in cash is
requested in writing. See "Dividends and Taxes".
Expense Summary Class D
Shareholder Transaction Expenses:. . . . . . . . . None
Maximum sales charge imposed on purchases
(as a percentage of offering price) . . . . . None
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price) None
Deferred sales charge (as a percentage of
original purchase price). . . . . . . . . . . None
Redemption fees (as a percentage of
amount redeemed) (1). . . . . . . . . . . . . None
(1) If you want to redeem shares by wire transfer, the Fund's
transfer agent charges a fee (currently $9.00) for each wire
redemption. Purchases and redemptions may also be made through
broker-dealers and others who may charge a commission or other
transaction fee for their services.
Class D
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory Fees (after fee waivers)(2). . . . . . 0.00%
12b-1 Fees . . . . . . . . . . . . . . . . . . . 0.35%
Other Expenses (3) . . . . . . . . . . . . . . . 1.90%
Total Fund Operating Expenses
(after fee waivers)(3). . . . . . . . . . . . . . 2.25%
(2) The Adviser has, on a voluntary basis, agreed to waive all or
a portion of its fees and to reimburse certain expenses of the Fund
necessary to limit the total operating expenses for the first year of
operations to 2.25% of the Fund's average net assets. The Adviser
reserves the right to terminate this waiver or any reimbursement at
any time, in its sole discretion. Absent such fee waivers and
presuming first year assets at $5 million, advisory fees for the Fund
would be 1.00% and estimated total operating expenses would be 7.65%
of the Fund's average daily net assets on an annualized basis.
(3) Since the Fund does not have any actual operating history and
for purposes of this table, "Other Expenses" is based on estimated
amounts for the upcoming fiscal year.
Example
Based on the level of expenses listed above, and (i) imposition of
the maximum sales charge, (ii) 5% annual return and (iii) redemption
at the end of each time period, the total expenses relating to an
investment of $1,000 would be as follows:
Class D
1 Year $ 23
3 Years $ 70
The foregoing example should not be considered a representation of
past or future expenses. Actual expenses may be more or less than
those shown. The purpose of the expense tables and example is to
assist the investor in understanding the various costs and expenses
that may be directly or indirectly borne by shareholders of the Fund.
Additional information may be found under "Management of the Fund".
See "How to Purchase Shares". Long-term holders of these Shares may
eventually pay more than the economic equivalent of the maximum
front-end sales charges otherwise permitted by the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the
"NASD").
Mission Statement of Polynous Capital Management, Inc., Adviser to
the Fund
At a time when many organizations in the investment management
business have redefined their objective to be "asset gathering" and
"client retention" rather than investment management excellence,
Polynous Capital Management, Inc., believes that there is an
opportunity to manage a firm whose sole purpose is to pursue
investment management excellence. A principal difference will also
be that the owners and associates of Polynous Capital Management,
Inc., believe the activity of investment management and its
concurrent fiduciary responsibilities are more properly regarded as a
profession rather than as a "business." As a profession, no
compromises will be tolerated in the pursuit of the best investment
management results for this Fund. Although the Adviser will also
strive to achieve excellence in its marketing, client service and
administration, these areas will always be regarded only as necessary
functions supporting our primary investment management activities and
not as the principal focus of the firm.
Introduction
This Prospectus provides a potential investor the information which
is needed so that an informed decision may be made as to including
shares of the Fund in that investor's investment program. The money
that an investor uses to purchase shares of the Fund will be pooled
with other shareholders money and collectively invested, or "managed"
by the Adviser in accordance with the Investment Objective of the
Fund. The tools used by the Adviser to make those investments of the
pooled money are referred to as Investment Policies and Strategies.
A major difference between the Investment Objective and Investment
Policies and Strategies is that the Investment Objective cannot be
changed unless a majority of the shareholders of the Fund approve
such a change. Other parts of this Prospectus will explain to a
prospective or current shareholder other matters concerning an
investment in the Fund such as the Risk Factors involved with such an
investment, the companies which provide services to the Fund, the
expenses of managing the Fund, the manner by which shares of the Fund
may be purchased or sold back as well as the overall management of
the Fund. Please read this Prospectus carefully before you invest or
send money and keep it for your future reference.
The Trust and the Fund
Polynous Trust (the "Trust") is an open-end management investment
company organized as a business trust under the laws of the State of
Delaware. The Trust is organized to offer separate series of shares
and is currently offering a single series of shares called Polynous
Growth Fund (the "Fund"). The Fund currently offers two separate
classes of shares and additional classes of shares may be added
without shareholder approval. Class A Shares and Class D Shares
differ with respect to sales charges and minimum initial investment.
Except for these differences, each share of the Fund represents an
undivided proportionate interest in the Fund. This Prospectus
concerns the offering of Class D Shares. For more information
regarding Class A Shares, please call (800)-________.
Investment Objective
The investment objective of Polynous Growth Fund (the "Fund") is
long-term capital appreciation.
The Fund seeks to achieve capital appreciation by investing in the
equity securities of U.S. companies with total market capitalization
at the time of purchase of between $500 million and $5 billion and
which, in the opinion of Polynous Capital Management, Inc., will have
an annual company revenue growth rate of between 15% and 30%.
This objective is fundamental and may not be changed without a vote
of the holders of the majority of the outstanding voting securities
of the Fund. The Fund's investment process, known as "The Polynous
Dynamic Value Process" described below is not fundamental and may be
changed without shareholder approval. Additional investment policies
and restrictions are described in the Statement of Additional
Information.
Investment Policies and Strategies
The Adviser may invest in or employ one or more of the following
investment policies or strategies to assist in its attempt to attain
the Fund's investment objective.
Equity Securities: Equity securities in which the Fund may invest
include common stocks, preferred stocks and securities convertible
into or exchangeable for common stocks, including warrants and
rights.
Private Placements: The Fund may invest up to 5% of its total assets
at the time of investment in securities which are subject to
restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined
to be liquid pursuant to the procedures discussed in the following
paragraph, are not subject to the foregoing restriction). These
securities are generally referred to as private placements or
restricted securities. Limitations on the resale of such securities
may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The
Fund may have to bear the expense of registering such securities for
resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under
the Securities Act, which permits the Fund to sell restricted
securities to qualified institutional buyers without limitation. The
Adviser, pursuant to procedures adopted by the Trustees of the Fund,
will make a determination as to the liquidity of each restricted
security purchased by the Fund. If a restricted security is
determined to be "liquid", such security will not be included within
the category "illiquid securities", which under current policy may
not exceed 15% of the Fund's total net assets. The Fund's policy is
to limit illiquid securities (which may include, but is not limited
to private placements) to a maximum of 15% of total net assets.
Repurchase agreements with maturities in excess of seven days will be
considered illiquid securities.
Options and Futures: The Fund may engage in transactions involving
the use of options and futures contracts for the purpose of hedging
against market changes. An "index future" is a contract to buy or
sell units of a particular stock index at an agreed price on a
specified future date. Depending on the change in value of the index
between the time when the Fund enters into and terminates an index
future transaction, the Fund realizes a gain or loss. The Fund may
buy and sell call and put options and index futures or on stock
indices in addition to or as an alternative to purchasing or selling
index futures or, to the extent permitted by applicable law. When the
Fund writes a call option, it gives up the opportunity to profit from
any increase in the price of a security above the exercise price of
the option. The Fund may engage in options and futures transactions
provided that no more than 5% of the Fund's total assets would be
required for premiums on such strategies.
The Fund's ability to use these strategies may be limited by market
conditions, regulatory limits and tax considerations and there can be
no assurance that any of these strategies will succeed.
The Polynous Dynamic Value Process
The Adviser's investment process combines the dynamic opportunities
of growth stock investing with the valuation disciplines of "value
investing." (Value investing refers to the process by which an
investment professional chooses certain stocks because that
professional believes that they are undervalued relative to some
static valuation parameter such as book value.) This combination is
a natural result of our "many thoughts" about what the Adviser
believes is an appropriate balance between return and risk for the
Fund.
The Adviser believes that growth stock investing with little or no
concern about absolute valuation subjects the Fund to unnecessary
risks. Conversely, while value investing has typically outperformed
growth investing while also having lower risk, the Adviser believes
the lower growth rates of "value" stocks truncate potential returns.
The Dynamic Value Process combines the advantageous qualities of each
approach in an overall process also having rigorous structure and
discipline thereby offering the Fund a more thoughtful approach using
higher growth equities.
In addition to using the positive aspects of each approach, the
Adviser seeks to implement an overall investment process that it
believes has more similarities with disciplined business management
than with a typical investment process. This process is divided into
two distinct activities: i) Research and ii) Portfolio Management;
with both having the same structure, control and discipline that may
be more often associated with a well managed business.
Each separate activity is further divided into discreet tasks for
greater structure. The individual tasks are:
The Research Process The Portfolio Management
Process
1. Economic/Sector/Industry analysis 1. Valuation
2. Initial Screening 2. Portfolio Characteristics
3. Opportunity assessment 3. Buy Discipline
4. Comprehensive risk assessment 4. Portfolio Monitoring
5. Continuing review 5. Sell Discipline/
Portfolio Optimization
Although having this structure, control and discipline is no
guarantee of success, the Adviser believes that the requirements of
its process will result in both high levels of knowledge about each
company before it can be considered for inclusion in the Fund's
portfolio and high return prospects for the companies which then
satisfy its portfolio purchase discipline. At each step of the
process the primary focus is on risk management, not stock selection.
The Adviser believes that risk is managed best by knowing more about
the Funds' portfolio companies than might be typical and having less
expensive companies in our portfolios than also might be typical for
a growth fund portfolio.
If the structure of the Adviser's research requirements and portfolio
management requirements result in there not being enough companies
meeting these requirements at any given time for the Fund to be fully
invested, the Fund is permitted to purchase and temporarily hold
liquid assets such as U.S. Treasury securities and the debt
securities of the Agencies of the U.S. government which are
guaranteed by the full faith and credit of the United States.
Pending the investment of new subscriptions, the Fund may also
temporarily hold liquid assets until there are enough companies
meeting the Adviser's "buy discipline". To the extent that the Fund
holds high levels of liquid assets, the Fund will not be invested so
as to achieve its objective. Contrasted with some practices
elsewhere in the investment management industry, the Adviser does not
automatically add to existing position sizes when additional cash
comes into the Fund from new subscriptions. All purchases, either of
new positions or of additions to existing positions, require a
certain minimum projected annualized return based on the Adviser's
research conclusions. All position sizes must also comply with the
Adviser's strict position size limits as specified by the Adviser's
"position size/projected return matrix." The Adviser also believes
that the requirements of its research process and the time which the
Adviser's personnel spend on analyzing each company result in the
Adviser investing cash from new subscriptions more slowly than may be
typical within the investment management industry. As a result,
there may be times during which the Fund holds a higher percentage of
its assets in short-term, high-quality instruments than other growth
oriented funds. During periods of significant subscription inflows,
the Adviser reserves the right to close the Fund to new subscriptions
with little or no notice until the Adviser has sufficient new
investment opportunities to enable the Fund to be more fully
invested. There may also be periods where for defensive purposes
when market circumstances so warrant that the Fund may temporarily
convert its assets into liquid assets. Liquid assets are defined as
U.S. Treasury bills, notes and bonds.
Risk Factors
There is no such thing as a guaranteed investment and no one can see
into the future. Accordingly, the value of an investment in the Fund
will probably fluctuate over time and may be valued higher or lower
at the time of redemption. An investment in the Fund should be only
a part of an overall investment strategy. Before investing, please
consider the following special factors in determining the
appropriateness of an investment in the Fund. No assurance can be
given as to the success of the Adviser's investment program.
Mid-Cap Sized Companies
The Adviser attempts to reduce the overall risks connected of
investing in equity securities through the implementation of its
investment process. Some, or even a substantial portion of the
companies in which the Fund will invest however, are likely to have
limited product lines, smaller markets and more limited financial
resources than larger companies. Also, some of these companies are
relatively young employing unseasoned management. The securities of
these companies may have limited marketability and be subject to
abrupt or erratic market movements compared to the securities of
larger and more established companies. Many of the securities of the
companies chosen for the Fund's portfolio are traded on the
over-the-counter-market (NASDAQ Market) and while this market has
grown substantially over the past seven years, it cannot be stated
that this growth will continue. Further, the securities on the NASDAQ
sometimes trade less often and in smaller volumes that those
securities on the larger exchanges. The value of NASDAQ securities
may fluctuate more sharply than the exchange listed securities and
the Fund may find it difficult to sell certain portfolio securities
under severe market circumstances.
Options and Futures Transactions
The Fund may enter into futures contracts for hedging purposes within
the meaning and intent of the Commodity Futures Trading Commission.
The use of futures and related options involves certain special
risks. Futures and options transactions involve costs and may result
in losses. Certain risks arise because of the possibility of
imperfect correlations between movements in the prices of index
futures and options and movements in the prices of the underlying
stock index or of the securities in the Fund's portfolio that are the
subject of a hedge.
The successful use of options and futures further depends on the
Adviser's ability to forecast market movements correctly. Other
risks arise from the Fund's potential inability to close out its
futures or options positions, and there can be no assurance that a
liquid secondary market will exist for any future or option at any
particular time. The Fund generally expects that its options and
futures transactions will be conducted on recognized exchanges. In
certain instances, however, the Fund may purchase and sell options in
the over-the-counter markets. The Fund's ability to terminate
options in the over-the-counter markets may be more limited than for
exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet
their obligations to the Fund.
Management of the Fund
The Board of Trustees
The Trust has a Board of Trustees that establishes the Fund's
policies and supervises and reviews the management of the Fund. The
day-to-day operations of the Fund are administered by the officers of
the Trust and by the Adviser pursuant to the terms of the Investment
Advisory Agreement with the Fund. The Trustees review the various
services provided by the Adviser to ensure that the Fund's general
investment policies and programs are being properly carried out and
that administrative services are being provided to the Fund in a
satisfactory manner. Information pertaining to the Trustees and
executive officers is set forth in the Statement of Additional
Information.
The Investment Adviser
Polynous Capital Management, Inc. serves as the Fund's investment
adviser and manager, and is an investment adviser registered as such
under the Investment Advisers Act of 1940, as amended. The Adviser
does not have any past experience managing mutual funds but its
principal has managed mutual funds in previous assignments. See
"Portfolio Management" below. The principal business address of the
Adviser is 88 Kearny Street, Suite 1300, San Francisco, California
94108.
The Adviser makes the investment decisions concerning the assets of
the Fund and continuously reviews, supervises and administers the
Fund's investment programs, subject to the supervision of, and
policies established by the Board of Trustees of the Fund.
Management Fees
The investment advisor believes that the benefits from the economies
of scale available in the investment management industry should be
shared with the shareholders of the Fund. As such, the annual
advisory fees described in the following have defined "break points"
at various levels of assets for the fund. For providing investment
advisory services, the Fund pays the Adviser a monthly fee which is
calculated daily by applying the following annual rates: 1.00% on
assets $100 million and below, 0.75% on the next $150 million, 0.60%
on the next $250 million, 0.50% on the next $500 million, and 0.40%
on all amounts above $1 billion. The table below offers a
theoretical example of the annual percentage management fee if the
fund's assets were fixed at the following amounts for an entire year:
Fund Size Annual Management Fee
$100 million 1.000%
$250 million .850%
$500 million .725%
$1 billion .6125%
$2 billion .50625%
As the assets of open-ended mutual funds may vary widely within a
given year, the example above is theoretical and the total management
fee within the fund's fiscal year as a percentage of year-end fund
assets may vary significantly from the percentage figures in the
example.
The investment advisory fee schedule listed above, particularly at
lower amounts of fund assets, result in fees higher than that paid by
most investment companies, although the Advisor believes the fees
comparable to that paid by investment companies with similar
investment objectives and policies. From time to time, the Adviser
may voluntarily waive all or a portion of its management fee and/or
absorb certain expenses of the Fund without further notification of
the commencement or termination of any such waiver or absorption. Any
such waiver or absorption will have the effect of lowering the
overall expense ratio of the Fund and increasing the Fund's overall
return to investors at the time any such amounts are waived and/or
absorbed. The Adviser has voluntarily agreed to waive all or a
portion of its fee, and/or to reimburse expenses of the Fund to the
extent necessary in order to limit net operating expenses for the
first year of operations to an annual rate of not more than 2.25% of
the Fund's average daily net assets. The Adviser reserves the right
to terminate its voluntary fee waiver and reimbursement at any time,
in its sole discretion. Any reductions in its fee that are made by
the Adviser are subject to reimbursement by the Fund within the
following three years, provided that the Fund is able to effect such
reimbursement and remain in compliance with applicable expense
limitations.
Portfolio Management
Kevin L. Wenck is primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Wenck has been investing his
own portfolio since 1968 and first began managing portfolios for
others in 1974. Mr. Wenck founded Performance Management in 1977 to
manage portfolios for individuals outside his immediate family and
continued those activities until 1983. Mr. Wenck's most recent
experience before founding Polynous Capital Management in June 1996
included five years managing mid-cap and small-cap growth stock
portfolios with G.T. Capital Management. Part of Mr. Wenck's
responsibilities at G.T. Capital Management (renamed LGT Asset
Management in 1996) included portfolio manager for G.T. Global:
America Growth Fund, which he managed from July 1, 1991 through April
30, 1996. During this period that Fund grew from approximately $100
million in assets to over $700 million in assets and was on was
ranked 22nd out of 286 growth funds as classified by Micropal over
the four year and ten month period ending April 30, 1996.
Supporting Mr. Wenck at Polynous Capital Management are three
analysts, Jeanne Kraus, Eric Wold, and Don Clark, who worked with Mr.
Wenck at G.T. Capital Management. Mr. Wenck's investment process on
which the Adviser relies, has remained virtually unchanged since
1987. Mr. Wenck's other professional investment experience include
three years managing small-cap growth stock portfolios with Matuschka
& Co.
Mr. Wenck's other principal business experience includes two years
with Advanced Micro Devices where he was responsible for
corporate-level budgets and forecasts as a member of the Corporate
Planning department. Additional experience includes product
development work with Applied Expert Systems, an artificial
intelligence software company, and also a number of entrepreneurial
activities in various types of businesses.
Mr. Wenck's professionally oriented educational experience includes
being awarded an M.B.A. degree in 1985 from Amos Tuck School of
Business at Dartmouth College and being awarded his C.F.A.
designation in 1986. Mr. Wenck's undergraduate degree was awarded by
Marlboro College in 1981 where he majored in Philosophy and Classical
Literature.
The Underwriter
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street,
Conshohocken, Pennsylvania 19428, serves as statutory Underwriter
pursuant to an agreement. The Underwriter serves the limited purpose
of facilitating the registration of shares of the Fund under state
securities laws and to assist in the sale of shares.
The Administrator
Fund/Plan Services, Inc. ("Fund/Plan"), which has its principal
business address at 2 W. Elm Street, Conshohocken, Pennsylvania
19428, serves as administrator of the Fund pursuant to an
Administrative Services Agreement. The services that Fund/Plan
provides to the Fund include: coordinating and monitoring of any
third parties furnishing services to the Fund; providing the
necessary office space, equipment and personnel to perform
administrative and clerical functions for the Fund; preparing, filing
and distributing proxy materials, periodic reports to shareholders,
registration statements and other documents; and responding to
shareholder inquiries.
The Custodian, Transfer Agent and Fund Accounting/Pricing Agent
The Bank of New York serves as custodian for the safekeeping
securities and cash of the Fund.
Fund/Plan serves as the Fund's transfer agent. As a transfer agent,
it maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions.
Shareholder inquiries should be addressed to the transfer agent at
(800) ________.
Fund/Plan also performs certain accounting and pricing services for
the Fund, including the daily calculation of the Fund's net asset
value per share.
Fund Expenses
The Fund is responsible for all of its own expenses. Such expenses
may include, but are not limited to: management fees; legal expenses;
audit fees; printing and postage costs (e.g. costs of printing annual
reports, semi-annual reports and prospectuses which are distributed
to existing shareholders); brokerage commissions; the expenses of
registering and qualifying shares of the Fund for sale with the
Securities and Exchange Commission and with various state securities
commissions; expenses of the organization of the Fund; transfer
agent, custodian and administrator fees; the expenses of obtaining
quotations of portfolio securities and pricing the Fund's shares;
trade association dues; all costs associated with shareholder
meetings and the preparation and dissemination of proxy materials;
costs of liability insurance and fidelity bonds; fees for Trustees
who are not officers, directors or employees of the Adviser; and any
extraordinary and nonrecurring expenses which are not expressly
assumed by the Adviser.
Class-specific expenses relating to distribution fee payments
associated with a Rule 12b-1 plan for a particular class of shares
and any other costs relating to implementing or amending such plan
(including obtaining shareowner approval of such plan or any
amendment thereto), will be borne solely by shareowners of such class
or classes. Other expense allocations which may differ among
classes, or which are determined by the Trustees to be class-specific,
may include but are not limited to: printing and postage
expenses related to preparing and distributing required documents
such as shareowner reports, prospectuses, and proxy statements to
current shareowners of a specific class; SEC registration fees and
state blue sky fees incurred by a specific class; litigation or other
legal expenses relating to a specific class; Trustee fees or expenses
incurred as a result of issues relating to a specific class; and
different transfer agency fees attributable to a specific class.
Brokerage
The Fund may execute brokerage or other agency transactions through
an affiliate of the Adviser or through FPBS for which the affiliate
or FPBS may receive "usual and customary" compensation. The Adviser
will use its best efforts to obtain the best available price and most
favorable execution with respect to all transactions of the Fund.
Subject to policies established by the Board of Trustees, however,
the Fund may pay a broker-dealer a commission for effecting a
portfolio transaction for the Fund in excess of the amount of
commission another broker-dealer would have charged if the Adviser
determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such
broker-dealer. In selecting and monitoring broker-dealers and
negotiating commissions, consideration will be given to a
broker-dealer's reliability, the quality of its execution services on
a continuing basis and its financial condition. All commissions paid
are reviewed quarterly by the Board of Trustees of the Trust.
Portfolio Turnover
The Fund anticipates the annual portfolio turnover rate will not
exceed 150%.
The Distribution Plan
The Board of Trustees of the Fund has adopted a distribution plan for
the shares pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the " Plan,"). As provided in the Plan, the Fund
will pay an annual fee up to 0.35% of the average daily net assets to
the Underwriter. From this amount, the Underwriter may make payments
to financial institutions and intermediaries such as banks, savings
and loan associations, insurance companies, investment counselors,
and broker-dealers who assist in the distribution of the of shares of
the Fund or provide services with respect to both classes of shares
of the Fund, pursuant to service agreements with the Fund. The Plan
is characterized as a compensation plan because the distribution fee
will be paid to the Underwriter without regard to the distribution or
shareholder service expenses incurred by the Underwriter or the
amount of payments made to financial institutions and intermediaries.
The Fund intends to operate the Plan in accordance with its terms and
within NASD rules concerning sales charges.
The fees paid to the Underwriter under the Plan are subject to the
review and approval by the Trust's unaffiliated trustees who may
reduce the fees or terminate the Plan at any time. All such payments
made pursuant to the Plan shall be made for the purpose of selling
shares issued by each respective class of shares. The distribution
fee of one class will not be used to subsidize the sale of the other
class of shares.
How to Purchase Shares
General
The Fund offers these shares to the general public on a continuous
basis through the Underwriter by mail subject to annual distribution
expenses pursuant to Rule 12b-1. See "The Distribution Plan".
Shares of the Fund are offered only to residents of states in which
the shares are eligible for purchase.
Purchase orders for shares of the Fund that are received by Fund/Plan
in proper form by the close of regular trading on the New York Stock
Exchange ("NYSE")(currently 4:00 p.m. Eastern time), on any day that
the NYSE is open for trading, will be purchased at the Fund's next
determined public offering price. Orders for Fund shares received
after the close of the NYSE (currently 4:00 p.m. Eastern time) will
be purchased at the public offering price determined on the following
business day.
The Fund reserves the right to reject any purchase order and to
suspend the offering of shares of the Fund. The Fund reserves the
right to vary the initial investment minimum and minimums for
additional investments at any time. In addition, the Adviser may
waive the minimum initial investment requirement for any investor.
Purchases By Mail
Shares of the Fund may be purchased initially by completing the
application accompanying this Prospectus and mailing it to the
transfer agent, together with a check payable to "Polynous Growth
Fund". The check or money order and application should be mailed to
Fund/Plan Services, Inc, 2 W. Elm Street, P.O. Box 874, Conshohocken,
Pennsylvania 19428-0874. If this is an initial purchase, please send
a minimum of $10,000 (or $1,000 for IRA and SEP accounts).
Subsequent investments in an existing account in the Fund may be made
at any time by sending a check payable to "Polynous Growth Fund", c/o
Fund/Plan Services, Inc., P.O. Box 412797, Kansas City, Missouri
64141-2797. Please enclose the bottom portion of your account
statement, and indicate the amount of the investment.
Purchases By Wire Transfer
An investor may make purchases by wire, but, before making an initial
investment by wire, an investor must first telephone the transfer
agent at (800) or (610) in order to be
assigned an account number. The investor's name, account number,
taxpayer identification number or Social Security number and address
must be specified in the wire. In addition, an account application
should be promptly forwarded to: Fund/Plan Services, Inc., 2 W. Elm
Street, P.O. Box 874, Conshohocken, Pennsylvania 19428-0874.
Shareholders having an account with a commercial bank that is a
member of the Federal Reserve System may purchase shares of the Fund
by requesting their bank to transmit funds by wire to:
United Missouri Bank KC NA
ABA #10-10-00695
For: Fund/Plan Services, Inc.
A/C 98-7037-071-9
FBO "Polynous Growth Fund"
Shareholder Name and Account Number
Additional investments may be made at any time through the wire
procedures described above, which must include a shareholder's name
and account number. The shareholder's bank may impose a fee for
investments by wire. The Fund will not be responsible for the
consequence of delays, including delays in the banking or Federal
Reserve wire systems.
Wire orders for shares of the Fund received by dealers prior to 4:00
p.m. Eastern time, and received by Fund/Plan before 5:00 p.m. Eastern
time on the same day, are confirmed at that day's public offering
price. Orders received by dealers after 4:00 p.m. Eastern time are
confirmed at the public offering price on the following business day.
It is the dealer's obligation to place the order with Fund/Plan
before 5:00 p.m. Eastern time.
Purchases Through Broker-Dealers
The Fund may accept telephone orders only from brokers, financial
institutions or service organizations which have been previously
approved by the Fund. It is the responsibility of such brokers,
financial institutions or service organizations to promptly forward
purchase orders and payments for the same to the Fund. Shares of the
Fund purchased through brokers, financial institutions, service
organizations, banks and bank trust departments, may charge the
shareholder a transaction fee or other fee for its services at the
time of purchase.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by
mail, bank wire, automatic investing or direct deposit. The minimum
for subsequent investments is $200 for all accounts. When making
additional investments by mail, please return the bottom portion of a
previous confirmation with your investment in the envelope that is
provided with each confirmation statement. Your check should be made
payable to "Polynous Growth Fund" and mailed to Fund/Plan Services,
Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797. Orders to
purchase shares are effective on the day Fund/Plan receives your
check or money order.
All investments must be made in U.S. dollars, and, to avoid fees and
delays, checks must be drawn only on banks located in the United
States. A charge (minimum of $20) will be imposed if any check used
for the purchase of shares is returned. The Fund and Fund/Plan each
reserve the right to reject any purchase order in whole or in part.
How to Sell Back (Redeem) Shares
Shareholders may redeem their shares of the Fund without being
subject to any redemption charge on any business day that the NYSE is
open for business. Redemptions will be effective at the current net
asset value per share next determined after the receipt by the
transfer agent of a redemption request meeting the requirements
described below.
Redemption By Mail
Shareholders may redeem their shares by submitting a written request
for redemption to Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box
874, Conshohocken, Pennsylvania 19428-0874.
A written request must be in good order which means that it must: (i)
identify the shareholder's account name and account number; (ii)
state the number of shares or dollar amount to be redeemed and (iii)
be signed by each registered owner exactly as the shares are
registered. To prevent fraudulent redemptions, the Transfer Agent
requires a signature guarantee for the signature of each person in
whose name an account is registered for any redemption requests
exceeding $10,000. A guarantee may be obtained from any commercial
bank, credit union, member firm of a national securities exchange,
registered securities association, clearing agency and savings and
loan association. A credit union must be authorized to issue
signature guarantees; notary public endorsement will not be accepted.
Signature guarantees will be accepted from any eligible guarantor
institution that participates in a signature guarantee program. The
transfer agent may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees
or guardians and retirement plans.
Redemption By Telephone
Shareholders who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by
calling the transfer agent at (800) or (610)
during normal business hours. In order to arrange for redemption by
wire or telephone after an account has been opened, or to change the
bank or account designated to receive redemption proceeds, a written
request with a signature guarantee must be sent to the transfer agent
at the address listed above, under the caption "Redemption By Mail".
The Fund reserves the right to refuse a wire or telephone redemption
if it is believed advisable to do so. Procedures for redeeming Fund
shares by wire or telephone may be modified or terminated at any
time.
During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event,
shareholders should follow the procedures for redemption by mail.
General Redemption Information
A redemption request will not be deemed to be properly received until
the transfer agent receives all required documents in proper form.
If you have any questions with respect to the proper form for
redemption requests you should contact the transfer agent at (800)
or(610) .
Redemptions will be processed only on a business day during which the
NYSE is open for business. Redemptions will be effective at the
current net asset value per share next determined after the receipt
by the transfer agent of a redemption request meeting the
requirements described above. The Fund normally sends redemption
proceeds on the next business day, but, in any event, redemption
proceeds are sent within seven calendar days of receipt of a
redemption request in proper form. Payment may also be made by wire
directly to any bank previously designated by an investor on his or
her new account application. There is a $9.00 charge for redemptions
made by wire to domestic banks. Wires to foreign or overseas banks
may be charged at higher rates. It should also be noted that banks
may impose a fee for wire services. In addition, there may be fees
for redemptions made through brokers, financial institutions and
service organizations.
Except as noted below, redemption requests received in proper form by
the transfer agent prior to the close of regular trading hours on the
NYSE on any business day on which the Fund calculates its net asset
value are effective as of that day. Redemption requests received
after the close of the NYSE will be effected at the net asset value
per share determined on the next business day following receipt. No
redemption will be processed until the transfer agent has received a
completed application with respect to the account.
The Fund will satisfy redemption requests for cash to the fullest
extent feasible, as long as such payments would not, in the opinion
of the Board of Trustees, result in the necessity of the Fund to sell
assets under disadvantageous conditions or to the detriment of the
remaining shareholders of the Fund.
Pursuant to the Fund's Trust Instrument, however, payment for shares
redeemed may also be made in kind, or partly in cash and partly
in-kind. The Fund has elected, pursuant to Rule 18f-1 under the 1940
Act 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 90 day period
for any one shareholder. Any portfolio securities paid or
distributed in-kind would be in readily marketable securities and
valued in the manner described below. See "Net Asset Value." In the
event that an in-kind distribution is made, a shareholder may incur
additional expenses, such as brokerage commissions, on the sale or
other disposition of the securities received from the Fund. In-kind
payments need not constitute a cross-section of the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of
payment for more than seven days during any period when (1) trading
on the NYSE is restricted or the NYSE is closed, other than customary
weekend and holiday closings; (2) the Securities and Exchange
Commission has, by order, permitted such suspension; (3) an
emergency, as defined by rules of the Securities and Exchange
Commission, exists making disposal of portfolio investments or
determination of the value of the net assets of the Fund not
reasonably practicable.
Shares of the Fund may be redeemed through certain brokers, financial
institutions, service organizations, banks, and bank trust
departments who may charge the investor a transaction or other fee
for their services. Such additional transaction fees would not
otherwise be charged if the shares were redeemed directly from the
Fund.
Telephone Transactions
Shareholders who wish to redeem their shares by telephone must first
elect the option, as described above. Neither the Fund nor any of
its service contractors will be liable for any loss or expense in
acting upon telephone instructions that are reasonably believed to be
genuine. In this regard, the Fund and its transfer agent require
personal identification information before accepting a telephone
redemption. To the extent that the Fund or its transfer agent fail
to use reasonable procedures to verify the genuineness of telephone
instructions, the Fund may be liable for losses due to fraudulent or
unauthorized instructions. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Written
confirmation will be provided for all redemption transactions
initiated by telephone. No purchases of shares may be made by
telephone unless made by a licensed investment professional with whom
an agreement has been signed by the Underwriter.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to involuntarily redeem shares in any account
at its then current net asset value (which will be promptly paid to
the shareholder) if at any time the total investment does not have a
value of at least $500 as a result of redemptions, but not market
fluctuations. A shareholder will be notified that the value of his
or her account is less than the required minimum and such shareholder
will be allowed at least 60 days to bring the value of his or her
account up to the minimum before the redemption is processed.
