UNITED STATES File No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940[x]
Amendment No [ ]
Polynous Trust
(Exact name of Registrant as Specified in Charter)
88 Kearny St., 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 hereby elects 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. A filing fee of $500.00 has
been wired to the lockbox. Registrant will file a Notice pursuant to
Rule
24f-2 within two months after the fiscal year end. A filing fee of
$1,000
pursuant to registration under the Investment Company Act of 1940 has
been
wired to the lockbox.
________________________________________________________________
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.
As filed with the U.S. Securities and Exchange TOTAL PAGES:
Commission on INDEX TO EXHIBITS,
PAGE:
<PAGE>
TABLE OF CONTENTS
Registration Statement of Polynous Trust
Page
1. Cross-Reference Sheet . . . . . . . . . . . . . . . . .
2. Polynous Growth Fund Class A Shares - Part A - Prospectus
3. Polynous Growth Fund Class D Shares - Part A - Prospectus
4. Polynous Growth Fund - Part B -
Statement of Additional Information . . . . . . . . . .
5. Polynous Growth Fund - Part C - Other Information . . .
6. Signature Page. . . . . . . . . . . . . . . . . . . . .
7. Index to Exhibits . . . . . . . . . . . . . . . . . . .
<PAGE>
POLYNOUS TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481a
Form N-1A Item Caption in Prospectus
Part A INFORMATION REQUIRED IN A PROSPECTUS
1. Cover Page Cover Page of Prospectus
2. Synopsis Prospectus Summary; Expense
Summary
3. Condensed Financial
Information *
4. General Description of
Registrant Investment Objective and Policies;
Risk Factors; Prospectus Summary;
The
Trust and the Fund; Investment
Limitations; General Information
5. Management of the Fund Prospectus Summary; Management
of the
Fund; Distribution Plan
5A. Management's Discussion
of Fund Performance *
6. Capital Stock and Other
Securities Prospectus Summary; General
Information; Dividends and Taxes;
Net
Asset Value
7. Purchase of Securities
Being Offered Prospectus Summary; How to
Purchase
Shares; Shareholder Services
8. Redemption or Repurchase Prospectus Summary; How to Redeem
Shares
9. Pending Legal Proceedings *
<PAGE>
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page of the Statement of
Additional Information
11. Table of Contents Table of Contents
12. General Information
and History *
13. Investment Objectives
and Policies Investment Policies and Techniques;
Investment Restrictions; Portfolio
Transactions
14. Management of the Fund The Trust; Investment Advisory and
Other Services; Trustees and
Officers
15. Control Persons and
Principal Holders
of Securities *
16. Investment Advisory and
Other Services Investment Advisory and Other
Services
17. Brokerage Allocation and
Other Practices Portfolio Transactions
18. Capital Stock and
Other Securities Other Information
19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchases; Redemptions
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculation of
Performance Data Performance Information
23. Financial Statements *
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>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification
under the securities laws of any such state.
Subject to Completion
Preliminary Prospectus Dated May , 1996
POLYNOUS GROWTH FUND
88 Kearny Street, Suite 1300
San Francisco, California 94108
Class A 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 A Shares.
You may receive information concerning Class D Shares by calling
1-(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 incorporated herein by
reference. 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".<PAGE>
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.
Annual Fund Operating Expenses:
(as a percentage of average net assets) Class A
Advisory Fees (after fee waivers)(3) . . . . . . . . . . 1.00%
12b-1 Fees . . . . 0.25%
Other Expenses (4) . . . 0.75%
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
waivers, advisory fees for the Fund would be 1.00% and estimated
total operating expenses would be x.xx% 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").<PAGE>
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 1-(800)-
.
Investment Objective
The investment objective of Polynous Growth Fund (the "Fund") is
long-term capital appreciation.<PAGE>
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
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 assets at the time of purchase.
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<PAGE>
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<PAGE>
The Portfolio Management Process
1. Valuation
2. Portfolio Characteristics
3. Buy Discipline
4. Portfolio Monitoring
5. Sell Discipline / Portfolio
Optimization
<PAGE>
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."
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, the
Fund may usually have higher levels of liquid assets 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.
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 or other
non-speculative 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. Asset Management (formerly
Capital Management) 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 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.
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 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
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":
Class A Shares Amount of Purchase
Less than $50,000. . . . . . . . . . . . . . . . . . . . . .
$ 50,000 or more but less than $100,000. . . . . . . . . .
$ 100,000 or more but less than $250,000 . . . . . . . . . .
$ 250,000 or more but less than $500,000 . . . . . . . . . .
$ 500,000 or more . . . . . . . . . . . . . . . . . . . . .
<PAGE>
Sales Charge
as Percentage
of
Offering
Price
4.50%
4.00%
3.00%
2.00%
0%
<PAGE>
Sales Charge as
Percentage
of Net Amount
Invested
x.xx%
x.xx%
x.xx%
x.xx%
x.xx%
<PAGE>
Reallowance and Bro-
kerage Commission
as Percentage of
Offering Price
4.00%
3.50%
2.75%
1.75%
*
<PAGE>
* 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) and any non-profit
institution investing $1 million or more. 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,
and dividing by the total number of outstanding shares. Expenses are
accrued daily and applied when determining the net asset value. 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.
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.
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
LEGAL COUNSEL
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, California 94111
AUDITORS
[ To Be Determined ]
For Additional Information about Polynous Growth Fund call:
(800)
(610)
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold nor may offers
to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would
be unlawful prior to registration or qualification
under the securities laws of any such state.
Subject to Completion
Preliminary Prospectus Dated May , 1996
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
1-(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 incorporated herein by
reference. 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 19428San 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".
<PAGE>
Expense Summary
Shareholder Transaction Expenses:. . . . . . . . . Class D
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.
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Class D
Advisory Fees (after fee waivers)(2) . . . . . . . . . . 1.00%
12b-1 Fees . . . . 0.35%
Other Expenses (3) . . . 0.90%
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
waivers, advisory fees for the Fund would be 1.00% and estimated
total operating expenses would be x.xx% 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").<PAGE>
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 1-(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 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
assets at the time of purchase.
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."
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, the
Fund may usually have higher levels of liquid assets 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.
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 or other
non-speculative 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. Asset
Management (formerly Capital Management) included portfolio manager for
G.T. the 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.
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
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
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.
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.
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
LEGAL COUNSEL
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, California 94111
AUDITORS
[ To Be Determined ]
For Additional Information about Polynous Growth Fund call:
(800)
(610) <PAGE>
Subject to Completion
Preliminary Statement of Additional Information dated May , 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This Statement of Additional
Information does not constitute a prospectus.
POLYNOUS TRUST
STATEMENT OF ADDITIONAL INFORMATION
, 1996
This Statement of Additional Information , 1996 is not a
prospectus but should be read in conjunction with the separate May
, Prospectuses describing Class A Shares and Class D Shares of the
Polynous Growth Fund (the "Fund") , 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 . . . . . . . . . . . . . . . . . . . .
Convertible Securities. . . . . . . . . . . . . . . . . .
Repurchase Agreements . . . . . . . . . . . . . . . . . .
Loans of Portfolio Securities . . . . . . . . . . . . . .
Securities of Other Investment Companies. . . . . . . . .
Illiquid Securities . . . . . . . . . . . . . . . . . . .
Rule 144A Securities. . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . . . .
Investment Advisory and Other Services
Investment Advisory Agreement . . . . . . . . . . . . . .
Administrator . . . . . . . . . . . . . . . . . . . . . .
Underwriter . . . . . . . . . . . . . . . . . . . . . . .
Distributor . . . . . . . . . . . . . . . . . . . . . . .
Trustees and Officers. . . . . . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Income Tax. . . . . . . . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . . . . . . .
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 Government Fund may invest in securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Such agencies and
instrumentalities include the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC"), and the Student Loan
Marketing Association ("SLMA"). Obligations of agencies such as GNMA
are backed by the full faith and credit of the U.S. Government. Others,
such as the obligations of FNMA, are not backed by the full faith and
credit of the U.S. Government but are supported by the right of the
issuer to borrow from the U.S. Treasury; others, such as those of SLMA,
are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; and still others, such as the Federal
Farm Credit Banks, are supported only by the credit of the agency. No
assurance can be given that the U.S. Government would provide financial
assistance to U.S. Government-sponsored agencies or instrumentalities if
it is not obligated to do so by law. Some of these securities are
considered to be "mortgage-related securities" because they represent
ownership in a pool of federally insured mortgage loans with maturities
of up to 30 years. However, due to scheduled and unscheduled principal
payments, such securities have a shorter average maturity and,
therefore, less principal volatility than a bond with a comparable
maturity. Since prepayment rates vary widely, it is not possible to
accurately predict the average maturity of a particular pool of
mortgages.
The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. Such
mortgage-related securities differ from conventional bonds in that
principal is paid back to the certificate holders over the life of the
loan rather than at maturity. As a result, there will be monthly
scheduled payments of principal and interest. In addition, there may be
unscheduled principal payments representing prepayments on the
underlying mortgages. Although mortgage-related securities may offer
yields higher than those available from other types of U.S. Government
securities, such securities may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because
of the prepayment feature. For instance, when interest rates decline,
the value of a mortgage-related security likely will not rise as much as
comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a mortgage-related security
originally purchased at a premium to decline in price to its par value,
which may result in a loss. The market value and interest yield of
these securities can vary due to market interest rate fluctuations and
early prepayments of underlying mortgages. Each Fund may invest in
Separately Traded Interest and Principal Securities ("STRIPs"), which
are component parts of U.S. Treasury securities traded through the
Federal Book-Entry System. Polynous will purchase only those STRIPs
that it determines are liquid or, if illiquid, do not violate the Fund's
investment policy concerning investments in illiquid securities. While
there is no limitation on the percentage of a Fund's assets that may be
comprised of STRIPs, Polynous will monitor the level of such holdings to
avoid the risk of impairing shareholders' redemption rights.
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.
The Fund may invest in repurchase agreements with foreign parties or a
repurchase agreement based on securities denominated in foreign
currencies. Legal structures in foreign countries, including bankruptcy
laws, may offer less protection to investors such as the Fund.
Furthermore, foreign repurchase agreements generally involve greater
risks than repurchase agreements made in the United States.
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 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 estate, 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 1/2 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
1/2 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.
Kevin L. Wenck, President, Polynous Capital Management, Inc. 88 Kearny
Street, Suite 1300, San Francisco, California 94108.
.
[ Additional Trustee information to be added]
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.
The calculation of the Fund's net asset values may not take place
contemporaneously with the determination of the prices of portfolio
securities held by the Fund. Events affecting the values of portfolio
securities that occur between the time their prices are determined and
the
close of the NYSE will not be reflected in the Fund's calculation of net
asset value unless the Board of Trustees deems that the particular event
would materially affect the net asset value, in which case an adjustment
will be made. Assets or liabilities initially expressed in terms of
foreign currencies are translated prior to the next determination of the
net asset value of the Fund's shares into U.S. dollars at the prevailing
market rates. The fair value of all other assets is added to the value
of
securities to arrive at the total assets.
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 -- (To be filed by
Amendment.)
(6) Underwriting Agreement -- (To be filed by
Amendment.)
(7) Bonus, Profit Sharing, Pension or Other Similar
Contracts -- None
(8) Custodian Agreements -- (To be filed by Amendment.)
(9) (a) Transfer Agent Services Agreement -- (To be
filed by Amendment.)
(b) Administration Agreement -- (To be filed by
Amendment.)
(c) Accounting Services Agreement -- (To be filed by
Amendment.)
(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 -- (To be
filed
by Amendment.)
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class D Shares -- (To be filed by
Amendment.)
(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 -- (To be filed by
Amendment.)
(19) Trustees' Powers of Attorney -- (To be filed by
Amendment.)
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 ADV (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 and President 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, 277 Park Avenue, 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 day of May, 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 /96
Kevin L. Wenck
/s/ As President
and /96
Principal Executive Officer
/s/ As Treasurer
and /96
Principal Accounting and
Financial Officer
POLYNOUS TRUST
TRUST INSTRUMENT
DATED APRIL 8, 1994
Principal Place of Business:
88 Kearny Street, Suite 1300
San Francisco, CA 94108
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - NAME AND DEFINITIONS . . . . . . . . . . . . . .1
Section 1.1 Name. . . . . . . . . . . . . . . . .1
Section 1.2 Definitions . . . . . . . . . . . . .1
ARTICLE II - BENEFICIAL INTEREST . . . . . . . . . . . . . .2
Section 2.1 Shares of Beneficial Interest . . . .2
Section 2.2 Issuance of Shares. . . . . . . . . .2
Section 2.3 Register of Shares and Share Certificates2
Section 2.4 Transfer of Shares. . . . . . . . . .3
Section 2.5 Treasury Shares . . . . . . . . . . .3
Section 2.6 Establishment of Series . . . . . . .3
Section 2.7 Investment in the Trust . . . . . . .4
Section 2.8 Assets and Liabilities of Series. . .4
Section 2.9 No Preemptive Rights. . . . . . . . .5
Section 2.10 Personal Liability of Shareholders. .5
Section 2.11 Assent to Trust Instrument. . . . . .5
ARTICLE III - THE TRUSTEES . . . . . . . . . . . . . . . . .5
Section 3.1 Management of the Trust . . . . . . .5
Section 3.2 Initial Trustee . . . . . . . . . . .6
Section 3.3 Term of Office of Trustees. . . . . .6
Section 3.4 Vacancies and Appointment of Trustees6
Section 3.5 Temporary Absence of Trustee. . . . .7
Section 3.6 Number of Trustees. . . . . . . . . .7
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee7
Section 3.8 Ownership of Assets of the Trust. . .7
ARTICLE IV - POWERS OF THE TRUSTEES. . . . . . . . . . . . .7
Section 4.1 Powers. . . . . . . . . . . . . . . .7
Section 4.2 Issuance and Repurchase of Shares . 10
Section 4.3 Trustees and Officers as Shareholders10
Section 4.4 Action by the Trustees and Committees10
Section 4.5 Chairman of the Trustees. . . . . . 11
Section 4.6 Principal Transactions. . . . . . . 11
ARTICLE V - EXPENSES OF THE TRUST. . . . . . . . . . . . . 11
Section 5.1 General . . . . . . . . . . . . . . 11
Section 5.2 Expenses of Series. . . . . . . . . 11
<PAGE>
ARTICLE VI - INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, ADMINISTRATOR
AND TRANSFER AGENT . . . . . . . . . . . . . . . . 12
Section 6.1 Investment Adviser. . . . . . . . . 12
Section 6.2 Principal Underwriter . . . . . . . 12
Section 6.3 Administrator . . . . . . . . . . . 12
Section 6.4 Transfer Agent. . . . . . . . . . . 12
Section 6.5 Parties to Contract . . . . . . . . 13
ARTICLE VII - SHAREHOLDERS' VOTING POWERS AND MEETINGS . . 13
Section 7.1 Voting Powers . . . . . . . . . . . 13
Section 7.2 Meetings. . . . . . . . . . . . . . 13
Section 7.3 Quorum and Required Vote. . . . . . 14
Section 7.4 Action by Written Consent . . . . . 14
ARTICLE VIII - CUSTODIAN . . . . . . . . . . . . . . . . . 14
Section 8.1 Appointment and Duties. . . . . . . 14
Section 8.2 Central Certificate System. . . . . 15
ARTICLE IX - DISTRIBUTIONS AND REDEMPTIONS . . . . . . . . 15
Section 9.1 Distributions . . . . . . . . . . . 15
Section 9.2 Redemptions . . . . . . . . . . . . 16
Section 9.3 Determination of Net Asset Value and
Valuation of Portfolio Assets. . . . . . 16
Section 9.4 Suspension of the Right of Redemption17
Section 9.5 Redemption of Shares in Order to Qualify as
Regulated Investment Company . . . . . . 17
ARTICLE X - LIMITATION OF LIABILITY AND INDEMNIFICATION. . 18
Section 10.1 Limitation of Liability . . . . . . 18
Section 10.2 Indemnification . . . . . . . . . . 18
Section 10.3 Shareholders. . . . . . . . . . . . 18
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . 19
Section 11.1 Trust Not a Partnership . . . . . . 19
Section 11.2 Trustees' Good Faith Action, Expert
Advice, No Bond or Surety. . . . . . . . 19
Section 11.3 Establishment of Record Dates . . . 19
Section 11.4 Termination of Trust or Series. . . 20
Section 11.5 Reorganization. . . . . . . . . . . 20
Section 11.6 Filing of Copies, References, Heading21
Section 11.7 Applicable Law. . . . . . . . . . . 21
Section 11.8 Amendments. . . . . . . . . . . . . 22
Section 11.9 Fiscal Year . . . . . . . . . . . . 22
Section 11.10 Use of Name "Matthews International Funds"22
Section 11.11 Provisions in Conflict with Law . . 22
<PAGE>
Polynous Trust
TRUST INSTRUMENT, made this 10th day of May, 1996 by Kevin Wenck
(the "Trustee").