SHAREHOLDER SERVICES
The following special services are available to shareholders of the
Fund. There are no charges for the programs noted below and a
shareholder may change or stop these plans at any time by written
notice to the Fund.
Automatic Investment Plan
Once an account has been opened, a shareholder can make additional
monthly purchases of shares of the Fund through an automatic
investment plan. An investor may authorize the automatic withdrawal
of funds from his or her bank account by opening his or her account
with a minimum of $10,000 and completing the appropriate section on
the new account application enclosed with this Prospectus.
Subsequent monthly investments are subject to a minimum required
amount of $200.
Retirement Plans
The Fund is available for investment by pension and profit sharing
plans including Individual Retirement Accounts, SEP, Keogh, 401(k)
and 403(b) plans through which an investor may purchase Fund shares.
For details concerning any of the retirement plans, please call the
Fund at (800) or (610) .
NET ASSET VALUE
The net asset value per share is calculated separately for each class
of the Fund and is computed once daily as of the close of regular
trading on the NYSE, currently 4:00 p.m. Eastern time. Currently,
the NYSE is closed on the following holidays or days on which the
following holidays are observed: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas.
The net asset value per share is computed by adding the value of all
securities and other assets in the portfolio, deducting any
liabilities, and dividing by the total number of outstanding shares.
Expenses are accrued daily and applied when determining the net asset
value. The portfolio securities of the Fund listed or traded on a
stock exchange are valued at the latest sale price. If no sale price
is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the
latest bid and asked prices. The Fund's equity securities are valued
based on market quotations or, when no market quotations are
available, at fair value as determined in good faith by, or under
direction, of the Board of Trustees.
Securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked
prices provided by investment dealers in accordance with procedures
established by the Board of Trustees. Options, futures and options
on futures are valued at the settlement price as determined by the
appropriate clearing corporation.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes
represents fair value. When a security is valued at amortized cost,
it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Board of
Trustees.
Net asset value is calculated separately for each class of the Fund
based on expenses applicable to the particular class. Although the
methodology and procedures for determining net asset value are
identical for the Fund's classes, the net asset value of the classes
may differ because of the different fees and expenses charged to each
class.
DIVIDENDS AND TAXES
Dividends
The Fund will distribute its net investment income annually in
December. Any net gain realized from the sale of portfolio securities
and net gains realized from foreign currency transactions are
distributed at least once each year unless they are used to offset
losses carried forward from prior years, in which case no such gain
will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at
net asset value, unless a shareholder elects to receive them in cash.
Distribution options may be changed at any time by requesting a
change in writing.
Dividends paid by the Fund with respect to Class D Shares are
calculated in the same manner and at the same time. Both Class A and
Class D Shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the per share
dividends of Class D Shares will differ from the per share dividends
of Class A Shares as a result of additional distribution expenses
applicable to Class D Shares.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which remains
uncashed for a period of more than one year may be reinvested in the
shareholder's account at the then current net asset value, and the
dividend option may be changed from cash to reinvest. Dividends are
reinvested on the ex-dividend date (the "ex-date") at the net asset
value determined at the close of business on that date. Dividends
and distributions are treated the same for tax purposes whether
received in cash or reinvested in additional shares. Please note
that shares purchased shortly before the record date for a dividend
or distribution may have the effect of returning capital although
such dividends and distributions are subject to taxes.
Taxes
The Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"), which will relieve the Fund of
any liability for federal income tax to the extent that its earnings
and net realized capital gains are distributed to shareholders. To
so qualify, the Fund will, among other things, limit its investments
so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be
invested in the securities of any single issuer and (ii) with respect
to 50% of the market value of its total assets, not more than 5% of
the market value of its total assets will be invested in the
securities of any single issuer, and the Fund will not own more than
10% of the outstanding voting securities of any single issuer.
An investment in the Fund has certain tax consequences, depending on
the type of account. The Fund will distribute all of its net
investment income to shareholders. Distributions are subject to
federal income tax and may also be subject to state and local income
taxes. Distributions are generally taxable when they are paid,
whether in cash or by reinvestment in additional shares, except that
distributions declared in October, November or December and paid in
the following January are taxable as if they were paid on December
31. If you have a qualified retirement account, taxes are generally
deferred until distributions are made from the retirement account.
For federal income tax purposes, income dividends and short-term
capital gain distributions are taxed as ordinary income.
Distributions of net capital gains (the excess of net long-term
capital gain over net short-term capital loss) are usually taxed as
long-term capital gains, regardless of how long a shareholder has
held the Fund's shares. The tax treatment of distributions of
ordinary income or capital gains will be the same whether the
shareholder reinvests the distributions or elects to receive them in
cash.
Shareholders may be subject to a 31 percent back-up withholding on
reportable dividend and redemption payments ("back-up withholding")
if a certified taxpayer identification number is not on file with the
Fund, or if to the Fund's knowledge, an incorrect number has been
furnished. An individual's taxpayer identification number is his/her
social security number.
Shareholders will be advised annually of the source and tax status of
all distributions for federal income tax purposes. Information
accompanying a shareholder's statement will show the portion of those
distributions that are not taxable in certain states. Further
information regarding the tax consequences of investing in the Fund
is included in the Statement of Additional Information. The above
discussion is intended for general information only. Investors
should consult their own tax advisers for more specific information
on the tax consequences of particular types of distributions.
The Fund intends to make sufficient distributions prior to the end of
each calendar year in order to avoid liability for federal excise
tax.
Sale, exchange or redemption of the Fund's shares is a taxable event
to the shareholder.
PERFORMANCE INFORMATION
Performance information such as total return for the Fund may be
quoted in advertisements or in communications to shareholders. Such
performance information may be useful in reviewing the performance of
the Fund and for providing a basis for comparison with other
investment alternatives. However, because the net investment return
of the Fund changes in response to fluctuations in market conditions,
interest rates and Fund expenses, any given performance quotation
should not be considered representative of the Fund's performance for
any future period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more
or less than their original cost.
The Fund's total return is the change in value of an investment in
the Fund over a particular period, assuming that all distributions
have been reinvested. Thus, total return reflects not only income
earned, but also variations in share prices at the beginning and end
of the period. Average annual return reflects the average percentage
change per year in the value of an investment in the Fund. Aggregate
total return reflects the total percentage change over the stated
period. Please refer to the Statement of Additional Information for
more information on performance.
GENERAL INFORMATION
Trustees and Officers of the Fund
The Trustees of the Fund have overall responsibility for the
operation of the Fund. The officers of the Fund who are employees or
officers of the Adviser serve without compensation from the Fund.
Description of Shares
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with no par value. Shares of the Fund represent
equal proportionate interests in the assets of the Fund only, and
have identical voting, dividend, redemption, liquidation and other
rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other right to subscribe to any
additional shares. Currently, there are two classes of shares issued
by the Fund. The validity of shares of beneficial interest offered by
this prospectus will be passed on by Shartsis, Friese & Ginsburg, One
Maritime Plaza, 18th Floor, San Francisco, California 94111. All
accounts will be maintained in book entry form and no share
certificates will be issued.
Voting Rights
A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held). All shares of the
Fund participate equally in regard to dividends, distributions, and
liquidations with respect to the Fund. Shareholders do not have
preemptive, conversion or cumulative voting rights.
Shareholder Meetings
The Trustees are not required, and do not intend, to hold annual
meetings of shareholders. The Trustees have undertaken to the SEC,
however, that they will promptly call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee
when requested to do so by holders of not less than 10% of the
outstanding shares of the Fund. In addition, subject to certain
conditions, shareholders of the Fund may apply to the Fund to
communicate with other shareholders to request a shareholders'
meeting to vote upon the removal of a Trustee or Trustees.
Shareholder Reports and Inquiries
The Trust issues unaudited financial information semiannually and
audited financial statements annually. Shareholder inquiries should
be addressed to the Fund c/o Polynous Capital Management, Inc., 88
Kearny Street, Suite 1300, San Francisco, California 94108 (800)
or(415) 956-3384. Purchase and redemption transactions should
be made through the transfer agent by calling (800) _________ or
(610) .
<PAGE>
INVESTMENT ADVISER
Polynous Capital Management, Inc.
88 Kearny Street, Suite 1300
San Francisco, California 94108
(415) 956-3384
UNDERWRITER
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)
(610)
SHAREHOLDER SERVICES
Fund/Plan Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)
(610)
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York
LEGAL COUNSEL
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, California 94111
AUDITORS
Ernst & Young LLP
Suite 1700
555 California
San Francisco, California 94104
For Additional Information about Polynous Growth Fund call:
(800)
(610) <PAGE>
POLYNOUS TRUST
STATEMENT OF ADDITIONAL INFORMATION
August __, 1996
This Statement of Additional Information dated August __, 1996 is not
a prospectus but should be read in conjunction with the separate
Prospectuses describing Class A Shares and Class D Shares of the
Polynous Growth Fund (the "Fund") dated August __, 1996. Each
Prospectus may be amended or supplemented from time to time. No
investment in shares should be made without first reading the
respective Prospectus. This Statement of Additional Information is
intended to provide additional information regarding the activities
and operations of the Fund, and should be read in conjunction with
the applicable Prospectus. A copy of each Prospectus may be obtained
without charge from Polynous Capital Management, Inc. (the "Adviser")
at the addresses and telephone numbers below.
Underwriter: Adviser:
Fund/Plan Broker Services, Inc. Polynous Capital Management, Inc.
2 W. Elm Street 88 Kearny Street, Suite 1300
Conshohocken, Pennsylvania 19428 San Francisco, CA 94108
(610) (415) 956-3384
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional
Information or in the Prospectus in connection with the offering made
by the Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by
the Trust or its distributor. The Prospectus does not constitute an
offering by the Trust or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
Page
The Trust and the Fund . . . . . . . . . . . . . . . . . . .
Investment Policies . . . . . . . . . . . . . . . . . . . .
Options . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Government Securities. . . . . . . . . . . . . . . .
Repurchase Agreements . . . . . . . . . . . . . . . . . .
Convertible Securities. . . . . . . . . . . . . . . . . .
Illiquid Securities . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . . . .
Investment Advisory and Other Services
Investment Advisory Agreement . . . . . . . . . . . . . .
Administrator . . . . . . . . . . . . . . . . . . . . . .
Underwriter . . . . . . . . . . . . . . . . . . . . . . .
Trustees and Officers. . . . . . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Transactions and Brokerage Commissions . . . . . .
Performance Information
In General. . . . . . . . . . . . . . . . . . . . . . . .
Total Return Calculation. . . . . . . . . . . . . . . . .
Performance and Advertisements . . . . . . . . . . . . .
Other Information. . . . . . . . . . . . . . . . . . . . . .
Shareholder Liability . . . . . . . . . . . . . . . . . .
Limitations on Trustees' Liability. . . . . . . . . . . .
Reports to Shareholders . . . . . . . . . . . . . . . . .
<PAGE>
THE TRUST AND THE FUND
This Statement of Additional Information relates to Polynous Growth
Fund (the "Fund"), a separate series of Polynous Trust (the "Trust"),
an open-end management company established on April 10, 1996 under
Delaware law as a Delaware business trust. The Trust Instrument
permits the Trust to offer separate series of shares of beneficial
interest. The Trust currently is comprised of one series, which
offers its shares through two separate classes: Class A Shares and
Class D Shares. The Trust is a newly formed entity and has no prior
operating history.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Prospectus
for the Fund regarding the permitted investments and risk factors and
the investment objective and policies of the Fund.
Options
The Fund may buy put and call options and write covered call and
secured put options. Such options may relate to particular
securities, stock indices, or financial instruments and may or may
not be listed on a national securities exchange and issued by the
Options Clearing Corporation. Options trading is a highly
specialized activity that entails greater than ordinary investment
risk. Options on particular securities may be more volatile than the
underlying securities, and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than a
direct investment in the underlying securities.
The Fund will write call options only if they are "covered." In the
case of a call option on a security, the option is "covered" if the
Fund owns the security underlying the call or has an absolute and
immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required,
liquid assets, such as cash, U.S. Government securities or other
liquid high-grade debt obligations, in such amount as are held in a
segregated account by its custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the
option is covered if a Fund maintains with its custodian a
diversified stock portfolio, or liquid assets equal to the contract
value. A call option is also covered if a Fund holds a call on the
same security or index as the call written where the exercise price
of the call held is (i) equal to or less than the exercise price of
the call written; or (ii) greater than the exercise price of the call
written provided the difference is maintained by the Fund in liquid
assets such as cash, U.S. Government securities and other high-grade
debt obligations in a segregated account with its custodian. The
Funds will write put options only if they are "secured" by liquid
assets maintained in a segregated account by the Funds' custodian in
an amount not less than the exercise price of the option at all times
during the option period.
The Fund's obligation to sell a security subject to a covered call
option written by it, or to purchase a security subject to a secured
put option written by it, may be terminated prior to the expiration
date of the option by the Fund's execution of a closing purchase
transaction, which is effected by purchasing on an exchange an option
of the same series as the previously written option. Such a purchase
does not result in the ownership of an option. A closing purchase
transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying security from being
called, to permit the sale of the underlying security or to permit
the writing of a new option containing different terms on such
underlying security. The cost of such a liquidation purchase plus
transaction costs may be greater than the premium received upon the
original option, in which event the Fund will have incurred a loss in
the transaction. There is no assurance that a liquid secondary
market will exist for any particular option. An option writer,
unable to effect a closing purchase transaction, will not be able to
sell the underlying security (in the case of a covered call option)
or liquidate the segregated account (in the case of a secured put
option) until the option expires or the optioned security is
delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline or
appreciation in the security during such period.
U.S. Government Securities
The Fund may invest in securities issued the U.S. Government. Such
securities are backed by the full faith and credit of the U.S.
Government.
Repurchase Agreements
Although the Fund has no current intention of employing repurchase
agreements in its investment program, it may in the future choose to
do so and such change will be noted in the Prospectus. The financial
institutions with whom the Fund may enter into repurchase agreements
are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting
dealers and banks, if such banks and non-bank dealers are deemed
creditworthy by the Adviser. The Adviser will continue to monitor
the creditworthiness of the seller under a repurchase agreement, and
will require the seller to maintain during the term of the agreement
the value of the securities subject to the agreement at not less than
the repurchase price. The Fund will only enter into a repurchase
agreement where the market value of the underlying security,
including interest accrued, will at all times be equal to or exceed
the value of the repurchase agreement.
Convertible Securities
The Fund may invest in convertible securities. Common stock occupies
the most junior position in a company's capital structure.
Convertible securities entitle the holder to exchange such securities
for a specified number of shares of common stock, usually of the same
company, at specified prices within a certain period of time, and to
receive interest or dividends until the holder elects to convert.
The provisions of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible
debentures, the holder's claims on assets and earnings are
subordinated to the claims of other creditors, and are senior to the
claims of preferred and common shareholders. In the case of
preferred stock and convertible preferred stock, the holder's claims
on assets and earnings are subordinated to the claims of all
creditors but are senior to the claims of common shareholders.
To the extent that a convertible security's investment value is
greater than its conversion value, its price will be primarily a
reflection of such investment value, and its price will be likely to
increase when interest rates fall and decrease when interest rates
rise, as is the case with a fixed-income security. If the conversion
value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. At such times, the
price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
Illiquid Securities
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines
reviewed by the Board of Trustees. The Adviser will monitor the
liquidity of securities held by the Fund, and report periodically on
such determinations to the Board of Trustees.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees
may, in the future, authorize the Fund to invest in securities other
than those listed here and in the prospectus, provided that such
investment would be consistent with the Fund's investment objective,
and that it would not violate any fundamental investment policies or
restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental
restrictions and may not be changed without the approval of a
majority of the outstanding voting shares (as defined in the 1940
Act) of the Fund. Unless otherwise indicated, all percentage
limitations listed below apply only at the time of the transaction.
Accordingly, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in the percentage which
results from a relative change in values or from a change in the
Fund's total assets will not be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVE INVESTMENT POLICIES
And STRATEGIES" and "RISK FACTORS" in the Prospectus, the Fund may
not:
1. purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the
Fund's total assets may be invested without regard to this
limitation, and except that this limit does not apply to securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities or to securities issued by other investment
companies;
2. purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of
issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities
issued or guaranteed by the U.S. government,its agencies or
instrumentalities;
3. issue senior securities or borrow money, except as permitted
under the 1940 Act and then not in excess of 33 of the Fund's total
assets (including the amount of the senior securities issued but
reduced by any liabilities not constituting senior securities) at the
time of the issuance or borrowing, except that the Fund may borrow up
to an additional 5% of its total assets(not including the amount
borrowed) for temporary or emergency purposes. The Fund will not
purchase securities when borrowings exceed 5% of its total assets;
4. make loans, except if collateral values are continuously
maintained at no less than 100% by "marking to market" daily and
through loans of securities or through repurchase agreements,
provided that, for purposes of this restriction, the acquisition of
bonds, debentures, other debt securities or instruments,or
participations or other interest therein and investments in
government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered
the making of a loan;
5. engage in the business of underwriting the securities of others,
except to the extent that the Fund might be considered an underwriter
under the Federal securities laws in connection with its disposition
of securities;
6. purchase or sell real property, including real estate limited
partnership interests, except that investments in securities of
issuers that invest in real estate or other instruments supported by
interests in real estate are not subject to this limitation, and
except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests to
hold real estate acquired by reason of such enforcement until that
real estate can be liquidated in an orderly manner; or
7. purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot
currency contracts, other financial contracts or derivative
instruments;
The following investment limitations are not fundamental and may be
changed without shareholder approval:
(i) The Fund does not currently intend to engage in short sales of
securities or maintain a short position, except that the Fund may (a)
sell short ("against the box") and (b) maintain short positions in
connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(ii) The Fund does not currently intend to purchase securities on
margin, except for short-term credit necessary for clearance of
portfolio transactions and except that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(iii) The Fund does not currently intend to purchase securities of
other investment companies except as permitted by the 1940 Act and
the rules and regulations thereunder.
(iv) The Fund does not currently intend to invest in companies for
the purpose of exercising control or management.
(v) The Fund does not currently intend to invest in oil, gas or
mineral exploration or development programs or leases, except that
investment in securities of issuers that invest in such programs or
leases and investments in asset-backed securities supported by
receivables generated by such programs or leases are not subject to
this prohibition.
(vi) The Fund does not currently intend to invest more than 5% of its
net assets in warrants, including within that amount no more than 2%
in warrants which are not listed on the New York or American Stock
Exchanges, except warrants acquired as a result of its holdings of
common stocks.
(vii) The Fund does not currently intend to purchase or retain the
securities of any issuer if, to the knowledge of the Fund, any
officer or director of the Fund or of its investment manager owns
beneficially more than one half of 1% of the outstanding securities of such
issuer, and such officers and directors of the Fund or of its
investment manager who own more than one half of 1%, own in the aggregate
more than 5% of the outstanding securities of such issuer.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Adviser have entered into an investment advisory
agreement (the "Investment Advisory Agreement"). The Investment
Advisory Agreement provides that the Adviser shall not be protected
against any liability to the Fund or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Investment Advisory Agreement provides that if, for any fiscal
year, any ratio of expenses of the Fund (including amounts payable to
the Adviser but excluding interest, taxes, brokerage, litigation and
other extraordinary expenses) exceeds limitations established by any
state in which the shares of the Fund are registered, the Adviser
will bear the amount of such excess.
If the Fund is registered in California, and to the extent that the
Fund purchases securities of open-end investment companies, the
Adviser will waive its advisory fee on that portion of the Fund's
assets invested in such securities.
The continuance of the Investment Advisory Agreement, after the first
two years, must be specifically approved at least annually (i) by the
vote of the Trustees or by a vote of the shareholders of Fund, and
(ii) by the vote of a majority of the Trustees who are not parties to
the Investment Advisory Agreement or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Investment Advisory Agreement will
terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Fund,
or by a majority of the outstanding shares of the Fund on not less
than 30 days' nor more than 60 days' written notice to the Adviser,
or by the Adviser on 90 days' written notice to the Fund.
Administrator
Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, Pennsylvania
19428 (the "Administrator") provides certain administrative services
to the Fund pursuant to an Administrative Services Agreement.
Under the Administrative Services Agreement, the Administrator:
(1)coordinates with the Custodian and Transfer Agent and monitors the
services they provide to the Fund; (2) coordinates with and monitors
any other third parties furnishing services to the Fund; (3) provides
the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform
administrative and clerical functions; (4) supervises the maintenance
by third parties of such books and records of the Fund as may be
required by applicable federal or state law; (5) prepares and, after
approval by the Fund, files and arranges for the distribution of
proxy materials and periodic reports to shareholders of the Fund as
required by applicable law; (6) prepares and, after approval by the
Fund, arranges for the filing of such registration statements and
other documents with the SEC and other federal and state regulatory
authorities as may be required by applicable law; (7) reviews and
submits to the officers of the Fund for their approval invoices or
other requests for payment of the Fund's expenses and instructs the
Custodian to issue checks in payment thereof and (8) takes such other
action with respect to the Fund as may be necessary in the opinion of
the Administrator to perform its duties under the agreement.
Pursuant to this Administrative Services Agreement, Fund/Plan
receives a fee computed at the annual rate of 0.15% of the first $50
million of total average net assets, 0.10% of the next $50 million of
total average net assets and 0.05% of total net assets in excess of
$100 million. Pursuant to the Administrative Services Agreement,
aggregate administration fees shall not be less than $67,000 for both
Class A Shares and Class D Shares of the Fund.
Underwriter
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street,
Conshohocken, Pennsylvania 19428-0874, has been engaged pursuant to
an agreement for the limited purpose of acting as statutory
underwriter to facilitate the registration of shares of the Fund
under state securities laws and to assist in the sale of shares.
Class A Shares and Class D Shares of the Fund are subject to separate
distribution plans (the "Distribution Plans") pursuant to Rule 12b-1
under the 1940 Act. As provided in the Distribution Plan for Class A
Shares, the Fund will pay an annual fee of 0.25% of the Fund's
average daily net assets attributable to Class A Shares, to FPBS as
compensation for its services. As provided in the Distribution Plan
for Class D Shares, the Fund will pay an annual fee of 0.35% of the
Fund's average daily net assets attributable to Class D Shares, to
FPBS as compensation for its services. From this amount, FPBS may
make payments to financial institutions and intermediaries such as
banks, savings and loan associations, insurance companies, investment
counselors and broker-dealers as compensation for services,
reimbursement of expenses incurred in connection with distribution
assistance or provision of shareholder services. The Distribution
Plans are characterized as compensation plans because the
distribution fee will be paid to FPBS as distributor without regard
to the distribution or shareholder service expenses incurred by FPBS
or the amount of payments made to financial institutions and
intermediaries. The Fund intends to operate the Distribution Plans
in accordance with their terms and within the rules of the National
Association of Securities Dealers, Inc. concerning sales charges.
Pursuant to such rules, the Distributor is required to limit
aggregate initial sales charges and asset-based sales charges to
6.25% of total gross sales of each class of shares.
The Distribution Plans will continue in effect from year to year,
provided that each such continuance is approved at least annually by
a vote of the Board of Trustees, including a majority vote of the
Trustees, cast in person at a meeting called for the purpose of
voting on such continuance. The Distribution Plans may be terminated
at any time, without penalty, by vote of a majority of the
independent trustees or by vote of the holders of a majority of the
outstanding shares of the applicable class on not more than 60 days',
nor less than 30 days' written notice to any other party to the
Plans. The Plans may not be amended to increase materially the
amounts to be spent for the services described herein without
approval by the shareholders of the applicable class, and all
material amendments are required to be approved by the Board of
Trustees. Each Plan will automatically terminate in the event of its
assignment. Pursuant to each Plan, the Board of Trustees will review
at least quarterly a written report of the distribution expenses
incurred on behalf of each class of shares of the Fund. The report
will include an itemization of the distribution expenses and the
purpose of such expenditures.
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and executive officers of the
Fund is set forth below.
Name and Address Age Position Principal Occupation(s) During
Past 5 Years
Kevin L. Wenck 39 President President and founder of Polynous
Capital Management, Inc.;
formerly portfolio manager for G.
T. Capital Management from July
1991 through April 1996. Mr.
Wenck's experience includes the
management of mid-cap and small-cap
growth stock portfolios
including G.T. Global: America
Growth Fund. Mr. Wenck also
managed small-cap growth stock
portfolios for Matuschka & Co.
Mr. Wenck was awarded an M.B.A
degree in 1985 from Amos Tuck
School of Business at Dartmouth
College and was awarded his
Chartered Financial Analyst
designation in 1986.
Ronald H. Kase 38 General Partner of New Enterprise
Associates, a venture capital
firm located in Menlo Park,
California from 1991 through
present. Mr. Kase held the
positions of Associate and
Partner with this firm and became
a General Partner in 1995.
Richard H. Kimball 39 General Partner of Technology
Crossover Ventures, a venture
capital firm located in San
Francisco, California from
January 1995 to present; formerly
Managing Director of Montgomery
Securities, a stock brokerage
firm, from September 1984 to
January 1995.
COMPENSATION TABLE
Trustees and Officers
Estimated Aggregate Compensation
From Trust for Estimated
Fiscal Year ended Total Compensation from
Name of Trustee July 31, 1997 Trust Paid to Trustees1
Kevin L. Wenck* $ 0 $ 0
Ronald H. Kase $1,000 $1,000
Richard H. Kimball $1,000 $1,000
* This Trustee is considered an "Interested Person" of the Trust as
defined under the 1940 Act.
1 This amount represents the estimated aggregate amount of
compensation paid to the Trustees for service on the Board of
Trustees for the calendar year ending December 31, 1997.
No officer or Trustee of the Trust who is also an officer or employee
of the Adviser receives any compensation from the Trust for services
to the Trust. The Trust pays each Trustee who is not affiliated with
the Adviser a fee of $500for attendance at Board Meetings and
reimburses each Trustee and officer for out-of-pocket expenses in
connection with travel and attendance at such meetings.
NET ASSET VALUE
The net asset value per share is calculated separately for Class A
Shares and Class D Shares of the Fund. The net asset value per share
is computed by dividing the value of the assets of the Fund, less its
liabilities, by the number of shares of the respective class of
shares outstanding.
Each class of the Fund will bear, pro-rata, all of the common
expenses of the Fund. The net asset value of all outstanding shares
of each class will be computed on a pro-rata basis for each
outstanding share based on the proportionate participation in the
Fund represented by the value of shares of the class. All income
earned and expenses incurred by the Fund will be borne on a pro-rata
basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of such shares of
such classes.
Portfolio securities are valued and net asset value per share is
determined as of the close of regular trading on the New York Stock
Exchange ("NYSE") which currently is 4:00 p.m. (Eastern Time), on
each day the NYSE is open for trading. The NYSE is open for trading
every day except Saturdays, Sundays and the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
TAXES
The following is only a summary of certain federal tax considerations
generally affecting the Fund and its shareholders that are not
described in the Prospectus, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax
advisors with specific reference to their own tax situations,
including their state and local tax liabilities. Non-U.S. investors
should consult their tax advisors concerning the tax consequences of
ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is based
on the Code and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. New legislation,
as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated
herein.
The Fund intends to qualify as a "regulated investment company"
("RIC") as defined under Subchapter M of the Code. By following such
a policy, the Fund expects to eliminate or reduce to a nominal amount
the federal income taxes to which it may be subject. In order to
qualify for treatment as a RIC under the Code, the Fund generally
must distribute annually to its shareholders at least 90% of its
investment company taxable income (generally, net investment income
plus net short-term capital gain) (the "Distribution Requirement")
and also must meet several additional requirements. Among these
requirements are the following: (i) at least 90% of the Fund's gross
income each taxable year must be derived from dividends, interest,
payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income;
(ii) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of stocks or
securities held for less than three months; (iii) at the close of
each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RlCs and other securities,
with such other securities limited, in respect to any one issuer, to
an amount that does not exceed 5% of the value of the Fund's assets
and that does not represent more than 10% of the outstanding voting
securities of such issuer and (iv) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities
or the securities of other RlCs) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same,
similar or related trades or businesses. Notwithstanding the
Distribution Requirement described above, which requires only that
the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net
short-term capital loss), the Fund will be subject to a nondeductible
4% federal excise tax to the extent that it fails to distribute by
the end of any calendar year 98% of its ordinary income for that year
and 98% of its capital gain net income (the excess of short- and
long-term capital gains over short- and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain
other amounts. The Fund intends to make sufficient distributions of
its ordinary income and capital gain net income prior to the end of
each calendar year to avoid liability for federal excise tax.
Any gain or loss recognized on a sale, redemption or exchange of
shares of the Fund by a non-exempt shareholder who is not a dealer in
securities generally will be treated as a long-term capital gain or
loss if the shares have been held for more than twelve months and
otherwise generally will be treated as a short-term capital gain or
loss. If shares of the Fund on which a net capital gain distribution
has been received are subsequently sold, redeemed or exchanged and
such shares have been held for six months or less, any loss
recognized will be treated as a long-term capital loss to the extent
of the long-term capital gain distribution.
In certain cases, the Fund will be required to withhold, and remit to
the United States Treasury, 31% of any distributions paid to a
shareholder who (1) has failed to provide a correct taxpayer
identification number, (2)is subject to backup withholding by the
Internal Revenue Service or (3) has not certified to the Fund that
such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will
be subject to tax on its taxable income at regular corporate rates.
In such an event, all distributions from the Fund generally would be
eligible for the corporate dividend received deduction for corporate
shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Fund does not have an obligation to deal with any broker/dealer
or group of broker/dealers in the execution of transactions in
portfolio securities. Subject to policies established by the
Trustees, the Adviser is responsible for placing the orders to
execute transactions for the Fund. In placing orders, it is the
policy of the Fund to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer
spread), the size, type and difficulty of the transaction involved,
the firm's general execution and operational facilities, and the
firm's risk in positioning the securities involved. While the Adviser
generally seeks reasonably competitive spreads, the Fund will not
necessarily be paying the lowest spread available.
It is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made
through brokers or dealers. However, the Adviser may place portfolio
orders with qualified broker/dealers who recommend the Fund to
clients, and may, when a number of brokers and dealers can provide
best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among
broker/dealers.
PERFORMANCE INFORMATION
In General
From time to time, the Fund may include general comparative
information, such as statistical data regarding inflation, securities
indices or the features or performance of alternative investments, in
advertisements, sales literature and reports to shareholders. The
Fund may also include calculations, such as hypothetical compounding
examples or tax-free compounding examples, which describe
hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions
and are not indicative of the performance of the Fund.
From time to time, the yield and total return of the Fund may be
quoted in advertisements, shareholder reports or other communications
to shareholders.
Performance information will be calculated for Class A Shares and
Class D Shares of the Fund and will vary due to the effect of expense
ratios on the performance calculations.
Total Return Calculation
The Fund computes average annual total return by determining the
average annual compounded rate of return during specified periods
that equate the initial amount invested to the ending redeemable
value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000
and raising the quotient to a power equal to one divided by the
number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation
can be expressed as follows:
ERV = P (1 + T)n
Where: ERV = ending redeemable value at the end of the
period covered by the computation of a hypothetical $1,000 payment
made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation,
expressed in terms of years.
T = average annual total return.
The Fund computes the aggregate total return by determining the
aggregate compounded rate of return during specified period that
likewise equate the initial amount invested to the ending redeemable
value of such investment. The formula for calculating aggregate total
return is as follows:
Aggregate Total Return = [ ERV - 1 ]
P
Where: ERV = ending redeemable value at
the end of the period covered by the computation of
a hypothetical $1,000 payment made at the beginning
of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period. The
ending redeemable value (variable "ERV" in each formula) is
determined by assuming complete redemption of the hypothetical
investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund
should not be used to compare an investment in the Fund's shares with
bank deposits, savings accounts and similar investment alternatives
which often provide an agreed-upon or guaranteed fixed yield for a
stated period of time. Shareholders should remember that performance
is generally a function of the kind and quality of the instruments
held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Performance and Advertisements
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds
in general or to the performance of particular types of mutual funds
with similar investment goals, as tracked by independent
organizations. Among these organizations, Lipper Analytical Services,
Inc. ("Lipper"), a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and
assets, may be cited. Lipper performance figures are based on
changes in net asset value, with all income and capital gains
dividends reinvested. Such calculations do not include the effect of
any sales charges imposed by other funds. The Fund will be compared
to Lipper's appropriate fund category, that is, by fund objective and
portfolio holdings. The Fund's performance may also be compared to
the average performance of its Lipper category.
The Fund's performance may also be compared to the performance of
other mutual funds by Morningstar, Inc. ("Morningstar") which ranks
funds on the basis of historical risk and total return.
Morningstar's rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the historical
risk level and total return of a fund as a weighted average for
three, five and ten year periods. Ranks are not absolute or
necessarily predictive of future performance.