WHEREAS, the Trustee desires to establish a business trust under the
Delaware Business Trust Act for the investment and reinvestment of funds
contributed thereto;
NOW, THEREFORE, the Trustee declares that all money and property
contributed to the trust hereunder shall be held and managed in trust
under this Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. The name of the trust created hereby is the
"Polynous Trust".
Section 1.2 Definitions. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) "By-laws" means the by-laws referred to in Article IV,
Section 4.1(e) hereof, as from time to time amended;
(b) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person" and "Principal Underwriter" shall have the meanings
given them in the 1940 Act. "Majority Shareholder Vote" shall have the
same meaning as the term "vote of a majority of the outstanding voting
securities" is given in the 1940 Act;
(c) "Net Asset Value" means the net asset value of each Series
of the Trust determined in the manner provided in Article IX, Section
9.3 hereof;
(d) "Outstanding Shares" means those Shares recorded from time
to time in the books of the Trust or its Transfer Agent as then issued
and outstanding, but shall not include Shares which have been redeemed
or repurchased by the Trust and which are at the time held in the
treasury of the Trust;
(e) "Series" means a series (or class) of Shares of the Trust
established in accordance with the provisions of Article II, Section 2.6
hereof;
(f) "Shareholder" means a record owner of Outstanding Shares
of the Trust;
(g) "Shares" means the equal proportionate transferable units
of beneficial interest into which the beneficial interest of each Series
of the Trust or class thereof shall be divided and may include fractions
of Shares as well as whole Shares;
(h) The "Trust" refers to "Polynous Trust" and
reference to the Trust, when applicable to one or more Series of the
Trust, shall refer to any such Series;
(i) The "Trustee" or "Trustees" means the person or persons
who has or have signed this Trust Instrument, so long as such person or
persons shall continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly qualified and
serving as Trustees in accordance with the provisions of Article III
hereof and reference herein to a Trustee or to the Trustees shall refer
to the individual Trustees in their capacity as Trustees hereunder;
(j) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the
account of one or more of the Trust or any Series, or the Trustees on
behalf of the Trust or any Series.
(k) The "1940 Act" refers to the Investment Company Act of
1940, as amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
Section 2.1 Shares of Beneficial Interest. The beneficial interest
in the Trust shall be divided into such transferable Shares of one or
more separate and distinct Series or classes of a Series as the Trustees
shall from time to time create and establish. The number of Shares of
each Series, and class thereof, authorized hereunder is unlimited. Each
Share shall have a par value of $0.001. All Shares issued hereunder,
including, without limitation, Shares issued in connection with a
dividend in Shares or a split or reverse split of Shares, shall be fully
paid and nonassessable.
Section 2.2 Issuance of Shares. The Trustees in their discretion
may, from time to time, without vote of the Shareholders, issue Shares
to such party or parties and for such amount and type of consideration,
subject to applicable law, including cash or securities (including
Shares of a different Series), at such time or times and on such terms
as the Trustees may deem appropriate, and may in such manner acquire
other assets (including the acquisitions of assets subject to, and in
connection with, the assumption of liabilities). In connection with any
issuance of Shares, the Trustees may issue fractional Shares and Shares
held in the treasury. The Trustees may from time to time divide or
combine the Shares of any Series or class into a greater or lesser
number without thereby changing the proportionate beneficial interests
in the Trust.
Section 2.3 Register of Shares and Share Certificates. A register
shall be kept at the principal office of the Trust or an office of the
Trust's transfer agent which shall contain the names and addresses of
the Shareholders of each Series, the number of Shares of that Series (or
any class or classes thereof) held by them respectively and a record of
all transfers thereof. As to Shares for which no certificate has been
issued, such register shall be conclusive as to who are the holders of
the Shares and who shall be entitled to receive dividends or other
distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or other distribution, nor to have notice given to him as
herein or in the By-laws provided, until he has given his address to the
transfer agent or such other officer or agent of the Trustees as shall
keep the said register for entry thereon. The Trustees, in their
discretion, may authorize the issuance of share certificates and
promulgate appropriate rules and regulations as to their use. In the
event that one or more certificates are issued, whether in the name of a
shareholder or a nominee, such certificate or certificates shall
constitute evidence of ownership of Shares for all purposes, including
transfer, assignment or sale of such Shares, subject to such limitations
as the Trustees may, in their discretion, prescribe.
Section 2.4 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only
by the record holder thereof or by his agent thereunto duly authorized
in writing, upon delivery to the Trustees or the Trust's transfer agent
of a duly executed instrument of transfer, together with a Share
certificate, if one is outstanding, and such evidence of the genuineness
of each such execution and authorization and of such other matters as
may be required by the Trustees. Upon such delivery the transfer shall
be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares
for all purposes hereunder and neither the Trustees nor the Trust, nor
any transfer agent or registrar nor any officer, employee or agent of
the Trust shall be affected by any notice of the proposed transfer.
Section 2.5 Treasury Shares. Shares held in the treasury shall,
until reissued pursuant to Section 2.2 hereof, not confer any voting
rights on the Trustees, nor shall such Shares be entitled to any
dividends or other distributions declared with respect to the Shares.
Section 2.6 Establishment of Series. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with
any such Series shall be held and accounted for separately from the
assets of the Trust or any other Series. The Trustees shall have full
power and authority, in their sole discretion, and without obtaining any
prior authorization or vote of the Shareholders of any Series of the
Trust, to establish and designate and to change in any manner any such
Series of Shares or any classes of initial or additional Series and to
fix such preferences, voting powers, rights and privileges of such
Series or classes thereof as the Trustees may from time to time
determine, to divide or combine the Shares or any Series or classes
thereof into a greater or lesser number, to classify or reclassify any
issued Shares or any Series or classes thereof into one or more Series
or classes of Shares, and to take such other action with respect to the
Shares as the Trustees may deem desirable. The establishment and
designation of any Series shall be effective upon the adoption of a
resolution by the Trustees setting forth such establishment and
designation and the relative rights and preferences of the Shares of
such Series. A Series may issue any number of Shares and need not issue
shares.
All references to Shares in this Trust Instrument shall be deemed to
be Shares of any or all Series, or classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally
to each Series of the Trust, and each class thereof, except as the
context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series. Each holder of
Shares of a Series shall be entitled to receive distributions of income
and capital gains, if any, which are made with respect to such Series
and which are attributable to such Shares. Upon redemption of Shares,
such Shareholder shall be paid solely out of the funds and property of
such Series of the Trust.
Section 2.7 Investment in the Trust. The Trustees shall accept
investments in any Series of the Trust from such persons and on such
terms as they may from time to time authorize. At the Trustees'
discretion, such investments, subject to applicable law, may be in the
form of cash or securities in which the affected Series is authorized to
invest, valued as provided in Article IX, Section 9.3 hereof.
Investments in a Series shall be credited to each Shareholder's account
in the form of full or fractional Shares at the Net Asset Value per
Share next determined after the investment is received; provided,
however, that the Trustees may, in their sole discretion, (a) fix the
Net Asset Value per Share of the initial capital contribution, or (b)
impose sales or other charges upon investments in the Trust.
Section 2.8 Assets and Liabilities of Series. All consideration
received by the Trust for the issue or sale of Shares of a particular
Series, together with all assets in which such consideration is invested
or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held and
accounted for separately from the other assets of the Trust and of every
other Series and may be referred to herein as "assets belonging to" that
Series. The assets belonging to a particular Series shall belong to that
Series for all purposes, and to no other Series, subject only to the
rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect
thereto, which are not readily identifiable as belonging to any
particular Series shall be allocated by the Trustees between and among
one or more of the Series in such manner as the Trustees, in their sole
discretion, deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series for all
purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to
that Series. The assets belonging to a particular Series shall be so
recorded upon the books of the Trust, and shall be held by the Trustees
in trust for the benefit of the holders of Shares of that Series. The
assets belonging to each particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged by the
Trustees between or among any one or more of the Series in such manner
as the Trustees in their sole discretion deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing
provisions of this Section 2.8, but subject to the right of the Trustees
in their discretion to allocate general liabilities, expenses, costs,
charges or reserves as herein provided, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of the Trust
generally. Notice of this contractual limitation on inter-Series
liabilities shall be set forth in the certificate of trust of the Trust
(whether originally or by amendment) as filed or to be filed in the
Office of the Secretary of State of the State of Delaware pursuant to
the Delaware Business Trust Act (the "Act"), and upon the giving of such
notice in the certificate of trust, the statutory provisions of the
Delaware Business Trust Act relating to limitations on inter-Series
liabilities (and the statutory effect under the Act of setting forth
such notice in the certificate of trust) shall become applicable to the
Trust and each Series. Any person extending credit to, contracting with
or having any claim against any Series may satisfy or enforce any debt,
liability, obligation or expense incurred, contracted for or otherwise
existing with respect to that Series from the assets of that Series
only. No Shareholder or former Shareholder of any Series shall have a
claim on or any right to any assets allocated or belonging to any other
Series.
Section 2.9 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or
other Series.
Section 2.10 Personal Liability of Shareholders. Each Shareholder of
the Trust and of each Series shall not be personally liable for the
debts, liabilities, obligations and expenses incurred by, contracted
for, or otherwise existing with respect to, the Trust or by or on behalf
of any Series. The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares
or otherwise. Every note, bond, contract or other undertaking issued by
or on behalf of the Trust or the Trustees relating to the Trust or to a
Series shall include a recitation limiting the obligation represented
thereby to the Trust or to one or more Series and its or their assets
(but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
Section 2.11 Assent to Trust Instrument. Every Shareholder, by
virtue of having purchased or otherwise acquired a Share, shall become a
Shareholder and shall be held to have expressly assented and agreed to
be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
Section 3.1 Management of the Trust. The Trustees shall have
exclusive and absolute control over the Trust Property and over the
business of the Trust to the same extent as if the Trustees were the
sole owners of the Trust Property and business in their own right, but
with such powers of delegation as may be permitted by this Trust Instr
ument. The Trustees shall have power to conduct the business of the
Trust and
carry on its operations in any and all of its branches and maintain
offices both within and without the State of Delaware, in any and all
states of the United States of America, in the District of Columbia, in
any and all commonwealths, territories, dependencies, colonies, or
possessions of the United States of America, and in any foreign
jurisdiction and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Trust Instrument, the presumption
shall
be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the
Trustees may be exercised without order of or resort to any court.
Except for the Trustee named herein or Trustees appointed to fill
vacancies pursuant to Section 3.4 of this Article III, the Trustees
shall
be elected by the Shareholders owning of record a plurality of the
Shares
voting at a meeting of Shareholders.
Section 3.2 Initial Trustee. The initial Trustee shall be the person
named herein.
Section 3.3 Term of Office of Trustees. The Trustees shall hold
office during the existence of this Trust, and until its termination as
herein provided; except (a) that any Trustee may resign his trust by
written instrument signed by him and delivered to the Chairman,
President,
Secretary, or other Trustees of the Trust, which shall take effect upon
such delivery or upon such later date as is specified therein; (b) that
any Trustee may be removed at any time by written instrument, signed by
at
least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (c) that
any
Trustee who requests in writing to be retired or who has died, become
physically or mentally incapacitated by reason of disease or otherwise,
or
is otherwise unable to serve, may be retired by written instrument
signed
by a majority of the other Trustees, specifying the date of his
retirement; and (d) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least
two-thirds of the outstanding Shares.
Section 3.4 Vacancies and Appointment of Trustees. In case of the
declination to serve, death, resignation, retirement, removal, physical
or
mental incapacity by reason of disease or otherwise of a Trustee, or a
Trustee is otherwise unable to serve, or an increase in the number of
Trustees, a vacancy shall occur. Whenever a vacancy in the Board of
Trustees shall occur, until such vacancy is filled, the other Trustees
shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing
such
other person as they in their discretion shall see fit consistent with
the
limitations under the 1940 Act.
An appointment of a Trustee may be made by the Trustees then in
office in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in number of Trustees effective at a later date,
provided that said appointment shall become effective only at or after
the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee appointed pursuant to this Section 3.4
shall have accepted this trust, he shall be deemed a Trustee hereunder.
Section 3.5 Temporary Absence of Trustee. Any Trustee may, by power
of attorney, delegate his power for a period not exceeding six months at
any one time to any other Trustee or Trustees, provided that in no case
shall less than two Trustees personally exercise the other powers
hereunder except as herein otherwise expressly provided.
Section 3.6 Number of Trustees. The number of Trustees shall be one,
or such other number as shall be fixed from time to time by the
Trustees.
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee. The
declination to serve, death, resignation, retirement, removal,
incapacity,
or inability of the Trustees, or any one of them, shall not operate to
terminate the Trust or to revoke any existing agency created pursuant to
the terms of this Trust Instrument.