In assessing such comparisons of yield, return or volatility, an
investor should keep in mind that the composition of the investments
in the reported indices and averages is not identical to those of the
Fund, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to
the formula used by the Fund to calculate its figures.
OTHER INFORMATION
Shareholder Liability
The Trust is an entity of the type commonly known as a "Delaware
business trust". Under Delaware law, shareholders of such a trust
could, under certain circumstances, be held personally liable as
partners for the obligations of the trust. Even if, however, the
Fund were held to be a partnership, the possibility of the
shareholders incurring financial loss for that reason appears remote
because the Trust Instrument contains an express disclaimer of
shareholder liability for obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or
the Trustees, and because the Trust Instrument provides for
indemnification out of the Trust property for any shareholder held
personally liable for the obligations of the Trust.
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only for
his own willful defaults and, if reasonable care has been exercised
in the selection of officers, agents, employees or investment
advisers, shall not be liable for any neglect or wrongdoing of any
such person. The Trust Instrument also provides that the Trust will
indemnify its Trustees and officers against liabilities and expenses
incurred in connection with actual or threatened litigation in which
they may be involved because of their offices with the Trust unless
it is determined in the manner provided in the Trust Instrument that
they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Trust. However, nothing in
the Trust Instrument shall protect or indemnify a Trustee against any
liability for his willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties.
Reports to Shareholders
Shareholders will receive unaudited semi-annual reports describing
the Fund's investment operations and annual financial statements
audited by the Fund's independent certified public accountants.
Inquiries regarding the Fund may be directed to the Adviser at (800).
<PAGE>
POLYNOUS TRUST
Form N-1A
Part C -- Other Information
Part C. Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
(To be filed by amendment.)
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument filed herewith.
(2) By-Laws- None.
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders
-- None
(5) Investment Advisory Contracts -- Investment
Advisory Agreement between Polynous Capital
Management, Inc. and Polynous Trust is filed
herewith electronically.
(6) Underwriting Agreement -- Underwriting
Agreement Between Polynous Trust and
Fund/Plan Broker Services, Inc. is filed
herewith electronically.
(7) Bonus, Profit Sharing, Pension or Other Similar
Contracts -- None
(8) Custodian Agreements --
(a) Custody Agreement between The Bank of
New York and Polynous Trust is filed
herewith electronically.
(b) Custody Administration Agreement
between Polynous Trust and Fund/Plan
Services, Inc. Is filed herewith
electronically.
(9)(a) Transfer Agent Services Agreement --
Transfer Agent Services Agreement
between Polynous Trust and Fund/Plan
Services, Inc. Is filed herewith
electronically.
(b) Administration Agreement --
Administration Agreement between Polynous Trust
and Fund/Plan Services, Inc. Is filed herewith
electronically.
(c) Accounting Services Agreement --
Accounting Services Agreement between Polynous Trust
and Fund/Plan Services, Inc. is filed herewith
electronically.
(10) (a) Opinion and Consent of Shartsis, Friese &
Ginsburg regarding the legality of the
securities being issued -- (To be filed by
Amendment.)
(11) Consent of Independent Auditors -- (To be filed
by Amendment.)
(12) Financial Statements Omitted from Item 23. --
None
(13) Agreements or Understandings Made in Consideration
for Providing the Initial Capital -- None
(14) Model Plan -- None
(15)(a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares -- Filed herewith
electronically.
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class D Shares -- Filed herewith
electronically.
(16) Schedule for Computation of Performance Quotations --
None.
(17) Financial Data Schedule -- None.
(18) Plan of Distribution pursuant to Rule 18f-3 with
respect to Multiple Class Shares -- Filed herewith
electronically.
(19) Trustees' Powers of Attorney -- Filed herewith
electronically.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 26. Number of Holders of Securities.
None.
Item 27. Indemnification.
Reference is made to Article X of the Registrant's Trust
Instrument (filed herewith as Exhibit 1.)
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the
Registrant pursuant to the Trust's Trust Instrument, its
By-Laws or otherwise, the Registrant is aware that in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in
the Act and, therefore, is 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 trustees, officers or
controlling persons of the Registrant in connection with
the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling persons
in connection with shares 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 whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication
of such issues.
Item 28. Business and Other Connections of Investment Adviser.
Polynous Capital Management, Inc, 88 Kearny Street, Suite
1300, San Francisco, California 94108 provides investment
advisory services to individual and institutional investors,
and as of had approximately in assets under management.
For information as to any other business, vocation or
employment of a substantial nature in which each Trustee
or officer of the Registrant's investment adviser has
been engaged for his own account or in the capacity of
Trustee, officer, employee, partner or trustee, reference
is made to Form ADD (File #801- ) filed by it under
the Investment Advisers Act of 1940.
Item 29. Principal Underwriter.
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the
principal underwriter for the Registrant's securities,
currently acts as principal underwriter for the following
entities:
The Brinson Funds, Inc.
Chicago Trust Funds
Fairport Funds
First Mutual Funds
Focus Trust, Inc.
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
The Japan Alpha Fund
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
(b) The table below sets forth certain information as to
the Underwriter's Directors, Officers and Control Persons:
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
Kenneth J. Kempf Director & Pres. None
2 W. Elm Street
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice President and None
2 W. Elm Street Principal
Conshohocken, PA 19428-0874
Rocco C. Cavalieri Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Gerald J. Holland Director, None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874 and Principal
Joseph M. O'Donnell, Esq. Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice President None
2 W. Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
James W. Stratton may be considered a control person of the
Underwriter due to his direct or indirect ownership of Fund/Plan
Services, Inc., the parent of the Underwriter.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All records described in Section 31(a) of the 1940 Act and
the Rules 17 CFR 270.31a-1 to 31a-3 promulgated thereunder, are
maintained by the Trust's Investment Adviser, Polynous Capital
Management, Inc. 88 Kearny Street, Suite 1300, San Francisco,
California 94108, except for those maintained by the Fund's
Custodian, The Bank of New York, 48 Wall Street, New York, New
York 10172 and the Trust's Administrator, Transfer Agent and
Fund Accounting Services Agent, Fund/Plan Services Inc., 2 W. Elm
Street, Conshohocken, PA 19428.
Item 31. Management Services.
There are no management-related service contracts not
discussed in Part A or Part B.
Item 32. Undertakings.
(a) Registrant hereby undertakes to file an amendment to
this Registration Statement with certified financial statements
showing the initial capital received before accepting subscriptions
from any person in excess of 25 if Registrant proposes to raise its
initial capital pursuant to Section 14(a)(3) of the 1940 Act.
(b) Registrant hereby undertakes to file a post-effective
amendment within four to six months from the effective
date of this Registration Statement under the Securities Act of 1933.
Registrant understands that such post-effective amendment will
contain reasonably current financial statements which need not be
certified by independent public accountants.
(c) Registrant hereby 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) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon the question
of removal of any director or directors when requested in writing to
do so by the record holders of not less than 10 percent of the
Registrant's outstanding shares and to assist its shareholders in
accordance with the requirements of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communications.
<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
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, and State of
California on the 23rd day of July, 1996.
Polynous Trust
Registrant
By /s/ Kevin L. Wenck
Kevin L. Wenck
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement of Polynous Trust has been signed below by the
following persons in the capacities and on the date indicated.
Signature Capacity Date
/s/ Kevin L. Wenck As Sole Trustee 7/23/96
Kevin L. Wenck
/s/ Kevin L. Wenck 7/23/96
Kevin L. Wenck President and
Principal Executive Officer
/s/ Kevin L. Wenck Principal Accounting 7/23/96
Kevin L. Wenck and Financial Officer
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NUMBER NAME
EX 99.B5 Investment Advisory Agreement
EX 99.B6 Underwriting Agreement
EX 99.B8(a) Custody Agreement
EX 99.B8(b) Custody Administration Agreement
EX 99.B9(a) Transfer Agency Agreement
EX 99.B9(b) Administration Agreement
EX 99.B9(c) Accounting Services Agreement
EX 99.B15(a) Distribution Plan - Class A
EX 99.B15(b) Distribution Plan - Class D
EX 99.B18 Rule 18f-3 Multiple Class Plan
EX 99.B19 Powers of Attorney
EX 99.B5
Investment Advisory Agreement
AGREEMENT made this 17th day of July, 1996 by and between
Polynous Trust (the "Trust"), a Delaware business trust on behalf of
Polynous Growth Fund and Polynous Capital Management, Inc., a
California Corporation (the "Adviser").
1. Duties of Adviser. The Trust hereby appoints the Adviser
to act as investment adviser to Polynous Growth Fund (the "Fund") for
the period and on such terms set forth in this Agreement. The Trust
employs the Adviser to manage the investment and reinvestment of the
assets of the Fund, to determine in its discretion the assets to be
held uninvested, to provide the Trust with records concerning the
Adviser's activities which the Trust is required to maintain, and to
render regular reports to the Trust's officers and Board of Trustees
concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to
the control of the officers and the Board of Trustees of the Trust,
and in compliance with the objectives, policies and limitations set
forth in the Trust's Prospectus and Statement of Additional
Information. The Adviser accepts such employment and agrees to
render the services and to provide, at its own expense, the office
space, furnishings, equipment and the personnel required by it to
perform the services on the terms and for the compensation provided
herein.
2. Portfolio Transactions. The Adviser shall provide the
Fund with a trading department. The Adviser shall select the brokers
or dealers that will execute the purchases and sales of securities
for the Fund, and is directed to use its best efforts to ensure that
the best available price and most favorable execution of securities
transactions for the Fund are obtained. The Fund will bear all
expenses associated with its investment activities, including,
without limitation, brokerage commissions and custody expenses.
Subject to policies established by the Board of Trustees of the Trust
and communicated to the Adviser, it is understood that the Adviser
will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Fund, or be in
breach of any obligation owing to the Trust or in respect of the Fund
under this Agreement, or otherwise, solely by reason of its having
caused the Fund to pay a member of a securities exchange, a broker or
a dealer a commission for effecting a securities transaction for the
Fund in excess of the amount of commission that another member of an
exchange, broker or dealer would have charged, if the Adviser
determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such
member, broker or dealer, viewed in terms of that particular
transaction or the Adviser's overall responsibilities with respect to
the accounts, including the Fund, as to which it exercises investment
discretion. The Adviser will promptly communicate to the officers
and Trustees of the Trust such information relating to Fund
transactions as they may reasonably request.
3. Compensation of the Adviser. For the services to be
rendered by the Adviser as provided in Section 1 and 2 of this
Agreement, the Fund shall pay to the Adviser within five business
days after the end of each calendar month, a monthly fee of one
twelfth of 1.00% of the Fund's average daily net assets for the
month. The net asset value shall be calculated in the manner
provided in the Fund's Prospectus and Statement of Additional
Information then in effect.
In the event of termination of this Agreement, the fee provided
in this Section 3 shall be paid on a pro rata basis, based on the
number of days when this Agreement was in effect.
4. Reports. The Fund and the Adviser agree to furnish to
each other such information regarding their operations with regard to
their affairs as each may reasonably request.
5. Status of Adviser. The services of the Adviser to the
Fund are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others so long as its services to the Fund
are not impaired thereby.
6. Liability of Adviser. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard by the
Adviser of its obligations and duties hereunder, the Adviser shall
not be subject to any liability whatsoever to the Fund, or to any
shareholder of the Fund, for any error of judgement, mistake of law
or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any
losses that may be sustained in connection with the purchase,
holding, redemption or sale of any security on behalf of the Fund.
7. Duration and Termination. This Agreement shall become
effective on the date that the Trust's registration statement is
declared effective by the U.S. Securities and Exchange Commission,
provided that first it is approved by the Board of Trustees of the
Trust, including a majority of those trustees who are not parties to
this Agreement or interested persons of any party hereto, in the
manner provided in section 15(c) of the Investment Company Act of
1940, as amended (the "Act"), and by the holders of a majority of the
outstanding voting securities of the Fund; and shall continue in
effect for two years. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i)
the Trust's Board of Trustees or, (ii) by the vote of a majority of
the outstanding voting securities of the Fund; and in either event by
a vote of a majority of those trustees of the Trust who are not
parties to this Agreement or interested persons of any such party in
the manner provided in section 15(c) of the Act. This Agreement may
be terminated by the Trust, at any time, without the payment of any
penalty, by the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the
Fund on 60 days' written notice to the Adviser. This Agreement may
be terminated by the Adviser at any time, without the payment of any
penalty, upon not more than 60 days' written notice to the Trust.
This Agreement will automatically terminate in the event of its
assignment. Any notice under this Agreement shall be given in
writing, addressed and delivered or mailed postpaid, to the other
party at the principal office of such party.
As used in this Section 7, the terms "assignment", "interested
person", and "a vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in Section
2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the Act and Rule
18f-2 thereunder.
8. Name of Adviser. The parties agree that the Adviser has
a proprietary interest in the name "Polynous", and the Trust agrees
to promptly take such action as may be necessary to delete from its
name and/or the name of the Trust any reference to the name of the
Adviser promptly after receipt from the Adviser of a written request
therefore.
9. Severability. If any provisions of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
10. Governing Law. This agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
California.
11. Records. All records held by the Adviser which are
required to be maintained and preserved by the Fund in order to
comply with Rules 31 a-1 and 31 a-2 of the Act remain the property of
the Fund and will be surrendered promptly by the Adviser upon the
request of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of this ______ day of ____________, 1996.
Polynous Trust Polynous Capital Management, Inc.
/s/ Kevin L. Wenck /s/ Kevin L. Wenck
Kevin L. Wenck, Chairman Kevin L. Wenck, President
EX 99.B6
UNDERWRITING AGREEMENT
This Agreement, dated as of the 17th day of July ,1996,
made by and between Polynous Trust, a Delaware business trust (the
"Trust") operating as an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the
"Act"); Polynous Capital Management, Inc. ("Polynous"), a registered
investment adviser existing as corporation duly organized and
existing under the laws of the State of California; and Fund/Plan
Broker Services, Inc. ("Fund/Plan"), a corporation duly organized and
existing under the laws of the State of Delaware (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to
issue separate series of shares representing interests in separate
investment portfolios (the "Series"), which Series are identified on
Schedule "C" attached hereto, and which Schedule "C" may be amended
from time to time by mutual agreement among the Parties;
WHEREAS, Polynous has been appointed investment adviser to the
Trust;
WHEREAS, Fund/Plan is a broker-dealer registered with the U.S.
Securities and Exchange Commission and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Parties are desirous of entering into an agreement
providing for the distribution by Fund/Plan of the shares of the
Trust (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and in exchange of good and valuable
consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment.
The Trust hereby appoints Fund/Plan as its exclusive agent for
the distribution of the Shares in the fifty United States of
America, the District of Columbia and Commonwealth of Puerto
Rico, and Fund/Plan hereby accepts such appointment under the
terms of this Agreement. The Trust agrees that it will not
sell any shares to any person except to fill orders for the
shares received through Fund/Plan; provided, however, that the
foregoing exclusive right shall not apply: (a) to shares
issued or sold in connection with the merger or consolidation
of any other investment company with the Trust or the
acquisition by purchase or otherwise of all or substantially
all of the assets of any investment company or substantially
all of the outstanding shares of any such company by the Trust;
(b) to shares which may be offered by the Trust to its
stockholders for reinvestment of cash distributed from capital
gains or net investment income of the Trust; or (c) to shares
which may be issued to shareholders of other funds who exercise
any exchange privilege set forth in the Trust's Prospectus.
Notwithstanding any other provision hereof, the Trust may
terminate, suspend, or withdraw the offering of the Shares
whenever, in its sole discretion, it deems such action to be
desirable.
2. Sale and Repurchase of Shares.
Fund/Plan agrees to provide the services contemplated hereby,
and
(a) Fund/Plan is hereby granted the right, as agent for the
Trust, to sell Shares to the public against orders
therefor at the public offering price (as defined in
sub-paragraph 2.(c) below).
(b) Fund/Plan will also have the right to take, as
agent for the Trust, all actions which, in
Fund/Plan's judgement, and subject to the Trust's
reasonable approval, are necessary to carry into
effect the distribution of the Shares.
(c) The public offering price for Class D Shares shall
be the net asset value per Share then in effect,
and the public offering price for Class A Shares
shall be the net asset value per Share plus a sales
charge, if applicable.
(d) The net asset value of the Shares shall be
determined in the manner provided in the then
current Prospectus and Statement of Additional
Information relating to the Shares, and when
determined shall be applicable to all transactions
as provided in the Prospectus. The net asset value
of the Shares shall be calculated by the Trust or
by another entity on behalf of the Trust.
Fund/Plan shall have no duty to inquire into, or
liability for, the accuracy of the net asset value
per Share as calculated.
(e) On every sale, the Distributor shall promptly pay
to the Trust the applicable net asset value of the
Shares.
(f) Upon receipt of purchase instructions, Fund/Plan
will transmit such instructions to the Trust or its
transfer agent for registration of the Shares
purchased.
(g) Nothing in this Agreement shall prevent Fund/Plan
or any affiliated person (as defined in the Act) of
Fund/Plan from acting as underwriter or distributor
for any other person, firm or corporation
(including other investment companies), or in any
way limit or restrict Fund/Plan or such affiliated
person from buying, selling or trading any
securities for its or their own account or for the
accounts of others for whom it or they may be
acting; provided, however, that Fund/Plan expressly
agrees that it will not for its own account
purchase any Shares of the Trust except for
investment purposes, and that it will not for its
own account sell any such Shares except by
redemption of such Shares by the Trust, and that it
will not undertake in any activities which, in its
judgement, will adversely affect the performance of
its obligations to the Trust under this Agreement.
(h) Fund/Plan may repurchase Shares at such prices and
upon such terms and conditions as shall be
specified in the Prospectus.
3. Rules of Sale of Shares.
Fund/Plan does not agree to sell any specific number of Shares.
Fund/Plan, as Underwriter for the Trust, undertakes to sell
Shares on a best efforts basis and only against orders received
therefor. The Trust reserves the right to terminate, suspend
or withdraw the sale of its Shares for any reason deemed
adequate by it, and the Trust reserves the right to refuse at
any time or times to sell any of its Shares to any person for
any reason deemed adequate by it.
4. Rules of NASD.
(a) Fund/Plan will conform to the Rules of Fair
Practice of the NASD and the securities laws of any
jurisdiction in which it directly or indirectly
sells any Shares.
(b) Fund/Plan will require each dealer with whom
Fund/Plan has a selling agreement to conform to the
applicable provisions of the Prospectus, with
respect to the public offering price of the Shares,
and Fund/Plan shall not cause the Trust to withhold
the placing of purchase orders so as to make a
profit thereby.
(c) The Trust and Polynous agree to furnish to
Fund/Plan sufficient copies of any and all:
agreements, plans, communications with the public
or other materials which the Trust or Polynous
intends to use in connection with any sales of
Shares, in adequate time for Fund/Plan to file and
clear such materials with the proper authorities
before they are put in use. Fund/Plan and the
Trust or Polynous may agree that any such material
does not need to be filed subsequent to
distribution. In addition, the Trust and Polynous
agree not to use any such materials until so filed
and cleared for use by appropriate authorities as
well as by Fund/Plan.
(d) Fund/Plan, at its own expense, will qualify as a
dealer or broker, or otherwise, under all
applicable state or federal laws required in order
that the Shares may be sold in such states as may
be mutually agreed upon by the Parties.
(e) Fund/Plan shall remain registered with the U.S.
Securities and Exchange Commission and a member of
the National Association of Securities Dealers for
the term of this Agreement.
(f) Fund/Plan shall not, in connection with any sale or
solicitation of a sale of the Shares, make or
authorize any representative, service organization,
broker or dealer to make any representations
concerning the Shares, except those contained in
the Prospectus covering the Shares and in
communications with the public or sales materials
approved by Fund/Plan as information supplemental
to such Prospectus. Copies of the Prospectus will
be supplied by the Trust or Polynous to Fund/Plan
in reasonable quantities upon request.
5. Records to be Supplied by the Trust.
The Trust shall furnish to Fund/Plan copies of all information,
financial statements and other papers which Fund/Plan may
reasonably request for use in connection with the distribution
of the Shares including, but not limited to, one certified copy
of all financial statements prepared for the Trust by its
independent public accountants.
6. Expenses.
(a) The Trust will bear the following expenses:
(i) preparation, setting in type, and printing of
sufficient copies of the Prospectuses and
Statements of Additional Information for
distribution to shareholders, and the cost of
distribution of same to the shareholders;
(ii) preparation, printing and distribution of reports
and other communications to shareholders;
(iii) registration of the Shares under the federal
securities laws;
(iv) qualification of the Shares for sale in the
jurisdictions as directed by the Trust;
(v) maintaining facilities for the issue and transfer
of the Shares;
(vi) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and
(vii)any original issue taxes or transfer taxes
applicable to the sale or delivery of the Shares
or certificates therefor.
(b) Polynous will pay all other expenses incident to the sale
and distribution of the Shares sold hereunder.
7. Term and Compensation.
(a) The term of this Agreement shall commence on the date on
which the Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission
("Effective Date").
(b) This Agreement shall remain in effect for two (2) years
from the Effective Date. This Agreement shall continue
thereafter for periods not exceeding one (1) year, if
approved at least annually (i) by a vote of a majority of
the outstanding voting securities of each Series; or (ii)
by a vote of a majority of the Trustees of the Trust who
are not parties to this Agreement (other than as Trustees
of the Trust) or interested persons of any such party,
cast in person at a meeting called for the purpose of
voting on such approval.
(c) Fees payable to Fund/Plan shall be paid by Polynous as
set forth in Schedule "B" attached and shall be fixed for
the two (2) year period commencing on the Effective Date
of this Agreement. Thereafter, the fee schedule will be
subject to annual review and adjustment.
(d) This Agreement (i) may at any time be terminated without
the payment of any penalty, either by a vote of the
Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of each Series with respect
to such Series, on sixty (60) days' written notice to
Fund/Plan; and (ii) may be terminated by Fund/Plan on
sixty (60) days' written notice to the Trust with respect
to any Series.
(e) This Agreement shall automatically terminate in the event
of its assignment.
8. Indemnification of Fund/Plan by Sage/Tso.
Polynous and the Trust will indemnify and hold Fund/Plan
harmless for the actions of Sage/Tso's employees registered
with the NASD as Fund/Plan representatives, and hereby
undertakes to maintain compliance with all rules and
regulations concerning any and all sales presentations made by
such employees.
9. Liability of Fund/Plan.
(a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall not be liable for any error
of judgement or mistake of law or for any loss suffered
by the Trust in connection with the performance of this
Agreement, except a loss resulting from a breach of
Fund/Plan's obligation pursuant to Section 4 of this
Agreement (Rules of NASD), a breach of fiduciary duty
with respect to the receipt of compensation for services
or a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of Fund/Plan in the
performance of its obligations and duties or by reason of
its reckless disregard of its obligations and duties
under this Agreement.
(b) The Trust agrees to indemnify and hold harmless Fund/Plan
against any and all liability, loss, damages, costs or
expenses (including reasonable counsel fees) which
Fund/Plan may incur or be required to pay hereafter, in
connection with any action, suit or other proceeding,
whether civil or criminal, before any court or
administrative or legislative body, in which Fund/Plan
may be involved as a party or otherwise or with which
Fund/Plan may be threatened, by reason of the offer or
sale of the Trust Shares by persons other than Fund/Plan
or its representatives, prior to the execution of this
Agreement. If a claim is made against Fund/Plan as to
which Fund/Plan may seek indemnity under this Section,
Fund/Plan shall notify the Trust promptly after any
written assertion of such claim threatening to institute
an action or proceeding with respect thereto and shall
notify the Trust promptly of any action commenced against
Fund/Plan within 10 days time after Fund/Plan shall have
been served with a summons or other legal process, giving
information as to the nature and basis of the claim.
Failure so to notify the Trust shall not, however,
relieve the Trust from any liability which it may have on
account of the indemnity under this Section 9(b) if the
Trust has not been prejudiced in any material respect by
such failure. The Trust shall have the sole right to
control the settlement of any such action, suit or
proceeding subject to Fund/Plan's approval, which shall
not be unreasonably withheld. Fund/Plan shall have the
right to participate in the defense of an action or
proceeding and to retain its own counsel, and the
reasonable fees and expenses of such counsel shall be
borne by the Trust (which shall pay such fees, costs and
expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel
stating that the use of counsel chosen by the
Trust to represent Fund/Plan would present such
counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such
action or proceeding include both Fund/Plan and
the Trust, and legal counsel to Fund/Plan shall
have reasonably concluded that there are legal
defenses available to it which are different from
or additional to those available to the Trust or
which may be adverse to or inconsistent with
defenses available to the Trust (in which case the
Trust shall not have the right to direct the
defense of such action on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to
employ separate counsel at the expense of the
Trust.
(c) Any person, even though also a director, officer,
employee, shareholder or agent of Fund/Plan, who may be
or become an officer, director, trustee, employee or
agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the
Trust (other than services or business in connection with
Fund/Plan's duties hereunder), to be rendering such
services to or acting solely for the Trust and not as a
director, officer, employee, shareholder or agent, or one
under the control or direction of Fund/Plan even though
receiving a salary from Fund/Plan.
(d) The Trust agrees to indemnify and hold harmless
Fund/Plan, and each person who controls Fund/Plan within
the meaning of Section 15 of the Securities Act of 1933,
as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any and all losses, claims,
damages and liabilities, joint or several (including any
reasonable investigative, legal and other expenses
incurred in connection therewith) to which they, or any
of them, may become subject under the Act, the Securities
Act, the Exchange Act or other federal or state law or
regulation, at common law or otherwise insofar as such
losses, claims, damages or liabilities (or actions, suits
or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue
statement of a material fact contained in a Prospectus,
Statement of Additional Information, supplement thereto,
sales literature or other written information prepared by
the Trust and furnished by the Trust to Fund/Plan for
Fund/Plan's use hereunder, disseminated by the Trust or
which arise out of or are based upon any omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading.
Such indemnity shall not, however, inure to the benefit
of Fund/Plan (or any person controlling Fund/Plan) on
account of any losses, claims, damages or liabilities (or
actions, suits or proceedings in respect thereof) arising
from the sale of the Shares of the Trust to any person by
Fund/Plan (i) if such untrue statement or omission or
alleged untrue statement or omission was made in the
Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon
and in conformity with information furnished in writing
to the Trust by Fund/Plan specifically for use therein or
(ii) if such losses, claims, damages or liabilities arise
out of or are based upon an untrue statement or omission
or alleged untrue statement or omission found in any
Prospectus, Statement of Additional Information,
supplement, sales or other literature, subsequently
corrected, but negligently distributed by Fund/Plan and a
copy of the corrected Prospectus was not delivered to
such person at or before the confirmation of the sale to
such person.
(e) Fund/Plan shall not be responsible for any damages,
consequential or otherwise, which Polynous or the Trust
may experience, due to the disruption of the distribution
of Shares caused by any action or inaction of any
registered representative or affiliate of Fund/Plan or of
Fund/Plan itself.
10. Amendments.
No provision of this Agreement may be amended or modified in
any manner whatsoever, except by a written agreement properly
authorized and executed by the Parties.
11. Section Headings.
Section and paragraph headings are for convenience only and
shall not be construed as part of this Agreement.
12. Reports.
Fund/Plan shall prepare reports for the Board of Trustees of
the Trust, on a quarterly basis, showing such information as,
from time to time, shall be reasonably requested by such Board.
13. Severability.
If any part, term or provision of this Agreement is held by any
court to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be considered
severable and not affected, and the rights and obligations of
the Parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic agreement is not
thereby substantially impaired.
14. Governing Law.
This Agreement shall be governed by the laws of the State of
California and the exclusive venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of
Pennsylvania.
15. Authority to Execute
The Parties represent and warrant to each other that the
execution and delivery of this Agreement by the undersigned
officer of each Party has been duly and validly authorized;
and, when duly executed, this Agreement will constitute a valid
and legally binding and enforceable obligation of each Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of ten typewritten pages, together with Schedule "A" and
Schedule "B", to be signed by their duly authorized officers, as of
the day and year first above written.
Polynous Capital Management, Inc. Fund/Plan Broker Services, Inc.
\s\ Kevin L. Wenck \s\ Kenneth J. Kempf
Kevin L. Wenck, President By: Kenneth J. Kempf,
President
Polynous Trust
\s\ Kevin L. Wenck
By: Kevin L. Wenck, President
<PAGE>
Schedule "A"
Underwriter/Sponsor Services
for
Polynous Trust
I. Underwriter/Sponsor services include:
A) Preparation and execution of Underwriter and 12b-1 Plan
Agreements
Monitoring accruals
Monitoring expenses
Disbursements for expenses and trail commissions
B) Quarterly 12b-1 Reports to Board of Trustees
C) Literature review, recommendations and submission to the
NASD
D) Initial NASD Licensing and Transfers of Registered
Representatives
U-4 Form and Fingerprint Submission to NASD
Supplying Series 6 and 63 written study material
Registration for Exam Preparation classes
Renewals and Terminations of Representatives
E) Written supervisory procedures and manuals for Registered
Representatives
F) Ongoing compliance updates for Representatives regarding
sales practices,
written correspondence and other communications with the
public.
G) NASD Continuing Education Requirement
II. Sales Support
FPBS offers additional optional sales support including Inbound
Telemarketing and Literature Fulfillment.
III. Inbound Telemarketing Services
A) Install an 800 line for prospective shareholders, and
track the number of inbound calls. An existing 800 line
can be moved to FPBS.
B) Calls answered with the name of your Fund Group by
Fund/Plan Broker Services' registered representatives
C) Utilize pre-approved scripts provided by Trust Management
D) Respond to Trust inquiries as your Trust's Marketing
Department
Requests for Literature/Prospectuses
Yields, Distribution Rates
Performance
Adviser/Management experience
Dividends
Portfolio Holdings
Account Attributes
E) Input marketing inquiries on a confidential database for
Trust Management review.
F) Written Call reports which include the following
information.
Number received
Alphabetical list
Regional Response List
Source List
Match calls with new accounts on Transfer Agent
files
G) Prepare Quarterly Report that matches calls with new
accounts in our Transfer Agent files.
IV. Literature Fulfillment
A) Receive requests from the Trust for literature
fulfillment
B) Record requests on confidential database for Trust
reporting
C) Prepare, package and forward customized requests
D) Assist with special direct mail programs
<PAGE>
Schedule "B"
Underwriter and Distribution Fee Schedule
for
Polynous Trust
This Fee Schedule is fixed for a period of two (2) years from the
Effective Date as that term is defined in the Agreement.
I. A) Underwriter/Sponsor Services
The annual fee to Fund/Plan Broker Services (FPBS) of
$25,000 per year for the initial portfolio or class of
shares and $2,500 per year for each additional portfolio
or class of shares for services rendered as primary
Underwriter/Sponsor of the Trust, including primary
licensing/regulatory agent for Trust personnel.
The fee for representing the Trust as primary Distributor
includes the expenses and personnel required to maintain
the various regulatory books and records of the
Broker/Dealer and maintenance of shareholder files and
records for all transactions processed on behalf of the
Trust. These fees also include the regulatory
requirements of all marketing related and distribution
reports including maintenance of records regarding
individual transaction activities of the Trust's
registered representatives.
B) FPBS will maintain annual NASD and state license renewals
and the monitoring required of representative activities
as follows:
Up to 10 States - $2,000 per Representative per Year
All 50 States - $4,000 per Representative per Year
II. Literature Fulfillment Services
$2.00 per inquiry and fulfillment request
$2,000 per month minimum fee
<PAGE>
Schedule "C"
Identification of Series
Below are listed the Series and Classes of Shares to which services
under this Agreement are to be performed as of the Effective Date of
this Agreement:
"Polynous Trust"
1. Polynous Growth Fund - Class A Shares
2. Polynous Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of
the Parties.
EX 99.B8(a)
CUSTODY AGREEMENT
Agreement made as of this day of ,
1996, between POLYNOUS GROWTH FUND, a Delaware business trust
organized and existing under the laws of the State of
Delaware, having its principal office and place of business at
88 Kearny St., Suite 1300, San Francisco, CA 94108
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a
New York corporation authorized to do a banking business, hav-
ing its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the "Cus-
todian").
W I T N E S S E T H :
WHEREAS, the Fund represents that pursuant to the Custody
Administration and Agency Agreement between Fund/Plan Ser-
vices, Inc. ("Fund/Plan") and the Fund, Fund/Plan (a) has
agreed to perform certain administrative functions which may
include the functions of administrator, transfer agent and
accounting services agent and (b) has been appointed by the
Fund to act as its agent in respect of certain transactions
contemplated in this Agreement; and
WHEREAS, the Fund represents that (a) Fund/Plan has
agreed to act as Fund's agent in respect of certain transac-
tions contemplated in this Agreement and (b) the Bank is au-
thorized and directed to rely upon and follow Certificates and
instructions given by Fund/Plan, the Fund's agent, in respect
of transactions contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, 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:<PAGE>
1. "Administrator" shall mean Fund/Plan Services, Inc.
and such successors or permitted assigns as may succeed and
perform its duties under the Administration Agreement.
2. "Administration Agreement" shall mean that certain
separate agreement entitled "Custody Administration and Agency
Agreement" dated as of _______________, 1996 between the Fund
and the Fund/Plan Services, Inc.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and fed-
eral agency securities, its successor or successors and its
nominee or nominees.
4. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer
thereof the specified underlying Securities.
5. "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 actually re-
ceived by the Custodian and signed on behalf of the Fund by
any two Officers, and the term Certificate shall also include
instructions communicated to the Custodian by the Administra-
tor by Terminal Link.
6. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange quali-
fied to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such
a clearing member.
7. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII
herein.
8. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from
the writer thereof the specified underlying Securities (ex-
cluding Futures Contracts) which are owned by the writer
thereof and subject to appropriate restrictions.
9. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
- 2 -<PAGE>
Exchange Commission, its successor or successors and its nomi-
nee or nominees. The term "Depository" shall further mean and
include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identi-
fied in a certified copy of a resolution of the Fund's Board
of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified
month at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
12. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
13. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or
a Clearing Member, or in the name of the Fund for the benefit
of a broker, dealer, futures commission merchant, or Clearing
Member, or otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), separate and distinct from the custody account, in
which certain Securities and/or money of the Fund shall be
deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time deter-
mine. Securities held in the Book-Entry System or the Deposi-
tory shall be deemed to have been deposited in, or withdrawn
from, a Margin Account upon the Custodian's effecting an ap-
propriate entry in its books and records.
14. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements,
debt obligations issued or guaranteed as to interest and prin-
cipal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipa-
tion note issued by any state or municipal government or pub-
lic authority, commercial paper, certificates of deposit and
bankers' acceptances, repurchase agreements with respect to
the same and bank time deposits, where the purchase and sale
of such securities normally requires settlement in federal
funds on the same day as such purchase or sale.
15. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
- 3 -<PAGE>
16. "Officers" shall be deemed to include the President,
any Vice President, the Secretary, the Clerk, the Treasurer,
the Controller, any Assistant Secretary, any Assistant Clerk,
any Assistant Treasurer, and any other person or persons, in-
cluding officers or employees of the Administrator, whether or
not any such other person is an officer of the Fund, duly au-
thorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument 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.
17. "Option" shall mean a Call Option, Covered Call Op-
tion, Stock Index Option and/or a Put Option.
18. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a
person reasonably believed by the Custodian to be an Officer.
19. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and tender of the specified un-
derlying Securities, to sell such Securities to the writer
thereof for the exercise price.
20. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date
and price.
21. "Security" shall be deemed to include, without limi-
tation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock In-
dex Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agree-
ments, common stocks and other securities having characteris-
tics similar to common stocks, preferred stocks, debt obliga-
tions issued by state or municipal governments and by public
authorities, (including, without limitation, general obliga-
tion bonds, revenue bonds, industrial bonds and industrial
development bonds), bonds, debentures, notes, mortgages or
other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase,
sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or as-
sets.
22. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
- 4 -<PAGE>
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
23. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund and listed on Appendix B
hereto as amended from time to time.
24. "Shares" shall mean the shares of beneficial inter-
est of the Fund, each of which is, in the case of a Fund hav-
ing Series, allocated to a particular Series.
25. "Stock Index Futures Contract" shall mean a bilat-
eral agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
stock index at the close of the last business day of the con-
tract and the price at which the futures contract is origi-
nally struck.
26. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive
an amount of cash determined by reference to the difference
between the exercise price and the value of the index on the
date of exercise.
26. "Terminal Link" shall mean an electronic data trans-
mission link between the Administrator on behalf of the Fund
and the Custodian requiring in connection with each use of the
Terminal Link by or on behalf of the Administrator on behalf
of the Fund use of an authorization code provided by the Cus-
todian and at least two access codes established by the Admin-
istrator on behalf of the Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custo-
dian as custodian of the Securities and moneys at any time
owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as herein-
after set forth.
- 5 -<PAGE>
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all moneys
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the
Series separate and apart. The Custodian will not be respon-
sible for any Securities and moneys not actually received by
it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previ-
ously made and moneys are not finally collected. The Fund
shall deliver to the Custodian a certified resolution of the
Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the
Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, includ-
ing, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and
deliveries and returns of Securities collateral. Prior to a
deposit of Securities specifically allocated to a Series in
the Depository, the Fund shall deliver to the Custodian a cer-
tified resolution of the Board of Trustees of the Fund, sub-
stantially in the form of Exhibit B hereto, approving, autho-
rizing and instructing the Custodian on a continuous and ongo-
ing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Deposi-
tory all Securities specifically allocated to such Series eli-
gible for deposit therein, and to utilize the Depository to
the extent possible with respect to such Securities in connec-
tion with its performance hereunder, including, without limi-
tation, in connection with settlements of purchases and sales
of Securities, loans of Securities, and deliveries and returns
of Securities collateral. Securities and moneys deposited in
either the Book-Entry System or the Depository will be repre-
sented in accounts which include only assets held by the Cus-
todian for customers, including, but not limited to, accounts
in which the Custodian acts in a fiduciary or representative
capacity and will be specifically allocated on the Custodian's
books to the separate account for the applicable Series.
Prior to the Custodian's accepting, utilizing and acting with
respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this
Agreement, the Custodian shall have received a certified reso-
lution of the Fund's Board of Trustees, substantially in the
- 6 -<PAGE>
form of Exhibit C hereto, approving, authorizing and instruct-
ing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received
by the Custodian, to accept, utilize and act in accordance
with such confirmations as provided in this Agreement with
respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for
the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed
by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name
and address of the person to whom the payment is to be made,
the Series account from which payment is to be made and the
purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Administrator with confirma-
tions and a summary, on a per Series basis, of all transfers
to or from the account of the Fund for a Series, either here-
under or with any co-custodian or sub-custodian appointed in
accordance with this Agreement during said day. Where Securi-
ties are transferred to the account of the Fund for a Series,
the Custodian shall also by book-entry or otherwise identify
as belonging to such Series a quantity of Securities in a fun-
gible bulk of Securities registered in the name of the Custo-
dian (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 fur-
nish the Administrator with a detailed statement, on a per
Series basis, of the Securities and moneys held by the Custo-
dian for the Fund.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the Custo-
dian hereunder, 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 hereunder 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 deter-
mine, or in the name of the Book-Entry System or the Deposi-
tory or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish or cause to be furnished
- 7 -<PAGE>
to the Custodian appropriate instruments to enable the Custo-
dian 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 hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold
all such Securities specifically allocated to a Series which
are not held in the Book-Entry System or in the Depository in
a separate account in the name of such Series physically seg-
regated at all times from those of any other person or per-
sons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or the Depository with respect to Securities held here-
under and therein deposited, shall with respect to all Securi-
ties held for the Fund hereunder in accordance with preceding
paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount pay-
able upon such Securities which are called, but only if either
(i) the Custodian receives a written notice of such call, or
(ii) notice of such call appears in one or more of the publi-
cations listed in Appendix C annexed hereto, which may be
amended at any time by the Custodian without the prior notifi-
cation or consent of the Fund;
(c) Present for payment and collect the amount pay-
able upon all Securities which mature;
(d) Surrender Securities in temporary form for de-
finitive Securities;
(e) Execute, as custodian, any necessary declara-
tions or certificates of ownership under the Federal Income
Tax Laws or the laws or regulations of any other taxing au-
thority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein depos-
ited, for the account of a Series, all rights and similar se-
curities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry Sys-
tem or the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authoriza-
tions, and any other instruments whereby the authority of the
- 8 -<PAGE>
Fund as owner of any Securities held by the Custodian hereun-
der for the Series specified in such Certificate may be exer-
cised;
(b) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in ex-
change for other Securities or cash issued or paid in con-
nection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege and receive and
hold hereunder specifically allocated to such Series any cash
or other Securities received in exchange;
(c) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any cor-
poration, and receive and hold hereunder specifically al-
located to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) Make such transfers or exchanges of the assets
of the Series specified in such Certificate, and take such
other steps as shall be stated in such Certificate to be for
the purpose of effectuating any duly authorized plan of liqui-
dation, reorganization, merger, consolidation or recapitaliza-
tion of the Fund; and
(e) Present for payment and collect the amount pay-
able upon Securities not described in preceding paragraph 5(b)
of this Article which may be called as specified in the Cer-
tificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain posses-
sion of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until
after it shall have determined, or shall have received a Cer-
tificate from the Fund stating, that any such instruments or
certificates are available. The Fund shall deliver to the
Custodian such a Certificate no later than the business day
preceding the availability of any such instrument or certifi-
cate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940, as
amended, in connection with the purchase, sale, settlement,
closing out or writing of Futures Contracts, Options, or Fu-
tures Contract Options by making payments or deliveries speci-
fied in Certificates received by the Custodian in connection
with any such purchase, sale, writing, settlement or closing
out upon its receipt from a broker, dealer, or futures commis-
sion merchant of a statement or confirmation reasonably be-
lieved by the Custodian to be in the form customarily used by
- 9 -<PAGE>
brokers, dealers, or future commission merchants with respect
to such Futures Contracts, Options, or Futures Contract Op-
tions, as the case may be, confirming that such Security is
held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or
any nominee of the Custodian) as custodian for the Fund, pro-
vided, however, that notwithstanding the foregoing, payments
to or deliveries from the Margin Account and payments with
respect to Securities to which a Margin Account relates, shall
be made in accordance with the terms and conditions of the
Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstand-
ing any provision in this Agreement to the contrary, make pay-
ment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are
available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Con-
tract, Option or Futures Contract Option for which such in-
struments or such certificates are available only against re-
ceipt by the Custodian of payment therefor. Any such instru-
ment or certificate delivered to the Custodian shall be held
by the Custodian hereunder in accordance with, and subject to,
the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract,
or a Futures Contract Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian (i) with respect
to each purchase of Securities which are not Money Market Se-
curities, a Certificate, and (ii) with respect to each pur-
chase of Money Market Securities, a Certificate or Oral In-
structions, specifying with respect to each such purchase: (a)
the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of pur-
chase and settlement; (e) the purchase price per unit; (f) the
total amount payable upon such purchase; (g) the name of the
person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custo-
dian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of
the moneys held for the account of such Series the total
- 10 -<PAGE>
amount payable upon such purchase, provided that the same con-
forms to the total amount payable as set forth in such Cer-
tificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, a Certificate, and (ii) with
respect to each sale of Money Market Securities, a Certificate
or Oral Instructions, specifying with respect to each such
sale: (a) the Series to which such Securities were specifi-
cally allocated; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e)
the sale price per unit; (f) the total amount payable to the
Fund upon such sale; (g) the name of the broker through whom
or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to
whom the Securities are to be delivered. The Custodian shall
deliver the Securities specifically allocated to such Series
to the broker specified in the Certificate against payment
upon receipt of the total amount payable to the Fund upon such
sale, provided that the same conforms to the total amount pay-
able as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each Option purchased: (a) the Series to which such Option
is specifically allocated; (b) the type of Option (put or
call); (c) the name of the issuer and the title and number of
shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the
number of Stock Index Options purchased; (d) the expiration
date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund in con-
nection with such purchase; (h) the name of the Clearing Mem-
ber through whom such Option was purchased; and (i) the name
of the broker to whom payment is to be made. The Custodian
shall pay, upon receipt of a Clearing Member's statement con-
firming the purchase of such Option held by such Clearing Mem-
ber for the account of the Custodian (or any duly appointed
and registered nominee of the Custodian) as custodian for the
Fund, out of moneys held for the account of the Series to
which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member
- 11 -<PAGE>
through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such Cer-
tificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall de-
liver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the
Series to which such Option was specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer
and the title and number of shares subject to such Option or,
in the case of a Stock Index Option, the stock index to which
such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date
of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through
whom the sale was made. The Custodian shall consent to the
delivery of the Option sold by the Clearing Member which pre-
viously supplied the confirmation described in preceding para-
graph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the
Fund, provided that the same conforms to the total amount pay-
able as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Call Option: (a) the Series to which such Call Option was spe-
cifically allocated; (b) the name of the issuer and the title
and number of shares subject to the Call Option; (c) the expi-
ration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid by
the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Call Option was exercised. The Cus-
todian shall, upon receipt of the Securities underlying the
Call Option which was exercised, pay out of the moneys held
for the account of the Series to which such Call Option was
specifically allocated the total amount payable to the Clear-
ing Member through whom the Call Option was exercised, pro-
vided that the same conforms to the total amount payable as
set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Put Option: (a) the Series to which such Put Option was spe-
cifically allocated; (b) the name of the issuer and the title
and number of shares subject to the Put Option; (c) the expi-
ration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to
the Fund upon such exercise; and (g) the name of the Clearing
- 12 -<PAGE>
Member through whom such Put Option was exercised. The Custo-
dian shall, upon receipt of the amount payable upon the exer-
cise of the Put Option, deliver or direct the Depository to
deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund
as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the Series to which such Stock
Index Option was specifically allocated; (b) the type of Stock
Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates;
(e) the expiration date; (f) the exercise price; (g) the total
amount to be received by the Fund in connection with such ex-
ercise; and (h) the Clearing Member from whom such payment is
to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the
title and number of shares for which the Covered Call Option
was written and which underlie the same; (c) the expiration
date; (d) the exercise price; (e) the premium to be received
by the Fund; (f) the date such Covered Call Option was writ-
ten; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the
customs prevailing among Clearing Members dealing in Covered
Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Cer-
tificate specifically allocated to such Series such restric-
tions as may be required by such receipts. Notwithstanding
the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and
not deposited with the Depository underlying a Covered Call
Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate instructing the Cus-
todian to deliver, or to direct the Depository to deliver, the
Securities subject to such Covered Call Option and specifying:
(a) the Series for which such Covered Call Option was written;
(b) the name of the issuer and the title and number of shares
subject to the Covered Call Option; (c) the Clearing Member to
- 13 -<PAGE>
whom the underlying Securities are to be delivered; and (d)
the total amount payable to the Fund upon such delivery. Upon
the return and/or cancellation of any receipts delivered pur-
suant to paragraph 6 of this Article, the Custodian shall de-
liver, or direct the Depository to deliver, the underlying
Securities as specified in the Certificate against payment of
the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written;
(b) the name of the issuer and the title and number of shares
for which the Put Option is written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Op-
tion is written; (g) the name of the Clearing Member through
whom the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash,
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Secu-
rity Account for such Series; and (i) the amount of cash
and/or the amount and kind of Securities specifically al-
located to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making
the deposits into the Collateral Account specified in the Cer-
tificate, issue a Put Option guarantee letter substantially in
the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Cer-
tificate against receipt of the premium specified in said Cer-
tificate. Notwithstanding the foregoing, the Custodian shall
be under no obligation to issue any Put Option guarantee let-
ter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and de-
scribed in the preceding paragraph is exercised, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the Series to which
such Put Option was written; (b) the name of the issuer and
title and number of shares subject to the Put Option; (c) the
Clearing Member from whom the underlying Securities are to be
received; (d) the total amount payable by the Fund upon such
delivery; (e) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be with-
drawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, spe-
cifically allocated to such Series, if any, to be withdrawn
from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put
Option, the Custodian shall pay out of the moneys held for the
- 14 -<PAGE>
account of the Series to which such Put Option was specifi-
cally allocated the total amount payable to the Clearing Mem-
ber specified in the Certificate as set forth in such Certifi-
cate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index
Option was written; (b) whether such Stock Index Option is a
put or a call; (c) the number of options written; (d) the
stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such Se-
ries; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be de-
posited in a Margin Account, and the name in which such ac-
count is to be or has been established. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account speci-
fied in the Certificate, and either (1) deliver such receipts,
if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among
Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate specifying with re-
spect to such Stock Index Option: (a) the Series for which
such Stock Index Option was written; (b) such information as
may be necessary to identify the Stock Index Option being ex-
ercised; (c) the Clearing Member through whom such Stock Index
Option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to
the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account;
and (f) the amount of cash and/or amount and kind of Securi-
ties, if any, to be withdrawn from the Senior Security Account
for such Series; and the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the Col-
lateral Account for such Series. Upon the return and/or can-
cellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay
- 15 -<PAGE>
out of the moneys held for the account of the Series to which
such Stock Index Option was specifically allocated to the
Clearing Member specified in the Certificate the total amount
payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a
"Closing Purchase Transaction" in order to liquidate its posi-
tion as a writer of an Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate
specifying with respect to the Option being purchased: (a)
that the transaction is a Closing Purchase Transaction; (b)
the Series for which the Option was written; (c) the name of
the issuer and the title and number of shares subject to the
Option, or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Options
held; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the type of Option (put
or call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Se-
ries. Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Op-
tion being liquidated through the Closing Purchase Transac-
tion, the Custodian shall remove, or direct the Depository to
remove, the previously imposed restrictions on the Securities
underlying the Call Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option pur-
chased or written by the Fund and described in this Article,
the Custodian shall delete such Option from the statements
delivered to the Fund pursuant to paragraph 3 Article III
herein, and upon the return and/or cancellation of any re-
ceipts issued by the Custodian, shall make such withdrawals
from the Collateral Account, and the Margin Account and/or the
Senior Security Account as may be specified in a Certificate
received in connection with such expiration, exercise, or con-
summation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Con-
tract, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to such Futures Contract, (or with respect to any number of
- 16 -<PAGE>
identical Futures Contract(s)): (a) the Series for which the
Futures Contract is being entered; (b) the category of Futures
Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts
entered into; (d) the delivery or settlement date of the Fu-
tures Contract(s); (e) the date the Futures Contract(s) was
(were) entered into and the maturity date; (f) whether the
Fund is buying (going long) or selling (going short) on such
Futures Contract(s); (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom the Fu-
tures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is
to be paid. The Custodian shall make the deposits, if any, to
the Margin Account in accordance with the terms and conditions
of the Margin Account Agreement. The Custodian shall make
payment out of the moneys specifically allocated to such Se-
ries of the fee or commission, if any, specified in the Cer-
tificate and deposit in the Senior Security Account for such
Series the amount of cash and/or the amount and kind of Secu-
rities specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or fu-
tures commission merchant with respect to an outstanding Fu-
tures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the
Fund with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certifi-
cate specifying: (a) the Futures Contract and the Series to
which the same relates; (b) with respect to a Stock Index Fu-
tures Contract, the total cash settlement amount to be paid or
received, and with respect to a Financial Futures Contract,
the Securities and/or amount of cash to be delivered or re-
ceived; (c) the broker, dealer, or futures commission merchant
to or from whom payment or delivery is to be made or received;
and (d) the amount of cash and/or Securities to be withdrawn
from the Senior Security Account for such Series. The Custo-
dian shall make the payment or delivery specified in the Cer-
tificate, and delete such Futures Contract from the statements
delivered to the Fund pursuant to paragraph 3 of Article III
herein.
- 17 -<PAGE>
4. Whenever the Fund shall enter into a Futures Con-
tract to offset a Futures Contract held by the Custodian here-
under, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in
paragraph 1 of this Article, and (b) the Futures Contract be-
ing offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commis-
sion, if any, specified in the Certificate and delete the Fu-
tures Contract being offset from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein, and
make such withdrawals from the Senior Security Account for
such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and con-
ditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall deliver or cause the Admin-
istrator to deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series
to which such Option is specifically allocated; (b) the type
of Futures Contract Option (put or call); (c) the type of Fu-
tures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Con-
tract Option purchased; (d) the expiration date; (e) the exer-
cise price; (f) the dates of purchase and settlement; (g) the
amount of premium to be paid by the Fund upon such purchase;
(h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of
the broker, or futures commission merchant, to whom payment is
to be made. The Custodian shall pay out of the moneys spe-
cifically allocated to such Series, the total amount to be
paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the
same conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Op-
tion purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to each
such sale: (a) Series to which such Futures Contract Option
was specifically allocated; (b) the type of Future Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d)
the date of sale; (e) the sale price; (f) the date of settle-
ment; (g) the total amount payable to the Fund upon such sale;
- 18 -<PAGE>
and (h) the name of the broker of futures commission merchant
through whom the sale was made. The Custodian shall consent
to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying: (a) the Series to
which such Futures Contract Option was specifically allocated;
(b) the particular Futures Contract Option (put or call) being
exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the date of exercise; (e) the
name of the broker or futures commission merchant through whom
the Futures Contract Option is exercised; (f) the net total
amount, if any, payable by the Fund; (g) the amount, if any,
to be received by the Fund; and (h) the amount of cash and/or
the amount and kind of Securities to be deposited in the Se-
nior Security Account for such Series. The Custodian shall
make, out of the moneys and Securities specifically allocated
to such Series, the payments, if any, and the deposits, if
any, into the Senior Security Account as specified in the Cer-
tificate. The deposits, if any, to be made to the Margin Ac-
count shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures
Contract Option was written; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d)
the expiration date; (e) the exercise price; (f) the premium
to be received by the Fund; (g) the name of the broker or fu-
tures commission merchant through whom the premium is to be
received; and (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior Se-
curity Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out
of the moneys and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any,
as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certifi-
cate specifying: (a) the Series to which such Futures Contract
- 19 -<PAGE>
Option was specifically allocated; (b) the particular Futures
Contract Option exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Fu-
tures Contract Option was exercised; (e) the net total amount,
if any, payable to the Fund upon such exercise; (f) the net
total amount, if any, payable by the Fund upon such exercise;
and (g) the amount of cash and/or the amount and kind of Secu-
rities to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon its receipt of the net to-
tal amount payable to the Fund, if any, specified in such Cer-
tificate make the payments, if any, and the deposits, if any,
into the Senior Security Account as specified in the Certifi-
cate. The deposits, if any, to be made to the Margin Account
shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying: (a) the Series to which such Option
was specifically allocated; (b) the particular Futures Con-
tract Option exercised; (c) the type of Futures Contract un-
derlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Fu-
tures Contract Option is exercised; (e) the net total amount,
if any, payable to the Fund upon such exercise; (f) the net
total amount, if any, payable by the Fund upon such exercise;
and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account
for such Series, if any. The Custodian shall, upon its re-
ceipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the moneys and Secu-
rities specifically allocated to such Series, the payments, if
any, and the deposits, if any, into the Senior Security Ac-
count as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Op-
tion described in this Article in order to liquidate its posi-
tion as a writer of such Futures Contract Option, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is
a closing transaction; (c) the type of Future Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d)
the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h)
- 20 -<PAGE>
the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for
such Series. The Custodian shall effect the withdrawals from
the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and con-
ditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Op-
tion written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdraw-
als from and/or in the case of an exercise such deposits into
the Senior Security Account as may be specified in a Certifi-
cate. The deposits to and/or withdrawals from the Margin Ac-
count, if any, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Ar-
ticle shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the
Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the
issuer and the title of the Security; (c) the number of shares
or principal amount sold, and accrued interest or dividends,
if any; (d) the dates of the sale and settlement; (e) the sale
price per unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the amount
and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has
been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker
through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee
of the Custodian) as custodian of the Fund, issue a receipt or
make the deposits into the Margin Account and the Senior Secu-
rity Account specified in the Certificate.
- 21 -<PAGE>
2. In connection with the closing-out of any short
sale, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the
title of the Security; (c) the number of shares or the princi-
pal amount, and accrued interest or dividends, if any, re-
quired to effect such closing-out to be delivered to the bro-
ker; (d) the dates of closing-out and settlement; (e) the pur-
chase price per unit; (f) the net total amount payable to the
Fund upon such closing-out; (g) the net total amount payable
to the broker upon such closing-out; (h) the amount of cash
and the amount and kind of Securities to be withdrawn, if any,
from the Margin Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from
the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Cus-
todian shall, upon receipt of the net total amount payable to
the Fund upon such closing-out, and the return and/or cancel-
lation of the receipts, if any, issued by the Custodian with
respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net
total amount payable to the broker, and make the withdrawals
from the Margin Account and the Senior Security Account, as
the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver or cause the Ad-
ministrator to deliver to the Custodian a Certificate, or in
the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions specifying: (a)
the Series for which the Reverse Repurchase Agreement is en-
tered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically al-
located to such Series; (c) the broker or dealer through or
with whom the Reverse Repurchase Agreement is entered; (d) the
amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such
Series to be deposited in a Senior Security Account for such
Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable
to the Fund specified in the Certificate or Oral Instructions
make the delivery to the broker or dealer, and the deposits,
if any, to the Senior Security Account, specified in such Cer-
tificate or Oral Instructions.
- 22 -<PAGE>
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall deliver or cause the Administrator to deliver a
Certificate or, in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate or Oral Instructions
to the Custodian specifying: (a) the Reverse Repurchase Agree-
ment being terminated and the Series for which same was en-
tered; (b) the total amount payable by the Fund in connection
with such termination; (c) the amount and kind of Securities
to be received by the Fund and specifically allocated to such
Series in connection with such termination; (d) the date of
termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be termi-
nated; and (f) the amount of cash and/or the amount and kind
of Securities to be withdrawn from the Senior Securities Ac-
count for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund
specified in the Certificate or Oral Instructions, make the
payment to the broker or dealer, and the withdrawals, if any,
from the Senior Security Account, specified in such Certifi-
cate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian here-
under, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each such loan: (a) the Series to which the loaned Securi-
ties are specifically allocated; (b) the name of the issuer
and the title of the Securities, (c) the number of shares or
the principal amount loaned, (d) the date of loan and deliv-
ery, (e) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of
cash collateral and the premium, if any, separately identi-
fied, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer
or financial institution to which the loan was made upon re-
ceipt of the total amount designated as to be delivered
against the loan of Securities. The Custodian may accept pay-
ment in connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a certi-
fied or bank cashier's check payable to the order of the Fund
or the Custodian drawn on New York Clearing House funds and
may deliver Securities in accordance with the customs prevail-
ing among dealers in securities.
- 23 -<PAGE>
2. Promptly after each termination of the loan of Secu-
rities by the Fund, the Fund shall deliver or cause the Admin-
istrator to deliver to the Custodian a Certificate specifying
with respect to each such loan termination and return of Secu-
rities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Cus-
todian (including the cash collateral for such Securities mi-
nus any offsetting credits as described in said Certificate),
and (f) the name of the broker, dealer, or financial institu-
tion from which the Securities will be returned. The Custo-
dian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were
loaned and upon receipt thereof shall pay, out of the moneys
held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certifi-
cate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior Se-
curity Account for such Series. In the event the Certificate
fails to specify the Series, the name of the issuer, the title
and the number of shares or the principal amount of any par-
ticular Securities to be deposited by the Custodian into, or
withdrawn from, a Senior Securities Account, the Custodian
shall be under no obligation to make any such deposit or with-
drawal and shall so notify the Administrator.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose ben-
efit, the account was established as specified in the Margin
Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Mar-
gin Account shall be dealt with in accordance with the terms
and conditions of the Margin Account Agreement.
- 24 -<PAGE>
4. The Custodian shall have a continuing lien and secu-
rity interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In ac-
cordance with applicable law the Custodian may enforce its
lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option guar-
antee letter or similar document or any receipt issued hereun-
der by the Custodian. In the event the Custodian should real-
ize on any such property net proceeds which are less than the
Custodian's obligations under any Put Option guarantee letter
or similar document or any receipt, such deficiency shall be a
debt owed the Custodian by the Fund within the scope of Ar-
ticle XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close
of business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custo-
dian shall make available upon request to any broker, dealer,
or futures commission merchant specified in the name of a Mar-
gin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
6. Promptly after the close of business on each busi-
ness day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Administrator with a statement with respect to such Col-
lateral Account specifying the amount of cash and/or the
amount and kind of Securities held therein. No later than the
close of business next succeeding the delivery to the Fund of
such statement, the Fund shall deliver or cause the Adminis-
trator to deliver to the Custodian a Certificate specifying
the then market value of the Securities described in such
statement. In the event such then market value is indicated
to be less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document,
the Fund shall promptly specify or cause the Administrator to
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to
deliver to the Custodian a copy of the resolution of the Board
of Trustees of the Fund, certified by the Secretary, the
Clerk, any Assistant Secretary or any Assistant Clerk, either
(i) setting forth with respect to the Series specified therein
- 25 -<PAGE>
the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which share-
holders entitled to payment shall be determined, the amount
payable per Share of such Series to the shareholders of record
as of that date and the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the
Fund on the payment date, or (ii) authorizing with respect to
the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian
to rely on Oral Instructions or a Certificate setting forth
the date of the declaration of such dividend or distribution,
the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the
amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions or Certificate, as the case may be, the Cus-
todian shall pay out of the moneys held for the account of
each Series the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver or cause the Administrator to deliver to the Custodian
a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the Cus-
todian for the sale of such Shares and specifically allocated
to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account
in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described
in the foregoing provisions of this Article, the Custodian
shall pay, out of the money held for the account of such Se-
ries, all original issue or other taxes required to be paid by
the Fund in connection with such issuance upon the receipt of
a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
- 26 -<PAGE>
the Custodian hereunder in connection with a redemption of any
Shares, it shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held in the separate account
in the name of the Series the total amount specified in the
Certificate delivered pursuant to the foregoing paragraph 4 of
this Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed
pursuant to any check redemption privilege which may from time
to time be offered by the Fund, the Custodian, unless other-
wise instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that the re-
demption 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 moneys held in
the separate account of the Series of the Shares being re-
deemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion ad-
vance funds on behalf of any Series which results in an over-
draft because the moneys held by the Custodian in the separate
account for such Series shall be insufficient to pay the total
amount payable upon a purchase of Securities specifically al-
located to such Series, as set forth in a Certificate or Oral
Instructions, or which results in an overdraft in the separate
account of such Series for some other reason, or if the Fund
is for any other reason indebted to the Custodian with respect
to a Series, including any indebtedness to The Bank of New
York under the Fund's Cash Management and Related Services
Agreement, (except a borrowing for investment or for temporary
or emergency purposes using Securities as collateral pursuant
to a separate agreement and subject to the provisions of para-
graph 2 of this Article), such overdraft or indebtedness shall
be deemed to be a loan made by the Custodian to the Fund for
such Series payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to 1/2% over
- 27 -<PAGE>
Custodian's prime commercial lending rate in effect from time
to time, such rate to be adjusted on the effective date of any
change in such prime commercial lending rate but in no event
to be less than 6% per annum. In addition, the Fund hereby
agrees that the Custodian shall have a continuing lien and
security interest in and to any property specifically al-
located to such Series at any time held by it for the benefit
of such Series or in which the Fund may have an interest which
is then in the Custodian's possession or control or in posses-
sion or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole dis-
cretion, at any time to charge any such overdraft or indebted-
ness together with interest due thereon against any balance of
account standing to such Series' credit on the Custodian's
books. In addition, the Fund hereby covenants that on each
Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/or otherwise borrow from a third
party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repur-
chase Agreement or such a borrowing, it shall prior to 9 a.m.,
New York City time, advise the Custodian, in writing, of each
such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified
other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Custo-
dian a Certificate specifying with respect to each such bor-
rowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrow-
ing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other
loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan
becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities
to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a
statement specifying whether such loan is for investment pur-
poses or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified col-
lateral and the executed promissory note, if any, against de-
livery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
- 28 -<PAGE>
payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such Se-
curities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities re-
leased 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 Fund fails to specify in a Certificate the Se-
ries, 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.
ARTICLE XV
TERMINAL LINK
1. At no time and under no circumstances shall the Ad-
ministrator on behalf of the Fund be obligated to have or uti-
lize the Terminal Link, and the provisions of this Article
shall apply if, but only if, the Fund in its sole and absolute
discretion directs the Administrator to utilize the Terminal
Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Adminis-
trator on behalf of the Fund only for the purpose of providing
Certificates to the Custodian with respect to transactions
involving Securities or for the transfer of money to be ap-
plied to the payment of dividends, distributions or redemp-
tions of Fund Shares, and shall be utilized by the Custodian
only for the purpose of providing notices to the Administra-
tor. Such use shall commence only after the Fund shall have
delivered or caused the Administrator to have delivered to the
Custodian a Certificate substantially in the form of Exhibit D
and shall have established access codes. Each use of the Ter-
minal Link by the Administrator shall constitute a representa-
tion and warranty that the Terminal Link is being used only
for the purposes permitted hereby, that at least two Officers
have each utilized an access code, that such safekeeping pro-
cedures have been established, and that such use does not con-
travene the Investment Company Act of 1940, as amended, or the
rules or regulations thereunder.
3. The Administrator shall obtain and maintain at its
own cost and expense all equipment and services, including,
but not limited to communications services, necessary for it
to utilize the Terminal Link, and the Custodian shall not be
responsible for the reliability or availability of any such
equipment or services.