Section 3.8 Ownership of Assets of the Trust. Legal title in and
beneficial ownership of all of the assets of the Trust shall at all
times
be considered as vested in the Trust, except that the Trustees may cause
legal title in and beneficial ownership of any Trust Property to be held
by, or in the name of one or more of the Trustees acting for and on
behalf
of the Trust, or in the name of any person as nominee acting for and on
behalf of the Trust. No Shareholder shall be deemed to have a severable
ownership interest in any individual asset of the Trust or of any Series
or any right of partition or possession thereof, but each Shareholder
shall have, except as otherwise provided for herein, a proportionate
undivided beneficial interest in the Trust or Series. The Shares shall
be
personal property giving only the rights specifically set forth in this
Trust Instrument. The Trust, or at the determination of the Trustees one
or more of the Trustees or a nominee acting for and on behalf of the
Trust, shall be deemed to hold legal title and beneficial ownership of
any
income earned on securities of the Trust issued by any business entities
formed, organized, or existing under the laws of any jurisdiction,
including the laws of any foreign country.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.1 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do any
and all acts and to make and execute any and all contracts and
instruments
that they may consider necessary or appropriate in connection with the
management of the Trust. The Trustees shall have full authority and
power
to make any and all investments which they, in their sole discretion,
shall deem proper to accomplish the purpose of this Trust. Subject to
any
applicable limitation in this Trust Instrument, the Trustees shall have
power and authority:
(a) To invest and reinvest cash and other property, and to
hold cash or other property uninvested, and to sell, exchange, lend,
pledge, mortgage, hypothecate, write options on and lease any or all of
the assets of the Trust;
(b) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the
conduct of such business;
(c) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property; to
endorse, guarantee, or undertake the performance of an obligation or
engagement of any other person and to lend Trust Property;
(d) To provide for the distribution of interests of the Trust
either through a Principal Underwriter in the manner hereinafter
provided
for or by the Trust itself, or both, or otherwise pursuant to a plan of
distribution of any kind;
(e) To adopt By-laws not inconsistent with this Trust
Instrument providing for the conduct of the business of the Trust and to
amend and repeal them to the extent that they do not reserve that right
to
the Shareholders, which By-laws shall be deemed a part of this Trust
Instrument and are incorporated herein by reference;
(f) To elect and remove such officers and appoint and
terminate such agents as they consider appropriate;
(g) To appoint custodians of any assets of the Trust, subject
to the 1940 Act and to any conditions set forth in this Trust
Instrument;
(h) To retain one or more transfer agents and shareholder
servicing agents, or both;
(i) To set record dates in the manner provided herein or in
the By-laws;
(j) To delegate such authority (which delegation may include
the power to subdelegate) as they consider desirable to any officers of
the Trust and to any investment adviser, manager, administrator,
custodian, underwriter or other agent or independent contractor;
(k) To purchase and pay for entirely out of Trust Property
such insurance as they may deem necessary or appropriate for the conduct
of the business of the Trust, including insurance policies insuring the
Trust Property and payment of distributions and principal on its
investments, and insurance policies insuring the Shareholders, Trustees,
officers, representatives, employees, agents, investment advisers,
managers, administrators, custodians, underwriters, or independent
contractors of the Trust individually against all claims and liabilities
of every nature arising by reason of holding, being or having held any
such office or position, or by reason of any action alleged to have been
taken or omitted by any such person in such capacity, including any
action
taken or omitted that may be determined to constitute negligence,
whether
or not the Trust would have the power to indemnify such person against
such liability.
(l) To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XI, Section 11.4(b) hereof;
(m) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to
execute and deliver powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(n) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(o) To hold any security or property in a form not indicating
any trust, whether in bearer, book entry, unregistered or other
negotiable
form; or either in the name of the Trust or in the name of a custodian
or
a nominee or nominees;
(p) To establish separate and distinct Series with separately
defined investment objectives and policies and distinct investment
purposes in accordance with the provisions of Article II hereof and to
establish classes of such Series having relative rights, powers and
duties
as they may provide consistent with applicable law;
(q) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern,
any
security of which is held in the Trust; to consent to any contract,
lease,
mortgage, purchase, or sale of property by such corporation or concern,
and to pay calls or subscriptions with respect to any security held in
the
Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including,
but
not limited to, claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to
require the redemption of the Shares of any Shareholders whose
investment
is less than such minimum upon giving notice to such Shareholder;
(u) To establish one or more committees composed of one or
more of the Trustees, and to delegate any of the powers of the Trustees
to
said committees, subject to the provisions of the 1940 Act;
(v) To interpret the investment policies, practices or
limitations of any Series;
(w) To establish a registered office and have a registered
agent in the state of Delaware; and
(x) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any purpose or
the
attainment of any object or the furtherance of any power hereinbefore
set
forth, either alone or in association with others, and to do every other
act or thing incidental or appurtenant to or growing out of or connected
with the aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees. Any
action by one or more of the Trustees in their capacity as such
hereunder
shall be deemed an action on behalf of the Trust or the applicable
Series,
and not an action in an individual capacity.
No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to
the application of any payments made or property transferred to the
Trustees or upon their order.
Section 4.2 Issuance and Repurchase of Shares. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, exchange, and otherwise deal
in Shares and, subject to the provisions set forth in Article II and
Article IX, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the
Trust,
or the particular Series of the Trust, with respect to which such Shares
are issued.
Section 4.3 Trustees and Officers as Shareholders. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of
Shares
to the same extent as if such person were not a Trustee, officer or
agent;
and the Trustees may issue and sell or cause to be issued and sold
Shares
to and buy such Shares from any such person or any firm or company in
which such person is interested, subject to the general limitations
herein
contained as to the sale and purchase of such Shares.
Section 4.4 Action by the Trustees and Committees. The Trustees (and
any committee thereof) may act at a meeting held in person or in whole
or
in part by conference telephone equipment or other communications
technology. One-third, but (except at such times as there is only one
Trustee) no less than two, of the Trustees shall constitute a quorum at
any meeting. Except as the Trustees may otherwise determine, one-third
of
the members of any committee shall constitute a quorum at any meeting.
The
vote of a majority of the Trustees (or committee members) present at a
meeting at which a quorum is present shall be the act of the Trustees
(or
any committee thereof). The Trustees (and any committee thereof) may
also
act by written consent signed by a majority of the Trustees (or
committee
members). Regular meetings of the Trustees may be held at such places
and
at such times as the Trustees may from time to time determine. Special
meetings of the Trustees (and meetings of any committee thereof) may be
called orally or in writing by the Chairman of the Board of Trustees (or
the chairman of any committee thereof) or by any two other Trustees.
Notice of the time, date and place of all meetings of the Trustees (or
any
committee thereof) shall be given by the party calling the meeting to
each
Trustee (or committee member) by telephone, telefax, or telegram sent to
the person's home or business address at least twenty-four hours in
advance of the meeting or by written notice mailed to the person's home
or
business address at least seventy-two hours in advance of the meeting.
Notice of all proposed written consents of Trustees (or committees
thereof) shall be given to each Trustee (or committee member) by
telephone, telefax, telegram, or first class mail sent to the person's
home or business address. Notice need not be given to any person who
attends a meeting without objecting to the lack of notice or who
executes
a written consent or a written waiver of notice with respect to a
meeting.
Written consents or waivers may be executed in one or more counterparts.
Execution of a written consent or waiver and delivery thereof may be
accomplished by telefax.
Section 4.5 Chairman of the Trustees. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman
shall preside at all meetings of the Trustees at which he is present and
may be (but is not required to be) the chief executive officer of the
Trust.
Section 4.6 Principal Transactions. Except to the extent prohibited
by applicable law, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the
Trust
to, any Trustee or officer of the Trust or any firm of which any such
Trustee or officer is a member acting as principal, or have any such
dealings with any investment adviser, distributor or transfer agent for
the Trust or with any Interested Person of such person; and the Trust
may
employ any such person, or firm or company in which such person is an
Interested Person, as broker, legal counsel, registrar, investment
adviser, distributor, transfer agent, dividend disbursing agent,
custodian
or in any other capacity upon customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Section 5.1 General. The Trustees shall have the power to incur and
pay or be reimbursed from the assets of the Trust or the assets of the
appropriate Series any expenses which in the opinion of the Trustees are
necessary or incidental to carry out any of the purposes of the Trust or
such Series, and to pay reasonable compensation from the funds of the
Trust to themselves as Trustees. The Trustees shall fix the compensation
of all officers, employees and Trustees, and shall be reimbursed from
the
assets of the Trust or the assets of the appropriate Series for expenses
reasonably incurred by themselves on behalf of the Trust.
Section 5.2 Expenses of Series. The Trustees shall have the power to
allocate and charge all expenses which are not readily identifiable as
belonging to any particular Series between or among any one or more of
the
Series as set forth in Article II, Section 2.8 of this Trust Instrument.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, ADMINISTRATOR
AND TRANSFER AGENT
Section 6.1 Investment Adviser. The Trustees may in their
discretion, from time to time, enter into an investment advisory or
management contract or contracts with respect to the Trust or any Series
whereby the other party or parties to such contract or contracts shall
undertake to furnish the Trust with such management, investment
advisory,
statistical and research facilities and services and such other
facilities
and services, if any, and all upon such terms and conditions, as the
Trustees may in their discretion determine; provided, however, that the
initial approval and entering into of such contract or contracts shall
be
subject to a Majority Shareholder Vote. Notwithstanding any other
provision of this Trust Instrument, the Trustees may authorize any
investment adviser (subject to such general or specific instructions as
the Trustees may from time to time adopt) to effect purchases, sales or
exchanges of portfolio securities, other investment instruments of the
Trust, or other Trust Property on behalf of the Trustees, or may
authorize
any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all
without further action by the Trustees). Any such purchases, sales and
exchanges shall be deemed to have been authorized by the Trustees.