- 29 -<PAGE>
4. The Fund and the Administrator each acknowledge that
any data bases made available as part of, or through the Ter-
minal Link and any proprietary data, software, processes,
information and documentation (other than any such which are
or become part of the public domain or are legally required to
be made available to the public) (collectively, the "Informa-
tion"), are the exclusive and confidential property of the
Custodian. The Fund and the Administrator shall, and shall
cause others to which either discloses the Information, to
keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential prop-
erty and trade secrets, and shall neither make nor permit any
disclosure without the express prior written consent of the
Custodian.
5. Upon termination of this Agreement for any reason,
the Fund and the Administrator shall return to the Custodian
any and all copies of the Information which are in its respec-
tive possession or under its respective control, or which ei-
ther distributed to third parties. The provisions of this
Article shall not affect the copyright status of any of the
Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Ter-
minal Link from time to time without notice to the Fund or the
Administrator except that the Custodian shall give the Admin-
istrator notice not less than 75 days in advance of any modi-
fication which would materially adversely affect the
Administrator's operation, and the Administrator agrees that
the it shall not modify or attempt to modify the Terminal Link
without the Custodian's prior written consent. The Fund ac-
knowledges that any software or procedures provided the Fund
as part of the Terminal Link are the property of the Custodian
and, accordingly, the Administrator agrees that any modifica-
tions to the Terminal Link, whether by the Administrator, or
by the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and sup-
pliers it utilizes or the Fund utilizes in connection with the
Terminal Link makes any warranties or representations, express
or implied, in fact or in law, including but not limited to
warranties of merchantability and fitness for a particular
purpose.
8. The Administrator will cause its officers and
employees to treat the authorization codes and the access
codes applicable to Terminal Link with extreme care, and the
Fund and the Administrator irrevocably authorizes the Custo-
dian to act in accordance with and rely on Certificates re-
ceived by it through the Terminal Link. The Fund acknowledges
that it is the Administrator's responsibility to assure that
only Officers use the Terminal Link, and that Custodian shall
- 30 -<PAGE>
not be responsible nor liable for use of the Terminal Link by
persons other than such persons or Officers, or by only a
single Officer, nor for any alteration, omission, or failure
to promptly forward.
9(a). Except as otherwise specifically provided in
Section 9(b) of this Article, the Custodian shall have no li-
ability for any losses, damages, injuries, claims, costs or
expenses arising out of or in connection with any failure,
malfunction or other problem relating to the Terminal Link
except for money damages suffered as the direct result of the
negligence of the Custodian in an amount not exceeding for any
incident $100,000 provided, however, that the Custodian shall
have no liability under this Section 9 if the Administrator
fails to comply with the provisions of Section 11.
9(b). The Custodian's liability for its negligence in
executing or failing to execute in accordance with a Certifi-
cate received through Terminal Link shall be only with respect
to a transfer of funds which is not made in accordance with
such Certificate after such Certificate shall have been duly
acknowledged by the Custodian, and shall be contingent upon
the Administrator complying with the provisions of Section 12
of this Article, and shall be limited to (i) restoration of
the principal amount mistransferred, if and to the extent that
the Custodian would be required to make such restoration under
applicable law, and (ii) the lesser of (A) the Fund's actual
pecuniary loss incurred by reason of its loss of use of the
mistransferred funds or the funds which were not transferred,
as the case may be, or (B) compensation for the loss of the
use of the mistransferred funds or the funds which were not
transferred, as the case may be, at a rate per annum equal to
the average federal funds rate as computed from the Federal
Reserve Bank of New York's daily determination of the effec-
tive rate for federal funds, for the period during which a
Fund has lost use of such funds. In no event shall the Custo-
dian have any liability for failing to execute in accordance
with a Certificate a transfer of funds where the Certificate
is received by the Custodian through Terminal Link other than
through the applicable transfer module for the particular in-
structions contained in such Certificate.
10. Without limiting the generality of the foregoing, in
no event shall the Custodian or any manufacturer or supplier
of its computer equipment, software or services relating to
the Terminal Link be responsible for any special, indirect,
incidental or consequential damages which the Fund or the Ad-
ministrator may incur or experience by reason of its use of
the Terminal Link even if the Custodian or any manufacturer or
supplier has been advised of the possibility of such damages,
nor with respect to the use of the Terminal Link shall the
Custodian or any such manufacturer or supplier be liable for
acts of God, or with respect to the following to the extent
beyond such person's reasonable control: machine or computer
- 31 -<PAGE>
breakdown or malfunction, interruption or malfunction of com-
munication facilities, labor difficulties or any other similar
or dissimilar cause.
11. The Fund shall cause the Administrator to notify the
Custodian of any errors, omissions or interruptions in, or
delay or unavailability of, the Terminal Link as promptly as
practicable, and in any event within 24 hours after the earli-
est of (i) discovery thereof, (ii) the Business Day on which
discovery should have occurred through the exercise of reason-
able care and (iii) in the case of any error, the date of ac-
tual receipt of the earliest notice which reflects such error,
it being agreed that discovery and receipt of notice may only
occur on a business day. The Custodian shall promptly advise
the Fund whenever the Custodian learns of any errors, omis-
sions or interruption in, or delay or unavailability of, the
Terminal Link.
12. The Custodian shall verify to the Administrator, by
use of the Terminal Link, receipt of each Certificate the Cus-
todian receives through the Terminal Link, and in the absence
of such verification the Custodian shall not be liable for any
failure to act in accordance with such Certificate and neither
the Fund nor the Administrator may claim that such Certificate
was received by the Custodian. Such verification, which may
occur after the Custodian has acted upon such Certificate,
shall be accomplished on the same day on which such Certifi-
cate is received.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to
employ, as sub-custodian for each Series' Foreign Securities
(as such term is defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, as amended) and
other assets, the foreign banking institutions and foreign
securities depositories and clearing agencies designated on
Schedule I hereto ("Foreign Sub-Custodians") to carry out
their respective responsibilities in accordance with the terms
of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been
previously delivered to the Fund and receipt of which is
hereby acknowledged (each such agreement, a "Foreign Sub-
Custodian Agreement"). Upon receipt of a Certificate,
together with a certified resolution substantially in the form
attached as Exhibit E of the Fund's Board of Trustees, the
Fund may designate any additional foreign sub-custodian with
which the Custodian has an agreement for such entity to act as
the Custodian's agent, as its sub-custodian and any such
- 32 -<PAGE>
additional foreign sub-custodian shall be deemed added to
Schedule I. Upon receipt of a Certificate from the Fund, the
Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's
assets and such Foreign Sub-Custodian shall be deemed deleted
from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and
will not be amended in a way that materially adversely affects
the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as
belonging to each Series of the Fund the Foreign Securities of
such Series held by each Foreign Sub-Custodian. At the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims by the
Fund or any Series against a Foreign Sub-Custodian as a
consequence of any loss, damage, cost, expense, liability or
claim sustained or incurred by the Fund or any Series if and
to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or
claim.
4. Upon request of the Fund, the Custodian will,
consistent with the terms of the applicable Foreign Sub-
Custodian Agreement, use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as
such books and records relate to the performance of such
Foreign Sub-Custodian under its agreement with the Custodian
on behalf of the Fund.
5. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the
securities and other assets of each Series held by Foreign
Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or
notifications of any transfers of Foreign Securities to or
from each custodial account maintained by a Foreign Sub-
Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as
mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall
be similar in kind and scope to that furnished to the Fund in
connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they
are located and their ability to provide the custodial
services required, and (ii) whether the Foreign Sub-Custodians
would provide a level of safeguards for safekeeping and
- 33 -<PAGE>
custody of securities not materially different form those
prevailing in the United States. The Custodian shall monitor
the general operating performance of each Foreign Sub-
Custodian. The Custodian agrees that it will use reasonable
care in monitoring compliance by each Foreign Sub-Custodian
with the terms of the relevant Foreign Sub-Custodian Agreement
and that if it learns of any breach of such Foreign Sub-
Custodian Agreement believed by the Custodian to have a
material adverse effect on the Fund or any Series it will
promptly notify the Fund of such breach. The Custodian also
agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund
all notices, reports or other written information received
pertaining to the Fund's Foreign Securities, including without
limitation, notices of corporate action, proxies and proxy
solicitation materials.
8. Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for securities received
for the account of any Series and delivery of securities
maintained for the account of such Series may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities
from such purchaser or dealer.
9. Notwithstanding any other provision in this
Agreement to the contrary, with respect to any losses or
damages arising out of or relating to any actions or omissions
of any Foreign Sub-Custodian the sole responsibility and
liability of the Custodian shall be to take appropriate action
at the Fund's expense to recover such loss or damage from the
Foreign Sub-Custodian. It is expressly understood and agreed
that the Custodian's sole responsibility and liability shall
be limited to amounts so recovered from the Foreign Sub-
Custodian.
ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in
Article XVI neither the Custodian nor its nominee shall be
liable for any loss or damage, including counsel fees, result-
ing from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for
- 34 -<PAGE>
any such loss or damage arising out of its own negligence or
willful misconduct. The Custodian agrees to indemnify and
hold harmless the Trust and Trust's Trustees and officers to
the extent described above (including reasonable counsel fees)
incurred or assessed against any of them as a result of any
breach or violation of this Agreement by the Custodian or its
officers, employees and agents or its nominees, resulting from
their negligence or willful misconduct. The Custodian may,
with respect to questions of law arising hereunder or under
any Margin Account Agreement, apply for and obtain the advice
and opinion of counsel to the Fund or of its own counsel, at
the expense of the Fund, and shall be fully protected with
respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall
be liable to the Fund for any loss or damage resulting from
the use of the Book-Entry System or any Depository arising by
reason of any negligence or willful misconduct on the part of
the Custodian or any of its employees or agents.
Notwithstanding the foregoing, or any other provision
contained in this Agreement, in no event shall the Custodian
be liable to the Trust, its Trustees or officers, or any third
party, for special, indirect or consequential damages, or lost
profits or loss of business, arising under or in connection
with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of
action.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into,
and shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality
of the purchase, sale or writing thereof, or the propriety of
the amount paid or received therefor;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor;
(c) The legality of the declaration or payment of
any dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securi-
ties, nor shall the Custodian be under any duty or obligation
to see to it that any cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any
time as a result of such loan of portfolio Securities of the
Fund is adequate collateral for the Fund against any loss it
- 35 -<PAGE>
might sustain as a result of such loan. The Custodian spe-
cifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to
Article XIV of this Agreement makes payment to it of any divi-
dends or interest which are payable to or for the account of
the Fund during the period of such loan or at the termination
of such loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment
to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see
that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the
amount the Fund is entitled to receive, or to notify the Fund
of the Custodian's receipt or non-receipt of any such pay-
ment.
3. The Custodian shall not 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 Custo-
dian 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 the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls, con-
versions, exchange offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely no-
tice from the Depository. In no event shall the Custodian
have any responsibility or liability for the failure of the
Depository to collect, or for the late collection or late
crediting by the Depository of any amount payable upon Securi-
ties deposited in the Depository which may mature or be re-
deemed, retired, called or otherwise become payable. However,
upon receipt of a Certificate from the Fund of an overdue
amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the
- 36 -<PAGE>
Fund, except that the Custodian shall not be under any obliga-
tion to appear in, prosecute or defend any action suit or pro-
ceeding in respect to any Securities held by the Depository
which in its opinion may involve it in expense or liability,
unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the Trans-
fer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga-
tion 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 satisfac-
tion of reimbursement of its costs and expenses in connection
with any such action.
7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or
Co-Custodians including, but not limited to, banking institu-
tions located in foreign countries, of Securities and moneys
at any time owned by the Fund, upon such terms and conditions
as may be approved in a Certificate or contained in an agree-
ment executed by the Custodian, the Fund and the appointed
institution.
8. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time de-
livered to, or held by it or by any Foreign Sub-Custodian, for
the account of the Fund and specifically allocated to a Series
are such as properly may be held by the Fund or such Series
under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not
involving the Custodian, are such transactions as may properly
be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all out-of-pocket expenses
and such compensation as may be agreed upon from time to time
between the Custodian and the Fund. The Fund represents that
the Administrator has agreed to pay such compensation and ex-
penses promptly upon receipt of statements therefor, and
hereby directs the Custodian to (i) send all statements for
compensation to its attention care of Fund/Plan at the follow-
ing address: Fund/Plan Services, Inc., 2 W. Elm Street,
Conshohocken, PA 19428, Attention: Mr. Elmer Gardner, Senior
- 37 -<PAGE>
Vice President, and (ii) accept all payments made by Fund/Plan
in the Fund's name as if such payments were made directly by
the Fund. The Fund shall pay to Fund/Plan fees for services
(including custodian services provided by the Custodian) in
accordance with the Administration Agreement. The Custodian's
compensation for services rendered hereunder is set forth in a
separate agreement between the Custodian and Fund/Plan.
Should Fund/Plan fail to pay or remit such compensation to the
Custodian within 20 days of the date the same is due and pay-
able, Custodian shall notify the Fund. If such payment or
remittance is not received from Fund/Plan within 15 days of
such notice, then the Custodian will be entitled to debit the
Custody Account directly for such compensation. The Custodian
may charge compensation with respect to which it has properly
sent a notice to the Fund, as provided in the preceding sen-
tence, and any expenses with respect to a Series incurred by
the Custodian in the performance of its duties pursuant to
such agreement against any money specifically allocated to
such Series. Unless and until the Fund or the Administrator
instructs the Custodian by a Certificate to apportion any
loss, damage, liability or expense among the Series in a
specified manner, the Custodian shall also be entitled to
charge against any money held by it for the account of a Se-
ries such Series' pro rata share (based on such Series net
asset value at the time of the charge to the aggregate net
asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the pro-
visions of this Agreement. The expenses for which the Custo-
dian shall be entitled to reimbursement hereunder shall in-
clude, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase
and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian. The
Fund agrees to forward or cause the Administrator to forward
to the Custodian a Certificate or facsimile thereof confirming
such Oral Instructions in such manner so that such Certificate
or facsimile thereof is received by the Custodian, whether by
hand delivery, telecopier or other similar device, or other-
wise, by the close of business of the same day that such Oral
Instructions are given to the Custodian. The Fund 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 au-
thorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral In-
structions given to the Custodian hereunder concerning such
- 38 -<PAGE>
transactions provided such instructions reasonably appear to
have been received from an Officer.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian
and reasonably believed by the Custodian to be given in ac-
cordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other no-
tice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission mer-
chant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property
of the Fund. Such books and records shall be prepared and
maintained as required by the Investment Company Act of 1940,
as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representa-
tives, shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable re-
quest of the Fund, copies of any such books and records shall
be provided by the Custodian to the Fund or the Fund's autho-
rized representative, and the Fund shall reimburse the Custo-
dian its expenses of providing such copies. Upon reasonable
request of the Fund, the Custodian shall provide in hard copy
or on micro-film, whichever the Custodian elects, any records
included in any such delivery which are maintained by the Cus-
todian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C.,
and with such reports on its own systems of internal account-
ing control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees, how-
soever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII
as part of any check redemption privilege program of the Fund,
except for any such liability, claim, loss and demand arising
out of the Custodian's own negligence or willful misconduct.
For any legal proceeding giving rise to the indemnification
set forth above in this paragraph, the Fund shall be entitled
to defend or prosecute any claim in the name of the Custodian
at its own expense and through counsel of its own choosing
- 39 -<PAGE>
reasonably acceptable to the Custodian if it gives written
notice to the Custodian within ten (10) Business days of re-
ceiving notice of such claim. Notwithstanding the foregoing,
the Custodian may participate in the litigation at its own
expense and with counsel of its own choosing.
15. Subject to the foregoing provisions of this Agree-
ment, including, without limitation, those contained in Ar-
ticle XVI the Custodian may deliver and receive Securities,
and receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in ac-
cordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is
instructed to deliver Securities against payment, delivery of
such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility
and liability for all credit risks involved in connection with
the Custodian's delivery of Securities pursuant to Certifi-
cates or instructions of the Fund or the Administrator which
responsibility and liability shall continue until final pay-
ment in full has been received by the Custodian.
16. In the event the Custodian is advised by the Fund
that the Fund is no longer utilizing the services of the Ad-
ministrator, then the Custodian shall furnish or give to the
Fund the statements or notices described above as to be fur-
nished or given to the Administrator.
17. The Custodian shall have no duties or responsibili-
ties whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Cus-
todian. Without limiting the generality of the foregoing, the
Custodian shall have no duties or responsibilities by reason
of any terms or provisions in the Administration Agreement,
and if such Administration Agreement shall cease to be in ef-
fect the Custodian shall have no additional duties hereunder.
ARTICLE XVIII
TERMINATION
1. Either of the parties hereto may terminate this
Agreement 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, provided, however, that if such notice is sent by the
Fund and recites that it is being given contemporaneously with
a termination of the Custody Administration any Agency Agree-
ment with Fund/Plan, such notice may specify any date of ter-
mination selected by the Fund. In the event such notice is
given by the Fund, it shall be accompanied by a copy of a
- 40 -<PAGE>
resolution of the Board of Trustees of the Fund, certified by
the Secretary, the Clerk, any Assistant Secretary or any As-
sistant Clerk, electing to terminate this Agreement and desig-
nating a successor custodian or custodians, each of which
shall be a bank or trust 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 Fund
shall, on or before the termination date, deliver to the Cus-
todian a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor cus-
todian or custodians. In the absence of such designation by
the Fund, 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 shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and moneys
then owned by the Fund and held by it as Custodian, after de-
ducting all fees, expenses and other amounts for the payment
or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding para-
graph, the Fund shall upon the date specified in the notice of
termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund be deemed to be its own custo-
dian 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 Fund to hold such Se-
curities hereunder in accordance with this Agreement.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present Of-
ficers. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present
Officer ceases to be an Officer or in the event that other or
additional Officers are elected or appointed. Until such new
Certificate 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 Officers
as set forth in the last delivered Certificate.
- 41 -<PAGE>
2. Any notice or other instrument in writing, autho-
rized or required by this Agreement to be given to the Custo-
dian, shall be sufficiently given if addressed to the Custo-
dian and mailed or delivered to it at its offices at 90 Wash-
ington Street, New York, New York 10286, or at such other
place as the Custodian may from time to time designate in
writing.
3. Any notice or other instrument in writing, autho-
rized or required by this Agreement to be given to the Fund
shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund
may from time to time designate in writing, and any notice or
other instrument in writing authorized or required to be given
to the Administrator shall be sufficiently given if addressed
to the Administrator at such address as the Administrator may
from time to time designate in writing.
4. This Agreement 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 approved by a
resolution of the Board of Trustees of the Fund.
5. 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 written consent of the Cus-
todian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Board of Trustees.
6. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby con-
sents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute
arising hereunder and hereby waives its right to trial by
jury.
7. 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.
- 42 -<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective Officers,
thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written.
POLYNOUS GROWTH FUND
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
_______________________
- 43 -<PAGE>
APPENDIX A
I, , President and I,
, of POLYNOUS GROWTH
FUND, a Delaware business trust (the "Fund"), do hereby
certify that:
The following individuals including officers and employ-
ees of the Administrator have been duly authorized by the
Board of Trustees of the Fund in conformity with the Fund's
Declaration of Trust and By-Laws to give Certificates or Oral
Instructions on behalf of the Fund, and the signatures set
forth opposite their respective names are their true and cor-
rect signatures:
Name Signature
_____________________ _________________________<PAGE>
APPENDIX B
SERIES<PAGE>
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF
NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of POLYNOUS GROWTH FUND, a Delaware business
trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at
a meeting duly held on , 1996, at which a
quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1996,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis to deposit in the Book-
Entry System, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated,
and to utilize the Book-Entry System to the extent pos-
sible in connection with its performance thereunder, in-
cluding, without limitation, in connection with settle-
ments of purchases and sales of securities, loans of se-
curities, and deliveries and returns of securities col-
lateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of POLYNOUS GROWTH FUND, as of the day of
, 1996.
[SEAL]<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of POLYNOUS GROWTH FUND, a Delaware business
trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at
a meeting duly held on , 1996, at which a
quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1996,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Depository, as
defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and re-
turns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of POLYNOUS GROWTH FUND, as of the day of
, 1996.
[SEAL]<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of POLYNOUS GROWTH FUND, a Delaware
business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on , 1996,
at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1996,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Participants
Trust Company as Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifi-
cally allocated, and to utilize the Participants Trust
Company to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and re-
turns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of POLYNOUS GROWTH FUND, as of the day of
, 1996.
[SEAL]<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of POLYNOUS GROWTH FUND, a Delaware
business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on ,
1996, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1996,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which
the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Cus-
tody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of POLYNOUS GROWTH FUND, as of the day of
, 1996.
[SEAL]<PAGE>
EXHIBIT D
The undersigned, , hereby cer-
tifies that he or she is the duly elected and acting
of POLYNOUS GROWTH FUND, a Delaware
business trust (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of
the Fund at a meeting duly held on , 1996, at
which a quorum was at all times present and that such
resolutions have not been modified or rescinded and are in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursu-
ant to the Custody Agreement between The Bank of New York and
the Fund dated as of , 1996 (the "Custody Agree-
ment") is authorized and instructed on a continuous and ongo-
ing basis to act in accordance with, and to rely on Certifi-
cates (as defined in the Custody Agreement) given by to the
Custodian by a Terminal Link (as defined in the Custody Agree-
ment).
RESOLVED, that the Fund shall establish access codes and
grant us of such access codes only to Officers of the fund as
defined in the Custody Agreement, shall establish internal
safekeeping procedures to safeguard and protect the confiden-
tiality and availability of such access codes, shall limit its
use of the Terminal Link to those purposes permitted by the
Custody Agreement, shall require at least two such Officers to
utilize their respective access codes in connection with each
such Certificate, and shall use the Terminal Link only in a
manner that does not contravene the Investment Company Act of
1940, as amended, or the rules and regulations thereunder.
RESOLVED, that Officers of the Fund shall, following the
establishment of such access codes and such internal safekeep-
ing procedures, advise the Custodian that the same have been
established by delivering a Certificate, as defined in the
Custody Agreement, and the Custodian shall be entitled to rely
upon such advice.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of POLYNOUS GROWTH FUND, as of the day of
, 1996.
[SEAL]<PAGE>
EXHIBIT E
The undersigned, , hereby cer-
tifies that he or she is the duly elected and acting
of POLYNOUS GROWTH FUND, a Delaware business
trust (the "Fund"), further certifies that the following
resolutions were adopted by the Board of Trustees of the Fund
at a meeting duly held on , 1996, at
which a quorum was at all times present and that such
resolutions have not been modified or rescinded and are in
full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in
each country listed in Schedule I hereto be, and hereby is,
approved by the Board of Trustees as consistent with the best
interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with
the foreign branches of The Bank of New York (the "Bank")
listed in Schedule I located in the countries specified
therein, and with the foreign sub-custodians and depositories
listed in Schedule I located in the countries specified
therein be, and hereby is, approved by the Board of Directors
as consistent with the best interest of the Fund and its
shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to
this meeting between the Bank and each of the foreign
sub-custodians and depositories listed in Schedule I providing
for the maintenance of the Fund's assets with the applicable
entity, be and hereby are, approved by the Board of Trustees
as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the appropriate officers of the Fund are
hereby authorized to place assets of the Fund with the afore-
mentioned foreign branches and foreign sub-custodians and de-
positories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or
any of them, are authorized to do any and all other acts, in
the name of the Fund and on its behalf, as they, or any of
them, may determine to be necessary or desirable and proper in
connection with or in furtherance of the foregoing resolu-
tions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal
of POLYNOUS GROWTH FUND, as of the day of ,
1996.
[SEAL]
EX 99.B.8(b)
CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This Agreement, dated as of the 17th day of July ,
1996 made by and between Polynous Trust, a business trust (the
"Trust") operating as an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the
"Act"), duly organized and existing under the laws of the State of
Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to
issue separate series of shares representing interests in separate
investment portfolios (the "Series"), which Series are identified on
Schedule "B" attached hereto, and which Schedule "B" may be amended
from time to time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby
Fund/Plan will provide certain certain custody administration
services on behalf of the Trust on the terms and conditions set forth
in this Agreement; and
WHEREAS, the Trust desires that Fund/Plan act as its agent for
the specific purpose of taking receipt of, and making payment for,
custody services performed on the Trust's behalf by The Bank of New
York pursuant to an agreement between The Bank of New York and the
Trust; and
WHEREAS, Fund/Plan is willing to serve in such capacity and
perform such functions upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for good and valuable consideration,
the receipt and sufficiency is hereby acknowledged, the Parties
hereto, intending to be legally bound, do hereby agree as follows:
APPOINTMENT OF FUND/PLAN AS AGENT
Section 1. The Trust hereby appoints Fund/Plan as an agent of
the Trust, and Fund/Plan hereby accepts such appointment, for the
limited purpose of: (i) accepting invoices charged to the Trust for
custody services performed by The Bank of New York on the Trust's
behalf, and (ii) remitting payment to The Bank of New York for such
services performed in amounts as set forth in Schedule "A" attached
hereto.
Section 2. As Custody Administrator, Fund/Plan shall:
a) coordinate and process portfolio trades through terminal
links with The Bank of New York.
b) input and verify portfolio trades
c) monitor pending and failed security trades
d) coordinate communications between brokers and banks to
resolve any operational problems
e) advise the Trust of any corporate action information,
address and follow up on any dividend or interest
discrepancies
f) process the Trust's expenses
g) interface with the accounting services provider and the
transfer agent to research and resolve custody cash
problems
h) provide daily and monthly reports
TERM AND FEES
Section 3.
(a) The term of this Agreement shall be for a period of
two (2) years commencing on the date which the Trust's registration
statement is declared effective by the U.S. Securities and Exchange
Commission ("Effective Date") and shall continue thereafter on a year
to year term subject to termination by either Party as set forth
below.
(b) After the initial term of this Agreement, the Trust
or Fund/Plan may give written notice to the other of the termination
of this Agreement, such termination to take effect at the time
specified in the notice, which date shall not be less than one
hundred and eighty (180) days after the date of receipt of such
notice. Upon the effective termination date, the Trust shall pay to
Fund/Plan such compensation as may be due as of the date of
termination and shall likewise reimburse Fund/Plan for any
out-of-pocket expenses and disbursements reasonably incurred by
Fund/Plan to
such date.
(c) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by
written notice to Fund/Plan in connection with the termination of
this Agreement, Fund/Plan shall promptly upon such termination and at
the expense of the Trust, transfer all records belonging to the Trust
and shall cooperate in the transfer of such records, duties and
responsibilities.
(d) The Trust agrees to pay Fund/Plan compensation for its
services and to reimburse it for expenses at the rates and amounts as
set forth in Schedule "A" attached hereto, and as shall be set forth
in any amendments to such Schedule "A" approved by the Trust and
Fund/Plan. The Trust agrees and understands that Fund/Plan's
compensation be comprised of two components, payable on a monthly
basis, as follows:
(i) a fixed fee for each Series, together with an asset
based fee which the Trust hereby authorizes Fund/Plan to collect by
debiting the Trust's custody account for invoices which are rendered
for the services performed for the applicable function. The invoices
for the services performed will be sent to the Trust after such
debiting with the indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by
Fund/Plan on behalf of the Trust, which out-of-pocket expenses will
be billed to the Trust within the first ten calendar days of the
month following the month in which such out-of-pocket expenses were
incurred. The Trust agrees to reimburse Fund/Plan for such expenses
within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the
value of a Series' net assets shall be computed at the times and in
the manner specified in the Trust's Prospectus and Statement of
Additional Information then in effect.
During the term of this Agreement, should the Trust seek
services or functions in addition to those stated, a written
amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and
the Trust.
GENERAL PROVISIONS
Section 4.
(a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall only be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement that result from
willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer,
director, employee or agent of the Trust, shall be deemed when
rendering services to such entity or acting on any business of such
entity (other than services or business in connection with
Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or under the control or
direction of Fund/Plan even though such person may receive
compensation from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement,
the Trust shall indemnify and hold harmless Fund/Plan, its directors,
officers, employees, shareholders and agents from and against any and
all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Fund/Plan
may sustain or incur or which may be asserted against Fund/Plan by
any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken
or omitted to be taken by Fund/Plan in good faith in reliance upon
any certificate, instrument, order or stock certificate or other
document reasonably believed by Fund/Plan to be genuine and signed,
countersigned or executed by any duly authorized person, upon the
oral or written instruction of an authorized person of the Trust or
upon the opinion of legal counsel to the Trust; or (iii) any action
taken in good faith or omitted to be taken by Fund/Plan in connection
with its appointment in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have
been altered, changed, amended or repealed. Indemnification under
this subparagraph shall not apply, however, to actions or omissions
of Fund/Plan or its directors, officers, employees, shareholders or
agents in cases of its or their willful misfeasance, bad faith, gross
negligence or reckless disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may
seek indemnity under this Section, Fund/Plan shall notify the Trust
promptly after any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and shall
notify the Trust promptly of any action commenced against Fund/Plan
within ten (10) days after Fund/Plan shall have been served with a
summons or other legal process, giving information as to the nature
and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on
account of the indemnity under this Section 4(c) if the Trust has not
been prejudiced in any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the
defense of any action, suit or proceeding in which Fund/Plan is
involved and for which indemnity is being provided by the Trust to
Fund/Plan. The Trust may negotiate the settlement of any action,
suit or proceeding subject to Fund/Plan's approval, which shall not
be unreasonably withheld. Fund/Plan shall have the right, but not
the obligation, to participate in the defense or settlement of a
claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such
participation will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of
an action or proceeding and to retain its own counsel, and the
reasonable fees and expenses of such counsel shall be borne by the
Trust (which shall pay such fees, costs and expenses at least
quarterly) if:
(i) Fund/Plan has received an opinion of counsel stating
that the use of counsel chosen by the Trust to represent Fund/Plan
would present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such action
or proceeding include both Fund/Plan and the Trust, and legal counsel
to Fund/Plan shall have reasonably concluded that there are legal
defenses available to it which are different from or additional to
those available to the Trust or which may be adverse to or
inconsistent with defenses available to the Trust (in which case the
Trust shall not have the right to direct the defense of such action
on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ
separate counsel at the expense of the Trust. Notwithstanding
anything to the contrary herein, it is understood that the Trust
shall not, in connection with any action, suit or proceeding or
related action, suit or proceeding, be liable under this Agreement
for the fees and expenses of more than one firm.
(d) The terms of this Section 4 shall survive the termination
of this Agreement.
Section 5. This Agreement may be amended from time to time by
a supplemental agreement executed by the Trust and Fund/Plan.
Section 6. Except as otherwise provided in this Agreement, any
notice or other communication required by or permitted to be given in
connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first class mail, postage prepaid, to
the respective parties as follows:
If to the Trust: Fund/Plan:
Polynous Trust Fund/Plan Services, Inc.
88 Kearny Street, Suite 1300 2 West Elm Street
San Francisco, CA 94108 Conshohocken, PA 19428
Attention: Kevin L. Wenck, Attention: Kenneth J. Kempf,
President President
Section 7. The Trust represents and warrants to Fund/Plan that
the execution and delivery of this Agreement by the undersigned
officers of the Trust has been duly and validly authorized by
resolution of the Board of Directors of the Trust.
Section 8. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and
the same instrument.
Section 9. This Agreement shall extend to and shall be binding
upon the Parties and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Trust without the written consent of Fund/Plan or by Fund/Plan
without the written consent of the Trust, authorized or approved by a
resolution of their respective Board of Trustees.
Section 10. This Agreement shall be governed by the laws of
the State of California and the venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of
Pennsylvania.
Section 11. No provision of this Agreement may be amended or
modified, in any manner except in writing, properly authorized and
executed by Fund/Plan and the Trust.
Section 12. If any part, term or provision of this Agreement
is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid provided that the basic Agreement is not
thereby substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement, consisting in its entirety of six typewritten pages,
together with Schedules "A" and "B" to be signed by their duly
authorized officers, as of the day and year first above written.
Polynous Trust Fund/Plan Services, Inc.
\s\ Kevin L. Wenck \s\Kenneth J. Kempf
By: Kevin L. Wenck, President By: Kenneth J. Kempf,President
<PAGE>
Schedule "A"
CUSTODY AGENCY AND ADMINISTRATION FEE SCHEDULE
FOR
POLYNOUS TRUST
I. Domestic Securities and ADRs: (1/12th payable monthly)
.0002 On the First $ 50 Million of Average Net Assets
.00015 On the Next $150 Million of Average Net Assets
.000125 Over $200 Million of Average Net Assets
Minimum monthly fee is $500 per separate series of
shares.
II. Custody Domestic Securities Transactions Charge: (billed
monthly)
Book Entry DTC, Federal Book Entry, PTC. . . . . $12.00
Physical Securities, Physical GNMA's . . . . . . $20.00
RIC's. . . . . . . . . . . . . . . . . . . . . . $24.50
P & I Paydowns . . . . . . . . . . . . . . . . . $ 7.00
Options/Futures. . . . . . . . . . . . . . . . . $20.00
Savings Account. . . . . . . . . . . . . . . . . $ 3.00
Wires. . . . . . . . . . . . . . . . . . . . . . $ 7.00
Check Request. . . . . . . . . . . . . . . . . . $ 6.00
A transaction includes buys, sells, maturities or free security
movements.
III. When Issued, Securities Lending, Index Futures
Should any of these investment vehicles require a separate
segregated custody account, a fee of $250 per account per month
will apply.
IV. Custody Miscellaneous Fees
Administrative fees incurred in certain local markets will be
passed onto the customer with a detailed description of the
fees. Fees include income collection, corporate action
handling, funds transfer, special local taxes, stamp duties,
registration fees, messenger and courier services and other
out-of-pocket expenses.
V. Additional Services
To the extent the Trust commences using investment techniques
such as Security Lending, Short Sales, Interest Rate Swaps,
Futures, Leveraging, Precious Metals and foreign securities,
additional fees will apply.
Activities of a non-recurring nature such as fund
consolidations, mergers, or reorganizations will be subject to
negotiation. Any enhanced services, programming requests or
reports will be quoted upon request.<PAGE>
Schedule "B"
Identification of Series
Below are listed the Series to which services under this Agreement
are to be performed as of the Execution Date of this Agreement:
"Polynous Trust"
1. Polynous Growth Fund - Class A Shares
2. Polynous Growth Fund - Class D Shares
This Schedule "B" may be amended from time to time by agreement of
the Parties.
<PAGE>
EX 99.B9(a)
TRANSFER AGENT SERVICES AGREEMENT
This Agreement, dated as of the 17th day of July ,
1996, made by and between Polynous Trust, a business trust (the
"Trust") operating as an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the
"Act"), duly organized and existing under the laws of the State of
Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to
issue separate series of shares representing interests in separate
investment portfolios (the "Series"), which Series are identified on
Schedule "C" attached hereto and which Schedule "C" may be amended
from time to time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to retain Fund/Plan to perform share
transfer agency, redemption and dividend disbursing services as set
forth in this Agreement and in Schedule "A" attached hereto, and to
perform certain other functions in connection with these duties; and
WHEREAS, Fund/Plan is registered with the Securities and
Exchange Commission as a Transfer Agent as required under Section
17A(c) of the Securities Exchange Act of 1934, as amended; and
WHEREAS, Fund/Plan is willing to serve in such capacity and
perform such functions upon the terms and conditions set forth below;
and
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and in exchange of good and valuable
consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
Section 1. The terms as defined in this Section wherever used
in this Agreement, or in any amendment or supplement hereto, shall
have the meanings herein specified unless the context otherwise
requires.
Shareholders shall mean the registered owners of the shares of
the Series in accordance with the share registry records maintained
by Fund/Plan for the Trust.
Shares shall mean the issued and outstanding shares of the
Series.
Signature Guarantee shall mean the guarantee of signatures by
an "eligible guarantor institution" as defined in rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations. Broker-dealers guaranteeing
signatures must be members of a clearing corporation or maintain net
capital of at least $100,000. Signature guarantees will be accepted
from any eligible guarantor institution which participates in a
signature guarantee program.
Oral Instruction shall mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted
to Fund/Plan in person or by telephone, telegram, telecopy or other
mechanical or documentary means lacking original signature, by a
person or persons reasonably identified to Fund/Plan to be a person
or persons so authorized by a resolution of the Board of Trustees of
the Trust.
Written Instruction shall mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted
to Fund/Plan in an original writing containing an original signature
or a copy of such document transmitted by telecopy including
transmission of such signature reasonably identified to Fund/Plan to
be the signature of a person or persons so authorized by a resolution
of the Board of Trustees of the Trust to give Written Instructions to
Fund/Plan.
TRANSFER AGENCY SERVICES
Section 2. Fund/Plan shall make original issues of Shares in
accordance with this Agreement and with the Trust's Prospectus and
Statement of Additional Information then in effect, upon the written
request of the Trust, and upon being furnished with (i) a certified
copy of a resolution or resolutions of the Board of Trustees of the
Trust authorizing such issue; (ii) an opinion of counsel as to the
validity of such Shares; and (iii) necessary funds for the payment of
any original issue tax applicable to such Shares.
Section 3. Transfers of Shares shall be registered and new
Shares issued by Fund/Plan upon redemption of outstanding Shares, (i)
in the form deemed by Fund/Plan to be properly endorsed for transfer,
(ii) with all necessary endorser's signatures guaranteed pursuant to
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
and accompanied by, (iii) such assurances as Fund/Plan shall deem
necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement, and (iv) satisfactory
evidence of compliance with all applicable laws relating to the
payment or collection of taxes.
Section 4. In registering transfers, Fund/Plan may rely upon
the applicable commercial code or any other applicable law which, in
the written opinion of counsel (a copy of which shall previously have
been furnished to the Trust), protect Fund/Plan and the Trust in not
requiring complete documentation, in registering transfer without
inquiry into adverse claims, in delaying registration for purposes of
such inquiry, or in refusing registration where in its judgment an
adverse claim requires such refusal.
Section 5. With respect to confirmed trades received by
Fund/Plan from a registered representative of an NASD member,
Fund/Plan shall periodically notify the Trust of the current status
of outstanding confirmed trades. Fund/Plan is authorized to cancel
confirmed trades which have been outstanding for thirty (30) days.
Upon such cancellation, Fund/Plan shall instruct the accounting agent
to adjust the books of the Trust accordingly. Fund/Plan will not
accept telephone purchases directly from shareholders.
Section 6. Fund/Plan will maintain stock registry records in
the usual form in which it will note the issuance, transfer and
redemption of Shares. Fund/Plan is responsible to provide reports of
Share purchases, redemptions, and total Shares outstanding on the
next business day after each net asset valuation. Fund/Plan is
authorized to keep records, which will be part of the stock transfer
records, in which it will note the names and registered address of
Shareholders and the number of Shares and fractions thereof owned by
them.
Section 7. In addition to the duties and functions above-mentioned,
Fund/Plan will perform the usual duties and functions of a
stock transfer agent for an investment company as listed in Schedule
"A" attached hereto. Fund/Plan may rely conclusively and act without
further investigation upon any list, instruction, certification,
authorization or other instrument or paper reasonably believed by
Fund/Plan in good faith, to be genuine and unaltered, and to have
been signed, countersigned, or executed by duly authorized person or
persons, or upon the instructions of any officer of the Trust, or
upon the advice of counsel for the Trust or for Fund/Plan. Fund/Plan
may record any transfer of Shares which it reasonably believes to
have been duly authorized or may refuse to record any transfer of
Shares if in good faith Fund/Plan deems such refusal necessary in
order to avoid any liability either of the Trust or Fund/Plan. The
Trust agrees to indemnify and hold harmless Fund/Plan from and
against any and all losses, costs, claims, and liability which it may
suffer or incur by reason of such reliance or acting or refusing to
act. Fund/Plan shall maintain and reconcile all operating bank
accounts necessary to facilitate all transfer agency processes;
including, but not limited to, distribution disbursements,
redemptions and payment clearance accounts.
Section 8. In the event of any request or demand for the
inspection of the Share records of the Series is received, Fund/Plan
shall use its best efforts to notify the Trust and to secure
instructions as to permitting or refusing such inspection. Fund/Plan
may, however, exhibit such records to any person in any case where it
is advised by its counsel that it may be held liable for failure to
do so.
ISSUANCE OF SHARES
Section 9. Prior to the daily determination of net asset value
in accordance with the Series' Prospectus and Statement of Additional
Information, Fund/Plan shall process all purchase orders received
since the last determination of the Series' net asset value.
Fund/Plan shall calculate daily the amount available for
investment in Shares at the net asset value determined by the Series'
pricing agent as of the close of regular trading on the New York
Stock Exchange, the number of Shares and fractional Shares to be
purchased and the net asset value to be deposited with the Trust's
custodian bank (the "Custodian"). Fund/Plan shall place a purchase
order daily with the appropriate Series for the proper number of
Shares and fractional Shares to be purchased and confirm such number
to the Trust, in writing.
Section 10. Share certificates will not be issued in
conjunction with the sale of Shares.
Section 11. Fund/Plan, having made the calculations provided
for above, shall thereupon pay over the net asset value of Shares
purchased to the Custodian. The proper number of Shares and
fractional Shares shall then be issued daily and credited by
Fund/Plan to the Shareholder Registration Records. The Shares and
fractional Shares purchased for each Shareholder will be credited by
Fund/Plan to that Shareholder's separate account. Fund/Plan shall
mail to each Shareholder a confirmation of each purchase, with copies
to the Trust, if requested. Such confirmations will show the prior
Share balance, the new Share balance, the amount invested and the
price paid for the newly purchased Shares.
REDEMPTIONS
Section 12. Fund/Plan shall, prior to the daily determination
of net asset value in accordance with the Series' Prospectus and
Statement of Additional Information, process all requests from
Shareholders to redeem Shares and determine the number of Shares
required to be redeemed to make monthly payments, automatic payments
or the like. Thereupon, Fund/Plan shall advise the Trust of the
total number of Shares available for redemption and the number of
Shares and fractional Shares requested to be redeemed. Fund/Plan
shall furnish the Trust with an appropriate confirmation of the
redemption and process the redemption by filing with the Custodian an
appropriate statement and make the proper distribution and
application of the redemption proceeds in accordance with the Series'
Prospectus and Statement of Additional Information then in effect.
The stock registry books recording outstanding Shares, the
shareholder registration records and the individual account of the
Shareholder shall be properly debited.
Section 13. The proceeds of redemption shall be remitted by
Fund/Plan by check mailed to the Shareholder at the Shareholder's
registered address or wired to an authorized bank account in
accordance with the Series' Prospectus and Statement of Additional
Information then in effect.
For the purposes of redemption of Shares which have been
purchased within 15 days of a redemption request, the Trust shall
provide Fund/Plan, from time to time, with Written Instructions
concerning the time within which such requests may be honored.
DIVIDENDS
Section 14. The Trust shall notify Fund/Plan of the date of
each dividend declaration or capital gains distribution. In
addition, the Trust shall provide to Fund/Plan five business days'
prior written notice of the record date for determining the
Shareholders entitled to payment. The per-share payment amount of
any dividend or capital gain shall be determined by the Trust and
communicated to Fund/Plan.
Section 15. On or before each payment date, the Trust will
notify Fund/Plan of the total amount of the dividend or distribution
currently payable. Fund/Plan will, on the designated payment date,
automatically reinvest all dividends in additional Shares except in
cases where Shareholders have elected to receive distribution in
cash, in which case Fund/Plan will mail distribution checks to the
Shareholders for the proper amounts payable to them from monies
transferred by the Custodian to Fund/Plan for that purpose.
FEES
Section 16. The Trust agrees to pay Fund/Plan compensation for
its services and to reimburse it for expenses, at the rates and
amounts as set forth in Schedule "B" attached hereto, and as shall be
set forth in any amendments to such Schedule "B" approved by the
Trust and Fund/Plan. The Trust agrees and understands that
Fund/Plan's compensation will be comprised of two components, payable
on a monthly basis, as follows:
(i) an annual shareholder Account Maintenance Fee
calculated by multiplying the monthly average number of accounts for
Class A Shares and Class D Shares of the Trust by one twelfth
(1/12th) the respective account fee as stated in Schedule "B",
subject to a minimum fee per class, which the Trust hereby authorizes
Fund/Plan to collect by debiting the Trust's custody account for
invoices which are rendered for the services performed for the
applicable function. The invoices for the services performed will be
sent to the Trust after such debiting with the indication that
payment has been made; and
(ii) reimbursement of any reasonable out-of-pocket
expenses paid by Fund/Plan on behalf of the Trust, which out-of-pocket
expenses will be billed to the Trust within the first ten calendar days
of the month following the month in which such out-of-pocket expenses
were incurred. The Trust agrees to reimburse Fund/Plan for such
expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the
value of the Series' net assets shall be computed at the times and in
the manner specified in the Series' Prospectus and Statement of
Additional Information then in effect.
During the term of this Agreement, should the Trust seek
services or functions in addition to those outlined above or in
Schedule "A" attached, a written amendment to this Agreement
specifying the additional services and corresponding compensation
shall be executed by both Fund/Plan and the Trust.
GENERAL PROVISIONS
Section 17. Fund/Plan shall maintain records (which may be
part of the stock transfer records) in connection with the issuance
and redemption of Shares, and the disbursement of dividends and
dividend reinvestments, in which will be noted the transactions
effected for each Shareholder and the number of Shares and fractional
Shares owned by each Shareholder. Fund/Plan agrees to make available
upon request and to preserve for the periods prescribed in Rule 31a-2
under the Act, any records relating to services provided under this
Agreement which are required to be maintained by Rule 31a-1 under the
Act.
Section 18. In addition to the services as Transfer Agent and
dividend disbursing agent set forth above, Fund/Plan may perform
other services for the Trust as agreed upon from time to time,
including but not limited to, preparation of and mailing Federal Tax
Information Forms and mailing semi-annual reports to shareholders of
the Trust.
Section 19. Nothing contained in this Agreement is intended to
or shall require Fund/Plan in any capacity hereunder, to perform any
functions or duties on any holiday, day of special observance or any
other day on which the New York Stock Exchange is closed. Functions
or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day on which the New York
Stock Exchange is open.
Section 20. Limitation of Liability
(a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall only be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement that result from
willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer,
director, employee or agent of the Trust, shall be deemed when
rendering services to such entity or acting on any business of such
entity (other than services or business in connection with
Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or under the control or
direction of Fund/Plan even though such person may receive
compensation from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement,
the Trust shall indemnify and hold harmless Fund/Plan, its directors,
officers, employees, shareholders and agents from and against any and
all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Fund/Plan
may sustain or incur or which may be asserted against Fund/Plan by
any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken
or omitted to be taken by Fund/Plan in good faith in reliance upon
any certificate, instrument, order or stock certificate or other
document reasonably believed by Fund/Plan to be genuine and signed,
countersigned or executed by any duly authorized person, upon the
oral or written instruction of an authorized person of the Trust or
upon the opinion of legal counsel to the Trust; or (iii) any action
taken in good faith or omitted to be taken by Fund/Plan in connection
with its appointment in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have
been altered, changed, amended or repealed. Indemnification under
this subparagraph shall not apply, however, to actions or omissions
of Fund/Plan or its directors, officers, employees, shareholders or
agents in cases of its or their willful misfeasance, bad faith, gross
negligence or reckless disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may
seek indemnity under this Section, Fund/Plan shall notify the Trust
promptly after any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and shall
notify the Trust promptly of any action commenced against Fund/Plan
within ten (10) days after Fund/Plan shall have been served with a
summons or other legal process, giving information as to the nature
and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on
account of the indemnity under this Section 20(c) if the Trust has
not been prejudiced in any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the
defense of any action, suit or proceeding in which Fund/Plan is
involved and for which indemnity is being provided by the Trust to
Fund/Plan. The Trust shall may negotiate the settlement of any
action, suit or proceeding subject to Fund/Plan's approval, which
shall not be unreasonably withheld. Fund/Plan shall have the right,
but not the obligation, to participate in the defense or settlement
of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such
participation will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of
an action or proceeding and to retain its own counsel, and the
reasonable fees and expenses of such counsel shall be borne by the
Trust (which shall pay such fees, costs and expenses at least
quarterly) if:
(i) Fund/Plan has received an opinion of counsel
stating that the use of counsel chosen by the Trust to represent
Fund/Plan would present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such
action or proceeding include both Fund/Plan and the Trust, and legal
counsel to Fund/Plan shall have reasonably concluded that there are
legal defenses available to it which are different from or additional
to those available to the Trust or which may be adverse to or
inconsistent with defenses available to the Trust (in which case the
Trust shall not have the right to direct the defense of such action
on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ
separate counsel at the expense of the Trust. Notwithstanding
anything to the contrary herein, it is understood that the Trust
shall not, in connection with any action, suit or proceeding or
related action, suit or proceeding, be liable under this Agreement
for the fees and expenses of more than one firm.
(d) The terms of this Section 20 shall survive the
termination of this Agreement.
Section 21. Fund/Plan is authorized, upon receipt of Written
Instructions from the Trust, to make payment upon redemption of
Shares without a signature guarantee. The Trust hereby agrees to
indemnify and hold Fund/Plan, its successors and assigns, harmless of
and from any and all expenses, damages, claims, suits, liabilities,
actions, demands, losses whatsoever arising out of or in connection
with a payment by Fund/Plan upon redemption of Shares pursuant to
Written Instructions and without a signature guarantee.
Section 22.
(a) The term of this Agreement shall be for a period of
two (2) years, commencing on the date which the Trust's registration
statement is declared effective by the U.S. Securities and Exchange
Commission ("Effective Date") and shall continue thereafter on a year
to year term subject to termination by either Party as set forth in
(c) below.
(b) The fee schedule set forth in Schedule "B" attached
shall be fixed for two (2) years commencing on the Effective Date of
this Agreement and shall continue thereafter subject to review and
adjustment as determined by the Parties.
(c) After the initial term of this Agreement, the Trust
or Fund/Plan may give written notice to the other of the termination
of this Agreement, such termination to take effect at the time
specified in the notice, which date shall not be less than one
hundred eighty (180) days after the date of receipt of such notice.
Upon the effective termination date, the Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and
shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by
written notice to Fund/Plan in connection with the termination of
this Agreement, Fund/Plan shall promptly, upon such termination and
at the expense of the Trust, transfer all required records which are
the property of the Trust and shall cooperate in the transfer of such
records, and its duties and responsibilities under the Agreement.
Section 23. The Trust shall file with Fund/Plan a certified
copy of each resolution of its Board of Trustees authorizing the
execution of Written Instructions or the transmittal of Oral
Instructions, as provided in Section 1 of this Agreement.
Section 24. This Agreement may be amended from time to time by
a supplemental agreement executed by the Trust and Fund/Plan.
Section 25. Except as otherwise provided in this Agreement,
any notice or other communication required by or permitted to be
given in connection with this Agreement shall be in writing, and
shall be delivered in person or sent by first class mail, postage
prepaid, to the respective parties as follows:
If to the Trust: If to Fund/Plan:
Polynous Capital Management, Inc. Fund/Plan Services, Inc.
88 Kearny Street, Suite 1300 2 West Elm Street
San Francisco, CA 94108 Conshohocken, PA 19428
Attention: Kevin L. Wenck, Attention: Kenneth J. Kempf,
President President
Section 26. Authority of Signatories The Parties represent and
warrant to each other that the execution and delivery of this
Agreement by the undersigned officer of each Party has been duly and
validly authorized; and, when duly executed, this Agreement will
constitute a valid and legally binding enforceable obligation of each
Party. The obligations under this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon
any officer or shareholder of the Series individually.
Section 27. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be
an original, but such counterparts shall together constitute but one
and the same instrument.
Section 28. This Agreement shall extend to and shall be
binding upon the Parties and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Trust without the written consent of Fund/Plan or by Fund/Plan
without the written consent of the Trust, authorized or approved by a
resolution of their respective Boards of Directors or Trustees.
Section 29. This Agreement shall be governed by the laws of
the State of California and the exclusive venue of any action arising
under this Agreement shall be Montgomery County, Commonwealth of
Pennsylvania.
Section 30. No provision of this Agreement may be amended or
modified, in any manner except in writing, properly authorized and
executed by Fund/Plan and the Trust.
Section 31. If any part, term or provision of this Agreement
is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision
held to be illegal or invalid, provided that the basic agreement is
not thereby substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement consisting
in its entirety, of eleven typewritten pages, together with Schedules
"A," "B" and "C," to be signed by their duly authorized officers as
of the day and year first above written.
Polynous Trust
\s\ Kevin L. Wenck
By: Kevin L. Wenck, President
<PAGE>
Fund/Plan Services, Inc.
\s\ Kenneth J. Kempf
By: Kenneth J. Kempf, President
<PAGE>
Schedule "A"
Transfer Agent/Shareholder Services
for
Polynous Trust
The following is a list of Services to be provided under this
Agreement:
I. - Shareholder File
1. Establish new accounts and enter demographic data
into shareholder base. Includes in-house processing
and NSCC - FundSERV - Networking transmissions.
2. Create Customer Information File (CIF) to link
accounts within the Trust and across funds within the
Trust. Facilitates account maintenance, lead
tracking, quality control, household mailings and
combined statements.
3. 100% quality control of new account information
including verification of initial investment.
* 4. Systematic linkage of shareholder accounts with exact
matches on social security number and address for the
purpose of consolidated account history reporting.
Periodic production of laser printed combined
statements.
* 5. Production of household mailing labels which enable
the Trust to do special mailings to each address in
the Trust Group rather than each account.
6. Maintain account and customer file records, based on
shareholder request and routine quality review.
7. Maintain tax ID certification and NRA records for
each account, including backup withholding.
8. Provide written confirmation of address changes.
9. Produce shareholder statements for daily activity,
dividends, on-request, third party and periodic
mailings.
* 10. Produce shareholder lists, labels and ad hoc reports
to Trust management as requested.
11. Establish and maintain dealer file by fund group,
including dealer, branch, representative number and
name.
12. Automated processing of dividends and capital gains
with daily, monthly, quarterly or annual
distributions. Payment options include reinvestment,
directed payment to another fund, cash via mail, Fed
wire or ACH.
13. Image all applications, account documents, data
changes, correspondence, monetary transactions, and
other pertinent shareholder documents.
II. - Shareholder Services
1. Provide quality service through a staff of highly
trained NASD licensed customer service personnel,
including phone, research and correspondence
representatives.
2. Answer shareholder calls: provide routine account
information, transaction details including direct and
wire purchases, redemptions, exchanges systematic
withdraws, pre-authorized drafts, FundSERV and wire
order trades, problem solving and process telephone
transactions.
* 3. Customized recording of fund prices daily after
regular business hours for shareholder access.
4. Silent monitoring of telephone representative calls
by the phone supervisor during live conversations to
ensure exceptional customer service.
5. Record and maintain tape recordings of all shareholder
calls for a six month period.
6. Phone Supervisor produces daily management reports of
shareholder calls which include tracking volumes,
call lengths, average wait time and abandoned call
rates to ensure quality service.
7. Provide quality assurance of phone routing by the
unit Assistant Phone Supervisor through verification
of the Rolm in house computer terminal linkage.
8. Phone representatives are throughly trained through
in house training programs on the techniques of
providing Exceptional Customer Service.
9. Customer inquiries received by letter or telephone
are researched by a correspondence team with an
average tenure of 15 years. These inquiries include
such items as, account/customer file information,
complete historical account information, stop
payments on checks and transaction details.
10. Provide written correspondence in response to
shareholder inquiries and request through the Fox Pro
letter writing system and our in house letter
processing programs. Provide written requests for
informational purposes (e.g., received unclear
shareholder instructions). Whenever possible,
unclear shareholder instructional letters are handled
by a phone call to the shareholder from our phone
representatives to avoid delay in processing of the
request.
<PAGE>
III. - Investment Processing
1. Establish and maintain Rights of Accumulation and
Letter of Intent files.
2. Initial investment (checks or Fed wires).
3. Subsequent investments (checks or Fed wires)
processed through lock box.
4. Pre-authorized investments (PAD) through ACH system.
5. Government allotments through ACH system.
* 6. Wire order and NSCC - Fund/SERV trades.
7. Prepare and process daily bank deposit of shareholder
investments.
IV. - Redemption Processing
1. Process letter redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal file and process
automated transactions on monthly basis.
4. Issue checkbooks and process checkbook redemption
through agent bank.
* 5. Provide wire order and NSCC - Fund/SERV trade
processing.
6. Redemption proceeds distributed to shareholder by
check, Fed wire or ACH processing.
V. - Exchange & Transfer Processing
1. Process legal transfers.
2. Process ACATS transfers.
3. Process exchange transactions (letter and telephone requests).
VI. - Retirement Plans
1. Fund sponsored IRAs offered using Semper Trust
Company as custodian. Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 one-half requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper
Trust Company as custodian. Services include those
listed under IRAs and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
VII. - Commission Processing
1. Settlement and payment of dealer commissions on the
10th and 25th of each month for front end load funds.
Dealer checks are sent to the main branch only.
2. Settlement and payment of Distributor/Underwriter
fees on the 10th and 25th of each month for front end
load funds.
VIII. - Settlement & Control
1. Daily review of processed shareholder transactions to
assure input was processed correctly. Accurate trade
activity figures passed to Trust's accounting agent
by 11:00am EST.
2. Preparation of daily cash movement sheets to be
passed to Trust's accounting agent and custodian bank
by 10:00am EST for use in determining the Trust's
daily cash availability.
3. Prepare a daily share reconcilement which balances
the shares on the Transfer Agent system to those on
the books of the Trust.
4. Resolve any outstanding share or cash issues that are
not cleared by trade date + 2.
5. Process shareholder adjustments including the proper
notification of any booking entries needed, as well
as any necessary cash movement.
6. Settlement and review of the Trust's declared
dividends and capital gains to include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after
dividend is posted. Verify the posting date
shares, the rate used and the NAV price of
reinvest date to ensure dividend was posted
properly.
c. Distribute copies to the Trust's accounting agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement sheets for the cash
portion of the dividend payout on payable date.
7. Placement of stop payments on dividend and
liquidation checks as well as the issuance of their
replacements.
8. Maintain inventory control for stock certificates and
dividend check form.
9. Aggregate tax filings for all Fund/Plan clients.
Monthly deposits to the IRS of all taxes withheld
from shareholder disbursements, distributions and
foreign account distributions. Correspond with the
IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC/FundSERV
activity.
IX. - Year End Processing
1. Maintain shareholder records in accordance with IRS
notices for under-reporting and invalid Tax IDs.
This includes initiating 31% backup withholding and
notifying shareholders of their tax status and the
corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified
accounts. Update account tax status to reflect
backup withholding or certified status depending upon
responses.
3. Conduct periodic W-8 solicitation of all non-resident
alien shareholder accounts. Update account tax
status with updated shareholder information and
treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in
transaction and distribution reporting and
specifications for the production of forms to ensure
compliance.
5. Coordinate year end activity with client. Activities
include producing year end statements, scheduling
record dates for year end dividends and capital
gains, production of combined statements and printing
of inserts to be mailed with tax forms.
6. Prepare Tax year-end confirmation letter for Trust
approval regarding all distributions made throughout
year. Dates and rates must be confirmed by the Trust
so that they can be used for reporting to the IRS.
7. Coordinate the ordering of form stock envelopes from
vendor in preparation of tax reporting. Review
against IRS requirements to ensure accuracy. Upon
receipt of forms and envelopes allocate space for
storage.
8. Prepare form flashes for the microfiche vendor. Test
and oversee the production of fiche for year end
statements and tax forms.
9. Match and settle tax reporting totals to fund records
and on-line data from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and
year end valuations. Quality assure forms before
mailing to shareholders.
11. Monitor IRS deadlines and special events such as
cross over dividends and prior year IRA
contributions.
12. Prepare IRS magnetic tapes and appropriate forms for
the filing of all reportable activity to the Internal
Revenue Service.
X. - Client Services
1. An Account Manager is assigned to each relationship.
The Account Manager acts as the liaison between the
Trust and the Transfer Agency staff. Responsibilities
include scheduling of events, system enhancement
implementation, special promotion/event
implementation and follow-up, and constant Trust
interaction on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailings
and special mailings.
b. Coordinate with the Trust shipment of materials
for scheduled mailings.
c. Liaison between the Trust and support services for
preparation of proofs and eventual printing of
statement forms, proxy cards, envelopes, etc.
d. Handle all notification to the client regarding
proxy tabulation through the meeting. Coordinate
scheduling of materials including voted cards,
tabulation letters, and shareholder list to be
available for the meeting.
e. Order special reports, tapes, discs for special
systems requests received.
f. Implement new operational procedures, e.g., check
writing feature, load discounts, minimum waivers,
sweeps, telephone options, PAD promotions, etc.
g. Coordinate with systems, services and operations,
special events, e.g., mergers, new fund start ups,
household mailings, additional mail files.
h. Prepare standard operating procedures and review
prospectuses for new start up funds and our
current client base. Coordinate implementation of
suggested changes with the Trust.
i. Liaison between the Trust and the Transfer Agency
staff regarding all service and operational
issues.
2. Proxy Processing (Currently one free per year)
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager
and mailroom. Tabulation of returned cards.
c. Provide daily report totals to Account Manager for
client notification.
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
a. Maintain file with additions, deletions, changes
and updates at the Trust's direction.
b. Provide daily and monthly reports to enable the
Trust to do necessary state filings.
* Separate fees will apply for these services.
DAILY REPORTS
REPORT NUMBER REPORT DESCRIPTION
-- Daily Activity\Register
024 Tax Reporting Proof
051 Cash Receipts and
Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate
Register
056 Blue Sky Warning Report
MONTHLY REPORTS
REPORT DESCRIPTION
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
Month To Date Sales - Demographics by Account Group
Account Analysis by Type
<PAGE>
Schedule "B"
Shareholder Services and Transfer Agent Fee Schedule
for
Polynous Trust
This Fee Schedule is fixed for a period of two (2) years from the
Effective Date
as that term is defined in the Agreement.
I. Transfer Agent and Shareholder Services:
Front-end load (Class A Shares)
$20.00 per account per year
Minimum monthly fee - $2,250 per portfolio
Note: The front-end load minimum will be reduced to $2,000
monthly for the first two years on the signing of a three
year contract.
No-Load with 12b-1 trail (Class D Shares)
$21.00 per account per year
Minimum monthly fee - $1,250 per portfolio
II. IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
$12.00 per account/per year/Annual Maintenance Fee (normally
charged to shareholder)
III. FUND/SERV Processing (if applicable)
$1,000 One time start-up fee
IV. Networking Processing (if applicable)
$1,000 One time start-up fee
V. Out of Pocket Expenses:
Polynous Trust will reimburse Fund/Plan Services monthly for
all reasonable out-of-pocket expenses, including postage,
stationery (statements), telecommunications (telephone, fax,
dedicated 800 line, on-line access), special reports,
transmissions, records retention, tapes, couriers and any pre-approved
travel expenses.
VI. Additional Services
Activities of a non-recurring nature including but not limited
to fund consolidations, mergers, acquisitions, reorganizations
or the addition or deletion of a series are not included
herein, and will be quoted separately. To the extent Polynous
Trust should decide to issue additional separate classes of
shares, additional fees will apply. Any enhanced services,
programming requests or reports will be quoted upon request.
<PAGE>
Schedule "C"
Identification of Series
Below are listed the "Series" to which services under this Agreement
are to be performed as of the execution date of the Agreement:
"Polynous Trust"
1. Polynous Growth Fund - Class A Shares
2. Polynous Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of
the Parties.
EX 99.B9(b) ADMINISTRATION AGREEMENT
This Agreement, dated as of the 17th day of July ,
1996, made by and between Polynous Trust, a business trust (the
"Trust") operating an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the
"Act"), duly organized and existing under the laws of the State of
Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to
issue separate series of shares representing interests in separate
investment portfolios (the "Series"), which Series are identified on
Schedule "C" attached hereto, and which Schedule "C" may be amended
from time to time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby
Fund/Plan will provide certain administration services to the Trust
on the terms and conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and
perform such administrative services under the terms and conditions
set forth below; and
WHEREAS, the Trust will provide all necessary information to
Fund/Plan concerning the Series so that Fund/Plan may appropriately
execute its responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and in exchange of good and valuable
consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
Section 1. Appointment The Trust hereby appoints Fund/Plan as
administrator and Fund/Plan hereby accepts such appointment. The
Trust further agrees to appoint Fund/Plan as administrator to any
additional Series which, from time to time, may be added to the
Trust.
Section 2. Duties and Obligations of Fund/Plan
(a) Subject to the succeeding provisions of this
section and subject to the direction and control of the Board of
Trustees of the Trust, Fund/Plan shall provide to each of the Series
all administrative services set forth in Schedule "A" attached
hereto, which Schedule is incorporated by reference in its entirety
into this Agreement. In addition to the obligations set forth in
Schedule "A", Fund/Plan shall (i) provide its own office space,
facilities, equipment and personnel for the performance of its duties
under this Agreement; and (ii) take all actions it deems necessary to
properly execute the administrative responsibilities of the Trust.