The Trustees may authorize, subject to applicable requirements of
the 1940 Act, the investment adviser to employ, from time to time, one
or
more sub-advisers to perform such of the acts and services of the
investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and sub-adviser. Any reference in
this
Trust Instrument to the investment adviser shall be deemed to include
such
sub-advisers, unless the context otherwise requires.
Section 6.2 Principal Underwriter. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares,
whereby the Trust may either agree to sell Shares to the other party to
the contract or appoint such other party its sales agent for such
Shares.
In either case, the contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
Section 6.3 Administrator. The Trustees may in their discretion from
time to time enter into one or more contracts whereby the other party or
parties shall undertake to furnish the Trust with administrative
services.
The contract or contracts shall be on such terms and conditions as the
Trustees may in their discretion determine.
Section 6.4 Transfer Agent. The Trustees may in their discretion
from time to time enter into one or more transfer agency and Shareholder
service contracts whereby the other party or parties shall undertake to
furnish the Trustees with transfer agency and Shareholder services. The
contract or contracts shall be on such terms and conditions as the
Trustees may in their discretion determine.
Section 6.5 Parties to Contract. Any contract described in this
Article VI or any contract described in Article VIII hereof may be
entered
into with any corporation, firm, partnership, trust or association,
although one or more of the Trustees or officers of the Trust may be an
officer, director, trustee, shareholder, or member of such other party
to
the contract, and no such contract shall be invalidated or rendered void
or voidable by reason of the existence of any relationship, nor shall
any
person holding such relationship be disqualified from voting on or
executing the same in his capacity as Shareholder and/or Trustee, nor
shall any person holding such relationship be liable merely by reason of
such relationship for any loss or expense to the Trust under or by
reason
of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
not
inconsistent with the provisions of this Article VI or Article VIII
hereof. The same person (including a firm, corporation, partnership,
trust, or association) may be the other party to contracts entered into
pursuant to this Article VI or pursuant to Article VIII hereof, and any
individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the contracts mentioned in this
Section 6.<PAGE>
5.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article III,
Section
3.1 hereof, (ii) for the removal of Trustees as provided in Article III,
Section 3.3(d) hereof, and (iii) with respect to such additional matters
relating to the Trust as may be required by law, by this Trust
Instrument,
or as the Trustees may consider desirable. On any matter submitted to a
vote of the Shareholders, all Shares shall be voted separately by
individual Series, except (i) when required by the 1940 Act, Shares
shall
be voted in the aggregate and not by individual Series; and (ii) when
the
Trustees have determined that the matter affects the interests of more
than one Series, then the Shareholders of all such Series shall be
entitled to vote thereon. The Trustees may also determine that a matter
affects only the interests of one or more classes of a Series, in which
case any such matter shall be voted on by such class or classes. Each
whole Share shall be entitled to one vote as to any matter on which it
is
entitled to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in
the
election of Trustees. Shares may be voted in person or by proxy or in
any
manner provided for in the By-laws. A proxy may be given in writing, by
telefax, or in any other manner provided for in the By-laws. Anything in
this Trust Instrument to the contrary notwithstanding, in the event a
proposal by anyone other than the officers or Trustees of the Trust is
submitted to a vote of the Shareholders of one or more Series or of the
Trust, or in the event of any proxy contest or proxy solicitation or
proposal in opposition to any proposal by the officers or Trustees of
the
Trust, Shares may be voted only in person or by written proxy. Until
Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Trust
Instrument or any of the By-laws of the Trust to be taken by
Shareholders.
Section 7.2 Meetings. Meetings of Shareholders may be held within or
without the State of Delaware. Special meetings of the Shareholders of
any
Series may be called by the Trustees and shall be called by the Trustees
upon the written request of Shareholders owning at least one-tenth of
the
Outstanding Shares entitled to vote. Whenever ten or more Shareholders
meeting the qualifications set forth in Section 16(c) of the 1940 Act
seek
the opportunity of furnishing materials to the other Shareholders with a
view to obtaining signatures on such a request for a meeting, the
Trustees
shall comply with the provisions of said Section 16(c) with respect to
providing such Shareholders access to the list of the Shareholders of
record of the Trust or the mailing of such materials to such
Shareholders
of record, subject to any rights provided to the Trust or any Trustees
provided by said Section 16(c). Notice shall be sent, by mail or such
other means determined by the Trustees, at least 15 days prior to any
such
meeting.
Section 7.3 Quorum and Required Vote. One-third of Shares entitled
to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting, except that where any provision of
law or of this Trust Instrument permits or requires that holders of any
Series shall vote as a Series (or that holders of a class shall vote as
a
class), then one-third of the aggregate number of Shares of that Series
(or that class) entitled to vote shall be necessary to constitute a
quorum
for the transaction of business by that Series (or that class). Any
lesser
number shall be sufficient for adjournments. Any adjourned session or
sessions may be held without the necessity of further notice. Except
when
a larger vote is required by law or by any provision of this Trust
Instrument, a majority of the Shares voted in person or by proxy shall
decide any questions and a plurality shall elect a Trustee, provided
that
where any provision of law or of this Trust Instrument permits or
requires
that the holders of any Series shall vote as a Series (or that the
holders
of any class shall vote as a class), then a majority of the Shares
present
in person or by proxy of that Series or, if required by law, a Majority
Shareholder Vote of that Series (or class), voted on the matter in
person
or by proxy shall decide that matter insofar as that Series (or class)
is
concerned.
Section 7.4 Action by Written Consent. Any action which may be taken
by the Shareholders of the Trust or of a Series may be taken without a
meeting if Shareholders holding more than a majority of the Shares
entitled to vote, except when a larger vote is required by law or by any
provision of this Trust Instrument, shall consent to the action in
writing. If the consents of all Shareholders entitled to vote have not
been solicited in writing and if the unanimous written consent of all
such
Shareholders shall not have been received, the Secretary shall give
prompt
notice to all Shareholders of actions approved by the Shareholders
without
a meeting.
ARTICLE VIII
CUSTODIAN
Section 8.1 Appointment and Duties. The Trustees shall at all times
employ a bank, a company that is a member of a national securities
exchange, or a trust company, each having capital, surplus and undivided
profits of at least two million dollars ($2,000,000) as custodian with
authority as its agent:
(1) to hold the securities owned by the Trust and deliver the same
upon written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct; and
(3) to disburse such funds upon orders or vouchers; and the Trust
may also employ such custodian as its agent:
(4) to keep the books and accounts of the Trust or of any Series or
class and furnish clerical and accounting services; and
(5) to compute, if authorized to do so by the Trustees, the Net
Asset Value of any Series, or class thereof, in accordance with the
provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian.
In accordance with the 1940 Act, the Trustees may also authorize the
custodian to employ one or more sub-custodians from time to time to
perform such of the acts and services of the custodian, and upon such
terms and conditions, as may be agreed upon between the custodian and
such
sub-custodian and approved by the Trustees.
Section 8.2 Central Certificate System. Subject to the 1940 Act, the
Trustees may direct the custodian to deposit all or any part of the
securities owned by the Trust in a system for the central handling of
securities established by a national securities exchange or a national
securities association, pursuant to which system all securities of any
particular class or series of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping
entry
without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the Trust
or its custodians, subcustodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
Section 9.1 Distributions.