(b) So that Fund/Plan may perform its duties under the terms
of this Agreement, the Board of Trustees of the Trust shall direct
the officers, investment advisor, distributor, legal counsel,
independent accountants and custodian of the Trust to cooperate fully
with Fund/Plan and to provide such information, documents and advice
relating to the Trust as is within the possession or knowledge of
such persons provided that no such person need provide any
information to Fund/Plan if to do so would, in the reasoned opinion
of counsel to the Trust, result in the loss of any privilege or
confidential treatment with respect to such information. In
connection with its duties, Fund/Plan shall be entitled to rely, and
shall be held harmless by the Trust when acting in reasonable
reliance upon the instruction, advice or any documents provided by
the Trust to Fund/Plan by any of the aforementioned persons. All
fees charged by any such persons shall be deemed an expense of the
Trust.
(c) Any activities performed by Fund/Plan under this
Agreement shall conform to the requirements of:
(1) the provisions of the Act and the Securities Act of
1933, as amended, and of any rules or regulations in force
thereunder;
(2) any other applicable provision of state and federal
law;
(3) the provisions of the Trust Instrument of the
Trust, as amended from time to time;
(4) any policies and determinations of the Board of
Trustees of the Trust; and
(5) the fundamental policies of the Trust as reflected
in its registration statement filed pursuant to the Act.
Fund/Plan acknowledges that all records that it maintains for
the Trust are the property of the Trust and will be surrendered
promptly to the Trust upon written request. Fund/Plan will preserve,
for the periods prescribed under Rule 31a-2 under the Act, all such
records required to be maintained under Rule 31a-1 of the Act.
(d) Nothing in this Agreement shall prevent Fund/Plan or any
officer thereof from acting as administrator for any other person,
firm or corporation. While the administrative services supplied to
the Trust may be different than those supplied to other persons,
firms or corporations, Fund/Plan shall provide the Trust equitable
treatment in supplying services. The Trust recognizes that it will
not receive preferential treatment from Fund/Plan as compared with
the treatment provided to other Fund/Plan clients. Fund/Plan agrees
to maintain the records and all other information of the Trust in a
confidential manner and shall not use such information for any
purpose other than the performance of Fund/Plan's duties under this
Agreement.
Section 3. Allocation of Expenses All costs and expenses of
the Trust shall be paid by the Trust including, but not limited to:
(a) fees paid to an investment adviser (the "Adviser");
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are
not affiliated persons of the Adviser;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder
servicing agent, fees and expenses;
(h) fees and expenses incident to the registration of
the shares of the Trust under Federal or state
securities laws;
(i) expenses related to preparing, setting in type,
printing and mailing prospectuses, statements of
additional information, reports and notices and
proxy material to shareholders of the Trust;
(j) all expenses incidental to holding meetings of
shareholders and Trustees of the Trust;
(k) such extraordinary expenses as may arise, including
litigation, affecting the Trust and the legal
obligations which the Trust may have regarding
indemnification of its officers and directors; and
(l) fees and out-of-pocket expenses paid on behalf of
the Trust by Fund/Plan.
Section 4. Compensation of Fund/Plan The Trust agrees to pay
Fund/Plan compensation for its services and to reimburse it for
expenses, at the rates and amounts as set forth in Schedule "B"
attached hereto, and as shall be set forth in any amendments to such
Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees
and understands that Fund/Plan's compensation be comprised of two
components and payable on a monthly basis as follows:
(i) an asset based fee calculated on the Trust's total assets
subject to a minimum fee calculated on the number of series and
classes within each series, which the Trust hereby authorizes
Fund/Plan to collect by debiting the Trust's custody account for
invoices which are rendered for the services performed for the
applicable function. The invoices for the services performed will be
sent to the Trust after such debiting with the indication that
payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by
Fund/Plan on behalf of the Trust, which out-of-pocket expenses will
be billed to the Trust within the first ten calendar days of the
month following the month in which such out-of-pocket expenses were
incurred. The Trust agrees to reimburse Fund/Plan for such expenses
within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the
value of the Trust's net assets shall be computed at the times and in
the manner specified in the Trust's Prospectus and Statement of
Additional Information then in effect.
During the term of this Agreement, should the Trust seek
services or functions in addition to those outlined above or in
Schedule "A" attached, a written amendment to this Agreement
specifying the additional services and corresponding compensation
shall be executed by both Fund/Plan and the Trust.
Section 5. Duration
(a) The term of this Agreement shall be for a period of two
(2) years, commencing on the date which the Trust's registration
statement is declared effective by the U.S. Securities and Exchange
Commission ("Effective Date") and shall continue thereafter on a year
to year term subject to termination by either Party set forth in (c)
below.
(b) The fee schedule set forth in Schedule "B" attached shall
be fixed for two (2) years commencing on the Effective Date of this
Agreement and shall continue thereafter subject to review and
adjustment as determined by the Parties.
(c) After the initial term of this Agreement, the Trust or
Fund/Plan may give written notice to the other of the termination of
this Agreement, such termination to take effect at the time specified
in the notice, which date shall not be less than one hundred eighty
(180) days after the date of receipt of such notice. Upon the
effective termination date, the Trust shall pay to Fund/Plan such
compensation as may be due as of the date of termination and shall
likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by
written notice to Fund/Plan in connection with the termination of
this Agreement, Fund/Plan shall promptly, upon such termination and
at the expense of the Trust, transfer all records which are the
property of the Trust and shall cooperate in the transfer of such
records and its duties and responsibilities under the Agreement.
Section 6. Amendment No provision of this Agreement may be
amended or modified, in any manner except by a written agreement
properly authorized and executed by Fund/Plan and the Trust.
Section 7. Applicable Law This Agreement shall be governed
by the laws of the State of California and the exclusive venue of any
action arising under this Agreement shall be Montgomery County,
Commonwealth of Pennsylvania.
Section 8. Authority of Signatories The Parties represent
and warrant to each other that the execution and delivery of this
Agreement by the undersigned officer of each Party has been duly and
validly authorized; and, when duly executed, this Agreement will
constitute a valid and legally binding enforceable obligation of each
Party. The obligations under this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon
any officer or shareholder of the Series individually.
Section 9. Limitation of Liability
(a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall only be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement that result from
willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer,
director, employee or agent of the Trust, shall be deemed when
rendering services to such entity or acting on any business of such
entity (other than services or business in connection with
Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or under the control or
direction of Fund/Plan even though such person may receive
compensation from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement,
the Trust shall indemnify and hold harmless Fund/Plan, its directors,
officers, employees, shareholders and agents from and against any and
all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Fund/Plan
may sustain or incur or which may be asserted against Fund/Plan by
any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken
or omitted to be taken by Fund/Plan in good faith in reliance upon
any certificate, instrument, order or stock certificate or other
document reasonably believed by Fund/Plan to be genuine and signed,
countersigned or executed by any duly authorized person, upon the
oral or written instruction of an authorized person of the Trust or
upon the opinion of legal counsel to the Trust; or (iii) any action
taken in good faith or omitted to be taken by Fund/Plan in connection
with its appointment in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have
been altered, changed, amended or repealed. Indemnification under
this subparagraph shall not apply, however, to actions or omissions
of Fund/Plan or its directors, officers, employees, shareholders or
agents in cases of its or their willful misfeasance, bad faith, gross
negligence or reckless disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may
seek indemnity under this Section, Fund/Plan shall notify the Trust
promptly after any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and shall
notify the Trust promptly of any action commenced against Fund/Plan
within ten (10) days after Fund/Plan shall have been served with a
summons or other legal process, giving information as to the nature
and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on
account of the indemnity under this Section 9(c) if the Trust has not
been prejudiced in any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the
defense of any action, suit or proceeding in which Fund/Plan is
involved and for which indemnity is being provided by the Trust to
Fund/Plan. The Trust may negotiate the settlement of any action,
suit or proceeding subject to Fund/Plan's approval, which shall not
be unreasonably withheld. Fund/Plan shall have the right, but not
the obligation, to participate in the defense or settlement of a
claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such
participation will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of
an action or proceeding and to retain its own counsel, and the
reasonable fees and expenses of such counsel shall be borne by the
Trust (which shall pay such fees, costs and expenses at least
quarterly) if:
(i) Fund/Plan has received an opinion of counsel
stating that the use of counsel chosen by the Trust to represent
Fund/Plan would present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such
action or proceeding include both Fund/Plan and the Trust, and legal
counsel to Fund/Plan shall have reasonably concluded that there are
legal defenses available to it which are different from or additional
to those available to the Trust or which may be adverse to or
inconsistent with defenses available to the Trust (in which case the
Trust shall not have the right to direct the defense of such action
on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ
separate counsel at the expense of the Trust. Notwithstanding
anything to the contrary herein, it is understood that the Trust
shall not, in connection with any action, suit or proceeding or
related action, suit or proceeding, be liable under this Agreement
for the fees and expenses of more than one firm.
(d) The terms of this Section 9 shall survive the termination
of this Agreement.
Section 10. Notices Except as otherwise provided in this
Agreement, any notice or other communication required by or permitted
to be given in connection with this Agreement shall be in writing,
and shall be delivered in person or sent by first class mail or by
overnight delivery, postage prepaid to the respective parties as
follows:
If to Polynous Trust: If to Fund/Plan:
Polynous Capital Management, Inc. Fund/Plan Services, Inc.
88 Kearny Street, Suite 1300 2 West Elm Street
San Francisco, CA 94108 Conshohocken, PA 19428
Attention: Kevin L. Wenck, Kenneth J. Kempf
President President
Section 11. If any part, term or provision of this Agreement
is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision
held to be illegal or invalid, provided that the basic agreement is
not thereby substantially impaired.
Section 12. This Agreement shall extend to and shall be
binding upon the Parties and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Trust without the written consent of Fund/Plan or by Fund/Plan
without the written consent of the Trust, authorized or approved by a
resolution of their respective Boards of Directors or Trustees.
Section 13. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and
the same instrument.
Section 14. This Agreement shall be governed by the laws of
the State of California and the exclusive venue of any action arising
under this Agreement shall be Montgomery County, Commonwealth of
Pennsylvania.
Section 15. Section Headings Section and paragraph headings
are for convenience only and shall not be construed as part of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement consisting of eight typewritten pages, together with
Schedules "A", "B" and "C," to be signed by their duly authorized
officers as of the day and year first above written.
Polynous Trust
\s\ Kevin L. Wenck
By: Kevin L. Wenck, President<PAGE>
Fund/Plan Services, Inc.
\s\ Kenneth J. Kempf
By: Kenneth J. Kempf, President
<PAGE>
Schedule "A"
Fund Administration Services
for
Polynous Trust
Additional
Tasks for
Multiple Classes
I. Regulatory Compliance
A. Compliance - Investment Company Act of 1940,
as amended
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts additional liability
d. distribution (12b-1) plans each class may have a
different plan
e administration contracts
f. accounting contracts
g. custody administration contracts
h. custody contract
i. transfer agent and shareholder
services contracts
2. Filings
a N-SAR (semi-annual report) -- additional reporting
required
b. N-1A (Registration Statement, requires
some . post-effective amendments and additional
reporting supplements thereto
("stickers")for cap stock and financial
information
c. Notice pursuant to Rule 24f-2:
indefinite registration of shares
d. fidelity bond under 17g-1
e. shareholder reports under 30(b)2-1
3. Annual up-dates of biographical and financial
information through questionnaires for
Directors/Trustees and Officers
B. Compliance - Other
1. applicable stock exchange rules
2. applicable state tax laws
<PAGE>
Additional
Tasks
for Multiple
Classes
II. Corporate Business and Shareholder/Public Information
A. Trustees/Management
1. Preparation of quarterly Trustees' meetings
a. draft agendas - all necessary items
of compliance. . . . . . . separate special reports
on 12b-1 income and
expenditures
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/
minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files separate by class
D. Release Corporate Information (as directed by management)
1. To shareholders
2. To financial and general press
3. To industry publications . . . .additional questionnaires
and/or announcements
some pertinent to only
one class
a. distributions (dividends and
capital gains) . . . . . . .separate calculation for
each class
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance. . . .separate performance
by class
4. Respond to:
a. financial press
b. miscellaneous shareholders
inquiries
c. industry questionnaires
<PAGE>
Additional Tasks
for Multiple Classes
E. Communications to Shareholders . . . . . separate class
information for
financial highlights
table and notes
1. Coordinate printing and distribution
of annual, semi-annual reports,
and prospectus
III. Financial and Management Reporting
A. Income and Expenses
1. Monitoring of expenses and expense
caps (monthly) . . . . . . . . . separate by class
2. Approve and coordinate payment of
expenses
3. Checking Account Reconciliation
(monthly) and establish Trust operating
expense checking account
4. Calculation of advisory fee, 12b-1 fee
and reimbursements to Trust (if applicable)
5. Approve the recording and amortization
of organizational costs and pre-paid
expenses (supplied by Adviser) for
start-up funds and reorganizations
6. Calculation of average net assets
B. Distributions to Shareholders
1. Projections of distribution amounts
2. Calculations of dividends and capital
gain distributions (in conjunction with the
Trust and its auditors). . . . . separate dividend
calculations
a. compliance with income tax provisions requires
additional calculations
b. compliance with excise tax provisions
c. compliance with Investment Company
Act of 1940, as amended
<PAGE>
Additional Tasks
for Multiple Classes
C. Financial Reporting
1. Liaison between fund management,
independent auditors and printers
for shareholder reports. . . . . requires additional
formatting and review
2. Prepare and review semi-annual
and annual reports to shareholders requires additional
disclosure and reporting
3. Prepare and review semi-annual and
annual N-SAR's (financial data). requires additional
disclosure and reporting
by class
4. Preparation of Financial Statements
for required SEC Post-Effective
Amendments (if applicable) . . . requires additional
disclosure and reporting
by class
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
E. Other Financial Analysis
1. Upon request from Trust management,
other budgeting and analyses can be
constructed to meet specific needs
(fee revisions may be necessary) requires additional
disclosure and reporting by
class
2. Sales information, portfolio turnover
(monthly)
3. Support independent accountants to the
Trust regarding the calculation of
any return of capital or excise tax requires additional
compliance disclosure and reporting
by class
4. Total return calculation (monthly) separate by class
5. 1099 Miscellaneous - prepared for
Directors/Trustees (annual)
6. Analysis of interest derived from various
Government obligations (annual) (if
interest income was distributed in a calendar
year)
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification
entries to ensure proper update requires additional
disclosure and reporting
by class
2. Perform various reviews to ensure
accuracy of monthly expense analyses
and daily custodian bank statements to
verify accurate money movement . requires additional
review by class
3. Review expense accruals and expend-
itures for accuracy. . . . . . . separate by class
G. Preparation and distribution of operational
reports to management by 10th business day
of each month. requires additional
disclosure and reporting by
class
1. Management Statistics (Recap) . . . separate by class
a.. portfolio
b.. book gains/losses/per share
c.. net income, book income/per share
d.. capital stock activity
e.. distributions
2. Performance Analysis . . . . . . separate by class
a.. total return
b.. monthly, quarterly,
. year to date, average annual returns
3. Expense Analysis . . . . . . . . separate by class
a. summary of due to/from adviser
b.. expenses paid
c.. expense cap
d.. accrual monitoring
e.. advisory fee
4. Short-Short Analysis
a.. short-short income test (i.e. 30% test)
b.. gross income (components)
5. Portfolio Turnover
a.. market value
6. a,. cost of purchases
b.. net proceeds of sales
c.. average market value
7. Asset Diversification Test
a.. gross assets
b.. non-qualifying assets
8. Shareholder Activity Summary . . separate by class
a.. shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requires additional
requested (monthly/quarterly). . . . . . reporting by class
I. For Money-Market Funds - Rule 2a-7 weekly
compliance monitoring
J. Standard schedules for Board Package (Quarterly) separate by
class
1. Shareholder Activity Summary
(III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided
(additional fees may apply)
Schedule "B"
Administration Services Fee Schedule
for
Polynous Trust
This Fee Schedule is fixed for a period of two (2) years from the Effective
Date as that term is defined in the Agreement.
I. Subject to a minimum annual fee of $55,000 for the initial Series' first
class of shares and $12,000 for each additional separate series or class
thereof, the Trust agrees to pay Fund/Plan each month an asset based
fee calculated at the annual rate of:
.0015 On the First $ 50 Million of the Average Net Assets of the Trust;
.0010 On the Next $ 50 Million of the Average Net Assets of the Trust;
.0005 Over $100 Million of the Average Net Assets of the Trust
II. Out-of-Pocket Expenses:
The Trust will reimburse Fund/Plan Services monthly for all out-of-pocket
expenses, including postage, telecommunications (telephone and fax),
special reports, cost of EDGAR filings, Board Meeting materials, approved
record retention, transportation costs as incurred and copying and sending
materials to independent accountants for off-site audits.
III. Additional Services
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and may be quoted separately upon request. To the extent the
Trust should decide to issue additional multiple/separate classes of
shares, additional fees will apply. Any additional/enhanced services
or reports will be quoted upon request.
IV. Blue Sky Administration
$150 per permit/per state/per year
NOTE: The above fee will cover normal business filings described in our
outline. An additional fee of $25 per filing will be charged for
non-standard filings such as secondary post-effective amendments,
additional classes of shares or mergers and acquisitions.
<PAGE>
Schedule "C"
Identification of Series
Below are listed the Series and Classes of Shares to which services
under this Agreement are to be performed as of the Effective Date of this
Agreement:
"Polynous Trust"
1. Polynous Growth Fund - Class A Shares
2. Polynous Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the
Parties.
EX 99.B9(c)
ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the 17th day of July ,
1996 made by and between Polynous Trust (the "Trust"), a business
trust operating as an open end management investment company
registered under the Investment Company Act of 1940, as amended (the
"Act"), duly organized and existing under the laws of the State of
Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation
duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to
issue separate series of shares representing interests in separate
investment portfolios (the "Series"), which Series and separate
classes of shares (the "Classes") are identified on Schedule "C"
attached hereto, and which Schedule "C" may be amended from time to
time by mutual agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to appoint Fund/Plan as Accounting
Services Agent to maintain and keep current the books, accounts,
records, journals or other records of original entry relating to the
business of the Trust (the "Accounts and Records") and to perform
certain other functions in connection with such Accounts and Records
pursuant to the terms and conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and
perform such functions pursuant to the terms and conditions set forth
in this Agreement; and
WHEREAS, the Trust will provide all necessary information
concerning the Series to Fund/Plan so that Fund/Plan may
appropriately execute its responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and in exchange of good and valuable
consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
Section 1. Appointment The Trust hereby appoints Fund/Plan as
Accounting Services Agent and Fund/Plan hereby accepts such
appointment. The Trust also agrees to appoint Fund/Plan as
Accounting Services Agent for any additional Series which, from time
to time, may be added to the Trust.
Section 2. Definitions. For purposes of this Agreement:
Oral Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted
to Fund/Plan in person or by telephone, telegram, telecopy, or other
mechanical or documentary means lacking an original signature, by a
person or persons reasonably identified to Fund/Plan to be a person
or persons authorized by a resolution of the Board of Trustees of the
Trust, to give such Oral Instructions on behalf of the Trust.
Written Instructions shall mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted
to Fund/Plan in original writing containing an original signature or
a copy of such document transmitted by telecopy including
transmission of such signature reasonably identified to Fund/Plan to
be the signature of a person authorized by a resolution of the Board
of Trustees of the Trust to give written instructions on behalf of
the Trust.
The Trust shall file with Fund/Plan a certified copy of each
resolution of its Board of Trustees authorizing execution of Written
Instructions or the transmittal of Oral Instructions as provided
above.
Section 3. To the extent Fund/Plan receives the necessary
information from the Trust or its agents by Written or Oral
Instructions, Fund/Plan shall maintain and keep current the following
Accounts and Records and any other records required to be kept
pursuant to Rule 31a-1 of the Act relating to the business of the
Trust in such form as may be mutually agreed upon between the Trust
and Fund/Plan:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Portfolio Dividend Receivable and Income Register
(m) Listing of Portfolio Holdings - showing cost, market
value and percentage of portfolio comprised of each
security.
(n) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and
the calculation of the net asset value of the Trust as provided
below, is to be furnished by Written or Oral Instructions to
Fund/Plan each day (in accordance with the time frame identified
below) prior to the close of regular trading on the New York Stock
Exchange.
Section 4. Fund/Plan shall perform the ministerial
calculations necessary to calculate the net asset value for each
Class of shares each day that the New York Stock Exchange is open for
business, in accordance with; (i) the current Prospectus and
Statement of Additional Information for the Trust, and (ii)
procedures with respect thereto approved by the Board of Trustees of
the Trust and supplied in writing to Fund/Plan. Portfolio items for
which market quotations are available by Fund/Plan's use of an
automated financial information service (the "Service") shall be
based on the closing prices of such Service except where the Trust
has given or caused to be given specific Written or Oral Instructions
to utilize a different value subject to the appropriate provisions in
the Trust's Prospectus and Statement of Additional Information then
in effect. All of the portfolio securities shall be given such
values as the Trust provides by Written or Oral Instructions
including all restricted securities and other securities requiring
valuation not readily ascertainable solely by such Service subject to
the appropriate provisions in the Trust's Prospectus and Statement of
Additional Information then in effect. Fund/Plan shall have no
responsibility or liability for; (i) the accuracy of prices quoted by
such Service; (ii) the accuracy of the information supplied by the
Trust, or (iii) any loss, liability, damage, or cost arising out of
any inaccuracy of such data. Fund/Plan shall have no responsibility
or duty to include information or valuations to be provided by the
Trust in any computation unless and until it is timely supplied to
Fund/Plan in usable form. Fund/Plan shall record corporate action
information as received from the custodian of the Trust's assets (the
"Custodian"), the Service or the Trust. Fund/Plan shall have no duty
to gather or record corporate action information not supplied by
these sources.
Fund/Plan will assume no liability for price changes caused by
the investment adviser(s), the Custodian, suppliers of security
prices and corporate action and dividend information, or any party
other than Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a
price change of an amount greater than or equal to one half of one
percent of the correct net asset value ("NAV"), consideration must be
given to the effect of the price change as described below. Notwithstanding
the provisions of Section 12, the following provisions govern Fund/Plan's
liability for errors in calculating the NAV of the Series:
If the NAV should have been higher for a date or
dates in the past, the error would have the effect of
having given more shares to subscribers and less money to
redeemers to which they were entitled. Conversely, if
the NAV should have been lower, the error would have the
effect of having given less shares to subscribers and
overpaying redeemers.
If the error affects the prior business day's NAV
only, and if Fund/Plan can rerun the prior day's work
before shareholder statements and checks are mailed, the
Trust hereby accepts this manner of correcting the error.
If the error spans five (5) business days or less,
Fund/Plan shall reprocess shareholder purchases and
redemptions where redeeming shareholders have been
underpaid. Fund/Plan shall assume liability to the Trust
for overpayments to shareholders who have fully redeemed.
If the error spans more than five (5) business
days, Fund/Plan would bear the liability to the Trust
for, (i) paying for the excess shares given to
shareholders if the NAV should have been higher, or, (ii)
funding overpayments to shareholders who have redeemed if
the NAV should have been lower. The cost of any
reprocessing required for shareholders who have been
credited with fewer shares than appropriate or for
redeeming shareholders who are due additional amounts of
money will also be borne by Fund/Plan.
Section 5. For all purposes under this Agreement, Fund/Plan is
authorized to act upon receipt of the first of any Written or Oral
Instruction it receives from the Trust or its agents on behalf of the
Trust. In cases where the first instruction is an Oral Instruction
that is not in the form of a document or written record, a
confirmatory Written Instruction or Oral Instruction in the form of a
document or written record shall be delivered, and in cases where
Fund/Plan receives an Instruction, whether Written or Oral, to enter
a portfolio transaction on the records, the Trust shall cause the
broker/dealer executing such transaction to send a written
confirmation to the Custodian. Fund/Plan shall be entitled to rely
on the first Instruction received, and for any act or omission
undertaken in compliance therewith shall be free of liability and
fully indemnified and held harmless by the Trust, provided however,
that in the event a Written or Oral Instruction received by Fund/Plan
is countermanded by a timely received subsequent Written or Oral
Instruction prior to acting upon such countermanded Instruction,
Fund/Plan shall act upon such subsequent Written or Oral Instruction.
The sole obligation of Fund/Plan with respect to any follow-up or
confirmatory Written Instruction, Oral Instruction in documentary or
written form, shall be to make reasonable efforts to detect any such
discrepancy between the original Instruction and such confirmation
and to report such discrepancy to the Trust. The Trust shall be
responsible, at the Trust's expense, for taking any action, including
any reprocessing, necessary to correct any discrepancy or error. To
the extent such action requires Fund/Plan to act, the Trust shall
give Fund/Plan specific Written Instruction as to the action
required.
Section 6. The Trust shall cause the Custodian to forward to
Fund/Plan a daily statement of cash and portfolio transactions. At
the end of each month, the Trust shall cause the Custodian to forward
to Fund/Plan a monthly statement of portfolio positions, which will
be reconciled with the Trust's Accounts and Records maintained by
Fund/Plan. Fund/Plan will report any discrepancies to the Custodian,
and report any unreconciled items to the Trust.
Section 7. Fund/Plan shall promptly supply daily and periodic
reports to the Trust as requested by the Trust and agreed upon by
Fund/Plan.
Section 8. The Trust shall provide and shall require each of
its agents (including the Custodian) to provide Fund/Plan as of the
close of each business day, or on such other schedule as the Trust
determines is necessary, with Written or Oral Instructions (to be
delivered to Fund/Plan by 11:00 a.m., Eastern time, the next
following business day) containing all data and information necessary
for Fund/Plan to maintain the Trust's Accounts and Records and
Fund/Plan may conclusively assume that the information it receives by
Written or Oral Instructions is complete and accurate.
Section 9. The Accounts and Records, in the agreed-upon
format, maintained by Fund/Plan shall be the property of the Trust
and shall be made available to the Trust promptly upon request and
shall be maintained for the periods prescribed in Rules 31a-1 and
31a-2 under the Act. Fund/Plan shall assist the Trust's independent
auditors, or upon approval of the Trust, or upon demand, any
regulatory body, in any requested review of the Trust's Accounts and
Records but shall be reimbursed for all expenses and employee time
invested in any such review outside of routine and normal periodic
review and audits. Upon receipt from the Trust of the necessary
information, Fund/Plan shall supply the necessary data for the Trust
or an independent auditor's completion of any necessary tax returns,
questionnaires, periodic reports to Shareholders and such other
reports and information requests as the Trust and Fund/Plan shall
agree upon from time to time.
Section 10. In case of any request or demand for the
inspection of the records of the Trust, Fund/Plan shall use its best
efforts to notify the Trust and to secure instructions as to
permitting or refusing such inspection. Fund/Plan may however,
exhibit such records to any person in any case where it is advised in
writing by its counsel that it may be held liable for failure to do
so.
Section 11. Fund/Plan and the Trust may from time to time
adopt such procedures as agreed upon in writing, and Fund/Plan may
conclusively assume that any procedure approved by the Trust or
directed by the Trust, does not conflict with or violate any
requirements of the Trust's Prospectus, Statement of Additional
Information, Trust Instrument or any rule or regulation of any
regulatory body or governmental agency. The Trust shall be
responsible for notifying Fund/Plan of any changes in regulations or
rules which might necessitate changes in Fund/Plan's procedures, and
for working out with Fund/Plan such changes.
Section 12. Limitation of Liability
(a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall only be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement that result from
willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer,
director, employee or agent of the Trust, shall be deemed when
rendering services to such entity or acting on any business of such
entity (other than services or business in connection with
Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or under the control or
direction of Fund/Plan even though such person may receive
compensation from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement,
the Trust shall indemnify and hold harmless Fund/Plan, its directors,
officers, employees, shareholders and agents from and against any and
all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Fund/Plan
may sustain or incur or which may be asserted against Fund/Plan by
any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken
or omitted to be taken by Fund/Plan in good faith in reliance upon
any certificate, instrument, order or stock certificate or other
document reasonably believed by Fund/Plan to be genuine and signed,
countersigned or executed by any duly authorized person, upon the
oral or written instruction of an authorized person of the Trust or
upon the opinion of legal counsel to the Trust; or (iii) any action
taken in good faith or omitted to be taken by Fund/Plan in connection
with its appointment in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have
been altered, changed, amended or repealed. Indemnification under
this subparagraph shall not apply, however, to actions or omissions
of Fund/Plan or its directors, officers, employees, shareholders or
agents in cases of its or their willful misfeasance, bad faith, gross
negligence or reckless disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may
seek indemnity under this Section, Fund/Plan shall notify the Trust
promptly after any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and shall
notify the Trust promptly of any action commenced against Fund/Plan
within ten (10) days after Fund/Plan shall have been served with a
summons or other legal process, giving information as to the nature
and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on
account of the indemnity under this Section 12(c) if the Trust has
not been prejudiced in any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the
defense of any action, suit or proceeding in which Fund/Plan is
involved and for which indemnity is being provided by the Trust to
Fund/Plan. The Trust shall may negotiate the settlement of any
action, suit or proceeding subject to Fund/Plan's approval, which
shall not be unreasonably withheld. Fund/Plan shall have the right,
but not the obligation, to participate in the defense or settlement
of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such
participation will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of
an action or proceeding and to retain its own counsel, and the
reasonable fees and expenses of such counsel shall be borne by the
Trust (which shall pay such fees, costs and expenses at least
quarterly) if:
(i) Fund/Plan has received an opinion of counsel
stating that the use of counsel chosen by the Trust to represent
Fund/Plan would present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such
action or proceeding include both Fund/Plan and the Trust, and legal
counsel to Fund/Plan shall have reasonably concluded that there are
legal defenses available to it which are different from or additional
to those available to the Trust or which may be adverse to or
inconsistent with defenses available to the Trust (in which case the
Trust shall not have the right to direct the defense of such action
on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ
separate counsel at the expense of the Trust. Notwithstanding
anything to the contrary herein, it is understood that the Trust
shall not, in connection with any action, suit or proceeding or
related action, suit or proceeding, be liable under this Agreement
for the fees and expenses of more than one firm.
(d) The terms of this Section 12 shall survive the
termination of this Agreement.
Section 13. All financial data provided to, processed by, and
reported by Fund/Plan under this Agreement shall be stated in United
States dollars. Fund/Plan's obligation to convert, equate or deal in
foreign currencies or values extends only to the accurate
transposition of information received from the various pricing and
informational services into Fund/Plan's Investment Accounting System.
Section 14. The Trust agrees to pay Fund/Plan compensation for
its services and to reimburse it for expenses, at the rates and
amounts as set forth in Schedule "B" attached hereto, and as shall be
set forth in any amendments to such Schedule "B" approved by the
Trust and Fund/Plan. The Trust agrees and understands that
Fund/Plan's compensation be comprised of two components and payable
on a monthly basis as follows:
(i) an asset based fee calculated on the Trust's
total assets, subject to a minimum fee calculated on the number of
Series and classes within each Series, which the Trust hereby
authorizes Fund/Plan to collect by debiting the Trust's custody
account for invoices which are rendered for the services performed
for the applicable function. The invoices for the services performed
will be sent to the Trust after such debiting with the indication
that payment has been made. And,
(ii) reimbursement of any reasonable out-of-pocket
expenses paid by Fund/Plan on behalf of the Trust, which out-of-pocket
expenses will be billed to the Trust within the first ten calendar days
of the month following the month in which such out-of-pocket expenses
were incurred. The Trust agrees to reimburse Fund/Plan for such expenses
within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the
value of the Series' net assets shall be computed at the times and in
the manner specified in the Series' Prospectus and Statement of
Additional Information then in effect.
During the term of this Agreement, should the Trust seek
services or functions in addition to those outlined above or in
Schedule "A" attached, a written amendment to this Agreement
specifying the additional services and corresponding compensation
shall be executed by both Fund/Plan and the Trust.
Section 15. Nothing contained in this Agreement is intended to
or shall require Fund/Plan, in any capacity hereunder, to perform any
functions or duties on any holiday, day of special observance or any
other day on which the New York Stock Exchange is closed. Functions
or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next succeeding business day on which
the New York Stock Exchange is open. Notwithstanding the foregoing,
Fund/Plan shall compute the net asset value of each Series on each
day required pursuant to (i) Rule 22c-1 promulgated under the
Investment Company Act of 1940, as amended, and (ii) the Trust's
Prospectus and Statement of Additional Information then in effect.
Section 16.
(a) The term of this Agreement shall be for a period of
two (2) years, commencing on the date which the Trust's registration
statement is declared effective by the U.S. Securities and Exchange
Commission ("Effective Date") and shall continue thereafter on a year
to year term subject to termination by either Party as set forth in
(c) below.
(b) The fee schedule set forth in Schedule "B" attached
shall be fixed for (2) years commencing on the Effective Date of this
Agreement and shall continue thereafter subject to its review,
adjustment or termination as set forth in section (c) below.