(a) The Trustees may from time to time declare and pay
dividends or other distributions with respect to any Series, or class
thereof. The amount of such dividends or distributions and the payment
of
them and whether they are in cash or any other Trust property shall be
wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to
the Shareholders of record at the time of declaring a dividend or other
distribution or among the Shareholders of record at such other date or
time or dates or times as the Trustees shall determine, which dividends
or
distributions, at the election of the Trustees, may be paid pursuant to
a
standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine. All dividends and other
distributions on Shares of a particular Series shall be distributed pro
rata to the Shareholders of that Series in proportion to the number of
Shares of that Series they held on the record date established for such
payment, except that such dividends and distributions shall reflect
expenses allocated to a particular class of such Series. The Trustees
may
adopt and offer to Shareholders such dividend reinvestment plans, cash
dividend payout plans or related plans as the Trustees shall deem
appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a
stock dividend pro rata among the Shareholders of a particular Series,
or
class thereof, as of the record date of that Series fixed as provided in
Section (b) hereof.
Section 9.2 Redemptions. In case any holder of record of Shares of
a particular Series desired to dispose of his Shares or any portion
thereof, he may deposit at the office of the transfer agent or other
authorized agent of that Series a written request or such other form of
request as the Trustees may from time to time authorize, requesting that
the Series purchase the Shares in accordance with this Section 9.2; and
the Shareholder so requesting shall be entitled to require the Series to
purchase, and the Series or the Principal Underwriter of the Series
shall
purchase his said Shares, but only at the Net Asset Value thereof (as
described in Section 9.3 of this Article IX). The Series shall make
payment for any such Shares to be redeemed, as aforesaid, in cash or
property from the assets of that Series and payment for such Shares
shall
be made by the Series or the Principal Underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which
the
request is effective. Upon redemption, shares shall become Treasury
shares
and may be re-issued from time to time.
Section 9.3 Determination of Net Asset Value and Valuation of
Portfolio Assets. The term "Net Asset Value" of any Series shall mean
that
amount of which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall
be
determined separately for each Series and shall be determined on such
days
and at such times as the Trustees may determine. Such determination
shall
be made with respect to securities for which market quotations are
readily
available, at the market value of such securities; and with respect to
other securities and assets, at the fair value as determined in good
faith
by the Trustees; provided, however, that the Trustees, without
Shareholder
approval, may alter the method of valuing portfolio securities
consistent
with the 1940 Act. The Trustees may delegate any of their powers and
duties under this Section 9.3 with respect to valuation of assets and
liabilities. The resulting amount, which shall represent the total Net
Asset Value of the particular Series, shall be divided by the total
number
of shares of that Series outstanding at the time and the quotient so
obtained shall be the Net Asset Value per Share of that Series. At any
time the Trustees may cause the Net Asset Value per Share last
determined
to be determined again in similar manner and may fix the time when such
redetermined value shall become effective. If, for any reason, the net
income of any Series, determined at any time, is a negative amount, the
Trustees shall have the power with respect to that Series (i) to offset
each Shareholder's pro rata share of such negative amount from the
accrued
dividend account of such Shareholder, or (ii) to reduce the number of
Outstanding Shares of such Series by reducing the number of Shares in
the
amount of each Shareholder by a pro rata portion of that number of full
and fractional Shares which represents the amount of such excess
negative
net income, or (iii) to cause to be recorded on the books of such Series
an asset account in the amount of such negative net income (provided
that
the same shall thereupon become the property of such Series and shall
not
be paid to any Shareholder), which account may be reduced by the amount,
of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such
asset account is reduced to zero; (iv) to combine the methods described
in
clauses (i) and (ii) and (iii) of this sentence; or (v) to take any
other
action they deem appropriate, in order to cause (or in order to assist
in
causing) the Net Asset Value per Share of such Series to remain at a
constant amount per Outstanding Share immediately after each such
determination and declaration. The Trustees shall also have the power
not
to declare a dividend out of net income for the purpose of causing the
Net
Asset Value per Share to be increased. The Trustees shall not be
required
to adopt, but may at any time adopt, discontinue or amend the practice
of
maintaining the Net Asset Value per Share of the Series at a constant
amount.
Section 9.4 Suspension of the Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date of
payment as permitted under the 1940 Act. Such suspension shall take
effect
at such time as the Trustees shall specify but not later than the close
of
business on the business day next following the declaration of
suspension,
and thereafter there shall be no right of redemption or payment until
the
Trustees shall declare the suspension at an end. In the case of a
suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the Net Asset
Value
per Share next determined after the termination of the suspension. In
the
event that any Series is divided into classes, the provisions of this
Section 9.4, to the extent applicable as determined in the discretion of
the Trustees and consistent with applicable law, may be equally applied
to
each such class.
Section 9.5 Redemption of Shares in Order to Qualify as Regulated
Investment Company. If the Trustees shall be of the opinion that direct
or
indirect ownership of Shares of any Series has or may become
concentrated
in any Person to an extent which would disqualify any Series as a
regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation) by lot or other
means deemed equitable by them (i) to call for redemption by any such
person of a number, or principal amount, of Shares sufficient to
maintain
or bring the direct or indirect ownership of Shares into conformity with
the requirements for such qualification and (ii) to refuse to transfer
or
issue Shares to any person whose acquisition of the Shares in question
would result in such disqualification. The redemption shall be effected
at
the redemption price and in the manner provided in this Article IX. The
holders of Shares shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the provisions of the
Internal Revenue Code, or to comply with the requirements of any other
taxing authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.1 Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the
Trust or a beneficial owner for any act, omission or obligation of the
Trust or any Trustee. A Trustee shall not be liable for any act or
omission in his capacity as Trustee, or for any act or omission of any
officer or employee of the Trust or of any other person or party,
provided
that nothing contained herein or in the Delaware Business Trust Act
shall
protect any Trustee against any liability to the Trust or to
Shareholders
to which he would otherwise be subject by reason willful misfeasance,
bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee hereunder.
Section 10.2 Indemnification. The Trust shall indemnify each of its
Trustees against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him in connection with the defense
or
disposition of any action, suit or other proceeding, whether civil or
criminal, in which he may be involved or with which he may be
threatened,
while as a Trustee or thereafter, by reason of his being or having been
such a Trustee except with respect to any matter as to which he shall
have
been adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties, provided that as to any
matter disposed of by a compromise payment by such person, pursuant to a
consent decree or otherwise, no indemnification either for said payment
or
for any other expenses shall be provided unless the Trust shall have
received a written opinion from independent legal counsel approved by
the
Trustees to the effect that if either the matter of willful misfeasance,
gross negligence or reckless disregard of duty, or the matter of bad
faith
had been adjudicated, it would in the opinion of such counsel have been
adjudicated in favor of such person. The rights accruing to any person
under these provisions shall not exclude any other right to which he may
be lawfully entitled, provided that no person may satisfy any right of
indemnity or reimbursement hereunder except out of the property of the
Trust. The Trustees may authorize advance payments in connection with
the
indemnification under this Section 10.2, provided that the indemnified
person shall have given a written undertaking to reimburse the Trust in
the event it is subsequently determined that he is not entitled to such
indemnification.
The Trust shall indemnify officers, and shall have the power to
indemnify representatives and employees of the Trust, to the same extent
that Trustees are entitled to indemnification pursuant to this Section
10.2.
Section 10.3 Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally liable solely
by
reason of his being or having been a Shareholder of such Series and not
because of his acts or omissions or for some other reason, the
Shareholder
or former Shareholder (or his heirs, executors, administrators or other
legal representatives, or, in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled out of the
assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability.
The
Trust, on behalf of the affected Series, shall, upon request by the
Shareholder, assume the defense of any claim made against the
Shareholder
for any act or obligation of the Series and satisfy any judgment thereon
from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Trust Not a Partnership. It is hereby expressly
declared that a trust and not a partnership is created hereby. No
Trustee
hereunder shall have any power to bind personally either the Trust's
officers or any Shareholder. All persons extending credit to,
contracting
with or having any claim against the Trust or the Trustees may satisfy
or
enforce any debt, liability, obligation or expense incurred, contracted
for or otherwise existing with respect to the Trust from the assets of
the
Trust only; and neither the Shareholders nor the Trustees, nor any of
their agents, whether past, present or future, shall be personally
liable
therefor.
Section 11.2 Trustees' Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances
then prevailing shall be binding upon everyone interested. Subject to
the
provisions of Article X hereof, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and
operation of this Trust Instrument, and subject to the provisions of
Article X hereof, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any surety
if
a bond is obtained.
Section 11.3 Establishment of Record Dates. The Trustees may close
the Share transfer books of the Trust for a period not exceeding ninety
(90) days preceding the date of any meeting of Shareholders, or the date
for the payment of any dividends or other distributors, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of Shares shall go into effect; or in lieu of closing the stock
transfer books as aforesaid, the Trustees may fix in advance a date, not
exceeding ninety (90) days preceding the date of any meeting of
Shareholders, or the date for payment of any dividend or other
distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall into effect, as a
record date for the determination of the Shareholders entitled to notice
of, and to vote at, any such meeting, or entitled to receive payment of
any such dividend or other distribution, or to any such allotment of
rights, or to exercise the rights in respect of any such change,
conversion or exchange of Shares, and in such case such Shareholders and
only such Shareholders as shall be Shareholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such meeting,
or to receive payment of such dividend or other distribution, or to
receive such allotment or rights, or to exercise such rights, as the
case
may be, notwithstanding any transfer of any Shares on the books of the
Trust after any such record date fixed as aforesaid.
Section 11.4 Termination of Trust or Series.
(a) This Trust shall continue without limitation of time but
subject to the provisions of sub-section (b) of this Section 11.4.
(b) The Trustees may
(i) sell and convey all or substantially all of
the assets of the Trust or any Series to another trust,
partnership, association or corporation, or to a separate
series of shares thereof, organized under the laws of any
state, for adequate consideration which may include the
assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust or any
Series, and which may include shares of beneficial interest,
stock or other ownership interests of such trust, partnership,
association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the
assets of the Trust or any Series.
Upon making reasonable provision, in the determination of the
Trustees, for the payment of all such liabilities in either (i) or (ii),
by such assumption or otherwise, the Trustees shall distribute the
remaining proceeds or assets (as the case may be) of each Series (or
class) ratably among the holders of Shares of that Series then
outstanding.
(c) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in subsection (b), the
Trust
or any affected Series shall terminate and the Trustees and the Trust
shall be discharged of any and all further liabilities and duties
hereunder and the right, title and interest of all parties with respect
to
the Trust or Series shall be cancelled and discharged.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of
the Trust's certificate of trust to be filed in accordance with the
Delaware Business Trust Act, which certificate of cancellation may be
signed by any one Trustee.
Section 11.5 Reorganization. Anything in this Trust Instrument to
the contrary notwithstanding, the Trustees, in order to change the form
of
organization and/or domicile of the Trust, may, without prior
Shareholder
approval, (i) cause the Trust to merge or consolidate with or into one
or
more trusts, partnerships, associations or corporations which is formed,
organized or existing under the laws of a state, commonwealth possession
or colony of the United States or (ii) cause the Trust to incorporate
under the laws of Delaware. Any agreement of merger or consolidation or
certificate of merger may be signed by a majority of the Trustees.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Business Trust Act, and notwithstanding anything to the
contrary contained in this Trust Instrument, an agreement of merger or
consolidation approved by the Trustees in accordance with this Section
11.5 may effect any amendment to the Trust Instrument or effect the
adoption of a new trust instrument of the Trust if it is the surviving
or
resulting trust in the merger or consolidation. Any merger or
consolidation of the Trust other than as described in the foregoing
provisions of this Section 11.5 shall, in addition to the approval of
the
Trustees, require the approval of the holders of a majority of the
Outstanding Shares.
Section 11.6 Filing of Copies, References, Headings. The original or
a copy of this Trust Instrument and of each amendment hereof or Trust
Instrument supplemental hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. Anyone dealing with the
Trust may rely on a certificate by an officer or Trustee of the Trust as
to whether or not any such amendments or supplements have been made and
as
to any matters in connection with the Trust hereunder, and with the same
effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this Trust Instrument or
of any such amendment or supplemental Trust Instrument. In this Trust
Instrument or in any such amendment or supplemental Trust Instrument,
references to this Trust Instrument, and all expressions like "herein,"
"hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust
Instrument. All expressions like "his", "he" and "him", shall be deemed
to
include the feminine and neuter, as well as masculine, genders. Headings
are placed herein for convenience of reference only and in case of any
conflict, the text of this Trust Instrument rather than the headings,
shall control. This Trust Instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 11.7 Applicable Law. The trust set forth in this instrument
is made in the State of Delaware, and the Trust and this Trust
Instrument,
and the rights and obligations of the Trustees and Shareholders
hereunder,
are to be governed by and construed and administered according to the
Delaware Business Trust Act and the laws of said State; provided,
however,
that there shall not be applicable to the Trust, the Trustees or this
Trust Instrument (a) the provisions of Section 3540 of Title 12 of the
Delaware Code or (b) any provisions of the laws (statutory or common) of
the State of Delaware (other than the Delaware Business Trust Act)
pertaining to trusts which relate to or regulate (i) the filing with any
court or governmental body or agency of trustee accounts or schedules of
trustee fees and charges, (ii) affirmative requirements to post bonds
for
trustees, officers, agents or employees of a trust, (iii) the necessity
for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv)
fees or other sums payable to trustees, officers, agents or employees of
a trust, (v) the allocation of receipts and expenditures to income or
principal, (vi) restrictions or limitations on the permissible nature,
amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or
(vii)
the establishment of fiduciary or other standards or responsibilities or
limitations on the acts or powers of trustees, which are inconsistent
with
the limitations or liabilities or authorities and powers of the Trustees
set forth or referenced in this Trust Instrument. The Trust shall be of
the type commonly called a "business trust", and without limiting the
provisions hereof, the Trust may exercise all powers which are
ordinarily
exercised by such a trust under Delaware law. The Trust specifically
reserves the right to exercise any of the powers or privileges afforded
to
trusts or actions that may be engaged in by trusts under the Delaware
Business Trust Act, and the absence of a specific reference herein to
any
such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 11.8 Amendments. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement
this
Trust Instrument by making an amendment, a Trust Instrument supplemental
hereto or an amended and restated trust instrument. Shareholders shall
have the right to vote (i) on any amendment which would affect their
right
to vote granted in Section 7.1 of Article VII hereof, (ii) on any
amendment to this Section 11.8, (iii) on any amendment as may be
required
by law and (iv) on any amendment submitted to them by the Trustees. Any
amendment required or permitted to be submitted to Shareholders which,
as
the Trustees determine, shall affect the Shareholders of one or more
Series shall be authorized by vote of the Shareholders of each Series
affected and no vote of shareholders of a Series not affected shall be
required. Anything in this Trust Instrument to the contrary
notwithstand-
ing, any amendment to Article X hereof shall not limit the rights to
indemnification or insurance provided therein with respect to action or
omission of Covered Persons prior to such amendment.
Section 11.9 Fiscal Year. The fiscal year of the Trust shall end on
a specified date as determined from time to time by the Trustees.
Section 11.10 Use of the Name "Polynous Trust". The name "Polynous
Trust," and all rights to the use thereof belong to Polynous Capital
Management, Inc., ("Polynous Capital"), the investment adviser of the
Trust. Polynous Capital has consented to the use by the Trust of such
name.
Section 11.11 Provisions in Conflict with Law. The provisions of
this Trust Instrument are severable, and if the Trustees shall
determine,
with the advice of counsel, that any of such provisions is in conflict
with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part
of
this Trust Instrument; provided, however, that such determination shall
not affect any of the remaining provisions of this Trust Instrument or
render invalid or improper any action taken or omitted prior to such
determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction
and shall not in any manner affect such provisions in any other
jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the initial Trustee of
the Trust, has
executed this instrument this 10th day of April, 1996.
/s/ Kevin Wenck
Kevin Wenck, Sole Trustee