(c) After the initial term of this Agreement, the Trust
or Fund/Plan may give written notice to the other of the termination
of this Agreement, such termination to take effect at the time
specified in the notice, which date shall not be less than one
hundred eighty (180) days after the date of receipt of such notice.
Upon the effective termination date, the Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and
shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by
written notice to Fund/Plan in connection with the termination of
this Agreement, Fund/Plan shall promptly upon such termination and at
the expense of the Trust, transfer all accounts and required records
which belong to the Trust and shall cooperate in the transfer of such
records, and its duties and responsibilities under the Agreement.
Section 17. Except as otherwise provided in this Agreement,
any notice or other communication required by or permitted to be
given in connection with this Agreement shall be in writing, and
shall be delivered in person or sent by first class mail, postage
prepaid to the respective parties as follows:
If to the Trust, Inc.: If to Fund/Plan:
Polynous Capital Management, Inc. Fund/Plan Services, Inc.
88 Kearny Street, Suite 1300 2 West Elm Street
San Francisco, CA 94108 Conshohocken, PA 19428
Attention: Kevin L. Wenck, Attention: Kenneth J. Kempf,
President President
Section 18. This Agreement may be amended from time to time by
supplemental agreement executed by the Trust and Fund/Plan and the
compensation stated in Schedule "B" attached hereto may be adjusted
accordingly as mutually agreed upon.
Section 19. The Parties represent and warrant to each other
that the execution and delivery of this Agreement by the undersigned
officer of each Party has been duly and validly authorized; and, when
duly executed, this Agreement will constitute a valid and legally
binding enforceable obligation of each Party.
Section 20. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and
the same instrument.
Section 21. 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 Trust without the written consent of Fund/Plan or
by Fund/Plan without the written consent of the Trust, authorized or
approved by a resolution of its respective Boards of Directors and
Trustees.
Section 22. This Agreement shall be governed by the laws of
the State of California and the exclusive venue of any action arising
under this Agreement shall be Montgomery County, Commonwealth of
Pennsylvania.
Section 23. No provision of this Agreement may be amended or
modified, in any manner except by a written agreement properly
authorized and executed by Fund/Plan and the Trust.
Section 24. If any part, term or provision of this Agreement
is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement consisting of eleven typewritten pages, together with
Schedules "A", "B" and "C", to be signed by their duly authorized
officers as of the day and year first above written.
Polynous Trust
\s\ Kevin L. Wenck
By: Kevin L. Wenck, President<PAGE>
Fund/Plan Services, Inc.
\s\ Kenneth J. Kempf
By: Kenneth J. Kempf, President
<PAGE>
Schedule "A"
Fund Accounting and Portfolio Valuation Services
to be performed on behalf of
Polynous Trust
Daily Accounting Services
1) Calculate Net Asset Value ("NAV") and Offering Price Per Share:
Series Level
Update the daily market value of securities held by the
Series using Fund/Plan's standard agents for pricing
domestic equity, bond and foreign securities. The
domestic equity pricing services are Reuters, Inc.,
Muller Data Corporation, J.J. Kenny Co., Inc. and
Interactive Data Corporation (IDC). Muller Data,
Telerate Systems, Inc., J.J. Kenny Co., Inc. and IDC are
used for bond and money market prices/yields. Bloomberg
is available and used for price research.
Enter limited number of manual prices supplied by
Polynous Growth Fund and/or broker.
Review variance reporting on-line and in hard copy for
price changes in individual securities using variance
levels established by Polynous Growth Fund. Verify US
dollar security prices exceeding variance levels by
notifying Polynous Growth Fund and pricing sources of
noted variances.
Review for ex-dividend items indicated by pricing
sources; trace to Fund's general ledger for agreement.
Series and Each Class
Allocate daily unrealized Fund appreciation/depreciation
to classes based upon value of outstanding class shares.
Prepare NAV proof sheets. Review components of change in
NAV for reasonableness. Complete Fund and class control
proofs.
Communicate required pricing information (NAV/Offering
Price) to Polynous Growth Fund, Transfer Agent and
electronically to NASDAQ.
2) Determine and Report Cash Availability to Series by
approximately 9:30 AM Eastern Time:
Series Level
Receive daily cash and transaction statements from the
Custodian by 8:30 AM Eastern time.
Receive previous day shareholder activity reports from
the Transfer Agent by 8:30 AM Eastern time. Class level
shareholder activity will be accumulated into the Fund's
available cash balances.
Fax hard copy Cash Availability calculations with all
details to Polynous Growth Fund.
Supply Polynous Growth Fund with 3-day cash projection
report.
Prepare and complete daily bank cash reconciliations for
the Fund including documentation of any reconciling items
and notify the Custodian and Polynous Growth Fund.
3) Reconcile and Record All Daily Expense Accruals:
Series Level
Accrue expenses based on budget supplied by Polynous
Growth Fund either as percentage of net assets or
specific dollar amounts.
If applicable, monitor expense limitations established by
Polynous Growth Fund.
If applicable, accrue daily amortization of
Organizational Expense.
Series and Each Class
Class specific accruals completed such as daily accrual
of 12b-1 expenses.
Allocate Fund expenses to classes based upon value of
outstanding class shares.
4) Verify and Record All Daily Income Accruals for Debt Issues:
Series Level
Review and verify all system generated Interest and
Amortization reports.
Establish unique security codes for bond issues to permit
segregated Trial Balance income reporting.
Series and Each Class
Allocate Fund income to classes based upon value of
outstanding class shares.
5) Monitor Domestic Securities held for cash dividends, corporate
actions and capital changes such as splits, mergers,
spinoffs, etc. and process appropriately.
Series Level
Monitor electronically received information from Muller
Data Corporation for all domestic securities.
Review current daily security trades for dividend
activity.
Interface with Custodian to monitor timely collection and
postings of corporate actions, dividends and interest.
Series and Each Class
Allocate Fund dividend income to classes based upon value
of outstanding class shares.
6) Enter All Security Trades on Investment Accounting System (IAS)
based on written instructions from Polynous Capital Management,
Inc.
Series Level
Review system verification of trade and interest
calculations.
Verify settlement through the statements supplied by the
Custodian.
Maintain security ledger transaction reporting.
Maintain tax lot holdings.
Determine realized gains or losses on security trades.
Provide complete broker commission reporting.
Series and Each Class
Allocate all Fund level realized and unrealized capital
and currency gains/losses to classes based upon value of
class outstanding shares.
7) Enter All Series Share Transactions on IAS:
Each Class
Process activity identified on reports supplied by the
Transfer Agent.
Verify settlement through the statements supplied by the
Custodian.
Reconcile to the Fund/Plan Services' Transfer Agent
report balances.
Roll each classes' capital share values into Fund and
determine allocation percentages based upon the value of
each classes' outstanding shares to the Fund total.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance
(listing all asset, liability, equity, income and expense
accounts)
Series Level
Post manual entries to the general ledger.
Post Custodian bank activity.
Post security transactions.
Post and verify system generated activity, i.e., income
and expense accruals.
Series and Each Class
Prepare Fund's general ledger net cash proof used in NAV
calculation.
Post class specific shareholder activity and roll values
into the Fund.
Allocate all Fund level net cash accounts on the Fund
Trial Balance to each specific class based upon value of
class outstanding shares.
Maintain allocated Trial Balance accounts on class
specific Allocation Reports.
Maintain class-specific expense accounts.
Prepare class-specific proof/control reports to ensure
accuracy of allocations.
9) Review and Reconcile with Custodian Statements:
Series Level
Verify all posted interest, dividends, expenses, and
shareholder and security payments/receipts, etc.
(Discrepancies will be reported to and resolved by the
Custodian.)
Post all cash settlement activity to the Trial Balance.
Reconcile to ending cash balance accounts.
Clear IAS subsidiary reports with settled amounts.
Track status of past due items and failed trades handled
by the Custodian.
10) Submission of Daily Accounting Reports to Polynous Growth Fund:
(Additional reports readily available.)
Series Level
Portfolio Valuation (listing inclusive of holdings,
costs, market values, unrealized
appreciation/depreciation and percentage of portfolio
comprised of each security.)
Cash availability
3-day Cash Projection Report
Series and Each Class
Fund Trial Balance and Class Allocation Report
NAV Calculation Report
Monthly Accounting Services
1) For each Series, full Financial Statement Preparation
(automated Statements of Assets and Liabilities, of Operations
and of Changes in Net Assets) and submission to Polynous Growth
Fund by 10th business day.
Class specific capital share activity and expenses will
also be disclosed.
2) Submission of Monthly Automated IAS Reports to Polynous Growth
Fund:
Series Level
Security Purchase/Sales Journal
Interest and Maturity Report
Brokers Ledger (Commission Report)
Security Ledger Transaction Report with Realized
Gains/Losses
Security Ledger Tax Lot Holdings Report
Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
Series Level
Report any security balance discrepancies to the
Custodian and Polynous Growth Fund.
4) Provide Monthly Analysis and Reconciliation of Additional Trial
Balance Accounts,
such as:
Series Level
Security cost and realized gains/losses
Interest/dividend receivable and income
Payable/receivable for securities purchased and sold
Series and Each Class
Payable/receivable for Fund's shares; issued and redeemed
Expense payments and accruals analysis
5) If Appropriate, Prepare and Submit to Polynous Growth Fund:
Series Level
Income by state reporting.
Standard Industry Code Valuation Report.
Alternative Minimum Tax Income segregation schedule.
SEC yield reporting (non-money market funds with domestic
and ADR securities only).
Annual (and Semi-Annual) Accounting Services
1) Assist and supply auditors with schedules supporting securities
and shareholder transactions, income and expense accruals, etc.
for the Fund and each class during the year in accordance with
standard audit assistance requirements.
2) Provide N-SAR Reporting (Accounting Questions):
If applicable for the Fund and Classes, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53,
55, 62, 63, 64B, 71, 72, 73, 74, 75 and 76.
Note: All N-SAR questions are completed by Fund/Plan Services
when Fund/Plan's Administration Group is retained.
<PAGE>
Accounting Services Basic Assumptions
For
Polynous Trust
The Accounting Fees as set forth in Schedule "B" are based on the
following assumptions. To the extent these assumptions are
inaccurate or requirements change,
fee revisions may be necessary.
Basic Assumptions:
1) Compliance reporting (Sub-Chapter "M") shall be maintained by
Fund/Plan Services as Fund Administrator.
2) It is assumed that the portfolio asset composition will be
primarily small to mid-cap equity securities. Trading activity
is expected to be light (50 to 60 trades per month). The
portfolio would generally hold around 40 issues.
3) The Trust has a tax year-end which coincides with its fiscal
year-end. No additional accounting requirements are necessary
to identify or maintain book-tax differences. Accounting
Services Unit (ASU) does not provide security tax accounting
which differs from its book accounting.
4) Fund/Plan's standard current pricing services for domestic
equity, bond and ADR securities will be used for pricing the
securities held in the Trust. Fund/Plan currently uses Reuters
Inc., Muller Data or Interactive Data Corporation (IDC) for
domestic equities and listed ADR's. Muller Data Corporation,
Telerate Systems, Inc. and IDC are used for bonds and money
markets. Bloomberg is also available for price research and
backup.
It is assumed that ASU will work closely with the Polynous
Growth Fund to ensure the accuracy of the Trust's NAV and
distribution rates and to obtain the most satisfactory pricing
sources and specific methodologies prior to the actual start-up
date. The Trust shall establish clear-cut security variance
procedures to minimize NAV and distribution rate
miscalculations.
5) To the extent the Trust requires daily security prices (limited
in number) from specific brokers for domestic securities, these
manual prices will be obtained by the Trust's investment
adviser and faxed to ASU by approximately 4:00 PM Eastern time
for inclusion in the NAV calculations. Polynous Growth Fund
will supply ASU with the appropriate pricing contacts for these
manual quotes.
6) ASU will supply daily Portfolio Valuation Reports to the
Trust's investment adviser identifying current security
positions, original/amortized cost, security market values and
changes in unrealized appreciation/depreciation.
It will be the responsibility of the Trust's investment adviser
to review these reports and to promptly notify ASU of any
possible problems, trade discrepancies, incorrect security
prices corporate action/capital change information or exchange
rate discrepancies that could result in a misstated NAV.
7) The Fund does not currently expect to invest in open-end
Regulated Investment Companies (RIC's), Mortgage Backed
Securities, Swaps, Futures, Hedges, Derivatives or Foreign
(non-US dollar denominated) securities and currency. The Fund
will not employ securities lending, leveraging or short sales
techniques. To the extent these investment strategies should
change, additional fees will apply after the appropriate
procedural discussions have taken place between ASU and Fund
management. (Two weeks advance notice is required should the
Fund commence trading in these investments.)
8) To the extent applicable, ASU will maintain on a daily basis US
dollar denominated, qualified, covered call options and index
options reporting on the daily Trial Balance and value the
respective options and underlying positions.
If the Fund commences investment in domestic options or
designated hedges, two weeks advance notice is required to
clarify operational procedures between ASU and the Fund's
investment adviser.
9) To the extent that the Fund should establish a Line of Credit
in segregated accounts with the custodian for temporary
administrative purposes, and/or leveraging/hedging the
portfolio, it is not the responsibility under this proposal for
ASU to complete the appropriate paperwork/monitoring for
segregation of assets and adequacy of collateral. The Fund
shall direct the investment adviser to execute such
responsibilities. ASU will, however, reflect appropriate Trial
Balance account entries and interest expense accrual charges on
the daily Trial Balance adjusting as necessary at month-end.
10) The Fund shall direct the investment adviser or Fund/Plan
Services as administrator to supply ASU with portfolio specific
expense accrual procedures and monitor the expense accrual
balances for adequacy based on outstanding liabilities monthly.
The administrator will promptly communicate to ASU any
adjustments needed.
11) Specific deadlines shall be met and complete information shall
be supplied by the Fund in order to minimize any settlement
problems or NAV miscalculations.
The Fund shall direct the investment adviser to provide to ASU
Trade Authorization Forms, with the appropriate officer's
signature on all security trades placed by the Fund no later
than 12:30 PM Eastern time on settlement/value date for short
term money market securities issues (assuming that trade date
equals settlement date); and by 11:00 AM Eastern time on trade
date plus one for non-money market securities. Receipt by ASU
of trade information within these identified deadlines may be
via telex, fax or on-line system access. The investment adviser
will communicate all trade information directly to the
Fund/Plan custody administrator. The investment adviser and/or
Fund/Plan's custody administrator will supply ASU with the
trade details in accordance with the above stated deadlines.
The Fund shall direct the investment adviser to include all
information required by ASU; including CUSIP numbers and/or
ticker symbols for all US dollar denominated trades and on the
Trade Authorization, telex or on-line support. ASU will supply
the investment adviser with recommended trade ticket documents
to minimize receipt of incomplete information. ASU will not be
responsible for NAV changes or distribution rate adjustments
that result from incomplete trade information.
12) To the extent the Fund utilizes Purchases In-Kind (U.S. dollar
denominated securities only) as a method for shareholder
subscriptions, ASU will provide the Fund with procedures to
properly handle and process securities in-kind. Should the
Fund prefer procedures other than those provided by ASU,
additional fees may apply. Discussions should take place at
least two weeks in advance between ASU and the Fund to clarify
the appropriate In-Kind operational procedures to be followed.
13) It is assumed that the Fund's investment adviser or Fund/Plan
Services as Administrator will complete the applicable
performance and rate of return calculations as required by the
SEC for the Fund.
14) The Parties shall establish mutually agreed upon amortization
procedures and accretion requirements for debt issues held by
the Fund prior to commencement of operations. Adjustments for
financial statements regarding any issues with Original Issue
Discount (OID) are not included under this agreement. The Fund
shall direct its independent auditors to complete the necessary
OID adjustments for financial statements and/or tax reporting.
<PAGE>
Schedule "B"
Fund Accounting and Portfolio Valuation Services Fee Schedule
for
Polynous Trust
This Fee Schedule is fixed for a period of two (2) years from the
Effective Date as that term is defined in the Agreement.
The Accounting Fees as set forth below are stated and offered subject
to the
"Basic Assumptions" as set forth in Schedule "A." To the extent that
those assumptions are inaccurate or requirements change, fee
revisions may be necessary.
I. Annual Fee Schedule Per Domestic Portfolio (US Dollar
Denominated Securities Only)(1/12th payable monthly in advance
based on the prior month's average daily combined classes' net
assets and number of portfolios):
$24,000 Minimum to $ 20 Million of Combined Class A and D
Average Net Assets
.0004 On the Next $ 30 Million of Combined Class A and D
Average Net Assets
.0003 On the Next $ 50 Million of Combined Class A and D
Average Net Assets
.0001 Over $100 Million of Combined Class A and D
Average Net Assets
Additional Class is $12,000 minimum per year.
II. Pricing Services Quotation Fee (based on individual CUSIP or
security identification number.) Specific costs will be
identified based upon options selected by Polynous Growth Fund
and will be billed monthly. While we anticipate that the Fund
would be invested in domestic equities, should the Fund invest
in different investments, the following pricing fees would
apply.
Security Types
Muller Data
Corp.*
Interactive
Data Corp.*
J.J. Kenney
Co., Inc.
Government Bonds
$ .50
$ .50
$ .25 (a)
Mortgage-Backed (evaluated, seasoned,
closing)
.50
.50
.25 (a)
Corporate Bonds (short and long term)
.50
.50
.25 (a)
U.S. Municipal Bonds (short and long
term)
.55
.80
.50 (b)
CMO's/ARM's/ABS
1.00
.80
1.00 (a)
Convertible Bonds
.50
.50
1.00 (a)
High Yield Bonds
.50
.50
1.00 (a)
Mortgage-Backed Factors (per Issue per
Month)
1.00
n/a
n/a
Domestic Equities
(d)*
.15
n/a
Domestic Options
n/a
.15
n/a
Domestic Dividends & Capital Changes
(per Issue per month)
(d)*
3.50
n/a
Foreign Securities
.50
.50
n/a
Foreign Securities Dividends & Capital
Changes
(per Issue per Month)
2.00
4.00
n/a
Set-up Fees
n/a
n/a
.25 (c)
All Added Items
n/a
n/a
.25 (c)
* Based on current Vendor costs, subject to change.
Costs are quoted based on individual security
CUSIP/identifiers and are per issue per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no cusip
(d) At no additional cost to Fund/Plan clients
A) Futures $2.00 per Issue per Day
B) Reuters, Inc.*
*Based on current vendor costs, subject to change.
Fund/Plan does not currently pass along the
charges for the domestic security prices supplied
by Reuters, Inc.
III. SEC Yield Calculation: (if applicable)
Provide up to 12 reports per year to reflect the
yield calculations for non-money market Funds
required by the SEC, $1,000 per year per Fund. For
multiple class Funds, $1,000 per year per class.
Daily SEC yield reporting is available at $3,000 per
year per Fund (US dollar denominated securities
only).
IV. Out-of-Pocket Expenses
The Fund will reimburse Fund/Plan Services, Inc.
monthly for all reasonable out-of-pocket expenses
including telephone, postage, EDGAR filings,
telecommunications, special reports, record
retention, special transportation costs, copying and
sending materials to auditors, as incurred and
approved.
V. Additional Services
To the extent the Fund commences using investment
techniques such as Futures, Security Lending, Swaps,
Short Sales, Derivatives, Leveraging, Precious Metals
or non-US dollar denominated futures and options,
additional fees will apply. Activities of a non-recurring
nature such as shareholder in-kinds, fund
consolidations, mergers or reorganizations will be
subject to negotiation. Any additional/enhanced
services or reports will be quoted upon request.
This Schedule may be amended to reflect the addition of
other reports and/or services.<PAGE>
Schedule "C"
Identification of Series
Below are listed the Series and Classes of Shares to which
services under this Agreement are to be performed as of the
Effective Date of this Agreement:
"Polynous Trust"
1. Polynous Growth Fund - Class A Shares
2. Polynous Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by
agreement of the Parties.
EX 99.B15(a) Distribution Plan
of
Polynous Trust, Class A Shares
The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "Act"), by Polynous Trust (the "Trust") for the Class
"A" shares (the "Retail Class") of the Trust and any separate series
of the Trust hereinafter organized. The Plan has been approved by a
majority of the Trust's Board of Trustees, including a majority of
the trustees who are not interested persons of the Trust and who have
no direct or indirect financial interest in the operation of the Plan
(the "non-interested trustees"), cast in person at a meeting called
for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that
the adoption of the Plan would be prudent and in the best interests
of the Trust and its shareholders. Such approval included a
determination that in the exercise of their reasonable business
judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Trust and its
shareholders. The Plan has also been approved by a vote of the sole
initial shareholder of the Retail Class shares of the Trust.
The Provisions of the Plan are:
1. The Retail Class of the Trust shall reimburse the
Advisor, the Distributor or others for all expenses incurred by such
parties in the promotion and distribution of shares of the Retail
Class of the Trust, including but not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of
preparation of sales literature and related expenses, advertisements,
and other distribution-related expenses, as well as any distribution
or service fees paid to securities dealers or others who have
executed a servicing agreement with the Trust on behalf of the Retail
Class or the Distributor, which form of agreement has been approved
by the Trustees, including the non-interested trustees. The monies
to be paid pursuant to any such servicing agreement shall be used to
pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services
include, among other things, assisting in establishing and
maintaining customer accounts and records; assisting with the
purchase and redemption requests; arranging for bank wires;
monitoring dividend payments from the Trust on behalf of customers;
forwarding certain shareholder communications from the Trust to
customers; receiving and answering correspondence; and aiding in
maintaining the investment of their respective customers in the
Retail Class.
2. The maximum aggregate amount which may be reimbursed by
the Retail Class of the Trust to such parties pursuant to paragraph 1
shall be 0.25% per annum of the average daily net assets of the
Retail Class.
3. The Advisor and the Distributor shall collect and monitor
the documentation of payments made under paragraph 1, and shall
furnish to the Board of Trustees of the Trust, for their review, on a
quarterly basis, a written report of the monies reimbursed to them
and others under the Plan as to the Trust's Retail Class, and shall
furnish the Board of Trustees of the Trust with such other
information as the Board may reasonably request in connection with
the payments made under the Plan as to the Trust's Retail Class in
order to enable the Board to make an informed determination of
whether the Plan should be continued.
4. The Plan shall continue in effect for a period of more
than one year only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the non-interested trustees, cast in person at a meeting
called for the purpose of voting on the Plan.
5. The Plan, or any agreements entered into pursuant to this
Plan, may be terminated at any time, without penalty, by vote of a
majority of the outstanding voting securities of the Trust, or by
vote of a majority of the non-interested Trustees, on not more than
sixty (60) days' written notice, and shall terminate automatically in
the event of any act that constitutes an assignment of the management
agreement between the Trust and the Manager.
6. The Plan and any agreements entered into pursuant to this
Plan may not be amended to increase materially the amount to be spent
by the Trust's Retail Class for distribution pursuant to Paragraph 1
hereof without approval by a majority of the Retail Class'
outstanding voting securities.
7. All material amendments to the Plan, or any agreements
entered into pursuant to this Plan, shall be approved by the non-
interested trustees cast in person at a meeting called for the
purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested trustees shall be committed
to the discretion of such non-interested trustees.
9. This Plan shall take effect on the 17 day of July
, 1996 .
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, the Advisor and the Distributor
as evidenced by their execution hereof.
Polynous Trust Polynous Capital Management, Inc.
By: By:
Fund/Plan Broker Services, Inc.
By:
EX 99.B15(b) Distribution Plan
of
Polynous Trust, Class D Shares
The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "Act"), by Polynous Trust (the "Trust") for the Class
"D" shares (the "Institutional Class") of the Trust and any separate
series of the Trust hereinafter organized. The Plan has been
approved by a majority of the Trust's Board of Trustees, including a
majority of the trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the
operation of the Plan (the "non-interested trustees"), cast in person
at a meeting called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that
the adoption of the Plan would be prudent and in the best interests
of the Trust and its shareholders. Such approval included a
determination that in the exercise of their reasonable business
judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Trust and its
shareholders. The Plan has also been approved by a vote of the sole
initial shareholder of the Institutional Class shares of the Trust.
The Provisions of the Plan are:
1. The Institutional Class of the Trust shall reimburse the
Advisor, the Distributor or others for all expenses incurred by such
parties in the promotion and distribution of shares of the
Institutional Class of the Trust, including but not limited to, the
printing of prospectuses and reports used for sales purposes,
expenses of preparation of sales literature and related expenses,
advertisements, and other distribution-related expenses, as well as
any distribution or service fees paid to securities dealers or others
who have executed a servicing agreement with the Trust on behalf of
the Institutional Class or the Distributor, which form of agreement
has been approved by the Trustees, including the non-interested
trustees. The monies to be paid pursuant to any such servicing
agreement shall be used to pay dealers or others for, among other
things, furnishing personal services and maintaining shareholder
accounts, which services include, among other things, assisting in
establishing and maintaining customer accounts and records; assisting
with the purchase and redemption requests; arranging for bank wires;
monitoring dividend payments from the Trust on behalf of customers;
forwarding certain shareholder communications from the Trust to
customers; receiving and answering correspondence; and aiding in
maintaining the investment of their respective customers in the
Institutional Class.
2. The maximum aggregate amount which may be reimbursed by
the Institutional Class of the Trust to such parties pursuant to
paragraph 1 shall be 0.35% per annum of the average daily net assets
of the Institutional Class.
3. The Advisor and the Distributor shall collect and monitor
the documentation of payments made under paragraph 1, and shall
furnish to the Board of Trustees of the Trust, for their review, on a
quarterly basis, a written report of the monies reimbursed to them
and others under the Plan as to the Trust's Institutional Class, and
shall furnish the Board of Trustees of the Trust with such other
information as the Board may reasonably request in connection with
the payments made under the Plan as to the Trust's Institutional
Class in order to enable the Board to make an informed determination
of whether the Plan should be continued.
4. The Plan shall continue in effect for a period of more
than one year only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the non-interested trustees, cast in person at a meeting
called for the purpose of voting on the Plan.
5. The Plan, or any agreements entered into pursuant to this
Plan, may be terminated at any time, without penalty, by vote of a
majority of the outstanding voting securities of the Trust, or by
vote of a majority of the non-interested Trustees, on not more than
sixty (60) days' written notice, and shall terminate automatically in
the event of any act that constitutes an assignment of the management
agreement between the Trust and the Manager.
6. The Plan and any agreements entered into pursuant to this
Plan may not be amended to increase materially the amount to be spent
by the Trust's Institutional Class for distribution pursuant to
Paragraph 1 hereof without approval by a majority of the
Institutional Class' outstanding voting securities.
7. All material amendments to the Plan, or any agreements
entered into pursuant to this Plan, shall be approved by the non-
interested trustees cast in person at a meeting called for the
purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested trustees shall be committed
to the discretion of such non-interested trustees.
9. This Plan shall take effect on the 17 day of July
, 199 6 .
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, the Advisor and the Distributor
as evidenced by their execution hereof.
Polynous Trust Polynous Capital Management Inc.
By: By:
Fund/Plan Broker Services, Inc.
By:
EX 99.B18 POLYNOUS TRUST
Polynous Growth Fund
Multiple Class Plan Pursuant to Rule 18F-3
Polynous Growth Fund (the "Fund") hereby adopts this Multiple Class
Plan (the "Plan") pursuant to Rule 18f-3 under the Investment Company
Act of 1940, as amended (the "1940 Act"), which sets forth the
separate distribution arrangements and expense allocations of each
class of the Fund. This Plan has been adopted by a majority of the
Board of Trustees, including a majority of the independent Trustees,
of Polynous Trust (the "Trust"). The Board has determined that the
Plan is in the best interests of each class and the Fund as a whole.
CLASS CHARACTERISTICS
Each class of shares will represent interest in the same
portfolio of investments and be identical in all respects to each
other class, except as set forth below.
Class A Shares: Class A Shares are sold subject to a front-end
sales charge of 4.50% for an investment less than
$50,000, 4.00% for investments over $50,000 but
less than $100,000, 3.00% for investments over
$100,000 but less than $250,000, 2.00% for
investments over $250,000 but less than $500,000
and 0.00% for investments $500,000 and over. Class
A Shares are subject to Rule 12b-1 distribution
charges with a fee of 0.25% per annum of the
average daily net assets of Class A Shares.
Class D Shares: Class D Shares are offered for sale at net asset
value per share without a sales charge. Class D
Shares are sold subject to a minimum initial
investment of $10,000 and subsequent investments of
$200 or more. Class D Shares are subject to Rule
12b-1 distribution charges with a fee of 0.35% per
annum of the average daily net assets of Class D
Shares.
The Rule 12b-1 charges associated with the Class A Shares and Class D
Shares shall be paid to Fund/Plan Broker Services, Inc. (the
"Distributor") for (i) expenses incurred pursuant to an agreement
regarding the provision of administrative support services to the
holders of the respective class of shares; (ii) distribution services
provided and expenses assumed in connection with distribution
assistance, including, but not limited to, printing and distributing
prospectuses to persons other than current shareholders of the Fund,
printing and distributing advertising and sales literature and
reports to shareholders in connection with the sale of the Fund's
shares, and personnel and communication equipment used in servicing
shareholder accounts and prospective shareholder inquiries; or (iii)
payments to the Distributor pursuant to the Underwriting Agreement
between the Trust and the Distributor. The Distributor may reallow a
portion or all of the 12b-1 fees received to broker-dealers or others
who have executed a selling agreement with the Distributor on behalf
of the respective class of shares of the Trust.
INCOME AND EXPENSE ALLOCATION
Certain expenses attributable to the Fund, and not to a
particular class will be borne by each class on the basis of the
relative aggregate net assets of the Fund. Notwithstanding the
foregoing, the investment manager or other service provider may waive
or reimburse the expenses of a specific class or classes to the
extent permitted under Rule 18f-3 under the 1940 Act.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each class of shares,
to the extent that any dividends are paid, will be calculated in the
same manner, at the same time, on the same day, and will be in the
same amount, except that any distribution fees, service fees and
class expenses allocated to a class will be borne exclusively by that
class.
EXCHANGES AND CONVERSIONS
There shall be no exchange or conversion features associated
with the Class A Shares or the Class D Shares.
GENERAL
The Fund's Rule 12b-1 Plans relating to the Class A Shares and
Class D Shares shall operate in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.,
Article III, Section 26.
Each Class shall vote separately and exclusively with respect
to any matter related to the respective Rule 12b-1 Plan. Each Class
shall vote separately with respect to any matter that relates solely
to that Class.
On an ongoing basis, the Trustees, pursuant to their fiduciary
responsibilities under the 1940 Act, and otherwise, will monitor the
Trust for the existence of any material conflicts between the
interests of the classes of shares. The Trustees, including a
majority of the independent Trustees, shall take such action as is
reasonably necessary to eliminate any such conflict that may develop.
The investment adviser and the distributor shall be responsible for
alerting the Board to any material conflicts that may arise.
Any material amendment to this Plan must be approved by a
majority of the Trustees of the Fund, including a majority of the
Trustees who are not interested persons of the Fund, as defined in
the 1940 Act.
Date:________________, 1996
EX 99.B19 POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Joseph M.
O'Donnell and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to sign any Registration Statement, or
amendment thereto of Polynous Trust (the "Trust") to be filed with
the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended;
and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the U.S. Securities and Exchange
Commission; and to take any appropriate action to qualify or register
all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully
as that person might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or any substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 17th day of July, 1996.
/s/ Kevin L. Wenck
Kevin L. Wenck, President
ACKNOWLEDGEMENT
State of California )
) ss:
County of )
The foregoing instrument was acknowledged before me this 17th day of
July, 1996, by Kevin L. Wenck, President of Polynous Trust.
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Joseph M.
O'Donnell and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to sign any Registration Statement, or
amendment thereto of Polynous Trust (the "Trust") to be filed with
the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended;
and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the U.S. Securities and Exchange
Commission; and to take any appropriate action to qualify or register
all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully
as that person might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or any substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 17th day of July, 1996.
/s/ Richard Kimball
Richard Kimball, Trustee
ACKNOWLEDGEMENT
State of California )
) ss:
County of )
The foregoing instrument was acknowledged before me this 17th day of
July, 1996, by Richard Kimball, Trustee of Polynous Trust.
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Joseph M.
O'Donnell and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to sign any Registration Statement, or
amendment thereto of Polynous Trust (the "Trust") to be filed with
the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended;
and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the U.S. Securities and Exchange
Commission; and to take any appropriate action to qualify or register
all or part of the securities of the Trust for sale in various
states; granting to such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act
requisite and necessary to be done in connection therewith, as fully
as that person might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or any substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 17th day of July, 1996.
/s/ Ronald Kase
Ronald Kase, Trustee
ACKNOWLEDGEMENT
State of California )
) ss:
County of )
The foregoing instrument was acknowledged before me this 17th day of
July, 1996, by Ronald Kase, Trustee of Polynous Trust.
Notary Public
